Atlas Corp. v. U.S., Nos. 89-1205

CourtUnited States Courts of Appeals. United States Court of Appeals for the Federal Circuit
Writing for the CourtBefore MARKEY, Chief Judge, BENNETT; BENNETT
Citation895 F.2d 745
Parties, 58 USLW 2508, 20 Envtl. L. Rep. 20,706, 36 Cont.Cas.Fed. (CCH) 75,810 ATLAS CORPORATION, Kerr-McGee Chemical Corporation, Quivira Mining Company, Western Nuclear, Inc., Atlantic Richfield Company, Umetco Minerals Corporation and Union Carbide Corporation, Homestake Mining Company of California, Inc., and Pathfinder Mines Corporation, Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee. to 89-1212.
Docket NumberNos. 89-1205
Decision Date02 February 1990

Page 745

895 F.2d 745
31 ERC 1100, 58 USLW 2508, 20 Envtl.
L. Rep. 20,706,
36 Cont.Cas.Fed. (CCH) 75,810
ATLAS CORPORATION, Kerr-McGee Chemical Corporation, Quivira
Mining Company, Western Nuclear, Inc., Atlantic Richfield
Company, Umetco Minerals Corporation and Union Carbide
Corporation, Homestake Mining Company of California, Inc.,
and Pathfinder Mines Corporation, Plaintiffs-Appellants,
v.
The UNITED STATES, Defendant-Appellee.
Nos. 89-1205 to 89-1212.
United States Court of Appeals,
Federal Circuit.
Feb. 2, 1990.

Page 747

Peter J. Nickles, Covington & Burling, Washington, D.C., Harley W. Shaver, Shaver & Licht, Denver, Colo. and Ramsay D. Potts, P.C., Shaw, Pittman, Potts & Trowbridge, Washington, D.C., argued, for plaintiffs-appellants. Also on the brief were Theodore Voorhees, Jr., Elliott Schulder, Jay T. Smith, Covington & Burling and R. Kenley Webster, P.C. and Jonathan S. Baker, Shaw, Pittman, Potts & Trowbridge, Washington, D.C.

Peter D. Dickson, Van Ness, Feldman, Sutcliffe & Curtis, Washington, D.C., represented Umetco Minerals.

Jon J. Indall, Carpenter, Crout & Olmsted, Santa Fe, N.M., represented Homestake Mining Co. of Cal., Inc.

Sunny J. Nixon, Carpenter, Crout & Olmsted, Santa Fe, N.M., represented Pathfinder Mines Corp.

Mary Mitchelson, Asst. Director, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued, for defendant-appellee. With her on the brief were Stuart E. Schiffer, Acting Asst. Atty. Gen. and David M. Cohen, Director. Also on the brief were Leonard Kreitzberg, Dept. of Energy and Charles Mullins, Nuclear Regulatory Com'n Washington, D.C., of counsel.

Before MARKEY, Chief Judge, BENNETT, Senior Circuit Judge, * and NEWMAN, Circuit Judge.

BENNETT, Senior Circuit Judge.

This appeal is from the final judgment of the Claims Court (Merow, J.) granting the government's motion for judgment on the pleadings and dismissing the complaints. 15 Cl.Ct. 681 (1988). We affirm.

BACKGROUND

The plaintiffs are corporations, or successors to corporations, which entered into contracts with the government for the production of uranium or thorium.

Following the Second World War, uranium production in the United States was practically nonexistent, and the military was dependent on foreign sources. In the late 1940's, the Atomic Energy Commission (AEC) began a major program to encourage the domestic production of uranium and alternative sources of atomic energy, such as thorium. The AEC encouraged private companies to enter the uranium milling industry by contracting with them for the production of uranium. The contracts contained pricing provisions designed so that the private companies could recover their costs, plus a reasonable profit. In addition, the government funded

Page 748

substantial research and development efforts to improve uranium milling technology, and it provided substantial technical services to the industry. The Atomic Energy Acts of 1946 and 1954 each provided that the federal government could be the sole owner of uranium products. Through statutes and regulations, licensing, administrative oversight, and its contracts, the federal government maintained pervasive control over all aspects of uranium and thorium procurement, production, sales and disposal, starting in the late 1940's and continuing through the 1950's.

The plaintiffs were awarded uranium production contracts by the AEC or have acquired or merged with the original contractor and have succeeded to the interests and obligations of the original contractor. Plaintiff Kerr-McGee is the successor in interest to thorium production contracts. For the purposes of this litigation, the parties have not alleged any significant differences between uranium and thorium production. The contracts between the government and the plaintiffs were amended several times and spanned the period from 1950 to 1970. Beginning in 1964, the uranium producers were permitted to sell their products to private parties without government permission.

