Court Opinion

ID: 2903286
Source: CourtListenerOpinion
Date Created: 2015-09-09 20:02:19.17363+00
Date Added: 2024-06-11T15:20:42.367255
License: Public Domain

In the United States Court of Federal Claims
                                      No. 12-902C
                               (Filed September 9, 2015)

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                                    *
DAIRYLAND POWER                     *               Motion in limine, Spent Nuclear
COOPERATIVE,                        *               Fuel, Offset Costs, Incurred Costs,
                                    *               Res Judicata
                  Plaintiff,        *
                                    *
            v.                      *
                                    *
THE UNITED STATES,                  *
                                    *
                  Defendant.        *
                                    *
*************************************

                               OPINION AND ORDER

        Before the Court is a Motion in limine filed by Plaintiff Dairyland Power
Cooperative (“Dairyland”). Dairyland seeks an order pursuant to Rule 7 of the Rules of
the Court of Federal Claims (“RCFC”) prohibiting Defendant, the United States, from
arguing that Dairyland must deduct from its pending damages claim the nonbreach world
cost of delivering spent fuel to the United States Department of Energy (“DOE”) in 1998
or earlier. Dairyland further seeks, pursuant to RCFC 26(c), a protective order barring
Defendant from seeking discovery into the costs Dairyland would have incurred in the
nonbreach world to deliver spent fuel.

        For the reasons set forth below, the Court hereby DENIES the Motion in limine.

   I.      Background

    This case is one of a number of cases before the court of Federal Claims involving the
ongoing breach of the Standard Contract between the DOE and nuclear utilities for the
removal and disposal of spent nuclear fuel (“SNF”). The general facts of the case have
been discussed at length in this Court’s first round case for damages, see Dairyland
Power Coop. v. United States, 90 Fed. Cl. 615 (Fed. Cl. 2009); thus the Court shall limit
discussion only to the facts relevant to the present controversy.

        Currently at issue is Dairyland’s claim for second round damages, for the time
period of 2007 to 2012. Dairyland seeks damages for, inter alia, the construction of dry
cask storage at the La Crosse Boiling Water Reactor (“LACBWR”). After determining
that such a project would be financially feasible, and in an effort to mitigate damages,
Dairyland removed the reactor pressure vessel (“RPV”) from LACBWR and installed a
specially fabricated cask loading pool, along with a temporary cask handling Crane. Mot.
at 5.1 This setup included a water system and water gate that would allow Dairyland to
manipulate water levels to enable the movement of casks in and out of the loading pool
and fuel assemblies. Id.

        On November 22, 2013, Defendant served several requests for admissions and
interrogatory requests on Dairyland, which now provide the basis for Dairyland’s
Motion. Dairyland specifically objects to Interrogatory requests 1-7 and 11, and requests
for admission 1-7, which “seek to isolate the amount spent on a specified sub-part of
Dairyland’s dry cask storage project.” Mot. at 6.2 Dairyland indicated that it was unable
to respond to these specific requests because Dairyland’s accounting method was set up
in such a way that all costs related to the dry cask storage project were accounted for
using a single accounting code; thus, it would be unduly burdensome for Dairyland to
retroactively reclassify every sub-category for the entire project.3 To date, Dairyland has
not substantively responded to these specific requests for admission and interrogatories.

        The fundamental premise for the disagreement between the parties is that the
government believes that at least some of the costs identified in its discovery requests
would have also been incurred by Dairyland in the nonbreach world – a premise
Dairyland disagrees with. In its Motion, Dairyland details what it believes would have
been the process for SNF removal in the nonbreach world, and contrasts it with the steps
it has undertaken in the breach world. Dairyland argues that the process of loading fuel
in the nonbreach world for DOE collection would have been drastically different than the
process that actually occurred when Dairyland loaded SNF into its newly constructed dry
cask storage, and Dairyland is prepared to present expert testimony at the trial for
damages to that effect. The government, on the other hand, is prepared to offer expert
testimony to the contrary – that several of the costs that Dairyland now seeks to recover
are costs that would have been incurred in the nonbreach world.

