Free Post Trial Brief - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS YANKEE ATOMIC ELECTRIC COMPANY, Plaintiff, v. THE UNITED STATES, Defendant. ) ) ) ) ) ) ) ) )

No. 98-126C (Senior Judge Merow)

DEFENDANT'S INITIAL POST-TRIAL BRIEF1 Pursuant to this Court's order dated September 21, 2004, defendant, the United States, respectfully submits its initial post-trial brief. SUMMARY OF ARGUMENT The Yankees have created a damages claim wholly based upon a house of cards. The Yankees seek payment of more than $550 million, while also demanding DOE's continuing performance under the "Standard Contract For Disposal Of Spent Nuclear Fuel And/Or HighLevel Radioactive Waste" ("Standard Contract"), and the right to seek additional damages, even though they have collectively paid less than $150 million into the Nuclear Waste Fund. To reach the ultimate damages that they have presented to the Court, the Yankees need the Court to engage in a multi-step process and accept every single "factual" prerequisite upon which their claims are based. If the Court rejects even one of the assumptions in the series of improbabilities that the Yankees have proposed, the elements that they need to prove causation and resultant damage fail, and the Court cannot award any damages because the Yankees elected not to present any alternative damages scenarios. As a result, the Yankees have placed their recovery of any The Government requests that this post-trial brief also be deemed applicable in Connecticut Yankee Atomic Power Co. v. United States, No. 98-154C, and Maine Yankee Atomic Power Co. v. United States, No. 98-474C.
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damages upon the gamble that this Court will adopt virtually every factual assumption that they and their experts have made in this litigation. The Yankees' damages claim first requires the Court to find that DOE was obligated to accept spent nuclear fuel ("SNF") from contract holders beginning in 1998 at a specific five-year ramp-up rate that they selected for this litigation2 followed by a 3,000 Metric Tons Uranium ("MTU") annual SNF acceptance rate. However, none of those rate assumptions actually appear in the Standard Contract, and the evidence and applicable case law do not support the imposition of the Yankees' litigation-driven rate. If the Court accepts their arguments regarding the acceptance rate, the Yankees next need the Court to accept either that a hypothetical economic "exchanges" model accurately establishes that the Yankees would have moved forward in the contract's SNF acceptance queue through a series of unidentified and undefined hypothetical exchanges of SNF acceptance allocations, as modeled by their expert, Mr. Frank Graves, or that DOE was obligated to provide them with priority in the acceptance of their SNF because of their status as shutdown reactors. As for the hypothetical exchanges, assuming the applicability of these minimum mandatory "ramp-up" and annual acceptance rates, Mr. Graves attempts to establish the date by which DOE "would have" removed all of each of the Yankees' SNF, based upon a series of unidentified hypothetical "exchanges" of SNF acceptance allocations between unidentified contract holders. His theoretical model ultimately concludes that, based upon these unidentified hypothetical series of exchanges, had DOE begun SNF acceptance by January 31, 1998, it would Specifically, the Yankees need the Court to impose into the Standard Contract an obligation upon DOE to accept exactly 1,200 MTUs of SNF in 1998; 1,200 MTUs in 1999; 2,000 MTUs in 2000; 2,000 MTUs in 2001; and 2,700 MTUs in 2002. -22

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have removed all of Yankee Atomic's SNF from its facility by 1999, all of Connecticut Yankee's by 2001, and all of Maine Yankee's by 2002. However, Mr. Graves' model is entirely based upon economic theory, not upon evidence adduced at trial. Indeed, in creating his model, Mr. Graves failed to speak with any utility, including the Yankees, and further failed to review any historical documents from the Yankees that call into question his underlying theoretical premise. As for priority, the Yankees' arguments that DOE would have provided, or was obligated to provide, them with priority as a shutdown reactor based upon a contract clause granting DOE the discretion to grant priority are simply unsupported by the record in this case. Indeed, the record establishes that DOE has consistently rejected all requests for priority and that the nuclear utility industry generally opposes any grant of priority for shutdown reactors. The Yankees have completely failed to show that, even if DOE granted priority, its SNF would have been removed by the dates that Mr. Graves selected or by any other dates from which damages could be calculated under the evidence presented at trial. If the Court does not accept the Yankees' assertions that an exchanges market or priority would have resulted in the acceptance of all of the Yankees' SNF by 1999, 2001, and 2002, the Yankees cannot establish causation for their claimed damages, having elected not to present any evidence that the costs that they incurred for dry storage construction, continuing wet storage, or continuing dry storage were "caused" by DOE's delay without reference to those dates. The only evidence that the Yankees have offered regarding the reasons for their decisions to build dry storage and the reasons that DOE is obligated to pay their storage costs is based upon the assumption that DOE was obligated to remove their SNF by the dates that they have specified. Because the evidence and the contract language do not support their assertions, this Court, if it -3-

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rejects any of the foundations upon which their causation analysis is based, need not proceed further. Even assuming that the Court adopts Mr. Graves' hypothetical exchanges model results or grants the Yankees priority, before the Court can award the Yankees damages, it must accept additional assumptions that the Yankees make. For example, the Yankees assert that the Government was somehow obligated to accept all of their Greater-Than-Class-C radioactive waste ("GTCC"), even though neither the Nuclear Waste Policy Act, 42 U.S.C. §§ 10101-10270, nor the Standard Contract require DOE to accept GTCC, and that DOE would have accepted that GTCC on the same schedule as SNF, even though it was not contractually obligated to do so. The Court must also find that DOE was obligated to accept all of the Yankees' failed fuel on the same schedule as its "standard" fuel, even though the Standard Contract permits DOE to remove failed fuel from the acceptance queue and accept it at a later date. The Yankees would have to incur significant costs for their indefinite storage of GTCC and failed fuel (including security and other operations and maintenance costs) regardless of DOE's delay, and the Yankees cannot place themselves in a better position than they would have been absent the breach by shifting those costs to the Government. The Yankees' decision to pursue an "all or nothing" judgment predicated upon unusually favorable factual premises can be explained by reference to the significant evidence adduced at trial. Once a lower acceptance rate is accepted, as the Yankees did prior to this litigation, or once Mr. Graves' early (and unsupported) fuel-out dates and priority are rejected, the evidence shows that each of the Yankees assumed lengthy non-breach storage obligations and that each would have constructed the dry storage facilities for which they now seek reimbursement. Because they -4-

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have failed to establish that their claimed damages were caused by DOE's delay or were incremental to DOE's delay, the Yankees have no basis to recover any damages in this litigation. DISCUSSION I. THE YANKEES BEAR THE BURDEN OF PROVING EVERY ELEMENT OF THEIR DAMAGES CLAIMS, INCLUDING LIABILITY, CAUSATION, AND RESULTANT DAMAGE A. The Yankees Bear The Burden Of Proving All Elements Of Their Damages, Including The Fact Of Damage, By Preponderant Evidence

To recover damages, a plaintiff "must prove the requirements for an award of damages by a preponderance of the evidence," and these "requirements include: causation, foreseeability, and reasonable certainty in the amount of damages." Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400, 413-14 (2004). According to the precedent of this circuit, the Yankees bore the burden of introducing clear proof that they were injured as a direct result of DOE's delay in accepting their SNF. Myerle v. United States, 33 Ct. Cl. 1, 27 (1897). The venerable decision in Myerle continues to represent the binding standard of this circuit. Glendale Federal Bank v. United States, 239 F.3d 1374, 1382 (Fed. Cir. 2001) (non-breaching party may recover reliance "damages for any losses actually sustained as a result of the breach"). Further, the "measure of damages to be applied in the particular case is irrelevant until the claimant has established the fact of losses that were the natural and proximate result of the breach of contract." Willems Indus., Inc. v. United States, 155 Ct. Cl. 360, 376, 295 F.2d 822, 831 (1961). "Absent tangible proof of damages, [a party] may not recover for an alleged injury." Roseburg Lumber Co. v. Madigan, 978 F.2d 660, 667 (Fed. Cir. 1992).

