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99-5096
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
NORTHERN STATES POWER COMPANY, Plaintiff - Appellant
v. UNITED STATES, Defendant - Appellee.APPEAL FROM THE UNITED STATES COURT OF FEDERAL CLAIMS
IN 98-CV-484, JUDGE JOHN P. WIESEBRIEF OF AMICI CURIAE, Alabama Power Company; Union Electric Company d/b/a Ameren UE, Indiana Michigan Power Company d/b/a American Electric Power; Arizona Public Service Company; Carolina Power & Light Company; Commonwealth Edison Corporation; The Detroit Edison Company; Duke Energy Corporation; Entergy Operations, Inc.; Florida Power Corporation; Florida Power & Light Company; Georgia Power Company; Nebraska Public Power District; North Atlantic Energy Service Corporation; Northeast Utilities Service Company; Omaha Public Power District; Pacific Gas & Electric Company; Public Service Electric & Gas Company; Southern Nuclear Operating Company, Inc.; TXU Electric Company; Vermont Yankee Nuclear Power Corporation; Virginia Electric and Power Company d/b/a/Virginia Power; Wisconsin Public Service Corporation; Wolf Creek Nuclear Operating Corporation, IN SUPPORT OF PLAINTIFF-APPELLANT NORTHERN STATES POWER COMPANY SUPPORTING REVERSAL OF THE DECISION BELOW
RALPH C. NASH, JR., Professor Emeritus
George Washington University Law School
Of Counsel
STEVEN L. SCHOONER, Associate Professor of
Government
Contract Law, George Washington University Law
School
720 20th Street, N.W. , Washington, D.C. 20052
(202) 994-3037
Counsel of Record for Amici Curiae
July 27, 1999
Counsel for Amici Curiae certifies that:
1. The full name of every amicus curiae represented is as follows:
(1) Alabama Power Company
(2) Union Electric Company d/b/a AmerenUE
(3) Indiana Michigan Power Company d/b/a American Electric Power
(4) Arizona Public Service Company
(5) Carolina Power & Light Company
(6) Commonwealth Edison Corporation
(7) The Detroit Edison Company
(8) Duke Energy Corporation
(9) Entergy Operations, Inc.
(10) Florida Power Corporation
(11) Florida Power & Light Company
(12) Georgia Power Company
(13) Nebraska Public Power District
(14) North Atlantic Energy Service Corporation
(15) Northeast Utilities Service Company
(16) Omaha Public Power District
(17) Pacific Gas & Electric Company
(18) Public Service Electric & Gas Company
(19) Southern Nuclear Operating Company, Inc.
(20) TXU Electric Company
(21) Vermont Yankee Nuclear Power Corporation
(22) Virginia Electric and Power Company d/b/a/Virginia Power
(23) Wisconsin Public Service Corporation
(24) Wolf Creek Nuclear Operating Corporation
2. The name of the real party in interest (if the party named in the caption is not the real party in interest) represented is as follows:
Not applicable. The parties named in the case
caption above are the real parties in interest.
3. All parent corporations and any publicly held companies that own 10 percent or more of the stock of the amicus curiae represented are as follows:
(1) Alabama Power Company
Southern Company is the parent company of Alabama Power Company.
(2) Union Electric Company d/b/a Ameren UE
Union Electric Company and Central Illinois Power Company are wholly-owned subsidiaries of Ameren Corporation.
(3) Indiana Michigan Power Company d/b/a American Electric Power
Indiana Michigan Power Company is a wholly-owned subsidiary of American Electric Power Company, Inc.
(4) Arizona Public Service Company
Arizona Public Service Company is a wholly-owned subsidiary of Pinnacle West Capital Corporation.
(5) Carolina Power & Light Company
None.
(6) Commonwealth Edison Corporation
Commonwealth Edison Corporation is a wholly-owned subsidiary of Unicom Corporation.
(7) The Detroit Edison Company
The Detroit Edison Company's parent corporation is DTE Energy Company.
(8) Duke Energy Corporation
None.
(9) Entergy Operations, Inc.
Entergy Operations, Inc. is a wholly-owned subsidiary of Entergy Corporation.
(10) Florida Power Corporation
Florida Power Corporation is a wholly-owned subsidiary of Florida Progress Corporation.
(11) Florida Power & Light Company
Florida Power & Light Company is a wholly-owned subsidiary of FPL Group, Inc.
(12) Georgia Power Company
Southern Company is the parent company of Georgia Power Company.
(13) Nebraska Public Power District
None.
(14) North Atlantic Energy Service Corporation
North Atlantic Energy Service Corporation is a wholly-owned subsidiary of Northeast Utilities.
(15) Northeast Utilities Service Company
Northeast Utilities Service Company is a wholly-owned subsidiary of Northeast Utilities.
(16) Omaha Public Power District
None.
(17) Pacific Gas and Electric Company
The parent company of Pacific Gas and Electric Company is PG&E Corporation.
(18) Public Service Electric & Gas Company
Public Service Enterprise Group is the parent company of Public Service Electric & Gas Company.
(19) Southern Nuclear Operating Company, Inc.
Southern Company is the parent company of Southern Nuclear Operating Company, Inc.
(20) TXU Electric Company
TXU Electric Company is a wholly-owned subsidiary of Texas Utilities Company.
(21) Vermont Yankee Nuclear Power Corporation
None.
(22) Virginia Electric and Power Company
Dominion Resources, Inc. is the parent company of Virginia Electric and Power Company.
(23) Wisconsin Public Service Corporation
Wisconsin Public Service Corporation is a wholly-owned subsidiary of WPS Resources Corporation.
(24) Wolf Creek Nuclear Operating Corporation
Wolf Creek Nuclear Operating Corporation is a wholly-owned subsidiary of Kansas Gas and Electric Company (47%), Kansas City Power & Light Company (47%), and Kansas Electric Power Cooperative, Inc. (6%).
4. The names of all law firms and the partners or associates that appeared for the amicus curiae in the trial court or agency or are expected to appear in this court are:
None.
___________________________________
Of
Counsel:
STEVEN L. SCHOONER
RALPH C. NASH,
JR.
ASSOCIATE PROFESSOR OF
PROFESSOR
EMERITUS
GOVERNMENT CONTRACT LAW
GEORGE
WASHINGTON
GEORGE WASHINGTON UNIVERSITY
UNIVERSITY LAW
SCHOOL LAW SCHOOL, 720 20th Street, N.W.
