Energy Northwest v. United States

United States Court of Appeals
for the Federal Circuit
__________________________

ENERGY NORTHWEST,
Plaintiff-Appellee,

v.
UNITED STATES,
Defendant-Appellant.
__________________________

2010-5112
__________________________

Appeal from the United States Court of Federal
Claims in case no. 04-CV-010, Judge Edward J. Damich.
__________________________

Decided: April 7, 2011
__________________________

NORMAN M. HIRSCH, Jenner & Block, LLP, of Chicago,
Illinois, argued for plaintiff-appellee. With him on the
brief were WILLIAM D. HEINZ, DAVID JIMÉNEZ-EKMAN,
CHRISTOPHER TOMPKINS and APRIL A. OTTERBERG.

HAROLD D. LESTER, JR, Trial Attorney, Commercial
Litigation Branch, Civil Division, United States Depart-
ment of Justice, of Washington, DC, argued for defendant-
appellant. With him on the brief TONY WEST, Assistant
Attorney General, JEANNE E. DAVIDSON, Director, and
SHARON A. SNYDER, Trial Attorney. Of counsel on the
ENERGY NORTHWEST v. US 2

brief were ALAN J. LO RE, Assistant Director, SCOTT R.
DAMELIN, Trial Attorney; and JANE K. TAYLOR, Office of
General Counsel, United States Department of Energy, of
Washington, DC.
__________________________

Before LOURIE, BRYSON, and PROST, Circuit Judges.
PROST, Circuit Judge.

The government appeals three categories of damages
awarded by the United States Court of Federal Claims for
the government’s breach of its commitment to dispose of
Plaintiff’s spent nuclear fuel. The contested categories
are as follows: First, the trial court awarded Plaintiff the
cost of certain site modifications that the government
contended were not proved to have been caused by the
breach. Second, the court awarded damages to account
for certain indirect overhead expenses that accompanied
Plaintiff’s mitigation activities, though Plaintiff did not
offer proof that the mitigation actually caused specific
categories of these indirect overhead expenses to increase.
Third, the court awarded Plaintiff the cost of interest
payments made in connection with Plaintiff’s financing of
its mitigation activities. Energy Nw. v. United States, 91
Fed. Cl. 531 (2010).

We hold that the Court of Federal Claims erred by
failing to require Plaintiff to prove that its site
modifications were actually caused by the government’s
breach. We hold that the court was correct in its
treatment of Plaintiff’s indirect overhead expenses. And
we hold that, because the government did not waive its
sovereign immunity against the recovery of interest, the
court erred in awarding Plaintiff recovery of its interest
costs. We therefore vacate the Court of Federal Claims’
judgment as to the site modifications, affirm as to the
3 ENERGY NORTHWEST v. US

indirect overhead expenses, reverse as to the interest
recovery, and remand.

I

A

This is a spent nuclear fuel case. In 1982, Congress
instructed the Department of Energy (“DOE”) to prepare
a plan for a permanent repository of spent nuclear fuel
(“SNF”) and other high-level radioactive waste (“HLW”)
produced as part of commercial nuclear power generation.
See Nuclear Waste Policy Act of 1982 § 111 [hereinafter
NWPA], 42 U.S.C. § 10131. As part of its plan for a
national nuclear waste disposal strategy, Congress
authorized the Secretary of Energy to contract with the
nuclear utilities. For our purposes, the bargain was this:
The utilities would pay fees into a Nuclear Waste Fund
that the government set up under the NWPA. In return,
the DOE committed to begin accepting and disposing of
contract holders’ SNF no later than January 31, 1998.
NWPA § 302, 42 U.S.C. § 10222.

In early 1983, as set forth in the NWPA, the DOE
promulgated regulations defining the text of its standard
contract with the nuclear utilities. Standard Contract for
Disposal of Spent Nuclear Fuel and/or High-Level
Radioactive Waste, 10 C.F.R. § 961.11 (1983) [hereinafter
Standard Contract]. The contract reflected the basic
bargain described above, but of course included many
terms defining the parties’ various obligations. Notably,
the contract provided that while the DOE would
ultimately accept title to the utilities’ SNF, each utility
had responsibility for preparing and loading the SNF for
transportation:
ENERGY NORTHWEST v. US 4

2. Preparation for Transportation

(a) The Purchaser [i.e., the utility] shall
arrange for, and provide, all
preparation, packaging, required
inspections, and loading activities
necessary for the transportation of
SNF and/or HLW to the DOE facility.

