System Fuels, Inc. v. United States
2012 U.S. App. LEXIS 1039
| Fed. Cir. | 2012Background
- NWPA/Standard Contract required DOE to dispose SNF/HLW; DOE breached by not starting disposal by 1998.
- SFI, Inc., System Energy Resources, and South Mississippi Power Association entered into the Standard Contract on June 30, 1983; Grand Gulf site stored SNF in a wet pool.
- Plaintiffs planned an ISFSI to hold additional dry storage; anticipated capacity shortfall by 2007 and DOE non-performance risks.
- Plaintiffs spent funds to design/construction of the ISFSI and incurred approximately $4.75 million by 2005; they paid into the Nuclear Waste Fund.
- Damages sought included capital work costs ($10.591 million) and financing costs ($1.587 million); trial court awarded about $10.014 million for mitigation, excluding borrowings.
- Issue regarding overhead costs for mitigation (capital suspense loader) and whether to offset damages against those costs became central.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Recovery of interest on borrowed funds | SFI seeks recovery of $1.587 million financing costs as damages. | England bars interest on claims against the United States absent explicit authorization. | No recovery of borrowed funds; no-interest rule applies. |
| Recoverability of overhead costs (capital suspense loader) | Overhead costs allocated to mitigation should be recoverable. | Overhead costs were not properly proven or attributable to mitigation. | Overhead costs recoverable; court reverses offset denying them. |
| Causation and offsets in mitigation damages | Damages should be calculated by comparing breach vs. non-breach worlds and applying appropriate offsets. | Offsets/causation should minimize damages based on non-breach world costs and anticipated performance. | Court affirms causation analysis and applicable offsets; damages supported by breach/non-breach comparison. |
| Appropriate framework for mitigation damages and rates | Costs tied to mitigation activities and overhead should be recoverable under established rates. | Standard contract framework limits recoveries and requires precise causation. | Court affirms use of mitigation framework and applicable adjustments, including the 1987 Annual Capacity Report Rate where appropriate. |
Key Cases Cited
- Yankee Atomic Electric Co. v. United States, 536 F.3d 1268 (Fed.Cir.2008) (burden to show acceptance rate and breach impact on damages; breach vs non-breach world analysis)
- Energy Northwest v. United States, 641 F.3d 1300 (Fed.Cir.2011) (clarifies offsetting and burden shifting in mitigation damages)
- Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed.Cir.2005) (damages recoverable for breach; mitigation and reasonable certainty)
- Sacramento Municipal Utility District v. United States, 293 Fed.Appx. 766 (Fed.Cir.2008) (modest appellate treatment of mitigation/overhead issues)
- LaSalle Talman Bank, F.S.B. v. United States, 317 F.3d 1363 (Fed.Cir.2003) (damages can include cost of capital and mitigation expenditures)
- Library of Congress v. Shaw, 478 U.S. 310 (1986) (interest as an element distinct from substantive damages; no blanket no-interest rule in all contexts)
- Mobil Oil Exploration & Producing Se., Inc. v. United States, 530 U.S. 604 (2000) (contract remedies applied to government breaches; mitigation costs as recoverable damages)
- Indiana Michigan Power Co. v. United States, 422 F.3d 1369 (Fed.Cir.2005) (Restatement-based damages framework including mitigation and foreseeability)