Union Elec. Co. v. U.S.

• Decision Date: 02 April 2004
• Docket Number: No. 03-5096.,03-5096.
• Citation: 363 F.3d 1292
• Parties: UNION ELECTRIC COMPANY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

363 F.3d 1292

UNION ELECTRIC COMPANY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 03-5096.

United States Court of Appeals, Federal Circuit.

April 2, 2004.

Jonathan S. Martel, Arnold & Porter, of Washington, DC, argued for plaintiff-appellant. With him on the brief was Howard N. Cayne.

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

Before CLEVENGER, RADER and DYK, Circuit Judges.

DYK, Circuit Judge.

This case presents, once again, questions concerning the constitutionality of the Energy Policy Act of 1992, Pub.L. No. 102-486, 106 Stat. 2776 (codified as amended in various sections of 42 U.S.C.) ("EPACT"). EPACT imposes special monetary assessments on domestic utility companies that have purchased government-enriched uranium for the purpose of commercial electricity generation, 42 U.S.C. § 2297g-1(c) (2000). In three previous decisions we rejected claims for recovery of EPACT assessments based on theories that (a) the assessments violated prior contracts between the utilities and the government and constituted takings of those contract rights, Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569 (Fed. Cir.1997), cert. denied, 524 U.S. 951, 118 S.Ct. 2365, 141 L.Ed.2d 735 (1998); (b) the assessments constituted takings or violated due process under the Fifth Amendment, Commonwealth Edison Co. v. United States, 271 F.3d 1327 (Fed.Cir.2001) (en banc), cert. denied, 535 U.S. 1096, 122 S.Ct. 2293, 152 L.Ed.2d 1051 (2002); and (c) the assessments violated the equal protection component of the Due Process Clause, Maine Yankee Atomic Power Co. v. United States, 271 F.3d 1357 (Fed.Cir. 2001), cert. denied, 535 U.S. 1095, 122 S.Ct. 2290, 152 L.Ed.2d 1049 (2002). This case presents the question whether the assessments constitute unconstitutionally unapportioned direct taxes. This issue was raised in passing in Maine Yankee, but we did not address it in deciding the case. We hold that stare decisis does not foreclose our review of the direct tax question, but on the merits we hold that the EPACT special assessments are not direct taxes and do not therefore require apportionment in accordance with the Direct Tax Clauses of the Constitution, U.S. Const. art. I, § 2, cl. 3; id. art. I, § 9, cl. 4. We therefore affirm the Court of Federal Claims' decision in Union Elec. Co. v. United States, No. 96-674C, slip op. at 6-7 (Fed.Cl. Jan. 30, 2003).

BACKGROUND

We have considered in detail the history and purpose of EPACT in our prior cases. See Yankee Atomic, 112 F.3d at 1572-73; Commonwealth Edison, 271 F.3d at 1332-34; Maine Yankee, 271 F.3d at 1360-61 (Friedman, J., concurring). Suffice it to say for present purposes that "Congress in EPACT addressed the need to decontaminate and decommission the government's uranium enrichment facilities ... the costs [of which] were to be shared by the government and those domestic utilities that benefited from processing [of uranium] at government facilities." Commonwealth Edison, 271 F.3d at 1333. The Act provided that, to this end, "a special assessment [would be collected] from domestic utilities" that "purchased [enriched uranium] from the Department of Energy for the purpose of commercial electricity generation, before October 24, 1992." 42 U.S.C. § 2297g-1(c).¹

The special assessment imposed on a particular utility was based on the percentage of the total number of government-produced separative work units ("SWU") (the measurement unit used to quantify government enrichment services) that the utility purchased.² The Act further explained that "a utility shall be considered to have purchased a separative work unit from the Department if [it] was produced by the Department, but purchased by the utility from another source" as long as the utility had not resold the government-enriched uranium before October 24, 1992. Id. § 2297g-1(c)(1)-(2). In other words, as to those utilities that submitted the uranium to the government for processing, the tax was effectively imposed on their utilization of the government enrichment services. See Commonwealth Edison, 271 F.3d at 1333. With respect to companies that purchased already-enriched uranium from those that had utilized the government enrichment services, the tax was effectively imposed on their purchase of the enriched uranium. The net effect of the statute was to tax domestic utility purchasers, but it did not apply to (1) foreign utility purchasers of government-enriched uranium; (2) domestic utilities that purchased enriched uranium from foreign sources; (3) domestic utilities that sold their government-enriched uranium prior to October 24, 1992; and (4) domestic utilities that purchased government-enriched uranium after October 24, 1992. See id. Finally, EPACT specified that the collection of special assessments would cease after "the earlier of ... 15 years after October 24, 1992; or ... the collection of $2,250,000,000." 42 U.S.C. § 2297g-1(e).

