Court Opinion

ID: 4189083
Source: CourtListenerOpinion
Date Created: 2017-07-25 12:02:46.108853+00
Date Added: 2024-06-11T14:40:23.360165
License: Public Domain

In the United States Court of Federal Claims
                                          No. 16-1717C
                                      (Filed: July 24, 2017)
*****************************
                            *                                  Spent Nuclear Fuel; Partial
ENTERGY LOUISIANA, L.L.C.,  *                                  Breach of Contract; Motion to
                            *                                  Dismiss; Nuclear Regulatory
          Plaintiff,        *                                  Commission Fees; Collateral
                            *                                  Estoppel; Breach of the Implied
     v.                     *                                  Duty of Good Faith and Fair
                            *                                  Dealing;   Fifth    Amendment
THE UNITED STATES,          *                                  Taking; Pleading Alternative
                            *                                  Theories.
          Defendant.        *
                            *
*****************************

       Samuel O. Morris, IV, Entergy Services, Inc., 1340 Echelon Parkway, M-ECHJ-520,
Jackson, MS 39213, for Plaintiff. L. Jager Smith, Jr., Jager Smith, LLC, 1340 Echelon Parkway,
Jackson, MS 39213, Of Counsel. Eric P. Langley and Robin F. Bromberg, Langley & Bromberg
LLC, 2700 U.S. Highway 280, Suite 240E, Birmingham, AL 35223, Of Counsel.

        Chad A. Readler, Robert E. Kirschman, Jr., Allison Kidd-Miller, and Adam E. Lyons, U.S.
Department of Justice, Civil Division, Commercial Litigation Branch, P.O. Box 480, Ben Franklin
Station, Washington, D.C. 20044, for Defendant. Lisa L. Donahue, Kelly A. Krystyniak, and
Anand R. Sambhwani, U.S. Department of Justice, Civil Division, Commercial Litigation Branch,
P.O. Box 480, Ben Franklin Station, Washington, D.C. 20044, Of Counsel. Jane K. Taylor, U.S.
Department of Energy, Office of General Counsel, 1000 Independence Avenue, SW, Washington,
DC 20585, Of Counsel.
               _____________________________________________________

                        MEMORANDUM OPINION AND ORDER
                _____________________________________________________

WILLIAMS, Judge.
        In its second spent nuclear fuel (“SNF”) litigation, Plaintiff, Entergy Louisiana, L.L.C.,1
claims damages incurred from January 1, 2011, through December 29, 2016. This matter comes
before the Court on Defendant’s motion for partial dismissal. Defendant contends that Plaintiff’s

1
         Entergy Louisiana, L.L.C. is the successor to Entergy Gulf States Louisiana, L.L.C., one
of the plaintiffs in the first round of this litigation. Compl. ¶ 5. On October 1, 2015, Entergy Gulf
States Louisiana, L.L.C. transferred all of its assets to Entergy Louisiana, L.L.C., including River
Bend Nuclear Generating Station and “all its rights and obligations under the Standard Contract .
. . .” Id.; Entergy Gulf States, Inc. v. United States, 125 Fed. Cl. 678, 685 (2016).
claim for fees imposed by the Nuclear Regulatory Commission (“NRC”) pursuant to 10 C.F.R.
Part 171 (“Part 171”) is barred under the doctrine of collateral estoppel and that its claims for
breach of the implied duty of good faith and fair dealing and a taking are not cognizable. For the
reasons stated below, the Court denies Defendant’s motion.

                                           Background
       River Bend Nuclear Generating Station (“River Bend”) is a boiling water reactor (“BWR”)
located in Saint Francisville, Louisiana. Entergy Gulf States, Inc. v. United States, 125 Fed. Cl.
678, 685 (2016). The Nuclear Regulatory Commission (“NRC”) issued an operating license to
River Bend in November of 1985. Id. In 2005, Plaintiff began using an Independent Spent Fuel
Storage Installation (“ISFSI”) after determining that it would run out of storage space in its spent
fuel pool before the Department of Energy (“DOE”) would begin collecting its spent fuel. Id. at
686. This Court awarded Plaintiff’s predecessor a total of $48,101,388 in damages in the first
round of litigation, which covered a claim period from January 1, 1999, through December 31,
2010. Id. at 683; see also Entergy Gulf States, Inc. v. United States, 132 Fed. Cl. 59, 64 (2017);
Entergy Gulf States, Inc. v. United States, 128 Fed. Cl. 335, 336 (2016).