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B.

The Yankees Cannot Establish Causation Or Resultant Damage Through Speculation

In analyzing whether the Yankees have met their burden of proof, this Court is guided by the well-established rule that damages claims must be certain and not speculative to warrant a remedy. San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557, 1563 (Fed. Cir. 1997). Indeed, "contract law precludes recovery for speculative damages." Id. This Court has held that damages based upon speculative expectations "are not recoverable in a common-law suit for breach of contract." Northern Helex Co. v. United States, 207 Ct. Cl. 862, 886, 524 F.2d 707, 720-21 (1975); accord Standard Havens Prods., Inc. v. Gencor Indus., Inc., 953 F.2d 1360, 1375 (Fed. Cir. 1992); see Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012, 1021-23 (Fed. Cir. 1996), cert. denied, 520 U.S. 1116 (1997). The principles disallowing the award of speculative damages are "especially true in suits against the United States for the recovery of common-law damages." Northern Helex, 207 Ct. Cl. at 886, 524 F.2d at 720; accord Wells Fargo, 88 F.3d at 1020 (quoting Northern Helex).3 The Yankees bear the burden of establishing that their claimed damages are not speculative, remote, or unforeseeable. Quiman, S.A. de C.V. v. United States, 39 Fed. Cl. 171, 183 (1997), aff'd, 178 F.3d 1313 (Fed. Cir. 1999). They further bear the burden of establishing reasonable certainty as to each item within their damages claims. Wells Fargo Bank, 88 F.3d at 1023; see also Restatement (Second) of Contracts § 352 cmt. a ("[a] party cannot recover To be recoverable, damages also must be direct and not the result of any intervening incident. See Ramsey v. United States, 121 Ct. Cl. 426, 434, 101 F. Supp. 353, 357 (1951). "For a damage to be direct there must appear no intervening incident . . . ; the cause must produce the effect inevitably and naturally, not possibly nor even probably." Id. at 434, 101 F. Supp. at 357. "There must not be two steps between cause and damage." Myerle, 33 Ct. Cl. at 27. -63

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damages for breach of a contract for loss beyond the amount that the evidence permits to be established with reasonable certainty"). If these burdens are not met, damages cannot be awarded. II. THE YANKEES FAILED TO PROVE THEIR BASIC ASSUMPTION THAT DOE WAS OBLIGATED TO ACCEPT SNF AT AN ANNUAL RATE OF 3,000 MTUs OR AT A SPECIFIC "RAMP-UP" RATE FOR THE FIRST FIVE YEARS OF SNF ACCEPTANCE UPON WHICH THE YANKEES' DAMAGES CLAIMS RELY A. The Yankees Have Failed To Establish That DOE Was Obligated To Accept SNF At A Rate Sufficient To Preclude Additional At-Reactor Storage And To Accept Some "Backlog" Of Utility-Stored SNF

One of the base assumptions that underlies all of the Yankees' damages claims is that DOE was obligated to accept SNF beginning in 1998 at an annual rate of 3,000 Metric Tons Uranium ("MTU"), after a short five-year "ramp-up" period. The Yankees appear to contend that DOE contractually obligated itself to accept SNF and/or HLW at a rate that (1) would eliminate the need for utilities to provide additional on-site storage after January 31, 1998, and (2) would work off the backlog of SNF and/or HLW already stored by utilities up until that deadline. They assert that, to meet this goal, DOE would have to accept SNF at a rate of 3,000 MTUs per year, after a short five-year "ramp-up" period. In his hypothetical exchanges model, which forms the basis of the Yankees' efforts to establish causation for their alleged damages, Mr. Graves assumes that DOE was obligated to accept SNF at this 3,000 MTU rate. The Yankees' basic assumptions are wholly in error and unsupported by either the Standard Contract or the NWPA. The evidence is completely contrary to the Yankees' assertions that DOE was required to create an acceptance rate that satisfied the Yankees' two-part "test." As the Court is aware, DOE published the Standard Contract at issue here as a "proposed rule" in the Federal Register. PFOF -7-

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12. In response to that proposed rule, several nuclear utilities and industry groups submitted comments, requesting, among other things, that DOE place into the Standard Contract an obligation requiring DOE to accept SNF at some pre-determined minimum rate or to adopt as contractual obligations the acceptance rates that would be identified in the statutorily-required Mission Plan. PFOF 25, 27, 30, 32. Although "[a]ll comments received by DOE in response to its proposed rule of February 4, 1983, both at the public hearing and the written comments received thereafter, were carefully reviewed and fully considered in the formulation of this final rule," 48 Fed. Reg. 16,590, 16,590 (Apr. 18, 1983), DOE declined to agree to such requests. In the final Standard Contract that it promulgated in the Federal Register, DOE intentionally excluded the creation of any contractual obligations to meet any pre-determined acceptance rate. PFOF 55-58. Instead of agreeing to a specific minimum acceptance rate or creating standards that would obligate DOE to satisfy a minimum rate, the Standard Contract creates a contractual mechanism for the development of a specific acceptance schedule that establishes, in essence, a two-phase process. First, the Standard Contract's schedule terms seek to obtain the agreement of the parties to a specific schedule for the acceptance of an individual contract holder's SNF and HLW. Pursuant to the terms of the Standard Contract, DOE was to issue, beginning not later than July 1, 1987, "an annual capacity report [("ACR")] for planning purposes," identifying "projected annual receiving capacity" at any DOE facilities and annual acceptance ranking for acceptance of contract holders' SNF and/or HLW for the first 10 years "following the projected commencement of operation of the initial DOE facility." 10 C.F.R. § 961.11, Art. IV.B.5(b). Subsequently, beginning on April 1, 1991, DOE was to issue "an annual acceptance priority -8-

