Petition for Writ of Certiorari — General Public Utilities Corp. v. United States
Supreme Court brief1985
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FILED
IN THE | NOV 15 1904
Supreme Court of the Hniteh. states STEVAS.
OCTOBER TERM, 1984 a
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GENERAL PUBLIC UTILITIES CORPORATION, JERSEY CEN-
TRAL POWER & LIGHT COMPANY, METROPOLITAN EDISON
COMPANY and PENNSYLVANIA ELECTRIC COMPANY,
Petitioners,
—_V.—
UNITED STATES OF AMERICA,
Respondent.
PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
David Klingsberg
Counsel of Record
Myron Kirschbaum
Aaron Stiefel
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER
425 Park Avenue
New York, New York 10022
(212) 407-8000
James B. Liberman
BISHOP, LIBERMAN & COOK
1155 Avenue of the Americas
New York, New York 10036
(212) 704-0100
Samuel B. Russell
RYAN, RUSSELL & MCCONAGHY
520 Penn Square Center
Reading, Pennsylvania 19603
(215) 372-4761
Attorneys for Petitioners
QUESTION PRESENTED
Whether the court of appeals erred in holding that, under
the discretionary function exception to the Federal Tort Claims
Act, the United States is insulated from liability for the
negligent failure of government agency officials to warn peti-
tioners, the owners of the Three Mile Island nuclear electric
generating facility, of serious safety hazards of which the
agency was aware as a result of its investigation of an event at
another utility’s nuclear facility as well as other information it
had obtained.
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TABLE OF CONTENTS
QUESTION PRESENTED .4 dccssassesseutaearens
OPINIONS BELOW . ..3.045siesveuedeeseeeaeaneee
JURISDICTION. ...3.<0cs4050ub eee eee
STATUTES INVOLVED .....ccssccucueeseeeeesesens
STATEMENT OF THE CARE .<csvascueuuuverseeens
REASONS FOR GRANTING THE WRIT...........
THE DECISION BELOW CONFLICTS WITH APPLI-
CABLE DECISIONS OF THIS COURT AND
OTHER COURTS OF APPEARS ses issscseseces es
A.
The Courts Have Repeatedly Upheld FTCA
Claims, Such As Petitioners’, Which Involve A
Negligent Failure To Warn Of Safety Hazards ...
. The Government’s Negligent Failure To Warn
Petitioners Of Known Safety Hazards Involved
No Social, Economic Or Political Policy Judg-
ments And, Under This Court’s Recent Decision
In Varig, Is Not Protected By The Discretionary
Function Exceptim .....:s:csceetesasseuepessees
The Third Circuit Erroneously Concluded Based
On Varig That Petitioners’ Claim Is Barred By
The Discretionary Function Exception Because
The Claim Challenges Regulatory Activities .....
CONCLUSION ..... . ..0s s¢n0a eee
APPENDIX
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TABLE OF AUTHORITIES
Cases PAGE
Andrulonis v. United States, No. 79-CV-847 (N.D.N.Y.
October 3, 1984) (available on LEXIS, Genfed Li-
La? ccdicgne hens see bdo eke sae ene 12, 13
Block v. Neal, 460 U.S. 289 (1983) .................. 12
Dalehite v. United States, 346 U.S. 15 (1953)..... 8, 9, 10, 16
Eastern Air Lines, Inc. v. Union Trust Co., 221 F.2d 62
(D.C. Cir.), aff’d per curiam sub nom. United States
v. Union Trust Co., 350 U.S. 907 (1955) ........... 7, 10
Estate of Callas v. United States, 682 F.2d 613 (7th Cir.
ee ay oe each baba shee ett baaawenece 8, 10
Hitchcock v. United States, 665 F.2d 354 (D.C. Cir.
ee ae ee kak sb as oe so bk 0 bode we eee 8
indian Towing Co. v. United States, 350 U.S. 61
ieee de weaen dade eek sce vensenacuns 7, 10, 15
Ingham v. Eastern Air Lines, Inc., 373 F.2d 227 (2d
Cir.), cert. denied, 389 U.S. 931 (1967)............. 7, 10
Scheuer v. Rhodes, 416 U.S. 232 (1974).............. 3
United Air Lines, Inc. v. Wiener, 335 F.2d 379 (9th Cir.),
cert. dismissed, 376 U.S. 951 (1964) ............... 7, 10
United States v. S. A. Empresa de Viacao Aerea Rio
Grandense (Varig Airlines), 104 S. Ct. 2755
Es ore eek ie yee eudeacseee.e 6a 6, 8 and passim
Statutes and Regulations
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Ee hei dees Ase Oe 6
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ERS 2
PAGE
es EN 0444 64 RR dh adedasecuwches 2, 6,9, 12
EP re rrr nT ir aP 12
Energy Reorganization Act, § 206, 42 U.S.C. § 5846... 3
Energy Reorganization Act, § 208, 42 U.S.C. § 5848... 3
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Other Authorities
U.S. Nuclear Regulatory Commission Annual Report
IN THE
Supreme Court of the United States
OCTOBER TERM, 1984
No.
—~<~_>-
GENERAL PUBLIC UTILITIES CORPORATION, JERSEY CEN-
TRAL POWER & LIGHT COMPANY, METROPOLITAN EDISON
COMPANY and PENNSYLVANIA ELECTRIC COMPANY,
Petitioners,
—_—V.—
UNITED STATES OF AMERICA,
Respondent.
>
PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
OPINIONS BELOW
The opinion of the court of appeals is unreported. (1a-17a.)'
The opinion of the United States District Court for the Eastern
District of Pennsylvania denying respondent’s motion to dis-
miss is reported at 551 F. Supp. 521. (18a-35a.)
l References are as follows: “J.A.” refers to the Joint Appendix filed
in the court of appeals which includes the complete text of petitioness’
Amended Complaint in this action; “__a” refers to the Appendix
herein which contains, among other things, pertinent excerpts from
petitioners’ Amended Complaint.
JURISDICTION
The judgment of the United States Court of Appeals for the
Third Circuit was entered on September 28, 1984 (36a), and
this petition is filed within 90 days of that date. This Court has
jurisdiction under 28 U.S.C. § 1254(1).
STATUTES INVOLVED
1. The Federal Tort Claims Act (“FTCA”), 28 U.S.C.
§ 2671 et seq., which provides in pertinent part:
“The United States shall be liable, respecting the provi-
sions of this title relating to tort claims, in the same
manner and to the same extent as a private individual
under like circumstances. . . .” 28 U.S.C. § 2674.
> > >
“The provisions of this chapter. . . shall not apply to—
(a) Any claim based upon an act or omission of an
employee of the Government, exercising due care, in the
execution of a statute or regulation, whether or not such
Statute or regulation be valid, or based upon the exercise
or performance or the failure to exercise or perform a
discretionary function or duty on the part of a federal
agency or an employee of the Government, whether or
not the discretion involved be abused.” 28 U.S.C.
§ 2680(a).
2. Portions of the Energy Reorganization Act of 1974, 42
U.S.C. § 5801, ef seq. (37a-38a.)
STATEMENT OF THE CASE
This action arises from the March 28, 1979 accident at
petitioners’ nuclear electric generating facility known as Three
Mile Island Unit No. 2 (*TMI”).? The complaint alleges that
negligent acts and omissions of employees of the Nuclear
Regulatory Commission (“NRC” or the “Commission”) con-
tributed to the catastrophic damage suffered by petitioners as a
result of the accident.
No answer to the complaint has been filed, and no discovery
haf been conducted. Accordingly, the only facts before the
district court and the court of appeals were those contained in
the complaint. Those facts must be accepted as true and must
be construed liberally in petitioners’ favor. Scheuer v. Rhodes,
416 U.S. 232, 236 (1974).
As alleged in the complaint, the NRC has undertaken,
Pursuant to statutes and regulations as well as long-standing
practice, to operate a central warning system for the protection
of operators of nuclear plants as well as the public. (40a-41a;
J.A. 71-73.)° Because it would be unrealistic for each operator
2 __— Plaintiff Metropolitan Company (“Met-Ed”) owns an undivided
$0% interest in TMI, which it operated under license from the NRC
prior to the accident. Jersey Central Power & Light Company
(“JCP&L”) and Pennsylvania Electric Company (“Penelec”) each own
an undivided 25% interest in TMI. General Public Utilities (GPU) is
an investor-owned public utility holding company which owns all the
common stock of JCP&L, Met-Ed and Penelec and coordinates their
operations to function as a single, integrated electric utility system
known as the GPU system. Disclosure statements, dated January 13,
1983, which are similar to that required by Rule 28.1 of the Supreme
Court Rules, as amended, were supplied to the Third Circuit pursuant
to Local Rule 25.
3 Section 208 of the Energy Reorganization Act of 1974, 42 U.S.C.
§ 5848, requires the NRC to disseminate information on any “abnor-
mal occurrence,” including its causes and action to prevent reoccur-
rence, as soon as the information becomes available to it. (38a.)
Similarly, the Commission's regulations impose a duty on the NRC to
administer programs for “notifying licensees regarding generic prob-
lems so as to achieve appropriate precautionary or corrective action.”
10 C.F.R. 1.64 ,1977). (41a; J.A. 72.) The NRC is also required by
statute to obtain reports from licensees and suppliers, which it analyzes
and uses in its warning system regarding nuclear safety hazards and
defects. Section 206, Energy Reorganization Act of 1974, 42 U.S.C.
§ 5846. (37a-38a.)
4
of a nuclear facility to monitor operating experience through-
out the industry, the NRC serves as a clearinghouse, gathering
information about generic safety hazards and rapidly dis-
seminating it to plant operators. (45a-46a; J.A. 91-93.) As the
NRC has stated, “when an inspection or investigation discloses
events or conditions that present a potential or actual threat to
public health and safety,” the NRC “routinely communicates
what it has found” to all licensees of nuclear plants. U.S.
Nuclear Regulatory Commission Annual Report 1978. (J.A.
74.) Prior to the TMI accident, the NRC’s warning system was
relied upon by all nuclear plant operators, and was crucial to
the existence of the nuclear power industry. Following the TMI
accident, and as a result of shortcomings in the NRC’s opera-
tion of its warning system disclosed by the accident, the
nuclear industry created a private organization to fulfill this
crucial function and supplement the NRC’s warning system.
(46a; J.A. 93.)
In a report entitled “Three Mile Island—A Report to the
Commissioners and to the Public,” the NRC admitted that
eighteen months before the TMI accident, an accident occurred
at the Davis-Besse nuclear plant in Ohio which was “@lmost an
exact copy of the accident that subsequently occurred at TMI.”
(39a; J.A. 70.) The Davis-Besse and TMI reactors were both
pressurized water reactors manufactured by the Babcock &
Wilcox Company (“B & W”). The NRC promptly investigated
the Davis-Besse event and identified the pertinent safety haz-
ards. (4la-42a; J.A. 80-81.) The NRC was aware that the
safety hazards discovered at Davis-Besse existed at other nu-
clear facilities, because it knew that “similar pieces of equip-
ment with comparable probabilities of similar failure modes
were installed on other B&W plants.” (40a; J.A. 70.) Yet the
NRC failed to warn the petitioners or other plant operators of
the hazards it had discovered. (/d.) As alleged in the com-
plaint, if the NRC had warned petitioners of the known safety
hazards revealed by the Davis-Besse event and certain other
precursors, the TMI accident would not have occurred. (40a;
J.A. 71.)
es oe a ee = owe-me= we a
Both the Davis-Besse and TMI accidents involved a stuck-
open valve at the top of the “pressurizer” which resulted in a
loss of water essential to cooling the reactor’s nuclear core.
The NRC learned from the Davis-Besse accident that the
emergency procedures in effect at B & W-designed nuclear
plants directed plant operators to monitor the water level in the
system using an indicator, i.e., water level in the pressurizer,
which proved to be inaccurate and misleading under certain
circumstances. In a January 1978 internal memorandum, NRC
employees noted that the operators at Davis-Besse had been
misled by this inaccurate indicator into thinking that there was
sufficient water in the reactor coolant system and had shut off
the flow of replacement water. (43a; J.A. 86-87.) The NRC
employees expressed concern that since “operators would con-
trol makeup flow based on the pressurizer level as part of their
normal procedures,” operators of B & W-designed plants
“could erroneously shut off makeup flow” even where the
system was actually experiencing a critical water shortage. (/d.)
Nevertheless, the NRC failed to transmit this essential safety
information to the owners of B & W-designed nuclear plants.
(44a; J.A. 88.)
As a result, on March 28, 1979 petitioners were misled as to
the true water level in the TMI reactor coolant system. Like the
operators at Davis-Besse before them, the TMI control room
operators reduced the flow of vital replacement water even as
the nuclear core was uncovering, overheating and beginning to
melt. Had the NRC warned petitioners not to rely on the
misleading indicator, the TMI accident would not have oc-
curred. (40a; J.A. 71.)
Petitioners brought this action in the United States District
Court for the Eastern District of Pennsylvania which had
jurisdiction pursuant to 28 U.S.C. § 1346(b).* The district
4 Petitioners are seeking review only with respect to their first cause of
action, based on the failure to warn described in text, and not their
6
court denied a motion to dismiss brought by respondent,
holding that (1) the petitioners had stated a claim upon which
relief could be granted and (2) that claim was not barred by the
discretionary function exception or the misrepresentation ex-
ception to the Federal Tort Claims Act, 28 U.S.C. § 2680(a),
(h). Recognizing the significance of the litigation involved, the
district court certified the following question for interlocutory
appeal pursuant to 28 U.S.C. § 1292(b):
“Is our decision correct that neither the misrepresentation
nor the discretionary function exception [to the Federal
Tort Claims Act] bars this suit?” (35a.)
The case was argued before the Third Circuit on September
13, 1983. However, in a letter dated October 25, 1983, the
Third Circuit advised the parties that it would await this
Court’s decision in United States v. S. A. Empresa de Viacao
Aerea Rio Grandense (Varig Airlines), Nos. 82-1349, 82-1350
(here‘nafter cited as Varig), which was then sub judice, before
rendering a decision. After Varig was decided, 104 S.Ct. 2755
(1984), the Third Circuit, relying entirely on Varig, held that
the government’s failure to warn of known, serious safety
hazards was protected by the discretionary function exception.
