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United States v. Advanced Circuits, Inc.

Supreme Court of Colorado, En Banc

June 18, 2018

United States Welding, Inc., a Colorado corporation, Petitioner
Advanced Circuits, Inc., a Colorado corporation; and Buckeye Welding Supply Company, Inc., a Colorado corporation. Respondents

          Certiorari to Colorado Court of Appeals Court of Appeals Court Case Nos. 15CA190 & 15CA331

          Attorneys for Petitioner: Arckey & Associates, LLC Thomas J. Arckey Centennial, Colorado

          Attorneys for Respondent Advanced Circuits, Inc.: Laff Gordon Bennett Logan PC John A. Logan Denver, Colorado

          No appearance on behalf of Respondent Buckeye Welding Supply Company, Inc.


          COATS JUSTICE.

         ¶1 U.S. Welding sought review of the court of appeals' judgment affirming the district court's order awarding it no damages whatsoever for breach of contract with Advanced Circuits. See Advanced Circuits, Inc. v. U.S. Welding, Inc., Nos. 15CA0190 & 15CA0331 (Colo.App. Mar. 24, 2016). Notwithstanding its determination following a bench trial that Advanced breached its contract to purchase from Welding all its nitrogen requirements during a one-year term, the district court reasoned that by declining Advanced's request for an estimate of lost profits expected to result from Advanced's breach prior to expiration of the contract term, Welding failed to mitigate.

         ¶2 Because an aggrieved party is not obligated to mitigate damages from a breach by giving up its rights under the contract, and because requiring Welding to settle for a projection of anticipated lost profits, rather than its actual loss, as measured by the amount of nitrogen Advanced actually purchased from another vendor over the contract term, would amount to nothing less than forcing Welding to relinquish its rights under the contract, the district court erred. The court of appeals' judgment concerning failure to mitigate is therefore reversed, and the case is remanded for further proceedings consistent with this opinion.


         ¶3 On March 5, 2014, Advanced Circuits, Inc., filed a complaint alleging breach of contract and interference with contract against United States Welding, Inc. In response, Welding filed a cross-complaint for breach of contract against Advanced and a third-party complaint against Buckeye Welding Supply Company, Inc., the company with which Advanced replaced Welding as its nitrogen supplier. Following a two-day bench trial in October 2014, the district court made findings and conclusions, and entered judgment.

         ¶4 The court found that on June 16, 2011, Welding and Advanced entered into a two-year contract for the sale of liquid nitrogen, whereby Advanced agreed to purchase all its required liquid nitrogen from Welding, without limitation on the mode by which the liquid nitrogen was to be delivered. For the initial two-year term of the contract, Welding delivered the liquid nitrogen to Advanced using individual cylinders-called "dewars"-according to the pricing scheme for delivery by dewar, the only pricing scheme specified in the contract.

         ¶5 Pursuant to its own terms, on June 16, 2013, the contract automatically renewed for an additional year. In late 2013, however, Advanced concluded that it would be cheaper to receive liquid nitrogen for its expanding needs in bulk rather than by dewar, and at its request, the parties attempted to negotiate a price for bulk delivery. After those negotiations proved unsuccessful, Advanced solicited bids from other liquid nitrogen suppliers for bulk delivery of the nitrogen. Advanced ultimately selected Buckeye as its new supplier and, on February 18, 2014, informed Welding that it was terminating their contract as of June 16, 2014-the end of the contract's term. Despite indicating that it was terminating at the end of the contract period, however, Advanced also advised Welding that it would be excused from future performance after February 28, 2014, and it requested that Welding calculate its anticipated lost profits to permit Advanced to "buy out" the remainder of the contract.

         ¶6 Welding responded by notifying Advanced that by refusing dewar delivery from it and, instead, accepting nitrogen from another vendor prior to expiration of the June 16, 2014 contract term, Advanced would be in breach of the contract. Notwithstanding the previous, failed negotiations regarding bulk delivery, Advanced again offered to accept bulk liquid nitrogen deliveries from Welding through the end of the contract term in lieu of immediately replacing Welding as its nitrogen supplier. Welding declined that offer, and on February 26, 2014, Advanced began receiving bulk-delivered liquid nitrogen from its new supplier, Buckeye. The district court found that prior to the end of the contract term, Buckeye delivered to Advanced the equivalent of 161 dewars of nitrogen.

         ¶7 Although the district court concluded that Advanced had breached its contract with Welding by allowing Buckeye to provide deliveries of liquid nitrogen between February and June of 2014, it nevertheless ruled that Welding was not entitled to recover any damages. It reasoned that by refusing to either (1) provide Advanced a requested lost profits analysis, or "buyout" amount, or (2) agree to bulk delivery for the remainder of the contract, Welding failed to take ...

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