Petition for Writ of Certiorari — Sacramento Municipal Utility District v. United States

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IN THE

Supreme Court of the United States

SACRAMENTO MUNICIPAL UTILITY DISTRICT.

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

Of Counsel: DENNIS G. LYONS

Counsel of Record

MELVIN C. GARBOW

HOWARD N. CAYNE

EDWARD H. SISSON

S. JNATEL SIMMONS

STEVEN M. COHN

Sacramento Municipal

Utility District

Sacramento, CA

ARNOLD & PORTER 555 Twelfth Street, N.W.

Washington, D.C. Washington, D.C. 20004

New York, New York (202) 942-5000

KENT A. YALOWITZ

399 Park Avenue

New York, New York 10022

Attorneys for Petitioner,

Sacramento Municipal

January 2002 Utility District

et AE CCAR OLE RMT RSME Ne NEE PE ARAN NE

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

In 1992 Congress passed a statute requiring electric utili-

ties that purchased uranium enrichment services from U.S.

Government-operated plants prior to the enactment of the

statute to pay, for the next fifteen years, an annual “special

assessment” based on their quantity of enrichment services

purchased from those Government-operated plants prior to

the statute’s enactment. No assessments on purchases after

the enactment were to be made. The assessments were to be

used as part of a fund to decontaminate the Government

plants in question, which had engaged in uranium enrichment

activities since the 1940s, so that the plants could be

privatized as a new for-profit enterprise. Sacramento Munic-

ipal Utility District (“SMUD”) had purchased enrichment

services from the plants from 1971 to 1981, like other utilities

on a written fixed-price basis. The questions presented are:

1. Does the retroactive exaction of the “special

assessments” from SMUD take SMUD’s property for

public use without just compensation, or deprive SMUD

of its property without due process of law, in violation of

the Fifth Amendment?

2. Does the retroactive exaction of the “special

assessments” from SMUD constitute a targeted breach

of the commercial service purchase contracts between

SMUD and the Government, requiring the payment of

damages by the Government under United States v.

Winstar Corp., 518 U.S. 839 (1996)?

(1)

PARTIES TO THE PROCEEDING BELOW

The only parties to this case are Sacramento Municipal

Utility District and the United States of America. However,

somewhat similar cases were also decided the same day by

the Court of Appeals involving as plaintiffs Maine Yankee

Atomic Power Co., Omaha Public Power District, and

Commonwealth Edison Co.

RULE 29.6 LIST

SMUD is a governmental subdivision of the State of Cali-

fornia. It is not a “nongovernmental corporation” or a corpo-

ration of any sort.

TABLE OF CONTENTS

PURE BIE TEe FURRSONEIEY BP oeeecececesssseecvncesseseosssscovsesceses

PARTIES TO THE PROCEEDING BELOW...............

acelin see abnkisiiniiscsindaliine

CONSTITUTIONAL PROVISIONS AND STAT-

a SE ae

RES ae Re

SMUD Enters and Exits Nuclear Electric

et et A Re

The Rise of the Enrichment Corporation ...............00+-

ITT AsLi hci Us cidecnibhldedaboesiliclibersnndenianinensnsinsinininsnenenies

EN ee

The Court of Appeals Decision

TS iid atilicits niaiaiaticnihacsaunbenstneasiseveeninenstitnte

aN aba EEC ee

REASONS FOR GRANTING THE WRIT...............00.

1. The Court Below Has Sanctioned a Retro-

spective Enactment by Congress that Is More

Radical than Any Permitted by this Court...........

en a

(b) The Effect of Self-Dealing on Analysis........

Contribution from Biameless Parties.............

(ili)

oN KN WH tr

TABLE OF CONTENTS—Continued

(d) “Benefit” Without Responsibility ..........++:++.

(e) An Unprecedented Taxing Statute............++

2. This Case May Allow Further the Analysis of

the Constitutional Provisions Relating to

Retrospective Legislation.......seesseseeeerereerersees

3. The Winstar Issue ............ccccccccrsrcrccceceressssvsecenceers

CONCLUSION occcececovsvesccccvonecseesceceseccsosvssereneseosoveosssorses

APPENDICES

Appendix A—Opinion of the Court of Appeals for the

Federal Circuit in Sacramento Municipal Utility

District V. United States .........cccssccssseserreseereeeenseenrnees

Separate Opinion of Chief Judge Mayer and Senior

Judge Friedman ........scscesesesseserssesrsseesesennenenesnensneees

Appendix B—Opinion of the Court of Appeals for the

Federal Circuit en banc in Commonwealth Edison

Co. V. United States ...........cccccscsscccsccccocvccccscssonsesccosees

Dissenting Opinion of Chief Judge Mayer and

Judges Newman and Rade..........ssssssesesenesseeeseneres

Appendix C—Opinion of the Court of Federal Claims

in Sacramento Municipal Utility District v. United

GENIOG cccecvveveessovseresenevesecosovervsssoercsecseoenrstoeeeweees sinicoeenes

Appendix D—

A.—Pertinent Provisions of EPACT as Enacted.

B.—Current State of Certain Provisions of

Titles X and XI Of EPACT ...ccccocecccccesceceeseoes

C.—Pertinent Provisions of Public Law 91-560.

Page

17a

69a

TABLE OF AUTHORITIES

CASES Page

Armstrong v. United States, 364 U.S. 40 (1960) ... 27

Atlas Corp. v. United States, 895 F.2d 745 (Fed.

Seals ‘OI vcisiabvaticesiasielasip ciara a Ree ee na aaa 24

Commonwealth Edison Co. y. United States,

247 F.3d 1378 (Fed. Cir. 2001), cert. denied,

No. 01-205, Dec. 3, 2001 .......ccscesessesesooeeseeeese..., 29

Commonwealth Edison Co. y. United States,

271 F.3d 1327 (2001)...cecocoscovecsecesoovecesseseecese,.., passim

Concrete Pipe and Products of California Co. v.

Construction Laborers Trust, 508 U.S. 602

LTTE ocscnicsisccsiniibiidaidnaddiiniaeasmuadn te Caner 13

Eastern Enterprises vy. Apfel, 524 U.S. 498

(1998) (“Eastern ECT IIE) vccisnsccevesencsseses, passim

FHA v. The Darlington, Inc., 358 U.S. 84 (1958)... 13

Funkhouser v. J. B. Preston Co., 290 U.S. 193

EP EI) insccontiencieinbnbiiinldaii ata. Counts 12

General Motors Co. v. Romein, 503 U.S. 181

CF) wsnvicceninctenepicctinaigia aida ee ae 12, 13

Landgraf v. USI Film Products, 511 U.S. 244

CF iccintneiteeseiaiiniaiamiacema nes ae ae 16

Lichter v. United States, 334 U.S. 742 (1948)....... 12

Milliken v. United States, 283 U.S. 15 CTFST} ccecees 13

National Railroad Passenger C orp. v. Atchison,

Topeka & Santa Fe R. Co., 470 U.S. 45]

CEP ncivnireiinnanscladisasbictaeslitieia uma ae eens 13

PBGC v. R. A. Gray & Co., 467 U.S. 717 (1984)... 9,13

Phillips v. Washington Legal Foundation, 524

ie EPP icchisntina nt ene 26

United States v. Carlton, 512 U.S. 26 (1994)

CC Dice ee 13, 20, 24, 27

United States v. Darusmont, 449 U.S. 292 (1981)

Weft ORSON Ss MET ~ 13, 24

United States v. Hemme, 476 U.S. 558 (1986)

GFP cchisitcucteeemcte i oo ee 13, 24

TABLE OF AUTHORITIES—Continued

Page

United States v. Locke, 471 U.S. 84 (1985).......++ 13

United States v. Sperry Corp., 493 U.S. 52

(1989) ....cccsccscsscsscsscsesseseersensesenensssrsenenesnssnsensnnens 12, 13

United States v. Winstar Corp., 518 U.S. 839

(1996) (“SWINStAL”’) ..ccceeeseeeseeneeensereeeneees 8, 9, 20, 27-28

Usery v. Turner Elkhorn Mining Co., 428 USS. |

(1976) (“Turner ELKROrN”’)......seseeesereeeeeees 9, 13, 16, 21

Washington Legal Foundation v. Legal F ounda-

tion of Washington, 271 F.3d 835 (9th

Cir, 2001 ) ..cosccecersoverceesevesevensevsceserroveneseveonsoesseners 26

Webb’s Fabulous Pharmacies, Inc. v. Beckwith,

449 U.S. 155 (1980).....sereeeereeeeeesnerseneerseeneennenens 26

Welch v. Henry, 305 U.S. 134 (1938) ....ereesereeeeeees 13

Yankee Atomic Elec. Co. v. United States, 112

F.3d 1569 (Fed. Cir. 1997), cert. denied, 524

U.S. 951 (1998) (“Yankee Atomic’’).......0+++ 7,9, 23, 28

FEDERAL STATUTES & REGULATIONS

2B U.S.C. § 1254(1) ....ccccccccessccesrecseseeeserssssserennees 2

PLL. 91-173, Title IV, Part C, § 421, 83 Stat. 795

(1969).....csccscscssscsecsscsseeseesenserseessessssesensenssensonees 12

P.L. 91-560, 84 Stat. 1474 0... .eececseseeesseteeeeeeeeneees 5

PLL. 102-486, Oct. 24, 1992, Title IX, § 901, 106

Stat. 2923 ef SOQ. ..cceccssseseerreesreeseaserscsrseeneeseasens 6

PL. 102-486, Title XI, § 1101, 106 Stat. 2951,

2953-54, 42 U.S.C. § 22972 & Q-1 ..eescereeeeerees 6, 7

P.L. 104-134, 110 Stat. 1321-336 and-349............ 6

31 Fed. Reg. 1649 (1966) .......ssesessereersrenseeneees 3

51 Fed. Reg. 27132 (1986) ......sssssseeerrerererneneneees 5

10: CER. Part 50....cccccccccccesesevesevceveesesoonsvereesesssesoes 4

10 CFR. Part 70....ccccccvcecsccccsesccceveossvcccvereseeronnveeeres 4

OTHER AUTHORITIES

Uranium Enrichment Services Criteria, AEC,

Dated Jan. 23, 1973........cccccscccccssccceeseeessecesneeeres 5

IN THE

Supreme Court of the United States

No.

SACRAMENTO MUNICIPAL UTILITY DISTRICT,

Petitioner,

UNITED STATES OF AMERICA,

Respondent.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

Sacramento Municipal Utility District (“SMUD”) respect-

fully petitions for a writ of certiorari to review the judgment

of the United States Court of Appeals for the Federal Circuit

in that court’s Docket No. 99-5158.

OPINIONS BELOW

The opinion of the panel of the Court of Appeals (App.

la-16a.) that rendered the decision is reported at 27]

F.3d 1357.' The court’s opinion and judgment were entered

' The opinion in question disposed of three separately docketed cases

in the Court of Appeals, which were not consolidated: No. 99-5156, in

which Maine Yankee Atomic Power Co. was Plaintiff-Appellant; No.

99-5158, in which SMUD was Plaintiff-Appellant; and No. 99-5160, in

which Omaha Public Power District was Plaintiff-Appellant. A judgment

was entered in each of the three dockets.

by the panel expressly under the constraint of an opinion of

that court en banc in a somewhat similar case decided the

same day, Commonwealth Edison Co. v. United States, 271

F.3d 1327. It is presented at App. 17a-68a. The opinion of

the Court of Federal Claims dismissing SMUD’s complaint

is reported at 44 Fed. Cl. 395 (1999) and appears at App.

69a-9 La.

JURISDICTION

The opinion and judgment of the Court of Appeals were

entered on November 20, 2001. This Court’s jurisdiction is

invoked under 28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED

This case concerns the last two clauses of the Fifth

Amendment to the Constitution, which read as follows:

No person shall . . . be deprived of life, liberty, or

property, without due process of law; nor shall

private property be taken for public use, without

just compensation.

It also involves certain provisions of Titles IX, X and XI of

the Energy Policy Act of 1992 (“EPACT”), P.L. 102-486

(Oct. 24, 1992), which, among other things, added new

sections to the Atomic Energy Act of 1954 (“AEA”). Those

provisions are presented at App. 92a-107a.

STATEMENT

Background.—Starting in World War II, the U.S. Gov-

ernment undertook the business of enriching uranium, first

for military purposes, but beginning in the late 1950s, also

for use as nuclear fuel to be used for commercial purposes.

J.A. 24.2 No later than 1966, those commercial sales were

2 “J A.” refers to the Joint Appendix in the Court of Appeals. Since

this case comes before this Court from a judgment of the Court of Appeals

made on standard commercial terms. J.A. 34; 31 Fed. Reg.

1649 (1966). The primary private customers for enriched

uranium were electric utilities using it as a heat source for

making steam to run their generators.

Uranium is a naturally occurring metal generally found as

an ore which may be chemically refined into metallic

uranium, much as iron ore is refined into iron. In most

natural occurrences of uranium, more than 99% of the

isotopes are “U-238”; less than 1% are “U-235.” U-235 and

U-238 isotopes behave differently when struck by neutrons:

atoms of U-235 will cleave more easily than atoms of U-238.

That cleavage of atoms is known as atomic “fission,” a

process accompanied by release of a large quantity of energy.

That energy may be used destructively (in atomic bombs) or

constructively (to make steam at electric generating plants).

In order for run-of-the-mill uranium to be used for those

purposes, it must be “enriched” by increasing the concen-

tration of the U-235 isotopes to a considerably higher degree

than that found in nature. For weapons purposes, this means

enriching it to a concentration in excess of 90%; for use in

generating electricity, a concentration of about 5%. The en-

richment process creates, as a usable co-product, a materia!

called “depleted uranium” because it has been significantly

depleted of the highly fissionable U-235 isotope. J.A. 31-32.

SMUD Enters and Exits Nuclear Electric Generation. —

SMUD began operating a nuclear generating plant called

“Rancho Seco” in 1971. It became a customer of the United

States, and received its first delivery of enriched uranium in

1971 from a Government-operated plant. Uranium hexa-

flouride was acquired from processors and delivered to the

affirming a decision of the Court of Federal Claims which granted a

motion to dismiss for failure to state a claim on which relief could be

granted, this statement is derived from SMUD’s complaint, the opinions

in the case and in the Commonwealth Edison case, which the court below

held was dispositive of SMUD’s case, and other matters of public record.

Government-operated plants. The Government took title to

the incoming material. The Government produced enriched

uranium from the incoming material, to the degree of enrich-

ment specified by SMUD. A written agreement provided for

pricing and other terms and conditions. Pricing was on a unit

basis, the number of units being based on the amount of

material involved and the extent to which it was to be

enriched. The price per unit was fixed at the “applicable

price or charge in effect at the time of performance of any

services under this agreement.” J.A. 57. On completion of

the enrichment process, the Government conveyed title to the

enriched uranium to SMUD and kept the depleted uranium,

which remained Government property. J.A. 34-37; Contract

Art. V1.9 4, J.A. 65. Depleted uranium, a hard, heavy metal,

was used for various non-nuclear weapons and for armor by

the military. SMUD used the enriched uranium to make

steam, and was responsible, under Government regulations,

for its handling and disposal.’ This case does not involve

SMUD’s handling or disposal of the enriched uranium, but

rather the Government’s conduct, over a period of almost 50

years, in operating the enrichment plants to produce material

for the military and later for sale for commercial use.

SMUD’s enriched uranium purchases from the Govern-

ment went on only for ten years, ending in 1981. While the

3 The construction and operation of nuclear generating plants, and the

use of enriched uranium in them, require licenses from the Nuclear

Regulatory Commission under Title 10 C.F.R. Jd. at §§ 50.10(a), (b);

70.3. Extensive regulations are provided for the siting, design and con-

struction of such generating plants and the reactor components therein,

and for the handing, inspection, control and disposition of enriched

uranium within them. /d. at part 50, Appendices A, B, C, E, G, H, J, M,N

& R: §§ 70.51, .52, .55 and .58. The activities of the Government

enrichment plants were exempt from these permitting, licensing and

regulatory provisions, which would otherwise cover them as “production

facilities” and possessors of “special nuclear material.” /d. at §§ 50.11(a),

(b)(1)(i)(A); 70.1 1(a); 70.3.

eae PE STUER ong. Sa SS hee Dk

ee ee ae

Government was the only domestic purveyor of enrichment

services, Over time competition in enrichment services from

foreign sources, which had commenced earlier, grew

Stronger. For the few years after 1981 that SMUD remained a

nuclear operator, SMUD purchased enrichment services only

from foreign sources, based on price. J.A. 35-36. The

Government was to price commercial enrichment services on

a basis of full cost recovery.* But the Government, before,

during, ana after the ten-year period in which SMUD did

business with it, either negligently, recklessly, or deliberately,

operated the enrichment facilities so as to contaminate them

to an extent that the Government incurred enormous

decontamination and cleanup costs and other liabilities.

J.A. 24-25. The Government’s pricing did not include what

would be necessary to pay those costs, although SMUD did

not know that. J.A. 24-25, 38-39, 41.

In 1989 SMUD exited the business of generating electricity

through nuclear fission, and shut down the Rancho Seco

Plant. In 1990, the Government and SMUD executed an

agreement in which the Government granted SMUD a general

release: the “Government agrees that all obligations arising

under the contract or by reason of its termination shall be

deemed to be concluded.” J.A. 36, 89. Those obligations had

included not only the obligation to pay the established price,

but also certain indemnities to the Government, including as

to the material supplied for processing by the Government.