Although the government’s negligent failure to warn in this
case involved no social, political or economic policy or regula-
tory decisions, the court of appeals held that the government
was immune from liability because the NRC’s categorization
of an event as an abnormal occurrence requiring congressional
notification might, under certain circumstances, entail “con-
siderations of public health and safety”, as well as “technical
and scientific evaluations”, and because the NRC was acting
here “in its role as regulator. . . .” (13a.) As we demonstrate
below, the Third Circuit’s decision conflicts with applicable
decisions of this Court and other courts of appeals.
second cause of action, which relates to the NRC’s undertaking to
review and approve safety analyses prepared by nuclear reactor manu-
facturers.
REASONS FOR GRANTING THE WRIT
THE DECISION BELOW CONFLICTS WITH
APPLICABLE DECISIONS OF THIS COURT
AND OTHER COURTS OF APPEALS
A. The Courts Have Repeatedly Upheld FTCA Claims, Such
As Petitioners’, Which Involve A Negligent Failure To
Warn Of Safety Hazards
Stripped of the industry jargon and scientific detail, peti-
tioners’ claim is simply that the NRC, having undertaken to
warn nuclear plant operators, such as petitioners, of safety
hazards, identified a serious safety hazard and failed to warn
petitioners. (39a-40a; J.A. 69-70.) The complaint alleges that if
a warning had been communicated, the TMI accident would
never have occurred. (40a; J.A.71.) Claims such as this, based
on a negligent failure to warn of safety hazards, have re-
peatedly been upheld under the Federal Tort Claims Act by this
Court and the courts of appeals. E.g., Indian Towing Co. v.
United States, 350 U.S. 61 (1955) (negligent failure to warn of
shipping hazard); Ingham v. Eastern Air Lines, Inc., 373 F.2d
227 (2d Cir.), cert. denied, 389 U.S. 931 (1967) (negligent
failure to warn of air traffic hazards); United Air Lines, Inc. v.
Wiener, 335 F.2d 379 (9th Cir.), cert. dismissed., 379 U.S. 951
(1964); Eastern Air Lines, Inc. v. Union Trust Co., 221 F.2d 62
(D.C. Cir.), aff’d per curiam sub nom. United States v. Union
Trust Co., 350 U.S. 907 (1955) (same).
As this Court held under the FTCA in Jndian Towing:
“It is hornbook tort law that one who undertakes to warn
the public of danger and thereby induces reliance must
perform his ‘good Samaritan’ task in a careful manner.”
350 U.S. at 64-65.
Thus, the Third Circuit’s decision here, holding that peti-
tioners’ failure to warn claim is barred by the discretionary
function exception to the FTCA, represents a significant de-
parture from the prior decisions of this Court and other courts
8
of appeals in failure to warn cases. Furthermore, this Court’s
opinon in Varig, on which the Third Circuit relied almost
entirely, was not a failure to warn case and did not define the
discretionary function exception to include a negligent failure
to warn of known safety hazards. Indeed, as demonstrated
below, it is clear from Varig that petitioners’ claim is not
covered by the discretionary function exception.
B. The Government’s Negligent Failure To Warn Petitioners
Of Known Safety Hazards Involved No Social, Economic
Or Political Policy Judgments And, Under This Court’s
Recent Decision In Varig, Is Not Protected By The Discre-
tionary Function Exception
In Varig, 104 S. Ct. 2755 (1984), this Court reaffirmed that
the rationale for the discretionary function exception to the
Federal Tort Claims Act was that
“Congress wished to prevent judicial ‘second-guessing’ of
legislative and administrative decisions grounded in so-
cial, economic and political policy through the medium of
an action in tort.” Jd. at 2765.
Accord, Dalehite v. United States, 346 U.S. 15, 36 (1953);
Estate of Callas vy. United States, 682 F.2d 613, 619-20 (7th Cir.
1982); Hitchcock v. United States, 665 F.2d 354, 363-64 (D.C.
Cir. 1981).
The claims in Varig which, unlike the present case, were
resolved after trial or on summary judgment rather than on a
motion to dismiss the complaint on its face, arose from
allegedly negligent certifications, by the Federal Aviation Ad-
ministration and its predecessor, of aircraft which did not
comply with FAA safety regulations. The aircraft had been
inspected pursuant to a “spot-check” program designed by the
FAA “to encourage manufacturers and operators to comply
fully with minimum safety requirements.” /d. at 2766. The
Court found no indication in the record, however, that in the
course of the “spot-check” program the defective component
“was actually inspected or reviewed by an FAA inspector.” Jd.
Under these circumstances, the Court held that the FAA’s
determination to utilize a “spot-check” system to monitor the
Se ee nee
9
manufacturers’ regulatory compliance was protected by the
discretionary function exception. Thus, the Court stated:
“The FAA’s implementation of a mechanism for com-
pliance review is plainly discretionary activity of the
‘nature and quality’ protected by § 2680(a). . . . Deci-
sions as to the manner of enforcing regulations directly
affect the feasibility and practicality of the Government’s
regulatory program; such decisions require the agency to
establish priorities for the accomplishment of its policy
objectives by balancing the objectives sought to be ob-
tained against such practical considerations as staffing
and funding. Here, the FAA has determined that a pro-
gram of ‘spot-checking’ manufacturers’ compliance with
minimum safety standards best accommodates the goal of
air transportation safety and the reality of finite agency
resources. . . . It was precisely this sort of judicial
intervention in policymaking that the discretionary func-
tion exception was designed to prevent.” Id. at 2768
(emphasis added).
In addition, the Court stated: “It follows that the acts of FAA
employees in executing the ‘spot-check’ program in accordance
with agency directives are protected by the discretionary func-
tion exception.” Jd. (emphasis added).°
The case at bar, however, is totally unlike Varig, for it
involves no high-level planning decision involving “social,
economic and political” judgments and no acts or omissions of
5
This analysis of the discretionary function exception is consistent
with this Court’s analysis more than thiry years ago in Dalehite v.
United States, 346 U.S. 15 (1953). In Dalehite the Court held that the
discretionary function exception protected not only discretionary pol-
icy decisions “made by executives or administrators in establishing
plans, specifications or schedules of operations,” id. at 35-36, but also
the “acts or omissions of government employees, exercising due care in
carrying out statutes or regulations whether valid or not.” Jd. at 33
(emphasis added). The Court held, however, that the “tortious conduct
of [government] agents acting within their scope of business” is not
protected. Jd. at 27-28.
10
government employees properly carrying out government pro-
grams “in accordance with agency directives.” Rather, the
complaint alleges that government employees negligently failed
to warn petitioners of known safety hazards—a clear example
of operational negligence which has long been held to be
outside the discretionary function exception. Indeed, the
courts, including this Court, have consistently upheld the
validity of claims under the FTCA alleging such operational
neglience. E.g., Indian Towing Co. v. United States, 350 U.S.
61 (1955); Estate of Callas v. United States, 682 F.2d 613, 624
(7th Cir. 1982) (once “policy decision to erect warning signs has
. . . been made. . . the government has no discretion to carry
Out its policies negligently”); Jngham v. Eastern Air Lines,
Inc., 373 F.2d 227 (2d Cir.), cert. denied, 389 U.S. 931 (1967)
(policy decision to establish air traffic control system was
exercise of discretion at planning level; failure to report
weather changes as necessary is not discretionary function);
United Air Lines, Inc. v. Wiener, 335 F.2d, 397 (9th Cir.), cert.
dismissed, 379 U.S. 951 (1964) (finding it was “negligence at
the operational level of the government to fail to inform
United of the details of the government’s hazardous activity”);
Eastern Air Lines, Inc. v. Union Trust Co., 221 F.2d 62, 77
(D.C. Cir.), aff’d per curiam sub nom. United States v. Union
Trust Co., 350 U.S. 907 (1955) (“discretion was excerised when
it was decided to operate the tower, but the tower personnel
had no discretion to operate it negligently”). See, Dalehite v.
United States, 346 U.S. 15 (1953) (establishing the distinction
between negligence at the planning level and operational negli-
gence).
As described above, this case involves a program established
by the NRC for collecting information regarding operating
experience at nuclear plants industrywide, analyzing that infor-
mation and warning nuclear plant owners of defects and
hazardous conditions. Clearly, the NRC’s decisions as to the
content of this warning system, such as staffing and funding,
involved “social, economic and political” judgments which are
protected by the discretionary function exception. Moreover,
as this Court held in Varig, the actions of NRC employees
following the directives of their superiors in performing the
i nT NiO whe neal ket
1]
specifics of the NRC’s undertaking are likewise protected by
the discretionary function exception.
In Varig, however, it was the FAA’s initial decision to
establish only a “spot-check” program and the implementation
by FAA officials of that decision, rather than the carelessness
of FAA employees in carrying out the program, that was
challenged by the plaintiffs. Here, it is neither the NRC’s
decision as to the scope of its undertaking nor the actions of
NRC employees in carrying out that undertaking “in accord-
ance with agency directives” which petitioners claim was negli-
gent. Petitioners’ claim is that NRC employees were negligent
in failing to provide a warning of known safety hazards as
required by the NRC’s own undertaking. In fact, the com-
plaint alleges that if the warning system was carried out as
established by the NRC the Three Mile Island accident would
never have happened. (40a; J.A. 71.) Thus, under Varig, the
discretionary function exception does not apply to the facts
alleged in the complaint.
No social, economic or political judgments, or actions in
furtherance of such judgments, are at issue here. Pursuant to
the NRC’s undertaking, NRC employees gathered information
regarding operating experience at the Davis-Besse plant and
other information and identified a serious safety hazard. (4la-
44a; J.A. 80-81; 86-88.) Due to simple negligence, however, a
warning regarding the hazard was not disseminated as it should
have been under the NRC program. Under the facts alleged in
the complaint, this failure to warn involved no balancing of
competing social interests which would implicate the discre-
tionary function exception, for there was no conceivable rea-
son for not issuing a warning. In fact, it appears from the
allegations of the complaint that the NRC never even made a
decision as to whether or not to issue such a warning; once
identified, the safety hazard was negligently forgotten until
after the TMI accident.
It is precisely the distinction between, on the one hand,
policy determinations and acts in accordance with such deter-
minations and, on the other hand, simple operational negli-
gence, that the Third Circuit ignored in holding that
12
petitioners’ claim is barred by the discretionary function excep-
tion. In applying the rationale of Varig to the entirely dissimilar
facts of this case, the Third Circuit erroneously read Varig as
protecting operational conduct by government employees, re-
gardless of whether such conduct actually involved the exercise
of policy judgment or discretion. Thus, the Third Circuit’s
erroneous application of Varig would eliminate a major aspect
of FTCA liability, contrary to what this Court and Congress
intended.
At the very least, the Third Circuit’s erroneous reading of
Varig would eliminate the entire area of FTCA claims involving
inspections actually made by the government. Surely, this was
not the Court’s intention in deciding Varig. Indeed, just last
year the Court upheld the validity of a negligent inspection
claim brought under the FTCA against the Farmers Home
Administration, holding that the claim was not barred by 28
U.S.C. § 2680(h), the misrepresentation exception to the
FTCA. Block v. Neal, 460 U.S. 289 (1983).
Recently, in Andrulonis v. United States, No. 79-CV-847
(N.D.N.Y. October 3, 1984) (available on LEXIS, Genfed
library, Dist file), the court cited this same distinction, between
acts in furtherance of a policy determination and simple
operational negligence, in holding that Varig did not bar an
FTCA claim for negligence in the development of a rabies
vaccine. The court said:
“It is significant to note that the plaintiffs in Varig did
not allege specific acts of negligence on the part of FAA
employees in the actual inspection of the defective planes.
Instead, the plaintiffs were challenging the effectiveness
of the FAA’s spot-checking system in insuring compliance
with safety regulations. The Court held that a challenge to
the method selected by the FAA in the exercise of its
regulatory authority implicated policy decisions; these
policy decisions and their implementation were the type of
exercise of discretionary authority that Congress intended
to immunize from tort liability under the discretionary
function exception, 28 U.S.C. § 2680(a).”
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13
Here, as in Andrulonis and unlike in Varig, the complaint
does not challenge “policy decisions” or “their implementa-
tion,” but rather “specific acts of negligence” by government
employees in carrying out their responsibilities under the
NRC’s warning program.
In sum, a proper reading of this Court’s decision in Varig
requires that the Third Circuit’s decision be reversed and
petitioners be permitted to pursue their claims against the
government.
C. The Third Circuit Erroneously Concluded Based On Varig
That Petitioners’ Claim Is Barred By The Discretionary
Function Exception Because The Claim Challenges Regu-
latory Activities
In Varig, this Court held that the discretionary function
exception to the FTCA “was intended to encompass the discre-
tionary acts of the Government acting in its role as a reguiator
of the conduct of private individuals.” 104 S. Ct. at 2765.
Purporting to follow this principle, the Third Circuit held that
petitioners’ claim is barred by the discretionary function excep-
tion since the NRC was “unquestionably acting in its role as
regulator of the conduct of private individuals.” (13a.)
Again, the Third Circuit seems to have misunderstood this
Court’s holding in Varig and the nature of the wrong alleged in
the complaint. First, as the language quoted above from Varig
makes clear, only the “discretionary acts” of the government
are protected, even when it is acting in a regulatory capacity.
Since the failure to warn alleged in the cogaplaint did not entail
any “discretionary acts,” defined by this Court as involving or
carrying out determinations of policy, the discretionary func-
tion exception does not apply.
