Thermal Science v. U.S. Nuclear Regulatory Com'n, 4:96-CV-2282 CAS.

Citation29 F.Supp.2d 1068
Decision Date23 June 1998
Docket NumberNo. 4:96-CV-2282 CAS.,4:96-CV-2282 CAS.
CourtUnited States District Courts. 8th Circuit. United States District Court (Eastern District of Missouri)
29 F.Supp.2d 1068
No. 4:96-CV-2282 CAS.
United States District Court, E.D. Missouri, Eastern Division.
June 23, 1998.

Page 1069

Gordon L. Ankney, Michael J. Morris, Thompson Coburn, St. Louis, MO, Martin S. Himeles, Jr., Sheryl B. Goldstein, Zuckerman and Spaeder, Baltimore, MD, for Thermal Science, Inc., plaintiffs.

Charles E. Mullins, Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC, for Nuclear Regulatory Commission, defendants.


SHAW, District Judge.

This matter is before the Court on plaintiff Thermal Science, Inc.'s ("TSI") Renewed Motion for a Preliminary Injunction and defendant Nuclear Regulatory Commission's ("NRC") Motion to Dismiss. Both motions have been briefed and this Court has heard oral argument. TSI's complaint for preliminary and permanent injunction asserts two separate arguments. First, TSI argues that the issuance of the Notice of Violation and proposed Imposition of Civil Penalties ("NOV") is a second attempt to punish TSI for the same offense in violation of the Double Jeopardy Clause. Second, TSI argues that the proceedings initiated by the NOV exceed the statutory authority of the NRC, because the agency lacks authority to impose monetary penalties on a non-licensee such as TSI.

Page 1070

The NRC responds that it has not exceeded its statutory authority or violated the Double Jeopardy Clause. The NRC further argues that this entire matter is before the Court prematurely, because TSI failed to exhaust its administrative remedies before filing the instant law suit, and the civil penalty it is challenging is only proposed.

After due consideration of the pleadings and the transcript of oral argument, this Court concludes that TSI's statutory and regulatory claims are premature and cannot be pursued in advance of a final NRC decision on whether to impose a civil penalty. The NRC's motion to dismiss will therefore be granted.


A. The Parties.

1. The NRC is an independent governmental regulatory agency established by Congress to regulate the nuclear power industry in the United States and to protect public health and safety under its authorizing statutes, the Atomic Energy Act ("AEA") of 1954, as amended, 42 U.S.C. § 2201, et seq., and the Energy Reorganization Act of 1974, as amended, 42 U.S.C. § 5801 et seq.

2. TSI is a Missouri corporation that manufactures, sells, and sometimes installs a family of products known as "Thermo-Lag." Thermo-Lag is a fire-retardant material with various industrial applications, including: (i) the protection from fire of chemical and petrochemical installations, railroad tank cars, and natural gas storage containers; (ii) protection of missiles and rockets from the heat generated upon reentry into Earth's atmosphere; and (iii) the protection of electrical cables in nuclear power plants.

B. The Enforcement Framework Established By The Atomic Energy Act.

3. All commercial nuclear power plants in the United States must operate under a license issued by the NRC.

4. Section 234 of the AEA, 42 U.S.C. § 2282, as most recently amended, provides that the NRC may issue civil monetary penalties to "[a]ny person who (1) violates any licensing or certification provision of ... 42 U.S.C. section 2073, [et seq.] ... or any rule, regulation, or order issued thereunder ... not to exceed $100,000 for each such violation." 42 U.S.C. § 2282(a)(1).

5. Under § 11s of the AEA, 42 U.S.C. § 2014(s), the term "person" includes "(1) any individual, corporation, partnership, firm, association ...; and (2) any legal successor, representative, agent, or agency of the foregoing."

6. According to §§ 221-223 of the AEA, 42 U.S.C. §§ 2271-2273, the U.S. Department of Justice may prosecute specified violations of law as criminal violations. These sections do not, however, grant the NRC independent authority to issue any regulations to implement those statutes.

7. Section 161 of the AEA, 42 U.S.C. § 2201, grants the NRC authority to "prescribe such regulations or orders as it may deem necessary ... to govern any activity authorized pursuant to this Act ....," 42 U.S.C. § 2201(i)(3), and under subsection p to "make, promulgate, issue, rescind, and amend such rules and regulations as may be necessary to carry out the purposes of this Act." 42 U.S.C. § 2201(p).

C. The NRC's 1991 Rulemaking Proceeding.

8. Between 1990 and 1991, the NRC conducted a rulemaking proceeding in which it amended its regulations governing the issuance of orders and civil penalties to unlicensed persons whose actions have a significant impact on activities authorized by the AEA.

9. On August 15, 1991, the NRC issued (1) a final rule establishing new procedures for issuing orders and civil penalties to non-licensed persons under 10 C.F.R. § 2.205 and (2) a new regulation, 10 C.F.R. § 50.5, which prohibited "deliberate misconduct" by both licensed and unlicensed persons with regard to licensed activities. See 56 Fed.Reg. 40,664 (1991).