J.A. 65, 75-76. After Rancho Seco shut down, SMUD

generated electricity mainly through gas-fired co-generation

and renewable forms of generation.

af 91-560, § 8 (1970) (App. 107a). To the same effect, the Atomic

Energy Commission’s (“AEC”) 1997 Pricing Rules contemplated

recovery of all costs “direct and indirect, of operating the enrichment

plants.” Uranium Enrichment Services Criteria, AEC, dated Jan. 23,

1973, at 7. Later regulations took the same approach. See 51 Fed.

Reg. 27132 (1986).

The Rise of the Enrichment Corporation.—In 1992 the

Government set about to privatize its commercial enrichment

business. The Government knew that it was unlikely that any

private investors would buy this enterprise unless it was shorn

of the liabilities for decontamination and cleanup that the

Government, through its operation of the plants, had created.

J.A. 25. As part of the EPACT legislation, to maximize the

commercial value of the enterprise, the Government stripped

the business of any liability for the Governnient’s past

contamination of its facilities, and reorganized it as the

“United States Enrichment Corporation” (“Enrichment

Corporation”). Its first two statutory purposes were “(1) To

operate as a business enterprise on a profitable and efficient

basis” and “(2) To maximize the long-term value of the

Corporation to the Treasury of the United States.” Another

title of that Act established a fund (the “Fund”) to pay for the

decontamination and cleanup of the enrichment facilities.

The Fund.—The statute called for a Fund of $480 million

per fiscal year (to be adjusted for inflation). Of this, up to

$150 million per fiscal year (inflation-adjusted) was to come

from what the statute called “special assessments” from

5 PL. 102-486, Oct. 24, 1992, Title IX, § 901, 106 Stat. 2923 et seq.,

App. 92a et seq.; Title XI, § 1101, 106 Stat. 2951, 2953-54, 42 U.S.C.

§ 2297g & g-1, App. 101a-103a. Privatization was authorized if it would

“result in a return to the United States at least equal to the net present

value of the Corporation” at the time of privatization, subject to approval

of the President and advance notice to Congress. ~ 106 Stat. 2938,

App. 96a. The provision shearing away the old liabilities from the

Corporation is in AEA § 1406, added by 106 Stat. 2936-37, App. 94a-95a.

In Public Law 104-134 (1996), the privatization provisions of Title 1X

were repealed effective as of “the date on which 100 percent of the

ownership of the Corporation has been transferred to private investors.”

110 Stat. 1321-336, 1321-349. That privatization occurred on July 28,

1998. See U.S.C.A. § 2297, Historical and Statutory Note. The company

is now called USEC, Inc. The provisions of Title XI requiring the utilities

to make 15 years of annual payments were not affected.

SON RY nd tis IRE BAERS RM G: tondle LOAN ere BO Ta CTS

certain electric utilities; the remainder of the sum was to be

appropriated annually by Congress. App. 102a-103a.

Only those electric utilities that had purchased enrichment

services prior to the 1992 enactment were to contribute to

the fund through those “special assessments.” ° /d. Only

purchases from the Government “before the date of enact-

ment of this title’ (October 24, 1992) counted in the

calculation of the assessments. The statute was thus entirely

retrospective. Subsequent purchases, going forward, would

not be burdened by assessments; thus, going forward, the new

Enrichment Corporation would be competitive with foreign

sources, and it would be free of the cleanup costs. accum-

ulated by its governmental predecessors.

There was only one aspect in which the “special assess-

ments” looked forward: those who had to pay were to keep

on paying. SMUD and the other utilities that had purchased

enriched uranium services from the Government prior to

October 24, 1992, would have to pay assessments annually

for up to fifteen years, or until $2.25 billion (adjusted for

inflation) had been extracted from them. App. 103a. Since

that liability depended entirely on actions—the purchases—

that took place in the past, the “special assessments” were

absolutely unavoidable. If SMUD could have foreseen the

assessments at the time of its purchases, they could have been

° There were two exceptions. First, foreign utilities were exempt,; they

amounted to 25% of the pre-enactment purchases. App. 72a. Second, if a

utility purchaser sold its enriched uranium to another utility, the second

utility, not the direct purchaser, would be assessed on that purchase. New

AEA § 1802(c)(1) and (2), 106 Stat. 2953-54, 42 U.S.C. § 2297g-1,

App. 103a. The lists of utilities assessed as direct purchasers and those as

having purchased from direct purchasers were similar but not identical.

App. 72a. No less than 85% of the purchases from the Government were

retained by the direct purchasers, rather than resold. See Yankee Atomic

Elec. Co. v. United States, 112 F.3d 1569, 1583 (Fed. Cir. 1997), cert.

denied, 524 U.S. 951 (1998) (quoting Government’s estimate).

8 .

avoided by “buying foreign” —or switching to other fuel. But

in 1992 there was no exit for SMUD other than by paying up.

This Suit—SMUD paid (and has continued to pay) its

annual assessments, now cumulatively amounting to $10.1

million. It brought suit in the Court of Federal Claims for a

refund of the amounts it had paid. It claimed that those

exactions violated the Fifth Amendment, both by taking its

property without just compensation and by depriving it of its

property without due process of law. J.A. 28-29, 48-49.

Other grounds for recovery were also pleaded, including a

claim that the legislation was a targeted statute involving a

breach of SMUD’s and the other nuclear utilities’ fixed-price-

on-delivery government contracts, and of SMUD’s release,

thus making the United States liable under the principles of

United States v. Winstar Corp., 518 U.S. 839 (1996). J.A. 52.

The court granted the Government’s motion to dismiss for

failure to state a claim on which relief could be granted. App.

91a. SMUD’s appeal to the Federal Circuit was heard by a

three-judge panel, which rendered an opinion on November

20, 2001, that indicated that the panel would have found a

violation of the Fifth Amendment, but that it was constrained

to affirm on the basis of an 8-to-3 decision of the court en

banc, rendered the same day, in the Commonwealth Edison

case.’ We accordingly discuss that en banc decision.

The Court of Appeals Decision.—(a) Takings—Three

primary claims in Commonwealth Edison were made, under

theories similar to those of SMUD: the Takings Clause, the

Winstar claim of a targeted legislative breach of a com-

mercial contract, and the Due Process Clause. The en banc

majority first discussed the Takings Clause, noting that in

Eastern Enterprises v. Apfel, 524 U.S. 498 (1998)—a retro-

spectivity case—five Justices of this Court had rejected the

” App. 2a, 4a. Like SMUD’s case, Commonwealth Edison came before

the Court of Appeals following a dismissal for failure to state a claim.

concept that “money” was “property” within the meaning of

that clause. Notwithstanding the fact that one of those five

Justices reached the same result in the Eastern Enterprises

case as the Justices who held that money was property and

found a “taking,” the en banc majority agreed with what it

described as “the prevailing view” of other Courts of Appeals

as to what to do with this Court’s 4-1-4 decision in Eastern

Enterprises; namely, not to follow the result. Accordingly,

the en banc majority rejected the Takings Clause argument.

App. 33a-37a.

(b) Winstar.—The en banc majority noted that in Yankee

Atomic a similar claim under this statute was rejected by a

divided Federal Circuit panel, which found the special

assessment to be “a general exercise of Congress’s taxing

power,” rather than “an act that retroactively increases the

price charged to contracting parties for uranium enrichment

services,” which was what it had seemed like to the plaintiff.

The en banc majority also held that there was no “un-

mistakable promise [in the contracts] that precluded the

Government from later imposing an assessment” on the

utilities that patronized the Government’s enrichment

services. It accordingly rejected this claim and followed the

earlier split panel decision in Yankee Atomic. App. 37a-38a.

finally reached its discussion of the Due Process Clause,

which it viewed as the appropriate place to discuss retro-

spectivity. App. 39a. The majority cited this Court’s state-

ment in Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15

(1976), that “it is by now well established that legislative

Acts adjusting the burdens and benefits of economic life

come to the court with a presumption of constitutionality,”

and this Court’s observations, in PBGC v. R. A. Gray & Co.,

467 U.S. 717, 729 (1984), that if “retroactive application of a

Statute is supported by a legitimate legislative purpose

furthered by rational means,” constitutional inquiries were at

an end. It did not explore whether the rules thus pronounced

would apply if the retroactivity was not simply one

“application” of a statute, but its entire object; or whether a

“legitimate legislative purpose” included avoiding in whole

or in substantial part the Government’s responsibility for its

own behavior; or whether the only “rationality” that was

required was the efficiency of the Government’s carrying out

an avoidance of that responsibility without causing

unpleasant commercial consequences to itself. App. 39a-40a.

The majority next, accurately enough, noted that the inven-

tory of cases in which this Court had in recent times

invalidated statutes, or their applications, on grounds of

retrospectivity, was rather small. It counted only four cases

“in the modern era,” and that only after grudgingly admitting

Eastern Enterprises into the group. The three other cases

were criticized because they were said to represent a pre- 1937

view of the Constitution and had been questioned to some

extent in later decisions. App. 40a-42a. The court then came

to Eastern Enterprises. App. 42a.

Eastern Enterprises involved a 1992 statutory provision

(actually Subtitle C of EPACT itself) that imposed certain

retrospective obligations on companies engaged in the coal

mining business that signed either the 1950 or the 1974

UMWA agreements providing for “pay as you go” health,

disability and death benefit funds for coal miners. Because of

increasing numbers of retirees and declining coal production,

the financial condition of the benefit funds became perilous.

The statute provided for a rescue fund to be financed by the

companies that had signed either of the two agreements. It

based the coal companies’ obligations to fund the benefits on

a head count of their employees in past years, and on the

companies’ own execution of the agreements in past years,

and accordingly it was retrospective. 524 U.S. at 514-16.

This Court held the statute unconstitutional with respect to

Eastern, a coal mining company that had signed the 1950

Ya Sch

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agreement, but not the 1974 agreement (Eastern left the

industry in 1965, id. at 516). This was because only the 1974

agreement had contained a promise of benefit levels that the

Court deemed sufficient to justify, under principles of fair-

ness, a substantial and deeply retrospective obligation.*

The en banc majority below distinguished the utilities in

this case from the petitioner in Eastern Enterprises, appar-

ently perceiving a meaningful connection with the long-term

pollution of the Government’s facilities on the part of SMUD

and the other nuclear utilities, although that connection was

simply as former cash customers of the Government.

App. 43a. It thus treated SMUD and the others like the coal

miner that signed the 1974 agreement and its promises. No

difference was perceived in the Government’s self-dealing

here, as long-time polluter, owner of the Enrichment Corpo-

ration, and lawmaker, from its role in Eastern Enterprises

where it was only umpire between labor and management:

Eastern Enterprises involved a regulation of the extent to

which the coal company would have to contribute to the

employees’ benefits and the extent to which the employees

would have to do without. Nor did the majority explore

whether the “rationality” of making that retrospective

provision might have to be judged on a different basis if its

purpose was to cleanse the Government from a major part of

the burden of cleaning up one of its industrial and commercial

* The four dissenting Justices in Eastern Enterprises had reached the

conclusion that the petitioner in that case was party to a general

nonwritten understanding prior to the 1974 agreement that the operators

would make good by “provid[ing] the miners with lifetime health

benefits” and that “this understanding . . . kept the mines in operation.”

524 U.S. at 551. The dissenters also cited the well-known health

probiems involved in working in the coal mines. Jd. at 559-60.

operations from close to half a century of environmental

mismanagement by the Government, an actor rather than

a “regulator.”

“On the other side of the balance” from Eastern Enter-

prises and the earlier cases, the majority listed fifteen cases in

which this Court had rejected challenges to “economic

legislation” based on the Due Process Clause. App. 44a-46a.

All of those cases involved legislation which was prospective

in application as well as retrospective; that is, they all

ascribed consequences to future acts as well as to past acts.”

Few of the cases involved the Federal fisc; '° indeed, a

number of the cases involved state statutes under the Four-

teenth Amendment or the Ex Post Facto Clause and did not

involve self-dealing.'' Many of the Federal statutes involved

” In some cases the consequences going forward as to future acts were

slightly different from those attaching to past acts, but had substantially

the same effect on the complaining parties. Thus, in the Black Lung case,

Turner Elkhorn, the benefits going forward were to be paid under state

workers compensation laws to the extent that they provided benefits

similar to the statute’s federal benefits, with the federal system paying if

the state system did not meet those standards. P.L. 91-173, Title IV,

Part C, § 421, 83 Stat. 795 (1969). But of course the workers com-

pensation systems and the federal system were all funded by employers,

the state systems generally through insurance purchased by them.

'° Essentially, the tax cases, where this Court has generally imposed

particularly strict standards on retrospectivity. See note 15, below. The

only exceptions, involving non-tax statutes affecting the Treasury, appear

to be United States v. Sperry Corp., 493 U.S. 52 (1989) (user fee which

was applied retrospectively only in the most technical sense; Congress

retrospectively corrected Claims Court’s decision holding that regulation

was not authorized by Congress), and Lichter v. United States, 334 U.S.

742 (1948) (renegotiations of excess wartime profits; application was not

clearly retrospective; just compensation was paid).

'' Generai Motors Corp. v. Romein, 503 U.S. 181 (1992) (correction of

court interpretation of prospective workers’ compensation statute);

Funkhouser v. J. B. Preston Co., 290 U.S. 193 (1933) (codification of

when pre-judgment interest is due on money suits; avoidable by those

paying their debts voluntarily).

true “regulation,” adjusting, both looking back and going

forward, economic issues between groups, such as employers

and employees.'* Others were regulatory provisions of more

modest scope, not involving decisions as to what interest

groups would pay, but simply laying down rules which could

be complied with, at the most, minimal economic impact.'°

Some of them were retrospective only to the extent that they

corrected what the legislature found was a misinterpretation

of its earlier prospective statutes.'* Those that affected the

Federal budget directly (with the exceptions discussed in

note 10) were cases of tax legislation with a very brief “look

back,” '° in at least one case correcting “too good to be true”

interpretations of the tax laws.'° Significantly, none of the

'2 Concrete Pipe and Products of California Co. v. Construction

Laborers Trust, 508 U.S. 602 (1993) (multi-employer withdrawal liabil-

ities); PBGC v. R. A. Gray & Co., 467 U.S. 717 (1984) (same); National

Railroad Passenger Corp. v. Atchison, Topeka & Santa Fe R. Co., 470

U.S. 451 (1985) (resolution of squabble between freight railroads and

Amtrak as to who paid for free passes granted by freight railroads);

Turner Elkhorn (responsibility of employers for latent Black Lung disease

becoming apparent after termination of employment).

'* United States v. Locke, 471 U.S. 84 (1985) (annual filing required to

maintain land patent); FHA v. The Darlington, Inc., 358 U.S. 84 (1958)

(enforcement that rental multiple-dwelling buildings with mortgage

guaranteed by FHA be leased for long terms, not rented to transients).

'* United States v. Sperry Corp., supra; General Motors Corp. vy.

Romein, supra.

'S United States v. Carlton, 512 U.S. 26 (1994) (corrective statute to

prevent outlandish outcome from misdrafted statute); United States y.

Hemme, 476 U.S. 558 (1986) (transitional change in existing tax provi-

sion); Milliken v. United States, 283 U.S. 15 (1931) (increase of tax rate

after gift was made but before decedent died; assertion of vested interest

in low rate rejected); United States v. Darusmont, 449 U.S. 292 (1981)

(additional tax on income already subject to tax); Welch v. Henry, 305

U.S. 134 (1938) (removal of deduction for certain dividends) (state

tax case).

'® Carlton, supra.

cases decided by this Court involved a purely retrospective

statute that operated to effect a substantial transfer of Govern-

ment responsibility onto a group of parties that had dealt with

the Government as buyer from a seller, on what were stand-

ard commercial terms, and with alternative sellers available.

The majority frankly held that the legislation was “severely

retroactive and costly,” but believed that the requisite “egre-

gious circumstances” to find a Fifth Amendment violation

required more than that. App. 47a. In that investigation for

egregious circumstances the court viewed the Government as

a bystanding regulator, devising solutions to “social prob-

lem[s]” (id.), rather than a commercial actor that had created

the “social problem.”

The majority believed that two conditions had to be

satisfied for the legislation to survive, or possibly only one of

them. /d. These were whether “the party subjected to retro-

active obligations benefits from activity that contributed to a

social problem” and whether “the imposition of retroactive

liability” was “contrary to that party’s reasonable expec-

tations.” Jd. As to the first, it concluded that the utilities

benefited from the activity, in that the Government supplied

them with the services they had contracted for, at the fixed

price on delivery that the Government demanded. The

majority did not discuss whether this test, extracted from

cases like those involving coal operators and their workers,

was appropriate where the Government itself was in charge of

performing, and was responsible for, the “activity that

contributed to a social problem” and retrospectively decreed

that its former customers would pay extra to help solve it.

Next, the majority distilled from the cases a_ three-

factor test for the affected party’s reasonable expectations.

App. 52a. The first of the three factors was “operating in a

highly regulated industry” which the court apparently found

present in the regulations concerning the construction of

nuclear generating plants and the utilities’ own handling, use

i ee eS ae ee ee ee ee a oe a

and disposition of enriched uranium once they got it from the

Government plant. /d. See note 3, above. But this case did

not involve that sort of regulation; it involved the purchase

and sale of the enrichment services, which took place in a

competitive market with the Government being a competitor

to foreign suppliers.

A second factor was, the majority said, did “the company

know of the problem at the time it engaged in the activity.”

App. 53a-54a. But the record shows no knowledge of prob-

lems by SMUD. If we assume, contrary to the record, that

SMUD knew of the contamination of the Government plants,

it was the Government’s responsibility; the Government was

operating the enrichment plants and had been doing so

for more than 25 years when SMUD started to purchase

the services.

