Free Joint Status Report - District Court of Federal Claims - federal

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United States Court of Appeals for the Federal Circuit
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FLORIDA POWER & LIGHT COMPANY , CONSOLIDATED EDISON COMPANY OF NEW YORK , INC. , EMPRESA NACIONAL DEL URANIO , IES UTILITIES , INC. , NIAGARA MOHAWK POWER CORPORATION PENNSYLYANIA POWER AND LIGHT COMPANY , WISCONSIN ELECTRIC POWER COMPANY , DUKE ENERGY CORPORATION , acting through its Duke Power Division , and VIRGINIA ELECTRIC AND POWER COMPANY

Plaintiffs-Appellants

UNITED STATES

Defendant-Appellee.

Judgment

ON APPEAL from the

United States Court of Federal Claims

In CASE NO(S).

96- CV- 644

This CAUSE having been heard and considered , it is

ORDERED and ADJUDGED:

VACATED AND REMANDED

ENTERED BY ORDER OF THE COURT

JUN "\
DATED

5 2004
Jan Horbaly, Clerk

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NOTE: Pursuant to Fed. Cir. R. 47. , this disposition
is not citable as precedent. It is a public record.

United States Court of

Appeals for

the Federal Circuit

03- 5127
FLORIDA POWER & LIGHT COMPANY , CONSOLIDATED EDISON COMPANY OF NEW YORK , INC. , EMPRESA NACIONAL DELURANIO A., IES UTILITIES, INC. , NIAGARA MOHAWK POWER CORPORATION PENNSYLVANIA POWER AND LIGHT COMPANY , WISCONSIN ELECTRIC POWER COMPANY , DUKE ENERGY CORPORATION , acting through its Duke Power Division , and VIRGINIA ELECTRIC AND POWER

- COMPANY

Plaintiffs-Appellants

UNITED STATES

Defendant-Appellee.

DECIDED: June 15, 2004 Circuit Judoes

Before MICHEL , BRYSON, and LINN,
LINN Circuit Judge

Florida Power & Light Company; Consolidated Edison Company of New York
Inc. ;

Empresa Nacional

Del Uranio , S. A.;

IES Utilities ,

Inc.

; Niagara Mohawk Power

Corporation; Pennsylvania Power and Light Company; Wisconsin Electric Power
Company; Duke

Energy Corporation; and Virginia Electric and Power Company

Court (collectively " appellants " or " utilities ) appeal from a decision of the United States
of Federal Claims entering judgment in favor the United States.

Fla. Power & Liqht Co.

);

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v. United States , No. 96- 644C , 56 Fed. CI. 555 (May 28

, 2003)

("Florida Power V
, we

Because we conclude that the trial court' s analysis was incomplete

vacate and

remand for further proceedings consistent with this opinion.
BACKGROUND

With this appeal , this case has now been before this court on three separate

occasions. Because the parties are familiar with the background of this case , and
because the facts underlying this case have been recited in previous opinions of this
court and the trial court , we will repeat only those facts as are relevant here.

See. e.

Fla. Power & Lioht
Florida Power IV

Co. v. United States , 307 F. 3d 1364 , 1366-

68 (Fed. Giro 2002)

Fla. Power & Lioht CO.

V. United States ,

198 F. 3d 1358 , 1359-

(Fed. Giro 1999) ( Florida Power II
In short

, each of the utilities was party to a contract

with the United States

wherein the utilities agreed to purchase a fixed percentage of their uranium needs from

the government. Before July 1 , 1993 , the contracts were administered and performed
through the Department of Energy ("DOE" ), and the price that the DOE could charge
was constrained by statute see
42 U.

C. ~ 2201 (v) (1988), which specified that " any
basis of recovery of the

prices established under this subsection shall be on
Government's costs over a reasonable period of time.

The Energy

Policy Act of 1992 ("EPAct"

) made significant changes in the
Most notably,

government's uranium enrichment services program.

EPAct established

the United

States Enrichment Corporation ("USEC" ) to undertake the uranium

enrichment services previously performed by DOE. All existing uranium enrichment
contracts , including those of appellants , were transferred to USEC for administration

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effective July 1

, 1993. EPAct also created the Uranium Enrichment Decontamination
established to pay, among other things
(DOE) . . . until

and Decommissioning Fund ("D&D Fund" ),

(t)he costs of all decontamination and decommissioning activities of
such time as the

Secretary certifies and the Congress concurs ,

by law, that such

activities are complete. " 42 U.

