Yankee Atomic Elec. Co. v. U.S.

• Decision Date: 07 August 2008
• Docket Number: No. 2007-5033.,No. 2007-5025.,No. 2007-5026.,No. 2007-5027.,No. 2007-5032.,No. 2007-5031.,2007-5025.,2007-5031.,2007-5026.,2007-5032.,2007-5027.,2007-5033.
• Citation: 536 F.3d 1268
• Parties: YANKEE ATOMIC ELECTRIC COMPANY, Plaintiff-Cross Appellant, v. UNITED STATES, Defendant-Appellant. Maine Yankee Atomic Power Company, Plaintiff-Cross Appellant, v. United States, Defendant-Appellant. Connecticut Yankee Atomic Power Company, Plaintiff-Cross Appellant, v. United States, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

536 F.3d 1268

YANKEE ATOMIC ELECTRIC COMPANY, Plaintiff-Cross Appellant, v. UNITED STATES, Defendant-Appellant.

Maine Yankee Atomic Power Company, Plaintiff-Cross Appellant, v. United States, Defendant-Appellant.

Connecticut Yankee Atomic Power Company, Plaintiff-Cross Appellant, v. United States, Defendant-Appellant.

No. 2007-5025.

No. 2007-5031.

No. 2007-5026.

No. 2007-5032.

No. 2007-5027.

No. 2007-5033.

United States Court of Appeals, Federal Circuit.

August 7, 2008.

Catherine E. Stetson, Hogan & Hartson L.L.P., of Washington, DC, argued for all plaintiffs cross-appellants. With her on the brief were Paul A. Werner III and

Jake M. Shields. Of counsel on the brief were Jerry Stouck and Robert L. Shapiro, Greenberg Traurig L.L.P., of Washington, DC.

Harold D. Lester, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellant. With him on the brief were Jeanne E. Davidson, Director, and Marian E. Sullivan, Trial Attorney. Of counsel on the brief was Jane K. Taylor, Office of General Counsel, United States Department of Energy, of Washington, DC.

Before MAYER, LOURIE, and RADER, Circuit Judges.

RADER, Circuit Judge.

This appeal is one of many in the long line of contract disputes arising from the Government's failure to accept and dispose of radioactive waste from the nation's nuclear utilities. This is the first in a trio of concurrent opinions addressing the categories and amount of damages due to the utilities because of the Government's breach. See Pac. Gas & Elec. Co. v. United States, 536 F.3d 1282; Sacramento Mun. Util. Dist., No.2007-5052 et al., ___ Fed.Appx. ___, 2008 WL 3539880

Yankee Atomic Electric Company (Yankee Atomic), Maine Yankee Atomic Power Company (Maine Yankee), and Connecticut Yankee Atomic Power Company (Connecticut Yankee) (collectively the Yankees) originally brought this action seeking damages to compensate for the cost of storing spent nuclear fuel (SNF) and high-level radioactive waste (HLW) beyond the time that the Government promised by contract to begin storing that waste in a permanent and secure repository. Because the Court of Federal Claims did not assess damages according to the rate at which the Government was contractually obligated to accept the utilities' waste, this court reverses and remands.

I

The general factual background of the contracts and circumstances surrounding the SNF cases appears in the trial court's opinion and earlier opinions by this court. See Yankee Atomic Elec. Co. v. United States, 73 Fed.Cl. 249, 250-259 (2006) (Yankee I); see also Me. Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1337-40 (Fed.Cir.2000). Accordingly, this opinion will only discuss the facts necessary for an understanding of the issues in this appeal.

The Yankees are three electric companies located in the northeastern United States. Maine Yankee produced nuclear power at its facility from 1972 until 1996, and elected to cease operations permanently in 1997. Connecticut Yankee produced nuclear power at its facility beginning in 1968 and shut down in 1996. Yankee Atomic, located in Massachusetts, generated nuclear power from 1960 until 1991.

Under the Nuclear Waste Policy Act of 1982, Pub.L. No. 97-425 (codified at 42 U.S.C. §§ 10101-10270) (NWPA), the Yankees (and the remainder of the nation's nuclear utilities) entered into a contract with the Department of Energy (the Department or DOE) in 1983. That contract (the Standard Contract), discussed in greater detail below, obligated the Department to take title to and dispose of the Yankees' SNF and HLW. In exchange, the contract obligated the Yankees to pay removal and disposal fees into the Nuclear Waste Fund (NWF). The contract bound the Department to begin acceptance and disposal of nuclear waste by January 31, 1998. Yet, even though the Yankees have paid nearly $130 million in fees to the Government, the Department has not removed any of their radioactive waste.

The Department's failure to perform beginning on January 31, 1998 constituted a partial breach of the contract. See Me. Yankee, 225 F.3d at 1343; Ind. Mich. Power Co. v. United States, 422 F.3d 1369, 1376-77 (Fed.Cir.2005). The parties in this appeal dispute only the amount of damages owed to the Yankees for that breach.

