Free Memorandum of Contentions of Fact and Law - District Court of Federal Claims - federal

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No. 98-488C (Judge Braden) IN THE UNITED STATES COURT OF FEDERAL CLAIMS SACRAMENTO MUNICIPAL UTILITY DISTRICT, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. DEFENDANT'S MEMORANDUM OF CONTENTIONS OF LAW AND FACT

PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director OF COUNSEL: JANE K. TAYLOR Office of General Counsel U.S. Department of Energy 1000 Independence Ave., S.W. Washington, D.C. 20585 ALAN J. LO RE Senior Trial Counsel JOSHUA E. GARDNER SCOTT R. DAMELIN TODD J. COCHRAN ELIZABETH THOMAS Trial Attorneys Commercial Litigation Branch Civil Division Department of Justice Washington, D.C. 20530 February 28, 2005 HAROLD D. LESTER, JR. Assistant Director RUSSELL A. SHULTIS Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tele: (202) 305-7571 Fax: (202) 307-2503 Attorneys for Defendant

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TABLE OF CONTENTS INTRODUCTION .......................................................................................................................... 1 STATEMENT OF FACTS ............................................................................................................ 4 ARGUMENT ............................................................................................................................... 15 I. SMUD CANNOT ESTABLISH THAT THE GOVERNMENT'S FAILURE TO BEGIN THE ACCEPTANCE OF SMUD'S SNF BY 2001 CAUSED ITS PURPORTED DAMAGES .......................................................................... 15 A. B. Contentions Of Law Regarding Causation .............................................. 15 Contentions Of Fact Regarding Causation ............................................... 17 1. SMUD's Decision To Pursue Dry Storage Is Unrelated To The Timing Of DOE's Performance Under The Standard Contract ........................................................................................ 17

II.

SMUD CANNOT PROVE ITS 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 ........................................................................................... 20 A. Because SMUD Elected To Pursue Dry Storage Without Regard To The Acceptance Rate, Resolution Of This Issue Is Unnecessary Here ......................................................................................................... 20 DOE Expressly Rejected The Industry's Request To Include A Particular Rate Of Acceptance In The Standard Contract ........................ 21 SMUD's Equation Of The Acceptance Rate With The Annual Capacity Of A Federal Repository Is Inappropriate ................................. 25 SMUD's Claim That It Would Have Had Early Fuel-Out Dates Because DOE Would Have Granted It Priority As A Shutdown Facility Or That It Would Have Engaged In Exchanges Of Its Queue Position Is Unsupported By Any Evidence .................................. 27

B. C. D.

III.

EVEN IF THE COURT ACCEPTS THAT SMUD PURSUED DRY STORAGE AS A DIRECT RESULT OF THE GOVERNMENT'S BREACH, MANY OF SMUD'S DAMAGES ARE NOT RECOVERABLE ..... 30 A. Contentions Of Law Regarding Damages ................................................ 30 -i-

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B.

Contentions Of Fact Regarding Damages ................................................ 32 1. 2. Summary ...................................................................................... 32 SMUD Has Failed To Mitigate Its Alleged Damages .................. 35 a. b. c. Had SMUD Kept Its SNF In Its Wet Pool, It Would Have No Damages ............................................... 35 SMUD Could Have Utilized A Dry Transfer System, Which Would Have Saved It Millions Of Dollars ........... 37 SMUD Chose A More Expensive Dual-Purpose Dry Storage System When Other Licensed Options Were Available .......................................................................... 38

3.

The Fact That SMUD Possesses Greater Than Class C Radioactive Waste And Failed Fuel, Which It Is Responsible For Storing Indefinitely, Precludes A Finding That No Continuing Storage Costs Or Dry Storage Construction Costs Would Have Been Incurred Absent DOE's Delay .................................................................... 42 a. b. SMUD Possesses GTCC Waste ....................................... 42 SMUD Possesses Failed Fuel .......................................... 44

4. 5.

