Vt. Yankee Nuclear Power Corp. v. United States

• Decision Date: 01 October 2012
• Docket Number: Nos. 2011–5033,2011–5034,2011–5042.,s. 2011–5033
• Citation: 74 ERC 1833,683 F.3d 1330
• Parties: VERMONT YANKEE NUCLEAR POWER CORPORATION, Plaintiff–Cross Appellant, v. ENTERGY NUCLEAR VERMONT YANKEE, LLC, and Entergy Nuclear Operations, Inc., Plaintiffs–Cross Appellants, v. United States, Defendant–Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

683 F.3d 1330

74 ERC 1833

VERMONT YANKEE NUCLEAR POWER CORPORATION, Plaintiff–Cross Appellant,

v.ENTERGY NUCLEAR VERMONT YANKEE, LLC, and Entergy Nuclear Operations, Inc., Plaintiffs–Cross Appellants,

v.United States, Defendant–Appellant.

Nos. 2011–5033, 2011–5034, 2011–5042.

United States Court of Appeals, Federal Circuit.

June 13, 2012.

Rehearing and Rehearing En Banc Denied Oct. 1, 2012.

Richard J. Conway, Dickstein Shapiro LLP, of Washington, DC, argued for plaintiff-cross appellant, Vermont Yankee Nuclear Power Corporation, of Washington, DC.

Brad Fagg, Morgan, Lewis & Bockius LLP, of Washington, DC, argued for plaintiffs cross appellants Entergy Nuclear Operations, Inc., et al. Of counsel on the brief was L. Jager Smith, Wise, Carter, Child & Caraway, P.A., of Jackson, Mississippi.

Andrew P. Averbach, Trial Attorney, United States Department of Justice, of

Washington, DC, argued for defendant-appellant. With him on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, and Harold D. Lester, Jr., Assistant Director Of counsel on the brief were Marian E. Sullivan, Jeremiah M. Luongo, Mariana T. Acevedo, Seth W. Greene, Joseph D. Keller, and Daniel G. Kim, Trial Attorneys; and Jane K. Taylor, Office of General Counsel, United States Department of Energy, of Washington, DC.

Kyle H. Landis–Marinello, Assistant Attorney General, Office of the Attorney General, State of Vermont, Montpelier, Vermont, for amicus curiae. With him on the brief was Gavin J. Boyles, Assistant Attorney General.

Before BRYSON, MAYER, and DYK, Circuit Judges.

Opinion for the court filed by Circuit Judge DYK, in which Circuit Judge MAYER joins except for Part I(C), and in which Circuit Judge BRYSON joins except for Part III(B), (D), and (F). Opinions dissenting in part filed by Circuit Judges MAYER and BRYSON.

DYK, Circuit Judge.

This case involves the federal government's breach of a contract requiring it to accept for disposal spent nuclear fuel generated at the Vermont Yankee Nuclear Power Station (“VYNPS”). The government, the current owner of VYNPS, Entergy Nuclear Vermont Yankee, LLC (“ENVY”),¹ and the former owner of VYNPS, Vermont Yankee Nuclear Power Corporation (“Vermont Yankee”), each appeal from a judgment of the Court of Federal Claims (“Claims Court”) awarding damages to ENVY for breach of the contract. Because the government agrees that it breached the contract, all issues on appeal concern either the assignment of the contract (or contract claims) from Vermont Yankee to ENVY or the measure of damages.

In Part I of this opinion, we hold that Vermont Yankee validly assigned to ENVY pre-existing claims against the government under the Standard Contract for Disposal of Spend Nuclear Fuel and/or High–Level Radioactive Waste, 10 C.F.R. § 961.11 (1984) (hereinafter “Standard Contract”). We also hold that while the partial assignment of rights and duties under the Standard Contract from Vermont Yankee to ENVY was not valid, the government nonetheless waived its right to object to the partial assignment.

In Part II, we hold that the scope of the assignment from Vermont Yankee to ENVY encompassed the claims Vermont Yankee asserted against the government, including the claim for pre-sale mitigation costs and the claim for the diminution in value of VYNPS.

In Part III, we hold that legal and lobbying fees incurred by ENVY to secure approval from the State of Vermont for a dry storage facility were foreseeable. We hold, however, that other state-imposed requirements were not foreseeable, and hence not recoverable, including payments into Vermont's Clean Energy Development Fund, performance of a flood analysis, and construction of a visual barrier to the dry storage facility.

In Part IV, we hold that ENVY did not meet its burden of proof with respect to its claimed damages for the costs of disposing of contaminated material discovered due to the breach and the characterization of spent fuel moved to dry storage.

In Part V, we discuss the remaining issues, which are for the most part controlled by our recent precedents. In accordance with those precedents, we hold that ENVY is not entitled to recover its cost of capital to fund its mitigation activities. And while we hold that ENVY is entitled to recover its capital suspense loader overhead costs, we hold that, due to insufficient argument on appeal, ENVY is not entitled to recover its Resource Code 19 payroll loader overhead costs.