        The government has indicated to Dairyland that it believes Dairyland to be
obligated to break down these costs as part of its legal burden of identifying and
deducting costs that would have been incurred in the nonbreach world. Mot. at 6. The
parties disagree about the existence and extent of any obligation Dairyland has to

1
  At the time the Court made its ruling in the case for damages for the period of 1998-2006, Dairyland had
begun the process of planning construction of dry cask storage and removing the RPV. The project had not
been completed at that time. See Dairyland, 90 Fed. Cl. at 623.
2
  For example, Interrogatory No. 5 asks Dairyland to “[i]dentify the total amount claimed by Dairyland in
its current claim for the purchase of damaged fuel cans, making sure to include all internal labor and vendor
costs incurred.” Mot. at Exhibit A. Request for Admission No. 1 asks Dairyland to “[a]dmit that the total
vendor cost including the current claim for the cask seismic restraint inside the reactor building (including
installation) is $28,039.09, consisting of the following vendor costs: a. Brand Scaffold Rental/Erection -
$13,300.00; b. Craig R. Nelson Company - $14,739.09.” Id.
3
  Dairyland notes that it “cannot query its accounting system for the information the government requests”
and that instead, it “would need to manually search and review its accounting records and exercise
significant subjective judgment in attempting to divide the dry cask storage project into the types of
individual cost categories that the government seeks to create.” Mot. at 7.

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delineate and deduct from damages the amount of costs it would have incurred in the
nonbreach world to deliver SNF to the government.

        Dairyland now seeks a judicial order which, pursuant to RCFC 74, would prohibit
the government from arguing that Dairyland would have incurred some of the loading
costs in the nonbreach world that it now seeks compensation for. Dairyland also asks for
a protective order to bar the government from requiring Dairyland to answer the
outstanding discovery (namely, Defendant’s First Set of Interrogatories number 1-7 and
11 and Defendant’s First set of Request for Admissions numbers 1-7). Finally, Dairyland
asks the Court for a protective order, pursuant to RCFC 26(c)5, that would bar the
government from seeking further discovery into the costs Dairyland would have incurred
in the nonbreach world to deliver SNF to DOE.

       II.       Standard of Review

        A motion in limine is “a recognized method under [RCFC] 16 and Fed. R. Civ. P.
16 for obtaining a pretrial order simplifying issues for trial.” White Mountain Apache
Tribe of Az. v. United States, 10 Cl. Ct. 115, 116 (1986). The basic purpose of a motion
in limine is "'to prevent a party before trial from encumbering the record with irrelevant,
immaterial or cumulative matters. Such a motion enables a court to rule in advance on
the admissibility of documentary or testimonial evidence and thus expedite and render
efficient a subsequent trial.'" INSLAW, Inc. v. United States, 35 Fed. Cl. 295, 302-03
(1996) (quoting Baskett v. United States, 2 Cl. Ct. 356, 367-68 (1983), aff'd, 790 F.2d 93
(Fed. Cir. 1986) (table)).

       III.      Discussion

       Dairyland objects to the government’s discovery requests for three reasons: (1)
Dairyland argues that its nonbreach world fuel transfer costs have already been deducted
from damages in the Round 1 case; (2) Dairyland argues that it is too late for the
government to seek a deduction for 1998 costs; and (3) that consideration of a reduction
of damages based on nonbreach world costs from 1998 or earlier is barred by res
judicata. See generally Mot. For the reasons set forth below, the Court finds Dairyland’s
arguments unavailing.

              A. Dairyland’s Nonbreach World Fuel Transfer Costs Have Not Been
                 Deducted From Damages

        Dairyland’s first argument is that the government may not now seek to reduce
loading costs from Dairyland’s potential damages because, in the Round 1 case,
Dairyland had already self-deducted those costs by not asking for them. Mot. at 9. By
the terms of the Standard Contract, utilities are to be responsible for the cost of preparing
and loading SNF for DOE to collect. See 10 C.F.R. § 961.11, art. IV.A.2(A). Because
Dairyland deliberately did not ask for damages associated with the loading of SNF in its

4
    RCFC 7(b) addresses requests for court orders made by a party.
5
    RCFC 26(c) addresses the general requirements for the court to issue a protective order.

