Free Order on Motion for Miscellaneous Relief - District Court of Federal Claims - federal

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In the United States Court of Federal Claims
No. 98-720 C Filed September 14, 2007 ____________________________________ ) Timber sale contracts, expectancy damages, PRECISION PINE & TIMBER, INC., ) consequential damages, lost volume seller, ) cover damages, "hole in the profit pipeline", Plaintiff, ) burden of proof, offset, collateral v. ) undertakings; overrun factor; conversion ) factor; product mix; economic THE UNITED STATES, ) impracticability; gross profit; net profit; ) manufacturing overhead; administrative Defendant. ) overhead ____________________________________)

Alan I. Saltman, Saltman & Stevens, P.C., Washington, D.C., for plaintiff. Richard W. Goeken and Bryan T. Bunting, Saltman & Stevens, P.C., Washington, D.C., of counsel. David A. Harrington, Trial Attorney, Kathryn A. Bleecker, Assistant Director, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, Peter D. Keisler, Assistant Attorney General, United States Department of Justice, Washington, D.C., for defendant. Lori Polin Jones and Patricia L. Disert, U.S. Department of Agriculture, Washington, D.C., of counsel. OPINION AND ORDER GEORGE W. MILLER, Judge. This matter is before the Court following the Court's previous Opinion and Order, 72 Fed. Cl. 460 (2006), requiring the parties to submit to the Court supplemental post-trial briefing with respect to plaintiff's modified lost volume seller theory of damage recovery, and on plaintiff's motion of October 17, 2006, styled as a "Motion for Relief from Limited Aspects of the Court's Order and Opinion of September 19" (docket entry 431, Oct. 17, 2006) and treated by the Court as a motion for reconsideration of the September 2006 Opinion pursuant to Rule 59(a)(1) of the Rules of the United States Court of Federal Claims ("RCFC"). This Opinion and Order assumes familiarity with the Court's September 2006 Opinion and Order. The September 2006 Opinion and Order followed a 24-day trial on damages held in Washington, D.C., between May 12, 2005, and June 20, 2005. The parties filed Post-Trial Proposed Findings of Fact and Conclusions of Law on September 2, 2005, and responses thereto

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on November 14, 2005.1 The Court heard closing argument on February 17, 2006 and on March 1, 2006. For the reasons set forth below, after reconsideration, the Court holds that the lost volume seller theory, as formulated by plaintiff, depends upon the demonstration of unrecoverable damages for independent and collateral undertakings in the form of profits from future additional timber contracts that are not related to the subject matter of the breached contracts. The Court further holds that permitting plaintiff to use these unrecoverable damages to reduce the amount of the deduction required to be made in the lost profits calculus to account for the profits earned on the breached contracts, would be the functional equivalent of affirmatively awarding damages for the lost profits on the future additional contracts. Moreover, the Court holds that even if plaintiff's theory of recovery did not require a demonstration of unrecoverable damages, plaintiff has failed to establish on the evidence of record that it meets the criteria set forth in the Court's September 2006 Opinion and Order for application of plaintiff's modified lost volume theory. As set forth below, the Court plaintiff is entitled to recover lost profits on the breached contracts as measured by the expected profits it would have earned on the breached contracts during the suspension period less profits it actually earned on the breached contracts in the postsuspension period. However, also as set forth below, the Court has determined that certain of the input values used by plaintiff in its calculation of lost profits require modification, and as a result, plaintiff's damages must be recalculated in light of the Court's findings. Finally, the Court finds that certain other categories of relief that plaintiff requests are either unavailable, or available only in part.

By leave of the Court, plaintiff filed Plaintiff's Corrected Post-Trial Brief (docket entry 386) and Plaintiff's Corrected Proposed Findings of Fact on September 16, 2005 (docket entry 386). For the sake of simplicity, throughout this Opinion and Order the Court will refer to Plaintiff's Corrected Post-Trial Brief and Plaintiff's Corrected Proposed Findings of Fact filed on September 16, 2005 as "Plaintiff's Post-Trial Brief" ("Pl.'s Br.") and "Plaintiff's Proposed Findings of Fact" ("PPFF"). Similarly, by leave of the Court, defendant filed Defendant's Corrected Proposed Findings of Fact on January 10, 2006 (docket entry 408). For the sake of simplicity, throughout this Opinion and Order the Court will refer to Defendant's Corrected Proposed Findings of Fact filed on January 10, 2006 as "Defendant's Proposed Findings of Fact" ("DPFF"). 2

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BACKGROUND2

This case concerns 14 timber sale contracts that were either awarded or transferred to Precision Pine & Timber, Inc. ("Precision Pine") prior to August 1995.3 On August 25, 1995, pursuant to an order of the United States District Court for the District of Arizona in Silver v. Babbitt, 924 F. Supp. 976, 989 (D. Ariz. 1995), the United States Forest Service (the "Forest Service") suspended harvesting on all Forest Service timber sale contracts in Forest Service Region Three, including Precision Pine's 14 contracts. Joint Stipulation of Facts ("Joint Stip.") ¶¶ 28­29 (docket entry 292, Mar. 11, 2005 ). The Silver court held that Section 7 of the Endangered Species Act ("ESA"), 16 U.S.C. § 1531 et. seq., required the Forest Service to submit its Land and Resource Management Plans ("LRMPs") for consultation with the Fish and Wildlife Service ("FWS") in light of the listing of the Mexican Spotted Owl as a threatened species. Silver, 924 F. Supp. at 988­89. The Forest