Washington, D.C. 20052
(202) 994-3037
Counsel of Record for Amici Curiae
July 27, 1999
Statement of Amici Curiae's Identity And Interest 1
I. The Parties Intended to Preserve the Breach Remedy for Material, Programmatic Breaches. 8
B. The Trial Court Confused Deference and Jurisdiction. 13
Certificate of Compliance
Table of
Authorities
CASES
Allied Materials & Equipment Co. v. United States, 569 F.2d 562 (Ct. Cl. 1978) 21, 23, 24
Brighton Village Assocs. v. United States, 52 F.3d 1056 (Fed. Cir. 1995) 23
Bruce Construction Corp. v. United States, 324 F.2d 516 (Ct. Cl. 1963) 16
Charles F. Wood v. United States, 258 U.S. 120 (1922) 27
Cherokee Nation of Oklahoma v. United States, 124 F.3d 1413 (Fed. Cir. 1997) 13
Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984) 14
Cohens v. Virginia, 19 U.S. 264 (1821) 13
Connecticut Yankee Atomic Power Co. v. United States, 42 Fed. Cl. 448 (1998) 6
Cutler Corp. v. Latshaw, 97 A.2d 234 (Pa. 1953) 28
Edward R. Marden Corp. v. United States,
442 F.2d 364 (Ct. Cl. 1971) 21, 23
Fortec Constructors v. United States, 760
F.2d 1288 (Fed. Cir. 1985) 11
Freedman v. United States, 320 F.2d 359 (Ct.
Cl. 1963) 26
General Builders Supply v. United States, 409 F.2d 246 (Ct. Cl. 1969) 16
Hunkin Conkey Construction Co. v. United
States, 461 F.2d 1270 (Ct. Cl. 1972). 11
Indiana Michigan Power Co. v. Department of
Energy, 88 F.3d 1272 (D.C. Cir. 1996) 19
Jefferson Construction Co. v. United States,
364 F.2d 420 (Ct. Cl.), cert. denied 386 U.S. 914 (1966) 27
Len Co. & Associates v. United States,
385 F.2d 438 (Ct. Cl. 1967) 15
Maine Yankee Atomic Power Co. v. United States, 42 Fed. Cl. 582 (1998) 6
Morrison-Knudsen Co. v. United States,
397 F.2d 826 (Ct. Cl. 1968) 28
New Valley Corp. v. United States, 119 F.3d
1576 (Fed. Cir. 1997) 26
Northern States Power Co. v. United States, 43 Fed. Cl. 374 (1999) passim
Quakenbush v. Allstate Insur. Co., 517 U.S. 706 (1996) 13
Rixon Electronics, Inc. v. United States, 536 F.2d 1345 (Ct. Cl. 1976) 27
Rumley v. United States, 285 F.2d 773 (Ct. Cl. 1961) 12
S.S. Mullen, Inc. v. United States, 389 F.2d 390 (Ct. Cl. 1968) 26
Teledyne Lewisburg v United States, 699
F.2d 1336 (Fed. Cir. 1983) 27
Thompson Ramo Wooldridge, Inc. v. United States,
361 F.2d 222 (Ct. Cl. 1966). 27
Tunkl v. Regents of University of California,
383 P.2d 441 (Cal. 1963) 30
United States v. Callahan Walker Construction Co., 317 U.S. 56 (1942) 16
Wells Brothers Co. v. United States, 254 U.S. 83 (1920) 27
Williams v. Secretary of the Navy, 787
F.2d 552 (Fed. Cir. 1986) 13
Yankee Atomic Power Co. v. United States, 42
Fed. Cl. 223 (1998) 5
STATUTES
42 U.S.C. § 10131(b) 18
42 U.S.C. § 10222(a) 17, 18
42 U.S.C. § 10222(d) 17, 18
Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§
601-613 3, 9
Nuclear Waste Policy Act of 1982 (NWPA), 42 U.S.C.
§§ 10101-10270 1, 3
Tucker Act, 28 U.S.C. § 1491 23
Wunderlich Act, 41 U.S.C. §§ 321-322 9
ADMINISTRATIVE MATERIALS
60 Fed. Reg. 21,793, 21797 (1995) 18
48 Fed. Reg. 16595 (April 18, 1983) 3, 9, 10
48 Fed. Reg. 16598 (Apr. 18, 1983) 10
48 Fed. Reg. 5458 (Feb. 4, 1983) 9
MISCELLANEOUS MATERIALS
Allan E. Farnsworth, Contracts
(3d ed. 1999) 30
DOE Civilian Radioactive Waste Management Program
Plan, DOE/RW-0504 (Revision 2, July 1998) 2
Donald P. Arnavas, Exculpatory Clauses,
98-10 Briefing Papers (September 1998) 26
Honorable Antonin Scalia, Judicial Deference to
Administrative Interpretations of Law, 1989 Duke L. J. 511 (1989) 14
John Cibinic, Jr. & Ralph C. Nash, Jr.
Administration of Government Contracts (3d ed. 1995) 9, 11, 25, 26
John W. Whelan, Federal Government Contracts, Cases
and Materials (1985) 9
Joseph Sachter, Resolution of Disputes Under
United States Government Contracts: Problems and Proposals, 2 Pub. Cont. L. J. 363
(1969) 9
Michael Grunwald, Lawsuit Surge May Cost U.S.
Billions, Wash. Post, August 10, 1998 5
Ralph C. Nash, Jr., Steven L. Schooner & Karen
R. O'Brien, The Government Contract Reference Book (2d ed. 1998) 9
Ralph C. Nash, Jr. & John Cibinic, Federal
Procurement Law (Vol. II, 3d ed. 1980) 9
Richard E. Speidel, Exhaustion of Administrative
Remedies in Government Contracts, 38 N.Y.U. L. Rev. 621 (1963) 23
Statement of Secretary Bill Richardson, U.S.
Department of Energy, Before the Subcommittee on Energy and Power, Committee on Commerce,
U.S. House of Representatives, 1999 WL 8085516 at 4-6 (March 12, 1999) 19
Issues Presented
1. Whether the parties intended the Standard Contract to preserve the utilities' breach remedy for the Department of Energy's (DOE's) programmatic and material breach of these contracts.(1)
2. Whether the trial court erred in concluding that the Standard Contract's "avoidable delays" provision was a remedy-granting clause that encompassed DOE's programmatic and material breach of the Standard Contract.
3. Whether the trial court's
reading of the "avoidable delays" provision is incorrect because it
unnecessarily transforms the provision into an unenforceable exculpatory clause.
Statement of Amici Curiae's Identity And Interest
Amici curiae are nuclear utilities similarly situated to plaintiff-appellant, Northern States Power Company (NSP).(2) Pursuant to the Nuclear Waste Policy Act of 1982 (NWPA), 42 U.S.C. §§ 10101-10270, acceptance of the Standard Contract was a de facto condition to utilities' ongoing generation of nuclear energy. As a result, each amicus is bound by the relevant terms and conditions in this matter.