Id. sec. IV.A.2. Such arrangements were to be made in
accordance with the DOE’s selection of a storage cask
technology for indefinitely storing the SNF:
2. DOE shall arrange for, and provide, a
cask(s) and all necessary transportation of
the SNF and/or HLW from the
Purchaser’s site to the DOE facility. Such
cask(s) shall be furnished sufficiently in
advance to accommodate scheduled
deliveries. Such cask(s) shall be suitable
for use at the Purchaser’s site, meet
applicable regulatory requirements, and
be accompanied by pertinent information
including, but not limited to, the following:
(a) written procedures for cask handling
and loading, including specifications
on Purchaser-furnished canisters for
containment of failed fuel;
(b) training for Purchaser’s personnel in
cask handling and loading, as may be
necessary;
(c) technical information, special tools,
equipment, lifting trunnions, spare
parts and consumables needed to use
and perform incidental maintenance
on the cask(s); and
5 ENERGY NORTHWEST v. US

(d) sufficient documentation on the
equipment supplied by DOE.
Id. sec. IV.B.2.

In June 1983, the DOE executed the Standard
Contract with Plaintiff Energy Northwest (then known as
the Washington Public Power Supply System). Energy
Northwest is a municipal corporation and joint operating
agency of the State of Washington. It began commercial
operations at its Columbia nuclear power plant in
Richmond, Washington, in December 1984.

Time passed. As the Columbia plant generated SNF,
Energy Northwest put it in a wet storage pool located on-
site. The wet storage pool had a limited capacity for SNF,
based on the pool’s dimensions and the “racking”
technique employed. By the early 1990s, Energy
Northwest projected that the pool would reach capacity
some time after 2003 if SNF were not removed.

Had the DOE timely begun accepting SNF for
disposal in 1998, this might not have been a problem.
With some modifications to the wet pool, such as building
additional storage racks in empty areas, the Columbia
plant would have had sufficient SNF storage capacity to
keep operating so long as SNF was leaving the pool and
being accepted by the DOE at the agreed-upon rates. But
as far back as the late 1980s there were indications that
the DOE’s timely performance was unlikely. In May
1994, these indications became manifest. The DOE
announced that it would not be able to begin accepting
SNF from Energy Northwest (or any other utilities) by
the agreed date of January 1998. Notice of Inquiry:
Waste Acceptance Issues, 59 Fed. Reg. 27,007 (May 25,
1994). The DOE informed the utilities that the earliest it
could begin accepting SNF was 2010. Id. at 27,008.
ENERGY NORTHWEST v. US 6

Energy Northwest faced a challenge. If it did not take
some action to expand the Columbia plant’s SNF storage
capacity, around 2003 the Columbia wet pool would fill up
and the plant would have to close. But neither did
Energy Northwest know exactly when—if ever—the DOE
would begin accepting SNF for final disposal. Energy
Northwest concluded that building its own solution for
indefinitely storing SNF was preferable to running the
risk that the DOE would not perform in time to prevent
the wet storage pool from filling up. 1

It therefore decided to build an Independent Spent
Fuel Storage Installation (“ISFSI”) where the Columbia
plant’s SNF could be stored indefinitely in dry casks. 2 In
1999, Energy Northwest entered into a contract for design
and construction of such a system. Work began in 2000,
and in September 2002 the Columbia plant’s ISFSI was
approved to store SNF.

B

Development of the ISFSI was, of course, a large
project for Energy Northwest. It estimated total costs
around $60 million. Three cost categories (as computed
by Energy Northwest) are relevant to this appeal.

1 Energy Northwest could have “re-racked” its wet
storage pool to eke out some additional SNF storage,
possibly enough for ten to twelve years’ additional capac-
ity. Its decision to build instead an indefinite-term stor-
age solution was held reasonable below and was not
appealed.
2 In the dry cask system Energy Northwest se-
lected, SNF assemblies are placed in a stainless steel
canister, which is then embedded in a concrete overpack.
The casks are then stored at a dedicated installation (the
ISFSI).
7 ENERGY NORTHWEST v. US

Modification costs. In order to get SNF safely out of
the wet pool and into dry storage casks, Energy
Northwest made modifications to the Columbia plant.
These included:

[A] seismic mitigation device in the cask wash
down area, the fabrication and installation of
seismic restraints in the cask loading pit, removal
and rework of the cask wash down pit grating and
modification of the cask wash down pit drain and
piping, haul path and transfer pad from the
reactor building to an on-site railroad line,
preparation or modification of procedures for cask
loading, and an underwater camera.

Energy Nw., 91 Fed. Cl. at 552. Energy Northwest
estimated that these modifications cumulatively cost
about $1 million.

Indirect overhead costs. Energy Northwest estimated
that about $2.9 million of its “overhead” costs were
assignable to the ISFSI project. For accounting purposes
Energy Northwest treats its administrative,
management, information services, and resource
development expenses as overhead costs that are not
specifically charged to any project. The $2.9 million
figure is derived by computing the fraction of Energy
Northwest’s total available labor that was spent on the
ISFSI project, and applying that fraction to the overhead
pool.