This recitation of facts sets forth certain of the Court's findings of fact in accordance with RCFC 52(a). Additional findings of fact and rulings on mixed questions of fact and law are set forth in the Discussion and Conclusion sections of this Opinion and Order. In this section, the Court summarizes necessary background facts relevant to the subject of this opinion. For a more complete account of the background facts and procedural history of this case, see Chief Judge Damich's opinion on liability, Precision Pine & Timber, Inc. v. United States, 50 Fed. Cl. 35 (2001), this Court's decision granting in part and denying in part Defendant's Motion for Partial Summary Judgment, Precision Pine & Timber, Inc. v. United States, 63 Fed. Cl. 122 (2004), this Court's decision denying Defendant's Motion for Partial Reconsideration and Clarification of the Court's decision granting in part and denying in part Defendant's Motion for Partial Summary Judgment, Precision Pine & Timber, Inc. v. United States, 64 Fed. Cl. 165 (2005), and the September 2006 Opinion, Precision Pine, 72 Fed. Cl. 460 (2006). The contracts at issue in this case are : 1) the Hay contract; 2) the St. Joe contract; 3) the O.D. Ridge contract; 4) the U-Bar contract; 5) the Jersey Horse contract; 6) the Salt contract; 7) the Hutch-Boondock contract; 8) the Mud contract; 9) the Monument contract; 10) the Saginaw-Kennedy contract; 11) the Brann contract; 12) the Manaco contract; 13) the Brookbank contract; and 14) the Kettle contract. Several of the contracts at issue provided for the harvesting of both sawlogs and roundwood, whereas other contracts only provided for the harvesting of sawlogs. See Plaintiff's Exhibit ("PX") 320. "Sawlogs" refer to trees that are 9.0 inches in diameter or greater at breast height, whereas "roundwood" or "pulpwood" refers to trees that are between 5.0 and 9.0 inches in diameter at breast height. See Trial Transcript ("Trial Tr.") at 111­ 12 (Porter). Technically, contracts that only require sawlogs to be harvested are referred to as "timber sale" contracts. See Precision Pine, 63 Fed. Cl. at 125 n.3. Contracts that require both sawlogs and roundwood to be harvested are referred to as "multi-product sale" contracts. Id. For the purposes of this Opinion and Order, the distinction is not relevant, and the Court will refer to all of the contracts as "timber sale contracts." 3
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Service had originally completed LRMPs for National Forests in Forest Service Region Three between 1985 and 1988, before the Mexican Spotted Owl was listed as a threatened species in 1993. Id. at 980­91. In 1994, however, the United States Court of Appeals for the Ninth Circuit held that the LRMPs represented ongoing "agency actions" for which the Forest Service was required to engage in consultations with the FWS whenever a new species is listed as threatened or endangered to the extent that the existing LRMPs "may affect" the newly listed species. Pacific Rivers Council v. Thomas, 30 F.3d 1050, 1055­56 (9th Cir. 1994). Following Pacific Rivers, the Arizona District Court enjoined the Forest Service from permitting timber harvesting in the affected areas until the Forest Service consulted the FWS regarding the impacts of the Forest Service's LRMPs upon the Mexican Spotted Owl. Silver, 924 F. Supp. at 988­89. Although the Arizona District Court order required the Forest Service to commence consultation with the FWS on the LRMPs in Region Three on August 24, 1995, the Forest Service did not request formal consultations until September 6, 1995, and did not formally initiate consultations until November 9, 1995. Precision Pine, 50 Fed. Cl. at 70. On October 18, 1995, less than eight weeks after the Mexican Spotted Owl suspensions ("MSO suspensions") required by Silver were imposed, the Forest Service released the Brann, Hutch-Boondock, and St. Joe timber sale contracts from the suspension pursuant to a stipulation with the plaintiffs in Silver.4 Precision Pine, 50 Fed. Cl. at 47 n.18. Pursuant to a settlement in a second lawsuit, Southwest Center For Biological Diversity v. United States Forest Service, No. 95 Civ. 1927 (D. Ariz. filed Sept. 13, 1995), the Mud contract was partially cancelled and was released for harvesting on March 11, 1996. See PX 106, ¶ 5; PX 109. However, the Arizona District Court did not dissolve the injunction against harvesting in Forest Service Region Three until December 4, 1996, because the formal consultations initiated by the Forest Service became protracted in length due in part to the Forest Service's delay in initiating the consultations and in part to the Forest Service's failure to provide a legally sufficient Biological Opinion in conformity with the parties' joint stipulation of facts in Silver. Precision Pine, 50 Fed. Cl. at 47­51; see also Joint Stip. ¶ 31 (docket entry 292, March 11, 2005). The Forest Service lifted the suspensions of the remaining contracts after the Arizona District Court dissolved the injunction. Precision Pine, 50 Fed. Cl. at 47­51. Each of the suspended contracts at issue except the Hay contract contained Special Contract Provision CT6.01, "Interruption or Delay of Operations," which provided: Purchaser agrees to interrupt or delay operations under this contract, in whole or in part, upon the written request of the contracting officer:

In his decision on liability, Chief Judge Damich found that the St. Joe and HutchBoondock timber sale contracts had not been breached. See Precision Pine, 50 Fed. Cl. at 73­74. Chief Judge Damich found that the Forest Service had breached its implied duty to cooperate with respect to the Brann contract. Id. at 73. 4

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(a) To prevent serious environmental degradation or resource damage that may require contract modification under C8.3 or termination pursuant to C8.2; (b) To comply with a court order, issued by a court of competent jurisdiction; or (c) Upon determination of the appropriate Regional Forester, Forest Service, that conditions on this sale are the same as or nearly the same as conditions existing on sale(s) named in such an order as described in (b). Purchaser agrees that in the event of interruption or delay of operations under this provision, that its sole and exclusive remedy shall be: (1) Contract Term Adjustment pursuant to BT8.21, or (2) when such an interruption or delay exceeds 30 days during Normal Operating Season, Contract Term Adjustment pursuant to BT8.21, plus out-of-pocket expenses incurred as a direct result of interruption or delay of operations under this provision. Out-of-pocket expenses do not include lost profits, replacement cost of timber, or any other anticipatory losses suffered by Purchaser. Purchaser agrees to provide receipts or other documentation to the Contracting Officer which clearly identify and verify actual expenditures. Precision Pine, 50 Fed. Cl. at 40. Throughout the suspensions, plaintiff informed the Forest Service that it considered the Forest Service to have breached the timber sale contracts. See PX 116; PX 299; Precision Pine, 62 Fed. Cl. at 637. Rather than treating the breaches as total and terminating the contracts, plaintiff instead elected to treat the breaches as partial and resumed harvesting timber from the sales after the suspensions were lifted. Precision Pine, 62 Fed. Cl. at 648­51. In addition, plaintiff requested contract term adjustments for each contract affected by the suspensions. Joint Stip. ¶ 34 (docket entry 292, March 11, 2005). The Forest Service granted each of plaintiff's requests for contract term adjustments and provided adjustments equivalent to the number of days lost during each contract's normal operating season. Id. In 1997, plaintiff submitted claims to the appropriate Forest Service contracting officer requesting a total of $13,097,209.62 in damages resulting from the suspension of the 14 contracts. See Precision Pine, 50 Fed. Cl. at 51. The contracting officer issued a final decision that plaintiff was entitled to only $18,242.78 in damages. See id. at 52. On September 11, 1998, plaintiff filed this action in the Court of Federal Claims, arguing that the Forest Service breached its implied duties to cooperate and not to hinder performance of 5