SMUD Has Usurped The Responsibility Of DOE To Provide For Transportation .......................................................... 45 SMUD's Management Decisions Resulted In Substantial Schedule And Cost Overruns, And These Overruns Are Not Recoverable As Damages ..................................................... 46 SMUD's Damages Claims Include Costs That It Otherwise Would Have Incurred ................................................................... 46 SMUD's Damages Claims Include Other Serious Deficiencies .................................................................................. 47 SMUD's Damages Claims Do Not Provide An Offset For The Savings Associated With Decommissioning Or Wet Storage Operating Costs ............................................................... 48 - ii -

6. 7. 8.

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IV.

SMUD's ARGUMENT THAT THE GOVERNMENT HAS BREACHED AN IMPLIED DUTY OF GOOD FAITH AND FAIR DEALING, AND ITS ARGUMENT THAT IT IS ENTITLED TO DAMAGES FOR THAT BREACH, ARE UNFOUNDED ......................................................................... 49 A. B. Contentions Of Law Regarding Implied Duty Of Good Faith And Fair Dealing ...................................................................................... 49 Contentions Of Fact Regarding Implied Duty Of Good Faith And Fair Dealing .............................................................................................. 51

CONCLUSION ............................................................................................................................ 52

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TABLE OF AUTHORITIES FEDERAL CASES Alaska Pulp Corp. v. United States, 59 Fed. Cl. 400 (2004) .................................................................................................... 15 Allstate Finance Corp. v. Utility Trailer of Ill., Inc., 936 F. Supp. 525 (N.D. Ill. 1996) ................................................................................... 49 Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234 (Fed. Cir. 2002) ....................................................................................... 50 Asco-Falcon II Shipping Co. v. United States, 32 Fed. Cl. 595 (1994) .................................................................................................... 50 Barrow Utils. & Elec. Co. v. United States, 20 Cl. Ct. 113 (1990) ...................................................................................................... 31 Beraha v. Baxter Health Care Corp., 956 F.2d 1436 (7th Cir. 1992) ......................................................................................... 49 Bluebonnet Savings Bank v. United States, 339 F.3d 1341 (Fed. Cir. 2003) ....................................................................................... 30 Boston Edison Company v. United States, No. 99-447C, 2005 WL 375603 (Feb.15, 2005) ............................................................. 51 California Federal Bank v. United States, 395 F.3d 1263 (Fed. Cir. 2005) ........................................................................................ 16 C.B.C. Enterprises, Inc. v. United States, 24 Cl. Ct. 1 (1991) .......................................................................................................... 50 Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir. 2005) ....................................................................................... 50 Dittmore-Freimuth Corp. v. United States, 182 Ct. Cl. 507, 390 F.2d 664 (1968) ........................................................................................................ 32 Fawick Corp. v. United States, 149 Ct. Cl. 623 (1960) .................................................................................................... 17

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Florida Power & Light Co. v. United States, No. 98-483C, 2005 WL 318678 (Fed. Cl. Jan. 31, 2005) ............................................... 24 Glendale Federal Bank v. United States, 239 F.3d 1374 (Fed. Cir. 2001) ....................................................................................... 16 Green v. General Services Admin., 220 F.3d 1313 (Fed. Cir. 2000) ....................................................................................... 28 Heagy v. United States, 12 Cl. Ct. 694 (1987), aff'd, 848 F.2d 1244 (Fed. Cir. 1988) ....................................................................................... 50 Hubbard v. Merit System Prot. Board, 205 F.3d 1315 (Fed. Cir. 2000) ....................................................................................... 28 Huston v. United States, 956 F.2d 259 (Fed. Cir. 1992) ......................................................................................... 28 Indiana Michigan Power Co. v. Department of Energy, 88 F.3d 1272 (D.C. Cir. 1996) ........................................................................................ 26 Jarvis v. United States, 43 Fed. Cl. 529 (1999) .................................................................................................... 49 Julius Goldman's Egg City v. United States, 697 F.2d 1051 (Fed. Cir. 1983), cert. denied, 464 U.S. 814 (1983) .................................................................................................. 25, 29 Koppers Co. v. Aetna Casualty & Surety Co., 98 F.3d 1440 (3d Cir. 1996) ............................................................................................ 31 Kucharczyk v. Regents of University of Calif., 946 F. Supp. 1419 (N.D. Cal. 1996) ............................................................................... 49 LaSalle National Bank v. Metropolitan Life Insurance Co., 18 F.3d 1371 (7th Cir. 1994) .......................................................................................... 50 LaSalle Talman Bank, FSB v. United States, 45 Fed. Cl. 64 (1999), rev'd on other grounds, 317 F.3d 1363 (Fed. Cir. 2003) ................................................................................. 36, 39 McDonnell Douglas Corp., ASBCA No. 26747, 83-1 B.C.A. ¶ 16,377 (1983) ........................................................................................... 23 -v-