Financing costs. In May 2002, Energy Northwest took
a $34 million advance against a credit agreement with
Citibank in order to raise capital for the ISFSI project. In
2003, it issued $46 million in utility bonds, using much of
the proceeds to repay the advance, address additional
ENERGY NORTHWEST v. US 8

costs of the ISFSI, and cover some costs of the bond issue
itself. Energy Northwest estimated that this financing
cost about $6 million in interest charges, which Energy
Northwest paid to Citibank and to the bond holders.

C

On January 7, 2004, Energy Northwest sued the
government in the Court of Federal Claims for breach of
contract. Two years later, the court entered summary
judgment of the government’s liability, and the case
proceeded to a bench trial on damages. Energy Nw. v.
United States, 69 Fed. Cl. 500 (2006).

On February 26, 2010, the court awarded Energy
Northwest $56.9 million in damages. Energy Nw., 91 Fed.
Cl. at 560. Analyzing the case as one of partial breach,
the court awarded Energy Northwest certain costs
associated with its construction of the Columbia ISFSI.
The award included about $1 million for the site
modifications, $2.9 million for indirect overhead costs,
and $6 million for the interest charges Energy Northwest
paid.

The government timely appealed the judgment as to
these three categories of award. It did not appeal the
remainder of the award, about $47 million.

II

A. Standard of Review

We have jurisdiction over this appeal from a final
judgment of the Court of Federal Claims pursuant to 28
U.S.C. § 1295(a)(3). We review that court’s judgments to
determine if they are incorrect as a matter of law or
9 ENERGY NORTHWEST v. US

premised on clearly erroneous factual determinations.
Whitney Benefits, Inc. v. United States, 926 F.2d 1169,
1171 (Fed. Cir. 1991). We review that court’s legal
determinations de novo. Dehne v. United States, 970 F.2d
890, 892 (Fed. Cir. 1992).

B. The Court of Federal Claims Erred in Its
Causation Analysis Concerning the Site Modifications

We turn first to the site modifications Energy
Northwest made to adapt the Columbia plant to the new
ISFSI. The issue on appeal is the legal rule for proving
causation in a damages award.

1

The parties do not at this stage dispute the judgment
that the government’s breach caused Energy Northwest to
build the Columbia ISFSI. But as the government points
out, a plaintiff seeking damages must submit a
hypothetical model establishing what its costs would have
been in the absence of breach. Glendale Fed. Bank, FSB
v. United States, 239 F.3d 1374, 1380 (Fed. Cir. 2001). It
is only by comparing this hypothetical “but-for” scenario
with the parties’ actual conduct that a court can
determine what costs were actually caused by the breach,
as opposed to costs that would have been incurred
anyway. Id.; see also Yankee Atomic Electric Co. v. United
States, 536 F.3d 1268, 1273 (Fed. Cir. 2003).

The government contends that Energy Northwest
failed to meet this burden as to the Columbia plant
modifications, which the government views as Energy
Northwest’s contractual responsibility under the
Standard Contract. See Standard Contract sec. IV.A.2.(a)
(requiring Energy Northwest to “arrange for, and provide,
ENERGY NORTHWEST v. US 10

all preparation, packaging, required inspections, and
loading activities” necessary to convey the SNF to the
DOE). Citing Yankee Atomic, the government claims that
Energy Northwest can recover its modification costs if
and only if it can prove that the modifications actually
made differ from those that were already required by the
contract. According to the government, Energy
Northwest should have presented the court with a
hypothetical scenario that modeled the costs of site
modifications necessary at the Columbia plant in the “but
for” world (i.e., in the world where the government did not
breach), and then compared the hypothetical scenario
with the costs actually incurred.

Energy Northwest takes a different view of how its
plant modifications fit into this case. According to Energy
Northwest, the issue is not whether the modification costs
would have been incurred in a hypothetical non-breach
world, but whether they will be incurred again in the
future, when the DOE ultimately performs and begins
accepting the Columbia plant’s SNF. Energy Northwest
cites as support Carolina Power & Light Co. v. United
States, 573 F.3d 1271, 1277 (Fed. Cir. 2009). Energy
Northwest, like the trial court, interprets the
government’s position as a request for a damages offset
due to avoided future costs. Energy Northwest posits that
if the government wants an offset, the burden is the
government’s to prove that costs have actually been
avoided—and not merely deferred. See id.

2

The parties therefore present two views of this issue,
each controlled by a prior precedential decision of this
court. But which, if either, controls this appeal? A brief
summary is instructive.
11 ENERGY NORTHWEST v. US

In Yankee Atomic, the plaintiff utility obtained a hefty
damages award from the government for failure to timely
accept the utility’s SNF. 536 F.3d at 1272. This court
vacated the portion of the award reimbursing certain
costs incurred after the breach and remanded. Id. at
1274. The problem was that the trial court’s opinion
failed to consider that even in the “but for” world, the
utility would likely have borne some costs for SNF
storage. Assuming the government had not breached,
neither would it have immediately accepted all the
utility’s SNF, so there would have been some interim
storage costs. It was thus improper to award the utility
all its post-breach costs, because only some of those costs
were actually caused by the breach (i.e., the costs
associated with storing SNF that the government should
have accepted). Because the record included no way to
separate the costs actually caused by the breach from
those that the utility would have borne anyway, the court
remanded for further development. Id. at 1273–74.