When DOE breached its unconditional, unqualified obligation in the Standard Contract - to commence disposing spent nuclear fuel (SNF) by January 31, 1998 - all domestic nuclear utilities were adversely affected. DOE's most recent estimate of its ability to begin disposing SNF is twelve years late, in 2010, and DOE offers no assurance that this projection will be met.(3) Nuclear utilities must continue to store SNF at their own expense, while they also continue to meet their responsibility to pay into DOE's Nuclear Waste Fund (hereinafter, the Fund).
Amici curiae confront staggering damages, statutory constraints barring certain means to mitigate those damages, and inadequate relief. The NWPA barred nuclear utilities from pursuing commercial SNF disposal alternatives, and DOE's Standard Contract mandated that utilities pay into the Fund; fixed the date of January 31, 1998, to begin disposing SNF; failed to provide a contractual remedy for the contingency that DOE would fail grossly to meet its contractual obligations; and denied nuclear utilities the full panoply of remedies that would otherwise be available pursuant to the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 601-613.(4) Now DOE refuses to begin disposing SNF for at least twelve years beyond the statutory and contractual deadline and offers an illusory administrative remedy - an adjustment of the charges amici curiae pay into the Fund.
To amici curiae, no nexus links the nuclear utilities' payments to the Fund - which the trial court expects DOE to adjust - and the substantial damages due to DOE's failure to begin accepting SNF. DOE's material, programmatic breach has caused, and continues to cause, nuclear utilities to suffer significant damages. For example, these damages include: (1) modifying existing on-site facilities to
accommodate SNF that DOE should have removed;(5) (2) investigating, designing, licensing, and building alternative off-site storage facilities; (3) increased decommissioning costs (such as continued maintenance of a nuclear staff, NRC licenses, nuclear insurance, etc.); and (4) in some cases, curtailing nuclear energy generation and, potentially, ceasing operations.
DOE's putative administrative remedy - an adjustment to future charges utilities pay to the fund - is illusory. Even if DOE could take money out of the Fund (or reduce payments into the Fund), the NWPA's full cost recovery provision would require DOE to off-set these adjustments with corresponding increases in utility payments into the Fund. Such a remedy, basically "robbing Peter to pay Peter," cannot compensate the nuclear utilities for this programmatic, material breach. Based upon this gross inadequacy of the putative administrative remedy, some nuclear utilities have already filed, while others plan to file, breach suits, as did NSP. The trial court's decision would bar amici curiae's path to adequate contractual relief.
The stakes are high. Damages to the nuclear utilities stemming from DOE's breach have been estimated in the billions.(6) Nuclear utilities have paid approximately $9.647 billion into the Fund. The Fund, including interest accrued, now exceeds $15.257 billion.(7) Utilities annually pour more than $600 million into the Fund and, by 2010, DOE's earliest projected date to begin disposing SNF, nuclear utilities will have paid more than an additional $6 billion into the Fund. Addendum at 10.
If this Court upholds the trial
court's erroneous legal interpretation of the Standard Contract, amici curiae could suffer
staggering damages without remedy. As discussed below, the trial court's reasoning not
only is incorrect but also is inconsistent with other CFC decisions addressing the
Standard Contract: Yankee Atomic Elec. Co. v. United States, 42 Fed. Cl. 223 (1998)
(the CFC certified Yankee Atomic for interlocutory appeal to this Court on June 18,
1999); Connecticut Yankee Atomic Power Co. v. United States, 42 Fed. Cl. 448
(1998); and Maine Yankee Atomic Power Co. v. United States, 42 Fed. Cl. 582 (1998).
As a result, amici curiae share NSP's significant interest in obtaining a correct answer
to the question of the CFC's jurisdiction to provide a breach remedy.
Summary of the
Argument
The Standard Contract reflects the parties' intent to preserve a breach remedy (actionable in court) for programmatic and material breaches separate from the administrative remedy for routine delays articulated in the "avoidable delays" provision. The Standard Contract: (1) contains the pre-CDA Disputes clause, providing that disputes arising under "remedy-granting" clauses be resolved administratively and, as a matter of law, permitting contract breaches to be resolved in court; (2) lacks a contractual remedy for DOE's material, programmatic breach of its statutory and contractual promise to commence SNF acceptance on January 31, 1998; and (3) includes the Article XI Remedies clause, which reserved the parties' common law remedies.
The Standard Contract's "avoidable delays" provision cannot be reasonably interpreted to encompass DOE's material, programmatic breach. The trial court
erroneously seized upon the term "any delay" and incorrectly concluded that the provision was a remedy-granting clause for all delays. However, reading all of the words in the provision, including its promise of an equitable adjustment, leads to the correct interpretation that the "delays" covered by the provision can only be those delays for which an equitable adjustment can be given. Since no equitable adjustment can be given for a material, programmatic breach of the contract, the provision cannot be reasonably interpreted to cover such a breach. What has occurred here is a cardinal delay - akin to a cardinal change - where DOE's refusal to accept any SNF until 2010, at the earliest, fundamentally alters the bargain of the parties.
Further, the trial court's holding that the "avoidable delays" provision is the exclusive remedy-granting clause for DOE's material, programmatic breach of the contract transforms this provision into an exculpatory clause by inoculating DOE against any consequences stemming from its actions. The "avoidable delays" provision, however, lacks the clarity and specificity necessary for a court to enforce such a broad disclaimer of government liability. As a matter of law, contract interpretation, and public policy, the better approach is to read the clause harmoniously with the balance of the contract language. The logical harmonious reading would apply the provision to cover routine delays in the context of contractual performance, not material, programmatic breaches of contract, such as where DOE fundamentally alters its contractual undertakings with the entire civilian nuclear industry. Any other reading of the provision exculpates DOE from any significant liability and, accordingly, must be avoided. For these reasons, the trial court's decision should be reversed.
I. The Parties Intended to Preserve the Breach Remedy for
Material, Programmatic Breaches.
A. During the Promulgation of the Standard Contract, the
Parties Demonstrated an Intent That a Court Would Resolve Claims for Material,
Programmatic Breaches.
In failing to take jurisdiction over NSP's breach claim, the trial court failed to fully comprehend the contractual scheme of the Standard Contract. In drafting the Standard Contract, the DOE intentionally chose to use the pre-CDA Disputes clause, providing that disputes arising under "remedy-granting" clauses be resolved through administrative procedures and that contract breaches be resolved in court.(8) After publishing the Standard Contract as a proposed rule, 48 Fed. Reg. 5,458 (February 4, 1983), DOE rejected utility suggestions that the contract include the CDA Disputes clause and issued the Standard Contract as a final rule. 48 Fed. Reg. 16,595-96 (April 18, 1983).