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plaintiff's timber sale contracts. Precision Pine, 50 Fed. Cl. at 39. On July 30, 2001, Chief Judge Damich issued a decision holding that the Forest Service had breached its implied duty to cooperate with respect to the Mud, Monument, Saginaw-Kennedy, Brann, Manaco, Brookbank, and Kettle contracts. Precision Pine, 50 Fed. Cl. at 73. Each of the contracts at issue (except Hay) contained Special Contract Clause CT 6.25, "Protection of Endangered Species." Chief Judge Damich found that CT 6.25 warranted that, at the time the contracts were entered into, the Forest Service had identified special measures necessary to protect endangered species under the ESA that were adequate for the protection of threatened or endangered species. Id. at 65­67. Chief Judge Damich reasoned that if a contract contains a specific warranty, a breach of that warranty breaches the implied duty to cooperate. Id. at 59 (citing Cedar Lumber, Inc. v. United States, 5 Cl. Ct. 539, 549­50 (1984)). Chief Judge Damich held that the Forest Service breached this warranty with respect to those contracts entered into after the Ninth Circuit issued its decision in Pacific Rivers on July 7, 1994. Id. at 69. After this date, the Chief Judge reasoned, the Forest Service knew that it was required to submit its LRMPs for consultation with the FWS. Id. Having failed to do so, the Forest Service had no reasonable basis to know whether the warranty language contained in CT 6.25 was true. Id. at 69­70. Chief Judge Damich also found that the Forest Service had breached its implied duty not to hinder with respect to the Hay, O.D. Ridge, U-Bar, Jersey Horse, Salt, Mud, Monument, Saginaw-Kennedy, Manaco, Brookbank, and Kettle contracts. Id. at 73­74. Chief Judge Damich found that even if a contract does not contain a specific warranty, an unreasonable delay in performance that is caused by the Government can breach the implied duty not to hinder. Id. at 59. Chief Judge Damich held that the length of the suspensions was unreasonable for these contracts, and that the Forest Service was at fault for the delay. Id. at 70­72. The Forest Service also unreasonably delayed completion of the consultation process by failing to provide the Arizona District Court with a legally sufficient Biological Opinion in conformity with the joint stipulation of Silver v. Babbitt until November 26, 1996. Id. at 71. As a result, Chief Judge Damich found that the suspensions became unreasonably protracted and plaintiff's operations were significantly hindered. Id. At the trial on damages before this Court and in its post-trial briefs, defendant argued that: (1) plaintiff cannot recover lost profits because "the manufacture and sale of lumber constituted independent and collateral undertakings"; (2) plaintiff is precluded from recovering lost profits damages because it elected to treat the breach as partial and continued to perform under the contracts after the suspensions had been lifted; and (3) lost lumber profits were not a foreseeable result of the suspensions of plaintiff's timber sale contracts. Precision Pine, 72 Fed. Cl. at 465­66. The Court ruled against defendant on all these arguments. With respect to defendant's independent and collateral undertakings argument, the Court held that the "relevant issue is whether the lost profits claimed `are too remote to be classified as a natural result' of the breach of a particular contract." Id. at 471 (quoting Ramsey v. United States, 121 Ct. Cl. 426, 434, 101 F. Supp. 353, 357 (1951)). The Court held that "the timber contracts themselves and the nature of the Forest Service timber sale program indicate that the manufacture and sale of lumber were within the contemplation of the parties at the time that the contracts were entered 6

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into." Id. at 473. Accordingly, the Court held that plaintiff was not "precluded from recovering lost lumber profits on the ground that they arose from independent and collateral undertakings." Id. at 476. With respect to defendant's arguments that plaintiff's decision to treat defendant's breach as partial rather than total precluded the recovery of lost profits, the Court held that the "remedy for a partial breach of contract is recovery of damages sufficient to place the injured party in as good a position as it would have been had the breaching party fully performed." Id. at 487 (citing Ind. Mich. Power Co. v. United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005)). The Court further held expectancy damages can include lost profits. Id. (citing Energy Capital Corp. v. United States, 302 F.3d 1314, 1324 (Fed. Cir. 2002); RESTATEMENT (SECOND ) OF CONTRACTS § 347.) With respect to defendant's argument that plaintiff's lost profits were not a foreseeable result of defendant's breaches, the Court held that although "plaintiff can only recover lost profits damages if plaintiff can establish that defendant should have reasonably foreseen that Precision Pine would not be able to obtain cover for the suspended timber sales," id. at 482, "it was foreseeable to defendant at the time of contracting that no replacement timber (i.e., `cover') would be available to Precision Pine in the event that the Forest Service suspended harvesting on all Forest Service timber sale contracts in Region Three." Id. at 483. At trial and in its post-trial briefs, plaintiff argued that its case was similar to that of a lost volume seller and that it "should not be required to offset profits that it earned by partially harvesting the suspended sales in the post-suspension period." Precision Pine, 72 Fed. Cl. at 465. The Court held that in order for plaintiff to demonstrate that it was entitled to recover lost profits without subtracting the profits it actually earned on the breached contracts during the postsuspension period,5 plaintiff was required to demonstrate that: (1) but for the suspensions, Precision Pine would have successfully bid on and been awarded additional timber sale contracts that it would have harvested and manufactured into lumber in the post-suspension period; (2) but for the suspensions, Precision Pine would have been operating its mills at full capacity in the post-suspension period; (3) but for the suspensions, Precision Pine would have sold at a profit the lumber that it would have manufactured from the additional timber sales that it would have bid on and been awarded in the post-suspension period; and (4) the profits that Precision Pine would have earned but for the suspensions by selling lumber from the additional timber sales that it
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Plaintiff contended there should be no subtraction of the profits it actually earned on the breached contracts because plaintiff was entitled to be compensated as if it were a lost volume seller. See Precision Pine, 72 Fed. Cl. at 469­71. 7

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would have bid on and been awarded in the post-suspension period would have equaled or exceeded the profits that Precision Pine actually earned by partially harvesting the suspended sales in the post-suspension period. Id. at 498. The Court ordered the parties to file supplemental briefs "discussing whether plaintiff has presented sufficient evidence to establish that it satisfies the four criteria that the Court has identified as necessary to prove that it is entitled to be compensated as a lost volume seller." Id. at 498­99. In response to the Court's September 2006 Opinion, the parties filed initial supplemental briefs on the issue of plaintiff's lost volume seller theory of damage recovery on October 17, 2006. On this same day, plaintiff filed its motion styled as a "Motion for Relief from Limited Aspects of the Court's Opinion and Order of September 17" ("Pl.'s Mot."). The Court ordered that plaintiff's motion be treated as an RCFC 59(a)(1) motion for reconsideration and that pursuant to RCFC 59(b), defendant was not to file a response unless ordered to do so by the Court. See Order of October 27, 2006 (docket entry 433). In its motion, plaintiff takes issue with the criteria set forth in the September 2006 Opinion. Although plaintiff acknowledges that it carries the initial burden of proof of establishing what it describes as its "basic case," Pl.'s Mot. at 11­12 (docket entry 431, Oct. 17, 2006), plaintiff argues that based on legal scholarship and existing case law with respect to traditional lost volume seller cases and cover damage cases, its basic case consists only of a demonstration that it is an ordinary dealer in goods--here, lumber--who, in the absence of defendant's breach, would have and could have entered into additional timber sale contracts during the post-suspension-period. Id. Plaintiff argues that once it makes such a demonstration the burden then shifts to defendant to show that, in the absence of the breach, plaintiff could not have performed both the breached contracts and the additional contracts that plaintiff contends it would have been awarded. Id. Accordingly, plaintiff requests that the Court grant it "relief from the effect of [the Court's] erroneous premises."6 Id. at 1. Each party filed a response to the opposing party's initial supplemental brief on November 14, 2006. On November 15, 2006, the Court ordered defendant to respond to plaintiff's motion for reconsideration. Defendant filed its response to plaintiff's motion on
6