10. The "Wrongdoer" Rule, 10 C.F.R. § 50.5, applies to, "Any licensee, applicant for a license, employee of a licensee or applicant; or any contractor (including a supplier or consultant), subcontractor, employee of a contractor or subcontractor of any licensee or

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applicant for a license ...." 10 C.F.R. § 50.5(a).

11. TSI is a supplier of materials to NRC licensees.

D. The Thermo-Lag Investigation.

12. TSI's fire-retardant material, Thermo-Lag, is installed in nuclear power plants to protect at least one train of equipment and wiring necessary to shut down a plant in the event of a fire. See 10 C.F.R. § 50.48; General Design Criteria # 3, 10 C.F.R. Part 50, Apps. A and R. See generally NRC Opposition to Motion for Preliminary Injunction ("NRC Opp.") at p. 6 and Ex. 1.

13. The NRC places a high premium on product testing that is independent of control by the product's manufacturer. See NRC Opp. at pp. 6-7 and Ex. 4.

14. During the early 1980's, TSI submitted the results of Thermo-Lag tests to the NRC, stating that the tests had been conducted independent of TSI's control. See NRC Opp. at pp. 7-8.

15. During the period from 1982 through 1992, TSI's sales of Thermo-Lag to the nuclear industry totaled over $58 million. TSI still sells Thermo-Lag products to the nuclear industry. See NRC Opp. at p. 8 and Ex. 5.

16. In 1989 NRC licensee Gulf States Utilities informed the NRC of a possible fire test failure by Thermo-Lag products. NRC Opp. at p. 8. The NRC formed a Special Review Team in 1991 to investigate the installation and testing of Thermo-Lag. See NRC Opp. at p. 8 and Ex. 3. At the same time, the NRC's Office of Inspector General and its Office of Investigations jointly commenced an investigation of possible criminal misconduct in connection with Thermo-Lag testing. These parallel NRC civil and criminal investigations centered around whether TSI had, in a number of communications with NRC licensees and the NRC itself, overstated the nature and extent of the involvement of independent testing laboratories, particularly Industrial Testing Laboratories ("ITL"), in the testing of Thermo-Lag. Compl. ¶ 13; NRC Opp. at p. 8, 12.

17. There were several exchanges of correspondence between TSI and the NRC, and the NRC conducted an inspection of TSI's facilities. See NRC Opp. at pp. 8-10 and Ex. 6

18. The NRC staff later concluded that some of the communications from TSI contained false or misleading information. See generally NRC Opp. at pp. 20-22 and Exs. 1 and 2.

19. The Special Review Team contracted with two independent laboratories, the National Institute of Standards and Technology ("NIST") and the Sandia National Laboratories ("Sandia") to conduct independent tests of Thermo-Lag. See NRC Opp. at pp. 10-11 and Exs. 7 and 8.

20. The NIST and Sandia tests revealed significant failures of Thermo-Lag. See NRC Opp. at pp. 10-11.

21. The NRC paid a total amount of approximately $800,000.00 for the NIST and Sandia tests. See NRC Opp. at p. 13 and Exs. 7 and 8.

22. In addition, the NRC re-assigned numerous individuals from their normal duties to investigate the testing and installation of Thermo-Lag. See NRC Opp. at pp. 11-13 and Exs. 8, 9 and 10.

23. Based upon the NRC's investigation, including the NIST and Sandia tests, the NRC issued eighteen formal communications to NRC licensees regarding problems with the installation and use of Thermo-Lag. See NRC Opp. at p. 11 & n. 3. In April 1992 the NRC Special Review Team issued its final report on Thermo-Lag. NRC Opp. Ex. 3. The NRC stated the fire resistive value of Thermo-Lag was "indeterminate," but found "the relative safety significance of the [Thermo-Lag] fire barrier concerns to be low." Id.; NRC Opp. at p. 10. Thermo-Lag remains installed at numerous nuclear power plants across the country and the NRC has continued to approve its installation.

E. The Criminal Investigation And Trial.

24. In the fall of 1992 the NRC referred its investigation of TSI to the Department of Justice, which brought the matter before a federal grand jury in the District of Maryland. NRC Opp. at p. 13.

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25. On September 29, 1994, the grand jury returned a seven count indictment against both TSI and its president, Rubin Feldman, for making false statements to the NRC concerning the independence of its Thermo-Lag testing program. NRC Opp. at p. 14; see Indictment, 9/29/94, United States v. Thermal Science, Inc., et al., No. DKC-94-0383.

26. The Indictment alleged as follows:

A. Count 1 charged that TSI and Mr. Feldman had conspired with ITL and others to impede and impair the NRC from performing its statutory duties, by making allegedly misleading statements about the nature of the Thermo-Lag tests and the respective levels of involvement of TSI and ITL in such tests;

B. Counts 2-4 charged TSI and Mr. Feldman with making the following...

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  • Thermal Science v. U.S. Nuclear Reg. Comm., 98-3147
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • 8. März 1999
    ...TSI's action was premature and granted2 the NRC's motion to dismiss. Thermal Science, Inc. v. United States Nuclear Regulatory Comm'n, 29 F. Supp. 2d 1068 (E. D. Mo. 1998). We affirm, relying largely on the well-supported opinion of the district court. We would not be justified in concludin......

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