           RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                         2     Diversified Energy v.                 Nos. 01-6043/6100
        ELECTRONIC CITATION: 2003 FED App. 0266P (6th Cir.)                      Tenn. Valley Authority
                    File Name: 03a0266p.06
                                                                                                _________________
UNITED STATES COURT OF APPEALS                                                                       COUNSEL
                  FOR THE SIXTH CIRCUIT                                    ARGUED:         Peter K. Shea, TENNESSEE VALLEY
                    _________________                                      AUTHORITY, Knoxville, Tennessee, for Appellant. Herbert
                                                                           S. Sanger, Jr., WAGNER, MYERS & SANGER, Knoxville,
 DIVERSIFIED ENERGY, INC.,        X                                        Tennessee, for Appellee. ON BRIEF: Peter K. Shea, Edwin
             Plaintiff-Appellee/ -                                         W. Small, TENNESSEE VALLEY AUTHORITY,
               Cross-Appellant, -                                          Knoxville, Tennessee, for Appellant. Herbert S. Sanger, Jr.,
                                   -   Nos. 01-6043/6100                   WAGNER, MYERS & SANGER, Knoxville, Tennessee,
                                   -                                       Martin B. Bailey, HUNTON & WILLIAMS, Knoxville,
            v.                      >                                      Tennessee, for Appellee.
                                   ,
                                   -
 TENNESSEE VALLEY                                                                               _________________
                                   -
 AUTHORITY ,                       -                                                                OPINION
          Defendant-Appellant/ -                                                                _________________
                Cross-Appellee. -
                                   -                                          COFFMAN, District Judge. This appeal, involving a
                                  N                                        dispute between the Tennessee Valley Authority (“TVA”) and
       Appeal from the United States District Court                        one of its former coal suppliers, raises three questions:
    for the Eastern District of Tennessee at Knoxville.                    (1) whether the district court erred in determining that it had
     No. 97-00223—Thomas G. Hull, District Judge.                          subject matter jurisdiction, pursuant to the Contract Disputes
                                                                           Act of 1978 (“CDA”), 41 U.S.C. § 601 et seq., over the
                    Argued: March 13, 2003                                 plaintiff’s claim for lost profits; (2) whether the district court
                                                                           properly concluded, under standard principles of contract law,
              Decided and Filed: August 1, 2003                            that the plaintiff is not entitled to recover damages based on
                                                                           a contract price/market price differential; and (3) whether the
Before: CLAY and ROGERS, Circuit Judges; COFFMAN,                          unappealed February 27, 2001, administrative decisions
                  District Judge.*                                         which denied the plaintiff’s claims for actual damages are
                                                                           entitled to res judicata effect. For the reasons that follow, we
                                                                           AFFIRM the district court’s judgment.



    *
     The Honorable Jennifer B. Coffman, United States District Judge for
the Eastern and Western Districts of Kentucky, sitting by designation.