Plaintiff focuses most of its attention on the second criterion concerning plaintiff's operational capacity. A fair reading of plaintiff's briefs suggests that plaintiff acknowledges that it must show that it "could have and would" have entered into the additional contracts (roughly corresponding to the first criterion), see Pl.'s Mot. at 10 (docket entry 431, Oct. 17, 2006), and that it must show that it would have earned as much or more on the additional timber contracts that it would have bid on and been awarded in the post-suspension period than it actually earned by partially harvesting the suspended sales in the post-suspension period (corresponding with the third and fourth criteria), see Pl.'s Mot. at 6 (docket entry 431, Oct. 17, 2006). 8

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December 15, 2006 ("Def.'s Resp. to Pl.'s Mot."). Plaintiff filed a reply on January 5, 2007 ("Pl.'s Reply"). DISCUSSION I. Reconsideration A. Standard of Review

"A motion for reconsideration `enables a trial court to address oversights, and the court appreciates the opportunity to do so.'" Cane Tenn., Inc. v. United States, 62 Fed. Cl. 703, 705 (2004) (quoting Fru-Con Constr. Corp. v. United States, 44 Fed. Cl. 298, 315 (1999)). The decision whether to grant a motion for reconsideration is largely within the trial court's discretion. Yuba Natural Res., Inc. v. United States, 904 F.2d 1577, 1583 (Fed. Cir. 1990); see also Triax Co. v. United States, 20 Cl. Ct. 507, 509 (1990) ("A motion for reconsideration is addressed to the discretion of the trial court."). However, "[a] motion for reconsideration is not intended to give an unhappy litigant an additional chance to sway the court." Chippewa Cree Tribe of the Rocky Boy's Reservation v. United States, 73 Fed. Cl. 154, 157 (2006) (quoting Bishop v. United States, 26 Cl. Ct. 281, 286 (1992)).7 B. Plaintiff's Modified Lost Volume Seller Theory Depends Upon Proof of Lost Profits on Contracts That It Allegedly Would Have Entered Into in the PostSuspension Period, But Such Lost Profits Are Not Based Directly on the Subject of the Breached Contracts and Are Therefore, As a Matter of Law, Too Remote and Indirect to Be Recovered

Plaintiff objects to the criteria set forth in the September 2006 Opinion. Plaintiff argues that based on existing case law with respect to traditional lost volume seller cases and cover damage cases, the Court should not require it to carry any burden beyond demonstrating that it is an ordinary dealer in goods who would have and could have entered into subsequent, profitable
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Defendant states that "the movant must show: (1) that an intervening change in the controlling law has occurred; (2) that previously unavailable evidence is now available; or (3) that the motion is necessary to prevent manifest injustice." Def.'s Resp. to Pl.'s Mot at 2 (docket entry 438, Dec. 15, 2006) (citing Strickland v. United States, 36 Fed. Cl. 651, 657 (1996)). Defendant refers to the factors applicable to the reconsideration of final judgments. Because plaintiff seeks reconsideration of an interlocutory order, and not a final judgment, "the law of the case doctrine governs. . . , not the rules that apply to reconsideration of final judgments." Wolfchild v. United States, 72 Fed. Cl. 511, 524 (2006). Under the law of the case doctrine, the Court has wider latitude to reconsider and modify an interlocutory order at any time before the entry of a final judgment, subject to the principle that questions once decided ought not to be subject to continued re-argument. First Fed. S&L Ass'n v. United States, 76 Fed. Cl. 765, 767 n.2 (2007) (citing Holland v. United States, 75 Fed. Cl. 492, 494 n.2 (2007)). 9

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timber sale contracts during the post-suspension period.8 Pl.'s Mot. at 10­11 (docket entry 431, Oct. 17, 2006). Defendant argues that Precision Pine has . . . alleged that but for the MSO suspensions it would have entered into additional timber sale contracts from which it would have earned additional lumber profits. Precision Pine's supposed inability to profit from additional contracts that it allegedly would have entered into but for the MSO suspensions might conceivably be claimed as consequential damages. It is wellestablished, however, that such consequential losses are unrecoverable as a matter of law. Defendant's Supplemental Response Brief ("Def.'s Supp. Response") at 3 (docket entry 435, Nov. 14, 2006) (citing Olin Jones Sand Co. v. United States, 225 Ct. Cl. 741, 743­44 (1980) (not published in FEDERAL REPORTER)) (footnote omitted). The Court has not yet addressed this precise issue.9 Because the Court has not yet entered a final judgment, it has the discretion under the law of the case doctrine to revisit any of its interlocutory orders and make any modifications that it deems necessary. Defendant urges the Court to deny plaintiff recovery under plaintiff's modified lost volume theory as a matter of law. Def.'s Supp. Resp. Br. at 3 (docket entry 435, Nov. 14, 2006). Defendant cites to Olin Jones, in which the United States Court of Claims, the predecessor court to the United States Court of Appeals for the Federal Circuit ("Federal Circuit"), held that as a