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ranking" ("APR") for receipt of the contract holders' SNF, "based on the age of SNF and/or HLW as calculated from [its] date of discharge." Id., Art. IV.B.5(a). Second, the contract holder, "[a]fter DOE has issued its proposed acceptance priority ranking" on April 1, 1991, and no earlier than January 1, 1992, would submit a delivery commitment schedule ("DCS") identifying "all SNF and/or HLW the [contract holder] wishes to deliver to DOE beginning sixty-three (63) months thereafter," for DOE's approval or disapproval. 10 C.F.R. § 961.11, Art. V.B.1. If DOE approves the DCS, the parties have effectively agreed and defined the amount of SNF that DOE will accept from that contract holder 63 months later. Id. If DOE disapproves the first DCS submission, the contract holder is entitled to make a second DCS submission, again for DOE's approval or disapproval. Id. If DOE approves the second DCS submission, the parties have, as stated above, effectively defined the amount of SNF that DOE will accept from that contract holder 63 months later. Id. If DOE disapproves the second submission, DOE responds with its own proposed schedule, which the contract holder may accept or, alternatively, may attempt to negotiate with DOE, with a right to appeal to the Energy Board of Contract Appeals if the disagreement cannot be resolved through negotiation. Id., Art. V.B.2 & XVI.A; see McDonnell Douglas Corp., ASBCA No. 26747, 83-1 BCA ¶ 16,377, at 81,421 (1983) (boards of contract appeals "[h]istorically and traditionally" assumed jurisdiction over non-monetary "disputes as to the interpretation of contract provisions and determination of the rights and obligations of the parties under the provisions of the contract"). Nothing in those terms creates an obligation upon DOE's part to accept SNF at a rate that (1) would eliminate the need for utilities to provide additional on-site storage after January 31, 1998, and (2) would work off the "backlog" of SNF. In fact, the Yankees can identify absolutely -9-

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no contractual language in the Standard Contract creating any such obligation. Further, the integration clause in the Standard Contract, Article XXII.A, expressly precludes reading any unwritten "agreement" into the contract: "Any representation, promise, or condition not incorporated in this contract shall not be binding on either party," and "[n]o course of dealing or usage of trade or course of performance shall be relevant to explain or supplement any provision contained in the contract." PFOF 63 (DX 6, 7, & 8, Art. XXII.A). The Yankees' proposed requirement for a rate that precludes additional at-reactor storage and reduces the "backlog" of SNF violates standard rules of contract interpretation. As this Court recently recognized in another SNF case in response to the same argument that the Yankees are raising, "[n]one of the demanded terms is found in the contract; and it is clear that the parties shared no meeting of the minds regarding those terms, as was made clear to all during contract negotiations." Florida Power & Light Co. v. United States, No. 98-483C, slip op. at 9 n.12 (Fed. Cl. Oct. 14, 2004) (unpublished). Further, it is clear that, even if the Court were to accept parol evidence to determine whether the contract contains any such obligation, the Yankees consistently understood that it did not. In interpreting the requirements of a contract, the behavior of parties before the "advent of controversy" is often more revealing than the contract language alone. Omni Corp. v. United States, 41 Fed. Cl. 585, 591 (1998). "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." Julius Goldman's Egg City v. United States, 697 F.2d 1051, 1058 (Fed. Cir. 1983), cert. denied, 464 U.S. 814 (1983). Here, the history of the notice-and-comment rulemaking itself is extremely clear in evidencing that DOE did not obligate itself to satisfy the - 10 -

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Yankees' two-part test and that the nuclear utilities were well aware of that fact. PFOF 25, 27, 30, 32, 55-58. Further, in the Yankees' own internal documents from 1983 and 1984, soon after the Standard Contract was executed, the Yankees indicated that DOE had not obligated itself in the contract to satisfy a minimum performance rate, and some of their witnesses testified at trial that they understood that DOE had never agreed to satisfy any specific rate of acceptance. PFOF 70.a-.f. Further, in submitting DCSs to DOE in the early 1990s, none of the Yankees ever complained that the acceptance rates upon which DOE had requested the contract holders base their DCSs were somehow inappropriate or in conflict with the requirements of the Standard Contract. PFOF 107, 109, 111, 115. To the contrary, Yankee Atomic requested that DOE grant it priority in SNF acceptance because of its status as a shutdown reactor, but never asserted that the rates that DOE had identified for SNF acceptance were too low. PFOF 111-115. The Yankees' "understanding" that DOE had some minimum acceptance rate obligation was created after disputes about timely SNF acceptance began. The contemporaneous evidence should preclude any reading of the Yankees' two-part test into the Standard Contract. B. The Yankees Have Failed To Establish That An Annual Acceptance Rate Of 3,000 MTU Is Necessary To Satisfy The Requirements To Which The Yankees Contend DOE Obligated Itself Or That DOE Ever Obligated Itself To Satisfy A 3,000 Rate

Even if the Yankees could establish the existence of the two-part requirement (eliminating additional at-reactor storage, and accepting some "backlog"), they failed to establish at trial that an annual steady-state rate of 3,000 MTU is necessary to satisfy that "requirement." Having established that the annual generation rate of SNF is approximately 2,000 MTUs per year, Tr. 712:9-18, 770:10-12, 1151:5-6, they offered no evidence at trial that an acceptance rate

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of 2,100 MTUs would not satisfy the alleged two-part requirement that they identified. In fact, the Yankees' own witnesses testified that an annual SNF acceptance rate well below 3,000 MTU could satisfy this two-part requirement. Tr. 712:16-18 (Bartlett); Tr. 909:15-25 (Graves); see Tr. 382:3-12 (Mills). On its face, an acceptance rate anywhere from 2,001 MTUs or above would seem to satisfy that alleged requirement, yet the Yankees presented no testimony to establish the reasons that a 3,000 MTU rate was, in fact, the only acceptable acceptance rate. The absence of this evidence precludes any finding that some annual rate lower than 3,000 MTU would be insufficient to meet this unwritten requirement. During trial, the Yankees appeared to assert that the 3,000 MTU rate is somehow mandatory because it has appeared in numerous DOE planning documents. However, the documents upon which the Yankees rely to evidence DOE's eventual "intent" to accept 3,000 MTUs of SNF annually depend upon the existence of an operational repository. PFOF 71. Yet, the Standard Contract does not require DOE to begin SNF acceptance at a repository. To the contrary, the language of the Standard Contract explicitly contemplates that DOE may accept SNF either at a repository or at "such other facility(ies) to which [SNF] and/or [HLW] may be shipped by DOE prior to its transportation to a disposal facility." PFOF 50; see 10 C.F.R. § 961.11, Art. I.10. In fact, between the proposed rule and the final rule, the definition of the type of "facility" to which DOE could deliver SNF was expanded to expressly state, in accordance with the [NWPA], that there may be an interim storage facility (or facilities) which DOE may utilize prior to emplacement in a repository." 48 Fed. Reg. 16590, 16591 (Apr. 18, 1983). As we discussed in prior briefing upon summary judgment, pursuant to the rationale of the United States Court of Appeals for the District of Columbia Circuit in Indiana Michigan - 12 -

