## Facts

- In 1995, the City of East Liverpool entered a 30-year water service agreement with the Board of Commissioners of Columbiana County, requiring the County to purchase a minimum of 235,000 gallons of water per day from the City.
- The County later assigned the agreement to Buckeye Water District (BWD), which operated the local distribution system.
- Beginning in 2004, BWD and the Commissioners failed to pay amounts due under the agreement.
- BWD and the Commissioners later notified the City that they were repudiating the agreement, claiming the City had breached by failing to provide required water quantity/pressure and by failing to provide safe potable water, including allegations involving trihalomethanes (THMs) and Ohio EPA-related compliance issues.
- The City sued for breach of contract in the Columbiana County Court of Common Pleas (filed in 2005).
- After a bench trial (concluding September 2007), the trial court ruled for the City on liability and awarded roughly $9.7 million in damages, including about $8.2 million attributed to future losses for the remaining contract term.
- The trial court did not apply a present-value discount to the future-damages stream, reasoning that the City’s ability and history of raising rates would offset discounting.
- BWD and the Commissioners appealed, challenging (a) whether they were justified in repudiating due to the City’s alleged breaches and (b) the amount and method of the damages award, including the lack of discounting and other calculation assumptions.

## Issues

1. Whether the City materially breached the water service agreement (quantity/pressure and potability/THMs) such that BWD and the Commissioners were excused from performance and justified in repudiating.
2. Whether the trial court properly calculated damages for breach of a long-term water service agreement, including an award of future damages for the remaining term.
3. Whether the trial court erred by failing to discount future damages to present value and by relying on assumed future rate increases as a substitute for discounting.
4. Whether any damages-calculation errors required reversal, modification, or other relief on appeal.

## Decision

- The court of appeals affirmed the trial court’s liability determination that BWD and the Commissioners breached/repudiated the agreement and were not excused by a material breach by the City.
- The court upheld the trial court’s factual findings (including on quantity/pressure and potability disputes) under the competent, credible evidence standard applicable to bench trials.
- The court agreed that an award including future damages for the remaining contract term could be appropriate where proven with reasonable certainty.
- The court modified the damages award, concluding the trial court’s approach to future damages was flawed, particularly its refusal to discount future losses to present value based on speculative assumptions about future rate increases.

## Legal Principles

- A party is not entitled to repudiate a contract unless the other party has committed a material breach; disputes or regulatory compliance concerns do not excuse performance unless they rise to a material failure of contractual duties on the record presented.
- In a bench trial, an appellate court generally defers to the trial court’s factual findings and credibility determinations when supported by competent, credible evidence.
- Contract damages aim to place the injured party in the position it would have been in had the contract been performed; future losses may be awarded if proved with reasonable certainty rather than conjecture.
- When future damages are awarded as a lump sum, discounting to present value is ordinarily required; a court should not replace discounting with unsupported assumptions that future price or rate increases would offset the time value of money.
- An appellate court may affirm liability yet modify the monetary judgment when the record shows errors in the damages computation.

## Conclusion

In *City of East Liverpool v. Buckeye Water Dist.*, the Seventh District held that Buckeye Water District and the Columbiana County Commissioners were not justified in repudiating the long-term water agreement based on alleged quantity, pressure, or THM-related water-quality problems, and it affirmed liability for breach; however, it modified the judgment because the trial court’s future-damages methodology—especially the failure to discount to present value based on assumed future rate increases—was not an acceptable basis for a lump-sum award.


City of East Liverpool v. Buckeye Water Dist., No. 08 CO 19, 2010 WL 2676900 (Ohio Ct. App. 7th Dist. June 21, 2010) (if the WL citation is accurate)