Further, DOE specifically rejected utilities' suggestions that DOE provide a contractual remedy in the event DOE breached its promise to commence SNF acceptance by the statutory and contractual January 31, 1998 date. DOE acknowledged that seven commentors "addressed the question of . . . Purchaser remedies" criticizing the Standard Contract for not providing "specific remedies against DOE for failing to meet the [January 31, 1998] date." 48 Fed. Reg. 16,598 (April 18, 1983). For example, the Edison Electric Institute, an association of electric companies whose member utilities (including amici curiae) provided three-quarters of the nation's electricity, bluntly stated in the penultimate paragraph of its comments on the proposed Standard Contract: "And, of most significance to utilities, the contract provides no specific remedies in the event that DOE fails to meet the 1998 deadline." Letter dated March 7, 1983 at 8 (emphasis added), Addendum at 11-12. Contrary to its current position, DOE failed to respond that the "avoidable delays" provision provided such a remedy. Rather, without explanation, DOE merely "decided not to adopt the recommended modification." 48 Fed. Reg. 16,598 (April 18, 1983).
This record demonstrates the intent of the parties that material, programmatic breaches of the contract by DOE were not covered by the "avoidable delays" provision of the contract. Certainly the comments reflect the utilities' belief that the "avoidable delays" provision did not deal with a material, programmatic breach of contract. Further, DOE's failure to respond to the utilities' comments by stating that there was a remedy in the "avoidable delays" provision of the Standard Contract indicates that DOE did not perceive that clause to provide such a remedy.(9)
Finally, the Standard Contract Article XI, the Remedies clause, reserved common law remedies for both parties. This clause unequivocally states: "Nothing in this contract shall be construed to preclude either party from asserting its rights and remedies under the contract or at law." (Emphasis added.) The trial court recognized that this clause preserved the right to relief when the contract "provides no specific relief." 43 Fed. Cl. at 388. But the trial court failed to grasp that DOE had rejected precisely what the nuclear industry suggested - that the contract should, but did not, state a specific remedy for DOE's breaching its promise to begin accepting SNF by January 31, 1998.
Thus, the trial court erroneously concluded that the Remedies clause, in effect, was surplusage that gave the contract no additional meaning. This violates a cardinal rule of interpretation, that a court should construe a contract to avoid rendering any terms meaningless. Fortec Constructors v. United States, 760 F.2d 1288, 1292 (Fed. Cir. 1985); Hunkin Conkey Construction Co. v. United States, 461 F.2d 1270, 1272 (Ct. Cl. 1972). These actions, taken as a whole, clearly indicate that the parties to the Standard Contract understood the difference between administrative remedies under the contract and a material, programmatic breach of all of DOE's contracts with the entire civilian nuclear power industry. Rumley v. United States, 285 F.2d 773, 777 (Ct. Cl. 1961) (similar "contract provision reserved . . . any common law remedies").
The trial court ignored this contractual scheme.
The trial court wrongly denied jurisdiction on the premise that the "avoidable
delays" provision was a remedy-granting clause covering a material, programmatic
failure by DOE to perform the contract as long as DOE characterized its breach as a
"delay." In effect, the trial court held that DOE's administrative process
should be given an opportunity to devise a remedy before the court determined whether the
"avoidable delays" provision was a remedy-granting clause. Yet despite years of
litigation and negotiation, DOE has suggested no meaningful administrative remedy for this
breach of contract. The reason for this is patently clear - DOE intentionally left a
remedy granting clause for this type of conduct out of the Standard Contract.
B. The Trial Court Confused Deference and Jurisdiction.
The trial court recognized that the existence of an administrative remedy was the linchpin to its jurisdiction. The trial court, however, erred in suggesting that "deference to the administrative process dictates that the contracting agency . . . be given the first opportunity to" speak to the court's jurisdiction. 43 Fed. Cl. at 386. In the same vein, the trial court erroneously concluded that "[i]t would . . . be an unwelcome intrusion upon the administrative process" to find that a breach action before the CFC was proper because "the administrative remedy appears unsatisfactory" to the court. 43 Fed. Cl. at 386.
Courts, not DOE, must determine their jurisdiction. Williams v. Secretary of the Navy, 787 F.2d 552, 557 (Fed. Cir. 1986) ("The federal courts have the power, and the duty, to determine their own jurisdiction"); Quakenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996) ("federal courts have a strict duty to exercise the jurisdiction that is conferred upon them by Congress."); Cohens v. Virginia, 19 U.S. 264, 404 (1821) ("It is true that this Court will not take jurisdiction if it should not: but it is equally true, that it must take jurisdiction if it should. . . . We have no more right to decline the exercise of jurisdiction which is given, than to usurp that which is not given."); Cherokee Nation of Oklahoma v. United States, 124 F.3d 1413, 1416, 1418 (Fed. Cir. 1997) (referencing the "court's paramount obligation to exercise jurisdiction timely in cases properly before it."). The trial court defers to agency procedures with an obeisance unsupported by law or logic.(10)
II. The Standard Contract's "Avoidable Delays"
Provision Cannot be Reasonably Interpreted to be a Remedy-Granting Clause that Encompasses
DOE's Material, Programmatic Breach.
The trial court incorrectly concluded that the "avoidable delays" provision in Article IX, Delays, is a remedy-granting clause covering DOE's material, programmatic breach of the contract. The trial court erred by focusing solely upon the term "any delay" and ignoring the other words in the clause and the contract as a whole.
The relevant language of Article IX.B reads (emphasis added):
In the event of any delay in the delivery, acceptance or transport of SNF . . . to or by DOE caused by circumstances within the reasonable control or either the Purchaser or DOE . . . , the charges and schedules specified by the contract will be equitably adjusted to reflect any estimated additional costs incurred by the party not responsible for or contributing to the delay.
In determining whether a contract clause is a remedy-granting clause, Len Co. & Associates v. United States, 385 F.2d 438, 442 (Ct. Cl. 1967) (emphasis added), explains that:
[I]f a fair reading of the particular contract shows that the specific dispute has not been committed to agency decision, the claims are then for a "pure" breach of contract and are considered de novo in this court.
A "fair reading" of the "avoidable delays" provision can only be arrived at by construing all of the words in the clause, including the promise of an equitable adjustment.
A. A Fair Reading of the Avoidable Delays Provision Is That it Covers Only Delays for Which an Equitable Adjustment Can be Given.
The trial court erroneously relied entirely upon the term "any delay" without examining the remedy granted by the clause. Only by assessing the remedy can the term "any delay in the . . . acceptance or transport of SNF" be understood. Here the remedy was clearly stated - the charges to be paid by the utility would be equitably adjusted. Further, that equitable adjustment had to "reflect any estimated additional costs incurred by the" utility.