Moreover, the wrong alleged in this action was not per-
formed by the NRC “acting in its role as a regulator of the
conduct of private officials,” as that phrase was used in Varig
by this Court. In Varig, the FAA was charged with negligently
certifying that the design of certain aircraft complied with FAA
14
safety regulations. 104 S. Ct. at 2758. However, in the present
case, the NRC is not charged with negligence in certifying
regulatory compliance. Rather, the complaint alleges that the
NRC undertook the non-regulatory function of monitoring
nuclear experience industrywide and warning the owners and
operators of nuclear plants of hazards discovered at other
plants. (40a; J.A. 71.) Indeed, the investigation and warning
function is so plainly non-regulatory that the nuclear generat-
ing industry has since formed a private organization to per-
form it. (46a; J.A. 93.) The NRC was not “regulating” the
plants receiving such warnings, but rather providing them with
essential safety information based on events discovered at
other plants throughout the country, pursuant to its congres-
sional mandate to perform that function.
The Third Circuit’s misunderstanding of the complaint
(from which all inferences were required to be drawn in
petitioners’ favor on the motion to dismiss) is further demon-
strated by its description of petitioners’ first cause of action as
challenging the NRC’s failure “to characterize the Davis-Besse
event as ‘an abnormal occurrence’—which the statute required
it to report—or a ‘generic problem’—for which the regulations
specified notification.” (lla.) In fact, nowhere in the com-
plaint do petitioners allege any failure by the NRC to properly
“characterize” the Davis-Besse event. Rather, the complaint
alleges a failure by the NRC to warn of serious safety hazards
which NRC employees actually uncovered in the course of
their investigation of Davis-Besse and otherwise. (4la-42a,
43a-44a; J.A. 80-81, 86-88.)
Moreover, the Third Circuit totally ignores the fact that the
complaint is based not merely on the NRC’s statutory duties
but also on its undertaking in fact to operate an industrywide
warning system and to provide the owners and operators of
nuclear plants with warnings of serious safety hazards uncov-
ered at other plants throughout the country. (45a; J.A. 91-92.)
This Court has consistently held that such an undertaking,
independent of statutory duties, gives rise to a common law,
non-regulatory duty on the part of the government to exercise
15
due care, violation of which is subiect to Federal Tort Claims
Act liability. See, e.g., Indian Towing Co. v. United States, 350
U.S. 61, 69 (1955).
In contrast to the FAA’s function in Varig, the NRC was
performing neither a discretionary nor a regulatory role in this
instance. Thus, the Third Circuit’s decision barring petitioners’
claims based on the discretionary function exception conflicts
with the applicable decisions of this Court and other courts of
appeals and should be reversed.
16
CONCLUSION
Based on the foregoing, the petition for a writ of certiorari
should be granted and the judgment of the court of appeals
reversed summarily on the authority of United States v. S. A.
Empresa de Viacao Aerea Rio Grandense (Varig Airlines), 104
S. Ct. 2755 (1984), and Dalehite v. United States, 346 U.S. 15
(1953).
Dated: November 13, 1984
Respectfully submitted,
David Klingsberg
Counsel of Record
Myron Kirschbaum
Aaron Stiefel
KAYE, SCHOLER, FIERMAN,
Hays & HANDLER
425 Park Avenue
New York, New York 10022
(212) 407-8000
James B. Liberman
BISHOP, LIBERMAN & COOK
1155 Avenue of the Americas
New York, New York 10036
(212) 704-0100
Samuel B. Russell
RYAN, RUSSELL & MCCONAGHY
530 Penn Square Center
Reading, Pennsylvania 19603
(215) 372-4761
Attorneys for Petitioners
UNITED STATES COURT OF APPEALS
FOR THE THIRD CiRCUIT
No. 83-1017
—-
GENERAL PUBLIC UTILITIES CORPORATION, JERSEY CEN-
TRAL POWER & LIGHT COMPANY, METROPOLITAN EDISON
COMPANY, PENNSYLVANIA ELECTRIC COMPANY,
Appellees
Vv.
UNITED STATES OF AMERICA,
Appellant
Appeal from the United States District Court for the Eastern
District of Pennsylvania (D.C. Civil Action No. 81-4950)
+
Argued September 13, 1983
Before:
WEIS, HIGGINBOTHAM, and SLOVITER, Circuit Judges.
Opinion Filed September 28, 1984
+
J. Paul McGrath, Esa.
Assistant Attorney General
Peter F. Vaira, Jr., Esq.
United States Attorney
Jeffrey Axelrad, Esq.
Director, Torts Branch
2a
James P. Klapps, Esq. (ARGUED)
Special Counsel
K. Roxanne McKee, Esq.
Trial Attorney
Torts Branch, Civil Division
U.S. Department of Justice
Washington, D.C. 20530
Of Counsel:
E. Leo Slaggie, Esq.
Acting Solicitor
Michael B. Blume, Esq.
Juan L. Rodriguez, Esq.
Nuclear Regulatory Commission
Attorneys for Appellant
David Klingsberg, Esq. (AKGUED)
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER
425 Park Avenue
New York, N.Y. 10022
Of Counsel:
Milton Handler, Esq.
Myron Kirschbaum, Esq.
Aaron Stiefel, Esq.
James B. Liberman, Esq.
DEBEVOISE & LIBERMAN
26 Broadway
New York, N.Y. 10004
Samuel B. Russell, Esq.
RYAN, RUSSELL & MCCONAGHY
530 Penn Square Center
Reading, PA 19603
Attorneys for Appellees
ee ee oe
3a
OPINION OF THE COURT
WEIS, Circuit Judge.
Alleging that the Nuclear Regulatory Commission failed to
warn them of equipment defects, the owners of the Three Mile
Island nuclear facility seek substantial damages attributed to a
valve failure at the plant. We conclude that the claims against
the government are barred by the discretionary function excep-
tion of the Federal Tort Claims Act.
The plaintiffs’ complaint asserts a right to recover under the
Tort Claims Act, 28 U.S.C. § 2671 et seq., because the Com-
mission did not comply with statutory directives or its own
regulations. The government moved to dismiss, asserting the
discretionary functicn and misrepresentation exceptions to the
Act, id. §§ 2680(a), (h). The district court denied the motion
but sua sponte certified its order as one involving a controlling
issue Of law under 28 U.S.C. § 1292(b). We accepted the
appeal.
Plaintiffs own and operate the Three Mile Island Unit No. 2
nuclear facility in Londonderry Township, Pennsylvania. '
Their complaint seeks more than four billion dollars in dam-
ages.
On March 28, 1979, a pilot-operated valve at Unit No. 2
failed to close properly, causing the reactor’s coolant system to
lose significant quantities of water and steam. The instruments
that should have indicated that the valve remained open
incorrectly showed it as being closed. A series of procedures
undertaken in the belief that the valve was closed deprived the
reactor of proper coolant, and it began to overheat. The
nuclear core and protective claddings were severely damaged,
resulting in the staggering financial losses to plaintiffs.
l Plaintiffs Metropolitan Edison Company, Jersey Central Power &
Light, and Pennsylvania Electric Company all sell electrical energy to retail
customers and other electrical companies. Each owns an interest in Three
Mile Island Unit No. 2. Plaintiff General Public Utilities Corporation is a
holding company owning all of the common stock of the electric companies.
In March 1979, Metropolitan Edison was the operator of Three Mile Island
Unit No. 2.
4a
The complaint is in two counts. The first alleges that the
Nuclear Regulatory Commission failed to exercise due care to
discover, analyze, and warn of safety hazards. In particular,
Count I alleges that in September 1977, 18 months before the
Three Mile Island incident, a similar event occurred at the
Davis-Besse nuclear power plant in Ohio. That facility was
operated by the Toledo Edison Company and had been de-
signed by the Babcock & Wilcox Company, which also pre-
pared the plans for Three Mile Island.’ Plaintiffs contend that
the Commission failed to properly forward information to
them about the cause of the Davis-Besse failure as well as the
corrective measures developed to prevent similar occurrences.
The second count complains that the Commission negli-
gently approved the Three Mile Island design and construction
plans at a time when it knew or should have known that the
pilot-operated relief valve could stick and cause a loss-of-
coolant accident. Plaintiffs allege that the agency failed to
require the manufacturer, Babcock & Wilcox, to analyze small
breaks in a coolant system such as the one that was caused by
the faulty valve at Three Mile Island.
In ruling on the government’s motion to dismiss, the district
court reviewed the Commission’s statutory authority and the
methods it uses to collect and disseminate safety information.
Owners and operators are required to notify the Commission
of defects in a facility that would create a substantial safety
hazard, and the Commission is obligated to submit reports to
Congress listing “abnormal occurrences.” This information is
also to be given wide dissemination to the public.
In carrying out its responsibility, the Commission has devel-
oped a series of mechanisms for the exchange of information
with licensees. When the most serious events occur, a Bulletin
is issued. It requires a response and may direct licensees to take
specific action on a one time basis. For lesser degrees of
danger, the Commission distributes a Circular, which does not
2 Plaintiffs have also filed a suit against Babcock & Wilcox, alleging
that it knew of the Davis-Besse incident but neverthe’ess completed Three
Mile Island Unit No. 2 with a defective valve.
da
mandate action or necessitate a reply. Other information
worthy of general distribution is provided in Licensee Event
Reports. NRC Inspectior and Enforcement Manual, Chap.
1125 (1977).
A Licensee Event Report was used to describe the Davis-
Besse incident and was sent to plaintiffs and other licensees in
January 1978.) No further warning or information was given
to plaintiffs, and their operating license was issued by the
Commission in February 1978.
The theories of liability asserted in the complaint are negli-
gence, negligence per se, and the “Good Samaritan” rule of the
Restatement (Second) of Torts §§ 323 and 324A. Plaintiffs
allege that they relied on the Commission but it failed to
exercise due care in the performance of its undertakings. The
district court concluded that the Energy Reorganization Act
imposed a duty on the Commission to monitor the nuclear
energy industry and alert licensees to safety problems.
Although the district court construed the complaint to essen-
tially allege a failure to warn, it determined that the misrepre-
sentation exception to the Tort Claims Act did not apply
because the plaintiffs’ losses were the result of the govern-
ment’s failure to disclose safety, not commercial, information.
The district judge-also rejected the Commission’s contention
that the discretionary function exemption barred the suit,
observing that the “governing standards are not so vague or
inexact as to call for unfettered scientific ‘discretion.’ ” When
decisionmakers exceed the scope of applicable regulations, he
reasoned, the government cannot invoke the discretionary
function exception.
After denying the motion to dismiss, the court certified the
following question for immediate interlocutory review: “Is our
decision correct that neither the misrepresentation nor the
discretionary function exception bars this suit?”
3 There is no reference to this report in the plaintiffs’ complaint, but
the district court observed that “plaintiffs do not, however, contest defen-
dant’s assertion that they received a Licensee Event Report.”
6a
Because the statutory exceptions constitute retentions of the
sovereign immunity that is otherwise waived in the Act, a
negative answer to either of the grounds for the district court’s
decision will require dismissal of the plaintiffs’ suit. We do not
discuss the misrepresentation issue because we conclude that
the discretionary function exception applies to this case.‘
One of the cases relied on by the district court in reaching its
conclusion was United Scottish Insurance Co. v. United States,
692 F.2d 1209 (9th Cir. 1982). Shortly after the district court
issued its order, the Supreme Court granted certiorari in United
Scottish and consolidated it with S.A. Empresa De Viaco
Aerea Rio Grandense (Varig Airlines) v. United States, 692
F.2d 1205 (9th Cir. 1982). The Supreme Court had not decided
those cases when the case at bar was presented to this panel. In
view of their relevancy, we chose to await the Court’s action.
Following the Court’s reversal of both cases, United States v.
S.A. Empresa De Viaco Aerea Rio Grandenese (Varig Air-
lines), 52 U.S.L.W. 4835 (June 19, 1984), we asked the parties
to comment on the decision.
In the Varig cases, the plaintiffs asserted liability against the
United States under the Tort Claims Act on allegations that the
Federal Aviation Administration had negligently certified com-
mercial aircraft. In each instance, an in-flight fire had caused
damage to the plane resulting in deaths and injuries.
Suits were brought by representatives of the deceased pas-
sengers and the owners of the planes. The plaintiffs contended
that the FAA certified the planes despite nonconformity with
the agency’s fire protection standards and, because of this
negligence, the government was responsible in damages.
4 Section 2680(a) provides that the Torts Claims Act shall not apply
to:
“(a) Any claim based upon an act or omission of an employee of the
Government, exercising due care, in the execution of a statute or
regulation, whether or not such statute or regulation be valid, or based
upon the exercise or performance or the failure to exercise or perform
a discretionary function or duty on the part of a federal agency or an
employee of the Government, whether or not the discretion involved
be abused.”
28 U.S.C. § 2680(a).
7a
The Supreme Court disagreed, stating that when the discre-
tionary function exception is invoked the basic inquiry is
“whether the challenged acts of a Government employee—
whatever his or her rank—are of the nature and quality that
Congress intended to shield from tort liability.” 52 U.S.L.W. at
4837. The discretionary function exception “plainly was in-
tended to encompass the discretionary acts of the Government
acting in its role as a regulator of the conduct of private
individuals.” Jd.
In the legislative history, the Court discerned a marked
emphasis on protection for regulatory activities. This suggested
that an underlying basis for excepting discretionary functions
was a congressional desire to prevent the use of a tort action as
a vehicle for “judicial ‘second guessing’ ” of administrative
decisions grounded in social, economic, and political policy.
Id.
The Court reviewed the FAA’s design regulations as well as
its compliance procedures and concluded that when an agency
determines the extent to which it will supervise the safety
procedures of private individuals, it “is exercising discretionary
regulatory authority of the most basic kind.” Jd. at 4839. The
Court noted that FAA employees conducting compliance re-
views “were specifically empowered to make policy judgments
regarding the degree of confidence that might reasonably be
placed in a given manufacturer, the need to maximize com-
pliance with FAA regulations, and the efficient allocation of
agency resources.” Jd.
In holding that the plaintiffs’ suits were barred, the Court
also discussed Dalehite v. United States, 346 U.S. 15 (1953), a
decision whose continued vitality had been questioned in recent
years. The Court rejected “the supposition that Dalehite no
longer represents a valid interpretation of the discretionary
function exception.” 52 U.S.L.W. at 4837.
