Florida Power & Light Co. v. U.S.

• Decision Date: 04 October 2002
• Docket Number: No. 02-5012.,No. 02-5023.,02-5012.,02-5023.
• Citation: 307 F.3d 1364
• Parties: FLORIDA POWER & LIGHT COMPANY, Consolidated Edison Company of New York, Inc., Empresa Nacional Del Uranio, S.A., IES Utilities, Inc., Niagara Mohawk Power Corporation, Pennsylvania Power and Light Company, Wisconsin Electric Power Company, Duke Energy Corporation, and Virginia Electric and Power Company, Plaintiffs-Cross-Appellants, v. UNITED STATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

307 F.3d 1364

FLORIDA POWER & LIGHT COMPANY, Consolidated Edison Company of New York, Inc., Empresa Nacional Del Uranio, S.A., IES Utilities, Inc., Niagara Mohawk Power Corporation, Pennsylvania Power and Light Company, Wisconsin Electric Power Company, Duke Energy Corporation, and Virginia Electric and Power Company, Plaintiffs-Cross-Appellants, v UNITED STATES, Defendant-Appellant.

No. 02-5012.

No. 02-5023.

United States Court of Appeals, Federal Circuit.

October 4, 2002.

Alex D. Tomaszcuk, Shaw Pittman LLP, of McLean; VA, argued for plaintiffs-cross appellants. Of counsel on the brief were John H. O'Neill, Jr., Michael G. Lepre, and Daniel S. Herzfeld, Shaw Pittman LLP, of Washington, DC.

James G. Bruen, Jr., Special Litigation Counsel, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellant. With him on the brief were Robert D. McCallum, Jr., Assistant Attorney General; J. Christopher Kohn, Director; and Matthew J. Troy, Attorney. Of counsel on the brief was Marc E. Kasischke, Attorney, Office of General Counsel, Department of Energy, of Washington, DC.

Before MICHEL, CLEVENGER, and BRYSON, Circuit Judges.

BRYSON, Circuit Judge.

The United States government has long performed uranium enrichment for domestic and foreign utility companies. Uranium enrichment consists of converting natural uranium into enriched uranium suitable for use in nuclear power plants. Each of the plaintiff utilities entered into an enrichment contract with the United States before September 1, 1992. Until July 1, 1993, the contracts were administered and performed through the Department of Energy ("DOE").

Under the contracts, the utilities agreed to purchase a fixed percentage of their enriched uranium needs from the United States. The contracts specified how the enriched uranium would be provided and how the utilities would be charged. The price for the enrichment services was to be "determined in accordance with the established DOE pricing policy for such services." The contracts defined "established DOE pricing policy" as "any policy established by DOE that is applicable to prices or charges in effect at the time of performance of any services under this contract."

The price DOE could charge for enrichment services was constrained by section 161(v) of the Atomic Energy Act, which specified that "any prices established under this subsection shall be on a basis of recovery of the Government's costs over a reasonable period of time." 42 U.S.C. § 2201(v) (1988). DOE pricing policy followed that statutory formula. See 10 C.F.R. § 762.5 (1994) (DOE's charges for enrichment services established "on a basis that recovers appropriate Government costs over a reasonable period of time"). DOE's price was expressed as a dollar amount for each unit of enrichment services, referred to as a "Separative Work Unit" ("SWU"). For Fiscal Year 1993, the price charged for enrichment services was $125 per SWU, which was near the ceiling price under the enrichment contracts.¹

The Energy Policy Act of 1992 amended the Atomic Energy Act and made significant changes in the government's uranium enrichment services program. The new statute established the United States Enrichment Corporation ("USEC") to take over the enrichment services from DOE. All existing uranium enrichment contracts, including those with the plaintiff utility companies, were transferred to USEC as of July 1, 1993. 42 U.S.C. §§ 2297b-14(e), 2297c(b)(1) (1994).

The Energy Policy Act also established the Uranium Enrichment Decontamination and Decommissioning Fund, which was to pay "[t]he costs of all decontamination and decommissioning activities of [DOE]," 42 U.S.C. § 2297g-2(b), and "[t]he annual cost of remedial action," 42 U.S.C. § 2297g-2(c). The Decontamination and Decommissioning Fund is supported in part by a special assessment of up to $150 million collected annually from domestic utilities that purchased enrichment services from DOE between 1945 and October 23, 1992. The first annual assessment was for Fiscal Year 1993.