The third factor, according to the majority, was whether the

target “in the light of the regulatory environment at the time”

could have “reasonably anticipated” “the possibility of the

assessments.” App. 54a. To support a “yes” answer, the

court relied upon various legal theories that sometimes make

persons peripherally involved in polluting activities respons-

ible for their remediation. App. 55a-62a. But none of them

went so far as to hold an entity which buys material at arm’s

length from a vendor to be liable to the vendor for the

vendor’s own pollution; and certainly, whatever public

remedies may be available against parties that are ancillarily

involved in polluting activity, no legal authority permits a

party owning, controlling and solely operating a polluting

facility, like the Government here, to obtain compensation

from its customers with respect to its own polluting activities.

Three judges of the eleven-judge bench dissented, for rea-

sons stated in the opinion of a fourth judge, Judge Friedman,

rendered in SMUD’s own case.'’ The dissenters expressed

7 App. 68a. Judge Friedman, as a Senior Judge, had no vote on the en

banc disposition.

the view that the due process challenge to the assessment

should have prevailed. That opinion of Judge Friedman to

which they subscribed made the following point:

In many (if not most) of the cases in which the Supreme

Court rejected Due Process challenges to retroactive

legislation, the statute dealt with the relationships,

financial and otherwise, among private parties; the

government’s role was only the regulation of those

relationships. In the present case, however, the statute

deals with the relationship between the government and

private parties; it seeks to transfer to those parties a

substantial portion of the government’s cosis of recti-

fying the contamination of its plants used to produce

the product it sold to those parties. It is by no means

clear that those Supreme Court cases may be auto-

matically and uncritically applied to the significantly

different situation here involved. App. 13a-14a.

REASONS FOR GRANTING THE WRIT

1. The Court Below Has Sanctioned a Retrospective

Enactment by Congress that Is More Radical than Any

Permitted by this Court—(a) Retrospectivity.—The courts

in the United States have always viewed retrospective

legislation as having potential for great unfairness, and,

among other things, will not construe a statute as retro-

spective unless it clearly expresses that intent. “[T}he

presumption against retroactive legislation is deeply rooted in

our jurisprudence, and embodies a legal doctrine centuries

older than our republic.” Landgraf v. USI Film Products, 511

U.S. 244, 265 (1994). A corollary of that, often stated by this

Court, is that “[i]t does not follow, however, that what

Congress can legislate prospectively it can legislate retro-

spectively.” Turner Elkhorn, 428 U.S. at 16. Here the statute

intentionally did apply retrospectively, and indeed it was

wholly retrospective. The statute thus potentially violates

norms of legislation that were memorialized by Chancellor

Kent and Justice Story, the two great early commentators on

American law of the first half of the 19th Century, that

members of this Court have cited with approval.!®

This Court has examined retrospective legislation under

two branches of the Fifth Amendment: the clause prohibiting

the taking of private property without just compensation (the

“Takings Clause”), and that forbidding the Government from

depriving persons of “life, liberty or property without due

process of law” (the “Due Process Clause”). While this Court

has certainly recognized that some retrospective legislation is

consistent with the Constitution, it examines retrospective

legislation with great care, and as the court below noted, has

decided about twenty cases on the subject in recent years.

The statute in question is more extreme than any retrospective

Statute that this Court has found to be constitutional and more

extreme than one recently found in its application to be

unconstitutional by this Court. And, as the dissenters below

noted, the statute is “significantly different” from that case—

and most other cases—because the retrospectivity imple-

mented the Government’s blatant commercial self-dealing.

p. 16, above,

(b) The Effect of Self-Dealing on Analysis.—The

majority below acknowledged that the statute was “severely

retroactive and costly.” But applying formulae that were

developed in entirely different contexts, it found that the

statute was “rational,” that the possibility of its enactment

'’ See Justice O’Connor’s opinion for the plurality in Eastern

Enterprises, citing, among other authorities, Justice Story’s “Commentary

on the Constitution,” 524 U.S. at 533-34, and Justice Kennedy’s

discussion therein, including passages from Justice Story and Chancellor

Kent. Jd. at 547-48. The dissenters in Eastern Enterprises took no

exception to the majority’s statements of the law concerning retro-

spectivity; they had a different evaluation of the facts. The dissenters

expressed the view that a retrospective statute, to the extent that the

retrospectivity was not consistent with “fundamental fairness,” violated

the Due Process Clause. /d. at 553-54.

should have been foreseen by the purchasing utilities in the

60s, ’70s and ’80s, and that there was nothing “egregious”

about the statute. App. 47a. The court referred to the statute

as a “regulation” (App. 39a, 50a), and said that it involved

“adjusting the burdens and benefits of economic life.”

App. 33a. It took concepts which this Court has enunciated

when the Government is acting as referee between interest

groups and used them in a case where the Government was

the major commercial player.

The “rationality” test for the validity of retrospective legis-

lation has a perverse effect when applied here. In a real

sense, the statute was highly rational, even brilliant: if we

view the maximization of an entity’s wealth as a rational

pursuit (and indeed, that presumption lies at the base of all

economic science, as well as being one of the statutory

objectives of the Enrichment Corporation), the statute is

rational from the standpoint of the Government’s wealth

maximization. By 1992 the Government had operated the

plants for well over forty years, with scant attention to

environmental concerns; the Cold War was over; the major

use of enriched uranium would clearly be commercial. So

the Enrichment Corporation was formed, to operate as a

for-profit enterprise and to be privatized through sale to

investors. The investors would demand an entity whose

facilities were not contaminated and that was free of existing

liabilities. That entity would have to compete with sellers of

enrichment services abroad that did not have those

environmental problems.

A way was found to take at least some of the liability off

the Government’s hands by way of a special tax. The tax

could not be prospective; it could only be retrospective. If it

was prospective, the tax would have raised the price of the

services beyond those of competitors, destroying the

profitability of the enterprise and its privatization sale value.

But there is no way for anyone to avoid a retrospective tax by

changing behavior. So viewing the Government as a com-

mercial entity, a role which it was playing in this case, this

enactment was perfectly “rational.”

SMUD does not believe that examining the statute based

on “rationality” of that sort is consistent with the Consti-

tution. The test to be applied is not the “rationality” of the

Government as a commercial enterprise engaged in increas-

ing its profits by forcibly transferring its responsibilities for

its past acts to selected portions of the citizenry who did

business with it, but the “rationality” of a republic observing

established principles of law.

Similarly, the “expectation” test, likewise applied by the

Court of Appeals, is not appropriate in this case of monu-

mental self-dealing on the part of the Government without a

similar adjustment in its focus. What should the expectation

of the citizen be after engaging in a fixed-price purchase from

its Government, paying the established price and receiving an

acknowledgment that all that was agreed to had been paid? If

the government was that of a Xerxes or some other eastern

satrap of antiquity, it might well be expected that whatever

the ruler might want to take from the citizen, it would take.

Indeed, if expectations are based on what the Government

might do if its only goal was the maximization of its wealth,

since by definition the Government has the power to make

laws, any retrospective assessment might be deemed

expectable. But that cannot be the rule of the Constitution

and its Fifth Amendment. They presuppose not the extractive

monarchy across the sea that governed prior to independence,

but such expectations as would be reasonable from a

republican government of limited powers, responsible to the

people, and subject to the law of the Constitution and

principles of fundamental fairness. There is, and was at the

times of SMUD’s purchases and of the enactment, no

principle of law that an active polluter might, at its own

insistence, collect compensation from its customers who

bought products from it, where the seller was managing its

business without due regard for minimizing and cleaning up

the pollution it was creating.

Justices of this Court have identified governmental self-

dealing as a factor in determining the constitutionality of

retrospective legislation, just as did the dissenters in the court

below. In Eastern Enterprises, Justice Kennedy commented

that “[g]overnmental self-enrichment” was a factor in deter-

mining whether a “taking” existed. 524 U.S. at 544. Justice

Souter, with three other Justices concurring, said in Winstar

that “The greater the Government’s self-interest, however, the

more suspect becomes the claim that its private contracting

partners ought to bear the financial burden of the Govern-

ment’s own improvidence. ...” 518 U.S. at 898. And Justice

O’Connor, in Carlton, analyzing the issue whether “rational

means” existed, said that a “‘wholly new tax’ cannot be

imposed retrospectively [citing United States v. Hemme, 476

U.S. 558, 568 (1986)], even though such a tax would surely

serve to raise money.” 512 U.S. at 38.

bution from Blameless Parties——Even ignoring the

Government’s dual roles here, this Court seems never to have

adjudicated a retrospectivity case as extreme as this, and

accordingly, and thankfully, precedents are not plentiful. The

present case is thus in fact “egregious”; it stands apart from

the flock of other retrospectivity cases that have come before

the Court in recent years. The Eastern Enterprises case,

involving a statute that was constitutional in some applica-

tions, establishes that some degree of responsible partici-

pation by a party in an activity is required in order for that

party to be held liable for retrospective funding, even where

the beneficiary (there the workers) is itself innocent. The

particular coal company involved in Eastern Enterprises

never made any of the promises regarding pensions that

others made, and while of course the workers had no fault,

there was no rational basis, the Court held, for taking that

coal company’s property and giving it to the pensioners.

Simply employing the workers was not enough. Here, the

Government admitted that the assessments were “not

premised on any responsibility” of the utilities.'? And clearly,

based on comparative involvement, and looking from an

‘umpire’s view, there is no rational basis for taking the

property of a customer and giving it to a business which was

established, “doing its thing” years before it sought private

customers and which (unlike the workers), through its own

mismanagement over a number of decades, had caused a

major problem.

Even apart from the Government’s enrichment of its own

wealth, this case exhibits an outcome less rational and more

violative of fundamental fairness than what was held

unconstitutional in Eastern Enterprises. There, the petitioner

had been engaged in a business which posed considerable

health risks for the employees: indeed, in other contexts, that

factor had-been held to justify retrospective legislation on

employers without regard to whether they had made promises

to their employees. Turner Elkhorn, 428 U.S. 1 (1976). The

employees, beneficiaries of the statute in Eastern Enterprises,

were themselves innocent. Here, the scales point entirely in

'” The Government occasionally in the courts below suggested that, in

effect, SMUD was involved in the Government’s pollution because it was

a customer of the Government. See, e.g., Br. 9, 35-37. However, the

Government submitted no evidence of actual involvement by SMUD in

the pollution, and there is no such evidence. The case was decided on the

Government’s motion on the basis of SMUD’s complaint and the facts of

public record. Those facts of public record indicated massive concealed

pollution endangering human life going back to the 1940s, mainly

involved in the production of bombs, for which the Government has made

a public apology. J.A. 107-12 (apology by Sec’y of Energy); 110-14;

122-35 (DOE Report on polluted Paducah plant). The Government

admitted in the court below that the assessments are “not premised upon

any responsibility for contamination,” nor were they “premised upon any

promises made by SMUD.” Br. 26.

the opposite different direction: the beneficiary was the one

at fault; instead of operating its business in an envir-

onmentally appropriate way, the Government created

pollution for decades and left it unremediated. All SMUD

did was give it business (which the Government had

solicited); that business did not impose any special

environmental problems that could not have been dealt with

by an operator respectful of the environment; the problems

created by the Government’s imprudent practices should have

been dealt with by the Government on an ongoing basis for

the whole half century of its operations, not simply when it

decided it might sell the operation.” The statute is as unfair

as would be a statute calling upon mine workers to make

payments toward the cleanup of environmental problems in

coal mines because they had benefited by being paid their

wages, and their labor gave the mine owners further

opportunities to pollute. Here the fact that the Government

owned and operated the polluting facilities makes the statute

clearly violative of fundamental fairness.

(d) “Benefit” Without Responsibility—The holding of

the court below, that the purchasers of enrichment services

obtained a benefit as cash customers which alone justified

decades of retrospective assessments against them, creates

interesting possibilities. First, it is clearly inconsistent with

Eastern Enterprises. There, the petitioner clearly obtained

benefits from the labor of the miners; and just as it promised

the miners nothing, neither did SMUD promise to pay more

than the fixed prices at the time of delivery of the enriched

uranium. Second, under the Federal Circuit’s logic, past cash

customers of any stricken company that the Government

thinks it useful to resuscitate could be assessed, based on their

past purchases, for the rehabilitation of the enterprise. The

2° To be sure, there are environmental hazards involved in running

a nuclear generating plant, but those are not involved in what this

statute addresses.

Ae eet ole

airlines are in difficulty; frequent flyers could readily be

assessed; the necessary recordkeeping is in place to compute

their past mileage. Current flights obviously would not be

surcharged, to avoid discouraging travel: only past flights

would be. The fact that the frequent flyers are not responsible

for the airlines’ plight is irrelevant; as the Government

successfully contended below: “Because causation or culpa-

bility for contamination is not the basis for the assessment,

any lack of culpability here is irrelevant.” Br. 36. We cannot

imagine that such a statute would be held consistent with the

Fifth Amendment. Yet it is exactly the same as the present

Statute; indeed, the present statute has the added vice of

self-dealing.

(e) An Unprecedented Taxing Statute.—The statute was

not a “regulation”—the only thing it regulated was SMUD’s

bank balance—and it does not adjust the ongoing benefits and

burdens of economic life among interest groups. It was, as

the Federal Circuit earlier called it,?' a tax. It was a

retrospective and narrowly focused tax. Unlike all of the

other cited cases in which technically retrospective taxes were

sanctioned by this Court, this was a purely retrospective

tax. It taxed only prior events—the purchase of uranium

enrichment services from the Government prior to Octo-

ber 24, 1992. No special tax on those purchases had ever

been levied before. None was levied going forward. The

retrospective taxation here is also distinguished by its

eatraordinary look-back from every Federal tax which this

Court has upheld despite some element of retrospectivity. It

reaches back with unparalleled scope—21 years in SMUD’s

case, over 30 in other cases—not the few months or a year or

two which characterizes the income or estate tax cases where

the brevity of the look-back, generally buttressed with other

factors contributing to the enactment’s fairness (see note 15,

above), has resulted in a holding of constitutionality.

2! Yankee Atomic, 112 F.3d at 1577.

The decisions of this Court as to retrospectivity of Govern-

ment exactions of cash speak in terms that are much more

demanding than those applied to retrospective rules involving

“regulation” properly so called. See Darusmont, 449 U.S. at

296-97; pp. 12-13 above and note 15, above. The temporal

extent of retrospectivity is examined very critically—Justice

O’Connor has indicated that anything over a year would be

highly suspect. Carlton, 512 U.S. at 38. Most of the tax

cases in which a degree of retrospectivity has been involved

and sanctioned meet that test. They generally also involve

the correction of misinterpretations, errors, or statutory

glitches; situations where the amount of the rate of an existing

tax was changed, directly or indirectly; transition rules

moving from one system to another; or other tweakings of an

existing tax system. See note 15, above. New retrospective

taxes are examined more critically, mainly because there is no

notice to the taxpayer who otherwise might alter her behavior

to avoid or minimize the tax. See Hemme, 476 U.S. at 567-

72. Indeed, the view has been expressed that a “new” tax

may not constitutionally be retrospective at all. Carlton, 512

U.S. at 38 (O’Connor, J., concurring). No decision supports

as constitutional, and the approach in all is repugnant to, a

new onerous tax of clearly “severe” retroactivity, having no

future application, and imposed on a transaction never taxed

before. None comes even close. ~”

2 Congress, in connection with the 1992 establishment of the Fund,

made the Fund available not only to finance the decontamination of the

Government’s uranium enrichment plants, but also to clean up the

operations of commercial companies engaged in mining and milling

thorium and uranium. Thus, the exactions from SMUD and other nuclear

utilities were intermingled in a fund used to pay private parties, such as

Atlas and Kerr-McGee to clean up (i) after their thorium mining and

milling, an element SMUD and the other utilities never used, and (ii) after

their uranium mining and milling. See the 1992 and current statutes,

App. 97a-99a, 101a-102a. For the history before the statute, see Atlas

Corp. v. United States, 895 F.2d 745 (Fed. Cir. 1990). This common-cup

Though a taxing statute, this enactment could not even pass

constitutional muster as a “regulatory” statute—if the enrich-

ment plants had been a private enterprise and the assessment

was to be paid to them to clean up forty years of mis-

management. The temporal extent of retrospectivity is com-

parable to the statutes dealing with health problems in the

coal industry. But in those cases, parties conducting a busi-

ness dangerous to the health of employees were the object of

Statutes designed to relieve the innocent employees, in some

cases constitutional and in others not. Here, the impact of the

Statute is turned around; an essentially blameless party is to

be made to contribute to a long-time poliuter.

The case is of obvious importance to the nuclear utility

industry, past and present—$2.25 billion worth. But it also

has an importance beyond the impact on the industry and its

former members. The rules which the Court of Appeals

misapplied here, including the rule of “rationality” and that of

“expectations,” are built-in “slippery slopes”; what the

Government has done before without judicial check sets a

new standard for what the expectations of business men and

women will be deemed to have.