                                   1
Nos. 01-6043/6100                         Diversified Energy v.               3   4        Diversified Energy v.                       Nos. 01-6043/6100
                                         Tenn. Valley Authority                            Tenn. Valley Authority

                      I. Factual Background                                       “Officials not to Benefit” provision3 of the Contract by giving
                                                                                  a $10,000 loan, a telephone calling card, and college football
   For a second time, these parties bring their dispute to this                   tickets to a TVA employee in exchange for confidential
Court.1 On August 18, 1990, the plaintiff, Diversified                            information. Furthermore, by letter dated March 19, 1993,
Energy, Inc. (“Diversified”), and the defendant, TVA, entered                     TVA’s Vice-President of Fossil Fuels, Gregory Vincent,
into a long-term coal supply contract (the “Contract”) under                      explained that TVA considered the Contract terminated and
which Diversified was to provide TVA with 10,000 tons of                          that it would not extend the Contract or accept any further
coal per week through March 27, 1996. Diversified was                             deliveries of coal from Diversified. In response, Diversified
authorized to obtain and deliver coal from only one source --                     exercised its rights to initiate a dispute under the Contract’s
the Sigmon Coal Company (“Sigmon”). In accordance with                            “Disputes” clause, which made the Contract subject to the
its agreement with Sigmon, Diversified was to pay Sigmon                          CDA and to TVA’s implementing regulations.4 On May 18,
the full purchase price, less a commission of $.98 per ton.                       1993, Diversified submitted a certified breach of contract
The Contract contained a “reopener” provision which entitled                      claim to a Contracting Officer requesting “a determination
either party to reopen the Contract at its midpoint to negotiate                  that [it] is entitled to recover from TVA the amount which [it]
price and other terms.2 By letter dated December 14, 1992,                        would have made from delivery of the remaining portion of
TVA invoked that provision but refused to negotiate with                          the maximum commitment under the Contract.” Diversified
Diversified because Diversified had allegedly violated the                        specifically claimed in its letter that this amount was
                                                                                  $21,980,000, representing the 1,570,000 tons of coal which

                                                                                      3
    1
                                                                                          This “Officials not to Benefit” provision read:
      This is the second ap peal of this case; the factual background is
more fully summarized in the Court’s prior opinion, Diversified Energy,               [N]or shall the C ontractor o ffer or give, direc tly or indirectly, to
Inc. v. TVA, 223 F.3d 32 8 (6th Cir. 2000) (hereinafter, “Diversified I”).            any officer, em ployee, special Government employee, or agent
                                                                                      of TV A any gift, gratuity, favor, entertainment, loan, or any
    2                                                                                 other thing of monetary value, except as provided in 18 C.F.R.
        The reopener provision provided:
                                                                                      § 1300.735-12 or -34. Breach of this provision shall constitute
    [T]his contra ct shall continue through M arch 27 , 1996 , unless                 a material breach of this contract and TV A shall have the right
    terminated by agreement or as otherwise nego tiated herein.                       to exercise all remed ies pro vided in this contract or at law.
    Provided, however, this contract may be reopened by either                        4
    party three (3) months prior to March 19, 19 93 . . . for the                       Pursuant to the CDA , a contractor and the contracting government
    purpose of negotiating price and other terms and conditions of                agency must submit disputes to a Contracting Officer. If the parties are
    the remaining portion of the maximum commitment . . . . If                    unab le to resolve their claims by agreement, the Contracting Officer may
    either party ex ercises this reop ener it sha ll give the o ther pa rty       issue a decision on the dispute. The terms of the instant Contract, as well
    written notice by December 19, 1992 . If the reopener provision               as TV A’s implementing regulations, have altered this administrative
    has been exercised, this contract will terminate on March 19,                 scheme slightly by requiring that any dispute which cannot be settled by
    1993, unless TVA and the Contractor [i.e., Diversified] have                  the parties shall be decided by a Disputes Contracting Officer, rather than
    mutually agreed in writing by M arch 1 9, 19 93, to continue this             a Contracting Officer. Under this scheme, a Contracting Officer’s role is
    contract. Neither party shall be under any obligation or liab ility           to receive claims from a contractor and to raise claim o n TVA ’s behalf.
    to extend this contract if either p arty desires to termina te                A Disputes Contracting Officer’s sole function is to dec ide claims. See
    deliveries.                                                                   Diversified I, 223 F.3d at 332.