C. ~ 2297g- 2(b) (2000). The D&D Fund is funded in

part by a special assessment , collected annually, from domestic utilities that purchased
enrichment services from DOE between 1945 and October 23

, 1992.

The relevant

time period in this appeal is the

transition period between the

enactment of EPAct on October 24 ,

1992

, and the date on which USEC assumed
, 1993. The utilities initially complained
pricing during the transition period

responsibility for the contracts in question ,

July 1

to the appropriate contracting officer that the DOE' s
was erroneously high.

After the contracting officer denied the utilities ' complaint , the
of Federal Claims ,

utilities filed suit in the Court

alleging that the DOE improperly

included decontamination and decommissioning costs in calculating its contract prices

during the transition period , because DOE separately recovered
the special assessment beginning fiscal year 1993.

those costs through

The Court of Federal Claims granted a motion for judgment on the

pleadings

judicata filed by the government , dismissing the utilities ' action as being barred by res Fla. Power & Liqht Co. v. United States , 41 Fed. CI. 477 (1998)
and stare decisis.

Florida Power I

). This court reversed and

remanded.

Florida Power II ,

198 F.

1358. On remand , and following discovery, the utilities asserted mat the price set by

DOE was based on

recovering costs that included approximately $1.

billion in

improper costs , categorized in two components: (1) "

remedial action costs " i.e., costs

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for cleaning up contamination from the DOE enrichment facilities; and (2) the costs of

disposing of depleted uranium tails.

The utilities asserted that these costs

were

improperly included because they were to be otherwise paid from the D&D fund. Later
the utilities advanced another set of arguments , asserting that two additional , improper

cost components had likewise been included in the costs: (1) $773 million in imputed
interest on the Gas Centrifuge Enrichment Project , and (2) $394 million in costs related

to the production of high-assay uranium for governmental applications. After trial , the
Court of Federal Claims held that the government had improperly included the remedial

action and depleted uranium tail costs in the

calculation.

Fla. Power & LiqhtCo. v.
). Because

United States , 49 Fed. CI. 656 , 662- 665 (2001) (" Florida Power III

the

stipulated price per unit , after removing these costs , was $103 as compared to the $125

per unit that DOE charged , judgment was entered in favor of the utilities and damages
were awarded in the amount of over $25 million. The court denied the utilities ' other
claims of improperly included costs on the ground that the utilities had presented these

claims too late and that the government was prejudiced

by the delay.

1!L at 665-668.

Finally, the court also held that the contracts were not governed by the Contract Dispute
Act , and therefore , the utilities were not entitled to recover interest from the date the

claims were submitted.

1!L at 668- 672

The government appealed the

damages

awarded for breach of contract; the utilities cross-appealed the decision that their other
claims were barred as being untimely raised and the denial of interest from the date the

claims were submitted.

In that appeal , the government advanced two arguments against the damages
awarded by the Court of Federal Claims , namely that: (1) the DOE was not limited

toa

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cost-recovery basis for pricing its services during the transition period , and (2) the price

for the government's services would have been the same even if the costs disallowed

by the trial court had been omitted. This court dispensed with the government's first
argument as without merit. As to the second , we found that the trial court had not ruled

on whether DOE had sufficient appropriate costs to justify a price at or near the ceiling

price , and so we could not reach the conclusion that the price would have been the
same without the disallowed costs.

Florida Power IV , 307 F. 3d

at 1368-69. As one

facet of that calculus , we noted that the trial court " did not directly address the issue of
what a

reasonable time would be in

the context of the

transition period and the

termination of DOE' s responsibility for administering the enrichment contracts as of July

1993.

kL. at 1369.

We also concluded that , within the context

of determining

appropriate costs on remand, the utilities could also raise the issues that had been
barred as untimely raised.

Finally, we affirmed the trial court' s determination that the

CDA was inapplicable, barring interest. We thus remanded the case for

determination
price

of whether the government incurred sufficient appropriate costs to justify the
charged.
On remand , the trial court concluded that as of June 30 ,
challenged by the

1993 , after all costs

utilities were removed ,

the DOE had incurred a $70 million

cumulative loss. For

this reason , the trial court concluded that the government was

entitled to charge the ceiling price , and entered judgment in favor of the government:

The utilities timely appealed to this court , alleging numerolTS errors in the trial
court'

decision.

This court has jurisdiction over the appeal

under 28 U.

~ 1295(a)(3).