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Power Co. v. Department of Energy, 88 F.3d 1272 (D.C. Cir. 1996), DOE was not obligated to have an operational repository by January 31, 1998, precluding any argument that DOE was somehow obligated to accept SNF at the rates it had anticipated for SNF acceptance at a repository. Because DOE was entitled to accept SNF at a facility other than a repository, the Yankees' reliance upon planning documents relating to SNF acceptance at a repository is meaningless. Further, the planning documents upon which the Yankees rely uniformly and expressly indicate that they are "not contractually binding," that they do not establish acceptance rates that create mandatory obligations, and that they were only for planning purposes. PFOF 71, 73, 79. Each Annual Capacity Report issued between 1987 and 1990 expressly advised contract holders that, in 1991, but not before, DOE would begin publishing firm individual utility acceptance schedules in accordance with the contracts, including shipment allocations. PFOF 80. Although the Yankees appear to rely in part upon the 1985 Mission Plan and its drafts to establish DOE's "intent" to accept SNF at a 3,000 annual rate, several commenters, prior to the promulgation of the final Standard Contract, had requested that DOE add a contract provision obligating itself to accept SNF at whatever rates were identified in the Mission Plan. PFOF 30-31. However, DOE intentionally declined to create any such obligation. PFOF 54-58.4 The Yankees have identified Importantly, the 1985 Mission Plan upon which the Yankees rely was created pursuant to a statutory requirement for submission to Congress. 42 U.S.C. § 10221(b)(3) After DOE submitted the 1985 Mission Plan and a 1987 Mission Plan Amendment to Congress, Congress enacted the 1987 amendments to the NWPA, presumably after considering DOE's Mission Plan submissions and evaluating the state of DOE's program. As it was entitled to do, Congress significantly modified the scope of the program at that time, limiting DOE's focus for development of a repository to one site, Yucca Mountain, and establishing linkages between a Monitored Retrievable Storage ("MRS") facility and a repository. 42 U.S.C. §§ 10133, 10161-69. The Yankees' reliance upon documents prepared for Congress that relate to possible - 13 4

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no language in which DOE somehow agreed or even suggested that the acceptance rates in any planning documents which DOE issued were contractually binding or constituted anything other than DOE's hopes and goals for its program. In National By-Products, Inc. v. United States, 186 Ct. Cl. 546, 405 F.2d 1256 (1969), the Court of Claims recognized that, "[b]efore a representation can be contractually binding, it must be in the form of a promise or undertaking . . . and not a mere statement of intention, opinion, or prediction." Id. at 558-59, 405 F.2d at 1263. In a dispute involving whether the Government had contractually agreed that it would built a right-bank levee, the Court in National By-Products determined that, although the Government's representative had represented during contract negotiations "that in its then view the right-bank dike would eventually come into being," such "a representation, without more, would not indicate the Government's commitment to build it, or its guarantee that it would be built." Id. at 570-71, 405 F.2d at 1270. "Rather, the representation would simply mirror the Government's current belief, opinion or prediction, even its fervent hope that this would occur," which could not constitute a contractual obligation upon the Government's part. Id. at 571, 405 F.2d at 1270; see id. at 570, 575, 405 F.2d at 1269, 1272 ("we attribute the Corps' activity in later acting as a catalyst for local action to provide right-bank protection to its public-minded concern with the problem . . . and not to any feeling of contractual liability" (italics in original)); see Commercial Metals Co. v. United States, 176 Ct. Cl. 343, 349 (1966) ("the Railroad's historical practice ­ which has not been incorporated in any

circumstances and scenarios that could have existed prior to congressional review of and action upon those pre-amendment planning documents does not support its argument that DOE has somehow obligated itself to accept SNF at a 3,000 MTU rate, regardless of whether a repository is available. - 14 -

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written pronouncement for the information of the public ­ could not modify the plain language of the sales contract between the plaintiff and the Railroad . . . ."); Branhill Realty Co. v. Montgomery Ward & Co., 60 F.2d 922, 923 (2d Cir. 1932) (although parties discussed lessee's use of leased premises as chain store, lessee "did not bind itself so to do" in the contract, so that lessee "might, at its option, use them either for a chain store or for any lawful purpose"). Because DOE has never obligated itself to satisfy a 3,000 MTU acceptance rate, the Court cannot incorporate such a requirement into the Standard Contract. C. The Yankees Have Failed To Establish That The Standard Contract Required DOE To Adopt The Specific "Ramp-Up" Rate Upon Which The Yankees Rely

The Yankees also rely upon a specific ramp-up rate that they appear to contend that DOE was obligated to satisfy: specifically, DOE would accept exactly 1,200 MTUs of SNF in 1998; 1,200 MTUs in 1999; 2,000 MTUs in 2000; 2,000 MTUs in 2001; and 2,700 MTUs in 2002. The Yankees' expert witness, Mr. Graves, relies upon this specific ramp-up rate in conducting his hypothetical exchanges model, which will be discussed below, and the results of his model are completely dependent upon the use of this "ramp-up rate." PFOF 190. The only testimony regarding the reasons for using this ramp-up rate came from Mr. Graves, who testified that he used it because it appeared in DOE documents. Tr. 780:6-13; 783:9-784:7. However, the ramp-up rates upon which Mr. Graves relied were not developed by DOE, but, instead, were included in legislation that was pending in Congress for the construction of a centralized interim storage facility that was never enacted. PFOF 125. The 1999 document from which Mr. Graves took these "rates" were mandated by the proposed legislation, id., and, accordingly, were not used to "plan" DOE's actual performance. - 15 -

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Further, numerous documents containing numerous alternative ramp-up rates were contained in other DOE documents, including actual planning documents. See PFOF 74, 125.c. The Yankees failed to establish at trial that DOE was obligated under the terms of the Standard Contract to accept SNF at the "ramp-up" rates that Mr. Graves identified or under any of the alternative ramp-up rates identified in other DOE planning documents. Interestingly, Mr. Graves initially modeled other lower ramp-up rates, but he did not include those ramp-up rates in his final opinion. PFOF 125.b. Because they failed to present any evidence that DOE was obligated to accept SNF under the ramp-up rates upon which Mr. Graves relied, they cannot use those in his hypothetical exchanges model. D. To The Extent That The Court Finds It Necessary To Define A Rate Of SNF Acceptance For The Standard Contract, Nothing In The Standard Contract Precluded DOE From Performing At A Minimal Rate 1. At Most, The Acceptance Schedule To Which DOE Could Be Held To Perform Could Not Exceed The Rates Contained In The DCSs That It Approved

As will be explained below in our discussion of Mr. Graves' hypothetical model, this Court need not define the specific minimum rate of SNF acceptance under which DOE could have performed without breaching the Standard Contract. Mr. Graves' hypothetical model is wholly dependent upon a specific "ramp-up" rate and a 3,000 MTU annual rate of SNF acceptance. Except for their unsupported theory that DOE would have given them priority in SNF acceptance, the Yankees base the entirety of their causation evidence upon Mr. Graves' hypothetical model. Without that model, and without their theory of priority acceptance, they have failed to present any evidence of causation for any of their claimed damages. Accordingly, once the Court rejects the Yankees' unsupported argument that the Standard Contract requires a - 16 -