Carolina Power presents a separate, if superficially
similar, issue. The government there urged this court to
reduce an $83 million damages award by $10 million
based on the government’s estimate that, had the
government timely begun accepting the utility’s SNF, the
utility would have had to spend $10 million processing
and loading its SNF into casks for transportation to the
government. 573 F.3d at 1277.

This court rejected the request for such an “offset,”
pointing out, “Plaintiffs have not avoided the costs of
loading. Rather, they have merely deferred these costs.”
Id. The underlying logic was that the court would not
draw premature conclusions about what the utilities’
future loading costs might or might not be. It was
impossible to award the government its full requested
ENERGY NORTHWEST v. US 12

offset without concluding that the utilities’ future loading
costs would be zero. This court declined to so speculate:
“Just as the utilities cannot now collect damages not yet
incurred under the ongoing contract, the government
cannot prematurely claim a payment that has not become
due.” 3 Id. (quoting Yankee Atomic, 536 F.3d at 1281).

These cases address separate aspects of the damages
analysis. Yankee Atomic shows the importance of proving
causation by comparing a hypothetical “but for” world to a
plaintiff’s actual costs. 536 F.3d at 1273–74. Under its
rule, a plaintiff must prove the extent to which his
incurred costs differ from the costs he would have
incurred in the non-breach world. Carolina Power
addresses the separate circumstance where a breaching
party seeks to offset an award by proving that the non-
breaching party has achieved some cost savings because
the breach permitted it to avoid—not just defer—some
aspect of performance. Carolina Power properly urges
caution when speculating about the future in a case of
partial breach—usually, the proper approach is to wait for
those events to actually occur, and to resist premature
conclusions. 573 F.3d at 1277.

3

Having assessed the precedent, we conclude that the
trial court did not properly apply Yankee Atomic to its
analysis of the Columbia plant modifications. Energy

3 This skepticism about reaching into the future is
consistent with our prior holdings. See Ind. Mich. Power
v. United States, 422 F.3d 1369, 1376 (Fed. Cir. 2005)
(declining to award damages for anticipated future non-
performance); Yankee Atomic, 536 F.3d at 1281 (declining
to award a damages offset to account for an anticipated
future payment).
13 ENERGY NORTHWEST v. US

Northwest is entitled to recover the cost of those
modifications only to the extent it can prove, to a
reasonable certainty, that but for the government’s breach
they would not have been incurred. 4 Ind. Mich. Power,
422 F.3d at 1373; Yankee Atomic, 536 F.3d at 1273. But
the trial court’s opinion analyzes the plant modifications
only under the avoided-costs standard of Carolina Power.
Energy Nw., 91 Fed. Cl. at 552–53. This was improper.
Before considering any offsets to the award, the trial
court had an obligation to first establish that the entire
awarded damages were actually caused by the breach.

Energy Northwest defends the trial court’s approach.
First, it argues that Energy Northwest carried the burden
required by Yankee Atomic to prove causation with regard
to the Columbia site modifications. Appellee Br. 27–28.
It notes that the trial court held (and the government
does not appeal) that the building of the ISFSI was a
reasonable and foreseeable response to the government’s
breach. Id. at 18. While that is true, it does not change
Energy Northwest’s obligation to prove the recoverable
costs associated with that construction. If a cost would
have been incurred even in the non-breach world, it is not
recoverable. Ind. Mich. Power, 422 F.3d at 1373; Yankee
Atomic, 536 F.3d at 1273. Here, the government has
argued that Energy Northwest’s claimed damages
improperly seek recovery of modification costs not caused
by the breach. As the party with the burden of proof,
Energy Northwest’s obligation is to prove that it is not
seeking to recover any improper costs.

4 The trial court here adopted the “but for” causa-
tion test, which this court has approved for use in cases of
this type. Energy Nw., 91 Fed. Cl. at 541 (citing Yankee
Atomic, 536 F.3d at 1272–73).
ENERGY NORTHWEST v. US 14

Energy Northwest next contends that it carried its
burden as to the modifications by presenting testimony
that there is a “90% likelihood” Energy Northwest will
have to re-modify the Columbia plant when the DOE
eventually performs and begins accepting SNF. Appellee
Br. at 27; see also Energy Nw., 91 Fed. Cl. at 553. Energy
Northwest argues that the government failed to
sufficiently rebut this “90%” testimony. The Court of
Federal Claims, however, applied the wrong test to this
case in evaluating the evidence presented. On remand it
can reweigh the evidence, including the “90%” opinion of
Energy Northwest’s expert, to determine whether Energy
Northwest’s burden was carried.