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ANAL YSIS

The mandate of this court in Florida Power IV stated:

The utilities assert that there is no need for a remand because the trial court has already rejected the government's factual submission that there were other appropriate government costs that would have . allowed the government to keep the price at or near the ceiling price. We disagree. The trial court did not make any findings as to the government's factual argument that there were other appropriate costs that would justify the price charged during the transition period. We therefore remand for the trial court to determine whether the total amount of the appropriate

government costs that could properly be considered in setting the pri ce for Fiscal Year 1993 would justify the price of $125 per (unit), and ita lower price would have been required , how much lower that price would have

been.
307 F. 3d at 1369. In that mandate , we also noted explicitly that , as part of the calculus

in determining whether the price of $125 per unit was justified , the trial court would
need to make a finding as to the reasonable period oftime over which the government's

costs were to be recovered. kl.
On appeal, appellants make three distinct arguments: (1) that the trial court
failed to satisfy the mandate qf this court in

Florida Power IV ; (2) that judgment in favor

of the government

is erroneous because EPAct established the sole method of
decision includes

recovery of all losses suffered by DOE; and (3) that the trial court' s

clearly erroneous factual findings. We consider each in turn.

A. Failure to follow mandate
The utilities argue that the trial court failed to satisfy the mandate of this court

because it: (a) failed to determine whether the government's claimed cumulative loss
consisted of " appropriate "
costs; (b) failed to reopen the

record; and (c)

failed to

recovered. determine the " reasonable period of time " over which the loss was to be
The first argument is unavailing. After our remand in

Florida Power IV , the government

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moved for judgment on the record, arguing that, even after
challenged by the

excluding all of the costs

utilities, it had still incurred sufficient cumulative losses to justify
ceiling price.

charging a price at or near the

Florida Power V , 56 Fed. CI. at 558- 59.

The trial court accepted

this argument , and simply removed

each of the costs
costs
the

challenged by the utilities.
challenged by the

Because the trial court

subtracted each of the

utilities as inappropriate , there was no need to further review

government's costs for appropriateness. Any allegations that other components of the
challenged government's costs were inappropriate should have been at the

earlier

stages of this protracted litigation. Appellants cannot now seek to make arguments that
should have been made before the litigation reached this late stage.

Appellants second argument , regarding the reopening
unavailing. On remand ,
we stated that U (w)hether

of the record , is also

additional trial proceedings should be

conducted to permit further development" of cost issues "

is a matter for the trial court to

, 307 F. 3d at 1370. We find decide in the exercise of its discretion. Florida Power IV

no abuse of discretion in the trial court' s conclusion that "

(t)he record developed at the

2001 trial is amenable to rendering findings on the subject of the remand.
Power V , 56 Fed. CI. at 560.

Florida

However, we find persuasive the utilities ' third argument

, that the trial court failed

to follow our mandate by not conclusively determining the reasonable time period over Florida Our opinion in
which the government's cumulative losses should be amortized.

Power IV specifically noted that the reasonable period of time over which costs were to

be recovered would need to be decided on remand.

307 F. 3d at 1369. The trial court

made note of the issue in its opinion , as well as the fact that DOE had used both a 10-

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year and a 12-year

period over the course of the contracts.

Florida Power V , 56 Fed.

CI. 557- 58

n.4.

Beyond that , however, the trial court neglected this issue , and neither

determined what the reasonable time period for amortization should be nor calculated
whether the government's losses, if amortized over this period , were sufficient to permit

the government to charge a price at or near

the ceiling price during the transition.

The

findings made by the trial court without a determination of a reasonable period of time
did not comport with our mandate and were , for that reason , erroneous.

The government argues that it " need not pretend it could recover its costs after

the transition period ended, Appellee s Br. at 26, and thus contends that its costs
should be fully amortized over the nine-month transition period. This argument is not
persuasive. For many years , the government had used firstten , and then twelve , years

as a reasonable period of time over which it was to recover its costs. By 1986 , the
government had begun using a computation tool

known as " FREE"

or Financial

Reports of the Enrichment Enterprise , to determine whether the price it charged would
recover its costs over a reasonable period of time as required by the statute.

Based on
would

a set of assumptions about future costs , sales , and prices , the FREE program
show the time period required to recover costs.

Using the FREE program , and running

various scenarios based on a range of assumptions , the results demonstrated that the

government would recover its costs over the calculated reasonable period of time.
Originally, the government interpreted the statutory recovery mandate that costs be
recovered over a " reasonable time period" to mean ten years; however , in 1990 , the

government was forced to adjust the cost- recovery period from ten to twelve years to

enable the government's recovery of costs without

exceeding the

contractual ceiling

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price

based on its FREE model. The twelve-year recovery period in effect prior to

EPAct was thus chosen by the government based on sound reasoning and empirical

evidence.
There is nothing about the enactment of EPAct to require or suggest a change in
the amortization term.

