Yankee Atomic Power Co. v. The United States

• Decision Date: 07 September 2010
• Docket Number: No. 98-126C,98-126C
• Parties: YANKEE ATOMIC POWER COMPANY, Plaintiff. v. THE UNITED STATES, Defendant.
• Court: U.S. Claims Court

YANKEE ATOMIC POWER COMPANY, Plaintiff.

v.THE UNITED STATES, Defendant.

No. 98-126C

United States Claims Court.

September 7, 2010

Jerry Stouck, Washington, D.C., for plaintiffs. Robert L. Shapiro and Kevin E. Stern, Washington, D.C., of counsel.

Anthony W. Moses, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant, with whom were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Alan J. Lo Re, Assistant Director. Marian E. Sullivan, Senior Trial Counsel, James P. Connor, Seth W. Greene, Joseph D. Keller and Scott Slater, Trial Attorneys. Jane K. Taylor, Office of General Counsel, United States Department of Energy, Washington, D.C., of counsel.

Spent nuclear fuel; decision on remand; net or incremental costs; mandate and preclusion principles.

OPINION ¹

Merow, J.

In Yankee Atomic Electric Co. v. United States, 536 F.3d 1268 (Fed. Cir. 2008) ("Yankee 77") the United States Court of Appeals for the Federal Circuit affirmed-inpart and reversed-in-part this court's findings and conclusions in Yankee Atomic Electric Co. v. United States, 73 Fed. Cl. 249 (2006) ("Yankee 7"). The Court remanded the case, requiring a reassessment of causation using the 1987 Annual Capacity Report ("ACR") acceptance rate for the reracking and dry storage costsawarded to plaintiffs. Remand proceedings, including briefing and oral argument, are completed.

Familiarity with the development of the Standard Contract between the government and nuclear utilities, and the firmly-established government liability for partial breach, is presumed. Me. Yankee Atomic Power Co. v. United States, 225 F.3d 1336 (Fed. Cir. 2000).² In the initial six-week trial on damages held in August of 2004, the Yankees³ presented both past and future costs of mitigating and providing a substitute performance for the contract services the government failed to supply. After trial covering both past and future costs, but before the Opinion was issued, the ruling in Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005) confined partial breach claims under the Standard Contract to past but not future expenses. Supplemental briefing in Yankee I served to segregate future costs, thus limiting the Opinion to actual costs incurred for Yankee Atomic and Connecticut Yankee through 2001, and through 2002 for Maine Yankee.

In Yankee I, Yankee Atomic was awarded $32,863, 366-the amount spent to build dry storage-an independent spent fuel storage installation ("ISFSI") that the court found would not have been built and the costs incurred if the government had timely performed its contract obligation to remove spent nuclear fuel ("SNF") and high-level waste ("HLW") at any reasonable acceptance rate. Connecticut Yankee was awarded $8,350, 893 for reracking its wet pool to increase storage capacity and $25,803, 986 for ISFSI construction as neither the project nor the costs thereof would have been necessary if the government had timely performed at any reasonable removal rate. Maine Yankee was awarded $10,069, 018 in reracking costs and $65,705, 536 in ISFSI construction expenses which would not have been incurred had the government performed its contractual removal obligations. Yankee I, 73 Fed. Cl. at 326. The court rejected the government's position that Greater-Than-Class-C radioactive waste ("GTCC") was not covered by the Standard Contract so that its presence would have required the Yankees to build dry storage for it in the nonbreach world, and the ISFSI costs, or some portion of the costs, would have been incurred in any event. Id. at 312-15. The court also rejected as premature the government's proposed offset for Maine and Connecticut Yankees' Nuclear Waste Fund ("NWF") fees that, under the terms of the Standard Contract, are not due to be paid until DOE first begins to remove the utilities' SNF. Id. at 325.

On appeal to the Federal Circuit, the government argued that: (1) the Yankees failed to establish a realistic non-breach world against which to determine whether actual costs would have been incurred regardless of breach; (2) the awards of prebreach reracking costs to Maine Yankee and Connecticut Yankee incurred prior to January 31, 1998, conflicted with Indiana Michigan, their decisions to rerack were not caused by DOE's announced delays and were not reasonable; (3) the Standard Contract was wrongly construed to include removal of GTCC; and (4) deferred NWF fees should have been deducted from costs awarded to Maine Yankee and Connecticut Yankee.