This formulation was not haphazard. DOE's contract drafters must be presumed to have known that the term "equitable adjustment" is a term of art in Government procurement. General Builders Supply Co. v. United States, 409 F.2d 246, 250 (Ct. Cl. 1969) (use of term "equitably adjusted" in termination clause indicated that contractor would receive "reasonable costs and a reasonable profit on work actually done"); United States v. Callahan Walker Construction Co., 317 U.S. 56, 61 (1942) (an equitable adjustment involves "merely the ascertainment of the cost [of the extra work] and the addition to that cost of a reasonable and customary allowance for profit."). As the court stated in Bruce Construction Corp. v. United States, 324 F.2d 516, 518 (Ct. Cl. 1963) (emphasis added): "Equitable adjustments are simply corrective measures utilized to keep a contractor whole when the Government modifies a contract."
This promise of an equitable adjustment is the key to arriving at a fair reading of the "avoidable delays" provision. Only by ignoring the words promising an equitable adjustment can one arrive at the trial court's interpretation of the provision to cover all "delays" - even material, programmatic breaches of contract. A reasonable interpretation - giving all of the words meaning - is that the provision covers DOE "delays in . . . acceptance or transport" of SNF for which a utility can be made whole by an adjustment to the charges which cover its additional costs.
The coverage of the provision is therefore highly dependent upon analysis of DOE's authority to adjust the charges and the impact of such adjustments on the utilities. Severe limitations constrain the use of these charges (the funds required to be collected by 42 U.S.C. § 10222(a)).(11) Under the statute, charges cannot be adjusted to cover the types of damages suffered by the nuclear utilities because of DOE's refusal to accept SNF.(12) For example, the Fund cannot legally be used to compensate utilities for the damages associated with prolonged on-site SNF storage, 43 Fed. Cl. at 376-77, citing 42 U.S.C. § 10222(d), (a)(4), such as modification of existing facilities; construction of alternative storage facilities; or curtailment of nuclear energy generation. 42 U.S.C. § 10222(d). DOE reached the same conclusion in its May 3, 1995 Final Interpretation, 60 Fed. Reg. 21,793, 21797 (May 3, 1995).
Further, even if the Fund could be used for these purposes, 42 U.S.C. § 10222(a)(4) requires that sufficient fees be collected from the utilities to ensure full recovery of all of the Government's costs. Thus, any payments out of the Fund, through reduction of charges or other means, must be recovered from the same or similarly situated nuclear utilities. 42 U.S.C. § 10131(a)(4), (b)(4). Nor does DOE deny that it intends to recoup Fund losses caused by downward equitable
adjustments through future increases in fees to be paid into the Fund.(13) Accordingly, the nuclear utility industry "would end up funding its own equitable adjustment." 43 Fed. Cl. at 385. This leads to the conclusion that the trial court's interpretation is not a fair reading of the "avoidable delays" provision because it permits DOE to promise an equitable adjustment but to give nothing.(14)
The only fair reading is that the "avoidable delays" provision covers delays resulting in increased costs of a reasonable nature - delays in the administration of individual contracts - such as delays in the arrival of a carrier to pick up SNF from a particular plant or delays in the inspection and acceptance process.(15) Such delays could be "equitably adjusted" through a reduction of the charges without a discernible impact on the Fund. But under no circumstances can the clause be reasonably interpreted to cover a material, programmatic breach of the contract such as DOE's current refusal to perform for a period of at least twelve years beyond the statutory and contractual deadline.
B. DOE's Failure Fundamentally Alters The Parties' Bargain
Such That It Is a Breach of Contract Akin To A "Cardinal Delay."
The trial court eschewed another logical route to the conclusion that the only reasonable interpretation of the Standard Contract is that DOE's programmatic, material disregard for the statutory and contractual January 31, 1998 commencement date is not cognizable under the "avoidable delays" provision. The trial court failed to recognize that what has occurred here is a "cardinal delay," much like the numerous "cardinal change" situations identified by the Court of Claims. That court, despite the fact that Federal government contracts contained a Changes clause providing for equitable adjustments in the event of changes, found that actions of the Government which fundamentally altered the bargain of the parties were not covered by that clause. Contrary to the trial court's reading, Edward R. Marden Corp. v. United States, 442 F.2d 364, 369 (Ct. Cl. 1971) (emphasis added, citations omitted), supports NSP's position:
[A] cardinal change is one which, because it fundamentally alters the contractual undertaking of the contractor, is not comprehended by the normal Changes clause. As we said in Wunderlich Contracting Co., there is no automatic or easy formula which can be used to determine whether a change . . . is beyond the scope of the contract and, therefore, in breach of it. "Each case must be analyzed on its own facts and in light of its own circumstances, giving just consideration to the magnitude and quality of the changes ordered and their cumulative effect upon the project as a whole."
The Marden court further explained, 442 F.2d at 369 (emphasis added, citations omitted), that it:
has frequently said that "a contractor is entitled to an equitable adjustment under the Changes article for increased costs of performance due to defective specifications." But, where drastic consequences follow from defective specifications, we have held that the change was not within the contract, i.e., that it was a cardinal change.
See also Allied Materials & Equipment Co. v. United States, 569 F.2d 562, 563-4 (Ct. Cl. 1978) (emphasis added), where the court framed the issue in slightly different language:
[A] cardinal change is a breach. It occurs when the government effects an alteration in the work so drastic that it effectively requires the contractor to perform duties materially different from those originally bargained for. By definition, then, a cardinal change is so profound that it is not redressable under the contract, and thus renders the government in breach.
These well-established tests are more than met here. The nuclear utilities planned for on-site SNF storage based on a statutorily and contractually established date of January 31, 1998, for DOE to commence SNF acceptance. DOE failed to begin on that date and now refuses to accept any fuel until 2010, at the earliest. DOE's unwillingness to perform for at least twelve years fundamentally alters the parties' bargain. DOE's breach effectively requires the utilities to perform duties materially different from what the parties bargained for. Specifically, despite utilities having met their responsibilities to pay into the Fund for the last fifteen years, DOE's breach, at a minimum, requires nuclear utilities to provide additional, or seek alternate, storage facilities until such time as DOE commences SNF acceptance. At worst, DOE's material, programmatic failure will require utilities to shut down their nuclear plants prematurely. (The former will cost the nuclear utilities billions of dollars; the latter could cost these utilities tens of billions.) This scenario must be recognized as a drastic consequence not contemplated by the terms of the contract. This is surely a "cardinal delay," which must be characterized as a breach of contract.(16)
The trial court incorrectly rejected the occurrence of a cardinal delay by reasoning that the "avoidable delays" provision contained different language than the standard Changes clause. Thus, focusing again on the words "any delay" in the "avoidable delays" provision, the trial court held that this clause covered all delays, not just delays "within the general scope of the contract" - the words of the Changes clause. This misinterprets Marden and Allied Materials, cases which focus not only upon the words of the Changes clause, but on whether the action of the Government "fundamentally alters the contractual undertakings" or "requires the contractor to perform duties materially different."(17)
The "cardinal" delay analysis here depends less upon the specific language of the Changes clause than the drastic nature of DOE's failure. DOE's breach drastically altered the original bargain of the parties, which did not contemplate utilities shouldering twelve or more years of additional on-site SNF storage beyond the statutory and contractual deadline; nor did the parties anticipate that DOE's delays might cause utilities to cease operation. The breadth of DOE's material, programmatic breach of every civilian nuclear utility's contract is far greater in magnitude than occurred in either Marden or Allied Materials. This Court, therefore, should follow the reasoning of the cardinal change cases to conclude that DOE's material, programmatic breach of the contract is not within the purview of the "avoidable delays" provision.