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Round 1 case, it is argued that allowing for the reduction of loading costs in the present
Round 2 case would amount to an impermissible double deduction. Id. at 10.

        While appreciating the difficulty of attempting to prove a negative, the Court
finds that there is nothing on the record to support Dairyland’s contention that it
deliberately did not seek loading costs in order to self-deduct these expenses it knew it
was responsible for. Rather, it is more likely that Dairyland did not seek internal labor
costs associated with loading SNF in the Round 1 case because Dairyland had yet to
incur any such costs. Federal Circuit precedent is clear that utilities may only claim
damages that they have actually incurred, and may not seek speculative future damages.
See Indiana Mich. Power Co. v. United States, 422 F.3d 1369, 1376-78 (Fed. Cir. 2005);
see also Yankee Atomic Elec. Co. v. United States, 536 F.3d 1268, 1273 (Fed. Cir. 2008);
Energy Northwest v. United States, 641 F.3d 1300, 1306 (Fed. Cir. 2011).

         At the time of the Round 1 case, Dairyland could not have sought damages related
to the loading of SNF into storage because it had not yet incurred that cost. Dairyland’s
SNF now lies in the dry cask storage at LACBWR, but at the time of the previous trial,
Dairyland had only recently begun the process of converting LACBWR into a storage
facility. Thus, no SNF had been loaded and no loading costs had yet been incurred by
Dairyland. Now that damages for the time period of 2007-2012 are before the Court, the
conversion of LACBWR into dry cask storage is complete and the SNF has been loaded
into storage. Thus, costs associated with loading SNF have now been incurred and
claims for those costs are timely, and Dairyland indeed seeks those costs.

       The Court concludes that Dairyland has not already deducted damages for loading
costs by not claiming them in the Round 1 case. Any claim for damages for costs
associated with the loading of SNF in the Round 1 case would have been untimely and
improper. Thus, the possibility of a reduction of loading cost damages in the instant case
cannot result in a double-deduction.

       B. The Government’s Potential Objection to Loading Costs is Not Untimely

        Dairyland’s second argument is that the government cannot seek to reduce
damages in the present claim period of damages (2007-2012) with costs that Dairyland
would have incurred in the old claim period of damages (1998-2006) in the nonbreach
world. Dairyland relies on specific findings of fact by this Court in the Round 1 case,
namely that Dairyland would have had all of its SNF collected by DOE by 1998 (in a
nonbreach world in which an exchange existed allowing utilities to barter in order to
move up in the collection line) or 2006 at the latest (in a nonbreach world in which the
exchange did not exist or in which Dairyland was not able to move to the front of the
collection queue). Dairyland, 90 Fed. Cl. at 618. Dairyland thus posits that the
government’s effort to reduce damages by nonbreach world loading costs amounts to an
untimely offset. Dairyland notes that “the government could have addressed the
nonbreach world spent fuel transfer issue in Dairyland’s first round damages case.” Reply
at 7.

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         Among a lengthy string of cites, Dairyland cites to Carolina Power & Light Co.
for the proposition that the court “rejected the government’s argument that a utility’s
damages should be reduced to account for costs the utility would have incurred in the
nonbreach world to transfer spent fuel to DOE.” Mot. at 13 citing Carolina Power &
Light Co. v. United States, 573 F.3d 1271, 1277 (Fed. Cir. 2009). However, this case
gives insight into why the government likely did not seek an offset during the Round 1
case for damages. In Carolina Power, the Court of Appeals affirmed the trial court’s
holding that the cost of loading casks for DOE was not properly classified as an avoided
cost but should rather be classified as a deferred cost. Id. As the trial court noted,
“[p]laintiffs, however, have not avoided the cost of loading DOE casks. The loading
costs have merely been deferred. When DOE arrives to pick up Plaintiffs’ spent nuclear
fuel in the future, [plaintiff] will have to pay the loading costs Defendant now seeks to
impose.” Carolina Power & Light Co. v. United States, 82 Fed. Cl. 23, 52 (Fed. Cir.
2008). Indeed, the citations provided by Dairyland affirm the position that the
government cannot argue for an offset related to cask loading costs because such a cost
has merely been deferred to a future date and that applying an offset now would lead to a
situation where a utility has effectively paid twice. See Portland Gen. Elec. Co. v. United
States, 107 Fed. Cl. 633, 654 (Fed. Cl. 2012); Ariz. Pub. Serv. Co. v. United States, 93
Fed. Cl. 384, 398 (Fed. Cl. 2010); Wis. Elec. Power Co. v. United States, 90 Fed. Cl. 714,
791-94 (Fed. Cl. 2009).