This damages inquiry focuses on whether the Department's breach was a substantial factor in the Yankees' decision to construct a dual-purpose dry storage facility to more safely and securely store their SNF. Another important inquiry involves the Government breach's alleged causal link to Maine and Connecticut Yankees' election to rerack their wet pool storage facilities to accommodate additional waste. The Court of Federal Claims found in favor of the Yankees on these counts (as well as several others), and awarded them a combined total of $142,795,520.55 in damages. Yankee I, 73 Fed.Cl. at 326.

The Government appeals because the trial court did not construct and refer to a non-breach world in calculating damages. Specifically, the Government complains that the trial court did not use the contractual acceptance rate to develop a non-breach scenario. Thus, according to the Government, the trial court did not evaluate whether the Yankees would have pursued dual-purpose dry storage even if the Department had timely performed. The Government likewise appeals the award of pre-breach mitigation damages for the reracks performed by Maine Yankee and Connecticut Yankee. In addition, the Government appeals the Court of Federal Claims' rulings that the disposal of Greater Than Class-C (GTCC) waste is covered by the Standard Contract, and that the Government is not entitled to an offset for the more than $312 million in contract fees that Maine Yankee and Connecticut Yankee have not yet paid. In their counter appeal, the Yankees raise just one issue, requesting entry of partial (rather than final) judgment under Court of Federal Claims Rule 54(b) and retention of jurisdiction over the Yankees' claims for future damages from the Government's continued failure to perform.

II

This court reviews contract interpretation as a question of law without deference. Winstar v. United States, 64 F.3d 1531, 1540 (Fed.Cir.1995) (en banc), aff'd, 518 U.S. 839, 116 S.Ct. 2432, 135 L.Ed.2d 964 (1996). Evidentiary rulings receive review for an abuse of discretion. Flex-Rest, LLC v. Steelcase, Inc., 455 F.3d 1351, 1357 (Fed.Cir.2006) (citing Gen. Elec. Co. v. Joiner, 522 U.S. 136, 141-43, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997)). A trial court's selection of a causation standard likewise "depends upon the facts of the particular case and lies largely within the trial court's discretion." Citizens Fed. Bank v. United States, 474 F.3d 1314, 1318 (Fed.Cir.2007).

The Government's primary challenge relates to the Court of Federal Claims' choice and application of the substantial factor causation standard. Citing to Indiana Michigan, the trial court elected to apply the "substantial factor" causation test rather than the more traditional "but for" test. Yankee I, 73 Fed.Cl. at 263-64. Use of that standard, which requires determination of whether the Government's breach of contract was a substantial factor in causing the plaintiff's damages, was within the trial court's discretion in this case. Although the substantial factor test is not preferred, this court has refrained from reversing trial courts that have applied the substantial factor test in Winstar and SNF cases. See, e.g., Citizens Fed., 474 F.3d at 1319; Ind. Mich., 422 F.3d at 1373.

While enjoying discretion to use the substantial factor test, the trial court must apply that test correctly. Specifically, damages for breach of contract require a showing of causation. The trial court erred in overlooking the Yankees' burden to prove causation. In this case, the Yankees can only sustain their damages claim if: "(1) the damages were reasonably foreseeable by the breaching party at the time of contracting; (2) the breach is a substantial causal factor in the damages; and (3) the damages are shown with reasonable certainty." Ind. Mich, 422 F.3d at 1373 (emphasis supplied).

The fundamental causation difficulty in this contract is the absence of an explicit SNF or HLW acceptance rate or time table. Without an express timetable for removal of the Yankees' waste in the event the Government had kept its bargain, the Yankees cannot show the expenses they might have avoided. The Court of Federal Claims attempted to avoid this complexity by simply decreeing that any reasonable acceptance rate would have enabled the Yankees to avoid their incurred costs. Thus, without accounting for any acceptance rate at all, the trial court determined that the Department's breach substantially caused the Yankees' costs:

Regardless of rate, these plaintiffs are faced with at least a twelve-year delay in commencement of performance. With due regard to the long lead time required for these mitigation decisions, the evidence establishes that the mitigating decisions and resulting expenditures were commercially reasonable and substantially caused by DOE's impending partial breach(es) and delay(s).

Yankee I, 73 Fed.Cl. at 268 (emphasis supplied). Such a simple direct approach to causation has a superficial appeal, but this intricate case demands more than estimates or assumptions as proof of causation. Thus, the Yankees had the burden to prove the contractual acceptance rate and apply that rate before suggesting that the Government's breach was a substantial factor in causing the Yankees' claimed expenses. The trial court had the obligation to hold the Yankees to that burden.

"The remedy for breach of contract is damages sufficient to place the injured party in as good a position as it would have been had the breaching party fully performed." Ind. Mich., 422 F.3d at 1373. Without record evidence about the Yankees' condition with full...