2. This Case May Allow Further Analysis of the

Constitutional Provisions Relating to Retrospective

Legislation. — In the Eastern Enterprises case, this Court by

a majority vote found an application of a provision of EPACT

unconstitutionally retrospective, but a majority was not able

to agree upon which provision of the Fifth Amendment

required that outcome. Four Justices viewed the statute as

violating the Takings Clause, taking private property for

public use without just compensation (although the “public

use” was, in effect, a transfer to particular individuals). The

use of the fund seems to make the special assessments on the utilities even

more like a tax, and if possible, even more arbitrary. SMUD never used

thorium in any manner (it was used for bombs, not in making steam), and

SMUD did not even deal with the uranium companies involved.

plurality opinion said that the analyses of the two provisions

of the Fifth Amendment generally applied in retrospectivity

cases were somewhat “correlated,” 524 U.S. at 537, but

declined to explore whether the statute also deprived the

petitioner of its property without due process of law. Justice

Kennedy, fifth Justice in the majority, took the view, at least

under the case’s circumstances, that “property” as used in the

Takings Clause did not include “money.” /d. at 540-41. As

was noted below, the lack of a majority opinion led to

considerable concern in the Courts of Appeals as to how to

apply the Court’s decision in other cases (App. 36a n.10), and

it seems to have had an effect on the decision below, which

analyzed the issues in a compartmentalized way without due

consideration of the Takings analysis, reaching an outcome

irreconcilable with Eastern Enterprises. App. 37a, 39a, 43a.

This case, which presents an egregious retrospectivity, with

a highly specific “special assessment” having the effect of a

tax, may present a useful opportunity for the Court to explore

those issues more fully. The statute appears to SMUD to be

violative of both clauses. As to the Takings Clause, a highly

specific quantity of money is being taken by the Government,

on a continuing basis each year, and diverted to the

Government’s own use (a “public use,” although for a profit-

making enterprise of the Government).”> While a “Taking”

can involve wealth transfers to third parties, this case involves

> A specific cache of money, such as interest on a specific fund, or a

fund (like an escrow fund) itself has been held to be “property” within the

meaning of the Takings Clause. Phillips v. Washington Legal Foun-

dation, 524 U.S. 156 (1998); Webb’s Fabulous Pharmacies, Inc. v.

Beckwith, 449 U.S. 155 (1980). It is not much of a stretch to hold that a

demand for a specific amount of money is a demand for “property.” It

would avoid the paradox of holding that “property” excludes “money” in

one clause of the Fifth Amendment but includes it in another. Cf.

Washington Legal Foundation v. Legal Foundation of Washington, 271

F.3d 835, 866 (9th Cir. 2001) (Kozinski, J., dissenting) (“But money

is property ...”).

ee ao

a hard-core transfer of SMUD’s money to the United States.

“Takings” fits; this Court’s statement of the purpose of the

Takings Clause is squarely applicable: it “was designed to

bar Government from forcing some people alone to bear

public burdens which, in all fairness and justice, should be

borne by the public as a whole.” Armstrong v. United States,

364 U.S. 40, 49 (1960).

As to the Due Process Clause, its use to analyze retro-

spective legislation is well established by this Court. The

constitutional provision prohibits governmental deprivation

of, among other things, “property,” without due process of

law. While there certainly is controversy over the extent to

which the Due Process Clause can be used in cases of

economic regulation—which made the plurality in Eastern

Enterprises unwilling to analyze the case under that clause—

what went on here was not “regulation,” but a pecuniary

deprivation by the Government, essentially a tax. The Due

Process Clause has for at least a century been viewed as

appropriate for the analysis of retrospective taxation by this

Court, including the author of the plurality opinion in Eastern

Enterprises. See Carlton, 512 U.S. at 37-39.

SMUD does not propose any particular line to be drawn

between the constitutional clauses, believing that both were

violated here. It makes these observations to suggest a

further reason for this Court’s review of this extraordinary

case.

3. The Winstar Issue.—In the Winstar case, this Court

held that a targeted regulatory statute which affected a narrow

group of entities that had made commercial contracts with the

Government (there acting as guarantor of the deposits in thrift

institutions), and which clearly would have been a breach of

contract if the result were brought about by a private party,

would entitle the harmed party to damages. The regulatory

Statute itself would remain in full force and effect; the

Government would have to pay. 518 U.S. at 868-70.

This case would seem to involve an a fortiori case from

Winstar: there was not even a “regulatory” provision here,

simply a naked exaction of money from a small group,

customers who had bought services under fixed-price written

contracts which did not provide for renegotiation and which

had been the subject of a release of all liability from the

Government at the end of the day. See pp. 4-5, 9, above.

However, in the 1997 Yankee Atomic case, the Federal Circuit

held that Winstar was inapplicable. It said that the provision

of the statute taxing those purchasers of enrichment services

who purchased their enriched uranium from another utility

(and relieving the reseller from the tax), prevented the statute

from being considered an attempt to raise the price of the pre-

1992 services. 112 F.3d at 1575-76. That court had also

pointed to the fact that the fixed-price contract did not contain

an express provision that the price, expressly fixed at the time

of delivery, would not be retrospectively increased, as if such

provisions were common commercially. /d. at 1579-80.

SMUD pressed the Winstar issue in this case (as did

Commonwealth Edison), but the en banc court adhered to the

split panel ruling in Yankee Atomic. App. 38a; p. 9, above.

This Court denied certiorari in Yankee Atomic. While

SMUD understands that denial of certiorari does not intimate

a view on the merits, it would be reluctant to urge that the

Court grant certiorari in this case if the only issue passed on

by the Court of Appeals here was the applicability of

Winstar.** However, since the present case involves a major

decision of the Court of Appeals analyzing retrospectivity

4 The decision of the Federal Circuit in Yankee Atomic did not discuss

Fifth Amendment issues, although the dissenting judge expressed himself

on those issues. The petitioner attempted to assert a Fifth Amendment

argument in its petition for certiorari. Petition at 19-20, No. 97-801. The

Solicitor General responded that the issue had not been pressed below and

“is not properly before this Court.” Br. in Opp. at 6; 11. The court en

banc in Commonwealth Edison treated the issue as of first impression.

under the Due Process Clause and the Takings Clause in a

governmental- commercial context, which will not be pre-

sented in another circuit,” SMUD respectfully suggests that it

might be of use to the Court to consider the closely related

issues posed by the failure to apply the Winstar decision.

CONCLUSION

For the reasons stated, this Petition for Certiorari should be

granted.

Respectfully submitted.

Of Counsel: DENNIS G. LYONS

Counsel of Record

MELVIN C. GARBOW

HOWARD N. CAYNE

EDWARD H. SISSON

S. JNATEL SIMMONS

STEVEN M. COHN

Sacramento Municipal

Utility District

Sacramento, CA

ARNOLD & PORTER 555 Twelfth Street, N.W.

Washington, D.C. Washington, D.C. 20004

New York, New York (202) 942-5000

KENT A. YALOWITZ

399 Park Avenue

New York, New York 10022

Attorneys for Petitioner,

Sacramento Municipal

January 2002 Utility District

> An attempt by Commonwealth Edison and 21 other utilities to have

the issues determined outside of the Federal Circuit was successfully

opposed by the Government. Commonwealth Edison Co. v. United States,

247 F.3d 1378 (Fed. Cir. 2001), cert. denied, No. 01-205, Dec. 3, 2001.

See App. 30a-33a.

APPENDICES

APPENDIX A

UNITED STATES COURT OF APPEALS,

FEDERAL CIRCUIT

[Filed Nov. 20, 2001]

Nos. 99-5156, 99-5158 and 99-5160.

MAINE YANKEE ATOMIC POWER COMPANY;

Plaintiff-Appellant,

Vv.

UNITED STATES,

Defendant-Appellee.

SACRAMENTO MUNICIPAL UTILITY DISTRICT,

Plaintiff-Appellant,

Vv.

UNITED STATES,

Defendant-Appellee.

OMAHA PUBLIC POWER DISTRICT,

Plaintiff-Appellant,

Vv.

UNITED STATES,

Defendant-Appellee.

Before MAYER, Chief Judge, FRIEDMAN, Senior Circuit

Judge, and GAJARSA, Circuit Judge.

PER CURIAM.

In the Energy Policy Act of 1992, Congress imposed

liability upon nuclear electric power companies that had

purchased enriched uranium from the United States—the

purchases having been made as far back as 1969--for a

substantial portion ‘of the government’s costs of decon-

taminating the plants in which it had enriched the uranium.

The three appellants—electric utilities that had purchased

enriched uranium from the government for their nuclear

power plants and who were subject to, and had paid part of,

the statutory liability—sued the United States in the Court of

Federal Claims, challenging the assessments as a taking of

their property for which they sought just compensation and as

an unconstitutional retroactive statutory application that

denied them due process and equal protection. On the

government’s motion, the Court of Federal Claims dismissed

the complaints, holding that they did not set forth valid

constitutional claims.

In Commonwealth Edison Co. v. United States, No. 00-

5069, also decided today, this court en banc has upheld the

constitutionality of that statutory assessment against similar

challenges, namely that it takes the property of another utility

and denies that utility due process. That decision binds this

panel, and requires us to reject the utilities’ taking and due

process arguments in the instant case.

Two of the utilities in — _, Maine Yankee Atomic

Power Company and Sacramento Municipal Utility District,

also argue that the statute denies them equal protection—a

contention not made in Commonwealth Edison. As the Court

of Federal Claims stated, the utilities argued that “the fact that

foreign utilities were exempted from the assessment imper-

missibly differentiates between similarly—situated entities—

i.e., all those that had consumed government-enriched

uranium. In addition, plaintiffs contend, the Act draws an

illegitimate distinction between purchasers who resold the

uranium, and those who kept it for their own purposes, as

well as between pre 1992 consumers (who are subject to the

fee) and post 1992 consumers (who are exempt).” Maine

Yankee Atomic Power Co. v. United States, 44 Fed.Cl.

372, 383 (1999),

The Court of Federal Claims correctly rejected those

contentions, We rely upon and accept that court’s reasoning:

Id.

The judgments of the Court of Federal Claims dismissing

With regard to Congress’s decision to exempt foreign

utilities from liability, we refer to the Supreme Court's

observation in Barclay & Co. v. Edwards, 267 U.S. 442,

451, 45 S. Ct. 348, 69 L.Ed. 703 (1924) that “[c]onsid-

erations of policy toward foreign countries may very

well justify an exemption of the foreign corporations

from taxes that might legitimately be imposed on them,

but which Congress does not think it wise to exact.” In

addition, we think it significant that, as defendant points

out in its motion to dismiss, the exclusion of foreign

utilities from the liability equation in no way in-

creases or otherwise affects plaintiffs’ portion of

domestic utility usage.

Similarly, legislatures need not burden the most

responsible party to survive rational basis review. Asso-

ciation of Bituminous Contractors, Inc. v. Apfel, 156

F.3d 1246, 1255-56 (D.C.Cir.1998). While the original

purchasers of uranium (those who resold it and were

therefore exempt from assessment) may seem, to

plaintiffs, equally to have benefited from the enrichment

services, we cannot conclude that Congress’s decision to

target end-users was without rational basis. And

although plaintiffs may have preferred a system under

which USEC’s post 1992 customers likewise picked up

the tab, Congress’s assignment of liability for a past

problem to past consumers does not stretch the limits of

the reasonable.

the complaints are AFFIRMED.

_—

Concurring opinion of FRIEDMAN, Senior Circuit Judge, in

which MAYER, Chief Judge, joins.

Since I agree that we are bound by Commonwealth Edison

and also agree with the court’s rejection of the equal

protection contention, I join in the opinion and judgment of

the court. If I were not bound by Commonwealth Edison,

however, I would hold that the retroactive assessment denies

the appellants due process. My reasons for that conclusion

follow.

: I

A. During World War II, the United States began enrich-

ing uranium, first for military purposes and, starting in the

mid 1960s, as nuclear fuel for commercial generation of

electricity, which it sold to domestic and foreign utilities.

Maine Yankee Atomic Power Co. v. United States, 44 Fed.Cl.

372, 374 (1999). The government sold the enriched uranium

under fixed price contracts, which did not authorize the

government to collect any additional amounts. Jd. The

decontamination and decommissioning of these polluted

facilities is expected to take 40 years and to cost up to $20

billion. Yankee Atomic Elec. Co. v. United States, 112 F.3d

1569, 1572 (Fed.Cir.1997). "

Congress dealt with this problem in the Energy Policy Act

of 1992 (“the Act” or “the Energy Act”). See generally id.

That was comprehensive legislation designed to implement a

“national energy policy,” a reaction, at least in part, to the

adverse economic effects of an oil embargo associated with

the military conflict in the Persian Gulf. H.R. Rep. No.

102-474(I), at 132 (1992), reprinted in 1992 U.S.C.C.A.N.

1953, 1955.

In this legislation, Congress sought to “reform the current

uranium enrichment program of the [government] so that it

will be operated in a more business-like fashion.” H.R.

Rep. No. 102-474(1), at 142 (1992), reprinted in 1992

—— a

U.S.C.C.A.N. 1953, 1965. The Act established the United

States Enrichment Corporation (“Enrichment Corporation”)

as a government corporation to assume the operation of the

government’s uranium enrichment services, 42 U.S.C.

§ 2297, and “which eventually could be sold to the private

sector.” H.R. Rep. No. 102-474(I), at 142-43 (1992), re-

printed in 1992 U.S.C.C.A.N. 1953, 1965-66. The Act

required that the Enrichment Corporation “[w]ithin 2 years

prepare a strategic plan for transferring ownership of the

Corporation to private investors.” 42 U.S.C. § 2297d(a). The

“key purposes of the Corporation includ{ed] providing

enrichment services in a business-like fashion, maximizing

the economic return to the [government].” H.R. Rep. No.

102-474(I), at 198 (1992), reprinted in 1992 U.S.C.C.A.N.

1953, 2021.

The Act provided that the Enrichment Corporation would

not be liable for the costs of cleaning up and closing

the government’s uranium enrichment facilities. 42 U.S.C.

§ 2297c-2(d). Instead, the Act established the Uranium

Enrichment Decontamination and Decommissioning Fund

(“Fund”) for that purpose. § 2297g. The Fund is financed

through both Congressional appropriations and an assessment

on those domestic utilities that purchased and used

government enriched uranium. § 2297g-1(b).

The Fund is instructed to obtain up to $480 million per

year (to be adjusted annually for inflation), with at most $150

million from a special assessment on the domestic utilities.

§ 2297g-1(a), (c). That assessment is based on each utility’s

share of the government’s enriched uranium sales (whether

purchased directly from the government or from another

source), which were made prior to October 24, 1992 and that

it did not resell. §2297g l(c). The special assessment

terminates after 15 years or after $2.25 billion has been

collected. § 2297g-1(e).

The Act also provided that the special assessments “shall

be deemed a necessary and reasonable current cost of fuel and

shall be fully recoverable in rates in all jurisdictions in the

same manner as the utility’s other fuel cost.” 42 U.S.C.

§ 2297g-1(g).

B. The three appellants filed separate complaints in the

Court of Federal Claims, as did a number of other similarly-

situated electric utilities. They contend that the special

assessment constituted a breach of the fixed-price contract

under which they had purchased enriched uranium from the

government. The complaints included the following factual

allegations, which we accept for purposes of the govern-

ment’s motions to dismiss. Highland Falls-Fort Montgomery

Cent. Sch. Dist. v. United States, 48 F.3d 1166, 1169-70

(Fed.Cir.1995) (“[W]e assume that all well-pled factual

allegations are true and indulge in all reasonable inferences in

favor of the movant.”’).

The appellants—Maine Yankee Atomic Power Company

(“Maine Yankee”), Sacramento Municipal Utility District

(“Sacramento District”), and Omaha Public Power District

(“Omaha District”) (collectively “the Utilities”) —all operated

nuclear power plants and ‘purchased government-produced

enriched uranium before 1992. Thus, as domestic utilities

that purchased and used government provided enriched

uranium, each is liable for a portion of the Act’s special

assessment, and each has paid millions of dollars.

The Utilities also allege that the government completely

contaminated its enrichment facilities (buildings, equipment,

property, and surrounding property) prior to 1969, at a time

when they were used almost exclusively for defense

purposes. Little, if any, additional contamination occurred

after 1969, when these facilities were used to enrich uranium

for sale to commercial utilities.

Maine Yankee is a domestic utility that operated a single

nuclear power plant, which was permanently closed in 1996.

It purchased enriched uranium from the government from

1970 to 1986 under two contracts, one executed on October y a

1970 and the other on November 4, 1982. On its purchases of

government enriched uranium, Maine Yankee is subject to a

$25 million special assessment, of which it has paid more

than $9.8 million.

Sacramento District is a municipal utility district in Cali-

fornia that generates electricity and operated a nuclear

generating facility, which it closed in 1989. During the

operation of that facility, the Sacramento District purchased

enriched uranium from the government, beginning in 1969

and ending in 1981. In 1990, the Sacramento District termi-

nated its contract for purchasing enriched uranium. Because

of those purchases, Sacramento District has paid $5.8 million

in special assessments and expects its total liability to reach

$8 million.

Omaha District is a domestic utility that generates and

supplies electricity in Nebraska. It purchased enriched

uranium from the government between 1969 and 1992 under

two contracts. Omaha District has paid special assessments

of more than $7.4 million, and estimates its total liability to

be nearly $20 million.

One of the other utilities that filed such a suit in the Court

of Federal Claims was Yankee Atomic Electric Company.

That court granted Yankee Atomic summary judgment,

holding that “the assessment imposed upon Yankee Atomic to

fund clean-up costs constitutes an unlawful exaction because

it violates the Government’s earlier contractual agree

ments to supply enriched uranium at fixed prices.” Yankee

Atomic Elec. Co. v. United States, 112 F.3d 1569, 1571

(Fed.Cir.1997). On the government's appeal, we reversed.