         Plaintiff also cites to Sacramento Mun. Util. Dist. v. United States, 566 Fed.
Appx. 985 (Fed. Cir. 2014) (“SMUD”) for the proposition that offsets should be
determined solely with respect to the present phase of litigation. Mot. at 12. In SMUD,
the trial court attempted to enter a combined judgment for both the round one and round
two cases for damages, effectively reducing the plaintiff utility’s judgment in the round
one case due to offsets in the round two case. Id. at 993. The Court of Appeals reversed
this determination, noting that “[a]t best, this result violates the settled principle that a
breaching party should never be placed in a better position as a result of its breach” and
that “[a]t worst, the decision to stay execution of a prior award pending a determination
of any offset available in the future creates a perverse incentive for the Department to
stall spending SNF actions with the hope of eviscerating past claims with future offsets.”
Id. at 996. Thus, the court held that past awards of damages could not be impacted by
present offsets.

        Such a situation is not what the Court is presently faced with however. In the
instant case, the government is not seeking an offset for loading costs that have been
avoided by Dairyland, but rather is directly challenging certain cask loading costs as ones
that would have been incurred in the nonbreach world. The Federal Circuit has noted the
distinction between these two arguments. See Energy Northwest v. United States, 641
F.3d 1300, 1306 (Fed. Cir. 2011) (noting the difference between avoided costs and
incurred costs as a “separate, if superficially similar, issue.”).

      The Court finds that this case is substantially similar to the one presented in
Energy Northwest v. United States, 115 Fed. Cl. 69 (Fed. Cl. 2014). In Energy
Northwest, the plaintiff utility sought damages for costs related to cask loading in its

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constructed dry cask storage project. Like Dairyland, the plaintiff sought to mitigate
damages due to DOE’s breach of the Standard Contract by constructing and maintaining
its own dry cask storage. Id. at 72. The plaintiff argued that “as a matter of law, cask
loading costs must be subjected to an ‘avoided’ rather than ‘incurred” cost analysis and
that “the government seeks nothing more than the very same offset that the Federal
Circuit rejected in Carolina Power & Light Co. v. United States.” Id. at 74 (internal
quotations and citations omitted). The court rejected plaintiff’s motion for summary
judgment on the issue of cask loading costs because plaintiff “ha[d] not presented any
model of its own as to what its costs would have been to load casks for shipment (as
opposed to for storage)” and noted that “[i]t seems clear that the court of appeals’
decision in [Energy Northwest] imposes this requirement on utilities with respect to all of
their incurred costs.” Id. at 75.

        The court thus held that “to establish its entitlement to damages for cask loading
costs, [a plaintiff] must satisfy its burden of demonstrating that such costs were incurred
because of the breach” and that to make this demonstration, a plaintiff must “submit a
hypothetical model establishing what its costs would have been in the absence of the
breach.” Id. at 73 (citing Energy Northwest, 641 F.3d at 1307; Indiana Mich. Power, 422
F.3d at 1373; Yankee Atomic, 536 F.3d at 1273; Vermont Yankee Nuclear Power Corp. v.
Entergy Nuclear Vt. Yankee, LLC, 683 F.3d 1330, 1349-50 (Fed. Cir. 2012).

        There is nothing in the facts of the instant case that lead the Court to believe it
should reach a conclusion contrary to the holding in Energy Northwest. The government
is not seeking an offset; it is prepared to argue that actual costs incurred by Dairyland
related to cask loading would also have been incurred in the nonbreach world, and thus
should be deducted from the award of damages. This is an entirely distinct legal issue
from the one of avoided costs that was struck down by Carolina Power and its progeny.
Additionally, unlike in SMUD, there is no timing issue – because Dairyland has incurred
loading costs in the round two claims period, this is the only opportunity the government
will have to contest these costs. The Court, therefore, will not prohibit the government
from arguing at trial that Dairyland should reduce its damages by its nonbreach world
cost of loading SNF to DOE.