Nos. 01-6043/6100                        Diversified Energy v.            5    6       Diversified Energy v.                     Nos. 01-6043/6100
                                        Tenn. Valley Authority                         Tenn. Valley Authority

remained undelivered under the Contract multiplied by $14                      Benefit” provision, thereby disqualifying it from any
per ton -- the amount which Diversified would have been                        damages.
entitled to in liquidated damages if TVA’s conduct amounted
to a unilateral termination of the Contract.5 In a July 11,                       Diversified appealed the district court’s decisions to this
1995, letter addressed to TVA’s Vice-President of                              Court, arguing that the district court was precluded from
Purchasing, Victor King, the Disputes Contracting Officer                      considering TVA’s defense under the Officials not to Benefit
who would be deciding its contract claim, Diversified made                     provision because TVA’s Contracting Officer had never
an alternative claim for damages based on the difference                       raised that claim. Diversified also argued that the district
between the contract price and the market price for                            court erred in refusing to construe TVA’s conduct as a
comparable long-term coal contracts at the time of TVA’s                       unilateral termination of the Contract. This Court affirmed
March 19, 1993, repudiation letter. In its letter, Diversified                 the district court on the unilateral termination issue but
alleged that the contract price exceeded the market price by                   reversed with respect to TVA’s claim under the “Officials not
$5.13 per ton of coal and that, therefore, it was due                          to Benefit” provision, concluding that the district court lacked
approximately $8,054,100 in damages. The Disputes                              jurisdiction over that claim because TVA’s Contracting
Contracting Officer rejected Diversified’s contract claim, as                  Officer had never raised it. We held that the district court
well as its two specific proposed measures of damages,                         could assert jurisdiction over TVA’s defensive claim only if
concluding that Diversified had violated the Officials not to                  it had been the subject of a valid, final decision by the
Benefit provision and that the TVA had a consequent right to                   contracting agency. We further held that a valid, final
terminate the Contract.                                                        decision on TVA’s claim could be made only if it had first
                                                                               been raised by a Contracting Officer. However, because the
  On March 31, 1997, Diversified filed suit in district court,                 March 19, 1993, letter which first raised TVA’s “Officials not
appealing the Disputes Contracting Officer’s decisions. Upon                   to Benefit” claim was not written by a Contracting Officer,6
Diversified’s motion for summary judgment, the trial judge                     and because the Disputes Contracting Officer who later raised
determined that TVA had, through “inept and heavy-handed”                      that claim was not simultaneously acting as the Contracting
behavior, breached the Contract in multiple ways. The trial                    Officer, we determined that TVA’s claim was not properly
court also ruled, however, that TVA’s breaches were not                        before the Disputes Contracting Officer. Accordingly, this
tantamount to a unilateral termination of the Contract.                        Court concluded that the district court had no power to
Moreover, the trial court determined that Diversified                          consider TVA’s defensive claim and remanded the case to the
committed prior material breaches of the “Officials not to                     district court with instructions to award damages to
                                                                               Diversified on its contract claims “in accordance with
                                                                               standard contract law principles.” See Diversified I, 223 F.3d
                                                                               at 336-38, 340.
    5
      The Contract contained a “Unilateral Termination Right” provision
which entitled TVA to terminate the Contract unilaterally upon 60 d ays’
prior written no tice. The penalty for invoking this clause was $14 per ton        6
of coal multiplied by the remaining number of tons scheduled for delivery           Vincent -- the author o f th e M arch 19, 1993, letter -- was not
from the effective termination date through the earliest applicable date for   authorized to act as a Contracting Officer when he alleged that Diversified
termination.                                                                   breached the “Officials not to Benefit” clau se.
Nos. 01-6043/6100                 Diversified Energy v.       7    8     Diversified Energy v.                 Nos. 01-6043/6100
                                 Tenn. Valley Authority                  Tenn. Valley Authority

  Upon remand, Diversified first sought an award of actual         would place Diversified in a better position than it would
damages under the contract price-market price differential.        have enjoyed had the Contract been performed fully. The
TVA, attempting to rely on the Court’s reasoning in                district court granted TVA’s motion, holding that
Diversified I, moved to dismiss that claim, arguing that           Diversified’s damages would be calculated on the basis of the
Diversified’s initial 1993 claim letter to the Contracting         profits it would have made had the Contract been performed.