Dalehite was a claim against the United States for massive
damages resulting from a disastrous explosion of fertilizer in
the harbor at Texas City, Texas. The government was charged
with various acts of negligence: the cabinet level decision to
institute the fertilizer program, the failure to conduct further
8a
experimentation into the possibility of explosion, deficiencies
in the drafting of a basic plan of manufactuie, and the failure
to properly police the loading and storage of the fertilizer
aboard ships.
In holding for the government, Dalehite concluded that the
discretior»ry function exception encompassed more than the
initiation of programs and activities. It included determina-
tions made by executives or administrators in establishing
plans, specifications, or schedules of operations. “Where there
is room for policy judgment and decision there is discretion. It
necessarily follows that acts of subordinates in carrying out the
operations of government in accordance with official direc-
tions cannot be actionable.” 346 U.S. at 35-36.
Varig and its reaffirmation of Dalehite has reduced some of
the uncertainty generated by the numerous courts of appeals’
decisions that have wrestled with the vague contours of the
discretionary exception.* Our canvas of authorities is accord-
ingly narrow, and our task is to determine if the actions of the
Nuclear Regulatory Commission fall within the Varig and
Dalehite perimeters.
It should be noted that the issue of negligence is not relevant
to the discretionary function inquiry. Moreover, in the proce-
dural posture of this case, we assume that the government did
not exercise due care. The question is whether the challenged
conduct comes within the exception. We consider seriatim the
allegations of the plaintiffs’ complaint.°
The first count charges that the Commission either did not
sufficiently investigate the Davis-Besse incident or, having
5 For a review of some of the pre- Varig cases, see Bernitsky v. United
States, 620 F.2d 948 (3d Cir.), cert. denied, 449 F.2d 870 (1980). See also
Reynolds, “The Discretionary Function Exception of the Federal Tort Claims
Act,” 57 GEO. L.J. 81, 82 (1968); Comment, “Scope of the Discretionary
Function Exception under the Federal Tort Claims Act,” 67 GEO. L.J. 978
(1979).
6 Because of our disposition of this appeal, we need not discuss the
“Good Samaritan” theory advanced by plaintiffs since that contention would
do no more than establish negligence.
9a
obtained information that could have been used to correct the
dangerous condition, failed to convey that information to
plaintiffs. Thus, the attack is on the thoroughness of the
investigation or, as an alternative, the failure to communicate
safety information in the agency’s possession.
The Energy Reorganization Act gives the Commission the
responsibility to “[rjeview the safety and safeguards of all
[nuclear] facilities, materials, and activities.” 42 U.S.C.
§ 5843(b)(2). The statute specifies that “such review functions
shall include but not be limited to—(A) monitoring, testing
and recommending upgrading of systems designed to prevent
substantial health or safety hazards.” Jd. The Commission is
also required to submit reports on “abnormal occurrences” —
“an unscheduled incident or event which the Commission
determines is significant from the standpoint of health or
safety.” Id. § 5848.
To assist the Commission in the performance of its safety
function, section 206 of the Act requires owners and operators
to notify the agency when a facility “contains a defect which
could create a substantial safety hazard, as defined by regula-
tions which the Commission shall promulgate.” /d.
§ 5846(a)(2). To insure compliance, the Commission “is autho-
rized to conduct such reasonable inspections and other en-
forcement activities as needed.” Jd. § 5846(d).
Although the statute directs the Commission to review the
safety of nuclear facilities, the means of accomplishing that
duty has been left to the agency. Section 203(b)(2) provides a
nonexhaustive listing of “review functions” and, by implica-
tion, allows the Commission to add others. For example, the
agency has, by regulation, undertaken a program of “notifying
licensees regarding generic problems so as to achieve precau-
tionary or corrective measures.” 10 C.F.R. § 1.64 (1978).
The Act also assigns to the Commission the determination of
what events constitute an “abnormal occurrence” or a “sub-
stantial safety hazard” that triggers the obligation of owners
and operators to report defects, see 10 C.F.R. § 21.3(k) (1978).
As to enforcement, the agency has the authority, not only to
ee
10a
conduct inspections, but to develop “other enforcement activi-
ties as needed.” Thus, the Commission has decided that it may,
in some circumstances, issue a Bulletin requiring licensees to
take specific action in aid of the investigation and evaluation
of an event.
In Varig, the plaintiffs challenged the FAA’s practice of
insuring compliance through a “spot check” system and its use
on the defective planes. See 52 U.S.L.W. at 4838-39. The Court
found both actions within the discretionary exemption stating,
“Decisions as to the manner of enforcing regulations directly
affect the feasibility and practicality of the Government’s
regulatory program.” /d. at 4839. Agencies are required to
balance “the objective sought to be obtained against such
practical considerations as staffing and funding.” /d. There-
fore, the FAA’s alleged failure to check specific items in the
course of certification fell squarely within the discretionary
function exception of section 2680(a).
That same analysis applies to the circumstances here. Con-
gress has directed the Commission to pursue safety-related
functions in the nuclear energy field, but has left implementa-
tion to the agency’s “ ‘judgment of the best course.’ ” Varig, 52
U.S.L.W. at 4838 (quoting Dalehite, 346 U.S. at 34). Thus, the
Commission determines what information should be collected
and how, whether incidents are to be investigated and in what
manner, and what data should be disseminated and in what
form. In formulating the means to accomplish its regulatory
objectives, the agency must engage in the same balancing the
Court spoke to in Varig.
That reasoning is no less applicable to the plaintiffs’ allega-
tion that the Commission’s investigation of the Davis-Besse
incident was wanting. Limitations on an investigation into
matters that come within the regulatory control of the Com-
mission are no different in principle than the FAA’s use of a
spot check system. The intensity and breadth of an investiga-
tion is necessarily influenced by the resources available, both in
terms of technically-trained personnel and funding. Of neces-
sity, judgments must be made as to priorities and allocations of
resources.
BOA “ont NAIR AES BI I hei Bt Nk SN in si nie
ce
lla
That in hindsight the Commission’s judgment may have
been ill-advised in no way changes the character of the func-
tion under scrutiny. The extent and scope of an investigation
remains a matter of the agency’s discretion. As this court
stated in Bernitsky v. United States, 620 F.2d 948, 955 (3d Cir.
1980), “Decision making as to investigation and enforcement,
particularly when there are different types of enforcement
action available, are discretionary judgments.”
Count I’s accusation of failure to furnish information in the
agency’s possession has several aspects. Plaintiffs complain
that, although it should have been widely disseminated, “vital
information regarding safety hazards was not sent out in any
form.” A fair statement of their position is not that they were
totally unaware of the Davis-Besse occurrence, but that the
Commission had specific data that it was under a duty to
circulate to all who might be affected by a similar hazardous
condition.
In essence, plaintiffs challenge the Commission’s failure, on
the basis of the information it had, to characterize the Davis-
Besse event as either an “abnormal occurrence”—which the
statute required it to report—or a “generic problem”—for
which the regulations specified notification. They argue that
because of the possible catastrophic consequences of a valve
failure, the Commission had no discretion under the governing
statutes and regulations—it was duty bound to report the
incident.
Use of the word discretion in this sense exposes the funda-
mental flaw in the plaintiffs’ position. The exemption from the
Tort Claims Act is based on the nature of the governmental
discretionary function, not whether there is an option to
choose. Regulatory activities are within the exemption, not
because alternatives exist in particular circumstances, but be-
cause of the fundamental character of the role assigned to the
agency.
If a government employee performing a discretionary func-
tion acts negligently, the exemption remains applicable even
though the activity constitutes an abuse of discretion. As the
l2a
Statute itself provides, discretionary functions are exempt
“whether or not the discretion involved be abused.” 28 U.S.C.
§ 2680(a).
The Energy Reorganization Act’s mandate that the Commis-
sion provide information on “abnormal occurrences” is trig-
gered by the happening of “an unscheduled incident or event
which the Commission determines is significant from the
standpoint of public health or safety.” 42 U.S.C. § 5848. Thus,
before the obligation to disseminate information attaches the
Commission is required to judge whether the incident raises
concerns about public health or safety.
The legislative history leaves no doubt that this determina-
tion has been entrusted to the discretion of the Commission.
The Senate had left “abnormal occurrence” undefined in its
bill, but intended that the Commission develop “uniform
criteria.” Sen. Rep. No. 980, 93d Cong., 2d Sess., reprinted in
1974 U.S. Code Cong. & Ad. News 5470, 5531. The Con-
ference Committee, however, added the definition that appears
in the statute “to make it clear that the Commission will
determine which abnormal occurrences are significant enough
to be reported.” Conf. Rep. No. 1445, 93d Cong. 2d Sess.,
reprinted in 1974 U.S. Code Cong. & Ad. News 5538, 5551.
Whether an event is significant from the standpoint of
health or safety may be easily determined in some situations—
perhaps even by a layman unacquainted with nuclear energy
technology. In other instances, however, it may require scien-
tific sophistication to understand the factual data before even
approaching the second question of effect on public health and
safety. The Commission’s manual on “abnormal occurrences”
states that “[w]jhether a particular event will be determined to
be an abnormal occurrence will depend on the specific facts
and circumstances of the event.”
The plaintiffs’ theory—that the Davis-Besse event gave no
alternative but to report—must not be allowed to obscure the
nature of the Commission’s function: that is, to determine on
the basis of information in its possession whether a specific
event constitutes “an abnormal occurrence” that requires aoti-
fication to Congress and the public. This is not a mere
l3a
ministerial task. Technical and scientific evaluations of nuclear
processes and facilities must be taken into account along with
considerations of public health and safety—matters within the
specialized knowledge of the Commission.
In following the dictates of the statute, the Commission is
unquestionably acting in its role as regulator of the conduct of
private individuals. See Varig, 52 U.S.L.W. at 4837. Moreover,
excluding the Commission’s role from the scrutiny of a tort
action provides an example of the underlying reason for the
discretionary function exclusion—to prevent judicial second-
guessing.’
There is no substantial distinction between the choice made
by the FAA as to its method of inspection and decisions made
by the Nuclear Regulatory Commission to classify certain
incidents as statutory “abnormal occurrences.” If anything, the
discretion entrusted to the Commission would seem to be
greater than that given the FAA.
In Dalehite, the Court used very broad language—“where
there is room for policy judgment anc decision there is discre-
tion.” 346 U.S. at 36. The discretionary tag the Court attached
to the government’s specifications of bag labels and bills of
lading in Dalehite, see id. at 39, iiaplicate far less of a policy
determination than the classification of a nuclear event as an
abnormal occurrence.
Plaintiffs rely on our case of Griffin v. United States, 500
F.2d 1059 (3d Cir. 1974), as excluding professional and scien-
tific judgments from the discretiona y category. Griffin con-
7 After defining “abnormal occurrence,” section 208 of the Energy
Reorganization Act continues: “Nothing in the preceding sentence shall limit
the authority of a court to review the determination of the Commission.” 42
U.S.C. § 5848. Although this provision might appear to suggest some
relaxation of the opposition to judicial “second-guessing” of the Commis-
sion’s determination, there is a marked difference between direct judicial
review of an agency decision and contesting that decision through the
medium of a tort suit. Not only are the standards in the two proceedings
likely to differ, but a tort action could have an undesirable inhibiting effect
on official activity and decisionmaking. See United States v. Muniz, 374 U.S.
150, 163 (1963).
l4a
trasted that type of decisionmaking with policy determinations
in the social and economic realm. Griffin, however, must be
read cautiously because in Varig the discretionary exception
covered an agency decision that rested on highly technical
information.* In any event, we find a distinct difference be-
tween applying rigid scientific specifications in a testing proce-
dure and the making of a judgment on public health and safety
after evaluating the happening of an out of the ordinary event
at a nuclear power facility.
What we have said is equally applicable to the plaintiffs’
contention that it should have been given information about
the Davis-Besse incident because the Commission knew or
should have known that the problems at the Ohio plant were
“generic.” See 10 C.F.R. § 1.64. The same considerations and
balancing that go into the agency’s determinations about
investigation, evaluation, and information exchange are at
work in the identification of generic probiems. The program
for notifying licensees of generic problems is but one part of
the overall discretionary function the Commission undertakes
when it monitors the safety of the nuclear industry.
We conclude, therefore, that Count I of the plaintiff’s
complaint comes within the discretionary function exemption.
Count II, which alleges that the Commission failed to exercise
due care in licensing the Three Mile Island plant, requires less
discussion. An agency entrusted with the task of approving
entities for licensing is engaged in activity that is at the heart of
the regulatory function.
8 In Griffin, the government was found liable for negligent approval
of a batch of polio vaccine. The panel majority held the discretionary
function exception inapplicable because the “decision involved] not public
policy but a scientific judgment as to the accuracy of test results.” 500 F.2d at
1066 n. 16. In addition, the government employees had relied on a factor not
in the regulations, and the court held that “{t}he violation of a discretionary
command takes what otherwise might be characterized as a ‘discretionary
function’ outside the scope of the statutory exception.” /d. at 1068-69. Judge
Van Dusen dissented, concluding that a function was no less discretionary
because it was scientific. We need not determine the continued vitality of
Griffin here, but note that our pre-Varig cases on the discretionary function
must be re-evaluated.
lSa
Section 2232 of the Atomic Energy Act of 1954, 42 U.S.C.
§ 2232 (1982), governs the Commission’s review of license
applications, see id. at § 5843(b). Applicants are to submit
“such information as the Commission . . . may determine to
be necessary to decide” the qualifications of the applicant and
such technical information “as the Commission may. . . deem
necessary in order to enable it to find that utilization or
production of special nuclear material . . . will provide ade-
quate protection to the heaith and safety of the public.” The
statute allows the Commission to determine what amount of
information is needed when it is passing on an application for
a license.