In the true "but for" world there would either have been no suspension or an abbreviated suspension. For the sake of simplicity, the Court, like the parties, uses the term "post-suspension period" to refer to the time period after December 4, 1996, the date upon which the suspensions were lifted. In addition the Court uses the term "suspension period" to refer to the time period between August 25, 1995, and December 3, 1996, whether discussing the "but for" world or when describing actual events. In its previous opinion the Court rejected defendant's arguments that under Olin Jones and its progeny, plaintiff's manufacture and sale of lumber products constituted "independent and collateral undertakings" and that, as a consequence, plaintiff could not recover lost profits damages. Precision Pine, 72 Fed. Cl. at 471­76. The Court remains of the view that the manufacture and sale of lumber were not independent of and collateral to plaintiff's purchase of timber from defendant. Here, the Court addresses the issue whether plaintiff's modified lost volume seller theory is dependent on plaintiff's establishing lost profits on contracts entered into after December 1996, and whether lost profits on such contracts are too remote and indirect to qualify as recoverable damages under Olin Jones and its progeny. Among such progeny is Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012 (Fed. Cir. 1996), which describes lost profits not related to the subject matter of the breached contracts as "independent and collateral undertakings." 10
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matter of law, damages "relating to potential future work or contracts"--"even assuming such damages could be proven"--"are too remote and indirect to be recoverable." Olin Jones, 225 Ct. Cl. at 744. Plaintiff in Olin Jones argued that defendant's delay in making required payments under the contracts in dispute, "damage[d] plaintiff's standing in the business community and impair[ed] its ability to obtain other work which required bonding." Id. at 742. The court held that plaintiff's injuries suffered due to its weakened business standing caused by the breach of contract could be "roughly divided into two categories; those which relate to completion of [the] particular contract [at issue], and those which involve plaintiff's ability to obtain other contracts or work." Id. at 743. While plaintiff could recover provable damages in the first category, "as a matter of law" it could not recover damages in the second category, and the trial judge was "foreclosed" from considering such damages. Id. In sum, even if plaintiff's damages in Olin Jones were certain, easily quantified by the court, and entirely foreseeable by the contracting parties at the time they entered into the contract, the court was barred from considering lost profits from the additional future contracts that plaintiff alleged it would have entered into absent defendant's breach. This rule has faced some criticism by practitioners. See, e.g., Daniel Patrick Graham, Departing From Hadley: Recovering Lost Profits on Collateral Undertakings in Suits Against the Government, 35 PUB. CONT . L.J. 43, 81 (2005) (arguing that the existing rule "represents a stark departure from the common law, which inquires whether such damages are, in fact, foreseeable and certain"); Marcia G. Madsen & Gregory A. Smith, Proceedings of the 15th Judicial Conference Celebrating the 20th Anniversary of the United States Court of Federal Claims: The Court of Federal Claims in the 21st Century: Specific Proposals for Legislative Changes, 71 GEO . WASH . L. REV . 824, 849­53 (2003) (arguing in favor of legislative initiative that would confer upon the United States Court of Federal Claims the "power to grant those damages that would be appropriate in commercial litigation between two private parties"). However, when the Federal Circuit has had occasion to revisit the holding in Olin Jones, it has consistently reaffirmed that case's central holding that lost profits that are unrelated to the subject matter of the breached contracts are not recoverable. See Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012 (Fed. Cir. 1996); Rumsfeld v. Freedom NY, Inc., 329 F.3d 1320 (Fed. Cir. 2003). In Wells Fargo, the Federal Circuit acknowledged that its predecessor court had "repeatedly refused to award damages for profits lost on transactions not directly related to the contract that was breached." Wells Fargo, 88 F.3d at 1022; see also id. at 1223 (discussing Olin Jones). Plaintiff in Wells Fargo argued that defendant's breach cost it the opportunity to earn profits from additional loans that it would have made in the absence of the breach. Id. at 1018. The trial court accepted plaintiff's theory, and awarded it lost profits on the loans that it proved at trial it would have made but for defendant's breach. Id. The Federal Circuit reversed, holding that plaintiff's "loss of interest on additional loans it allegedly could have made had there been no breach is `too uncertain and remote to be taken into consideration as part of the damages occasioned by the breach of the contract in suit'" Id. at 1023 (quoting Ramsey v. United States, 121 Ct. Cl. 426, 435, 101 F. Supp. 353, 358 (1951)). In so holding, the Federal Circuit classified 11

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the additional loans as "independent and collateral undertakings." Id. (quoting Myerle v. United States, 33 Ct. Cl. 1, 26 (1897), as quoted in Ramsey, 121 Ct. Cl. at 435, 101 F. Supp. at 358). The Federal Circuit also emphasized that "not every injury resulting from a breach of contract is remediable in damages." Id. at 1022 (citing Globe Ref. Co. v. Landa Cotton Oil Co., 190 U.S. 540 (1903)). The Federal Circuit drew a distinction between the "anticipated profits of the contracts in question [and] the anticipated profits of its entire business enterprise." Id. at 1022 (quoting Myerle, 33 Ct. Cl. 26 , as quoted in Ramsey, 121 Ct. Cl. at 434). The Federal Circuit held that the former category was remediable in damages but the latter was not. The Federal Circuit once again restated this principle in Rumsfeld v. Freedom NY, Inc., 329 F.3d 1320 (Fed. Cir. 2003). In that case, plaintiff argued that the Armed Services Board of Contract Appeals ("Board") "should have awarded [it] anticipated profits and fixed overhead associated with future contracts which, it contend[ed], it would have been awarded . . . absent the government's breach of contract." Id. at 1333. Citing both Olin Jones and Wells Fargo, the Federal Circuit held that the "Board . . . correctly held that such profits are too `remote and uncertain' to be recoverable." Id. Following these precedents the Court of Federal Claims has stated that "[c]ollateral undertakings that are too remote to be the basis for expectancy damages are those that are not based directly on the subject of the contract, but instead either involve the fruits of the contract or the opportunities crowded out by the breach of the contract." Mann v. United States, 68 Fed. Cl. 666, 669 (2005); see also, e.g., United Med. Supply Co. v. United States, 63 Fed. Cl. 430, 440 (2005) (plaintiff not entitled to "consequential damages to its overall business or lost profits on future contracts that were not obtained."); Mega Constr. Co. v. United States, 29 Fed. Cl. 396, 474 (1993). Plaintiff suggests that it hypothetically "could have, but did not, seek the difference between the full profits that it would have made on [the future contracts that it alleges it would have obtained but for defendant's breach] in the post-suspension period and the much smaller actual profit that it made [on the suspended contracts in the post-suspension period]." Pl.'s Mot. at 5 n.4 (docket entry 431, Oct. 17, 2006). Based on Olin Jones and its progeny, plaintiff's conclusion with respect to its hypothetical is mistaken. The profits from the additional contracts that plaintiff alleges it would have performed in the absence of the breach do not "relate" to the breached contracts as that term was used in Wells Fargo. Generally, lost profits based upon a later transaction relate to the subject matter of the breached contract when the breached contract is an agreement to supply inputs or resources that plaintiff uses to produce and sell end goods in a second transaction. Wells Fargo, 88 F.3d at 1023 (plaintiff was entitled to the profits from a later transaction only when "the only purpose of the contract . . . was for the plaintiff to make profits on the subject of the contract--[for example] through mining, dairy cow operations, or property resale."). However, as the cases cited above consistently hold, it is never enough for a plaintiff to merely allege that the lost profits on the breached contract made entering into the second contract economically infeasible or that defendant's breach "crowded out" another opportunity that would have existed in the absence of the breach. Such contracts are considered independent and collateral to the breached contacts and profits from those contracts do not relate