Officer submitted only a claim for liquidated damages. On          On May 23, 2001, TVA filed objections to the district court’s
November 6, 2000, the district court, uncertain whether            jurisdiction, claiming, among other things, that Diversified
Diversified’s 1993 claim letter was sufficient to state a valid    needed to amend its complaint to appeal the adverse
claim for actual, non-liquidated damages, stayed the action        February 27, 2001, decisions in order for the district court to
for 120 days “to allow for administrative consideration of         have jurisdiction over any of its damage claims.
Diversified’s claim for actual damages.”
                                                                     On June 7, 2001, Diversified moved for summary judgment
   In an August 29, 2000, letter sent to Diversified, TVA’s        on its lost profits claim. TVA opposed the motion, alleging
Vice-President of Procurement, Paul R. LaPointe, had advised       (1) that the district court lacked jurisdiction over that claim
that Larry A. Mize had been assigned as the new Contracting        because it had not been submitted to a Contracting Officer
Officer who would be administering Diversified’s contract          before Diversified filed its original complaint and because
claims. On November 14, 2000, Mize informed Diversified            Diversified had not been granted leave to amend its complaint
that TVA would also be asserting a claim that Diversified had      to appeal the February 27, 2001, administrative decisions
breached the “Officials not to Benefit” Clause -- the same         which denied that claim, (2) that expenses should be deducted
claim which we ruled the district court lacked jurisdiction to     from Diversified’s claim for lost profits, and (3) that the
consider. Mize also asked Diversified to submit any                February 27, 2001, administrative decisions of the Disputes
additional materials relevant to its contract claims, indicating   Contracting Officer were entitled to res judicata effect and
that his role was to resolve the matter by agreement. On           precluded Diversified’s claim for any actual damages. On
January 22, 2001, Diversified sent a letter to Mize specifying     July 12, 2001, the district court overruled TVA’s objections
that it sought actual damages as measured by the difference        and granted, in part, Diversified’s motion for summary
between the contract price and the market price or,                judgment. With regard to the jurisdictional issue raised by
alternatively, the profits it lost due to TVA’s repudiation. In    TVA, the district judge assumed that it had power to comply
two letters dated February 27, 2001, Mize -- now also acting       with this Court’s previous mandate that it award Diversified
as the Disputes Contracting Officer -- refused to award            damages in accordance with standard contract law principles,
Diversified either measure of damages, concluding that its         characterizing the procedural posture of the case as “simply
prior breach of the “Officials not to Benefit” clause precluded    the end-stage of Diversified’s original breach of contract
it from recovering any damages.                                    action not a new lawsuit based upon some separate set of
                                                                   facts.” With respect to the lost profits claim, the district court
  On March 7, 2001, the district court lifted its stay. On the     awarded Diversified $1,139,185 (plus interest) in actual
same day, TVA moved for partial summary judgment on                damages, reflecting the $.98 per ton in commissions which it
Diversified’s claim based on the contract/market price             would have received from Sigmon if TVA had accepted the
differential, claiming that such an award would not be             remaining tons of coal, less a reduction of $.22 per ton which
consistent with standard contract law principles because it        Diversified had agreed to pay a third party, Billy Evans d/b/a/
Nos. 01-6043/6100                   Diversified Energy v.        9    10       Diversified Energy v.                    Nos. 01-6043/6100
                                   Tenn. Valley Authority                      Tenn. Valley Authority

B & A Coals, for all coal delivered under the Contract.               lost profits, but instead stated only a claim for liquidated
Finally, the trial court refused to give res judicata effect to the   damages.7
unappealed February 27, 2001, administrative decisions
because it believed that this Court’s prior decision precluded           TVA asserts that Diversified’s failure to refer to lost profits
it from finding -- or accepting the Disputes Contracting              expressly in its claim letter violated its duties under the CDA,
Officer’s findings -- that Diversified’s breaches of the              specifically, 41 U.S.C. §§ 605(a) and 605(c)(1), to ensure that
“Officials not to Benefit” provision barred it from recovering        all of its claims were submitted in writing to a Contracting
any damages.                                                          Officer and to certify that the data supporting its claims was
                                                                      accurate and complete. It also claims that Diversified’s
                   II. Standard of Review                             alleged omission amounted to noncompliance with TVA’s
                                                                      implementing regulations which provide, among other things,
  This Court reviews de novo a district court's grant of              that a contractor’s claim submittal must “[i]nclude sufficient