The Yankees responded that the court did make non-breach world findings, concluding that if DOE had performed at any reasonable rate, the dry storage and reracking costs awarded would not have been incurred; pre-breach reracking costs were properly awarded; there was no error in construing the Standard Contract to encompass GTCC; the parties intended that the Yankees' GTCC would be removed with their SNF; and the NWF fees not due until DOE first performs were deferred, not avoided costs.

Yankee II confirmed that DOE's failure to begin performance prior to January 31, 1998, was a partial breach of contract, and addressed the award of damages for incremental costs, affirming Yankee I's findings on foreseeability, reasonable certainty and the use of the substantial causal factor standard to determine causation for those costs, 536 F.3d at 1272-73. Yankee I's conclusion that the NWF fees of Maine Yankee and Connecticut Yankee were not appropriate deductions from damages, but would be due when DOE first arrived at the respective utility site and removed SNF, was also affirmed. This court was instructed on remand to apply the 1987 ACR acceptance rates to assess causation for the ISFSI and reracking costs awarded. These costs are compared with hypothetical non-breach world costs avoided because of the breach, to determine the net or incremental costs caused by the government's partial breach. "Without record evidence about the Yankees' condition with full Government performance, the Court of Federal Claims could not perform the necessary comparison between the breach and non-breach worlds and thus could not accurately assess the Yankees' damages." Id. at 1273 (citations omitted). "[C]ausation for the Yankees' storage expenditures depended on some comparison of the contractually-defined hypothetical world to the expenses actually incurred." Id. at 1274.

The Federal Circuit in a second SNF case issued on the same day as Yankee II, selected the non-breach world, concluding that the 1987 ACR⁴ process "provides thebest available pre-breach snapshot of both parties' intentions for an acceptance rate." PG & E v. United States, 536 F.3d 1282, 1292 (Fed. Cir. 2008) ("PG & E IF"). In PG & EII, the Federal Circuit rejected the 1991 ACR acceptance rate advanced by the government because it was "tainted" by the impending breach. Id. (explaining that "[a]fter the 1987 Amendments Act, breach became highly likely or inevitable because of the strict linkage requirements. Later ACS reports became tainted by the impending breach and even impending litigation strategies."). By 1991, "DOE's timely performance of its full contractual obligations had, by then, already become a distant possibility." Id. at 1291. Instead, the Federal Circuit instructed that: "[t]he most accurate picture of the parties' intent for this contract is their conduct at a time when both parties still anticipated timely and full performance of the contract," id. at 1290-91, and in 1987, for the most part, "both the DOE and the nuclear utilities realistically expected that DOE would accept SNF/HLW on schedule." Id. at 1291. Accordingly, consideration of post-contract formation conduct and intentions is appropriate.

Because this court relies on this post-formation conduct to interpret the contract itself, the most accurate picture of the parties' intent for this contract is their conduct at a time when both parties still anticipated timely and full performance of the contract. See Julius Goldman's Egg City v. United States, 697 F.2d 1051, 1058 (Fed. Cir. 1983) (per curiam) ("A principle of contract interpretation is that the contract must be interpreted in accordance with the parties' understanding as shown by their conduct before the controversy." (citing Macke Co. v. United States, 199 Ct. Cl. 552, 467 F.2d 1323, 1325 (1972))); Macke, 467 F.2d at 1325 ("[H]ow the parties act under the arrangement, before the advent of controversy, is often more revealing than the dry language of the written agreement by itself.").

PG & EII, 536 F.3d at 1290-91. See also Yankee II, 536 F.3d at 1278 (citing postcontracting evidence of the parties' actions and intentions).

The court concludes that in the non-breach world of full government performance at the 1987 ACR removal rates, neither Yankee Atomic, Maine Yankee nor Connecticut Yankee would have built dry storage, and neither Maine Yankee nor Connecticut Yankee would have reracked. Accordingly, the breach world mitigation costs awarded and affirmed as to reasonableness and foreseeability in Yankee II would not have been incurred in this non-breach world, and their award to the respective Yankees as modified in this Opinion, would not place them in a better position than if the government had not partially breached. Other matters raised by the parties, assertedly beyond the scope of the mandate, are separately addressed.

I. Background

From prior opinions in this matter familiarity with the historical and statutory background of the government's responsibility for SNF disposal is presumed. Briefly, nuclear fuel in the core of civilian nuclear power reactors eventually becomes relatively inefficient for producing heat to create the steam that powers the turbines to generate electricity. About every eighteen months, some of the fuel assemblies that contain the nuclear fuel are removed from the reactor core and placed in a...