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to the breached contract. The law in this Circuit is well-established that lost profits caused by the lost opportunity to enter into collateral contracts are not recoverable. Plaintiff also argues that "any offset post-suspension profits will place it in a substantially worse position than it would have been had defendant performed as expected and therefore . . . no offset is appropriate," Pl.'s Supp. Br. at 2 (docket entry 430, Oct. 17, 2006). However, as the Federal Circuit enunciated in Wells Fargo, "not every injury resulting from a breach of contract is remediable in damages." Wells Fargo, 88 F.3d at 1022 (citing Globe Ref. Co. v. Landa Cotton Oil Co., 190 U.S. 540 (1903)). Thus, plaintiff's contention that it will be placed in a substantially worse position than it would have been in the absence of the breach does not establish the viability of its modified lost volume seller theory. The Court's September 2006 Opinion, describes a hypothetical involving the sale of a washing machine. Precision Pine, 72 Fed. Cl. at 491. The seller "has or can obtain more machines than it can sell. The buyer breaches and the seller resells the washing machine destined for the breacher at same list price to another." 1 WHITE & SUMMERS, UNIFORM COMMERCIAL CODE ("WHITE & SUMMERS"), § 7-9, 484 (5th ed. 2006). Because the "resale buyer is one of seller's regular customers who had intended to purchase a washing machine from seller anyway," deducting the profits that seller made on the sale of that specific machine from the profits that seller would have made absent the breach would under-compensate the seller. In the absence of the buyer's breach, the seller would have made two sales, but instead, the seller only made one sale. In such cases, the seller is entitled to the entire lost profit that it would have earned on the breached contract, without reducing that amount by the profits ultimately earned on the sale of that specific washing machine. Compare the foregoing typical example of a lost volume sale to the following hypothetical. Assume that the seller and the buyer have contracted for the sale and delivery of the washing machine. As part of their agreement the buyer has promised to make himself available to accept the delivery. However, when the seller arrives at the point of delivery, the buyer cannot be found, and the seller's delivery truck returns to the seller's shop having failed to deliver the washing machine. After further communication, the seller re-schedules the delivery and buyer accepts the washing machine. Assume further that the seller can prove that but for the buyer's breach, the seller would have been able to accomplish one additional sale, because the seller would have been able to make a different delivery during the time it was occupied completing the rescheduled delivery. Note that in this hypothetical, the seller suffers the exact same injury as the seller in the typical example of a lost volume sale: the loss of one sale. However, to the extent that lost volume damages in the first hypothetical may be available in the Court of Federal Claims, it is well-settled that lost volume damages are not available in the second case. That is because the lost sale in the second hypothetical concerns a collateral contract opportunity "crowded out by the breach of the contract," see Mann, 68 Fed. Cl. at 669,

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and thus the loss of that opportunity falls into the category of injuries not "remediable in damages." Wells Fargo, 88 F.3d at 1022.10 With respect to the second hypothetical above, plaintiff here does not directly request the lost profits from the second sale. Rather, plaintiff's theory is analogous to the seller of the washing machine requesting the full profits that it would have earned on the failed delivery without respect to the consideration that the buyer actually paid the seller. For the sake of simplicity, assume that the cost of the washing machine to the seller was $250, its delivery costs were $50, and the contract price is $500. The seller, thus, expected to earn $400 ($200 on each sale and delivery), but due to defendant's breach, it earned only $200. The critical question as the hypothetical pertains to the case before the Court is whether the seller may seek the full $200 "lost profits" that it would have earned on the failed delivery without accounting for the $150 ($200 less the additional $50 in costs for the second delivery trip) it actually earned on the rescheduled delivery. Based on Olin Jones and its progeny, the Court holds that plaintiff cannot. Plaintiff cannot escape the fact that it requests an amount in excess of its actual lost profits on the contracts in dispute. By definition, the "lost" profits on the contracts in dispute cannot include the profits earned on those contracts. A lost profit is only the amount that was not--but would have been--earned due to defendant's breach. The cases discussed above stand for the principle that only damages that flow from the "subject matter" of the contracts may be recovered, and plaintiff is not entitled to damages affecting its "entire business enterprise." Wells Fargo Bank, 88 F.3d at 1022; Ramsey, 121 Ct. Cl. at 434. In this case, the subject matter of the contracts is the specific timber that defendant sold to plaintiff. Thus, following the precedent discussed above, plaintiff may recover the losses it suffered due to its inability to sell lumber products manufactured from the specific timber that plaintiff was unable to harvest because of defendant's breach. Plaintiff cannot, however, recover the profits it would have earned on the collateral contracts that it alleges it would have profited from in the absence of defendant's breach. According to plaintiff's model, the profits that plaintiff would have earned in the absence of defendant's breach can be broken down into two transactions. Pl. Mot. at 3­4 (docket entry 431, Oct. 17, 2006). Transaction 1 consists of the profits that plaintiff would have earned during the suspension period. Id. Transaction 2, according to plaintiff, consists of the profits from lumber sales that plaintiff would have made in the absence of the breach in 1997 and 1998. Id.

Like plaintiff, the seller in this hypothetical probably would not qualify as a traditional lost volume seller. This is because in this hypothetical (1) delivery is part of the sales package and (2) the seller has a limited truck capacity. The lost volume seller theory generally operates under the assumption that seller has the capacity to sell an unlimited number of goods. See, e.g., 3 FARNSWORTH ON CONTRACTS § 12.10 (3d ed. 2004); 1 WHITE & SUMMERS, § 7-9, 484 ; see also, e.g, 3 WILLISTON ON SALES, § 24:26, 658 (5th ed. 2006) (discussing Lake Erie Boat Sales, Inc. v. Johnson, 11 Ohio App. 3d. 55, 463 N.E.2d 70 (8th Dist. Cuyahoga County 1983)); 4A LAWRENCE 'S ANDERSON ON THE UNIFORM COMMERCIAL CODE, § 2-708:5, 220 (3d. ed. 2006). 14

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Thus, under plaintiff's view, Transaction 1 never occurred. Id. Plaintiff argues it partially completed Transaction 2, which as a matter of "happenstance," id. at 10, involved the timber from the breached contracts. Id. The Court reads the above-cited precedent to require a more rigorous tracking of which profits flow from which contracts. Put another way, plaintiff is not entitled to the profits it would have earned during the suspension period; rather, plaintiff is entitled to the profits it would have earned from the breached contracts. Under plaintiff's approach, the Court would simply ignore the profits that plaintiff actually earned on the breached contracts during the post-suspension period. Plaintiff argues that its approach is appropriate because even though it did make up some of its lost production on the specific breached contracts, it could never have made up lost production with respect to its overall business operations. Pl.'s Supp. Br. at 9 (arguing that the "hole in the `profit pipeline' in the full amount of [the lost volume during the suspension period attributable to the breached contracts] remains unfilled.") (docket entry 430, Oct. 17, 2006). However, this approach is impermissible because plaintiff is not entitled to "anticipated profits of its entire business enterprise" but only the "anticipated profits [on] the contracts in question." Wells Fargo, 88 F.3d at 1022; Ramsey, 121 Ct. Cl. at 434. Although plaintiff appears to treat the breached contracts and the collateral contracts as fungible profit-making opportunities the sources of which are a matter of "happenstance," within this circuit plaintiff must show that its lost profits actually flow from the breached contracts. In addition to its inconsistency with the general rule that injuries to a plaintiff's overall business enterprise that do not flow directly from the subject matter of the breached contract are nonremediable, plaintiff's approach, if accepted, would circumvent the more specific rule that a plaintiff may not recover for its losses related to collateral contract opportunities "crowded out by the breach of the contract." Mann, 68 Fed. Cl. at 669. It would make little practical difference if the Court affirmatively permitted plaintiff to recover lost profits on collateral contracts or if it permitted plaintiff to use its lost profits on such contracts as a quasi-credit to negate the profits plaintiff actually earned on the breached contracts in the post-suspension period. Arithmetically, adding a positive figure is identical to subtracting a negative figure. The only practical difference between awarding damages for lost profits on unrelated contracts and adopting plaintiff's lost volume seller theory is that plaintiff's approach would place a cap on the amount recoverable from lost profits on unrelated contracts equal to the profits earned on the breached contracts.11