Background

This is another in a long series of cases in which the government breached a commitment for the disposal of spent nuclear fuel (“SNF”) and high-level radioactive waste (“HLW”). Briefly, the background is as follows. In 1983, Congress enacted the Nuclear Waste Policy Act of 1982 (“NWPA”), Pub.L. No. 97–425, 96 Stat. 2201 (1983) (codified as amended at 42 U.S.C. §§ 10101–10270 (2006)). The NWPA authorized the Department of Energy (“DOE”) to enter into contracts with nuclear facilities for the disposal of SNF and HLW. 42 U.S.C. § 10222. Congress expressly mandated that, under the terms of the contracts, DOE accept SNF and HLW “beginning not later than January 31, 1998.” Id. § 10222(a)(5)(B). Contemplating the potential sale of nuclear facilities, the NWPA also provided that “[t]he rights and duties of a party to a contract entered into under this [Act] may be assignable with transfer of title to the spent nuclear fuel ... involved.” Id. § 10222(b)(3).

Pursuant to its authority under the NWPA, DOE promulgated regulations defining the terms of the Standard Contract to be executed with nuclear facilities. See42 U.S.C. § 10222(a)(1); 48 Fed.Reg. 5,458 (Feb. 4, 1983) (proposed rule); 48 Fed.Reg. 16,590 (Apr. 18, 1983) (final rule). Consistent with section 10222(b)(3), the Standard Contract provided: “The rights and duties of the Purchaser may be assignable with transfer of title to the SNF ... involved; provided, however, that notice of any such transfer shall be made to DOE within ninety (90) days of transfer.” 10 C.F.R. § 961.11, art. XIV; see also J.A. 120.

In June 1983, DOE entered into a Standard Contract with Vermont Yankee for the disposal of SNF stored at the VYNPS facility. In consideration for DOE's commitment to dispose of SNF, the Standard Contract required the utilities to pay fees to DOE. First is a one-time fee that is based on any SNF generated prior to April 1983. Payment of this one-time fee may be deferred with interest until anytime prior to the beginning of DOE's performance. Vermont Yankee had been producing SNF since 1972, and was thus obligated to pay the one-time fee for disposal of its pre–1983 SNF. Vermont Yankee elected to defer the payment of the one-time fee, which at the time of this action, has not yet been paid. Second, contract holders must pay a continuing quarterly fee based on the amount of electricity generated and sold during that quarter by the utility. This fee has been paid by Vermont Yankee and ENVY during the period of their ownership of VYNPS and accepted by the government.

DOE failed to begin accepting and disposing of SNF from Vermont Yankee and other utilities in the nuclear industry by January 31, 1998. On August 15, 2001, Vermont Yankee entered into a Purchase and Sale Agreement (“PSA”) with ENVY. On July 31, 2002, the parties completed the sale of VYNPS, including title to all of the SNF generated and stored at VYNPS. The PSA expressly provided that “[Vermont Yankee] shall assign to [ENVY] the DOE Standard Contract, except for the obligation to pay the one time fee.” J.A. 241. The PSA further provided that Vermont Yankee transferred to ENVY “any claims of [Vermont Yankee] related to [DOE]'s defaults under the DOE Standard Contract accrued as of the Closing, whether relating to periods prior to or following the Closing.” J.A. 197. The assignment excluded “claims as may relate to the one-time fee with respect to fuel used to generate electricity prior to April 7, 1983.” J.A. 197.

In a letter dated July 31, 2002, ENVY notified DOE “that Vermont Yankee ha [d] ... assigned its right, title, and interest” under the Standard Contract to ENVY, and that ENVY would “assume and discharge the obligations of Vermont Yankee under the [Standard] Contract in lieu of Vermont Yankee.” J.A. 268. In a letter dated August 21, 2002, Vermont Yankee similarly notified DOE that it had transferred to ENVY “its title to Spent Nuclear Fuel” at VYNPS along with “its rights and duties under the [Standard] Contract.” J.A. 269. The Vermont Yankee letter also notified DOE that it had “retained the rights to any and all damages and other remedies that might accrue under from [DOE]'s breach of its obligations under the [Standard] Contract to the extent of the one-time fee for fuel used to generate electricity prior to April 7, 1983.” J.A. 269. However, neither letter notified DOE that Vermont Yankee had also retained the obligation to pay the one-time fee prior to DOE's performance. This reservation was not discovered by the government until it obtained a copy of the PSA during document production in this case in 2006.

As a result of DOE's breach, and as mitigation, ENVY concluded that it should construct an on-site dry-storage facility to provide for the interim storage of SNF at VYNPS. Pursuant to federal regulations and ENVY's preexisting license with the Nuclear Regulatory Commission (“NRC”), ENVY was permitted to construct a dry-storage facility implementing a system that had been previously approved by the NRC. However, as discussed below, ENVY claims that it incurred other expenses in order to obtain approval from the State of Vermont to construct the facility, including: (1) legal and lobbying fees; (2) payments into Vermont's Clean Energy Development Fund; (3) the cost of performing a flood analysis; and (4) the cost of constructing a visual barrier.

On November 12, 2003, ENVY filed an action in the Claims Court for damages caused by DOE's breach of contract. The Claims Court...