Id. We held that the special assessment did not constitute a

retroactive increase of the contract price, id. at 1575, but

instead “constitutes a general exercise of Congress’s taxing

power for the purpose of addressing a societal problem rather

than an act that retroactively increases the price charged

to contracting parties for uranium enrichment services,”

id. at 1577.

After our decision in Yankee Atomic, the Utilities amended

their complaints to assert claims not addressed in Yankee

Atomic; namely, that the assessment was a taking of their

property and denied them due process in violation of the Fifth

Amendment. Maine Yankee and the Sacramento District also

asserted that the assessment denied them equal protection.

On the government’s motion, the Court of Federal Claims

granted summary judgment dismissing the complaints for

failure to state a claim upon which relief could be granted.

Maine Yankee Atomic Power Co. v. United States, 44 Fed. Cl.

372 (1999); Omaha Pub. Power Dist. v. United States, 44

Fed. Cl. 383 (1999); Sacramento Mun. Util. Dist., 44 Fed.Cl.

395 (1999).

In an opinion dealing with the three cases (but issued |

separately for each case), the court first held that Yankee

Atomic was not stare decisis on the constitutional issues the

Utilities raised. Maine Yankee, 44 Fed.Cl. at 376-77. In

holding that the complaints did not state a valid takings claim, |

the court concluded that none of the factors in “a traditional |

takings analysis . ..—the economic impact of the legislation, ,

the reasonableness of plaintiffs’ investment-backed expecta-

tions and the character of the government action—support

the finding of a taking of property.” Jd. at 381. The

court rejected the Utilities’ due process claim based

on the retroactivity of the assessment. Jd. at 379-80. The

court concluded its discussion of these issues with the

following statement:

Whether we analyze the assessment under the Due i

Process Clause, under the Takings Clause, or under

some amalgam of the two, we are, in the end, faced with

a single, basic question: Is it inherently unfair, unjust, or

irrational for Congress, when faced with costs resulting

ae Renna

—s ae eee ante — — ——

from the enrichment of uranium, to ask those parties

who received the uranium to contribute to the solution?

The answer, quite clearly, is no. Plaintiffs’ assessments

are directly proportional to their usage of uranium

enrichment services the very services which created the

contamination. Congress itself took responsibility for

more than ‘wo thirds of the clean-up costs and assigned

the rest, as a general tax, to the rate-payers in districts

which had~previously benefited from nuclear power.

Such a scheme can hardly be construed as beyond the

reach of fairness or rationality.

Id. at 382-83.

Finally, the court rejected the claim that the special

assessment denied Maine Yankee and the Omaha District

equal protection because it did not cover (1) foreign utilities

or (2) utilities that purchased but resold government- enriched

uranium. The court denied this claim since “legislatures need

not burden the, most responsible party to survive rational basis

review.” Id. 7 383 (citing Ass’n of Bituminous Contractors,

Inc. v. Apfel, 156 F.3d 1246, 1255-56 (D.C.Cir.1998)).

A. The Supreme Court has noted that “the presumption

against retroactive legislation is deeply rooted in our juris-

prudence, and embodies a legal doctrine centuries older than

our Republic. Elementary considerations of fairness dictate

that individuals should have an opportunity to know what the

law is and to conform their conduct accordingly; settled

expectations should not be lightly disrupted.” Landgraf v.

USI Film Prods., 511 U.S. 244, 265, 114 S. Ct. 1483, 128

L.Ed.2d 229 (1994) (footnotes omitted). When the retro-

activity is severe, the legislation may violate the Due Process

Clause. See United States v. Carlton, 512 U.S. 26, 32, 114

S.Ct. 2018, 129 L.Ed.2d 22 (1994) (concluding that the

application of a 1987 federal tax statute to a 1986 transaction

10a

did not violate due process in part because “Congress acted

promptly and established only a modest period of

retroactivity.””); see also id. at 38, 114 S. Ct. 2018 (O'Connor,

J., concurring) (“A period of retroactivity longer than the year

preceding the legislative session in which the law was

enacted would raise, in my view, serious constitutional

questions.”). In exceptional circumstances not involving tax

law, however, longer retroactivity has been held not to deny

due process. See Usery v. Turner Elkhorn Mining Co., 428

U.S. 1, 96 S. Ct. 2882, 49 L.Ed.2d 752 (1976), discussed in

Part III B below.

Another pertinent principle is that economic legislation has

a presumption of constitutionality, which may be overcome

by demonstrating that the legislation is arbitrary or irrational.

Turner Elkhorn, 428 U.S. at 15, 96 S. Ct. 2882 (noting that

“legislative Acts adjusting the burdens and benefits of

economic life come to the Court with a presumption of

constitutionality, and that the burden is on one complaining of

a due process violation to establish that the legislature has

acted in an arbitrary and irrational way”) (citing, for example,

Ferguson vy. Skrupa, 372 U.S. 726, 83 S. Ct. 1028, 10 L.Ed.2d

93 (1963); Williamson v. Lee Optical Inc., 348 U.S. 483,

487-88. 75 S. Ct. 461, 99 L.Ed. 563 (1955)). Thus, to prevail

here, the Utilities must demonstrate that the Act is arbi-

trary and irrational as applied to them. They have carried

that burden.

The special assessment was wholly retroactive: it covered

only purchases of enriched uranium before the effective date

of the Act. The retroactivity was severe. It reached back to

the Utilities’ enriched uranium purchases that occurred up to

twenty-two years (or twenty-three years, in the case of

Omaha District) before the Act was passed, six years after

Maine Yankee had stopped purchasing government enriched

uranium, and three years after Sacramento District closed its

lla

plant. It also was substantial, subjecting the Utilities to

additional charges which they assert would total $25 million,

$8 million and almost $20 million for the three companies.

The Utilities did not cause or contribute to the contam-

ination of the government’s plants, which the special assess-

ment was designed to cure, and did not benefit from it. The

Utilities allege that the contamination occurred prior to the

beginning of their purchases, when the plants were producing

enriched uranium “almost exclusively” for the military, and

that “[l]ittle, if any additional contamination” occurred

thereafter. Moreover, when the Utilities entered into the

purchase contracts at a fixed price, they had no reason to

believe, or even suspect, that years later the government

would seek to make them pay for a substantial portion of its

cleanup costs. They may well have understood and expected

that the government would incur substantial expenses in

making that cleanup, but they reasonably would have

believed that the charges the government made for the

enriched uranium included the cleanup cost. They certainly

had no basis to expect that they would be subject to the

additional large amounts of the assessments.

To be sure, the Utilities benefited from their participation

in the government’s uranium enrichment program, but the

plant contamination and the cost of cleaning it up arose from

an earlier stage of that program (when the Utilities were not

participants). For the reasons just given, however, the

Utilities’ participation is not a sufficient basis under the Due

Process Clause to subject the Utilities to such a substantial

portion of the costs of cleaning up the contamination, which

they did not cause and from which they did not benefit.

B. The government contends that Usery v. Turner Elkhorn

Mining Co., 428 U.S. 1, 24, 96 S. Ct. 2882, 49 L.Ed.2d 752

(1976), supports the retroactive assessment against the

Utilities. Turner Elkhorn involved a provision of the Federal

Coal Mine Health and Safety Act of 1969, 83 Stat. 792, as

lai

12a

amended by the Black Lung Benefits Act of 1972, 86 Stat.

150, 30 U.S.C. § 901 et seq., that required mining companies

to pay death or total disability benefits to employee miners

suffering from pneumoconiosis (black lung disease), as

applied to miners who had stopped so working before the

effective date of the Act. The disease, whose symptoms may

“become apparent only after a miner has left the coal mines,”

id. at 8, 96 S. Ct. 2882, “is caused by long-term inhalation of

coal dust,” id. at 6, 96 S. Ct. 2882. The mining companies

challenged this retroactive application of the Act as violating

due process.

The Supreme Court upheld the Act against this challenge.

The Court recognized that the legislation imposed new

liability for disabilities developed prior to enactment, but

concluded that such retroactivity was “justified as a rational

measure to spread the costs of the employees’ disabilities to

those who have profited from the fruits of their labor.” /d. at

18, 96 S. Ci. 2882. It reflected the “interlocking economic

rights and duties of employers and employees,” and “ad-

just[ed] the burdens and benefits of economic life.” /d. at 15,

96 S. Ct. 2882. Thus, Turner Elkhorn held that it was not a

due process violation for legislation “to satisfy a specific need

created by the dangerous conditions under which the former

employee labored--to allocate to the mine operator an actual,

measurable cost of his business.” /d. at 19, 96 S. Ct. 2882.

The Court, however, in sustaining the presumptions of the

Coal Act relating to total disability, which were also at issue

in the case, stated: “To the extent that the presumption of |

death due to pneumoconiosis is viewed as requiring

compensation for damages resulting from death unrelated to

the operator’s conduct, its application to employees who

terminated their employment before the Act was passed

would present difficulties not encountered in our prior

discussion of retroactivity. The justification we found for the

retrospective application of the Act is that it serves to spread

ee ey ee siete tithes he

ick |

13a

costs in a rational manner—by allocating to the operator an

actual cost of his business, the avoidance of which might be

thought to have enlarged the operator’s profits. The damage

resulting from a miner’s death that is due to causes other than

the operator’s conduct can hardly be termed a ‘cost’ of the

operator’s business.” Jd. at 24, 96 S.Ct. 2882; see also

Concrete Pipe and Prods. v. Constr. Laborers Pension Trust,

508 U.S. 602, 641, 113 S. Ci. 2264, 124 L.Ed.2a 539 (1993);

United States v. Carlton, 512 U.S. 26, 31, 114 S.Ct. 2018,

129 L.Ed.2d 22 (1994). Thus, in Turner Elkhorn, the Su-

preme Court recognized culpability as an important factor

supporting the imposition of retroactive liability.

There is a critical difference between Turner Elkhorn and

the present case that precludes the application of Turner

Elkhorn here. In Turner Elkhorn the miners’ illness was

caused by conditions that existed when they were working for

the company, for which it was responsible and which

“profited from the fruits of their labor.” The company,

therefore, could fairly be charged with responsibility for its

former employees’ condition.

In the present case, however, the contamination occurred

before the government sold enriched uranium to the Utilities,

which neither were responsible for nor benefited from the

contamination. In these circumstances, as shown, it would be

unfair and unreasonable to subject the Utilities to a sub-

stantial additional charge to cure the contamination they

neither caused nor benefited from.

In many (if not most) of the cases in which the Supreme

Court rejected Due Process challenges to retroactive legis-

lation, the statute dealt with the relationships, financial and

otherwise, among private parties; the government’s role was

only the regulation of those relationships. In the present case,

however, the statute deals with the relationship between the

government and private parties; it seeks to transfer to those

parties a substantial portion of the government’s costs of

l4a

rectifying the contamination of its plants used to produce

the product it sold to those parties. It is by no means clear

that those Supreme Court cases may be automatically and

uncritically applied to the significantly different situation

here involved.

C. The government contends that the Comprehensive

Environmental Response, Compensation, and Liability Act of

1980 (“Environmental Response Act”), 42 U.S.C. § 9601 et

seq. (1994), supports the validity under the Due Process

Clause of the retroactive assessment of clean-up costs on the

Utilities. Among other things, that Act provides for the

clean-up of inactive hazardous waste disposal sites and

established a Hazardous Substances Response Trust Fund

(“Superfund”) to pay for it. The Superfund was funded

initially, and in large part, by special taxes on certain

petroleum products and chemicals and was to be replenished

by assessments on persons responsible for the waste.

Hazardous Substance Response Revenue Act of 1980, Title

Il, Subtitle A §§ 611, 4661, Title Il, Subtitle B, § 221, 26

U.S.C. §§ 611, 4661, 42 U.S.C. § 9631. The government

used the Superfund to fund the clean-up and replenished the

cost by charging the persons responsible for the hazardous

waste. 42 U.S.C. §§ 9604(a)(1), 9607. Such responsible

persons include those involved in the cleanup work, including

“the owner and operator of . . . a facility,” anyone who at the

time of disposal “owned or operated any facility at which

such hazardous substances were disposed of,” anyone who

arranged for or participated in the “transport for disposal or

treatment, of hazardous substances” and anyone who

“accepted any hazardous substances for transport to disposal

treatment facilities, incineration vessels or sites selected by

such person, from which there is a release, or a threatened

release which causes the incurrence of response costs, of a

hazardous substance.” 42 U.S.C. § 9607(a).

nn,

-1Sa

The Environmental Response Act thus retroactively im-

poses liability on numerous persons for cleanup of pre-

enactment contamination.

The government cites two Court of Appeals cases that

upheld the retroactive application of the Environmental

Response Act against Due Process challenges to its con-

Stitutionality, as support for the constitutionality of the

retroactive assessment against the Utilities. United States v.

Northeastern Pharm. & Chem. Co., 810 F.2d 726 (8th

Cir.1986), held liable for cleanup costs individuals who

arranged for the transportation and dumping of hazardous

waste before the effective date of the Act. In United States v.

Monsanto Co., 858 F.2d 160, 174 (4th Cir.1988), the court

ruled that retroactive application of the Environmental

Response Act did not violate due process as applied to (1)

landowners who leased their property to a company that

stored hazardous waste on the land and (2) the companies that

generated the waste but which contracted with another waste-

handling business, which provided transportation, recycling

and disposal of chemical waste. Noting that the companies

that generated the waste profited from inexpensive waste

disposal methods that may have been technically legal prior

to the [Environmental Response Act]’s enactment, it was

certainly foreseeable at the time that improper disposal could

cause enormous damage to the environment. [The Envir-

onmental Response Act] operates remedially to spread the

costs of responding to improper waste disposal among all

parties that played a role in creating the hazardous con-

ditions .... [T]he retroactive application of [the Environ-

mental Response Act] does not violate due process. /d. at

174 (citations omitted).

In the present case, however, the Utilities did not par-

ticipate in any way, directly or indirectly, or play any role in,

the creation of the hazardous conditions at the government’s

uranium facilities. The Utilities merely purchased enriched

uranium after the contamination had occurred, long before the

l6a

passage of the Energy Act. The Utilities’ tangential con-

nection with the contamination of the government’s uranium

enrichment facilities is quite different from the relationships

to the hazardous waste disposal of the persons held con-

stitutionally liable under the Environmental Response Act.

D. The government also contends that because 42 U.S.C.

§ 2297g-1(g) provides that the assessments “shall be deemed

a necessary and reasonable current cost of fuel and shall be

fully recoverable in rates in all jurisdictions in the same

manner as the utility’s other fuel cost,” the Utilities will be

able to pass the assessments on to their customers, and that

the assessments, therefore, will not have any substantial

economic impact on them.

It is impossible to predict, however, to what extent (if any)

state and local regulatory agencies and courts would

permit the Utilities to treat the assessments as a “current cost

of fuel” in determining their rates. The question whether

§ 2297g-1(g) preempts state regulatory authority in this area

appears difficult. The power of Congress to require that

particular items be included in the Utilities’ costs for rate

making purposes is uncertain. Regulation of retail electric

power rates is a traditional function of state government. The

likelihood of the state action that the government envisions is

far too speculative and conjectural to constitute a valid basis

for upholding the assessments.

In any event, the question whether, ond to what extent, the

state regulatory agencies and courts will recognize the

assessment as part of the Utilities’ costs for rate making

purposes appears more appropriately an issue for the damages

phase of these cases than for the liability phase.

E. In sum, I conclude that the Utilities’ complaints have

stated a valid claim under the Due Process Clause, and that

the Court of Federal Claims erred in dismiSsing the

complaints for failure to state a claim upon which relief could

be granted.

17a

APPENDIX B

UNITED STATES COURT OF APPEALS,

FEDERAL CIRCUIT

[Nov. 20, 2001]

No. 00-5069

COMMONWEALTH EDISON COMPANY,

Plaintiff-Appellant,

Vv.

UNITED STATES,

Defendant-Appellee.

Before MAYER, Chief Judge, NEWMAN, MICHEL,

LOURIE, CLEVENGER, RADER, SCHALL,

BRYSON, GAJARSA, LINN, and DYK, Circuit

Judges.*

DYK, Circuit Judge.

This case is one of a large number of cases brought in the

Court of Federal Claims challenging the constitutionality of

the Energy Policy Act of 1992, Pub.L. No. 102-486, 106 Stat.

2776 (codified as amended in various sections of 42 U.S.C.)

(“EPACT” or “the Act”), which imposes special monetary

assessments on domestic utilities for the remediation of

environmentally contaminated uranium processing facilities

owned by the United States. See 42 U.S.C. § 2297g 1. After

argument before a panel on April 4, 2001, we sua sponte

ordered that the case be heard in banc without additional

briefing. The case was heard in banc on October 3, 2001.

* Circuit Judge Prost, who entered on duty on October 3, 2001, has not

participated in the disposition of this case.

18a

In light of our decision in Consolidated Edison Co. v.

United States, 247 F.3d 1378 (Fed.Cir.2001),' Edison’s

request for a stay of the proceedings in the Court of Federal

Claims has become moot.

