System Fuels v. U.S.

Jan 19: In these two separate and related cases in the U.S. Court of Appeals, Federal Circuit, Case Nos. 2008-5025, -5035; and Case Nos. 2010-5116, -5117. Appealed from the United States Court of Federal Claims.

 

    In the first case, after trial, the United States Court of Federal Claims awarded Plaintiffs-Cross Appellants System Fuels, Inc. and Entergy Arkansas, Inc. (collectively SFI Arkansas or Plaintiffs) damages arising from the Department of Energy's (DOE) partial breach of a contract. System Fuels, Inc. v. United States, 79 Fed. Cl. 37, 40 (2007). The majority Appeals Court said, "Because the trial court properly declined to offset the damages award by the amount of Plaintiffs' one-time fee, this court affirms. On the other hand, this court reverses the trial court's denial of Plaintiffs' capital suspense loader costs. This court also remands the action for analysis in view of this court's decisions in Pacific Gas & Electric Co. v. United States, 536 F.3d 1282 (Fed. Cir. 2008) and Yankee Atomic Electric Co. v. United States, 536 F.3d 1268 (Fed. Cir. 2008)."

 

    In the second case, on summary judgment, the United States Court of Federal Claims determined that the United States breached its contract with Plaintiffs-Appellants System Fuels, Inc., System Energy Resources, and South Mississippi Electric Power Association (collectively Plaintiffs) for the removal of spent nuclear fuel. Sys. Fuels, Inc. v. United States, 66 Fed. Cl. 722, 732-33 (2005) (SFI I). The trial court also granted summary judgment in favor of the Government regarding the implied covenant of good faith and fair dealing. Id. at 735. The trial court set damages for the breach at $10,014,114 as well as the cost of borrowed funds for financing the construction of the dry fuel storage project. Sys. Fuels, Inc. v. United States, 78 Fed. Cl. 769, 809 (2007) (SFI II). On reconsideration, the trial court reduced damages to $9,735,634 and denied the cost of borrowed funds. Sys. Fuels, Inc. v. United States, 92 Fed. Cl. 101, 114 (2010) (SFI III). The majority Appeals Court ruled, "This court affirms the trial court's denial of borrowing costs and reverses the denial of overhead costs. On damages, this court affirms the trial court's award."

 

    The majority said further, "Because the trial court properly adhered to the decision of England [England v. Contel Advanced Systems, Inc., 384 F.3d 1372, 1379 (Fed. Cir. 2004)], this court affirms the denial of Plaintiffs' claim for the cost of borrowed funds. This court reverses the trial court's denial of overhead costs. This court affirms the trial court's causation analysis and revised award of nominal damages."

 

    The dissenting Justice in both cases said, "I concur in the court's opinion and the rulings based thereon, with the exception of the ruling that damages for breach of contract cannot include the cost of financing the construction and storage expenditures required to mitigate the breach. As explained in my dissenting opinion in the companion case, System Fuels, Inc. v. United States, No. 2010-5116, -5117, these costs were incurred solely because of the government's breach of contract, and thus are recoverable as damages for the breach."

 

    Access the complete opinion in case one (click here). Access the complete opinion in case two (click here). [#Haz/Nuclear, #Energy/Nuclear, #CAFed]

 

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