                                            Discussion
Plaintiff’s Claim for NRC Fees is Not Barred Under the Doctrine of Collateral Estoppel
       Plaintiff claims that it is entitled to recover NRC Part 171 fees for the damages period
applicable to this second round of litigation - - January 1, 2011, through December 29, 2016.
Compl. ¶¶ 27-29.
        The NRC “has long recovered a substantial portion of its operating budget through fees
levied on those that it regulates.” Entergy Gulf States, 125 Fed. Cl. at 712. The NRC imposes
two categories of fees pertinent here - - fees to cover specific benefits it provides to licensees,
which fall under 10 C.F.R. Part 170, and since 1986, annual fees under 10 C.F.R. Part 171 to
recover other generic costs. Id. Site-specific fees are license and inspection fees charged directly
to the applicant or licensee involved and include fees associated with the review of applications
for new licenses, the review of renewal applications, the review of license amendment requests,
and inspections of licensees. 10 C.F.R. § 170.12 (2014).
       In 1999, the NRC established the Spent Fuel Storage/Reactor Decommissioning Fee
(“SFS/RD fee”), which covered costs for both wet and dry storage as well as decommissioning.
Entergy Gulf States, 125 Fed. Cl. at 712. Prior to 1999,
       the NRC charged an annual generic fee to all licensees operating nuclear reactors
       to cover the NRC’s general expenses related to wet storage and nuclear plant
       decommissioning. Before 1999, the NRC also charged a separate annual generic
       fee to all licensees with dry storage facilities to cover the NRC’s generic expenses
       related to dry storage. The 1999 rule change eliminated the separate generic fees
       for (1) dry storage, and (2) wet storage and decommissioning, and created a new
       annual Spent Fuel Storage/Reactor Decommissioning (“SFS/RD”) fee, which
       covered the NRC’s generic costs related to both dry storage and wet storage as well
       as decommissioning. Specifically, the annual SFS/RD fee covered “the costs of the
       NRC’s generic and other research activities directly related to reactor

                                                 2
       decommissioning and spent fuel storage (both [wet and dry] storage options), and
       other safety, environmental, and safeguards activities directly related to reactor
       decommissioning and spent fuel storage.”
                                         *       *        *
       The 1999 rule change combined the previously separate categories for wet storage
       and dry storage, and covered the NRC’s generic wet-storage costs with a single
       SFS/RD fee that applied to all licensees with either wet storage or dry storage on
       site.
Consol. Edison Co. of N.Y., Inc. v. Entergy Nuclear Indian Point 2, LLC, 676 F.3d 1331, 1338
(Fed. Cir. 2012) (alteration in original) (internal citation omitted). In the proposed rulemaking,
the NRC observed that the existing policy raised the following concerns about the equitable
allocation of generic fees:
       (a) [t]he fee structure could create a disincentive for licensees to pursue dry storage;
       (b) [t]he fairness of assessing multiple annual fees if a licensee holds multiple [dry
       storage] licenses for different designs; and (c) [n]ot all affected licensees are being
       assessed the costs of NRC’s generic decommissioning activities.
Entergy Gulf States, 125 Fed. Cl. at 712-13.
         Defendant argues that Plaintiff is not entitled to recover its claimed Part 171 fees because
this claim is barred under the doctrine of collateral estoppel. Def.’s Mot. 5. In the first round of
litigation, Plaintiff’s predecessor argued, as Plaintiff does here, that DOE’s breach was a
“substantial causal factor” of the NRC’s decision to change the fee rule in 1999, as many more
utilities were required to implement dry fuel storage. Entergy Gulf States, 125 Fed. Cl. at 714.
The first round plaintiffs proffered the testimony of Mr. Jesse Funches, a former Chief Financial
Officer (“CFO”) of the NRC, as an expert in NRC fee assessment. Id. at 713. Mr. Funches relied
on a number of NRC documents to support Plaintiffs’ claim that the 1999 rule change was a result
of DOE’s breach. Id. at 713-14. This documentary evidence was identical to that presented in
Consolidated Edison, which the United States Court of Appeals for the Federal Circuit found
insufficient to establish a direct causal link between DOE’s breach and the NRC’s rule change.
676 F.3d at 1338-40.
       This Court denied Plaintiff’s predecessor recovery of NRC Part 171 fees, stating:
       Consistent with Consolidated Edison, in order to recover NRC fees in the instant
       action, Plaintiffs must establish a direct link between DOE’s breach and the 1999
       rule change. However, the evidence proffered by Mr. Funches in the instant case
       was similar to that previously analyzed by the Federal Circuit in Consolidated
       Edison and found to be insufficient. The internal NRC documents in evidence in
       the instant action . . . emphasized the NRC’s need to change the fee structure in
       order to address concerns about unequal fee treatment creating a disincentive to use
       dry fuel storage, but did not expressly attribute the need to change the fee structure
       to DOE’s breach of the Standard Contract. Other NRC documents . . ., also
       contained similar reasoning about eliminating a potential disincentive to use dry
       storage.