To calculate "lost profits" one subtracts the earned profits ("Y") from the expected profits ("X"). Lost profits can thus be expressed as X - Y. From an arithmetic standpoint, it makes no difference if the Court directly permits plaintiff to affirmatively recover its lost profits on collateral contracts in amounts up to Y (this can be expressed as "(X - Y) + Y"), or whether it permits plaintiff to negate the value of Y based on the existence unrelated contracts (this can be expressed as "X - (Y-Y)"). In both scenarios, plaintiff is left with the full amount X. The only difference between adopting plaintiff's approach and permitting it to affirmatively recover the lost profits on the unrelated contracts--something that is clearly impermissible under Olin Jones (continued...) 15

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However, for the reasons stated above, lost profits on collateral contracts are nonremediable as a matter of law. There is simply no basis to conclude that injuries that are per se nonremediable may nonetheless be awarded in smaller fractions. In view of the foregoing, the Court now holds that plaintiff's modified lost volume seller theory is not viable because plaintiff's theory relies upon proof of lost profits on contracts that were independent and collateral undertakings not related to the subject matter of the breached contracts. Lost profits on contracts plaintiff allegedly would have entered into in the postsuspension period are, as a matter of law, too remote and indirect to be recovered. In sum, plaintiff may only recover for its losses that flow from the specific contracts in dispute and not from losses to its overall business enterprise. Because plaintiff has no legal entitlement to recover in this action its losses stemming from collateral contracts, it may not recover damages for such losses either affirmatively or by using the existence of such losses as a means to reduce the profits actually earned on the suspended contracts in the post-suspension period. Plaintiff's modified lost volume theory of recovery fails because the losses on collateral contracts are, as a matter of law, too remote and indirect. Thus, for all contracts, except Manaco,12 plaintiff must reduce the profits it would have earned on the suspended contracts by the profits it actually earned on such contracts in the post-suspension period. C. Even If Plaintiff's Modified Lost Volume Seller Theory Did Not Depend On Proving Damages That Are Not Recoverable as a Matter of Law, Plaintiff Has Not Established on the Evidence of Record That It Meets the Criteria Set Forth in the Court's September 2006 Opinion and Order 1. Plaintiff Bears the Burden of Proof

Plaintiff objects to the formulation of burden of proof set forth in the September 2006 Opinion and Order. Plaintiff characterizes the Court's opinion as placing the burden on plaintiff "to show that profits [in the post-suspension period] should not be offset against the profits that

(...continued) and its progeny--is that plaintiff could not recover amounts above Y to the extent that the value of the expected profits on the unrelated contracts exceeded Y. Manaco presents a unique situation because even absent defendant's breach, plaintiff likely would not have harvested the entire amount of timber on that contract until the postsuspension period. Infra, Section II.A.1.e. Thus, plaintiff need not deduct the entire amount of profit that it earned on the Manaco contract from the profit it would have earned during the suspension period in the absence of the breach. Specifically, plaintiff need not deduct the portion of its post-suspension profit that it earned on the Manaco contract equivalent to the amount that the Court determines plaintiff likely would have earned on the Manaco contract in the postsuspension period even absent defendant's breach. Infra, Section II.A.1.e. 16
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Precision Pine lost . . . during the suspension period." Plaintiff argues that once it proves its "basic case,"13 the burden then shifts to defendant to prove that its post-suspension profits should be "offset"14 from the profits that plaintiff would have earned in the absence of defendant's breach. Pl.'s Mot. at 12 (docket entry 431, Oct. 17, 2006). Plaintiff argues that other commentators agree with this formulation: Although the ultimate burden must rest on the [non-breaching party], once the [non-breaching party] has made a basic showing of lost volume status, the burden of going forward with the evidence should fall upon the . . . defendant.

Plaintiff adopted the phrase "basic case" from WHITE & SUMMERS, § 7­14. Pl.'s Mot. at 10 (docket entry 431, October 17, 2006). Plaintiff argues that its basic case consists of showing that it is a "regular dealer in goods" that "could have and would have" completed both the breached transaction and the lost transaction. Pl.'s Mot. at 10­12 (docket entry 431, October 17, 2006). The Court has adopted the phrase used by plaintiff and the text writers, understanding it to mean "prima facie case." Much of the confusion appears to derive from the imprecise use of the word "offset." Both the parties and the Court use the word "offset" as a shorthand to refer to the "reduction of the profits plaintiff would have earned in the absence of the breach by the profits actually earned on the breached contract during the suspension period." However, defendant is not actually requesting an "offset" as that term is traditionally understood. See, e.g., BLACK'S LAW DICTIONARY (8th ed., 2004) (quoting 4 Ann Taylor Schwing, CALIFORNIA AFFIRMATIVE DEFENSES 2d § 44:1, at 4­5 (1996) ("The . . . equitable concept of `offset' recognizes that the debtor may satisfy a creditor's claim by acquiring a claim that serves to counterbalance or to compensate for the creditor's claim . . . .")); see also Caroline Hunt Trust Estate v. United States, 65 Fed. Cl. 271, 315 (2005) (noting that the set-off, or offset, equaled the value of benefits conferred on plaintiff). Here, defendant is neither asserting any claims against plaintiff nor arguing that plaintiff's profits actually earned on the breached contracts represent a benefit conferred upon plaintiff. For this reason, case law which plaintiff cites to stand for the proposition that defendant carries the burden of establishing the amount of an "offset" is not on point. See Precision Pine, 72 Fed. Cl. at 495 ("A different burden of proof applies where plaintiff is attempting to prove its damages than where defendant is attempting to establish an offset against damages that a plaintiff has proved.") (citing Caroline Hunt Trust Estate, 65 Fed. Cl. at 315). Here, the parties dispute the outcome of the application of the ordinary lost profits calculus in the first instance. The burden is on plaintiff to show that it is entitled to be compensated as if it were a lost volume seller, i.e., that it is entitled to recover lost profits on the breached sales without reducing those profits by the profits actually earned on the breached sales in the post-suspension period. See Precision Pine, 72 Fed. Cl. at 492 n.21. 17
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. . . The [defendant] may, of course, effectively counter evidence of the seller's lost volume status if the buyer can show either that the breach enabled the [non-breaching party] to make a resale that otherwise could not have been made, or that the [non-breaching party] unreasonably failed to mitigate damages by making such a sale. Id. at 11 n.9 (quoting Roy Ryden Anderson, Damages for Sellers under the Code's Profit Formula, 40 SW . L.J. 1021, 1060 (1986)). This second passage clarifies that the burden of proof shifts to defendant only when defendant intends to show that its breach benefitted plaintiff by enabling plaintiff to "make a resale that otherwise could not have been made" or that plaintiff "unreasonably failed to mitigate damages by making such a sale." Here, defendant makes neither argument, and the Court's criteria do not force plaintiff to carry the burden of proof with respect to those issues. Although plaintiff suggests that the Court has mistakenly tried to "shoe horn" its case to fit within the traditional lost volume fact pattern, Plaintiff's Reply Brief ("Pl.'s Reply. Br."), at 6 n.3 (docket entry 439, Jan. 5, 2007), it is actually plaintiff that urges the Court to apply case law that is not on point. As the Court explained in its September 2006 Opinion, "Precision Pine does not precisely fit within the traditional concept of a lost volume seller. Thus, the criteria that Precision Pine must establish to demonstrate that it should be compensated as a lost volume seller differ somewhat from the criteria set forth in more traditional lost volume seller cases." Precision Pine, 72 Fed. Cl. at 497. Put another way, and using the terminology that plaintiff has adopted from the White & Summers treatise, plaintiff here must prove a different set of facts to establish its "basic case" than a plaintiff in a traditional lost volume seller case. Plaintiff explains its case as follows: "[B]ut for" defendant's breach, during the nearly 20-month period from August 25, 2006 [sic] to April 15, 1997, Precision Pine would have harvested and processed 25,000 mbf (LS) more timber than it did, sold the resulting lumber and by-products and made a profit thereon of $6,551,856 (These sales of lumber and by-products are designated herein as "Transaction 1.") . . . Furthermore, while in this "but-for" world, as of [December 1996] Precision Pine would have had little to no timber to harvest, it still would have had three sawmills and substantial resources (i.e., the profits from Transaction 1) with which to purchase the timber to supply those mills from the Forest Service which had just resumed selling timber on the four national forests where Precision Pine historically operated. Therefore, but for the suspension Precision Pine would have bought a substantial volume of that timber, processed it into lumber and byproducts and sold that lumber and by products. (The sales of lumber and by-products from 25,000 mbf (LS) of such timber that would have taken place in 1997 and 1998 are designated herein as 18