summary judgment. Edwards v. TVA, 25 F.3d 318, 322 (6th               supporting data to permit the Contracting Officer to decide
Cir. 2001). The existence of subject matter jurisdiction under        the claim, provide appropriate reference to previously
the CDA is also reviewed de novo. See Campanella v.                   submitted data.” 18 C.F.R. § 1308.2(c) (2003). In TVA’s
Commerce Exch. Bank, 137 F.3d 885, 891 (6th Cir. 1998).               view, because Diversified did not comply with these
                                                                      requirements, it did not submit a valid claim for lost profits to
                        III. Discussion                               the original Contracting Officer and, thus, the original
                                                                      Disputes Contracting Officer did not issue a final decision
A. Jurisdiction over Diversified’s Lost Profits Claim                 denying that claim.
  In this appeal, TVA renews the primary contention that it
made to the district court upon remand: that the district court
lacked jurisdiction over Diversified’s lost profits claim
because that claim had not been presented to a Contracting                 7
                                                                             TV A’s assumption is not well-founded, as Diversified’s 199 3 claim
Officer before Diversified filed its original complaint and           letter clearly stated that it believed itself “entitled to recover from TVA
because Diversified has not amended its complaint to include          the amo unt which [it] would have ma de from de livery of the rem aining
an appeal of the February 27, 2001, administrative decisions          portion of the maximum commitment under the Contract.” This language
                                                                      plainly enco mpa sses a claim for lost profits. See, e.g., Allen, H eaton &
which rejected that claim. The critical assumption underlying         Mc Do nald v. Castle Farm Amusement Co., 86 N .E.2d 78 2, 78 4 (O hio
TVA’s position is that Diversified’s May 18, 1993, certified          1949) (“When a p laintiff sues on a contract to recover the amount he
claim -- the basis of the district court’s jurisdiction when          would have received for the full performance prevented by a defend ant's
Diversified initiated suit in 1997 -- failed to make a claim for      breach, he seeks in effect to recover as damages the profit from
                                                                      performance of the contract which profit defendant's breach prevented
                                                                      him from earning.”). It is true tha t the May 18, 1993, letter states that
                                                                      Diversified identified its lost profits as the amount due under the
                                                                      Unilateral Termination Right clause, but Diversified did not in any way
                                                                      indicate that this was the exclusive measure of damages sough t. Instead,
                                                                      it appears that Diversified stated a contract claim for what Diversified
                                                                      “would have made,” and then understandably contended that the amount
                                                                      be m easured in terms of the con tract’s liquid ated d amages rem edy.
Nos. 01-6043/6100                  Diversified Energy v.       11    12   Diversified Energy v.                 Nos. 01-6043/6100
                                  Tenn. Valley Authority                  Tenn. Valley Authority

   TVA, as an agency of the United States, enjoys sovereign          a claim must, among other things, “state the amount of
immunity unless Congress specifically waives it. See, e.g.,          monetary relief, or the kind of nonmonetary relief, sought,”
Campanella, 137 F.3d at 890. Under the CDA, Congress has             provide “sufficient supporting data to permit the Contracting
conditionally waived the sovereign immunity of executive             Officer to decide the claim,” and, if greater than $100,000,
agencies which contract with others for services or certain          “include a signed certification by the Contractor that the claim
kinds of property. See, e.g., SMS Data Products Group, Inc.          is made in good faith, that the supporting data are accurate
v. United States, 19 Cl. Ct. 612, 614 (Cl. Ct. 1990). With           and complete to the best of the Contractor's knowledge and
regard to the TVA, this waiver applies only to contracts, like       belief, and that the amount requested accurately reflects the
the one signed by Diversified, which “contain a disputes             contract adjustment for which the Contractor believes TVA
clause requiring that a contract dispute be resolved through an      is liable.” 18 U.S.C. § 1308.2(c)(1)-(3). The term “claim” is
agency administrative process.” 41 U.S.C. § 602(b). One              to be interpreted broadly to embrace virtually all disputes
condition which Congress has placed upon the waiver of               arising under or relating to a government contract. See RMI
TVA’s immunity under the CDA is the requirement that a               Titanium, 78 F.3d at 1135 (citing Z.A.N. Company v. United
contractor exhaust the agency’s administrative procedures            States, 6 Cl. Ct. 298, 303 (1984)).
