United States Court of Appeals
for the Federal Circuit
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SOUTHERN CALIFORNIA EDISON COMPANY,
Plaintiff-Appellee,
v.
UNITED STATES,
Defendant-Appellant.
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2010-5147
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Appeal from the United States Court of Federal
Claims in case no. 04-CV-109, Judge Lawrence M. Baskir.
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DECIDED: August 23, 2011
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BRAD FAGG, Morgan, Lewis & Bockius LLP, of Wash-
ington, DC, argued for plaintiff-appellee.
ANDREW P. AVERBACH, Attorney, Commercial Litiga-
tion Branch, Civil Division, United States Department of
Justice, of Washington, DC, argued for defendant- appel-
lant. On the brief were TONY WEST, Assistant Attorney
General, JEANNE E. DAVIDSON, Director, HAROLD D.
LESTER, JR., Assistant Director, and LISA L. DONAHUE,
Trial Attorney. Of counsel on the brief was JANE K.
SOUTHERN CALIFORNIA EDISON CO v. US 2
TAYLOR, Attorney, Office of General Counsel, United
States Department of Energy, of Washington, DC.
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Before LOURIE, PLAGER, and DYK, Circuit Judges.
PLAGER, Circuit Judge.
In this, another of the spent nuclear fuels cases, the
United States (“Government”) had contracted to dispose
of plaintiff’s spent nuclear fuel and related wastes; as in
the other cases, the contract continues to be breached
because the United States has yet to perform. The only
issue before us is the measure of damages, specifically,
whether certain indirect overhead costs incurred by
plaintiff can be included in plaintiff’s damages calcula-
tions. The United States Court of Federal Claims (“Court
of Federal Claims”) concluded that such indirect costs are
includable. The Government appeals. Because the trial
court did not err in its conclusion, we affirm.
BACKGROUND
In 1983, Congress enacted the Nuclear Waste Policy
Act (“NWPA”), which authorized the Secretary of Energy
to enter into contracts with nuclear plant utilities, the
generators of spent nuclear fuel (“SNF”) and high-level
radioactive waste (“HWL”). The Act provided that the
Government would accept and dispose of the utilities’
nuclear waste in return for the generators paying into a
Nuclear Waste Fund. See Nuclear Waste Policy Act of
1982 § 302, 42 U.S.C. § 10131. In June 1983, pursuant to
its authority, the Department of Energy (“DOE”) entered
into a contract, what became known as the Standard
Contract, with Southern California Edison (“SCE”) for the
acceptance of SNF and HLW produced at SCE’s San
Onofre Nuclear Generating Station (“SONGS”). Where
3 SOUTHERN CALIFORNIA EDISON CO v. US
exactly the Government intended to dispose of these
wastes became a controversial issue; in 1987, Congress
amended the NWPA to specify that the repository for
storing these nuclear wastes would be located in Yucca
Mountain, Nevada. 42 U.S.C. § 10172(a)-(b).
DOE has yet to accept spent fuel from SONGS. De-
spite the 1987 amendment, the question of where and
how the Government will dispose of the wastes remains
unanswered to this date. The Government’s current
estimate is that it will not begin accepting the waste until
2020, if at all. See S. Cal. Edison v. United States, 93
Fed. Cl. 337, 341-42 (2010).
In 2010, the Secretary of Energy, at the direction of
the President, established The Blue Ribbon Commission
on America’s Nuclear Future. The Commission’s charge
was to conduct a comprehensive review of policies for
managing the back end of the nuclear fuel cycle. See
Presidential Memorandum of Jan. 29, 2010—Blue Ribbon
Commission on America’s Nuclear Future, 75 Fed. Reg.
5485 (Feb. 3, 2010). The Commission has just released its
report: “[t]he overall record of the U.S. nuclear waste
program has been one of broken promises and unmet
commitments.” Blue Ribbon Commission on America’s
Nuclear Future Draft Report to the Secretary of Energy,
Blue Ribbon Commission on America’s Nuclear Future,
July 29, 2011, at xiv, available at http://www.brc.gov. The
Commission further concluded that the recent “decision to
suspend work on the [Yucca] repository has left . . .