Exercising its authority, the Commission decided to consider
numerous factors. These include the site for the facility, its
design, the materials and method of construction, the plant’s
safety features and procedures, the financial qualifications of
the applicants, the technical expertise of the operators, and the
adequacy of the applicants’ quality assurance program for all
stages from design through operation. See 106 C.F.R. Parts 50
(facilities), 55 (operators), 100 (site criteria). Each of these
considerations is part of the Commission’s overall objective of
ascertaining whether there is a reasonable assurance that the
nuclear facility can be operated without endangering the health
and safety of the public. 10 C.F.R. §§ 50.35(c), 50.57(a)(3)
(1978).
Plaintiffs allege that the Commission acted negligently when
it approved the Babcock & Wilcox design because the agency
“should have known that it was necessary to require manufac-
turers . . . to analyze small breaks ia the reactor coolant
system such as a stuck-open pilot-operated reiief valve.” Ac-
cording to the complaint, the safety analyses submitted by
Babcock & Wilcox generally considered small breaks of only
about five square inches. The valve that malfunctioned in the
Three Mile Island incident had an aperture of approximately
one square inch.
When an agency determines the amount of information
needed to fulfill its regulatory mission, it is exercising the
l6a
essence of a discretionary function. Varig leaves no doubt on
that score. As we noted earlier, an action will not lie under the
Tort Claims Act for an abuse of the agency’s discretion.
It is also appropriate to take note of statements on the
Commission’s licensing role in the congressional Conference
Report to the Energy Reorganization Act. After pointing out
that the Commission would have certain research capabilities
that “may be characterized as confirmatory assessment,” the
Report states that “[i]f the license application is inadequate in
any respect considered significant by the regulatory agency, the
license is refused.” Conf. Rep. No. 1445, 93d Cong., 2d Sess.,
reprinted in 1974 U.S. Code Cong. & Ad. News 5538, 5548
(emphasis added). The Report continues:
“It would be a serious mistake, however, to make a
regulatory agency responsible for the performance of
research that gces beyond the need for confirmatory
assessment. . . . The regulatory agency should never be
placed in a position 10 generate, and then have to defend,
basic design data of its own... .
“As with research, the regulatory agency need not and
should not perform process development, develop cun-
struction procedures or designs, or conduct quality con-
trol work (which is the responsibility of the licensee or
vendor). . . . The regulatory agency should not assume
any part of the burden of the applicant to prove the
adequacy of a license application.”
Id. at 5548-49.
It is the burden and responsibility of the applicant to
demonstrate the adequacy of its application. The Commis-
sion’s obligation is to assess the application according to what
the agency determines is significant from the standpoint of
health or safety. The exercise of this authority falls squarely
within the discretionary function. Therefore, Count II is also
excluded by the discretionary function exemption of the Tort
Claims Act.
17a
Consequently, in response to the question submitted by the
district court, we answer that the discretionary function excep-
tion is a bar to the plaintiffs’ suit in this case. This case will
therefore be remanded to the district court for proceedings
consistent with this opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
18a
UNITED STATES DISTRICT COURT
E.D. PENNSYLVANIA
Civ. A. No. 81-4950
Nov. 24, 1982.
+
GENERAL PUBLIC UTILITIES CORPORATION, JERSEY CEN-
TRAL POWER & LIGHT COMPANY, METROPOLITAN EDISON
COMPANY, PENNSYLVANIA ELECTRIC COMPANY
Vv.
UNITED STATES OF AMERICA.
+
DAVID KLINGSBERG, James B. Liberman, New York City,
Samuel B. Russell, Allen Seltzer, Reading, Pa., for plaintiffs.
JAMES P. KLAPPS, Asst. Director, Torts Branch, J. Paul
McGrath, Asst. Atty. Gen., Civ. Div., Dept. Justice, Roxanne
K. McKee, Michael B. Blume, Trial Attys., Torts Branch, Civ.
Div., Dept. Justice, James A. Fitzgerald, Acting Sol. Nuclear
Regulatory Com’n, Washington, D.C., Peter F. Vaira, Jr., U.S.
Attorney, Philadelphia, Pa., for defendant.
++
MEMORANDUM AND ORDER
TROUTMAN, District Judge.
Background
In the early morning hours of March 28, 1979, a turbine
generator at plaintiffs’’ Three Mile Island Unit 2 nuclear
1 Plaintiff, General Public Utilities Corp. (GPU), is an investor-owned
public utility holding company operating pursuant to the Public Utility
19a
facility (TMI), designed by Babcock & Wilcox (B & W), expe-
rienced a shutdown “trip” due to a loss of feedwater. Subse-
quently, a rapid heat buildup raised the pressure in the reactor
coolant system and caused a pilot-operated relief valve to
open, thereby relieving excess pressure. Shortly thereafter, the
reactor shut down and pressure in its coolant system dropped
to within the normal range; the pilot-operated relief valve
should have closed. It failed to do so. Worse, the instrumenta-
tion designed to indicate the true position of the relief valve
also failed; it incorrectly indicated that the valve was closed
when, in fact, it was open.
Thereafter, a “loss-of-coolant accident” occurred; signifi-
cant quantities of coolant water and steam were lost through
the malfunctioning valve. As a result thereof, pressure in the
reactor coolant system continued to drop and coolant water
and steam escaped. Within a few minutes of the original
“trip”, the engineered safety system began high-pressure injec-
tion of water into the reactor coolant system.
Continued monitoring by plant operators incorrectly lead
them to believe that the facility was “going solid”; i.e., that the
pressurizer was dangerously close to filling with water. Follow-
ing B & W generated and Nuclear Regulatory Commission
(NRC) approved procedures, and attempting to guard against
this eventuality, TMI operators reduced the high pressure
injection of water into the coolant system and initiated max-
imum let-down of coolant. The reduction of high-pressure
coolant injection exasperated the developing problem; i.e.,
coolant which escaped through the malfunctioning valve was
not replaced.
Within one or two hours of the original “trip”, TMI opera-
tors, again acting pursuant to B & W established and NRC
approved procedures, shut down the plant’s four reactor
coolant pumps which normally circulate coolant through the
Holding Company Act of 1935, 15 U.S.C. § 79. GPU owns all the common
stock of its co-plaintiffs, Jersey Central Power & Light Company (JCP & L),
Metropolitan Edison Company (Met Ed), and Pennsylvania Electric Com-
pany (Penelec). For the sake of clarity, these parties will simply be referred to
as “plaintiffs”.
20a
reactor vessel. Once this occurred, the reactor vessel was
deprived of the coolant water and steam which had previously
circulated through it, the nuclear core began to uncover and it,
along with the protective cladding, was severely damaged.
Radioactive material from the damaged core spread through-
out the building and adjacent structures. As a result, the public
was exposed to catastrophic dangers. The resulting damage to
plaintiffs is allegedly in excess of four billion dollars.
The complaint further alleges that eighteen months earlier,
on September 24, 1977, a “loss-of-coolant” accident occurred
at the Davis-Besse nuclear power plant designed by B & W and
operated by Toledo Edison Company. Importantly, the acci-
dent at Davis-Besse closely paralleled the events which later
occurred at TMI. The ultimate consequences of terminating
high pressure injection at Davis-Besse were, however, severely
mitigated by the fact that the Ohio plant was only operating at
9% capacity at the time of its accident. TMI, by contrast, was
operating at 97% capacity.
Plaintiffs assert that the NRC failed to properly disseminate
information to them regarding the cause of the Davis-Besse
accident and also the corrective measures subsequently devel-
oped to prevent similar accidents. Moreover, plaintiffs com-
plain that the NRC negligentiy approved the TMI construction
plans, containing the faulty pilot-operated relief valve at a time
when it knew, or should have known, that the valve could stick
and cause a “loss-of-coolant” accident.
The two-count complaint seeks recompense in Count [| for
the purported failure of defendant, United States, acting
through its agent, the NRC to properly warn and advise
plaintiffs of existing hazards and defects in their plant. Count
II inveighs against the NRC’s purported negligent approval of
B & W’s emergency procedures. Specifically, the complaint
asserts three grounds for relief: breach of the Good Samaritan
duty’, negligence, and negligence per se.
2 See, Restatement of Torts (2d) which provides:
§ 324 A. Liability to Third Person for Negligent Performance of
Undertaking
One who undertakes, gratuitously or for consideration, to render
services to another which he should recognize as necessary for the
2la
Jurisdiction is predicated upon the Federal Tort Claims Act,
28 U.S.C. § 1346(b)? (FTCA), which generally imposes govern-
protection of a third person or his things, is subject to liability to the
third person for physical harm resulting from his failure to exercise
reasonable care to protect his undertaking, if
(a) his failure to exercise reasonable care increases the risk of such
harm, or
(b) he has undertaken to perform a duty owed by the other to the
third person, or
(c) the harm is suffered because of reliance of the other or the third
person upon the undertaking.
This method of imposing liability is recognized by federal courts as the law
of Pennsylvania, Evans v. Liberty Mutual Insurance Co., 398 F.2d 665 (3d
Cir. 1968) and may be used by plaintiffs to affix governmental liability in a
Federal Tort Claims Act suit. Toppi v. United States, 327 F.Supp. 1277 (E.D.
Pa. 1971). See also, Blessing v. United States, 447 F.Supp. 1160 (E.D. Pa.
1978). Additionally, Pennsylvania recognizes negligent inspection as an
actionable tort. Mays v. Liberty Mutual Ins. Co., 323 F.2d 174 (3d Cir.
1963); Evans v. Otis Elevator Co., 403 Pa. 13, 168 A.2d 573 (1961). Most
recently, § 324A and its companion, § 323 of the Restatement of Torts (2nd),
were applied to a claim arising out of a maritime accident brought under the
Suits in Admiralty Act, 46 U.S.C. § 742. See, Patentas v. United States, 687
F.2d 707 (3d Cir. 1982).
§ 323 of the Restatement provides:
Negligent Performance of Undertaking to Render Services.
One who undertakes, gratuitously or for consideration, to render
services to another which he should recognize as necessary for the
protection of the other’s person or things, is subject to liability to the
other for physical harm resulting from his failure to exercise reason-
able care to perform his undertaking, if
(a) his failure to exercise such care increases the risk of such harm,
or
(b) the harm is suffered because of the other’s reliance upon the
undertaking.
3 28 U.S.C. § 1346(b) provides that
[s]ubject to the provisions of chapter 171 of this title, the district
courts, together with the United States District Court for the District
of the Canal Zone and the District Court of the Virgin Islands, shall
have exclusive jurisdiction of civil actions on claims against the United
States, for money damages, accruing on and after January 1, 1945, for
injury or loss of property, or personal injury or death caused by the
negligent or wrongful act or omission of any employee of the Govern-
ment while acting within the scope of his office or employment, under
circumstances where the United States, if a private person, would be
liable to the claimant in accordance with the law of the place where the
act or omission occurred.
22a
mental liability, inter alia, “under circumstances where the
United States, if a private person, would be liable”. Resolution
of the Government’s motion to dismiss* requires construction
of two important exceptions to the general abrogation of
sovereign immunity contained in the FTCA. The “misrepresen-
tation exception”, 28 U.S.C. § 2680(h), prevents the imposi-
tion of governmental liability on any claim arising out of, inter
alia, a “misrepresentation”. The “discretionary function” ex-
emption, 28 U.S.C. § 2680(a), shields governmental conduct
from liability where the claim is grounded in “the failure to
exercise or perform a discretionary function or duty”. It
applies even where there is an abuse of discretion. Dalehite v.
United States, 346 U.S. 15, 33-36, 73 S.Ct. 956, 966-68, 97
L.Ed. 1427 (1955).
The Government’s Duty
Plaintiffs asseverate that the NRC breached its duty to warn
of design hazards when it failed to employ either of the two
primary methods which it uses to provide licensees with safety
information. The first is the issuance of an “IE Bulletin”.
When the NRC determines that a specified event may have
“generic” applicability, it issues an IE Bulletin in order to
“achieve appropriate precautionary or corrective action” by
nuclear licensees and operators. 10 CFR § 1.64. The NRC also
requires that all IE Bulletins be responded to so that it, the
NRC, may “assess [ ] the situation”. See, U.S. Nuclear Regu-
latory Commission, Office of Inspection and Enforcement,
Inspection and Enforcement Manual (Manual), Chapter 1100,
MC 1125-031. The second mode of NRC licensee notification
is the distribution of “Circulars”. These are designed simply to
4 Fed.R.Civ.P. 12(b)(1) and (6). For present purposes we assume the
veracity of plaintiffs’ factual allegations. Walker Processing Equipment Co.
v. Food Machinery & Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15
L.Ed.2d 247 (1965). We do not, of course, accord this same deference to the
conclusion of law contained in the complaint. Frederiksen v. Poloway, 637
F.2d 1147, 1150 n. 1 (7th Cir.), cert. denied, 451 U.S. 1017, 101 S.Ct. 3006,
69 L.Ed.2d 389 (1981).
23a
“inform the licensee or permit holder” of issues regarding
“safety, safeguards, or environmental interest”. Jd. at
MC1125-032. Importantly, Circulars do not require a licensee’s
response to the NRC; they generally signify a lesser degree of
“danger” than does an IE Bulletin.
The final information gathering and dissemination function
which the NRC performs is the compilation and submission of
“abnormal occurrence” reports to the Congress. An “abnor-
mal occurrence” is defined as, inter alia, a “major deficiency in
design, construction, use of, or management” of a licensed
nuclear facility. See, Energy Reorganization Act of 1974,
(Energy Act) § 208, 42 U.S.C. § 5848. Importantly, plaintiff
asserts that it is among the intended beneficiaries of the NRC’s
statutory obligation.
In any event, after the Davis-Besse accident, the NRC
neither distributed an IE Bulletin, Circular, nor issued an
abnormal occurrence report to the Congress. (Plaintiffs do
not, however, contest defendants’ assertion that they received a
Licensee Event Report, issued by the Office of Resource
Management, NRC, regarding the Davis-Besse accident.)
Rather than issue any warning, the Government approved
plaintiffs’ construction plans; this notwithstanding the fact
that they called for inclusion of the faulty pilot-operated relief
valve. Plaintiffs contend that their license issuance, which
authorized them to operate an incorrectly designed plant, and
the failure to widely disseminate corrective measures designed
after Davis-Besse, violated defendant’s duty to monitor the
nuclear power industry and to warn licensees of dangerous
practices and conditions.