       C. The Doctrine of Res Judicata is Inapplicable To The Instant Case

        Dairyland’s final argument is that reduction of damages based on nonbreach
world costs from time period of 1998-2006 is barred by the doctrine of res judicata. Mot.
at 16. Dairyland avers that because its Round 1 damages for the period of 1998-2006
have been finalized by this Court and reviewed by the Court of Appeals for the Federal
Circuit, that amount cannot be disturbed by the government now seeking to opine on
loading costs that would have been incurred in the nonbreach world during that time
period. Id. at 18. Dairyland believes that it’s “round one claim will never be truly final if
the government may, at its leisure, seek to reopen the recoverability of costs that may
have been incurred in the nonbreach world in a period not presently under litigation.” Id.

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         Dairyland appears to be arguing for the “issue preclusion” half of the res judicata
doctrine, commonly referred to as collateral estoppel. A claim is barred by collateral
estoppel when "(1) the issues in the prior proceeding are identical to the issues in the
present proceeding; (2) those issues were actually litigated in the prior proceeding; (3) the
resolution of those issues was necessary to the judgment in the prior proceeding; (4) the
party against whom collateral estoppel is asserted had a full and fair opportunity to
litigate the issue in the prior proceeding." Ammex, Inc. v. United States, 384 F.3d 1368,
1371 (Fed. Cir. 2004).

         The Court finds that res judicata is inapplicable to the instant case because the
issue of whether Dairyland’s loading costs can be offset by the loading costs it would
have incurred in the nonbreach world has yet to be considered. For all the reasons
discussed supra in this order, the Court has determined that the government may properly
challenge the costs Dairyland seeks to recover by arguing that Dairyland would have
incurred a portion of those costs in the nonbreach world. Dairyland has not previously
tried to recover costs associated with loading SNF and the Court has never made a
determination as to what costs Dairyland would have incurred related to loading in the
nonbreach world. Thus, this issue is new before the Court and cannot be barred by res
judicata.

        Dairyland attempts to argue that the government may not now seek to reduce
loading costs because it “was well aware throughout the entirety of Dairyland’s Round 1
case that Dairyland was planning to move LACBWR’s spent fuel to dry storage, whether
onsite or at PFS” and that the government, at that time “did not challenge Dairyland’s
claim for roughly $1 million of planning costs related to the dry cask storage project
incurred during the claim period covered by Dairyland’s Round 1 claim.” Mot. at 19.
This argument must fail because it once again fails to account for the timing issue. The
government did not substantively challenge Dairyland’s claim for planning costs related
to the dry cask storage project because it would have been illogical to do so – Dairyland
incurred these costs directly as a result of needing to create a contingency plan to
compensate for DOE’s ongoing breach. Such costs are exactly the type that a utility
could be expected to reasonably recover in these nuclear fuel cases as there is little doubt
that Dairyland would not have constructed dry cask storage in the nonbreach world.

       However, just because the government did not contest a relatively small amount
of planning costs in the Round 1 case does not mean that it is now barred from contesting
any costs related to the project, especially when those costs were incurred in the Round 2
claim period of 2007-2012. Indeed, because Dairyland had yet to incur any costs
associated with loading in the 1998-2006 claims period, the government has not had the
opportunity to seek a deduction of those costs based upon costs it believes Dairyland
would have incurred in the nonbreach world. Accordingly, the doctrine of res judicata is
inapplicable in the instant case.

   IV.      CONCLUSION

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       For all the reasons set forth above, the Court concludes that it is not improper for
the government to argue, in this second round case for damages, that some of the costs
that Dairyland seeks in relation to the loading and storage of SNF would have been
incurred in the nonbreach world. Accordingly, Dairyland’s request for a judicial order
pursuant to RCFC 7 and protective order pursuant to RCFC 26(c) is DENIED.

                                                             s/ Edward J. Damich
                                                             EDWARD J. DAMICH
                                                             Senior Judge

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