III. The Trial Court's Reading of the "Avoidable
Delays" Provision Unnecessarily Transforms It Into An Unenforceable Exculpatory
Clause.
The trial court's conclusion - that the "avoidable delays" provision is a remedy-granting clause covering DOE's refusal to perform the contract - would turn this putative remedy-granting provision into an exculpatory clause. The administrative remedy, in this instance, is illusory - any adjustment DOE would make to NSP's payments to the Fund must, by statute, subsequently be offset by increased payments by the nuclear utilities. Thus, the trial court's interpretation of the "avoidable delays" provision - that the "avoidable delays" provision provides the sole remedy for any delay, no matter how long(18) - results in exculpating DOE from liability to the utilities for its material, programmatic breach causing billions of dollars in on-site storage costs, costs of developing alternative off-site storage, or losses associated with premature plant shut down.
With nothing more, this Court would have little choice but to invalidate such an exculpatory clause. A fundamental rule of contract interpretation, however - reading the "avoidable delays" provision in harmony with the rest of the contract - avoids such a harsh result. See generally Cibinic & Nash, Administration 159-60. Harmonizing the provision makes sense here, because the "avoidable delays" provision fails to pass muster as a valid exculpatory clause.
The "avoidable delays" provision lacks the specificity necessary to enforce such a shockingly broad disclaimer of government liability. This Court consistently has scrutinized and, accordingly, narrowly construed exculpatory clauses - clauses that seek to relieve the Government from liability under government contracts. In Freedman v. United States, 320 F.2d 359, 366-67 (Ct. Cl. 1963) (emphasis added, citations omitted), the Court of Claims reiterated the principle "that general provisions seeming to immunize the Government from paying damages due to its own breach . . . should be construed, if possible, as not covering serious breaches . . . causing important loss to the contractor." See also New Valley Corp. v. United States, 119 F.3d 1576, 1584 (Fed. Cir. 1997) (contract "does not insulate the government from a claim that it [breached and, as a result] caused . . . damages"); see generally, Cibinic & Nash, Administration 348-63.
If the Government intends to disclaim liability, it must use clear language. See generally, S.S. Mullen, Inc. v. United States, 389 F.2d 390, 398 (Ct. Cl. 1968) ("natural application" of language would not afford government "a defense to liability"); Donald P. Arnavas, Exculpatory Clauses, 98-10 Briefing Papers 1-2, 12 (September 1998) (emphasis in original) (Government disclaimers must be "clear, specific, and unambiguous" and "[t]he more specific a disclaimer . . . the more likely the disclaimer will be enforced according to its terms.") The Standard Contract's putative disclaimer doe not even approach an express warning or disclaimer of the type upheld in controlling cases.(19)
Further, language of asserted exculpatory provisions is read and enforced literally. Neither inferred nor implied exculpatory provisions are upheld. Similarly, disclaimers face heightened scrutiny if they would negate other contract clauses since, whenever possible, courts seek to harmonize the two clauses. See generally, Teledyne Lewisburg v United States, 699 F.2d 1336, 1338, 1358-60 (Fed. Cir. 1983), discussing Thompson Ramo Wooldridge, Inc. v. United States, 361 F.2d 222, 227-28, 229-30 (Ct. Cl. 1966) (rejecting the position that the exculpatory language in the Government Furnished Property clause "wiped out, or seriously diminished, the warranty of suitability"); Morrison-Knudsen Co. v. United States, 397 F.2d 826, 829, 842 (Ct. Cl. 1968) ("an interpretation which gives a reasonable meaning to all parts of a contract will be preferred to one which leaves a portion of it inoperable or superfluous").
Contrary to the trial court's analysis, NSP's interpretation of the "avoidable delays" provision makes sense when read in conjunction with the Disputes and Remedies clauses. The nuclear utilities understood the difference between the post-CDA Disputes clause language (arising under or relating to the contract) and the pre-CDA language (arising under) utilized in the Standard Contract. The language adopted in DOE's Standard Contract meant that breaches of contract were not covered by the Disputes clause. Similarly, the Remedies clause reserved the utilities' common law rights. If DOE intended to exculpate itself from damages for material, programmatic breaches of the Standard Contract, only a specific, clear disclaimer could do so.(20)
During promulgation of the Standard Contract, DOE never suggested that the "avoidable delays" provision covered its potential material, programmatic failure to commence SNF acceptance. Nor did DOE ever affirmatively or specifically disclaim liability. Rather, DOE included both a Disputes clause, permitting suit in court for breach of contract, and a Remedies clause, which unequivocally stated that "[n]othing in this contract shall be construed to preclude either party from asserting its rights and remedies under the contract or at law." (Emphasis added.) Thus, the only reasonable interpretation of this course of conduct is a harmonious reading of the Delays, Disputes, and Remedies clauses, which permits nuclear utilities to: (1) seek an administrative adjustment of their Fund charges and disposal schedule for routine delays and (2) pursue breach damages in court for DOE's material, programmatic breaches.
If the trial court's reading of
the "avoidable delays" provision is correct and the provision is an exculpatory
clause, this Court should not permit its enforcement against the utilities. A better
solution, however, is to read the provision harmoniously with the balance of the contract
language and hold that it only covers routine delays or delays within the scope of the
contract, not material, programmatic breaches of contract.(21)
Conclusion
Reading the contract as a whole leads to one conclusion. The "avoidable delays" provision provides a remedy for routine DOE delays in acceptance and transport of SNF. Conversely, utilities are entitled to sue in court for a material, programmatic breach of contract where DOE has chosen not to perform its obligations and projects that its refusal will span at least twelve years beyond the statutory and contractual commencement date. This reading of the clause is supported by the expressed intent of the parties in the drafting process, a fair reading of the language of the clause, and an analysis of the exculpatory impact of trial court's interpretation of the "avoidable delays" provision. Any other reading of the contract deprives the nuclear utilities of meaningful relief without disclosure by DOE that this was the contract's intent. For these reasons, the trial court's decision should be reversed.