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specific "ramp-up" rate and a 3,000 MTU annual acceptance rate, it will not need to identify the specific rate of acceptance to apply to this contract because the Yankees' proof of causation for any damages will have failed. Nevertheless, to the extent that the Court finds it necessary to define a specific rate of SNF acceptance applicable to the Standard Contract, the maximum rate that it can identify should be by reference to the DCSs that the Yankees submitted and DOE approved. In its June 26, 2003 decision upon the Government's motion for summary judgment, the Court placed the issue of the meaning and effect of the DCSs in issue for trial in this case. In its decision, the Court relied upon this Court's decision in Commonwealth Edison Co. v. United States, 56 Fed. Cl. 652 (2003), in which the Court found that "plaintiff's submission and defendant's acceptance of the proposed DCSs did not create a contractually binding obligation for either party." Id. at 666. However, to the extent that DCSs were not "contractually binding," that fact does not render the submission of DCSs meaningless. To the contrary, under the acceptance mechanism of the Standard Contract, a contract holder had to submit a DCS to DOE for a specific amount of SNF 63 months in advance of the date upon which it wanted DOE to accept that amount of SNF. 10 C.F.R. § 961.11, Art. V.B.1. Under the Standard Contract, if the contract holder did not submit that DCS in a timely manner, the contract holder would not have satisfied the contract prerequisites and requirements for scheduling SNF deliveries and acceptances. Although the Yankees and numerous other contract holders submitted DCSs in this case that DOE approved, the Yankees appear to believe that, regardless of those submissions, they had some right to some greater acceptance of SNF beginning in 1998. Yet, they failed to present any evidence at trial regarding how they, or any other contract holder, would have been able to - 17 -

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convince DOE, in 1998, to accept significantly more SNF than that identified in previously approved DCSs. Under their theory of the contract, had DOE begun SNF acceptance in 1998, all of the previously approved DCSs would have been worthless, and DOE would somehow have accepted SNF in substantially greater quantities than those to which it previously had agreed. In essence, the Yankees simply read the 63-month notice requirement in the acceptance schedule contract provisions out of the contract, in violation of standard contract interpretation principles. See Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991). Under the Yankees' theory, DOE will magically know when each contract holder wants SNF accepted, without regard to the DCSs that the contract holders submit; each contract holder's desires will magically correspond to the "oldest fuel first" requirements of the Standard Contract; DOE will have no problems simply taking SNF from every contract holder when each wants acceptance, regardless of space, capacity, staffing, or transportation limitations or notice; and DOE will have no problem with the significant financial repercussions and waste that it will suffer if a contract holder is not prepared to deliver SNF to DOE when DOE arrives at the contract holder's site with the appropriate transportation casks contemplated by the Standard Contract. By reading the DCS process out of the Standard Contract, the Yankees have eliminated the only mechanism that would allow the parties to plan for, and commit themselves to, actual performance under the Standard Contract. Without enforcement of the DCS provisions, the Standard Contract cannot function. The Yankees' attempts to obtain damages based upon acceptance obligations that far exceed any commitments that DOE made when approving DCSs 63 months before SNF acceptance was to commence are unsupported.

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2.

Because Of The Manner In Which The Contract's Schedule Provisions Grant DOE The Discretion To Define The Schedule, Any Damages Award Should Be Based Upon The Minimum Schedule That DOE Could Have Selected

The Yankees have argued in the past that, because the Standard Contract does not identify a minimum mandatory acceptance rate, the Court's role is to identify a "reasonable" rate for inclusion in the Standard Contract, and the Yankees suggest that the 3,000 MTU rate they propose is "reasonable." However, because the Standard Contract does not contain the requirements that the Yankees have suggested, the acceptance rates that they have proposed lack any basis. Further, and importantly, because of the manner in which the acceptance schedule mechanism in the Standard Contract is drafted, this Court may not simply identify a rate that it believes "reasonable" and incorporate it into the contract. In light of the manner in which the acceptance schedule contract provisions in this contract were written, DOE can, at best, be held responsible for failing to accept SNF at the minimum rate at which it could have performed its obligations in accordance with the Standard Contract. The Standard Contract's schedule terms provide DOE with the option of selecting any one of numerous potential acceptance scenarios, subject only to review by the EBCA for abuse of discretion, the schedule terms act as a form of "alternative contract." "An alternative contract is one in which a party promises to render some one of two or more alternative performances [any] one of which is mutually agreed upon as the bargained-for equivalent given in exchange for the return performance by the other party." 11 A. Corbin, Corbin on Contracts § 1079, at 394 (interim ed. 1979); see Restatement of Contracts § 344 cmt. a, at 565 (1932) ("[a]n alternative contract is one wherein A promises B some one of two or more alternative performances"). "A

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promise of one of several alternative performances will give the choice of alternatives, unless the contrary is stated, to the person who is to render the performance." 11 W. Jaeger, Williston on Contracts § 1407, at 592 (3d ed. 1968); see 11 A. Corbin, supra, § 1079, at 394 ("[t]he choice among these alternatives, the power of election, is usually given to the promisor"). In such circumstances, "he has power to discharge his contractual duty by performing either alternative." 11 A. Corbin, supra, § 1079, at 394; see Restatement of Contracts § 344 cmt. a, at 565 (1932) ("[t]he option may be given to A, in which case he has power to discharge his duty by performing either alternative"). If the promisor breaches its obligations under the alternative contract, the measure of damages is not an amount that the promisee or the Court determines is most attractive or most reasonable of the possible alternative methods of performance that the promisor could have elected, but instead is the "least valuable," or least costly to the promisor, of the possible alternative performances: The damages to which the promisee would be entitled in case of breach of such a promise would be based on the least valuable of the alternative performances. . . . A promise to give any one of a thousand specified things as the promisor may choose, though it cannot be enforced specifically, is not too indefinite to have a clear meaning, and the promisee's damages would be the value of the least valuable of the one thousand things. The same is true of a promise to perform whenever within a specified period of time the promisor may choose. 1 R. Lord, supra, § 4:24, at 557-58 (emphasis added). The Restatement of Contracts succinctly defines this rule as follows: The damages for breach of an alternative contract are determined in accordance with that one of the alternatives that is chosen by the party having an election, or, in case of breach without an election, - 20 -