On the merits, we conclude that requiring plaintiff

Commonwealth Edison Company (“Edison”) and the other

domestic utilities that benefited from the uranium processing

services to contribute to the remediation costs does not

constitute a Fifth Amendment taking because the Takings

Clause does not apply to legislation requiring the payment of

money. We also conclude that the Act does not violate the

Due Process Clause of the Fifth Amendment. The retroactive

application of the Act rationally furthers a legitimate legis-

lative objective—the remediation of contaminated facilities

used by the United States to process uranium for domestic

utilities. Congress reasonably concluded that the utilities

received benefits from the processing and that the utility

processing contributed to the contamination. Liability was

imposed on those utilities for only a portion of the cleanup

costs. As a matter of law, Edison and other similarly situated

utilities could have reasonably expected to be liable for a

share of the remediation costs arising from the contamination

of the processing facilities. | Edison’s other arguments

on the merits are foreclosed by our decision in Yankee

Atomic Electric Co. v. United States, 112 F.3d 1569

(Fed.Cir.1997), cert. denied, 524 U.S. 951, 118 S. Ct. 2365,

141 L.Ed.2d 735 (1998).

We therefore dismiss as moot the appeal from the denial of

the stay request and affirm the decision of the Court of

Federal Claims dismissing the complaint.

' This opinion replaced our previous decision in that case, reported at

234 F.3d 642 (Fed.Cir.2000).

19a

BACKGROUND

This case arises against the background of our earlier

decision in Yankee Atomic where we rejected contentions that

EPACT breached uranium processing contracts between

Yankee Atomic Electric Co. (“Yankee Atomic”) and the

United States and constituted a taking of those contract rights.

Some of the claims asserted by Edison are the same as

those asserted in Yankee Atomic. Edison also claims that

the statutory obligation to pay money to the government

constitutes a taking of that money, and that the retro-

activity of the Act renders it unconstitutional under the Due

Process Clause.

Resolution of this appeal requires a brief overview of the

history of the United States government’s involvement in the

enrichment of low-grade uranium for Edison and other

domestic utilities, as well as the provisions of EPACT.

The uranium processing facilities involved here were

originally constructed and operated by the United States

government for national defense purposes. Between 1945

and 1970, approximately 96% of the enriched uranium

produced by the government was used for weapons

production. These facilities were also capable of producing

enriched uranium for nuclear power reactors.

Before 1954, United States law permitted only the United

States government to own nuclear power reactors. In 1954,

however, Congress enacted amendments to the Atomic

Energy Act of 1954, Pub.L. No. 83-703, 68 Stat. 919, which

for the first time authorized private ownership of nuclear

power reactors. The government extensively regulated these

reactors, inter alia, “to protect the health and safety of the

public” from the possible environmental hazards. /d. at § 2

(codified as amended at 42 U.S.C. § 2210).

Plaintiff Edison is a domestic utility company with its

principal place of business in Illinois. Beginning in 1960,

20a

Edison owned and operated nuclear reactors, which it used

to generate electrical power for sale and distribution to its

customers in Illinois. Those nuclear reactors, in turn,

required enriched uranium.

Edison alleges that in 1960 it began to “purchase or lease”

enrichment services from the government. However, we note

that until 1964 the government retained strict control over the

technology used to enrich low-grade uranium for use in

nuclear reactors, and barred private ownership of enriched

uranium. In that year, Congress passed the Private Owner-

ship of Special Nuclear Materials Act, Pub.L. No. 88-489, 78

Stat. 602 (1964), which authorized the private ownership

of enriched uranium. ‘ After the passage of that act, the

government began to offer uranium enrichment services to

commercial customers like Edison.

Beginning in 1969, Edison entered into a series of mullti-

year contracts with the United States government in which

Edison agreed to purchase uranium enrichment services from

the United States. Those enrichment services were provided

at enrichment plants operated first by the Atomic Energy

Commission and later (beginning in 1974) by the Energy

Research and Development Administration and, ultimately

(beginning in 1977) by the Department of Energy

(collectively, “DOE”). :

Under those contracts, Edison delivered low-grade uranium

to the government-owned facilities for enrichment. The

government took title to the low-grade uranium, processed

the uranium, and returned enriched uranium to Edison. The

enrichment services were measured in terms of “separative

work units” (“SWUs”). The plaintiff here, like other domestic

utilities, paid for the services by multiplying the number of

SWUs provided by the unit price set forth in its contracts with

the government. Although the utilities’ contracts varied

somewhat, each stated that the price paid by the utility for the

enrichment services would be based on an “established

2la

Commission pricing policy,” defined under the contracts as

the price in effect at the time the service was rendered. A

number of these contracts also capped the maximum per unit

charge for the enrichment services. Edison alleges in its

complaint that it purchased a portion of its uranium

enrichment services “with the Government’s knowledge and

consent, from other sources.” First Amended Complaint of

Plaintiff-Appellant Commonwealth Edison Company (here-

inafter “Complaint”) at § 50.

Edison alleges that “[b]y the late 1970s and early 1980s,

foreign suppliers of uranium enrichment services emerged,

threatening the Government’s monopoly power and creating

significant competition for the Government.” /d. at § 41.

Edison further alleges that the Government’s share of the

uranium processing market “declined substantially, from

nearly 100% in the 1960s and 1970s, to below 50% in 1983.”

Id. Edison elected, however, to continue to use government

processing facilities even though those foreign alternatives

became available.

In January 1984, the government developed a standard.

requirements-type contract for uranium enrichment services,

referred to as a Utility Services Contract. In July 1984,

Edison entered into a Utility Services Contract after

terminating all of its existing uranium enrichment services

contracts with the government through a Supplemental

Agreement of Settlement (“Settlement Agreement”). This

Utility Services Contract, like the previous contracts, charged

the utilities for the services according to the “established

pricing policy,” and likewise capped the maximum unit

charge. It appears that the government developed this Utility

Services Contract, at least in part, at the request of Edison and

the other domestic utilities.

As a result of the government’s use of the processing

facilities for national defense purposes, they had become

contaminated, even before the utilities’ uranium processing

22a

commenced. Although Edison alleges that the facilities were

“fully contaminated with radioactive and other hazardous

materials” before they began to be used for the processing of

the utilities’ uranium, Complaint at § 23, there is no question

that the processing of the utilities’ uranium caused the same

type of contamination as the government’s earlier use of the

facilities to enrich uranium for weapons purposes. Indeed,

Edison at oral argument specifically conceded that that was

the case, and agreed that contamination cleanup costs are

incurred any time uranium is enriched, including when it is

enriched for the benefit of the utilities. Edison alleged,

however, that the cleanup costs were not “materially”

increased by the later contamination resulting from the utility

uranium processing.”

2 At oral argument, counsel for Edison explained Edison’s contribution

to the contamination as follows:

COUNSEL FOR EDISON: If it can be demonstrated-—in our cases

there’s nothing in the record—but if it can be demonstrated that

there was additional cost associated with the enrichment being—

services provided to the commercial utilities, then perhaps there

would be an argument that we have a certain responsibility . ...

THE COURT: Well, of course there are. You can’t run a nuclear

enrichment program without creating contamination, so of course—

we can quarrel about exactly how to measure them or how big they

are, but of course there are contamination cleanup Costs.

COUNSEL FOR EDISON: There are. Let me try to make an

analogy .... 1 know in terms of nuclear utilities, when they have

boiling water, nuclear generated, and they periodically are required

to decontaminate, what they do is they have these very large deep

swimming pool type reactors. What they do is paint the well of the

reactor with a rubberized paint that the contamination adheres to.

Then they peel that paint off and the—.... The contamination

adheres to that paint. So regardless of whether there is a half inch of

contamination or a full inch of contamination, all the contamination

WP Baie fen ny

STORE eee neerEma erences at

oer Ae " 9 soy

23a

_ Edison also admits in its complaint that the obligation to

decontaminate and decommission the facilities “was an

obligation well understood by operators of nuclear facilities

throughout the industry.” Complaint at § 31. Although the

contracts provided for recovery of the government’s costs of

operating the plants and fixed the price as of the time of

delivery, the original contracts, the Utility Services Contract,

and the Settlement Agreement did not expressly preclude (or

even address) the government’s future assignment to Edison

of any remediation costs for the decontamination of the

government’s uranium enrichment facilities.”

These remediation costs were addressed by Congress -in

1992. Faced with its declining share of the uranium

processing market, Congress decided to restructure the

government’s uranium processing services in order to remain

adheres to that rubberized paint and you just peel it off, and the

cost is no more.

THE COURT: Well, that’s basically your point, that the processing

of the utilities’ uranium caused pollution, but it didn’t cost any more

to clean it up than it would have cost to clean up the weapons

pollution, right?

COUNSEL FOR EDISON: Exactly. Yes, Sir.

* The Utility Services Contract merely stated, in pertinent part, that:

[T]he Customer and DOE desire to terminate all previous long-term

contracts between the Customer and DOE for the furnishing of

uranium enrichment services in order to accommodate the

Customer’s desire to obtain such services under the Utility Services

form of uranium enrichment services contract... .

(Emphasis added.).

That contract further provided that “the unit charge for enrichment

services under this contract shall not exceed a ceiling charge of $135.00

per separative work unit through September 30, 1985.”

The Settlement Agreement provided that “the Government agrees that

all obligations arising under the [previous] contracts or by reason of their

termination shall be deemed to be concluded.”

24a

competitive with its overseas providers. Congress created a

new, for-profit, governmental corporation called the United

States Enrichment Corporation (“USEC”) to provide those

services to Edison and other domestic utilities.

At the same time that it created the USEC, Congress in

EPACT addressed the need to decontaminate and decom-

mission the government’s uranium enrichment facilities. The

DOE “estimated that the total cost of this clean up could

exceed $20 billion over 40 years, which amounted to about

$500 million per year, indexed to inflation.” Yankee Atomic,

112 F.3d at 1572. As this court noted in Yankee Atomic,

“Iblecause [the magnitude of] this decontamination and

decommissioning fiscal problem was not [fully] recognized

until the 1980s, the prices charged in the Government’s past

uranium enrichment contracts had not accounted for the

problem.” /d.

EPACT established a Uranium Enrichment Decontamina-

tion and Decommissioning Fund (the “Fund”) to accumulate

over a fifteen-year period the funds necessary to remediate

the uranium enrichment facilities. 42 U.S.C. §§ 2297,

2297g 1. The Act provided that the costs were to be shared by

the government and those domestic utilities that benefited

from processing at government facilities. The Act

accordingly provided that the annual deposits of $480 million

(adjusted for inflation) would come from two sources: (1) up

to $150 million (or up to approximately 32% of the total

amount) was to be collected as a special assessment from

domestic utilities that purchased (on the primary or

secondary markets) the uranium enriched at these facilities;

and (2) the balance of at least $330 million—the lion’s share

* The implementing regulations for the Fund defined “domestic utility”

as any utility in the United States that purchased SWUs from the

government between 1945 and October 23, 1992. See 10 C.F.R. § 766.3.

It is undisputed that Edison meets this definition. ;

Sect reel pet) ot pa

25a

of the costs, amounting to at least 68%—was to be paid by

the government. The Act further provided that the imposition

of these special assessments on Edison and the other utilities

would cease after the earlier of 15 years after October 24,

1992 (the date of EPACT’s enactment) or the collection of

$2.25 billion (again adjusted for inflation) from the domestic

utilities. See 42 U.S.C. § 2297g-1.

Under the Act, the special assessment imposed on each

domestic utility was based on the percentage of SWUs

purchased from the DOE relative to the total number of

SWUs produced by the DOE. 42 U.S.C. § 2297g-I(c). As

noted above, the Act provided that a domestic utility was

considered to have purchased a SWU from the DOE if the

SWU was originally produced by the DOE, even if the utility

actually purchased it from another source. Similarly, a utility

was not considered to have purchased a SWU from the DOE

if it subsequently resold that SWU to another utility. As this

court noted in Yankee Atomic, “[i]n sum, the Act impose[d]

the assessment upon whichever utility company eventually

use [d] the enrichment services.” 112 F.3d at 1572.

Two groups of purchasers of uranium enrichment services

were exempt from the special assessment: (1) domestic

utilities that purchased USEC services any time after 1992;

and (2) foreign utilities, which represented 25% of DOE’s

pre-1992 customer base. See Commonwealth Edison Co. v.

United States, 46 Fed. Cl. 29, 33 n. 1 (2000); see also

Complaint at § 25 (alleging that sales to foreign utilities

historically “accounted for approximately 25% of the

Government’s commercial uranium enrichment market’’).

EPACT also provided the utilities with a “pass-through”

provision, providing in pertinent part that the special

assessment “shall be deemed a necessary and reasonable

current cost of fuel and shall be fully recoverable in rates in

all jurisdictions in the same manner as the utility’s other fuel

cost.” 42 U.S.C. § 2297g-I(g). This statutorily mandated

\ 26a

pass-through provision was binding on state regulatory

agencies. See Mississippi Power & Light Co. v. Mississippi,

487 U.S. 354, 369-72, 108 S.Ct. 2428, 101 L.Ed.2d 322

(1988); Nantahala Power & Light Co. v. Thornburg, 476 U.S.

953, 962-65, 106 S. Ct. 2349, 90 L.Ed.2d 943 (1986). At oral

argument, counsel for Edison conceded that Edison sought to

recover the costs of the special assessment by passing the

costs through to Edison’s customers, though counsel

expressed some doubt whether Edison recovered those costs

in light of deregulation of the market and the competitive

rates that deregulation produced.

The cost-sharing provisions were enacted after “much

congressional debate over the issue of how these costs should

be recovered, especially to what extent DOE’s nuclear utility

customers should be expected to share in paying for these

costs.” 138 Cong. Rec. H11,399, H1 1,401 (1992) (statement

of Rep. Phillip Sharp on Conference Report), reprinted in

Senate Comm. On Energy & Natural Res., 103d Congress 2d.

Sess., 6 Legislative History of the Energy Policy Act of 1992,

at 4519, 4553 (Comm. Print 1994). Ultimately, the utilities’

share was limited to 32% even though the House Report

concluded that “{h]istorical production from these plants

ha[d] been divided almost evenly between the government

and commercial sectors.” H.R. Rep. No. 102-474(D, at 144

(1992), reprinted in 1992 U.S.C.C.A.N. 1953, 1967.

Indeed, Edison and other utilities participated actively in

shaping the legislation that became EPACT and approved the

concept of cost sharing. See Comprehénsive National Energy

Policy Act: Hearings on H.R. 776 Before the House Comm.

on Ways & Means, 102d Cong. 170-83 (1992) (“Committee

Hearings I’). During the course of EPACT’s consideration,

the House Committee on Energy and Commerce proposed to

impose “a $419 million annual liability, or a $9 billion

[liability] over 20 years,” on the utility industry for

remediation of the enrichment facilities. Jd. at 181. In

metenenst inert eel - a -

cet ae eae

= Awe

ees

27a

Edison’s case the company estimated that this funding

proposal, if enacted, would increase its uranium enrichment

costs by “one third” over the amount it had already agreed

to pay. /d.

In the hearings on EPACT, Edison’s President complained

that the industry was being asked to pay a “disproportionate

share” of the costs, and, as in the present Complaint, stated

that “virtually all the contamination at [the government

enrichment] facilities occurred during the first 20 years of

Operations, when operations were strictly for the defense

program.” Jd. at 180-81 (statement of Bide L. Thomas,

President, Commonwealth Edison Co., et al.).° Edison

offered no independent study of the industry’s relative

contribution to the contamination and relied entirely on the

testimony of the Department of Energy. That testimony, by

Assistant Secretary for Nuclear Energy William Young, was

that “there is additional pollution in the area of the sites [of

the enrichment facilities] because of commercial operations

subsequent to the exclusive operation [of the facilities] for the

government.” Department of Energy Budget Request for

Fiscal Year 1993: Oversight Hearing Before the Subcomm.

On Energy and the Env’t of the House Comm. on Interior

and Insular Affairs, 102d Cong. 80 (1992) (“Committee

Hearings II”). He estimated the remediation costs for that

portion of the pollution attributable to the enrichment of the

utilities’ uranium amounted io approximately $1.6 billion, out

of a total cost of approximately $18.5 billion. He concluded

that “[i]f you look at it from a polluter-pays basis, about $1.6

° This testimony was a joint statement of Bide L. Thomas; Michael R.

Peevey, President, Southern California Edison Co.; and Joseph M. Farley,

Chairman and Chief Executive Officer, Southern Nuclear Operating Co.

See id. at 178.

28a

billion of that $18.5 billion would be properly allocated

to commercial customers” of the enrichment facilities.

Id. a 79.

° Assistant Secretary Young further explained this proposed allocation

when questioned by Representative Kostmayer during his testimony:

MR. KOSTMAYER: Who else did the polluting besides the

government?

MR. YOUNG: In some cases, there is additional pollution in the

area of the sites because of [the] commercial operations subsequent

to the exclusive operation for the government. Some of the tailings

are there as a result of commercial operations, for example.

MR. KOSTMAYER: Commercial operations conducted by some

party other than the government?

MR. YOUNG: No, no. We have run the diffusion plants. A certain

amount of the tails are there because of [the] SWUs produced for

the government. Another certain amount of the tails are there

because of SWUs produced for commercial customers.

MR. YOUNG: ... The largest piece of [the estimated total cleanup

cost] is $14 billion which is [decontamination and decom-

missioning] of the buildings and systems themselves. Of that,

because of the government operation having led to the contamin-

ation, we are saying the government would pay 100 percent of that.

There are two other elements of the cleanup that has got to take

place. One is on the grounds around the facilities and we are saying

that some of the contamination that occurred in the ground resulted

not solely from the 20 years of government operation, but a

measurable amount more resulted from the commercial—operation

to the benefit of commercial customers. And since we did not pass

those costs on in the past, we feel it is equitable to pass those costs

on in the future.

Further, with the tails, some of the tails were created for the

benefit of commercial customers, and the portion that was, and

again, not passed on in the past, we feel it is equitable to pass

it on to commercial customers at this time. Committee Hearings II

at 80-81.