Respectfully submitted
___________________________________
Of
Counsel:
STEVEN L. SCHOONER
RALPH C. NASH,
JR.
ASSOCIATE PROFESSOR OF
PROFESSOR
EMERITUS GOVERNMENT CONTRACT
LAW
GEORGE
WASHINGTON GEORGE
WASHINGTON UNIVERSITY
UNIVERSITY LAW
SCHOOL LAW SCHOOL, 720 20th Street, N.W.
Washington, D.C. 20052
(202) 994-3037
Counsel of Record for Amici Curiae
July 27, 1999
I certify under penalty of perjury that I caused two copies of the foregoing BRIEF OF AMICI CURIAE to be served this 27th day of July, 1999, by hand, upon:
Harold D. Lester, Jr.
Assistant Director
Commercial Litigation Branch
Civil Division
United States Department of Justice
Washington, D.C. 20530
Attention: Classification Unit
8th Floor, 1100 L Street, N.W.
Alexander D. Tomaszczuk
Shaw Pittman
1676 International Drive
McLean, VA 22101-7940
_______________________________
Steven L. Schooner
Pursuant to Federal Rule of Appellate Procedure
32(a)(7)(B)(i) and 32(a)(7)(C), I certify that this brief complies with the type-volume
limitation. Based upon the word count of the word processing system used to prepare this
brief, there are 6942 words in the brief, excluding, tables, addendum, and certificates of
counsel.
___________________________________
Of
Counsel:
STEVEN L. SCHOONER
RALPH C. NASH,
JR.
ASSOCIATE PROFESSOR OF
PROFESSOR
EMERITUS GOVERNMENT CONTRACT
LAW
GEORGE
WASHINGTON GEORGE
WASHINGTON UNIVERSITY
UNIVERSITY LAW SCHOOL LAW
SCHOOL, 720 20th Street, N.W.
Washington, D.C. 20052
(202) 994-3037
Counsel of Record for Amici Curiae
July 27, 1999
Document
Page
DOE Civilian Radioactive Waste Management
Program Plan,
DOE/RW-0504 (Revision 2, July 1998) (excerpts) . .
. . . . . . . . . . . . . . . . . . . . . 1-8
Energy Resources International, Inc., Program
Revenue and Costs
from FY 1983 Through Projected to End of FY 1999 .
. . . . . . . . . . . . . . . . . . . . 9
Energy Resources International, Inc., Projected
Utility NWF
Fees Through 2010 . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Edison Electric Institute Letter Dated March 7,
1983 to Robert Morgan,
Project Director, Nuclear Waste Policy Act Project
Office (excerpts) . . . . . . 11-12
FOOTNOTES
1. As discussed below, the term "programmatic and material breach" highlights amici curiae's interest in this matter. DOE failure to perform -- for, at a minimum, twelve years -- materially breaches individual contracts with the entire civilian nuclear power industry.
2. Pursuant to Federal Rule of Appellate Procedure 29(b), amici curiae filed a motion for leave to file this brief.
3. Even a "forecasted twelve-year delay", 43 Fed. Cl. at 383, based upon DOE's 2010 estimate, is suspect. DOE's 2010 date depends upon, inter alia: DOE successfully completing draft and final repository environmental impact statements (in 1999 and 2000) and the Yucca Mountain site suitability study (in 2001); sufficient appropriations; submitting an application (in 2002) to, and obtaining construction authorization from, the Nuclear Regulatory Commission; commencing and completing the construction in a timely manner; DOE's modification of the Standard Contract (in 2001) to effect the transfer of SNF; and developing plans for waste acceptance and transportation services (in 2003), etc. See generally, DOE Civilian Radioactive Waste Management Program Plan, DOE/RW-0504 (Revision 2, July 1998). Addendum at 1-8 (excerpts).
4. See 48 Fed. Reg. 16,595 (April 18, 1983). Even if the CDA was not invoked -- because the Government was providing (rather than procuring) the service -- nothing prohibited DOE from using post-CDA Disputes clause language.
5. These damages may include, but are not limited to, costs of: (a) modifications to existing spent fuel pools (e.g., most utilities have "re-racked" their SNF pools to expand storage capacity) or dry storage, and corresponding changes to plant operating procedures and technical specifications, (b) designing, licensing, building, and operating additional on-site storage capacity, (c) initiating state legislative efforts for increased on-site storage capacity, and (d) responding to state and local challenges to increased on-site storage.
6. Michael Grunwald, Lawsuit Surge May Cost U.S. Billions, Wash. Post, August 10, 1998, at A1 (predicting that utilities would eventually seek between $31 and $53 billion).
7. This estimate was prepared by Energy Resources International, Inc. based upon its review of DOE records, projected through the end of Fiscal Year 1999. In addition, the Fund's total assets do not reflect one-time fees of $2.3 billion not yet paid by the utilities. Addendum at 9.
8. The clear distinction between the scope of the pre-CDA Disputes clause (claims arising under the contract) and post-CDA version (claims arising under or relating to the contract) is well understood. See, generally, Ralph C. Nash, Jr., Steven L. Schooner & Karen R. O'Brien, The Government Contract Reference Book 38-39, 67-68, 438 (2d ed. 1998) (citing, inter alia, the Wunderlich Act, 41 U.S.C. §§ 321-322, and the CDA); John W. Whelan, Federal Government Contracts, Cases and Materials 669-72 (1985) (distinguishing the Court of Claims' pre-CDA breach jurisdiction from disputes arising under the contract); Ralph C. Nash, Jr. & John Cibinic, Jr., Federal Procurement Law, 2037-31 (Vol. II, 3d ed. 1980); John Cibinic, Jr. & Ralph C. Nash, Jr. Administration of Government Contracts 1239-1245 (3d ed. 1995). See also, Joseph Sachter, Resolution of Disputes Under United States Government Contracts: Problems and Proposals, 2 Pub. Cont. L. J. 363, 365-69 (1969) (suggesting that "[t]he distinction is perhaps better understood in the context of . . . court decisions which speak of disputes over rights given by the contract and disputes over violations of the contracts." The latter, arising outside of the contract, permits immediate access to the courts.).
9. Moreover, if DOE interpreted the "avoidable delays" provision to cover the material, programmatic breaches feared by the utilities, good faith and fair dealing would require notice of DOE's interpretation during the Standard Contract's promulgation. See generally, Cibinic & Nash, Administration 3-6.