                                                  3
Entergy Gulf States, 125 Fed. Cl. at 714-15 (internal citations omitted).
        This Court found that these internal NRC documents “echo[ed] the NRC’s public
statements in the Federal Register, which the Federal Circuit in Consolidated Edison held were
insufficient to prove causation,” and that Mr. Funches’ testimony “did not cure this evidentiary
deficit.” Id. at 715. The Court concluded:
       Mr. Funches’ testimony, although informed by his experience as the NRC’s CFO
       and his awareness of the impact DOE’s well-known delay had on the regulatory
       climate, does not meet the stringent legal requirement for causation established in
       Consolidated Edison – that the NRC itself attribute DOE’s breach as the reason for
       implementing the 1999 SFS/RD fee. Nor did Mr. Funches recall any NRC member
       making such an explicit statement.
Id. at 716-17 (internal footnote omitted).
       The doctrine of collateral estoppel applies when four conditions are met:
       (1) an issue is identical to one decided in the first action; (2) the issue was actually
       litigated in the first action; (3) the resolution of the issue was essential to a final
       judgment in the first action; and (4) the party defending against issue preclusion
       had a full and fair opportunity to litigate the issue in the first action.
Shell Petroleum, Inc. v. United States, 319 F.3d 1334, 1338 (Fed. Cir. 2003) (internal citations
omitted). Collateral estoppel “serves to bar the revisiting of ‘issues’ that have already been fully
litigated . . . .” Jet, Inc. v. Sewage Aeration Sys., 223 F.3d 1360, 1366 (Fed. Cir. 2000).
        Here, Defendant argues that all four conditions have been met, as this Court denied
Plaintiff’s predecessor recovery of Part 171 fees in the first round of litigation. Plaintiff counters
that Defendant has not established the requirement for “identical issues in the prior proceeding”
because it will offer different evidence in support of its claim for NRC fees for the January 1, 2011
to December 29, 2016 period than that presented in the first round case. Such different evidence
will raise a different issue than that previously litigated - - whether this new evidence will be
sufficient to establish that the Government’s breach caused the rule change. As such, it would be
premature to conclude at this juncture that collateral estoppel bars this claim.
Plaintiff’s Claim for Breach of the Covenant of Good Faith and Fair Dealing May Be
Maintained
        Plaintiff alleges that DOE has breached the covenant of good faith and fair dealing, citing
the following acts and omissions:
       by failing and refusing to make any effort to meet the contractual deadline for
       beginning to dispose of [spent nuclear fuel]; by steadfastly attempting to avoid its
       obligations under the [Standard Contract]; by failing to make any effort to dispose
       of Entergy Louisiana’s [spent nuclear fuel] or even to provide Entergy Louisiana
       with a firm date on which DOE will begin to do so; and by insisting on Entergy
       Louisiana’s continued performance of its reciprocal obligation to pay fees into the
       Nuclear Waste Fund through May 15, 2014 despite DOE’s refusal to perform.

                                                  4
Compl. ¶ 35.
        In seeking to dismiss Plaintiff’s claim for breach of the covenant of good faith and fair
dealing, Defendant argues that this claim duplicates Plaintiff’s express contract claim and that
Plaintiff has not alleged any extra-contractual conduct that frustrates the purpose of the contract.
Def.’s Mot. 12-13. Plaintiff counters that its claim for breach of the covenant of good faith and
fair dealing is supplemental to its breach of contract claim and goes to Defendant’s “lack of
diligence in performing its obligations under the Standard Contract” and Defendant’s “subterfuges
and evasions regarding when it would actually perform.” Pl.’s Resp. 14-15 (internal citation and
quotation marks omitted).
         The implied duty of good faith and fair dealing covers an independent duty not expressly
stated in the contract that does not conflict with express contract provisions. The Federal Circuit
in Metcalf Construction Co., Inc. v. United States recognized the need for such an implied duty,
stating that “it is rarely possible to anticipate in contract language every possible action or omission
by a party that undermines the bargain . . . .” 742 F.3d 984, 991 (Fed. Cir. 2014). The implied
duty of good faith and fair dealing “prevents a party’s acts or omissions that, though not proscribed
by the contract expressly, are inconsistent with the contract’s purpose and deprive the other party
of the contemplated value.” Id. (citing First Nationwide Bank v. United States, 431 F.3d 1342,
1350 (Fed. Cir. 2005)); see also Agility Pub. Warehousing Co. KSCP v. Mattis, 852 F.3d 1370,
1384-85 (Fed. Cir. 2017). Because Plaintiff’s claim of breach of the covenant of good faith and
fair dealing is separate and distinct from its claim of breach of contract and constitutes a separate
cause of action, Plaintiff is entitled to plead both claims.