Before turning to issues raised by the misrepresentation and
di.cietionary function exceptions, the Government argues a
very basic tort concept: that the NRC owes no duty to
plaintiffs or the nuclear power industry. Defendant asserts that
the myriad of regulatory activities and standards promulgated
by the NRC simply describe minimal safety standards to which
the industry must adhere. Moreover, defendant argues that all
of these regulations are designed to and, in fact, inure only to
the benefit of the public. An evaluation of the relevant stat-
utes, regulations and legislative history establishes, however,
24a
that the relationship between the NRC and the nuclear industry
contains elements of symbiosis, which may form the predicate
for imposing liability.
Specifically, the Government’s statutory and regulatory obli-
gations imposed by §§ 206 and 208 of the Energy Act, 42
U.S.C. §§ 5846 and 5848, and the regulations promulgated
thereunder, create a duty on behalf of the Government to
properly and carefully regulate, monitor and warn the nuclear
power industry of existing dangers.
For example, § 206 of the Energy Act, 42 U.S.C.
§ 5846(a)(2), requires nuclear plant operators to notify the
NRC of any plant “defect” which rises to the level of a
“substantial safety hazard”. Moreover, § 208 of the Energy
Act, 42 U.S.C. § 5848, directs the NRC to prepare quarterly
Congressional reports listing “abnormal occurrences” at nu-
clear facilities. Additionally, the NRC is charged with provid-
ing “wide dissemination” of “abnormal occurrence” reports.
Because the legislative history of the Energy Act cross
references §§ 206 and 208, 42 U.S.C. §§ 5846 and 5848, the
reports of defects made to the Commission pursuant to § 206
inure to the benefit of electric utilities. These same reports
frequently form the basis of the Commission’s Congressional
“abnormal occurrence” reports, mandated by § 208 of the
Energy Act and receive industry-wide dissemination. Hence,
plaintiffs are one of the intended beneficiaries of those statu-
tory provisions.
The fact that §§ 206 and 208, 42 U.S.C. §§ 5846 and 5848,
run to plaintiffs’ benefit finds support in the legislative history
of the Energy Act as well. Specifically, S.Rep. No. 980, 93rd
Cong., 2d Sess. reprinted in 1974 U.S.Code Cong. &
Admin.News 5470, 5527-28, demonstrates that Congress “in-
tended” the obligation of licensees to report safety defects to
the appropriate governmental authorities to benefit “electric
utilities in particular”. The Senate report noted that valves
were “the most frequent components involved in abnorma!
occurrences . . . the breakdown of a valve has potentially
catastrophic implications”. Jd. Continuing, the report virtually
predicated many of the events which were to occur at TMI and
observed that
25a
[t]he system most requently involved in abnorma?! occur-
rences. . . was the primary cooling system, which is used
to prevent a meltdown of the nuclear core of a reactor.
The system next most frequently affected by defects. . .
was the emergency core cooling system, which prevents a
meltdown in case the primary cooling system fails. A
meltdown is the worst conceivable reactor accident; such
an accident could result in breaching of the containment
vessel of a powerplant and in the release of radioactive
fallout equivalent to many Hiroshima bombs.
Id. The report finally notes that the combined effect of
industry reporting safety defects to the Government, 42 U.S.C.
§ 5846, and the requirement that the Commission report “ab-
normal occurrences” to the Congress on a quarterly basis, 42
U.S.C. § 5848, will “substantially ungrade the Federal re-
sponse to defects in all licensed nuclear facilities”. 1974
U.S.Code Cong. & Admin.News at 5528. Upon signing the
Energy Act, President Ford echoed a similar sentiment and
observed that the NRC will be “fully empowered to see to it
that reactors using nuclear materials will be properly [ ]
designed [and] constructed”. Presidential Documents: Gerald
R. Ford, Vol. 10; Number 41, p. 1271, 1273 (October 11,
1974).
Two particularly important regulations promulgated pur-
suant to the Energy Act also merit consideration. As noted,
infra, 10 CFR § 1.64 requires the Office of Inspection and
Enforcement to “notify licensees regarding generic problems so
as to achieve appropriate precautionary or corrective actions”.
(emphasis added). Plaintiffs’ contention is, of course, that the
defect which existed at Davis-Besse was improperly designed
into their plant and was “generic” in nature. Further, that the
NRC not only failed to disseminate “appropriate precau-
tionary Or corrective actions”, /d., but also it approved TMI’s
plans notwithstanding the fact that they contained a “generic
problem”.
The NRC’s duty to monitor the industry and warn of safety
problems does not, however, amount to a guarantee of plant
safety. Far from it. 10 CFR 60, App. B, clearly specifies that
26a
although the licensee may delegate its obligation to establish
and execute quality assurance programs, the licensee neverthe-
less “shall retain responsibility therefor”. /d.
Accordingly, we conclude that the Act’s plain language,
legislative history, and regulations, support plaintiffs’ assertion
that the NRC has undertaken some duty to carefully monitor
nuclear experiences and to disseminate appropriate warnings.
Moreover, this duty runs, infer alia, to the nuclear power
industry. See also, Regulation of Nuclear Power Reactors and
Related Facilities, \6 Atomic Energy Law Journal 256 (1974).
Application of the Federal Tort Claims Act
The existence and alleged breach of the duty does not,
however, end our inquiry. If the purported breach occurred
through a misrepresentation or the exercise of discretion, suit
is nevertheless barred. As such, the mere breach of a duty may
be an insufficient predicate to impose liability. United States v.
Neustadt, 366 U.S. 696 at 710-11, 81 S.Ct. 1294 at 1302, 6
L.Ed.2d 614; Green v. United States, 629 F.2d 581, 584 (9th
Cir.1980) (“[T]he existence of a duty on the part of the
Government to provide information to plaintiffs [does not]
render the [misrepresentation] exception inapplicable”); Pre-
ston v. United States, 596 F.2d 232, 238 n.9 (7th Cir.), cert.
denied, 444 U.S. 915, 100 S.Ct. 228, 62 L.Ed.2d 169 (1979)
(where the breach of an existing duty occurs through a misrep-
resentation, suit is barred.) Accord, Cross Brothers Meat
Packers, Inc. v. United States, 533 F.Supp. 1319, 1323
(E.D.Pa. 1982).
Misrepresentation Exception
We now turn to the “misrepresentation” exception. Plain-
tiffs contend that the governmental duty owed to them was
breached by the NRC’s negligent failure to properly perform
its undertaking of nuclear plant inspection, licensing and
distribution of supplemental safety notices. The NRC, on the
other hand, characterizes the complaint as alleging only a
negligent misrepresentation; i.e., by failing to warn when there
was a duty to do so, it misrepresented to plaintiffs the fact that
the plant was safe when, in reality, it was not.
27a
The FTCA’s “misrepresentation exception” includes a juris-
dictional prohibition against suits for “negligent misrepresen-
tation”. United States v. Neustadt, 366 U.S. at 706-07, 81
S.Ct. at 1300. Additionally, the Supreme Court has cautioned
that our inquiry necessitates “looking beyond the literal mean-
ing” of the complaint to determine the “real” cause of action.
Id. at 703, 81 S.Ct. at 1298. This frequently “decisive and
difficult” task requires separating cases of “true negligence”
from those of “misrepreseatation in negligence’s clothing”.
Cross Brothers Meat Packers v. United States, 537 F.Supp. 204
at 205 (E.D.Pa. 1982) (denying motion to reconsider}.
The initial issue then becomes one of characterization. Does
the complaint at bar sound in “negligent misrepresentation” or
“negligence”? The inquiry is a difficult one and conflicts
between decided cases are not subject to facile resolution.
Two Supreme Court cases highlight the conflicting lines of
authority. United States v. Neustadt, supra, and Indian Towing
v. United States, 350 U.S. 61, 76 S.Ct. 122, 100 L.Ed. 48
(1955).
Neustadt involved a couple who obtained FHA mortgage
approval prior to the purchase of their home. Specifically,
defendant therein, the FHA, approved the mortgage 2pplica-
tion for $24,000. Structural damage manifested itself shortly
after plaintiffs closed on the house. Plaintiffs, claiming that
they relied upon the FHA’s valuation of the house when they
$ Interestingly, plaintiffs have a suit currently pending against B & W,
the plant designers. The allegations there track the ones at bar and complain
generally that defendant therein knew of the Davis-Besse accident and
nevertheless completed construction of the TMI plant with the faulty pilot-
operated relief valve. Moreover, plaintiffs complain in the other suit that B &
W promulgated safety regulations designed to av-ud a similar accident and
that they failed to notify plaintiffs of the new procedures. The complaint
against B & W sounds in misrepresentation and not negligence. Here, of
course, plaintiffs assert that similar allegations purportedly sound in negli-
gence and not misrepresentation.
Recently, the New York Court granted B & W's motion for summary
judgment on all of plaintiffs’ claims grounded in strict liability. See, General
Public Utilities Corp. v. Babcock & Wilcox Co., $47 F.Supp. 842
(S.D.N.Y.1982).
28a
prepared their offer, sued for the difference between the FHA’s
appraised value and the house’s fair market value.
The Supreme Court held that the FHA negligently misrepre-
sented the house’s value to plaintiffs, but that the suit was
barred by the misrepresentation exception. The Court also
observed that the FTCA’s misrepresentation exception gener-
ally governs governmentally transmitted “information for the
assistance and guidance of other persons in the conduct of
their economic and commercial affairs”, and is confined “very
largely to the invasion of interests of a financial or commercial
character in the course of business dealings”. 366 U.S. at 710
and 711 and n. 26, 81 S.Ct. at 1302 and n. 26.
in Indian Towing, supra, the Coast Guard undertook to
operaie a lighthouse off the Louisiana coast. Having assumed
“operational control” of the lighthouse, the Coast Guard
failed to properly maintain it. The court held that once the
Governmen: had undertaken control of the lighthouse it was
then obligated to maintain it in proper working order. The
negligent failure to properly do so provided a liability-creating
predicate.
The parallel between the case at bar and Neustadt and
Indian Towing is obvious. Plaintiffs contend that the NRC’s
Statutory and actual assumption of the duty to inspect and
approve license applications, operating procedures and design
specifications, etc., is much like the beacon which the Coast
Guard provided to warn mariners in /ndian Towing. Since the
duty was purportedly breached, plaintiffs urge that the Gov-
ernment’s motion to dismiss must be denied.
The Government, on the other hand, views the case as
falling squarely within the line of cases which follow Neustadt.
Its assertion is that a look beyond the literal wording of the
complaint discloses, at best, a simple negligent misrepresenta-
tion to plaintiffs of their plant’s safety. Moreover, the NRC’s
purported failure to warn can amount to a negligent misrepre-
sentation by omission since the exception applies to cases
where “mere ‘talk’ or failure to ‘talk’ on the part of a
government employee is asserted as the proximate cause of the
damages”. City & County of San Francisco v. United States,
615 F.2d 498, S05 (9th Cir.1980), quoting, National Mfg. Co.
v. United States, 210 F.2d 263, 276 (8th Cir.1954).
29a
The case at bar actually represents a hybrid case falling
somewhere between Neustadt and Indian Towing. The Indian
Towing line of cases usually involves the negligent “operational
control”® of the harm-causing instrumentality. Damages gener-
ally are expressed in terms of personal injury or loss of
property. The cases which follow Neustadt concern governmen-
tal transmission of false or inadequate information which
results in damages flowing from commercial decisions based
thereon. Under Neustadt, there is no “operational control”
and frequently no liability. Green v. United States, 629 F.2d at
581. In the case at bar, we have the Neustadt element of the
transmittal of false information coupled with the /ndian Tow-
ing element of property damage.
We recognize that the characterization of plaintiffs’ com-
plaint as sounding in actionable negligence or in inactionable
negligent misrepresentation is not free from doubt and that the
decided cases are not fully reconcilabie, Green v. United
States, 629 F.2d at 585. Nevertheless, we conclude that the
NRC’s lack of “operational control” of TMI’, coupled with
plaintiffs’ allegations of “misrepresentation” in the B & W
suit’ and the NRC’s “failure to talk” here, warrants our
conclusion that the suit sounds in negligent misrepresentation
6 Plaintiffs asseverated at oral argument that “operational control” is
not a sine qua non for imposing governmental liability. Rather, they argue
that liability may be imposed if the Government fails to warn of a dangerous
condition after engendering reliance. This theory is supported by S.A.
Empresa De Vincas Aerea Rio Grandense (Varig Airlines) v. United States,
81-5366 (9th Cir. October 8, 1982) and Barnson ». United States, 531 F.Supp.
614 (D.Utah 1982) (denying motion to dismiss a complaint grounded in the
Government's inspection of a privately owned, federally licensed mine.) See
also, Blessing v. United States, 447 F.Supp. 1160 (E.D.Pa.1978). However, in
most cases in which governmental liability is found, some degree of opera-
tional control frequently exists.
7 Plaintiffs correctly argue that Toole v. United States, 588 F.2d 403
(3d Cir. 1978), imposed liability absent operational control of the harm-caus-
ing instrumentality. However, Toole did not address the misrepresentation
exception and did not consider whether the lack of operational control would
affect the Court's characterization of the suit as sounding in negligence or
misrepresentation.
8 See, note 5, supra.
30a
as defined in Neustadt and its progeny. This does not, however,
end our inquiry.
Most of the cases which discuss the scope of the misrepresen-
tation exception opine that.it is limited “very largely”, Neu-
stadt, 366 U.S. at 711 and n. 26, 81 S.Ct. at 1302 n. 26, to the
invasion of financial interests or that it is “most often”
applicable to suits alleging improper governmental evaluation
of economic factors. Ramirez v. United States, 567 F.2d 854,
856 (9th Cir.1977). Plaintiffs, therefore, argue that notwith-
standing any characterization of their complaint as sounding in
“negligent misrepresentation”, this action is not necessarily
barred because the complained of misrepresentation does not
relate to the invasion of financial interests. Hence, according
to plaintiffs, assuming a negligent misrepresentation, they may
nevertheless maintain this suit which seeks recompense for the
Government’s failure to provide safety data, rather than the
faulty transmission of information containing an economic
forecast.