The relevant facts in this case are not in dispute. Union Electric is a Missouri corporation that operates various electricity-generating facilities. Prior to October 24, 1992, Union Electric owned government-enriched uranium that it had purchased both directly from the government and on the secondary market. Union Electric was liable for special assessments under EPACT, and it paid a total of $14,436,240.51 in special assessments as of the date the complaint was filed. In October of 1996 Union Electric filed a complaint in the Court of Federal Claims, claiming that it was entitled to a refund of these EPACT special assessments on a variety of theories. The Court of Federal Claims stayed the proceedings in Union Electric's case pending the outcomes in Yankee Atomic, Commonwealth Edison, and Maine Yankee.

Following our resolution of these three cases, Union Electric filed an amended complaint in the Court of Federal Claims, where it asserted seven grounds for invalidation of the EPACT special assessments, including a claim that the special assessments violated the Direct Tax Clauses of the Constitution.³ Union Electric claimed that the EPACT special assessments were direct taxes and therefore unconstitutional because they were not apportioned as required by sections 2 and 9 of Article I. The government filed a motion to dismiss, and the Court of Federal Claims dismissed the complaint in its entirety, finding that all the claims were governed by our court's opinions in Yankee Atomic, Commonwealth Edison, and Maine Yankee.⁴ The Court of Federal Claims held that stare decisis barred it from deciding the direct tax claim even though it had not been explicitly decided in the prior opinions. The court stated:

It is true that no Federal Circuit decision has unambiguously announced a ruling denying the unapportioned direct tax claim argued by plaintiffs. The [EPACT special assessments] litigation, however, has encompassed dozens of lawsuits, offering a spectrum of constitutional arguments against EPACT. Those arguments, including the direct tax challenge at issue here, were heard in turn by the Federal Circuit which did not regard the issue as dispositive. It cannot be assumed that the Federal Circuit has chosen to base the resolution of this complicated litigation on an unconstitutional act.... This court holds that a better reading of Commonwealth Edison, Yankee Atomic, and Maine Yankee forecloses any suit predicated on an unapportioned direct tax challenge.

Union Elec., slip op. at 6-7.

Union Electric appeals the dismissal of its direct tax claim. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

DISCUSSION

We review the Court of Federal Claims' dismissal without deference. See First Hartford Corp. Pension Plan & Trust v. United States, 194 F.3d 1279, 1286-87 (Fed.Cir.1999).

I

The first question we address is whether consideration of the direct tax issue is foreclosed by our earlier decisions. We hold that it is not.

The Court of Federal Claims declined to consider the direct tax challenge, finding that it was implicitly decided by our earlier EPACT decisions because the "[Federal Circuit] court grounded its approval of EPACT assessments on the theory that those assessments are taxes.... It is indeed untenable to assert that the court would issue that holding without simultaneously considering whether such taxes are constitutional." Union Elec., slip op. at 6. However, the direct tax issue was not specifically argued in Yankee Atomic or Commonwealth Edison.

In Yankee Atomic we considered whether the EPACT tax breached the domestic utilities' contracts with the government by "retroactively increasing the price [of] previously supplied uranium enrichment services," 112 F.3d at 1573, and whether the assessments constituted takings of the utilities' contract rights, see id. at 1580 n. 8. We held that the special assessments did not breach domestic utilities' prior contracts with the government because these contracts "did not include an unmistakable promise that precluded the Government from later imposing an assessment upon all domestic utilities that employed the DOE's uranium enrichment services." Id. at 1580. We also concluded that Yankee Atomic's takings claim failed because the lack of an "unmistakable promise" against future assessments meant that "Yankee Atomic had no property right (via a vested contract right) which was subsequently taken by the assessment." Id. at 1580 n. 8.

So too, we affirmed the constitutionality of the EPACT assessments in our en banc decision in Commonwealth Edison without considering the direct tax issue. The tax was challenged as violating...