During the transition period between October 24, 1992, when the Energy Policy Act was enacted, and July 1, 1993, when USEC began administering the enrichment services contracts, DOE continued performing enrichment services under the contracts. In 1996, the utilities filed suit, asserting that during the transition period DOE had improperly included decontamination and decommissioning costs in its contract prices. The utilities contended that recovering those costs was improper because DOE had separately recovered those costs through the Fiscal Year 1993 special assessment. The Court of Federal Claims dismissed the suit on res judicata grounds, Fla. Power & Light Co. v. United States, 41 Fed. Cl. 477 (1998), but we reversed and remanded, Fla. Power & Light Co. v. United States, 198 F.3d 1358 (Fed.Cir.1999).

On remand, the utilities abandoned their claim that DOE had improperly collected decontamination and decommissioning costs during the transition period, but they asserted that DOE's price for enrichment services improperly included approximately $1.5 billion in two cost components: (1) what the trial court termed "remedial action costs," i.e., the costs for cleaning up contamination from the DOE enrichment facilities, and (2) the costs of disposing of depleted uranium tails. Then, in February 2001, the utilities argued for the first time that the government had improperly included two other cost components in calculating the price of enrichment services during the transition period: (1) $773 million in imputed interest on the Gas Centrifuge Enrichment Project ("GCEP"), and (2) $394 million in costs that, according to the plaintiffs, related only to the production of high-assay uranium for governmental (mostly military) applications.

After trial, the Court of Federal Claims held that the government had improperly included the remedial action and depleted uranium costs in the price of enrichment services, and it awarded damages to the utilities in the amount that those costs added to the price of enrichment services during the transition period. The court refused to grant recovery on the imputed interest and high-assay uranium claims, however, on the ground that the utilities had delayed unreasonably in presenting those claims and that the government had been prejudiced by the delay. Finally, the trial court held that the Contract Disputes Act did not apply to the contract, and that the utilities therefore were not entitled to recover interest from the date their claims were submitted.

The government appeals from the judgment awarding damages for breach of contract. The utilities cross-appeal the court's rulings that the contracts are not covered by the Contract Disputes Act and that the utilities are barred from recovering on two theories because those theories were raised too late.

I

The government has not appealed the trial court's finding that it improperly included the remedial action and depleted uranium costs in the price for enrichment services, but it challenges the award of damages to the utilities. According to the government, the utilities should not have been awarded damages for two reasons: (1) because DOE was not limited to a cost-recovery basis for pricing its enrichment services during the transition period, and (2) because the price for the government's enrichment services would have been the same even if the costs that the trial court disallowed had been omitted in calculating the price of the enrichment services.

The trial court correctly rejected the first argument. Even though the statute that required pricing to be based on cost recovery was repealed in October 1992, the contract required DOE to determine charges for enrichment services "in accordance with the established DOE pricing policy for such services," and the DOE regulations that set forth DOE's pricing policy were still in effect throughout the transition period. The fact that the statute that required DOE to employ that pricing policy had been repealed does not alter the fact that the policy remained in place until the enrichment operation was transferred to USEC on July 1, 1993. The government therefore cannot prevail on its contention that throughout the transition period DOE had no pricing policy and the only constraint on its pricing decisions was the contractual ceiling price.

The government's second argument has more force. Under its established pricing policy, DOE was required to price enrichment services so as to recover "appropriate government costs over a reasonable period of time." 10 C.F.R. § 762.5 (1988). As of the beginning of Fiscal Year 1993, there was a large cumulative unrecovered loss from DOE's operations. The government argues that even after eliminating the remedial action and depleted uranium costs, there was still a large cumulative unrecovered loss that DOE was entitled to recover through enrichment charges. Accordingly, the government contends that even without including the environmental remediation and depleted uranium costs, the price for enrichment services during the transition period would have remained at the Fiscal Year 1993 price of $125 per SWU.

The trial court did not accept the government's legal theory. In response to the government's argument that costs other than remedial action and depleted uranium costs would have justified a price of $125 per SWU during the transition period, the court stated that "[t]o sanction an approach that allows DOE to take the position, with the full benefit of hindsight, that a substitute hypothetical analysis could have resulted in the same contract price anyway does violence to the established DOE pricing policy. Defendant cannot play a shell game with cost recovery."

The court's analysis does not fully respond to the government's argument as to remedy. The government's argument is not that it is entitled to engage in a ...