[states and communities across the United States] won-
dering, not for the first time, if the federal government
will ever deliver on its promises.” Id. at 25; see also Mark
Maremont, Nuclear Waste Piles Up—in Budget Deficit,
Wall St. J., Aug. 9, 2011, at A3 (describing the current
SOUTHERN CALIFORNIA EDISON CO v. US 4
and projected federal liabilities associated with the Gov-
ernment’s promise to dispose of the SNF).
Against this backdrop, it is hardly surprising that in
2001, SCE began constructing dry storage facilities,
known as the Independent Spent Fuel Storage Installa-
tion (“ISFSI”), for its SONGS-produced nuclear waste. S.
Cal. Edison, 93 Fed. Cl. at 346. SCE created its ISFSI
facilities to provide on-site storage for part of its SNF
rather than to continue using an outside company. Id.
Following the construction of the first ISFSI facility, SCE
filed a complaint in the Court of Federal Claims seeking
damages from the United States as a result of DOE’s
breach of the Standard Contract. SCE requested dam-
ages in the following categories:
• costs of constructing and operating the ISFSI fa-
cilities;
• overhead allocated to the ISFSI project;
• off-site storage of SNF; and
• costs associated with SCE’s participation in a lim-
ited liabilities corporation with other nuclear utili-
ties known as the Private Fuel Storage project.
Id. The trial court conducted a six-day trial and awarded
$142,394,294 to SCE for expenses undertaken because of
DOE’s breach. Id. at 340. Of that amount, $23,657,791
was attributable to indirect overhead costs associated
with the ISFSI project. Id. at 371.
The indirect overhead costs claimed by SCE were
separated into three categories: (1) Common Allocation;
(2) Corporate Administrative and General (“A&G”); and
(3) Internal Market Mechanism. Id. at 356-57. The
Common Allocation costs included items such as plant
security, emergency response systems, lease payments,
regulatory fees, and costs associated with SCE’s compli-
5 SOUTHERN CALIFORNIA EDISON CO v. US
ance with certain environmental requirements. Id. at
356. The Corporate A&G costs related to salaries, bo-
nuses, and the management of SCE’s physical properties.
Id. at 357. Lastly, the Internal Market Mechanism costs
related to labor, materials, and services for the internal
management of SCE’s corporate real estate divisions and
its mechanical shop. Id.
At trial, the Government did not contest the accuracy
of the overhead costs presented by SCE, but instead
argued that overhead costs were an improper measure of
SCE’s damages. Id. at 356-58. The trial court disagreed
with the Government, concluding that the construction of
the ISFSI facilities was “a necessary and integral part of
SCE’s overall operations” and “[c]onsequently, it draws on
the company’s resources, whether they be payroll ser-
vices, insurance, or a host of other general expenses
which represent the cost of doing business.” Id. at 358.
The trial court further found that “[h]ad the Government
not created the need for temporary dry storage at the
plant, SCE could have allocated its resources to other
projects.” Id. at 359. The court concluded that the indi-
rect overhead costs properly constituted an element in
SCE’s damages. Id. The Government timely appealed
the trial court’s determination regarding the indirect
overhead costs. 1 We have jurisdiction pursuant to 28
U.S.C. § 1295(a)(3).
DISCUSSION
We review the Court of Federal Claims judgments “to
determine if they are incorrect as a matter of law or
premised on clearly erroneous factual determinations.”
1 The Government has not appealed the other dam-
ages amounts awarded by the Court of Federal Claims.
SOUTHERN CALIFORNIA EDISON CO v. US 6
Whitney Benefits, Inc. v. United States, 926 F.2d 1169,
1171 (Fed. Cir. 1991). Legal conclusions by the Court of
Federal Claims are reviewed without deference. Dehne v.
United States, 970 F.2d 890, 892 (Fed. Cir. 1992).
Recently, this court had occasion to consider, in con-
nection with these spent nuclear fuel cases, whether it is
proper to award overhead costs associated with the
breach of the Standard Contract. See Energy Nw. v.
United States, 641 F.3d 1300, 1308-10 (Fed. Cir. 2011)
(affirming the trial court’s award of overhead damages).