29a

Based on Edison’s view of the industry’s responsibility for

the contamination, Edison reaffirmed its and other utilities’

“willingness to pay a fair share of the [decontamination and

decommissioning costs] for these [enrichment] facilities.”

Committee Hearings I at 182; see also id. at 172 (“[T]he

industry is willing to participate in the cleanup

program....”) (testimony of Bide L. Thomas, President,

Commonwealth Edison Company). But Edison and other

utilities objected that their share should not exceed the $1.6

billion estimated by the Department of Energy, and sought “a

cap to protect ratepayers from being assessed more than their

fair share of costs.” /d. at 181. Edison and other utilities

urged Congress to adopt a compromise funding proposal—

one adopted by the House Committee on Science, Space and

Technology (the “Science Committee”)—that would have

capped the utilities’ liability for the remediation costs at $2.5

billion. Edison and two other utilities stated, on behalf of

themselves and two industry interest groups,’ that:

While $2.5 billion is significantly more than the $1.6

billion that DOE estimates the civilian sector should

contribute [to the remediation of the enrichment

facilities], the industry is willing to accept this

compromise in the interest of providing certain liability

levels and to move forward with this restructuring

legislation and [decontamination and decommissioning]

program.

Id. at 182. (Emphasis added.) The liability cap proposed by

the Science Committee, which Edison viewed as protecting

its ratepayers from paying more than “their fair share of

” These interest groups were the American Nuclear Energy Council

(“ANEC”) and the Edison Electric Institute (“EEI”). ANEC “represents

over 100 domestic and international organizations that have an interest in

nuclear energy.” EEI, in turn, “is the national association of investor-

owned electric companies” and represents “approximately three-quarters

of all American electricity customers.” Committee Hearings I at 178.

30a

[remediation] costs,” essentially became the cap in the

legislation that Edison now challenges, though the ultimate

liability of the utilities under the enacted legislation was more

certain than under the Science Committee proposal. See 42

U.S.C. § 2297g-1.

Following the enactment of EPACT in 1992, as well as

corresponding DOE regulations implementing EPACT, the

government assessed Edison and similarly situated domestic

utilities on an annual basis for each utility’s share of the

special assessment. Edison alleges that as of the date of the

complaint, it had paid the government approximately $95.5

million in seven special assessments for the decontamination

and decommissioning of the enrichment facilities. These

special assessments covered the period from 1969, when

Edison first began to purchase uranium processing services

from the government, until 1992, the year of EPACT’s

enactment.

PROCEEDINGS BELOW

On Aprii 9, 1997, Edison commenced an action in the

Court of Federal Claims challenging the legality of the

special assessments authorized by the Act. Edison’s original

complaint alleged that the special assessment breached its

contracts with the government by retroactively increasing the

cost of the uranium enrichment services and constituted an

impermissible taking of those contracts in violation of the

Fifth Amendment. See, e.g., Original Complaint of Plaintiff

Appellant Commonwealth Edison Company at §§ 53, 68-69.

On May 6, 1997, during the pendency of Edison’s action, this

court issued its decision in Yankee Atomic rejecting identical

claims made by another utility.

Following our decision in Yankee Atomic, Edison filed a

new and separate action for declaratory and injunctive relief

in the United States District Court for the Southern District of

New York seeking to invalidate EPACT and to bar the

government from attempting to compel future payments

3la

under the Act (the “New York action”). The district court

subsequently denied a motion by the United States to transfer

the case to the Court of Federal Claims. Consol. Edison Co.

v. United States, 45 F. Supp.2d 331 (S.D.N.Y.1999). In

Consol. Edison Co. v. United States, Dept. of Energy, 247

F.3d 1378 (Fed.Cir.2001), we reversed that decision and

instructed the district court to transfer the New York action to

the Court of Federal Claims for adjudication.

On November 6, 1998, Edison also filed a motion in the

Court of Federal Claims to stay proceedings in that court

pending resolution of the New York action. On February 2,

1999, Edison amended its original complaint in the Court of

Federal Claims to state new and additional theories for

recovery. The amended complaint stated essentially three

theories for recovery. Edison alleged that the special

assessments imposed by EPACT: (1) constituted an unlawful

taking of money under the Takings Clause of the Fifth

Amendment; (2) constituted a breach of contract, inasmuch as

“[t]he fixed price nature of [Edison’s] enrichment contracts,

coupled with the additional release granted by the

Government pursuant to the termination of certain of those

contracts, provided [Edison] with an unmistakable promise

that it would not be subject to future liability to the

Government based upon its contractual purchases of

enrichment services”; and (3) constituted an illegal exaction

in violation of the Due-Process Clause of that amendment.

The government moved to dismiss the amended complaint for

failure to state a claim.

On February 3, 2000, the Court of Federal Claims denied

Edison’s motion for a stay, noting, in part, that the original

action in the Court of Federal Claims wus the first filed action

and that it “has the jurisdiction to rule on each of the counts

in the amended complaint and thus need not defer to the

district court’s broader jurisdiction.” Commonwealth Edison,

46 Fed. Cl. at 34. In a well-reasoned opinion, the Court of

Federal Claims also granted the government’s motion to

32a

dismiss, concluding that neither the old nor new theories of

recovery stated a claim. That court rejected Edison’s first

claim--that EPACT constituted an impermissible taking of

Edison’s property without just compensation—on the ground

that “a government-imposed payment of money cannot result

in a compensable taking.” /d. at 41.

The court dismissed the utility’s claim that the imposition

of the special assessments constituted a taking of its contract

rights with the government, finding that “this issue was

squarely addressed” in this court’s decision in Yankee Atomic.

Id. at 46. In reaching this conclusion, the court rejected

Edison’s arguments that its contracts with the government

were significantly different from those contracts at issue in

Yankee Atomic. Id.

Finally, the court rejected Edison’s claim that the special

assessment constituted an illegal exaction barred under

the Due Process Clause. Recognizing the well-established

principle that “an economic statute, such as the Energy Policy

Act, comes to the court with a presumption of validity,” id.

at 43, the Court of Federal Claims determined that although

the Act is indeed retroactive, “it cannot be said that the

retroactivity of the Act is irrational or that that retroactivity

unfairly impacted on the plaintiff.” /d. at 44 (citing Usery v.

Turner Elkhorn Mining Co., 428 U.S. 1, 18, 96 S. Ct. 2882,

49 L.Ed.2d 752 (1976)). -The court further held that “the

liability imposed by the special assessment is neither

disproportional nor excessive,” as EPACT imposed “liability

only on those utilities that benefited from the government's

uranium enrichment services.” Jd. at 45.

This timely appeal followed. We have jurisdiction over

this appeal pursuant to 28 U.S.C. § 1295(a)(3)."

® Amicus Curiae briefs in support of Edison were filed in this case

by Sacramento Municipal Utility District and Maine Yankee Atomic

Power Co.

SE ARE FRI MT PS OO EOP a EO

33a

DISCUSSION

As an initial matter, we note that the decision of the Court

of Federal Claims to deny Edison’s request for a stay of those

proceedings pending resolution of the New York action is

now moot, in light of our decision in Consolidated Edison,

247 F.3d 1378, in which we instructed the United States

District Court for the Southern District of New York to

transfer that action to the Court of Federal Claims.

Accordingly, the only question before us is whether the

Court of Federal Claims erred in dismissing this action for

failure to state a claim upon which relief may be granted. We

review that decision without deference. First Hartford

Corp. Pension Plan & Trust v. United States, 194 F.3d 1279,

1286-87 (Fed.Cir.1999). In so doing, we also “assume that

all well-pled factual assertions are true and make all

reasonable inferences in favor of’ Commonwealth Edison,

New Valley Corp. v. United States, 119 F.3d 1576, 1580

(Fed.Cir.1997), to the extent that such allegations are relevant

to the constitutional issues.

Ever since the New Deal Supreme Court’s discarding of

the Lochner ° line of substantive due process cases, the Court

has repeatedly held that economic legislation “adjusting the

burdens and benefits of economic life” is to be judged under a

deferential standard. Usery v. Turner Elkhorn Mining Co.,

428 US. 1, 15, 96 S. Ct. 2882, 49 L.Ed.2d 752 (1976). There

remain, however, at least three areas in which judicial review

of federal legislation imposing regulatory burdens still bites.

Not surprisingly, Edison relies on each of these three theories.

” Lochner v. New York, 198 U.S. 45, 25 S. Ct. 539, 49 L.Ed. 937

(1905).

34a

First, there are the takings cases, in which the government

is alleged to have taken property without just compensation

under the Fifth Amendment. The Supreme Court has made

clear that government regulation can constitute a taking of

property requiring compensation. See, e.g., Lucas v. So.

Carolina Coastal Council, 505 U.S. 1003, 1027-28, 112

S. Ct. 2886, 120 L.Ed.2d 798 (1992). It is also clear that a

fund of money can be property protected under the Takings

Clause. See Phillips v. Washington Legal Found., 524 USS.

156, 160, 118 S.Ct. 1925, 141 L.Ed.2d 174 (1998) (holding

that interest income generated by funds held in IOLTA

accounts is private property of the owner of the principal for

purposes of the Takings Clause); see also Webb’s Fabulous

Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 164-65, 101

S. Ct. 446, 66 L.Ed.2d 358 (1980) (holding that the Takings

Clause can apply to monetary interest generated from the

operation of a specific, separately identifiable fund of

money). However, although a minority of the Supreme Court

has urged that a taking can occur when Congress nas imposed

an obligation to pay money, see Eastern Enterprises v. Apfel,

524 U.S. 498, 537, 118 S. Ct. 2131, 141 L.Ed.2d 451 (1998),

we are bound to follow: the views of a majority of the

Supreme Court.

In United States v. Sperry Corp., 493 U.S. 52, 110 S. Ct.

387, 107 L.Ed.2d 290 (1989), the Supreme Court held that a

federal statute that required the payment of a portion of an

arbitral award from the Iran-United States Claim Tribunal to

the United States government did not violate the Takings

Clause because, in part, “[iJt is artificial to view deductions of

a percentage of a monetary award as physical appropriations

of property. Unlike real or personal property, money is

fungible.” /d. at 62 n. 9, 110 S. Ct. 387.

In Eastern Enterprises, five justices of the Court rejected

the theory that an obligation to pay money constitutes a

taking. There, the Supreme Court confronted a constitutional

35a

challenge to the retroactive liability provisions of the Coal

Industry Retiree Health Benefit Act of 1992, codified at 26

U.S.C. §§ 9701-9722 (the “Coal Act”). The Coal Act

required coal operators such as petitioner Eastern Enterprises

(“Eastern”) to fund future health benefits of current and

former coal mine employees. There was no majority opinion

of the Supreme Court. Writing for the plurality, Justice

O’Connor, joined by three other justices, concluded that the

retroactive impact of the Coal Act as applied to Eastern

Enterprises resulted in an unconstitutional taking of property

because it placed a “severe, disproportionate and extremely

retroactive burden on Eastern.” Eastern Enters., 524 U.S. at

538, 118 S. Ct. 2131.

Justice Kennedy in his concurrence, however, disagreed

with the plurality’s conclusion that the Coal Act resulted in an

unconstitutional taking of property:

Our cases do not support the plurality’s conclusion that

the Coal Act takes property. The Coal Act imposes a

Staggering financial burden on the petitioner, Eastern

Enterprises, but it regulates the former mine owner

without regard to property. It does not operate upon or

alter an identified property interest, and it is not

applicable to or measured by a property interest. The

Coal Act does not appropriate, transfer, or encumber an

estate in land (e.g., a lien on a particular piece of

property), a valuable interest in an intangible (e.g.,

intellectual property), or even a bank account or accrued

interest. The law simply imposes an obligation to

perform an act, the payment of benefits.

Id. at 540, 118 S. Ct. 2131. The four dissenters in Eastern

Enterprises (Justices Stevens, Souter, Ginbsurg, and Breyer)

agreed that the Takings Clause was not implicated because

“(t]he ‘private property’ upon which the [Takings] Clause

traditionally has focused is a specific interest in physical

or intellectual property. ... This case involves not an interest

36a

in physical or intellectual property, but an ordinary liability

to pay money....” /d. at 554, 118 S.Ct. 2131 (Citations

omitted.).

Thus five justices of the Supreme Court in Eastern

Enterprises agreed that regulatory actions requiring the

payment of money are not takings. We agree with the

prevailing view that we are obligated to follow the views of

that majority.”

This court has similarly concluded that the imposition of an

obligation to pay money does not constitute an

unconstitutional taking of property. In Atlas Corp. v-United

States, 895 F.2d 745 (Fed. Cir.), cert. denied, 498 U.S. 811,

111 S.Ct. 46, 112 L.Ed.2d 22 (1990), for example, we

considered the constitutionality of the Uranium Mill Tailings

See Parella v. Ret. Bd. of the R.I. Employees’ Retirement Sys., 173

F.3d 46, 58 (Ist Cir.1999) (upholding state statute temporarily

withholding excess retirement benefits against a Takings Clause challenge

because “a majority of justices found that the Takings Clause did not

apply under the facts of Eastern Enterprises, because they concluded that

a Takings Clause issue can arise only after a plaintiff's property right has

been independently established”); Unity Real Estate Co. v. Hudson, 178

F.3d 649, 659 (3d Cir.) (“[Wle are bound to follow the five-four vote

against the takings claim in Eastern.”), cert. denied, 528 U.S. 963, 120

S. Ct. 396, 145 L.Ed.2d 309 (1999); Holland v. Big River Minerals Corp.,

181 F.3d 597, 606 (4th Cir.1999) (following Supreme Court in holding

Takings Clause inapplicable to the Coal Act because five Justices in

Eastern Enterprises reasoned that “no identifiable property interest was

infringed by the legislation”), cert. denied, 528 U.S. 1117, 120 S. Ct. 936,

145 L.Ed.2d 814 (2000); but see U.S. Fidelity & Guar. Co. v. McKeithen,

226 F.3d 412, 416 (Sth Cir.2000) (citing Eastern Enterprises but

analyzing a Takings Clause challenge to retroactive assessments under the

Louisiana Workers’ Compensation Fund under ad hoc, fact-specific

factors), cert. denied, __U.S.__, 121 S. Ct. 1360, 149 L.Ed.2d 289 (2001);

United States v. Hercules, Inc., 247 F.3d 706, 722 (8th Cir.2001) (stating

that “inquiry into the constitutionality of CERCLA... would be

‘essentially ad hoc and fact intensive’” (quoting Eastern Enterprises, 524

U.S. at 523, 118 S. Ct. 2131)).

37a

Radiation Control Act (““UMTRCA”), Pub.L. No. 95-604, 92

Stat. 3021 (1978), which required that uranium producers

spend large sums of money to clean up uranium tailings piles,

a by-product of uranium manufacture. We held that the

UMTRCA’s imposition of the obligation to pay money to

clean up the tailings piles did not constitute an

unconstitutional taking of property under the Takings Clause:

In this case, [the uranium producer] has not alleged a

physical taking of any of its property. Its complaint

alleges only that it will be required to spend sums of

money for reclamation of tailings and mill

decommissioning. Requiring money to be spent is not a

taking of property.

Id. at 756 (citing United States v. Sperry Corp., 493 U.S. 52,

62 n. 9, 110 S. Ct. 387, 107 L.Ed.2d 290 (1989)).

In short, while a taking may occur when a specific fund of

money is involved, the mere imposition of an obligation to

pay money, as here, does not give rise to a claim under the

Takings Clause of the Fifth Amendment.

Ill

The second area, represented by the Supreme Court’s

decision in United States v. Winstar Corp., 518 U.S. 839, 116

S. Ct. 2432, 135 L.Ed.2d 964 (1996), involves contracts in

which the government has agreed to pay damages if it

engages in certain types of regulation.

A similar contract claim was made with respect to the

present contracts and rejected by this court in Yankee Atomic.

In that case, this court was confronted with a claim that the

special assessments imposed under EPACT breached the

utility’s fixed-price contracts with the government by, “in

effect, retroactively increasing the price that it must pay for

the previously supplied uranium enrichment services.” 112

F.3d at 1573. Relying on the analysis prescribed by the

38a

Supreme Court’s decision in Winstar, we held that the

imposition of the special assessments was a lawful exercise of

Congress’s taxing power under the sovereign acts doctrine,

and was not designed to retroactively increase the price of the

government’s earlier contracts with Yankee Atomic. /d. at

1575. In other words, this court concluded that the special

assessments constituted “a general exercise of Congress’s

taxing power for the purpose of addressing a societal problem

rather than an act that retroactively increases the price

charged to contracting parties for uranium enrichment

services.” /d. at 1577.

We further held that because the contracts between the

plaintiff in that case and the government “did not include an ~

unmistakable promise that precluded the Government from

later imposing an assessment upon all domestic utilities that

employed the DOE’s uranium enrichment services,” id. at

1580, the special assessments imposed by the Act did not

constitute a breach of contract. We similarly disposed of the

plaintiff's takings claim by concluding that “[bJecause the

contracts did not contain an unmistakable promise against a

future assessment, [the utility] had no property right (via a

vested contract right) which was subsequently taken by the

assessment.” /d. at 1580 n. 8. This court denied Yankee

Atomic’s motion to rehear the case in banc, 112 F.3d 1569

(Fed.Cir.1997), and the Supreme Court denied certiorari, 524

U.S. 951, 118 S. Ct. 2365, 141 L.Ed.2d 735 (1998).

We reject Edison’s request that we distinguish our decision

in Yankee Atomic. There is no meaningful difference

between the contract theories asserted here and in Yankee

Atomic, and we therefore agree with the Court of Federal

Claims’ conclusion that Edison’s claims based on its

contracts with the government are barred by that decision.