Energy Northwest also argues that there is
uncertainty about what the non-breach world
modification costs would have been, and that the
government is responsible for this uncertainty. Appellee
Br. 28–29. It points out that the non-breach world
modification costs would have depended on the storage
system selected by the DOE. Part of the breach was the
DOE’s failure to select such a system. Energy Northwest
therefore argues that the burden of proof should have
shifted to the government.

Though Energy Northwest frames this argument in
discussion of the future world, it is worth considering
whether the government somehow constrained Energy
Northwest from carrying its burden under Yankee Atomic.
On the record before us we do not see any evidence that
the government somehow obstructed Energy Northwest
from presenting, on the available evidence, its best
possible model of what the DOE would have done absent
breach. The discovery process affords litigants the
opportunity to learn even confidential details of what
each other knew, or planned, or what was technically
15 ENERGY NORTHWEST v. US

possible, at various points in time. The opinions of
experts can be leveraged to fill gaps. Should one party
unjustifiably fail to participate in discovery, trial courts
have a variety of remedial measures available, up to and
including the resolution of fact issues against the non-
participating party. On the record before us we are
unable to say that Energy Northwest faced any improper
hindrance in its ability to assemble the proof required by
Yankee Atomic. We therefore see no reason why the
burden of proving the non-breach world—as to the plant
modifications—should not lie with Energy Northwest. 5

Finally, Energy Northwest argues that the Standard
Contract actually required Energy Northwest to make no
modifications at all because it bound the DOE to choose

5 This court’s recent opinion in Southern Nuclear
Operating Co. v. United States, No. 2008-5020, slip op. at
12–13, 2011 WL 832912 (Fed. Cir. Mar. 11, 2011), is
consistent. There, this court noted that a defendant may
seek to offset a damages award due to avoided costs (i.e.,
non-breach-world costs that the plaintiff avoided because
of the breach). While the burden of proof for causation
remains squarely with the plaintiff, a defendant seeking
an offset has an obligation to “move forward by pointing
out the costs it believes the plaintiff avoided because of its
breach,” or risk having the issue both determined against
it and waived on appeal. Id. at 13. Once the defendant
has properly articulated an offset, “the burden shift[s] to
the plaintiff to incorporate those saved costs into its
formulation of a plausible but-for world.” Id. at 14.
As discussed supra, however, this appeal does not
concern a defendant seeking an offset due to avoided
costs, but a defendant arguing that certain awarded
damages were not caused by the breach in the first place.
Yankee Atomic is clear—and Southern Nuclear is not
inconsistent—that the burden to prove causation is the
plaintiff’s.
ENERGY NORTHWEST v. US 16

an SNF cask “suitable for use” at Energy Northwest’s
facility. Appellee Br. at 30–31 (quoting Standard
Contract sec. IV.B.2). If anything, this argument
highlights why the trial court should have required
Energy Northwest to prove causation as to the plant
modifications under Yankee Atomic. That inquiry would
have set up for the parties and the court the necessary
investigation into precisely what would have been done
absent breach. As we are remanding, we decline Energy
Northwest’s invitation to interpret this aspect of the
Standard Contract at this time.

Because the trial court should have required Energy
Northwest to prove that the Columbia site modifications
would not have been necessary but for the government’s
breach, we vacate the award of damages associated with
those modifications. We remand for further proceedings
to analyze the trial evidence under the correct standard.

C. There Was No Error in Awarding Damages for
Indirect Overhead Expenses

The next issue is whether the trial court committed
legal error in awarding Energy Northwest $2 million in
compensation for certain indirect overhead expenses. The
government argues that these costs were improperly
awarded because Energy Northwest did not offer proof
that its overhead costs actually increased as a result of
the breach. The government again cites Yankee Atomic
and contends that Energy Northwest should have been
required to prove what its indirect overhead costs would
have been in the absence of the breach. Appellant Br. 21–
22. The government would then limit Energy Northwest’s
recovery to overhead costs actually shown to have
increased over the non-breach world.
17 ENERGY NORTHWEST v. US

Energy Northwest argues that the award of damages
for overhead costs is a factual question of the damages
amount, not a legal question of causation. Appellee Br. 32
(citing Carolina Power, 573 F. 3d at 1276). It notes that
the larger question of whether the breach caused Energy
Northwest to build the ISFSI, having been resolved in
Energy Northwest’s favor below, is not on appeal here. As
such, Energy Northwest contends that the only question
is whether the trial court committed clear error in the
amount of the award.

