Opinion ID: 214194
Heading Depth: 1
Heading Rank: 3

Heading: The Court of Federal Claims Erred in Its Causation Analysis Concerning the Site Modifications

Text: 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.2008). 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, 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. 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 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 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. 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 nonbreach world modification costs would have been, and that the government is responsible for this uncertainty. Appellee Br. 28-29. It points out that the nonbreach 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 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 nonparticipating 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 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.