Plaintiff’s Claim for a Fifth Amendment Taking is Not Subject to Dismissal at This Juncture
         Defendant argues that Plaintiff’s taking claim cannot survive because the proper cause of
action recognized in spent nuclear fuel cases has been a partial breach of contract claim. Plaintiff
counters that the Court should allow its taking claim “to remain until a judgment is entered on
Plaintiff’s breach of contract claim” because “it is possible that during the pendency of this
litigation, a change in law or circumstances could render Plaintiff’s takings claim the more
appropriate vehicle for recovery of damages . . . .” Pl.’s Resp. 17-18.
        Plaintiff is entitled to plead alternative theories of recovery. Taking claims pleaded in the
alternative have previously been allowed in spent nuclear fuel cases. Plaintiff argues that by failing
to pick up spent nuclear fuel in compliance with the terms of the Standard Contract, Defendant has
taken Plaintiff’s “vested real property rights,” as Plaintiff is prevented from “being able to
decommission its nuclear plant site and devote that site to commercial uses as soon as it otherwise
would have been able to do so.” Compl. ¶ 41. Courts have found this allegation sufficient to state
a claim for a regulatory taking. See Omaha Pub. Power Dist. v. United States, 69 Fed. Cl. 237,
242-43 (2005) (“OPPD”); Sys. Fuels, Inc. v. United States, 65 Fed. Cl. 163, 172 (2005);
Sacramento Mun. Util. Dist. v. United States, 61 Fed. Cl. 438, 442 (2004) (“SMUD”); see also
Maine Yankee Atomic Power Co. v. United States, 225 F.3d 1336, 1342-43 (Fed. Cir. 2000).
        It would be inappropriate to dismiss Plaintiff’s taking claim at this stage of the litigation as
the record is not yet fully developed. Sys. Fuels, 65 Fed. Cl. at 172 (“Given that the standard for
determining whether a regulatory taking has occurred is both fact-intensive and case-specific,
developing a more comprehensive record is appropriate.”); SMUD, 61 Fed. Cl. at 442 (finding that

                                                   5
because a regulatory takings analysis is “ad hoc and fact intensive,” dismissal of a takings claim
at an early stage would be “premature”) (internal quotation marks omitted); Detroit Edison Co. v.
United States, 56 Fed. Cl. 299, 302-03 (2003) (“A more fully developed record will allow the court
to assess whether the property right implicated in plaintiff’s takings claim falls outside the rights
granted under the Standard Contract.”).
        While Plaintiff is allowed to plead a taking claim in the alternative, this Court will not
address such a claim unless Plaintiff’s breach of contract claim fails. OPPD, 69 Fed. Cl. at 243
n.4 (“The court will address Plaintiff’s takings claim only if the contract claims fail.”); Sys. Fuels,
65 Fed. Cl. at 173 (stating that “a viable breach-of-contract claim trumps a valid takings claim,”
and that “maintaining both claims is a more appropriate course prior to the time judgment is
rendered on the contract claims”); Detroit Edison, 56 Fed. Cl. at 303 (“[T]he court views plaintiff’s
takings theory as an alternative to its contract claim . . ., and not as a mechanism by which plaintiff
may obtain remedies unavailable to it under the Standard Contract.”) (internal citation omitted).

                                             Conclusion
       Defendant’s motion to dismiss Counts II and III of the Complaint is DENIED.
       Defendant shall respond to Plaintiff’s complaint by August 23, 2017.

                                               s/Mary Ellen Coster Williams
                                               MARY ELLEN COSTER WILLIAMS
                                               Judge

                                                  6