Energy Northwest is correct. A plaintiff is entitled to
recover costs that were caused by the defendant’s breach.
The plaintiff may prove the amount of costs by whatever
means available, so long as the cumulative result is a
reasonable certainty that the awarded costs were actually
caused by the breach. Ind. Mich. Power, 422 F.3d at
1373.

Here, it is undisputed that Energy Northwest
undertook a variety of mitigation activities because of the
government’s breach, including construction of an ISFSI.
We find nothing objectionable in Energy Northwest’s
argument that its mitigation activities generally were
supported by certain overhead services that Energy
Northwest provided for the benefit of all its operations
(not only its mitigation activities). Energy Northwest did
not argue that the entire cost of these overhead services
was recoverable as damages. Instead, it presented
testimony estimating the portion of its overhead costs
fairly allocated to support of the mitigation via generally
accepted accounting practices, and sought to recover that
portion. Energy Northwest’s allocation was “based on
labor, measured by time, that is spent on [mitigation].”
Energy Nw., 91 Fed. Cl. at 553. The trial court accepted
ENERGY NORTHWEST v. US 18

this allocation as creating a reasonable certainty as to
causation, and we find no legal error in that acceptance.

This holding is consistent with Yankee Atomic. The
government is apparently resigned to the award of
Energy Northwest’s direct labor costs, and so does not
contest that that work (and the direct cost of it) was
actually caused by the breach. But it seeks a different
outcome for the indirect costs of supporting that same
work. We do not see any such requirement in Yankee
Atomic. That case requires a plaintiff to show what it
would have done in the non-breach world, and what it did
post-breach. Yankee Atomic, 336 F.3d at 1273–74. Once
a plaintiff has proved that certain work was undertaken
because of the breach (i.e., it would not have been
undertaken in the non-breach world), he is entitled to
prove the amount of the associated cost (including both
direct and indirect costs) by whatever reasonable
techniques are available.

The government also cites Carolina Power, but that
case is similarly unavailing. There, as here, the plaintiff
allocated a portion of its overhead expenses to mitigation
projects. Carolina Power, 573 F.3d at 1276–77. Both the
trial court and this court reviewed the allocation and
found it proper. This court noted that its holding was
supported by the fact that had the utility not allocated
part of its overhead to the mitigation, “other activities
would have assumed a disproportionate amount of the
total overhead,” id. at 1277, but contrary to the
government’s theory that circumstance was neither
necessary nor dispositive. “Determining the amount of
damages to award is not an exact science, and the
methodology of assessing and computing damages is
committed to the sound discretion of a district court.”
Ferguson Beauregard/Logic Controls v. Mega Sys., LLC,
19 ENERGY NORTHWEST v. US

350 F.3d 1327, 1345 (Fed. Cir. 2003) (quotation marks
omitted). That the Carolina Power case presented an
apparently undisputed fact that failure to allocate for
mitigation would have distorted the plaintiff’s overall
accounting does not mean such a fact must be presented
in all cases. So long as the plaintiff can present a
sufficient basis for making the trial court reasonably
certain that the claimed damages were caused by the
breach, whatever the proof method, we will defer to that
finding in the absence of clear error. See also Precision
Pine & Timber, Inc. v. United States, 596 F.3d 817, 834
(Fed. Cir. 2010) (emphasizing requirement that
recoverable costs must be “directly related” to the contract
and a “direct result” of the breach, but not limiting
litigants’ method of proof).

D. Energy Northwest Cannot Recover Interest

Finally, the government seeks reversal of $6 million
in damages attributable to interest Energy Northwest
paid on its bond issue and its credit agreement with
Citibank. The government claims sovereign immunity
against liability for interest, including interest on funds
borrowed in order to mitigate the government’s breach.
Library of Cong. v. Shaw, 478 U.S. 310, 314 (1986). Such
immunity, according to the government, must be
explicitly waived before interest can be awarded. The
government finds no waiver in the statutes or the
Standard Contract, and thus no liability for interest. The
relevant statute reads:

2516. Interest on claims and judgments

(a) Interest on a claim against the United States
shall be allowed in a judgment of the United
States Court of Federal Claims only under a
ENERGY NORTHWEST v. US 20

contract or Act of Congress expressly providing for
payment thereof.

28 U.S.C. § 2516(a). The government also argues that
this court’s precedent bars recovery of interest paid on
funds “borrowed as a result of the government’s breach.”
England v. Contel Advanced Sys., Inc., 384 F.3d 1372,
1379 (Fed. Cir. 2004).

Energy Northwest contends that the immunity
against interest limits only interest “on” a claim (e.g.,
awards of prejudgment interest), and not interest “as” a
claim (e.g., Energy Northwest’s financing costs incurred
as part of mitigation). Appellee Br. 42. The government
disagrees, arguing that there is no caselaw support for
differential treatment between interest “on” a claim and
interest “as” a claim. Appellant Br. 45.