Countering, the Government urges that the multitude of
cases which discuss the misrepresentation bar as being “very
largely” confined to cases involving financial interests, does
not preclude the possibility that suits based upon misrepresen-
tations of non-financial interests and factors are also barred.
Indeed, one court noted that it was “unaware” of any Congres-
sional indication to limit the misrepresentation exception to
cases alleging financial or commercial loss and concluded that
recovery for personal injury, wrongful death or property dam-
age is also barred. Lloyd v. Cessna Aircraft Co., 429 F.Supp.
181, 187 (E.D.Tenn.1977). Other courts disagree. See, e.g.,
Kohn v. United States, 680 F.2d 922, 926 (2nd Cir. 1982) (the
misrepresentation exception bars only those suits seeking dam-
ages for commercial decisions predicated upon incorrect or
incomplete information.) In any case, most courts continue to
hold that the misrepresentation bar goes “most often” to cases
involving business transactions. Although there may be and
probably are grounds for differences of opinion, we conclude
that the scope of the misrepresentation exception is not so
broad as to bar this suit.
Our conclusion is not altered by the NRC’s attempt to
characterize their function as supplying business information
3la
.o piaintiffs. True, plaintiffs are claiming economic damage
due to their reliance upon the NRC’s misrepresentations.
However, the type of information relied’ upon by plaintiffs
differs substantially from that which is traditionally discussed
in the cases in which suit is barred. See e.g., Neustadt.
Moreover, the fact that plaintiffs’ damages are expressed as
business losses does not transform safety misrepresentations
into commercial ones. The articulated “test” for determining
the type of misrepresentations which occurred is “not whether
the injury was economic, but whether it resulted from a
commercial decision based upon governmental misrepresenta-
tions”. Preston v. United States, 596 F.2d 232, 239 (7th
Cir.1979). Hence, our inquiry focuses upon whether plaintiffs’
9 Patentas v. United States, 687 F.2d 707 at 717, stressed the fact that
reliance upon the Government’s undertaking which induces forebearance
from engaging in a similar, private undertaking, is one method of properly
alleging a claim under the Good Samaritan rule.
Patentas, authored by Judge Becker, considered whether plaintiifs could
maintain suit against the Coast Guard for the faulty inspection of a ship
which exploded during the unloading of its oil cargo. The ship, ELIAS,
suffered a fire while at sea. Prior to its unloading, a Coast Guard inspector
checked to determine whether it was safe to unload the cargo and to be sure
that the cause of the fire had been remedied. The Coast Guarda determined
that the ship was safe when, in fact, it was not. Thereafter, while unloading,
the ship exploded killing thirteen people.
Patentas held that the district court properly dismissed the complaint. In
discussing the scope of the Government’s Good Samaritan liability, the court
noted that none of the plaintiffs had known of the purpose of the Coast
Guard inspection. The announced role is that reliance upon the Govern-
ment’s inspection must be alleged in order to state a claim under the FTCA
for failure to conduct a proper inspection.
In the case at bar, plaintiffs have argued that due to the NRC’s undertak-
ing, they and the industry forebore from “developing their own private
warning system to monitor nuclear operating experience industrywide”. See,
Plaintiffs’ Memorandum In Opposition To Defendants’ Motion To Dismiss
(Documen. 18) at 66-67, n. 12. Moreover, in a recently filed amended
complaint, plaintiffs have specifically alleged the element of reliance as part
of their complaint. See, Paragraphs 66A, 66B, 66C of plaintiffs’ amended
complaint.
Accordingly, the Patentas rule aids plaintiffs to the extent that this action
is not otherwise barred by the misrepresentation exception.
32a
injuries arise from an economic or a safety misrepresentation.
The fact that the injury manifested itself as economic harm is
irrelevant to this determination. As the Third Circuit noted,
Congress, in enacting the FTCA, “focused its attention upon
the type of governmental activity that might cause harm, not
the type of harm caused”. Quinones v. United States, 492 F.2d
1269, 1280 (3d Cir.1974) (emphasis added). Applying these
standards we conclude that plaintiffs have suffered losses due
to safety and not commercial misrepresentations and deny
defendant’s motion predicated upon the misrepresentation ex-
ception.
Discretionary Function Exception
We now consider the Government’s claim that the “discre-
tionary function exception” bars this suit.'° Briefly, this excep-
tion precludes an FTCA suit against the Government for the
harm resulting from the improper exercise of official discretion
and is grounded in notions of separation of powers. The
Government argues that its decision to issue a license to
plaintiffs, to promulgate IE Bulletins, Circulars and to notify
Congress of “abnormal occurrences”, etc., all involve the
exercise of executive discretion which is not subject to judicial
scrutiny. For example, defendant argues that prior to the
issuance of an “IE Bulletin”, NRC officials must exercise their
experience, expertise and discretion in determining whether the
event is “important”, has “potential” for being “generic in
nature” and whether “timely information is necessary for
licensees”. See Manual, Chapter 1100-1125-041. Similar deter-
minations must be made prior to the issuance of Circulars
which consider whether an event “warrants wide dissemina-
tion”. Jd. at 1125-042.
10 In view of our conclusion we need not address plaintiffs’ alternate
argument that if the discretionary function exception is applicable, we should
not dismiss the suit af this juncture. This argument is grounded on the
allegation that the record does not now reveal whether NRC scientists
actually made a discretionary decision not to warn of Davis-Besse or whether,
through default or caprice, they simply abdicated their responsibility.
33a
In Griffin v. United States, 500 F.2d 1059, 1063-66 (3d
Cir.1974), the Third Circuit rejected a contention similar to the
one which the Government makes today. Here, the Govern-
ment contends that it employed discretionary decision-making
authority in determining how, if at all, to notify nuclear
licensees of the Davis-Besse accident and of other so-called
“precursors”. Defendant asserts that the scientific judgments
which it made in determining the “generic” applicability of the
Davis-Besse accident are the kinds of decisions of which the
discretionary function exception bars review.
Plaintiff in Griffin had ingested a live polio vaccine; the
Governnent had previously tested the lot from which it came
and certified it as safe. The decision to certify the vaccine
required reference by Government scientists to five criteria.
Hence, whether the vaccine was safe required exercise of
scientific judgment, expertise and discretion by Government
scientists.
The court held that the “discretionary function” exception
did not dar suit since the judgment involved was of a scientific
nature and that the discretionary function exception only bars
suit predicated upon policy-making decisions; i.e., those which
consider the feasibility or practicability of Government pro-
grams. Cf., Dalehite, supra, (barring suit challenging the
Governnent’s decision to create a fertilizer export program
using volatile chemicals which resulted in an unprecedented
explosion.) The Griffin court viewed scientific “judgments”,
similar io the ones at bar, as essentially ministerial acts per-
formed by Government physicians whose responsibility was
“limited” to “merely executing policy judgments” of the Sur-
geon Geeral. 500 F.2d at 1059. Judge Becker also concluded
that regulatory decisions of a scientific or professional charac-
ter, aS opposed to policy-oriented conclusions, are properly
reviewable. Blessing v. United States, 447 F.Supp. at 1178.
Defendant attempts to distinguish Griffin by asserting that
the degree of scientific judgment there involved was subject to
exact, specific statutory commands, see e.g., Griffin v. United
States, ‘00 F.2d at 1062-63, n. 7, whereas here in the NRC’s
34a
scientific judgments as to whether an “abnormal event” oc-
curred at Davis-Besse or whether “generic problems” existed,
requires reference to broad, inexact statutory commands. Con-
tinuing, defendant urges that the lack of specific statutory
guidelines within which NRC scientists exercise their “discre-
tion” distinguishes this case from Griffin.
We disagree. Although NRC scientists possess judgmental
latitude broader than that which existed in Griffin, we con-
clude that the governing standards are not so vague or inexact
as to call for unfettered scientific “discretion”. Indeed, equally
broad exercises of judgment have survived similar challenges.
For example, Caban v. United States, 671 F.2d 1230, 1233
(2nd Cir.1982) held that an immigration officer’s judgment
governed by standards requiring reference as to how an appli-
cant “appears” and requiring that the official be properly
“satisfied” of the proofs of entitlement, are not so broad as to
compel immunization from suit under the discretionary func-
tion exception. Ingham v. Eastern Airlines, 373 F.2d 227, 233
(2nd Cir.), cert denied, 389 U.S. 931, 88 S.Ct. 295, 19 L.Ed.2d
292 (1967) held that the duty to report changing weather
conditions when “necessary” was sufficient guidance to with-
stand challenge. Accord, Wenninger v. United States, 234
F.Supp. 499, 504 (D.Del. 1964), aff'd, 352 F.2d 523 (3d
Cir.1965). Moreover, there is nothing so unique in the type of
injury at bar as to preclude application of traditional tort
principles. Allen v. United States, 527 F.Supp. 476, 488
(D.Utah 1981).
Finally, the Griffin court noted that the judgments which
Government scientists may permissibly make are circumscribed
by applicable regulations; where decision-makers exceed that
scope, liability may properly be imposed. 500 F.2d at 1068-69.
See also, United Scottish Ins. Co. v. United States, 614 F.2d
188, 198 (9th Cir.1979) (the breach of “duty creating” regula-
tions vitiates the Government’s ability to assert the discre-
tionary function exception).
35a
Conclusion
The issues which we have addressed, the initial characteriza-
tion of the suit as sounding in misrepresentation or negligence,
the contours of the misrepresentation exception and the proper
breadth of the Government’s discretion are all “controlling
issues” which admit to a “substantial ground for difference of
opinion”. 28 U.S.C. § 1292(b). Indeed, in deciding these issues
we have considered numerous decisions which are admittedly
not “fully reconcilable”. Green v. United States, 629 F.2d at
585. Moreover, our conclusion to deny the . overnment’s
motion to dismiss subjects the Government to tremendous trial
costs, a staggering amount of potential liability!’ and forces
them to defend a suit in which they may ultimately prevail on
jurisdictional issues. As such, we conclude that the “ultimate
termination” of this litigation may well be “materially ad-
vanced” by an immediate appeal. See, Katz v. Carte Blanche
Corp., 496 F.2d 747, 755 (3d Cir.1974), 28 U.S.C. § 1292(b).
Accordingly, we will certify this matter for an immediate
interlocutory appeal and stay all proceedings in this Court
pending the outcome thereof. Jd. The question which we
certify to the Third Circuit is no broader than that which has
previously been certified for such an appeal, Zenith Radio
Corp. v. Matsushita Electric Industrial Co., Inc., 478 F.Supp.
889, 946 (E.D.Pa. 1979), and is as follows:
“Is our decisicn correct that neither the misrepresentation
nor the discretionary function exception bars this suit?”
An appropriate order will issue.
li We recognize that the amount in controversy, coupled with the
industry involved and the identity of the defendant invites a visceral reaction
quite unlike that which normally permeates litigation. However, we have at
all times sought to dispense true Plutonic justice; i.e., justice deriving from
“reason unaffected by passion”.
36a
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 83-1017
as
GENERAL PUBLIC UTILITIES CORPORATION, JERSEY CEN-
TRAL POWER & LIGHT COMPANY, METROPOLITAN EDISON
COMPANY, PENNSYLVANIA ELECTRIC COMPANY,
WS.
UNITED STATES OF AMERICA,
Appellant.
(D.C. Civil No. 81-4950)
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
i
Present:
WEIS, HIGGINBOTHAM and SLOVITER,
Circuit Judges.
-t-
JUDGMENT
This cause came on to be heard on the record from the
United States District Court for the Eastern District of Penn-
sylvania and was argued by counsel September 13, 1983.
On consideration whereof, it is now here ordered and ad-
judged by this Court that the within cause be, and the same is
hereby remanded to the said District Court for further pro-
ceedings consistent with the opinion of this Court.
ATTEST
/s/ SALLY MRVOS
Clerk
September 28, 1984
37a
Provisions of the Energy Reorganization Act of 1974,
42 U.S.C. § 5801, et seq.
Section 206, 42 U.S.C. § 5846:
Compliance with safety regulations
Notification to Commission of noncompliance
(a) Any individual director, or responsible officer of a firm
constructing, Owning, operating or supplying the components
of any facility or activity which is licensed or otherwise
regulated pursuant to the Atomic Energy Act of 1954 as
amended, or pursuant to this chapter, who obtains information
reasonably indicating that such facility or activity or basic
components supplied to such facility or activity—
(1) fails to comply with the Atomic Energy Act of
1954, as amended, or any applicable rule, regulation,
order or license of the Commission relating to substantial
hazards, or
(2) contains a defect which could create a substantial
safety hazard, as defined by regulations which the Com-
mission shall promulgate,
shall immediately notify the Commission of such failure to
comply, or of such defect, unless such person has actual
knowledge that the Commission has been adequately informed
of such defect or failure to comply.
Penalty for failure to notify
(b) Any person who knowingly and consciously fails to
provide the notice required by subsection (a) of this section
shall be subject to a civil penalty in an amount equal to the
amount provided by section 2282 of this title.
Posting of requirements
(c) The requirements of this section shall be prominently
posted on the premises of any facility licensed or otherwise
38a
regulated pursuant to the Atomic Energy Act of 1954, as
amended.
Inspection and Enforcement
(d) The Commission is authorized to conduct such reason-
able inspections and other enforcement activities as needed to
insure compliance with the provisions of this section.
Section 208, 42 U.S.C. § 5848:
Abnormal occurrence reports
The Commission shall submit to the Congress each quarter a
report listing for that period any abnormal occurrences at or
associated with any facility which is licensed or otherwise
regulated pursuant to the Atomic Energy Act of 1954 as
amended, or pursuant to this chapter. For the purposes of this
section an abnormal occurrence is an unscheduled incident or
event which the Commission determines is significant from the
standpoint of public health or safety. Nothing in the preceding
sentence shall limit the authority of a court to review the
determination of the Commission. Each such report shall
contain—
(1) the date and place of each occurence;
(2) the nature and probable consequence of each occur-
rence;
(3) the cause or causes of each; and
(4) any action taken to prevent reoccurrence;
the Commission shall also provide as wide dissemination to the
public of the information specified in clauses (1) and (2) of this
section as reasonably possible within fifteen days of its receiv-
ing information of each abnormal occurrence and shall provide
as wide dissemination to the public as reasonably possible of
the information specified in clauses (3) and (4) as soon as such
information becomes available to it.