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Midwest Indus., Painting of Florida, Inc. v. United States, 4 Cl. Ct. 124 (1983) ......................................................................................................... 31 Myerle v. United States, 33 Ct. Cl. 1 (1897) ........................................................................................................... 16 National By-Products, Inc. v. United States, 186 Ct. Cl. 594, 405 F.2d 1256 (1969) ...................................................................................................... 27 Northern Helex Co. v. United States, 207 Ct. Cl. 862, 524 F.2d 707 (1975) ........................................................................................................ 15 Omni Corp. v. United States, 41 Fed. Cl. 585 (1998) .............................................................................................. 24, 29 Osage Oil & Ref. Co. v. Chandler, 287 F. 848 (2d Cir. 1923) ................................................................................................. 17 Quiman, S.A. v. United States, 39 Fed. Cl. 171 (1997), aff'd, 178 F.3d 1313 (Fed. Cir. 1999) ....................................................................................... 31 Ramsey v. United States, 121 Ct. Cl. 426, 101 F. Supp. 353 (1951) ................................................................................................. 16 Robinson v. United States, 305 F.3d 1330 (Fed. Cir. 2002) ....................................................................................... 31 Roseburg Lumber Co. v. Madigan, 978 F.2d 660 (Fed. Cir. 1992) ................................................................................... 16, 31 San Carlos Irrigation & Drainage District v. United States, 111 F.3d 1557 (Fed. Cir. 1997) ........................................................................... 17, 30, 31 State of Alaska v. United States, 35 Fed. Cl. 685 (1996), aff'd, 119 F.3d 16 (Fed. Cir. 1997) ........................................................................................... 49 State of Idaho v. U.S. Department of Energy, 945 F.2d 295 (9th Cir. 1991) .......................................................................................... 14

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United Industrial Syndicate, Inc. v. Western Automobile Supply Co., 686 F.2d 1312 (8th Cir. 1982) ........................................................................................ 17 Village on Canon v. Bankers Trust Co., 920 F. Supp. 520 (S.D.N.Y. 1996) .................................................................................. 50 Wells Fargo Bank, N.A. v. United States, 88 F.3d 1012 (Fed. Cir. 1996) ......................................................................................... 17 Willems Industrial, Inc. v. United States, 155 Ct. Cl. 360, 295 F.2d 822 (1961) .................................................................................................. 16, 30 FEDERAL STATUTES AND REGULATIONS 10 U.S.C. § 10161 .......................................................................................................................... 5 28 U.S.C. § 2501 ......................................................................................................................... 51 42 U.S.C. §§ 2021b-2021i ........................................................................................................... 43 42 U.S.C. §§ 10133, 10161-69 .................................................................................................... 27 42 U.S.C. § 10162(b), et seq. ............................................................................................ PASSIM 42 U.S.C. § 10221(b)(3) .............................................................................................................. 27 10 C.F.R. § 961.11, Art. II ............................................................................................... 21, 23, 28 48 Fed. Reg. 16,590 (Apr. 18, 1983) .............................................................................. 22, 26, 27 48 Fed. Reg. 5458 (Feb. 4, 1983) ........................................................................................... 22, 27 59 Fed. Reg. 27007 (May 25, 1994) ........................................................................................... 13 MISCELLANEOUS Restatement (Second) of Contracts § 205 ................................................................................... 49 Restatement (Second) of Contracts § 350 cmt. b (1981) ............................................................ 32 Restatement (Second) of Contracts § 352 cmt. a ........................................................................ 17 - vii -