Uranium and thorium milling operations produce a sand-like residue called "tailings." Typical domestic uranium ore usually contains only about two to eight pounds of uranium per ton of ore, so the residual tailings may be quite extensive. The tailings are ordinarily stored in large tailings piles, usually located on the land adjacent to the mills. Tailings from the production of uranium pursuant to the contracts with the government have been commingled with the tailings from the production of uranium for private parties.

While nearly all of the uranium is extracted from the ore, the tailings continue to emit residual low-level radiation, primarily in the form of radon gas. According to the appellants, this fact was known to the parties to the contracts, but its significance was not fully understood at the time of the contracts. It was not until the late 1970's that the long-term potential health hazards associated with mill tailings and the radon emissions were widely recognized. To alleviate those hazards, costly measures are required to stabilize existing tailings piles. Such measures include seepage control, regarding the piles and covering them with clay and soil, and revegetating the piles or covering them with crushed rock.

Because of the potential health hazards associated with uranium mill tailings, Congress enacted the Uranium Mill Tailings Radiation Control Act (UMTRCA), Pub.L. No. 95-604, 92 Stat. 3021 (Nov. 8, 1978), codified at 42 U.S.C. Secs. 2022, 2113, 2114, 7901-7942 (1982). Title I of the Act provides that the federal government has responsibility for the stabilization and decommissioning of all inactive mill sites which were not licensed on January 1, 1978. 42 U.S.C. Secs. 7912-7919. Title II of the Act authorizes the Environmental Protection Agency to develop regulations for the stabilization and decommissioning of mill sites which remained active after January 1, 1978. 42 U.S.C. Secs. 2022, 2113. Under title II of the UMTRCA, the licensees are responsible for complying with the federal regulations concerning stabilization of the mill tailings piles, decontamination and decommissioning of the mill plants, and reclamation of the plant site. 42 U.S.C. Sec. 2113. The EPA and the Nuclear Regulatory Commission have issued regulations governing the stabilization of the licensed mill sites. 40 C.F.R. pt. 192 (1988); 10 C.F.R. pts. 40, 150 (1989). In addition, some states have enacted laws directed to the hazards of radon gas.

The plaintiffs held licenses on January 1, 1978, for active facilities. As a result of the UMTRCA and the regulations issued pursuant to that Act, and also possibly as a result of the plaintiffs' recognition of general obligations to conduct their business in a manner that does not expose the public to harm, the plaintiffs have undertaken costly measures to stabilize the tailings piles and to decontaminate and reclaim the uranium and thorium mill sites. In their complaints, the plaintiffs sought recovery of the costs associated with stabilization of the mill tailings that were generated from the uranium

Page 749

and thorium production under the completed contracts with the government.

The plaintiffs based their complaints on various theories. All of the plaintiffs sought reformation of the contracts due to mutual mistake. All of the plaintiffs other than Atlas alleged breach of express contract. Western Nuclear, Homestake, and Pathfinder alleged breach of an implied-in-fact contract. Western Nuclear included allegations of agency and that the UMTRCA is a compensable Fifth Amendment taking, violates the equal protection clause, and is an ex post facto law.

The government moved, pursuant to RUSCC 12(c) and 12(h), for judgment on the pleadings arguing that the plaintiffs had failed to state a claim for relief. The Claims Court granted the government's motion and dismissed the complaints, except for Western Nuclear's equal protection and ex post facto claims, which it transferred to the United States District Court in Colorado. All of the plaintiffs filed appeals. On appeal, Western Nuclear abandoned its agency claim.

ISSUE

The issue in this appeal is whether the Claims Court erred in granting judgment on the pleadings and in dismissing the plaintiffs' reformation, breach of express contract, breach of implied-in-fact contract, and taking claims.

OPINION

We review Claims Court decisions for errors of law and clearly erroneous findings of fact. Cooper v. United States, 827 F.2d 762, 763 (Fed.Cir.1987); Milmark Services, Inc. v. United States, 731 F.2d 855, 857 (Fed.Cir.1984). Because this case was before the Claims Court on the government's motion for judgment on the pleadings, each of the well-pled allegations in the complaints is assumed to be correct, and the court must indulge all reasonable inferences in favor of the plaintiffs. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Owen v. United States, 851 F.2d 1404, 1407 (Fed.Cir.1988).

I. The Contract Claims

The Claims Court held that the plaintiffs could not establish reformation or breach claims on the facts pled. The court referred to its limited contractual jurisdiction and stated that jurisdiction is conferred only where the government has agreed to be bound. It observed that it had no authority to write contracts, or contract clauses, for the United States by means of reformation where there has been no agreement, citing American President Lines, Ltd. v. United States, 821 F.2d 1571, 1582 (Fed.Cir.1987).

The Claims Court stated that it is undisputed that there was no agreement between the parties with respect to the now required tailings stabilization. Because the existence of the tailings hazard was not knowable at the time of the contract negotiations, there was no mutual mistake and no agreement between the parties that could be placed into effect through reformation. The court observed that only those costs that were knowable and...

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