before filing suit in district court. The purposes of this
condition are to encourage resolution of disputes by                    Under the CDA, a district court is not deprived of
negotiation prior to litigation and to “keep government              jurisdiction over a contract claim merely because the
contract disputes out of the district courts.” Campanella, 137       contractor changes the amount of his claim or the theory of
F.3d at 890 (citing United States v. Kasler, 123 F.3d 341, 346       his damages, so long as the modified claim is “‘based on the
(6th Cir. 1997)). An additional, related condition is the            same set of operative facts underlying the claim’ submitted to
requirement that a contractor seeking more than $100,000 in          the contracting officer.” ThermoCor, Inc. v. United States, 35
damages present a valid, certified contract “claim” to a             Fed. Cl. 480, 489 (1996) (quoting Cerberonics, Inc. v. United
Contracting Officer. See 41 U.S.C. § 605(c)(1); RMI                  States, 13 Cl. Ct. 415, 417 (1987)). “The critical test is
Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125,              whether the contracting officer’s right to adjudicate the claims
1135 (6th Cir. 1996). This condition serves to ensure that the       is undermined by circumventing his statutory role ‘to receive
Contracting Officer is given enough information to evaluate          and pass judgment on the contractor's entire claim.’” Id.
the claim fairly so that a final decision may be reached. E.g.,      (quoting Cerberonics, 35 Cl. Ct. at 418). This rule recognizes
Colon v. United States, 35 Fed. Cl. 337, 342 (1996). These           that “it would be very disruptive to a court’s procedures, if
conditions are jurisdictional in nature; a failure to satisfy them   theories, developed as a result of pretrial proceedings
will preclude the district court from entertaining an appeal of      including discovery, had to be submitted to the contracting
the contractor’s claims. See, e.g., Diversified I, 223 F.3d at       officer before the court could render a final decision on a
336; SMS Data Products, 19 Cl. Ct. at 615.                           claim.” Id. (citing J.F. Shea Co. v. United States, 4 Cl. Ct.
                                                                     46, 54 (1983)). Hence, as long as Diversified’s claim for lost
   The CDA does not define what constitutes a “claim.”               profits was based on the same operative facts as its claim for
Colon, 35 Fed. Cl. at 340. Under TVA’s regulations, that             liquidated damages and did not prevent the Contracting
term is defined as a “written demand by a Contractor . . . for       Officer from evaluating whether Diversified was entitled to
a decision by a Contracting Officer under a disputes clause.”        such a remedy, it was properly before the district court. See