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in accordance with the alternative that will result in the smallest recovery. Restatement of Contracts § 344, at 565 (1932) (emphasis added); see Koby v. United States, 53 Fed. Cl. 493, 501 (2002) ("general rule is that, unless the contract specifically preserved the right of election for the promisee, 'in the case of breach without an election (of alternatives), [damages] (shall be) in accordance with the alternative that will result in the smallest recovery'" (quoting In the Matter of Community Med. Ctr., 623 F.2d 864, 867-68 (3d Cir. 1980)) (brackets and parentheses in original); Branhill Realty, 60 F.2d at 923 ("[w]here a promisor has agreed to alternative performances, in case of breach without an election, the damages are measured by the alternative that will result in the smallest recovery"); 11 W. Jaeger, supra, § 1407, at 593 (where "no choice has been made" between the various alterative methods of performance, "either expressly by the promisor or automatically by the terms of the contract or by law, the measure of damages . . . is the value of the alternative least onerous to the defendant" (emphasis added)); see also White v. Delta Constr. Int'l, Inc., 285 F.3d 1040, 1043 (Fed. Cir. 2002) ("damages for breach of contract shall place the wronged party in as good a position," but not a better position, "as it would have been in, had the breaching party fully performed its obligation" (emphasis added)).5 "The ratio dicendi for this rule is that the court may not place the promisee in a better position than had the contract been performed ­ it presumes that the promisor had bargained for

"An inconsistent and, it seems, erroneous rule has been laid down in a few cases which hold that if the promisor fails to make an election the promisee thereupon has the option." 11 W. Jaeger, supra, § 1407, at 594. However, this minority view is incorrect. Id.; see Community Med. Cntr., 623 F.2d at 868 (explaining that minority view "has garnered scholarly approval in only one situation ­ where the contract itself contains language granting the promisee the right to elect remedies"). Any grant of election of remedies to the utility plaintiffs would eliminate the discretion that the Standard Contract grants to DOE. - 21 -

5

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the flexibility of the alternatives and, therefore, should be liable for no more than the least expensive alternative he could have chosen." Koby, 53 Fed. Cl. at 501; see Liberty Bank v. Talman Home Mortgage Corp., 877 F.2d 400, 407 n.10 (5th Cir. 1989) ("[t]he rationale for this rule is simply: the promisor is held liable only for the cost of the least expensive alternative he could have chosen 'as a recognition of the flexibility which had been bargained for by the party in breach'"). To the extent that the Court determines that acceptance schedules have not already been defined through DCSs and that it must define the appropriate manner in which acceptance schedules, for purposes of evaluating plaintiffs' damages claims, should be identified, the Court must identify schedules that account for DOE's flexibility, absent an agreement to a particular DCS, to have selected among numerous SNF and HLW acceptance scenarios and apply the rule of alternative contracts that any plaintiff's damages for DOE's failure to accept SNF and/or HLW must be based upon "the value of the alternative least onerous to the defendant." 11 W. Jaeger, supra, § 1407, at 593. In this case, the Standard Contract provides a specific mechanism for defining the schedule of SNF acceptance, requiring the contract holder to submit DCSs and Final Delivery Schedules ("FDSs") if it wants to define specific acceptance rights, the Government's review of those DCSs and FDSs, the Government's eventual identification of a proposed schedule if it does not approve of the contract holder's request, and the contract holder's right to challenge DOE's proposed schedule at the EBCA. 10 C.F.R. §§ 961.11, Arts. V.B & XVI.A. If the process proceeds to the stage in which DOE identifies the DCS or FDS amount to the contract holder, that selection is subject to review by the EBCA only for abuse of discretion. See 10 C.F.R. § 961.11, Art. XVI.A; see also Reservation Ranch v. United States, 39 Fed. Cl. 696, 714 (1997) - 22 -

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("when the parties to a contract vest one party with the discretion to make a critical factual determination under the contract, this court narrowly reviews that determination to ascertain whether that discretion was arbitrarily or capriciously exercised"), aff'd, 217 F.3d 850 (Fed. Cir. 1999). Because the Standard Contract provides DOE with broad discretion in determining the acceptance schedule for the Standard Contract, the acceptance schedule mechanism is essentially an "alternative contract" provision, and this Court cannot determine a "reasonable" schedule, substituting its views for the agency's, but instead can, at best, identify the minimum schedule under which DOE could have accepted SNF without breaching the Standard Contract. Because the Standard Contract does not contain any performance standards or requirements, other than a start date for the acceptance of SNF, DOE's discretion in identifying an acceptance schedule is extremely broad, including the right to select a slow rate of SNF acceptance. Here, to the extent that the Court finds it necessary to decide the rate of SNF acceptance applicable to this contract, it would need to identify a minimal mandatory rate. Since the Yankees presented no evidence to support any findings regarding that rate, they have failed to satisfy their burden of proof. III. THE YANKEES HAVE FAILED TO ESTABLISH WITH ANY CREDIBLE EVIDENCE THAT, THROUGH EXCHANGES OF APPROVED DELIVERY COMMITMENT SCHEDULES, DOE WOULD HAVE BEEN OBLIGATED TO ACCEPT ALL OF THEIR SNF BY 1999, 2001, AND 2002, RESPECTIVELY A. The Yankees' Causation Analysis Is Dependent Upon Mr. Graves' Hypothetical Exchanges Model

The predicate upon which the Yankees base their damages is the assumption that, assuming a specific "ramp-up" rate and a continuing annual acceptance of 3,000 MTUs, the Yankees would have exchanged SNF acceptance allocations with other contract holders and moved earlier in the acceptance queue. Although the Standard Contract provides that DOE will - 23 -

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initially allocate acceptance positions in its SNF acceptance queue based upon the age of the various contract holders' SNF, 10 C.F.R. § 961.11, Art. VI.B.1, it also provides that contract holders can "exchange approved delivery commitment schedules with parties to other contracts with DOE for disposal of SNF and/or HLW; provided, however, that DOE shall, in advance, have the right to approve or disapprove, in its sole discretion, any such exchanges." 10 C.F.R. § 961.11, Art. V.E (italics in original; underlining added). Using a hypothetical "exchanges" model created by their expert, Mr. Graves, the Yankees conclude that, through the use of exchanges, Yankee Atomic's final fuel-out date would have been in 1999, Connecticut Yankee's would have been in 2001, and Maine Yankee's would have been in 2002. PFOF 129. These fuel-out dates are substantially earlier than under the general rates of acceptance applied within the "oldest fuel first" acceptance queue. PFOF 127-128. In determining whether its specific requested damages were caused by DOE's failure to complete accepting the Yankees' SNF, the Yankees ask this Court to evaluate causation using these earlier fuel-out dates based upon "exchanges." B. As A Matter Of Law, A Hypothetical Model Must Have Adequate Factual Evidentiary Support

In determining whether a hypothetical model provides sufficient basis for an award of damages, the Court must determine whether the plaintiff has established a realistic and complete "but for" world. Dolphin Tours, Inc. v. Pacifico Creative Serv., Inc., 773 F.2d 1506, 1512 (9th Cir. 1985) ("[i]n projecting free market profits, antitrust plaintiffs are not entitled to assume favorable aspects of an anticompetitive market"); Restatement (Second) of Contracts § 347(c). Where, as here, plaintiffs attempt to prove that they have suffered damages using a computer