The enactment of EPAct , by the government , should not result

in a windfall to DOE or work to the detriment of the utilities. The EPAct also clearly
contemplated that the government' s full costs would not be recovered within the nine-

month transition period ,

as EPAct also included

provisions for recovering previously

unrecovered costs thro ugh
C. ~ 2297c- 3(d)
(1994),

the proceeds of the sale of stock issued by USEC. 42
repealed by Pub. L. No. 104- 134

, 110 Stat.

1321- 349

(1996).

For these reasons , the government's argument for a nine-month reasonable
Barring any adjustment warranted
on the

period of time is unpersuasive.

record

considered by the trial court on remand , it may be that the court will conclude , for
example , that the reasonable time for the amortization of costs should remain precisely
what it was p.rior to the enactment of EPAct , or twelve years. Because the trial court did
not make a determination of the reasonable period of time over which costs should be

recovered , we conclude that the trial court failed to follow our mandate. Accordingly,

we vacate the trial court' s judgment in favor of the government and remand for a
determination of the reasonable period of time and further proceedings consistent with
the remainder of this opinion.

B. EPAct as sole method of recovery

The utilities also argue that Congress , in enacting EPAct ,
EPAct statutory scheme as the
government's

contemplated the

only method for recovering

any

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cumulative losses of the DOE' s

uranium enrichment

activity, and that any cumulative

loss incurred by the government prior to the transition period was not to be included in

the per unit price calculation but was to be recovered by the proceeds of the sale of
stock issued by USEC and by dividends.

As the government notes , this is an issue that the trial court had decided at an
earlier stage of the trial. Although the utilities did file a cross-appeal from the Court of
Federal Claims ' original judgment ,

this issue was not raised in that cross-appeal. In

Florida Power V , the trial court concluded that the utilities were precluded from raising it

again , because it was within the scope of the previous appeal and the utilities had failed
to raise it on appeal. The trial court therefore concluded thatthe
Fed. CI. at 563 (citing

issue was waived. 56

Tronzo v. Biomet , 236 F. 3d 1342 (Fed. Cir. 2001)). We find no

error in the trial court' s ruling on this issue and affirm the court' s waiver determination.

C. Clearly erroneous fact findings
Finally, the utilities challenge many of the trial court' s
factual findings as clearly

erroneous. The argument is centered around alleged mathematical errors including the

asserted failure to subtract costs that the trial court insisted it subtracted. In light of our

vacation of the trial court' s denial of damages for failure to amortize

the costs over a

reasonable period of time , as discussed above , we need not and do not examine the
details of the trial court' s computations and leave it to the trial court in its recalculation
of damages on remand to correct whatever mathematical errors it may have made in its

last computation.

Before the trial court on this case s

last iteration

, both the trial court and the

parties expressed confusion over exactly what it was that this court had mandated.

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be clear , the trial court , on remand ,

must (1) look at the calculations regarding price

per unit that would have occurred but for the enactment of EPAct; (2) remove the costs
challenged by the

utilities--namely remedial action costs ,

the costs of disposing of

depleted uranium tails , imputed interest on the Gas Centrifuge Enrichment Project , and

costs related to high-assay uranium--to the extent those costs were relied upon by the

government to justify the per unit price charged; and (3)

amortize the net costs

calculated in steps (1) and (2) over the reasonable period of time to be determined by

the trial court. While we leave the conduct of proceedings on remand to the sound
discretion of the trial court , we believe that all relevant issues and arguments have been

fully presented and considered and that the time has now come to bring this case.

conclusion without more.
If the amortized costs are sufficient to support the government's charging of the

contractual ceiling price during the transition period , the trial court should find in favor of
the government.

Otherwise ,

the trial court should find for the utilities and award

damages based on the per unit price justified by the amortized costs. In this appeal
the utilities also request a mandate to the trial court of a determination of entitlement to

interest should an award of damages be made. Because the question of interest was
not decided by the trial court , the issue is not ripe for our consideration.
Accordingly,

we make no decision on the utilities ' entitlement to any award of interest and leave that
issue for consideration by the trial court , on remand , as may be appropriate.

CONCLUSION

Because the trial court failed to determine the " reasonable period of time

" over

which the government's appropriate costs should be recovered , we vacate the trial

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court' s

judgment in favor of the government

and remand the case to the Court of

Federal Claims for proceedings consistent with this opinion.

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