18 C.F.R. § 1308.2(c). TVA’s regulations specify further that        id.
Nos. 01-6043/6100                 Diversified Energy v.      13    14        Diversified Energy v.                      Nos. 01-6043/6100
                                 Tenn. Valley Authority                      Tenn. Valley Authority

  TVA contends that Diversified submitted no information           B. Diversified’s Claim Under the Contract/Market Price
regarding its lost profits to the Contracting Officer, thus           Differential
providing him with no opportunity to make a final decision
on that claim. TVA specifically asserts that the claim for lost      The district court did not err in rejecting Diversified’s claim
profits was based on different evidence than the liquidated        for damages based on the $5.13 per ton difference between
damages claim. TVA’s position, however, ignores the reason         the Contract price and the market price. Upon remand, this
underpinning the rule enunciated in ThermoCor and                  Court instructed the district court to determine Diversified’s
Cerberonics: as long as the contracting agency is given an         damages in accordance with standard principles of contract
adequate opportunity to make decisions on the issues               law. Diversified mistakenly argues here that those principles
presented by a contractor’s claim, the subsequent                  entitled it to a measure of damages reflective of the
modification (or clarification) of the remedy sought by the        contract/market price differential under the Uniform
contractor does not prejudice the contracting agency and does      Commercial Code (“UCC”), specifically § 2-708(1).8 Even
not, therefore, deprive the district court of jurisdiction over
the modified claim. See, e.g., ThermoCor, 35 Fed. Cl. at 489-
90; Cerberonics, 13 Cl. Ct. at 419.
  Diversified’s claim for lost profits arose from the same
operative facts which were before the Contracting Officer in
1993 -- TVA’s conduct in repudiating the Contract.
Additionally, since the original Disputes Contracting Officer
denied Diversified’s claim on the issue of liability, he
necessarily refused to award Diversified damages under any
available remedy theory. The Disputes Contracting Officer               8
was given an adequate opportunity to address the lost profits               This section p rovides:
claim. Therefore, the district court had jurisdiction over
                                                                        (1) Subject to subsection (2) and to the pro visions o f this Article
Diversified’s lost profits claim when Diversified filed its             with respe ct to proof o f mark et price (Section 2-723), the
complaint in 1997. Furthermore, since its lost profits claim            measure of damages for no n-acce ptanc e or repud iation by the
was properly before the district court by virtue of its original        buyer is the difference between the market price at the time and
complaint, Diversified had no obligation to amend that                  place for tender and the unpaid contract price together with any
pleading to appeal the February 27, 2001, administrative                incidental damages provided in this Article (Section 2-710), but
decisions. See Sharman Company, Inc. v. United States, 2                less exp enses sa ved in consequence of the buyer's breach.
F.3d 1564, 1570 (Fed. Cir. 1993). Accordingly, the district             (2) If the measure of damages pro vided in subsection (1 ) is
court’s assumption that it had jurisdiction to award                    inade quate to put the seller in as good a position as performance
Diversified lost profits was correct.                                   would have done then the me asure of damages is the profit
                                                                        (including reasonable overhead) which the seller would have
                                                                        made from full performance by the buyer, together with any
                                                                        incidental damages provided in this Article (Section 2-710), due
                                                                        allowance for costs reasonably incurred and due credit for
                                                                        payments or proceeds of resale.
Nos. 01-6043/6100                         Diversified Energy v.           15     16     Diversified Energy v.                       Nos. 01-6043/6100
                                         Tenn. Valley Authority                         Tenn. Valley Authority

assuming that the UCC applies,9 however, Diversified was                            Diversified relies principally upon Trans World Metals,
not entitled to damages under § 2-708(1).                                        Inc. v. Southwire Co., 769 F.2d 902, 908 (2d Cir. 1985) to
                                                                                 support its argument that it is entitled to damages under § 2-
  Sigmon -- the entity which actually owned the coal -- paid                     708(1). That case is not applicable, however. Unlike the
Diversified a fixed commission of $.98 for each ton of coal                      plaintiff in Trans World Metals, Diversified did not assume
delivered to TVA. Diversified was obligated to pay a portion                     any risk that the market price of coal would increase. Rather,
of those commissions, $.22 for each ton delivered, to a third                    any such risk was assumed, if at all,10 by Sigmon -- the only
party, Billy Evans, as compensation for his assignment of the                    authorized producer of the coal under the Contract.