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model of the hypothetical "but for" company premised upon a number of critical assumptions, the "failure to establish the reasonableness of these assumptions is fatal" to the damage claim. Southern Pac. Communications Co. v. AT&T, 556 F. Supp. 2d 825, 1076 (D.D.C. 1982), aff'd, 740 F.2d 1011 (D.C. Cir. 1984); see Kidder, Peabody & Co. v. IAG Int'l Acceptance Group N.V., 28 F. Supp. 2d 126, 133-34 (S.D.N.Y. 1998) (calculations based upon "series of assumptions and projections" prevent lost profits from being reasonably certain). Plaintiffs' damages models may not be based upon mere speculation or hypotheticals. Home Sav. of Am. v. United States, 57 Fed. Cl. 694, 727 (2003) (appeal pending) (citing Franklin Fed. Sav. Bank v. United States, 55 Fed. Cl. 108 (2003), & Willems Indus., Inc. v. United States, 155 Ct. Cl. 360, 295 F.2d 822 (1961)). This Court has repeatedly rejected as inherently speculative expert models that lack evidentiary foundation, finding that the proof upon which a plaintiff relies in such models "must be rooted in fact" and that "[a] claim whose basic structural components lack such factual foundation is simply speculation." Castle v. United States, 48 Fed. Cl. 187, 206 (2000), aff'd in part, rev'd in part, 301 F.3d 1328 (Fed. Cir. 2002). A plaintiff's damages model must "be based on sufficient factual evidence, must use assumptions and calculations that are moored in that factual evidence, and must be credible." Columbia First Bank, FSB v. United States, 60 Fed. Cl. 97, 107-08 (2004); see Shockley v. Arcan, Inc., 248 F.3d 1349, 1362 (Fed. Cir. 2001) (plaintiff must supply "adequate evidence to enable the fact-finder to responsibly estimate future losses based on sound economic models and evidence, not pure guesswork"). In Fifth Third Bank v. United States, 55 Fed. Cl. 223 (2003), the Court rejected the plaintiff's damages model, explaining that the model failed because it created a certain result - 25 -

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"without identifying any specific investments or opportunities" that would have allowed the plaintiff to obtain the modeled result: Plaintiff's model ignores the presence of competitors similarly unfettered by the breaching provisions of FIRREA. But the most outstanding flaw is the assumption that the But-for-Bank would, even if it could, engage in the same type of activities without identifying any specific investments or opportunities, and that these activities would produce the same results (discounted to be conservative) as the actual business activities in which plaintiff engaged. The court agrees with defendant that this deficiency renders plaintiff's model speculative as a matter of fact and law. Id. at 241 (emphasis added); see Shockley, 248 F.3d at 1363-64 (rejecting accounting expert's model because underlying assumption lacked factual underpinnings and, therefore, any basis in economic reality); Oiness v. Walgreen Co., 88 F.3d 1025, 1029-30, 1032 (Fed. Cir. 1996) (rejecting model where damages rested upon unsupported assumptions "fraught with speculation," plaintiff's expert "offered no sound economic reasoning to support his assumption," and expert's "projections lacked evidentiary support"), cert. denied, 519 U.S. 1112 (1997); accord Southern Nat'l Corp. v. United States, 57 Fed. Cl. 294, 305 (2003); see also Glendale Fed. Bank, FSB v. United States, 43 Fed. Cl. 390, 399 (1999) ("The court believes that plaintiff's lost profits model suffers from serious defects, which undercut the basis for using it as a credible model for ascertaining lost profits . . . ."), aff'd in relevant part, vacated in part, 239 F.3d 1374 (Fed. Cir. 2001); Suess v. United States, 52 Fed. Cl. 221, 228 (2002) (rejecting damages model as "premised on unrealistic assumptions"). The Supreme Court is in accord. Specifically, the Supreme Court has held that expert opinion cannot sustain a judgment when the opinion "is not supported by sufficient facts to validate it in the eyes of the law, or when indisputable record facts contradict or otherwise render - 26 -

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the opinion unreasonable." Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 242 (1993). Where expert testimony is speculative, it is not competent proof, and such testimony contributes "nothing to a 'legally sufficient evidentiary basis.'" Weisgram v. Marley Co., 528 U.S. 440, 454 (2000) (citing Brooke Group, 509 U.S. at 242). As the Supreme Court instructed, while "[e]xpert testimony is useful as a guide to interpreting market facts, . . . it is not a substitute for them." Brooke Group, 509 U.S. at 242; see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 594 n.19 (1986) (expert opinion evidence "has little probative value in comparison with the economic factors."). The decisions of courts outside this Circuit support the conclusion that hypothetical expert models which lack evidentiary support must be rejected. The United States Court of Appeals for the Eighth Circuit has held that deficiencies in the foundation of an expert's opinion resulted in conclusions that were "mere speculation." Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1057 (8th Cir. 2000). Similarly, in Virgin Atlantic Airways Ltd. v. British Airways PLC, 69 F. Supp. 2d 571 (S.D.N.Y.1999), aff'd, 257 F.3d 256 (2d Cir. 2001), the district court held that "an expert's opinion is not a substitute for a plaintiff's obligation to provide evidence of facts that support the applicability of the expert's opinion to the case." Id. at 579-80; see Elkind v. Liggett & Meyers, Inc., 635 F.2d 156, 170-172 (2d. Cir.1980) (rejecting expert testimony on the price at which the market would have valued the stock if there had been disclosure as hypothetical and "entirely speculative"); Callahan v. A.E.V., Inc., 182 F.3d 237, 257 (3d Cir. 1999) (hypothetical "but for" calculations "usually rely upon unrealistic ex ante assumptions about the business environment, such as assumptions of perfect knowledge of future demand, future prices, and future costs that tend to overstate the plaintiff's damages claim"). - 27 -

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C.

Instead Of Evidentiary Support, Mr. Graves' Model Is Founded Upon An Unrealistic Economic Theory Of A Perfectly Competitive Exchanges Market 1. To Reach The 1999, 2001, And 2002 Fuel-Out Dates That They Desire, The Yankees Require A Perfectly Competitive Exchanges Marketplace

Mr. Graves' model is not premised upon any investigation that he undertook concerning the willingness of nuclear utilities to exchange acceptance allocations with other utilities, concerning the obstacles to exchanges that might exist, or concerning the reasons that no exchanges requests were ever submitted to DOE for approval. Before preparing his model, Mr. Graves failed to contact any utility ­ and even failed to speak with the Yankees ­ to determine the viability of or evidentiary foundation for an exchanges market that might have developed absent DOE's delay in beginning SNF acceptance. PFOF 130, 143. Indeed, Mr. Graves admitted that his model does not set forth what would have happened had DOE timely performed. PFOF 141. Instead, Mr. Graves' model is based entirely upon the application of economic theory following from assumptions that a market for exchanges of SNF acceptance allocations, absent DOE's delay in beginning SNF acceptance, would have been analogous to a perfectly competitive market guided by the "invisible hand." See PFOF 142, 144-145. To obtain the 1999, 2001 and 2002 fuel-out dates for the Yankees, any exchanges market must be consistent with the economic theory of perfect competition underlying Mr. Graves' model. PFOF 146. Any deviations would delay the projected fuel-out dates. PFOF 153, 159, 161-164, 176-177. The principle of the "invisible hand" theory, which was first proclaimed by Adam Smith, "holds that in selfishly pursuing only his or her personal good, every individual is led, as if by an invisible hand, to achieve the best good for all," Tr. 4259:4-7 (quoting P. Samuelson & W. - 28 -