This also disposes of Edison’s argument that the Act

constitutes a taking of Edison’s supposed contract rights to be

free of future government assessments.

39a

The third area of judicial review occurs where a regulation

is retroactive and accordingly implicates the Due Process

Clause. The Supreme Court has made clear that federal

legislation is to be construed to avoid retroactivity.'’ No such

issue is presented here since the statute is clear on its face,

and no party urges that a narrowing construction is either

possible or appropriate. Accordingly, we must address the

Due Process issue.

The standard of review in this area is well-settled. As the

Supreme Court stated in Turner Elkhorn, 428 U.S. at 15, 96

S. Ct. 2882, “[i]t is by now well established that legislative _

Acts adjusting the burdens and benefits of economic life

come to the Court with a presumption of constitutionality,

and that the burden is on one complaining of a due process

violation to establish that the legislature has acted in an

arbitrary and irrational way.” So too the Supreme Court

observed in Pension Benefit Guaranty Corp. v. R.A. Gray &

Co., 467 U.S. 717, 104 S. Ct. 2709, 81 L.Ed.2d 601 (1984):

Provided that the retroactive application of a statute is

supported by a legitimate legislative purpose furthered

by rational means, judgments about the wisdom of such

legislation remain within the exclusive province of the

legislative and executive branches.

Id. at 729, 104 S. Ct. 2709 (citing Turner Elkhorn, 428 U.S.

at 15-16, 96 S. Ct. 2882). Where the basis for the challenge

'! See Landgraf v. USI Film Prods., 511 U.S. 244, 270, 114 S. Ct.

1483, 128 L.Ed.2d 229 (1994) (“Since the early days of this Court, we

have declined to give retroactive effect to statutes burdening private rights

unless Congress had made clear its intent.”); Bowen v. Georgetown

Univ. Hosp., 488 U.S. 204, 208, 109 S.Ct. 468, 102 L.Ed.2d 493

(1988) (“{C]longressional enactments and administrative rules will not

be construed to have retroactive effect unless their language requires

this result.”’).

40a

is retroactivity, the Supreme Court has held that Due Process

is satisfied “simply by showing that the retroactive

application of the legislation is itself justified by a rational

legislative purpose.” /d. at 730, 96 S. Ct. 2882.

In judging the rationality of legislation under the Due

Process Clause, an evidentiary trial of facts, such as the

relative contributions of weapons processing and utility fuel

processing to the total contamination at the government

plants, is not required. Rather, as the Supreme Court has

noted in another context:

the question is whether the legislative conclusion [to

enact the statute] was reasonable and supported by

substantial evidence in the record before Congress. In

making that determination, we are not to re-weigh the

evidence de novo, or to replace Congress’ factual

predictions with our own. Rather, we are simply to

determine if the standard [of review] is satisfied. If it is,

summary judgment... is appropriate regardless of

whether the evidence is in conflict.

Turner Broad. Sys., Inc. v. FCC, 520 U.S. 180, 211, 117

S. Ct. 1174, 137 L.Ed.2d 369 (1997) (Citations omitted.). In

short, legislative facts control the analysis. In these Due

Process cases the federal courts are not assigned the task of

making policy, determining a fair outcome, or determining

the actual state of facts. We are charged simply with

determining whether the congressional action was rational.

Under that rational purpose standard it will be a rare

circumstance where federal legislation that is retroactive will

be held unconstitutional under the Due Process Clause. In the

modern era this has occurred on only a very few occasions,

even if we count Eastern Enterprises as being such a case.

See Nichols v. Coolidge, 274 U.S. 531, 47 S.Ct. 710, 71

L.Ed. 1184 (1927); Blodgett v. Holden, 275 U.S. 142, 48

S. Ct. 105, 72 L.Ed. 206 (1927) (per curiam); R.R. Ret. Bd. v.

4la

Alton R.R. Co., 295 U.S. 330, 55 S. Ct. 758, 79 L.Ed. 1468

(1935); Eastern Enters., 524 ve 498, 118 S.Ct. 2131, 141

L.Ed.2d 451."

The cases that invalidated these statutes were most

unusual.

Both Blodgett v. Holden and Nichols v. Coolidge involved

the government’s retroactive application of revenue statutes

to transactions made well before the enactment of the

respective statutes. The Supreme Court held in both cases

that such retroactive application violated due process.

Blodgett, 275 U.S. at 147, 48 S. Ct. 105; Nichols, 274 U.S. at

542-43, 47 S. Ct. 710."

In United States v. Carlton, 512 U.S. 26, 114 S. Ct. 2018,

129 L.Ed.2d 22 (1994), the Court questioned the continuing

relevance of those decisions to present day challenges to

retroactive statutes, concluding that “[t]hose cases were

decided during an era characterized by exacting review of

economic legislation under an approach that has long since

been discarded.” Jd. at 34, 114 S.Ct. 2018. In any event

those decisions were limited to situations involving a “wholly

new tax.” Jd. EPACT, unlike the statutes at issue in those

two cases, is not a mere revenue-raising measure. Rather, it

represents an assessment on particular existing domestic

utilities, which Congress concluded benefited from the

government’s operation of the uranium enrichment facilities,

'2 Cf. United States v. Sec. Indus. Bank, 459 U.S. 70, 78-82, 103 S. Ct.

407, 74 L.Ed.2d 235 (1982) (declining to retroactively construe a

provision of the Bankruptcy Reform Act, Pub.L. No. 95-592, 92 Stat.

2549 (1978), without clear evidence of Congressional intent to apply that

statute retroactively, and expressing “substantial doubt whether the

retroactive” application would “comport with the Fifth Amendment”).

'S Ueeermyer v. Anderson, 276 U.S. 440, 48 S. Ct. 353, 72 L.Ed. 645

(1928). “veelwed a challenge to the same statute at issue in Blodgett, and

reacted) (he arse result.

42a

and which Congress also concluded were themselves partially

responsible for the problem the statute seeks to remedy.

In Alton, the Court invalidated a statute that required

railroads to establish a pension fund covering both current

employees and former employees who had worked for the

railroad within the year before passage of the statute because

of the retroactive effect of the statute. Alton bears little

resemblance to this case, and it appears that Alton, in any

event, has effectively been overruled. See Pension Benefit,

467 U.S. at 733, 104 S. Ct. 2709 (questioning whether Alton

“*retains vitality’ despite the changes in judicial review of

economic legislation that have occurred in the ensuing

years”); see also Turner Elkhorn, 428 U.S. at 19, 96 S. Ct.

2882. We note that neither Edison nor any of its amici relies

on Alton.

Eastern Enterprises, which is the focus of the parties’

attention, is also starkly different from this case. There, the

employees’ claims of entitlement to the payment of future

health benefits arose from a number of National Bituminous

Coal Wage Agreements (““NBCWAs” or “Agreements”)

between the employees’ union and various coal mine

operators. The statute in Eastern Enterprises was justified on

the ground that expectations of future benefits had been

created by these agreements. A majority of the Court

concluded that the obligation to pay benefits could not be

imposed on companies that had no role in creating those

expectations.

The plurality noted that Agreements negotiated in 1974,

1978, and subsequently first suggested an industry commit-

ment to the funding of health benefits for former employees

and their dependents. Eastern Enters., 524 U.S. at 530, 118

S. Ct. 2131. The plurality emphasized, however, that Eastern

“ceased its coal mining operations in 1965 and neither

participated in negotiations nor agreed to make contributions

in connection with the [employees’] Benefit Plans under the

43a

1974, 1978 or subsequent NBCWA’s.” J/d. Under the

particular facts of that case, the plurality accordingly

reasoned that the Coal Act’s retroactive provisions violated

the Takings Clause of the Fifth Amendment. In his

concurrence, Justice Kennedy agreed with the plurality that

the particular facts of the case warranted the invalidation of

the statute, but based his reasoning on Due Process grounds.

He wrote:

Eastern was once in the coal business and employed

many of the beneficiaries, but it was not responsible for

their expectation of lifetime health benefits.... As the

plurality opinion discusses in detail, the expectation was

created by promises and agreements made long after

Eastern left the coal business. Eastern was not

responsible for the resulting chaos in the funding

mechanism caused by other coal companies leaving the

framework of the [NBCWA]. This case is far outside

the bounds of retroactivity permissible under our law.

524 U.S. at 550, 118 S. Ct. 2131 (Kennedy, J., concurring).

Even if the Eastern Enterprises plurality and concurrence

could be read together to announce a binding holding on the

Due Process issue,'* this case does not involve the imposition

of liability on companies having no responsibility for creating

the expectation of a future benefit. Rather, it involves a

congressional determination to impose liability on companies

that received a benefit, the production of which benefit

contributed to a societal problem.

'4 The District of Columbia Circuit has concluded that the plurality and

concurrence in Eastern Enterprises cannot be combined into a single

holding on the Due Process issue. Ass’n of Bituminous Contractors v.

Apfel, 156 F.3d 1246, 1254-55 (D.C.Cir.1998) (“Justice Kennedy’s

concurrence in the judgment is of no help in appellant’s efforts to cobble

together a due process holding from Eastern Enterprises’ fragmented

parts.... Justice Kennedy’s due process reasoning can in no sense be

thought a logical subset of the plurality’s takings analysis.”).

44a

On the other side of the balance, on more than ten

occasions, the Supreme Court has rejected challenges to

economic legislation based on the Due Process Clause of the

Fifth Amendment. See United States v. Carlton, 512 U.S. 26,

35, 114 S.Ct. 2018, 129 L.Ed.2d 22 (1994) (upholding a

retroactive amendment to the federal estate tax, even though

the taxpayer received no advance notice of the amendment

and relied to his detriment on pre-amendment law); Concrete

Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust

for S. Cal., 508 U.S. 602, 636-41, 113 S.Ct. 2264, 124

L.Ed.2d 539 (1993) (upholding retroactive withdrawal

liability provisions of the- Multiemployer Pension Plan

Amendments Act (“MPPAA”) which assessed employer

nearly $300,000 for its withdrawal from a pension plan prior

to the effective date of the MPPAA); Gen. Motors Corp. v.

Romein, 503 U.S. 181, 191-92, 112 S. Ct. 1105, 117 L.Ed.2d

328 (1992) (finding that Michigan workers’ compensation

statute did not violate the Due Process Clause, even though it

required the petitioners to pay nearly $25 million for

retroactive benefits to disabled employees); United States v.

Sperry Corp., 493 U.S. 52, 64-65, 110 S.Ct. 387, 107

L.Ed.2d 290 (1989) (upholding retroactive imposition of an

arbitration fee on prevailing parties before the Iran United

States Claim Tribunal); United States v. Hemme, 476 US.

558, 571, 106 S. Ct. 2071, 90 L.Ed.2d 538 (1986) (rejecting

Due Process challenge to statutorily-prescribed transitional

rule that retroactively applied to gifts made before enactment

of rule); United States v. Locke, 471 U.S. 84, 105-06, 105

S. Ct. 1785, 85 L.Ed.2d 64 (1985) (upholding the retroactive

application of the filing requirements of the Federal Land

Policy and Management Act of 1976 (“FLPMA”), codified at

43 U.S.C. § 1744, that resulted in the forfeiture of mining

claims made before the enactment of the FLPMA); Nat’! R.R.

Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co.,

470 U.S. 451, 475-79, 105 S.Ct. 1441, 84 L.Ed.2d 432

(1985) (upholding legislation requiring private railroads to

7 Ss SS RU A

45a

reimburse Amtrak for rail travel privileges provided by

Amtrak to the private railroads’ employees and former

employees even though Amtrak for some years had not

imposed such costs on the private railroads); Pension Benefit,

467 U.S. at 731-32, 104 S.Ct. 2709 (upholding the

retroactive application of the withdrawal liability provisions

of the MPPAA during period before the MPPAA’s

enactment); United States v. Darusmont, 449 U.S. 292, 296-

302, 101 S.Ct. 549, 66 L.Ed.2d 513 (1981) (upholding the

retroactive application of an amendment to the federal tax

statute to transactions made before enactment of amendment);

Turner Elkhorn, 428 U.S. at 18, 96 S. Ct. 2882 (upholding

requirement that coal mine operators compensate former

employees disabled by work-related illnesses, even though

those operators had never contracted for such liability, and

the employees involved were no longer employed by the

operators); FHA v. The Darlington, Inc., 358 U.S. 84, 91, 79

S.Ct. 141, 3 L.Ed.2d 132 (1958) (upholding application of

statutory requirement that occupants of mortgaged housing

must be residents as opposed to transients to apartment

buildings mortgaged prior to enactment of the statute);

Lichter v. United States, 334 U.S. 742, 788, 68 S. Ct. 1294,

92 L.Ed. 1694 (1948) (upholding statute permitting

government to require private parties to pay excessive profits

realized during wartime to the government); Welch v. Henry,

305 U.S. 134, 146-51, 59 S.Ct. 121, 83 L.Ed. 87 (1938)

(sustaining retroactive Wisconsin statute that taxed

shareholder dividends paid two years before statute’s

enactment); Funkhouser v. J.B. Preston Co., 290 U.S. 163,

167-68, 54 S.Ct. 134, 78 L.Ed. 243 (1933) (upholding

retroactive application of statute providing that interest be

added to damages awards for breach of contract claims);

Milliken v. United States, 283 U.S. 15, 21-24, 51 S. Ct. 324,

75 L.Ed. 809 (1931) (upholding retroactive application of

federal estate tax statute to tax gifts made prior to enactment

of the statute). In Eastern Enterprises, both the plurality and

46a

Justice Kennedy suggested that liability for health care costs

limited to miners formerly employed by the companies could

be retroactively imposed, presumably because the companies

benefited from their services, and the performance of those

services contributed to the health problems.'° Significantly,

other courts of appeals have rejected claims that -similar

retroactive effects of the Comprehensive Environmental

Response, Compensation and Liability Act, 42 U.S.C. § 9601,

et seq., (“CERCLA”) violate Due Process. See United States

v. Northeastern Pharm. & Chem. Co., 810 F.2d 726, 734 (8th

Cir.1986), cert. denied, 484 U.S. 848, 108 S.Ct. 146, 98

L.Ed.2d 102 (1987); United States v. Monsanto Co., 858 F.2d

160, 174 (4th Cir.1988), cert. denied, 490 U.S. 1106, 109

S.Ct. 3156, 104 L.Ed.2d 1019 (1989); Franklin County

Convention Facilities Auth. v. Am. Premier Underwriters,

° See Eastern Enters., 524 U.S. at 536, 118 S. Ct. 2131 (“Eastern

might be responsible for employment-related health problems of all

former employees whether or not the cost was foreseen at the time of

employment . . . .”) (plurality opinion); id. at 549, 118 S. Ct. 2131 (noting

that the Supreme Court has “upheld the imposition of liability on former

employers based on past employment relationships”) (Kennedy, J.,

concurring); see also Turner Elkhorn, 428 U.S. at 18, 96 S.Ct. 2882

(“[T]he imposition of liability for the effects of disabilities bred in the past

is justified as a rational measure to spread the costs of the employees’

disabilities to those who have profited from the fruits of their labor . . . .”).

'° These courts have reasoned that “{c]leaning up inactive and

hazardous waste disposal sites is a legitimate legislative purpose, and

Congress acted in a rational manner in imposing liability for the cost of

cleaning up such sites upon those parties who created and profited from

the sites and upon the chemical industry as a whole.” Northeastern

Pharm., 810 F.2d at 734. See also, e.g., O'Neil v. Picillo, 883 F.2d 176,

183 n. 12 (1st Cir.1989), cert. denied sub nom. American Cyanamid Co.

v. O'Neil, 493 U.S. 1071, 110 S.Ct. 1115, 107 L.Ed.2d 1022 (1990);

United States v. R.W. Meyer, Inc., 889 F.2d 1497, 1506 (6th Cir.1989),

cert. denied, 494 U.S. 1057, 110 S. Ct. 1527, 108 L.Ed.2d 767 (1990);

Long Beach Unified Sch. Dist. v. Godwin Cal. Living Trust, 32 F.3d 1364,

1366 (9th Cir.1994)..

47a

have repeatedly rejected Due Process challenges to

retroactive federal statutes. See, e.g., Atlas, 895 F.2d at 756

(upholding retroactive legislation requiring uranium

producers to spend large sums of money to clean up uranium

tailings piles).

Not surprisingly, in light of this history, the Supreme Court

has repeatedly advised us that such Due Process challenges

will only succeed in the rarest of cases. As Justice Kennedy

noted in Eastern Enterprises, “[s]tatutes may be invalidated

on due process grounds only under the most egregious of

circumstances.” 524 U.S. at.550, 118 S. Ct. 2131.

Although such “most egregious circumstances” do not

exist unless the legislation is severely retroactive, they do not

exist merely because the legislation is severely retroactive

and costly, as is the case here. Without attempting to define

exactly when retroactive legislation will be held

unconstitutional, we perceive that the imposition of even

severe retroactive obligations for past acts will be found

rational and will be held constitutional under the Due Process

Clause if two conditions are satisfied: (1) Congress

reasonably concluded that the party subjected to retroactive

obligations benefited from activity that contributed to a

societal problem, and liability is not disproportionately

imposed on that party; and (2) the imposition of retroactive

liability would not be contrary to that party’s reasonable

expectations. It may well be that legislation is constitutional

if either of the two conditions is satisfied, but we need not

decide that question in this case. Both of those conditions

are present.

The first is easily disposed of. Whether or not Edison

received the enrichment services below cosi

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