Both parties acknowledge that this court has, on
occasion, held the government liable for interest. The
main case is Bell v. United States, 404 F.2d 975, 984 (Ct.
Cl. 1968). See also Contel Advanced, 384 F.3d at 1379
(discussing Bell); J.D. Hedin Constr. Co. v. United States,
456 F.2d 1315, 1330 (Ct. Cl. 1972) (same).

Bell involved an Army procurement contract that
included a standard clause, called a “Changes” clause,
authorizing judicial adjustment of the contract terms to
account for unilateral changes the government might
make to the contractor’s obligation. See Bell, 404 F.2d at
976. The clause read as follows:
The Contracting Officer may at any time, by a
written order, and without notice to the sureties
make changes of any one or more of the following
types:
21 ENERGY NORTHWEST v. US

[list of change types] . . . .
If such changes cause an increase or decrease in
the amount of work under this contract or in the
cost of performance of this contract or in the time
required for its performance an equitable
adjustment shall be made . . . .
Id. at 976–77 (quoting “Changes” clause) (emphasis
added). Following a number of “Change Orders” from the
government unilaterally modifying the contractor’s
obligation, the contractor in Bell sought to recover certain
interest costs undertaken in order to meet the changed
requirements. This court’s predecessor held that such
costs were recoverable. Id. at 984. It reasoned that the
“Changes” clause contemplated the award of interest costs
to compensate a contractor for changes to the contract;
this constituted government consent to the award of
interest. Id.

Bell spawned a host of other “equitable adjustment”
cases, some of which (like Bell) consented to the award of
interest costs. And as in Bell, the underlying reason for
the interest award was the government’s consent to
liability for interest, indicated by the inclusion of the
“Changes” clause. When litigants have brought claims for
interest unsupported by such a clause, or some other
express waiver of immunity, this court has consistently
held the government immune from recovery of interest. 6

6 Briefing and argument in this appeal suggested
another category of cases where this court held the gov-
ernment liable for interest without an express waiver of
immunity. Bluebonnet Savings Bank, F.S.B. v. United
States, 266 F.3d 1348, 1355 (Fed. Cir. 2001) [hereinafter
Bluebonnet III], was a Winstar-type case. See generally
United States v. Winstar Corp., 518 U.S. 839, 843–58
(1996). Both Energy Northwest and the government read
ENERGY NORTHWEST v. US 22

Bluebonnet III as consenting to government liability for
interest without an express contractual or statutory
waiver. We do not share that view. While the plaintiffs
in Bluebonnet III sought to recover the increased interest
costs they experienced due to the government’s breach,
both this court and the Court of Federal Claims rejected
that claim for inadequate proof as to the amount. 266
F.3d at 1358 (rejecting Bluebonnet’s claim for “non-EBA
damages”). This court obliquely noted that the Court of
Federal Claims had also rejected those damages under
Shaw, but this court did not take up the sovereign immu-
nity question. Id. (“We need not address and express no
opinion on the court’s alternative grounds for denying an
award of non-EBA damages.”).
This court did reverse the Court of Federal Claims’
denial of a separate class of damages—the costs associ-
ated with plaintiffs’ execution of a certain “Economic
Benefits Agreement.” Id. Plaintiffs sought to recover
money paid out under that agreement, namely, a 49%
share in the profits of plaintiffs’ holding company. Blue-
bonnet Sav. Bank, FSB v. United States, 47 Fed. Cl. 156,
181–82 (2000), rev’d, 266 F.3d 1348 (2001); see also Blue-
bonnet Sav. Bank, F.S.B. v. United States, 339 F.3d 1341,
1343 (Fed. Cir. 2003). While the conveyance of these
profit shares was a “financing cost” of a sort, neither this
court nor the Court of Federal Claims treated it as an
award of interest. This court’s reversal and remand as to
those shares should not be interpreted as a departure
from Shaw.
We note further that the Winstar cases (of which
Bluebonnet III is an example) presented a dramatically
different picture than this appeal. There, the essence of
the contractual relationship was the government’s desire
to promote acquisition of failing thrifts that were not
economically viable without various government guaran-
tees. The government’s breach, and the complex financial
results, present a dramatically different picture than the
situation at bar. Thus, even if Bluebonnet III had
awarded interest, it would not control this appeal.
23 ENERGY NORTHWEST v. US

See, e.g., Contel Advanced, 384 F.3d at 1379; J.D. Hedin
Constr., 456 F.2d at 1330.

Energy Northwest, however, does not contend that
the Standard Contract here has any sort of “Changes”
clause, and points to no other express waiver of immunity
against recovery of interest. Nevertheless, it believes the
trial court was correct to award it its interest costs. It
argues that there exists a class of case in which interest
can be awarded, even without express waiver, so long as
the interest costs are directly traceable to the
government’s breach. It cites as support Wickham
Contracting Co. v. Fischer, 12 F.3d 1574, 1582 (Fed. Cir.
1994).

