Dairyland Power Cooperative v. United States
2011 U.S. App. LEXIS 12724
Fed. Cir.2011Background
- DOE breached its obligation to accept spent nuclear fuel under the Standard Contract, delaying removal and forcing on-site storage at Dairyland's La Crosse plant.
- The contract contemplated exchanges to accelerate disposal, with a provision allowing utilities to exchange delivery commitment schedules subject to DOE approval.
- Dairyland sought damages for SNF storage costs from 1999–2006, overhead, and its investment in Private Fuel Storage (PFS) via Genoa Fuel Tech (GFT).
- The Court of Federal Claims awarded damages based on an 'exchange' model, plus overhead and G&A costs, and reduced the year-one delivery commitments damages by half; it also awarded PFS-related damages.
- The government appealed, arguing the damages were too speculative or misallocated, and Dairyland cross-appealed on the reduction and the PFS investment award.
- The Federal Circuit affirmed the exchange model and overhead costs, vacated the PFS investment damages in part, and remanded for further proceedings to separate mitigation versus speculative aspects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 'exchange' damages model was proper | Dairyland Farm asserts exchanges would have eliminated all SNF. | Government contends the model is too speculative and lacks certainty. | Affirmed exchange-based damages as proper. |
| Whether damages should be offset for the cost of exchanges | Dairyland argues no offset or a smaller offset is appropriate. | Government contends the offset reflects the value of exchanged commitments. | Affirmed offset, reducing SNF storage damages by half for year-one commitments. |
| Whether overhead and G&A costs were properly awarded as damages caused by the breach | Dairyland contends overhead/G&A are recoverable if caused by breach. | Government argues lack of causation and improper allocation. | Affirmed award of overhead and G&A costs as causally linked to breach. |
| Whether Dairyland's investment in PFS (via GFT) should be recoverable in full | Investment was a mitigation cost, properly recoverable. | Investment was speculative/profit-seeking and not recoverable in full. | Vacated in part; remanded to determine extent of mitigation versus speculation. |
Key Cases Cited
- Energy Northwest v. United States, 641 F.3d 1300 (Fed. Cir. 2011) (causation and offset principles in breach damages)
- Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed. Cir. 2005) (recovery of costs caused by breach; mitigation focus)
- San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1561 (Fed. Cir. 1997) (damages too speculative due to agency discretion in disposal of surplus)
- Carolina Power & Light Co. v. United States, 573 F.3d 1271 (Fed. Cir. 2009) (caution against uncertain future costs in breach damages)
- Pac. Gas & Elec. Co. v. United States, 536 F.3d 1282 (Fed. Cir. 2008) (analysis of breach damages and related standards)