We concluded that “[s]o 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.” Id. at 1310. Here,
witnesses from both sides, including expert witnesses,
testified to SCE’s accounting procedures and the manner
in which the overhead costs were allocated to the ISFSI
project. The trial court found that none of the evidence
“exposed any significant concerns with the reliability or
accuracy of the accounting methods used” and, therefore,
“accept[ed] the quantum of the various [overhead] costs
incurred by SCE.” S. Cal. Edison, 93 Fed. Cl. at 356.
The Government does not contest the existence of the
claimed overhead expenses, nor does it contest that SCE’s
general overhead expenses increased because of the
Government’s breach. Instead, the Government argues
that SCE failed to meet its burden of separating out the
overhead costs caused by the breach from those unrelated
to the breach. See Yankee Atomic Elec. Co. v. United
States, 536 F.3d 1268, 1273 (Fed. Cir. 2008) (requiring
that the plaintiffs in breach of contract suits present
sufficient evidence for the court to perform a comparison
between the breach and non-breach worlds in order to
7 SOUTHERN CALIFORNIA EDISON CO v. US
accurately assess damages). Relying upon our decision in
Carolina Power & Light Co. v. United States, 573 F.3d
1271 (Fed. Cir. 2009), the trial court found that it was
proper for SCE to allocate the indirect overhead costs to
the ISFSI project on a percentage basis because if it had
not, “other projects and SCE operations [would] support
an unequal share of the overhead costs.” S. Cal. Edison,
93 Fed. Cl. at 359. Further, the court found that the
overhead costs were causally linked to the breach because
if “the Government had not created the need for tempo-
rary dry storage at the plant, SCE could have allocated its
resources to other projects.” Id. (internal citations omit-
ted). We find no error in the trial court’s determination
that SCE’s overhead expenses were linked to the breach
and therefore are recoverable; we defer to that finding as
required by our precedent.
The Government further argues that because the trial
court found that most of the indirect overhead costs “are
of the type that had been incurred prior to the breach and
would be incurred as a result of normal operations at
SONGS irrespective of the breach,” the costs are neces-
sarily unrecoverable. Id. at 356. To reach this conclu-
sion, the Government relies on our opinion in Precision
Pine & Timber, Inc. v. United States, 596 F.3d 817 (Fed.
Cir. 2010), in which we upheld the trial court’s decision
not to award damages for all the proposed overhead costs.
But such reliance is misplaced. In Precision Pine, the
United States Forest Service entered into fourteen con-
tracts that required the plaintiff to cut and remove speci-
fied timber. 596 F.3d at 821. Subsequently, the Mexican
spotted owl that resided in the affected woods was placed
on the endangered species list. This led to the suspension
of the plaintiff’s contracts. Id. at 822. The plaintiff
viewed the suspensions as a partial breach of contract and
SOUTHERN CALIFORNIA EDISON CO v. US 8
sought to recover damages flowing from the suspensions.
We concluded that in all but one of the contracts, the
suspensions were authorized and the Government did not
violate the implied duty of good faith and fair dealing. Id.
at 828-31. In the one remaining contract, however, we
found that the contract did not contain a provision au-
thorizing the suspension; damages were due. The plain-
tiff was not, however, entitled to the full amount of
overhead damages that it requested because several of
the costs were fixed costs associated with operating the
sawmills, whose existence did not depend on the Govern-
ment contracts. Id. at 834. Specifically, we found that,
while the costs per item produced by the sawmill in-
creased due to the breach, “there was no actual change in
the underlying cost of operating the sawmills.” Id.
In this case, the Government’s breach of the Standard
Contract caused SCE to build, staff, and maintain an
entirely new facility for SNF storage. SCE specifically
constructed the ISFSI facilities to mitigate the Govern-
ment’s breach. Because the ISFSI facilities had not
existed prior to the Government’s breach, and indeed
were necessitated by the breach, this is not a case where
the underlying costs were incurred by operations inde-
pendent of and unrelated to the breach.
CONCLUSION
The judgment of the Court of Federal Claims is af-
firmed.
AFFIRMED