In Wickham Contracting, a plaintiff attempted to
recover interest payments it had made in order to finance
performance under a government contract. There is no
express mention of a “Changes” clause in the opinion.
This court denied plaintiff’s claim for lack of proof, but
noted:

Although interest on equity capital is not
recoverable, a contractor may recover interest
actually paid on funds borrowed because of the
government’s delay in payments and used on the
delayed contract. Gevyn Constr. Corp. v. United
States, 827 F.2d 752, 754 (Fed. Cir. 1987) (“[28
U.S.C. §] 2516(a) does not bar an interest award
as part of an equitable adjustment under a fixed-
price contract if the contractor has actually paid
interest because of the government’s delay in
payment.”).

Id. at 1582–83 (citation expanded).
ENERGY NORTHWEST v. US 24

Energy Northwest, like the trial court, concludes that
Wickham Contracting thus holds that a plaintiff whose
contract lacks any “Changes” clause may nevertheless
recover interest “as” a claim if “its financing costs were
directly traceable to the Government’s breach.” Appellee
Br. 44.

Energy Northwest is reading too much into Wickham
Contracting. As the quoted matter shows, that case’s
pronouncement that “a contractor may recover interest
actually paid on funds borrowed” was limited to the
context of an “equitable adjustment.” Wickham
Contracting, 12 F.3d at 1582–83. The term “equitable
adjustment” had specific meaning in government
contracting cases denoting the presence of a “Changes”
clause. See Bell, 404 F.2d at 976–77 (quoting “Changes”
clause’s specific invocation of an “equitable adjustment”).
Although Wickham Contracting does not expressly
describe such a clause, the core issue in that case was the
application of an “equitable adjustment” for numerous
delays unilaterally imposed by the General Services
Administration (“GSA”). 12 F.3d at 1575. The opinion
repeatedly refers to “the Eichleay formula”—a formula
used in computing equitable adjustments under a
“Changes” clause. Id. at 1575–76; see also Sauer Inc. v.
Danzig, 224 F.3d 1340, 1347 (Fed. Cir. 2000) (discussing
use of Eichleay formula for equitable adjustments
occasioned by a “Changes” clause). And the Board opinion
underlying Wickham Contracting notes the GSA’s many
“change orders.” See Wickham Contracting Co., GSBCA
No. 8675, 92-3 BCA ¶ 25,040, 124,816–17.

Based on this we conclude that Wickham Contracting,
contrary to Energy Northwest’s contention, was in fact a
“Changes” clause case governed by Bell. Because the
“Changes” clause amounted to a waiver of the
25 ENERGY NORTHWEST v. US

government’s immunity against recovery of interest,
Wickham Contracting cannot stand for the proposition
Energy Northwest puts forward (i.e., that interest may be
recovered without a waiver if the interest is traceable to
the breach).

In the absence of a “Changes” clause (or other waiver
of statutory immunity), this court’s caselaw makes clear
that the government has sovereign immunity against the
award of interest. In J.D. Hedin Construction, our
predecessor court held that a plaintiff could not recover
interest payments on loans he had taken out “because of
financial stringency resulting from a breach by the
Government.” 456 F.2d at 1330. More recently, in Contel
Advanced, this court denied a contractor’s attempt to
recover certain interest payments it was required to make
because of the government’s delay. 384 F.3d at 1372.

Energy Northwest argues that these cases should not
control this appeal. It attempts to distinguish Contel
Advanced and J.D. Hedin Construction as fundamentally
turning on the government’s delay in payment. It argues
that interest was not recoverable there as compensation
for delay, but should be recoverable here as part of the
costs of mitigation. Appellee Br. 52–53.

Such a narrow reading of Contel Advanced and J.D.
Hedin Construction is unsupported by the cases. Those
cases reason, under Shaw, that the government has
sovereign immunity against recovery of interest charges a
contractor undertakes as part of either financing
performance (as in Contel Advanced) or staving off
creditors (as in J.D. Hedin). We find nothing in those
opinions, or in Shaw, to limit that reasoning to
circumstances where the breach involved delayed
payment. Further, we see no reason why the fact that
ENERGY NORTHWEST v. US 26

Energy Northwest’s interest charges were paid as part of
mitigation rather than performance should change our
conclusion. The government’s sovereign immunity
against interest payments, as described in Shaw, is not so
limited.

We thus conclude that the trial court erred as a
matter of law in awarding Energy Northwest its interest
costs.

III

We therefore vacate the Court of Federal Claims’
award of damages for the Columbia plant modifications,
affirm the award for indirect overhead expenses, reverse
the award of interest, and remand for further
proceedings.

COSTS

Each party shall bear its own costs.

VACATED-IN-PART, AFFIRMED-IN-PART,
REVERSED-IN-PART, AND REMANDED