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Nordhaus, Economics (15th ed. 1995)), resulting in a perfectly competitive marketplace. PFOF 142. Consistent with a perfectly competitive market, Mr. Graves assumes that all entities with SNF acceptance allocations would have participated in the exchanges market and that no utilities would have rationed that participation. PFOF 144. Mr. Graves further assumes that market participants would have had perfect information available to them, that the market would have negligible transaction and information costs, that decision-making concerning market participation would have been driven solely by economic considerations, that all utilities trading down in the acceptance queue would have been price takers, and that the market would have had sufficiently numerous participants. PFOF 144. These assumptions are all consistent with the "invisible hand" theory and perfect competition. PFOF 142, 144; see Federal Trade Comm'n v. Elders Grain, Inc., 868 F.2d 901, 907 (7th Cir. 1989) (model of perfect competition implies infinite number of sellers, identical costs, a perfectly homogeneous product, and perfectly informed buyers); A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396, 1397 (7th Cir. 1989) (describing perfect market in which concentration is low, product is fungible, and where price approaches marginal cost). 2. Courts Have Not Supported The Theory That, In The Real World, Marketplaces Are Perfectly Competitive

Courts have rejected the application of economic models premised upon perfectly competitive marketplaces. "No market fits the economist's model of perfect competition." Elders Grain, 868 F.2d at 907. As the United States Supreme Court has recognized, "[t]here is no reason for believing that the marketplace of ideas is free from market imperfections any more than there is to believe that the invisible hand will always lead to optimum economic decisions in

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the commercial market." Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y., 447 U.S. 557, 592 (1980). "`[I]n the real economic world rather than an economist's hypothetical model,' the latter's drastic simplifications generally must be abandoned." Illinois Brick Co. v. Illinois, 431 U.S. 720, 742 (1977) (quoting Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968)). The district court's holding in Honorable v. Easy Life Real Estate Sys., 100 F. Supp. 2d 885 (N.D. Ill. 2000), is instructive here. In analyzing a model premised upon perfect competition, the district court found that the conditions which must exist to support a "perfect" market are theoretical, not real: [E]conomic theories that imply that market prices are efficient, thus beneficial for consumers, presuppose that consumers are informed, markets are competitive, and the costs of making transactions are not excessively burdensome. To produce theoretical equilibrium, neoclassical economics in fact assumes perfect information, perfect competition, and no transaction costs, among other idealizations. But these assumptions must be relaxed, and perhaps, ultimately replaced, if economic theory is to have any application to what happens in actual markets. Id. at 888-89 (italics in original). Indeed, the court concluded that, if perfect market conditions "fail to obtain to a sufficient degree, even the rough efficiency of the market outcome can no longer be presumed," and "the conclusion (that markets are efficient) no longer follows from the premises." Id. at 889; see Image Tech. Services, Inc. v. Eastman Kodak Co., 903 F.2d 612, 617 (9th Cir. 1990) ("market imperfections can keep economic theories about how consumers will act from mirroring reality"); United States v. Realty Multi-List, Inc., 629 F.2d 1351, 1368 (5th Cir. 1980) (perfect competition is theoretical concept as all markets subject to varying degrees of imperfections); United States v. E.I Du Pont & De Nemours & Co., 118 F. Supp. 41, 49 (D. Del. - 30 -

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1951) ("[w]e start . . . with recognition that all practicable forms of competition are 'imperfect,' and that the 'perfect competition' of economic theory is academic."). 3. The Analyses That Mr. Graves Decided To Ignore, And The Yankees' Own Past Analyses, Conflict With The "Perfect Competition" Fuel-Out Dates Upon Which The Yankee Now Rely

An early draft of Mr. Graves' expert report demonstrates the difficult alternative to perfect competition that the Yankees faced in this case. In preparing his analysis, Mr. Graves modeled intra-utility swaps between only the three plaintiffs in this case: Yankee Atomic, Connecticut Yankee, and Maine Yankee. PFOF 146. Inserting that intra-utility exchange assumption into the Graves model, the three Yankees would not be able to require DOE to remove all of their SNF until 2011, nine years later than Mr. Graves eventually estimated in his "perfect competition" model.6 PFOF 146. Studies of exchange alternatives that the Yankees themselves conducted likewise extend fuel-out dates beyond those that Mr. Graves projects. PFOF 146. At trial, the Yankees offered no estimate of what their fuel-out dates would have been had the exchanges market, absent DOE's delay, failed to perform as Mr. Graves projected. PFOF 147. 4. The Requirement That Contract Holders Obtain DOE's Discretionary Approval Of Any Exchange Request Belies A Perfect Market

Under the Standard Contract, contract holders may not merely exchange approved DCSs at their own whim. The "Exchanges" provision of the Standard Contract requires that contract holders must seek DOE's approval of any exchange request and that DOE, "in its sole Under the intra-utility model, and applying the acceptance rate that Mr. Graves assumes, Yankee Atomic can have its SNF removed by 1998, but Connecticut Yankee and Maine Yankee cannot obtain removal until 2007 and 2011. PFOF 146. - 31 6

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discretion," may approve or disapprove that request. PFOF 138 (DX 6, 7, & 8, Art. V.E). Any requirement of Government approval to complete transactions in a market is antithetical to a perfectly competitive market guided by the invisible hand. PFOF 149. The fact that the Standard Contract provides DOE with the "sole discretion" to approve or disapprove exchange requests bars, as a matter of law, a finding that Mr. Graves' model accurately establishes the contractual fuel-out dates for the Yankees. For Mr. Graves' model to succeed, DOE would have to exercise its "sole discretion" in favor of approval of every single exchange request submitted. PFOF 150. Yet, DOE would have no obligation to do so. The Standard Contract does not contain, and DOE has not developed, any standards or factors that DOE is required to consider in exercising its discretion, PFOF 139, rendering its ability to disapprove exchange requests extremely broad, if not unfettered. See Brinson v. Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir. 1995) (in response to claim of breach of good faith and fair dealing, providing extremely broad and deferential review to contracting party's decision, which was within its "sole discretion" pursuant to contract language, to ensure that court did not "add a term to the Contract" that was not otherwise there).7 In light of this extremely broad discretion, and given that no contract holder has ever submitted an exchange request to DOE for approval, this Court, as a matter of law, cannot base a damages award upon an assumption that DOE would have approved every single exchange It could be argued that the manner in which Article V.E of the Standard Contract is written precludes any duty of good faith and fair dealing as it applies to DOE's decision to approve or disapprove any particular exchange request. See Big Horn Coal Co. v. Commonwealth Edison Co., 852 F.2d 1259, 1267 (10th Cir. 1988) ("it is possible to so draw a contract as