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"Transaction 2.") Accordingly, Precision Pine would have had the profits from both Transaction 1 and Transaction 2. Pl. Mot. at 3­4 (docket. entry 431, Oct. 17, 2006) (citations and footnotes omitted). Plaintiff's model needs to be more precise. Each "transaction"15 consists of at least two sub-transactions: (1) a purchase of timber and (2) the manufacture and sale of lumber products and by-products. To modify plaintiff's model from above, the Court labels the purchase of goods or input materials relating to the breached contract--here, the breached timber sale contracts--as Transaction 1A, and the manufacture and/or sale of the corresponding goods--here, lumber and by-products--as Transaction 1B. Similarly, the Court labels the purchase of goods or input materials for the nonbreached contracts--here, the unrelated contracts that plaintiff alleges it would have entered into but for defendant's breach--as Transaction 2A, and the manufacture and/or sale of the corresponding goods as Transaction 2B. As mentioned above, plaintiff argues that to prove its basic case it must demonstrate only that it is a "regular dealer in goods" that "could have and would have" completed both the breached transaction and the lost transaction. See Pl. Mot. at 10­12 (docket entry 431, October 17, 2006). These are important elements of what the Court holds is plaintiff's basic case, and indeed the Court's criteria require plaintiff to demonstrate these facts. The Court's first and third criteria, see supra, p. 7, require plaintiff to establish these facts. However, where plaintiff and the Court's views on plaintiff's basic case appear to diverge is with respect to whether plaintiff must also show that defendant's breach deprived it of the opportunity to accomplish the second transaction.16 See infra, Section II.C.3. The Court is of the view that this is an essential component of plaintiff's basic case, and the second criterion requires plaintiff to establish that defendant permanently deprived plaintiff of the lost opportunity to earn profits from the additional contracts that plaintiff alleges it would have completed in the absence of defendant's breach.

As discussed previously, supra, pp. 14­15, the Court rejects plaintiff's approach the extent that it attempts to define the "transactions" as the I) profits it would have earned during the suspension period and ii) the profits plaintiff would have earned in 1997­1998. Rather, the Court uses the term transaction in the traditional sense--i.e., a contract to buy or sell something. Or as the Court held in the September 2006 Opinion, "to the extent that plaintiff's lost volume seller theory is based on the argument that Precision Pine lost an opportunity to produce and sell lumber that can never be replaced, plaintiff would not be entitled to be compensated as a lost volume seller if the alleged lost production opportunity could have simply been made up in the post-suspension period by increasing the rate at which Precision Pine operated its mills." Precision Pine, 72 Fed. Cl. at 492. In such a case, plaintiff's lost profits would be the result of its own business decisions. 19
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As formulated by the Court in its September 2006 Opinion and using the model outlined above, plaintiff must demonstrate that defendant's breach deprived it of the opportunity to manufacture additional lumber in the post-suspension period and that but for defendant's breach it would have purchased additional timber in Transaction 2A, manufactured such timber into lumber and by-products, and sold its products at a profit in Transaction 2B. As always, plaintiff would carry the burden of proving its basic case. Under the Court's view, in order to prove its basic case, plaintiff would have to prove that it satisfied the first three of the Court's four criteria. The fourth criterion is only relevant after plaintiff establishes that it is entitled to be compensated as a lost volume seller. Put another way, if plaintiff fails to demonstrate any of the first three criteria, it cannot show that it is entitled to recover as if it were a lost volume seller.17 However, if plaintiff fails to demonstrate the fourth criterion, it can still recover as if it were a lost volume seller. The consequence of failing to demonstrate the fourth criterion would be a reduction of the lost volume damages in order to prevent placing plaintiff in a better position than it would have been in but for the breach. The purpose of the fourth criterion is perhaps best understood through use of another hypothetical. Assume that in the absence of defendant's breach, plaintiff would have earned $10 on the breached contracts in the suspension period and $5 on the collateral contracts that it would have entered into during the post-suspension period. Plaintiff would thus have earned a total of $15 profit in the absence of the breach. If plaintiff actually earned $7 in the post-suspension period, it would be improper for the Court to award it the full $10 that it would have earned during the suspension period in the absence of the breach because that would leave plaintiff with $17 ($10 in damages plus the $7 that it actually earned) whereas in the absence of defendant's breach it would have only earned $15. Thus, in such a case, it would be appropriate to reduce the lost profits on the breached sales by $2, or the amount that the profits actually earned on such sales in the post suspension period ($7) exceeded the lost profits plaintiff would have earned on the collateral contracts ($5). The Court concludes that in this case, it is fair to place the burden on plaintiff to show that "the profits that Precision Pine would have earned but for the suspensions by selling lumber from the additional timber sales that it would have bid on and been awarded in the post-suspension period would have equaled or exceeded the profits that Precision Pine actually earned by partially harvesting the suspended sales in the post-suspension period." Only plaintiff knows its intent and plaintiff can best present evidence with respect to its strategy for harvesting

Even a traditional lost volume plaintiff is not necessarily entitled to its full profits on the lost sale. Rather, once plaintiff has established its basic case, the presumptive starting point for the calculation of damages is the full profits of the lost sale. However, these damages are reduced to the extent that such an award would place plaintiff in a better position than ha