Contract to Diversified on June 19, 1980. Hence, as indicated                    Therefore, Diversified was not entitled to damages based on
in Diversified I, if TVA had performed the Contract fully,                       the contract/market price differential under § 2-708(1). See
Diversified’s maximum expectancy would have been $.76 per                        Nobs Chem., 616 F.2d at 215; see also Union Carbide Corp.
ton of undelivered coal. See Diversified I, 223 F.3d at 338.                     v. Consumers Power Co., 636 F. Supp. 1498, 1501-02 (E.D.
                                                                                 Mich. 1986). Because Diversified would have received only
   A non-breaching party is entitled to be placed in the same                    $.76 per ton of coal had the Contract been performed, the
position it would have enjoyed had the defendant abided by                       district court properly limited its damages to an amount based
the contract, but is not entitled to more than the benefit of his                on that figure.
bargain. See, e.g., San Carlos Irrigation & Drainage Dist. v.
United States, 111 F.3d 1557, 1562-63 (Fed. Cir. 1997);                          C. The Res Judicata Effect of the February 27, 2001,
Rodgers v. Fisher Body Div., Gen. Motors Corp., 739 F.2d                            Administrative Decisions
1102, 1107 (6th Cir. 1984). A damage award which fails to
adhere to this principle is unreasonable as a matter of law.                        The February 27, 2001, administrative decisions which
See Cincinnati Fluid Power, Inc. v. Rexnord, Inc., 797 F.2d                      purported to resurrect TVA’s “Official not to Benefit” defense
1386, 1393 (6th Cir. 1986). The UCC, including § 2-708, has                      and to deny Diversified’s claims were invalid from the outset
adopted this philosophy. See, e.g., Nobs Chem., U.S.A., Inc.                     and are therefore not entitled to any preclusive effect. Where,
v. Koppers Co., 616 F.2d 212, 215 (5th Cir. 1980).                               as here, a claim for damages under the CDA is in litigation,
                                                                                 a Disputes Contracting Officer has absolutely no authority to
                                                                                 issue a final decision on that claim. See Sharman Co. v.
                                                                                 United States, 2 F.3d 1564, 1571-72 (Fed. Cir. 1993), rev’d
    9
                                                                                 on other grounds, Reflectone, Inc. v. Dalton, 60 F.3d 1572,
      It is unclear the extent to which the UCC ap plies to government           1580 (Fed. Cir. 1995) (citing Durable Metal Prods., Inc. v.
contracts. See, e.g., Technical Assistance Int’l, Inc. v. United States, 150     United States, 21 Cl. Ct. 41, 46 (1990)). In Sharman, there
F.3d 1369, 1372 (Fed. Cir. 1998) (looking to the UCC for guidance, but
concluding that “the U niform Commercial C ode is not binding with
                                                                                 had been no stay of judicial proceedings, and we do not hold
respect to gov ernment contracts . . . .”) (citation omitted ); Northern Helix
Co. v. United States, 455 F.2d 546, 553 (Ct. Cl. 1972) (“This court has
explicitly recognized the authority and relevance of the Uniform                      10
Commercial Code in the field of public contracts . . . .”) (citations                   As obse rved by the district court, the reopener provision allowed
omitted). We need not settle this question here, however, since, even            either party to reopen the Contract (with certain restrictions) for the
assuming that the U CC applies, Diversified is not entitled to the relief it     purpo se of negotiating new terms in the event that the market price of coal
claims.                                                                          changed.
Nos. 01-6043/6100                  Diversified Energy v.      17
                                  Tenn. Valley Authority

that court stays are never appropriate to permit additional
administrative proceedings under the CDA. In this case,
however, in light of our holding that the district court had
jurisdiction over Diversified’s lost profits claim when
Diversified filed its complaint in 1997, there was no need for
the district court to stay the judicial proceedings, and at least
in that context the Disputes Contracting Officer’s
February 27, 2001, decisions must be treated as entitled to no
preclusive effect.
                       IV. Conclusion
 For the foregoing reasons, the district court’s decision is
AFFIRMED.