10. Justice Scalia suggests that, even in light of Chevron, U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984):
It is not immediately apparent why a court should ever accept the judgment of an executive agency on a question of law. . . . Surely the law, the immutable product of Congress, is what it is, and its content -- ultimately to be decided by the courts -- cannot be altered or affected by what the Executive thinks about it. I suppose it is harmless enough to speak about "giving deference to the views of the Executive" . . . -- the mealy-mouthed word "deference" not necessarily meaning anything more than considering those views with attentiveness and profound respect, before we reject them. But to say that those views . . . will ever be binding -- that is, seemingly, a striking abdication of judicial responsibility.
The Honorable Antonin Scalia, Judicial Deference to Administrative Interpretations of Law, 1989 Duke L. J. 511, 513-14 (1989).
11. 42 U.S.C. § 10222(d) limits DOE's Fund expenditures to radioactive waste disposal activities, including: (1) repository development and construction operations; (2) nongeneric research, development, and demonstration; (3) administrative costs of the radioactive waste disposal program; (4) transporting, treating, or packaging SNF; (5) acquisition, operation, and construction of facilities at a repository site; and (6) assistance to States, units of general local government, and Indian tribes. But "[n]o amount may be expended . . . for the construction or expansion of any facility unless such construction or expansion is expressly authorized by this or subsequent legislation. [DOE] is authorized to construct one repository and one test and evaluation facility."
12. The trial court appears to overstate the authority of DOE's contracting officers or its board of contact appeals to provide an administrative remedy or "rectify the problem." 43 Fed. Cl. at 386. The NWPA sets utilities' fund payments. 42 U.S.C. § 10222(a)(2). If the Fund contains insufficient or excess revenues for statutorily permitted nuclear waste disposal activities, the Secretary of Energy (as opposed to the contracting officer or the agency board of contract appeals) recommends fee increases or reductions. 42 U.S.C. § 10222(d). Moreover, the Secretary's recommendations are contingent upon absence of action by both Houses of Congress for 90 days. Id.
13. In related litigation, DOE argued that "any substantial downward adjustments in the fees paid by some contract holders in later years may well force offsetting upward adjustments in the fees paid by other contract holders." Respondent's Petition for Rehearing and Suggestion for Rehearing En Banc, December 1997, Northern States v. Department of Energy (Nos. 97-1064, et al., D.C. Circuit). Appendix at 135-36. Similarly, DOE informed Congress of its intent to recoup downward equitable adjustments in fees paid into the Fund through future rate increases. Statement of Secretary Bill Richardson, U.S. Dep't of Energy, Before the Subcomm. on Energy and Power, Comm. on Commerce, U.S. House of Representatives, 1999 WL 8085516 at 4-6 (March 12, 1999).
14. In related litigation, the D.C. Circuit analogized a similar argument to the Yiddish saying: "Here is air; give me money." Indiana Michigan Power Co. v. Department of Energy, 88 F.3d 1272, 1276 (D.C. Cir. 1996).
15. For example, the clause covers delays associated with DOE's eventual shipping and transportation services. Similarly, a more mundane delay -- for example, DOE scheduling the shipping truck for the wrong day -- might generate compensable overtime costs for a utility's work crew under the clause.
16. Nor does the Tucker Act, 28 U.S.C. § 1491, require exhaustion of administrative remedies in this context. See Richard E. Speidel, Exhaustion of Administrative Remedies in Government Contracts, 38 N.Y.U. L. Rev. 621, 649 (1963) ("Exhaustion is required when . . . the administrative remedy is both available and adequate."); Brighton Village Assocs. v. United States, 52 F.3d 1056, 1059 (Fed. Cir. 1995) (Tucker Act provides CFC jurisdiction over damages for breach of an express contract).
17. The contract in Allied Materials, similar to DOE's Standard Contract, provided an "equitable adjustment" remedy for "any delay in delivery of government furnished property . . . and any withdrawal of authority to use property." 569 F.2d at 564 (emphasis added). Despite such all-encompassing language, the Court accepted the cardinal change doctrine because it applies "generally to modifications . . . so fundamental that they cannot be redressed within the contract by an equitable adjustment to contract price, whether under the Government Furnished Property clause, the traditional changes clause or any other." Id. (emphasis added).
18. To reach this conclusion, the trial court either ignored the words equitably adjusted in the "avoidable delays" provision or concluded that they were not used in the manner understood in Government contracting. See discussion, supra at 16.
19. See, e.g., Wells Brothers Co. v. United States, 254 U.S. 83, 85-87 (1920) (involving "a plain and unrestricted covenant" that was "immediately coupled with a declaration . . . that . . . such a claim . . . would not be allowed" and where it "would be difficult to select language giving larger discretion to the United States to suspend" or "change the work or materials"); Charles F. Wood v. United States, 258 U.S. 120, 121-22 (1922) (upholding clear exculpatory language that "no claim shall have been made or allowed for any damages which may arise out of a delay"); Jefferson Construction Co. v. United States, 364 F.2d 420, 424 (Ct. Cl.), cert. denied 386 U.S. 914 (1966) (specification "could not have been read by any thinking bidder without conveying the warning"); Rixon Electronics, Inc. v. United States, 536 F.2d 1345, 1352 (Ct. Cl. 1976) ("the main reason for the plaintiff's then parlous economic conditions was its pig-headed resolve to take the contract despite provisions . . . amply sufficient to alert it, and despite express warnings that it was going to lose money.").
20. Just as courts invalidate exculpatory language in very small type on the back of a document, this Court should not uphold a putative disclaimer not made obvious to the nuclear utilities. "One of the most hateful acts of the ill-famed Roman tyrant Caligula was that of having laws inscribed upon pillars so high that the people could not read them." Cutler Corp. v. Latshaw, 97 A.2d 234, 237 (Pa. 1953).
21. Under common law, the
result would be the same because enforcing the putative exculpatory clause would violate
public policy. Professor Farnsworth cites Tunkl v. Regents of University of California,
383 P.2d 441, 445-446 (Cal. 1963), for six criteria describing the "type of
transaction in which exculpatory provisions will be held invalid[,]" all of which
prove apt here: (1) The transaction "concerns a business of a type generally thought
suitable for public regulation"; (2) the party seeking exculpation is performing an
important public service; (3) the party "holds himself out as willing to perform this
service for any member of the public who seeks it"; (4) due to "the essential
nature of the service, in the economic setting of the transaction, the party invoking
exculpation possesses a decisive advantage of bargaining strength"; (5)
"exercising a superior bargaining power[,] the party confronts the public with a . .
. contract of exculpation, and makes no provision whereby a purchaser may pay additional
reasonable fees and obtain protection against negligence"; and (6) "as a result
of the transaction, the . . . property of the purchaser is placed under the control of the
seller, subject to the risk of carelessness by the seller or his agents." See
Allan E. Farnsworth, Contracts 329-30 (3d ed. 1999).