Excerpts From The Amended Complaint
FIRST CAUSE OF ACTION
NRC’s Failure to Perform with Due Care its Undertaking to
Discover, to Analyze and to Warn of Safety Hazards
20. Plaintiffs repeat and reallege paragraphs 1-19 as pre-
viously set forth.
21. The NRC had undertaken to discover, to analyze and to
warn licensees of nuclear plants, including Met-Ed, of defects
and hazardous conditions in plant components, systems, anal-
yses, procedures and instructions. The NRC knew or should
have known that plaintiffs would rely on the said undertaking,
and plaintiffs did so rely. As set forth below, a proximate
cause of the March 28, 1979 accident at TMI-2, its disastrous
effects and the resulting damages to plaintiffs was the NRC’s
failure to perform this operational undertaking with due care.
22. As alleged in detail herein, the NRC negligently or
wrongfully failed to warn licensees of other B&W-supplied
nuclear plants, including Met Ed, of defects and hazardous
conditions in plant components, systems, analyses, procedures
and instructions of which the NRC, in the exercise of due care,
should have known as a result of its investigation of a similar
incident in September 1977 at the Davis-Besse nuclear plant of
the Toledo Edison Company and as a result of other ‘‘precur-
sors’? of the TMI-2 accident. The NRC has admitted its
negligent or wrongful failure, which is documented in a four-
volume report that the NRC approved, published and released
to the public in January 1980, entitled ‘‘Three Mile Island—A
Report to the Commissioners and to the Public’’ (hereinafter,
‘*Special Inquiry’’). The NRC, in its Special Inquiry, admits
that ‘‘The information concerning the incident that occurred at
Davis-Besse was not effectively distributed to other B&W
utilities, specifically to Metropolitan Edison,’’ even though
‘*it]he incident that occurred at Davis-Besse is almost an exact
copy of the accident that subsequently occurred at TMI.’’
40a
(Special Inquiry, Vol. 11, Part 1 at 155-56). The Special Inquiry
also states that the NRC knew that “‘similar pieces of equip-
ment [to that involved in the incident at Davis-Besse] with
comparable probabilities of similar failure modes were in-
stalled on other B&W plants. . . ."” (/d. at 156). Yet the NRC
failed to warn the licensees of such plants, including Met-Ed,
of the similar dangers. The NRC also admitted that ‘‘precur-
sors’’ such as “‘the Michelson report [a study by an NRC
consultant concerning, among other things, the response of
B&W reactors during a small-break loss-of-coolant accident
occurring at the top of the pressurizer] should have produced
guidance that, if it had been used, would have prevented the
extensive core damage that occurred at TMI.’’ (Special In-
quiry, id. at 138, emphasis in original). Had the NRC warned
Met-Ed of the defects and hazardous conditions which, in the
exercise of due care, should have been known to the NRC from
its investigation of the Davis-Besse incident and from other
precursors, Met-Ed would have used the information, instruc-
tions and guidance to prevent the extensive core damage that
occurred at TMI-2.
The NRC Undertaking
23. The NRC has undertaken to render services to licensees
of nuclear plants which, as the NRC has or should have
recogni=ed, are necessary for the protection of the property of
owners, Operators and licensees of nuclear plants, including
plaintiffs. Specifically, th NRC in fact undertook to discover
information from varicus sources, including operating experi-
ence at other nuclear plants, to analyze that information, and
to warn licensees of defects and hazardous conditions in plant
components, systems, analyses, procedures and instructions.
24. The NRC’s undertaking to discover, to analyze and to
warn licensees of defects and hazardous conditions was per-
formed pursuant to statutory and regulatory requirements. In
particular, Section 208 of the Energy Reorganization Act of
1974, 42 U.S.C. § 5848, requires the NRC to disseminate
information on any abnormal occurrence, including its causes
4la
and any action taken to prevent reoccurrence, ‘‘as soon as such
information becomes available to it.’’ Likewise, 10 C.F.R.
§ 1.64 imposes a duty on the NRC to administer programs for
“*notifying licensees regarding generic problems so as to
achieve appropriate precautionary or corrective action.’’ These
Statutory and regulatory requirements were promulgated for
the particular benefit of owners, operators and licensees of
nuclear plants, as well as for the protection of the public health
and safety. Thus, plaintiffs are members of the class which the
statutory and regulatory requirements were designed to pro-
tect.
25. The Energy Reorganization Act requires the NRC to
obtain, from any entity which constructs, owns, operates or
supplies components to a nuclear facility, reports of (a) non-
compliance with the Atomic Energy Act or any applicable rule,
regulation, order, or license of the NRC relating to substantial
safety hazards, in any component or analysis of a nuclear
facility or (b) any defect which could create a substantial safety
hazard, as defined by NRC regulations.
26. The NRC has in fact undertaken to disseminate among
licensees of nuclear plants information derived from operating
experience at all nuclear plants in the United States, including
data on component failures and procedure changes, and has
done so pursuant to mandatory regulations and agency operat-
ing procedures. 10 C.F.R. § 1.64 (1977); NRC Manual Ch.
0127 (1978); Inspection and Enforcement Manual Ch. 1110
(1977). Methods of dissemination include the issuance of
Bulletins and Circulars to warn licensees of events or condi-
tions of generic importance to safety. Inspection and Enforce-
ment Manual Ch. 1125 (1978).
37. On September 26, 1977, the NRC commenced an inves-
tigation into the accident at Davis-Besse as required by its
regulations. An NRC inspector from the Office of Inspection
and Enforcement identified both the problem of operator
response during the accident and the need for revised operator
42a
training. The NRC inspector and six other members of the
NRC staff, including senior engineers from the Office of
Nuclear Reactor Regulation, attended meetings at Davis-Besse
during the week following the accident.
38. Within two weeks of the September 24, 1977 accident,
members of the NRC Office of Nuclear Reactor Regulation
and the Office of Inspection and Enforcement met to discuss
the NRC investigation of the accident. Subsequently the Office
of Inspection and Enforcement, which had assumed primary
responsibility for investigation of the accident, was directed to
ascertain ‘‘the operator’s role in participating in the event
...°’ and to investigate ‘‘the operator’s decision to secure HPI
[high-pressure injection] flow based on pressurizer level indica-
tion ....’’ Internal NRC memorandum from Denwood F.
Ross to Karl V. Seyfrit, October 20, 1977.
39. On October 21, 1977, the Assistant Director of the
Division of Reactor Operations Inspection of the Office of
Inspection and Enforcement requested that Toledo Edison
explain in its Licensee Event Report why the operators termi-
nated high-pressure injection during the September 24, 1977
accident. In fact, the Toledo Edison report did not relate the
reasons for the termination of high-pressure injection by the
operators, and the NRC negligently or wrongfully failed to
report such reasons and related safety problems to licensees.
40. Following the September 1977 incident at Davis-Besse,
the NRC failed to use due care in performing its undertaking
to warn Met-Ed and other licensees of B&W-supplied nuclear
plants of defects and hazardous conditions in certain compo-
nents, systems, procedures and instructions which the NRC, in
the exercise of due care, should have discovered and analyzed.
These failures to use due care were inconsistent with duties
previously assumed and undertaken by the NRC through past
practice and regulations.
41. In addition, the NRC’s negligence or wrongful conduct
contravened duties imposed on the NRC by statute and regula-
tions.
43a
50. In September 1977, the NRC Reactor Systems Branch of
the Division of Systems Safety, Office of Nuclear Reactor
Regulation, received copies of a report prepared by Carlyle
Michelson, a Tennessee Valley Authority engineer and a con-
sultant to the NRC Advisory Committee on Reactor Safe-
guards (“ACRS”). The report, entitled “Decay Heat Removal
Probiems Associated with Recovery from a Very Small Break
LOCA for a B&W 205—Fuel Assembly PWR,” stated that,
during certain small-break loss-of-ccolant accidents, the pres-
surizer water level on B&W plants would give an erroneous
indication of the amount of water in the reactor coolant
system.
51. In January 1978, the Reactor Systems Branch ac-
knowledged the concerns of the Michelson report in a memo-
randum expressing concern that a misleading indication from
the pressurizer of the amount of water in the reactor coolant
system during a loss-of-coolant accident caused by a small
break at the top of the pressurizer would induce plant opera-
tors to turn off the liigh-pressure injection of replacement
coolant. The Reactor Systems Branch specifically noted in the
memorandum that such an incident had already occurred at
Davis-Besse as a result of a stuck-open pilot-operated relief
valve. The memorandum recognized that “operators would
control makeup flow [i.e., high-pressure injection] based on
the pressurizer level as part of their normal procedures” and
that as a result, “the operator could erroneously shut off
makeup flow [high-pressure injection] when significant [steam]
void occurs elsewhere in the system or loss of inventory
[coolant] is continuing.” The memorandum concluded that the
NRC should review the proposed procedures of plants which
were in the licensing process in order to ensure that plant
operators would have adequate information before terminating
the flow of high-pressure injection during such an incident. At
that time, TMI-2 was in the NRC licensing process, prior to the
issuance of its operating license.
52. In January 1978, Michelson provided the ACRS with a
revised version of his report. The revised Michelson report
44a
stated that plant operators, in reliance on the erroneous indica-
tion provided by the pressurizer water level of the amount of
water in the reactor coolant system, would terminate the
automatically activated high-pressure injection. The report
also revealed that the loss-of-coolant accident which would
cause such operator response had not been analyzed by B&W.
53. In the exercise of due care, the NRC should have
known, as a result of the Michelson Report and the Reactor
Systems Branch memorandum, that one potential consequence
of the predicted termination of high-pressure injection was
core uncovery and fuel damage.
54. After receiving the Michelson report, the NRC failed to
use due care in performing its undertaking to warn Met-Ed and
other licensees of B&W-supplied plants of generic defects and
hazardous conditions in components, systems, analyses, proce-
dures and instructions. These failures to use due care were
inconsistent with duties previously assumed and undertaken by
the NRC.
55. In addition, the NRC’s negligence or wrongful conduct
contravened duties imposed on the NRC by statute and regula-
tions.
* * *
Reliance on Undertaking and Proximate Cause
64. The aforesaid failures of the NRC to exercise due care in
the performance of its undertaking to discover, to analyze and
to warn plaintiffs of defects and hazardous conditions were
proximate causes of the accident at TMI-2 on March 28, 1979,
its disastrous effects and the resulting damages to plaintiffs.
Each of the acts or omissions set forth above was a substantial
factor in bringing about the accident, its effects and the
resulting damages.
65. Plaintiffs suffered harm to their property (a) because of
plaintiffs’ reliance upon the NRC’s undertaking to discover, to
analyze and to warn them of substantial safety hazards, and
4$a
(b) because the NRC’s failure to use due care to perform said
undertaking increased the risk of such harm.
66. Plaintiffs relied on the NRC to discover, to analyze and
to issue warnings of defects and hazardous conditions in
components, systems, analyses, procedures and instructions in
accordance with the NRC’s undertaking in fact and in accord-
ance with the NRC’s statutory and regulatory duties. Specifi-
cally, plaintiffs relied on the NRC to exercise due care to
discover, to analyze and to warn them of substantial safety
hazards based on operating experience at similar B&W-sup-
plied plants and other sources. Met-Ed maintained a formal
program for the review of communications from the Office of
Inspection and Enforcement to determine promptly whether
any adverse condition reported by the NRC required corrective
action at TMI-2. Consequently, had the NRC performed with
due care its undertaking to discover, to analyze and to warn
Met-Ed of substantial safety hazards, Met-Ed would have
taken prompt corrective action, thus avoiding the March 28,
1979 accident, its disastrous effects and the resulting damages
to plaintiffs.
66A. Plaintiffs’ knowledge of and reliance on the NRC’s
undertaking to discover, analyze and issue warnings of defects
and hazardous conditions in components, systems, analyses,
procedures and instructions induced them to forego certain
other possible remedies or precautions against the risk of such
defects and hazardous conditions.
66B. In light of the potentially devastating hazards of nu-
clear power recognized by Congress, the NRC’s undertaking
was central to the existence of the nuclear industry. Electric
utilities would not have chosen nuclear power over fossil fuels,
and would not have continued to operate nuclear plants,
without the assurances of safety provided by the NRC’s warn-
ing system or some alternative private system. Had the NRC
ceased operating its system, nuclear plant operators, including
plaintiffs, would have had to cease or drastically cut back their
operations or devise an alternative warning system.
46a
66C. Since it would have been totally unrealistic for each
plant to dispatch a team of investigators every time an unusual
occurrence with potentially generic significance took place at
another plant, the only realistic alternative to the NRC’s
warning system would have been a private central organization
to monitor nuclear operating experience nationwide and to
warn nuclear plant operators of generic safety hazards. As
long as the NRC’s warning system was in operation and it was
believed that the NRC was performing its undertaking with
due care, such a private organization would have been duplica-
tive and unnecessary. However, since the accident at TMI-2 and
the disclosure of the NRC’s failure to exercise due care in the
performance of its undertaking in connection with the Septem-
ber 24, 1977 event at Davis-Besse, the owners and operators of
nuclear plants, including plaintiffs, have in fact formed the
Institute of Nuclear Power Operations (INPO) which, among
other things, now monitors nuclear operating experience in-
dustrywide and warns the owners and operators of nuclear
plants of defects and hazards discovered at other plants.
Plaintiffs’ knowledge of and reliance on the NRC’s undertak-
ing to discover, analyze and issue warnings of generic safety
hazards and defects induced them to forego the possibility of
joining with other owners and operators of nuclear plants prior
to March 28, 1979 to form such a private central organization.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.