# Amicus Curiae Brief — Commonwealth Edison Co. v. United States

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386010_1619%3A5

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2002
- **Citation:** 535 U.S. 1096

## Text

———
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FILED

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No. 01-1411 'APR24 oop

IN THE i
Supreme Court of the United States

COMMONWEALTH EDISON COMPANY,

Petitioner,
v.

UNITED STATES OF AMERICA,

Respondent.

On Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Federal Circuit

BRIEF OF AMICUS CURIAE FEDERAL CIRCUIT
BAR ASSOCIATION IN SUPPORT OF PETITIONER

GEORGE E. HUTCHINSON ANDREW G. MCBRIDE

EXECUTIVE DIRECTOR (Counsel of Record)
FEDERAL CIRCUIT Scott M. MCCALEB
BAR ASSOCIATION ALLYSON P. NEWTON
1300 I Street, NW WILEY REIN & FIELDING LLP
Suite 700 1776 K Street, NW
Washington, DC 20005 Washington, DC 20006
202.408.4000 202.719.7000
Counsel for Amicus Curiae
Federal Circuit Bar

Association

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TABLE OF CONTENTS
Page

TABLE Gr COIN Bi wicesisisciccsssercccsesscrsesnnccnssissseccrersecdinsss 1
TABLE OF ALF TIIORITTES ccsccccccccsscctcessscsccsisnssesseccsssnnsns ill
INTEREST OF AMICUS CURIASB 000.....0c0:ccccccscccsesssscsssesees l
SUMMARY OF THE ARGUMENT.................ccccssecessseeeees 2
PTE sihestnssnsinihttnsninaeiesinpeannhicindasinincanspaniannasanaisaasananins 3
I. COMMONWEALTH EDISON ENDORSES

RETROACTIVE SELF-DEALING BY THE

GOVERNMENT IN CONTRAVENTION

OF THIS COURT’S FIFTH AMENDMENT

AND GOVERNMENT CONTRACTS

PU Ie piste tannnnssnsiesccnedaaenscninndsiatarscendansnin 3

A. Commonwealth Edison Compounds ~
The Uncertainty Left By Eastern
Enterprises Over When Severely
Retroactive Exactions Violate The
ee PAIN co iiccncictarnsstncienscsnerencrenacerts 5

B. Commonwealth Edison Erodes The
Finality And Protection That Fixed-
Price Contracts Afford Buyers..................0 9

c. Commonwealth Edison Magnifies
Uncertainty About The
Unmistakability And Sovereign Acts
I sis sscrcisscntcacscoteatscmmcdtectnacsandteninsisanie 12

il

TABLE OF CONTENTS
(continued)
Page

II. COMMONWEALTH EDISON WILL
PROFOUNDLY AND ADVERSELY
AFFECT TRANSACTIONS BETWEEN
THE GOVERNMENT AND ITS
COON RAM TUB icucconisdertenmcii aimee 15

A. Commonwealth Edison Will
Adversely Impact The Negotiation
And Execution Of Government
| RRC ty er ERIN ce PINES OPS OES 15

B. Commonwealth Edison Will
Adversely Affect The Government’s

SOIR ose iisckcniexsscacnorne a atraasmied 17
oF Commonwealth Edison Disrupts

Investment-Backed Expectations

Based Uppers Sette BWW oss sicssciaceséansssceneesens 18

COIN LUBRIRIIN oscscccscaiasncssilonianneitastaiccen peieeea ean aa au 20

lll

TABLE OF AUTHORITIES

Page
CASES

Armstrong v. United States, 364 U.S. 40 (1960).............. 4
Association of Bituminous Contractors v. Apfel,

136 F.3d 1246 (D.C. Cir. 1998) oooicccccccccccccccececcccceeee. 8
Barseback Kraft AB y. United States,

121 F.3d 1475 (Fed. Cir. 1997) ..ococcccccccccccceces. eae
Boyle v. United Technologies Corporation,

487 U.S. 500 (1988).......... ‘atietdnnddanibsinsseduaibubieadstinaica 18
Brooks-Scanion Corporation v. United States.

BP i. NOG (EGG) osscsscsacecsesecsncesececaresesseseesesssese...... 9
Commonwealth Edison Company y. United States.

46 Fed. CL. 29 (2000) ........ceccscscecccecececesesecesecsesosesesese. 19
Commonwealth Edison Company v. United States,

271 F.3d 1327 (Fed. Cir. 2001) ....ceccccccccccccscsoeeees passim
Dalton v. Cessna Aircraft Company,

98 F.3d 1298 (Fed. Cir. 1996)... ccccccccccccsecesececeees. 9,11
Eastern Enterprises v. Apfel,

DA Us FOB (1996) o.nsecececesncecescscvececeneasseesece... passim
Horowitz v. United States, 267 U.S. 458 to.) 13

Kaiser Aetna v. United States.
WE Fats BOO (IDI) oo ncscnccocecanccscesecccsvescsseseseessees..... 4,7

iV
Page
Lynch vy. United States, 292 U.S. 571 (1934)... 9
Maine Yankee Atomic Power Company v.

United States, 271 F.3d 1357 (Fed. Cir. 2001) ........... 11
National Railroad Passenger Corporation v.

Atchison, Topeka & Santa Fe Railway Company,

I a Te Ce es kos nncinsicceniennissaniniiininicendvinebbaniadias 6
Perry v. United States, 294 U.S. 330 (1935)............... 4,6
Ruckelshaus v. Monsanto Company,

er Ss Se is tatihidelestsltctncieicesdasnutidiniecnanasaiaboania 9
Salsbury Industrial v. United States,

oe bel) fk a, Re mneN nan 16
Sinking-Fund Cases, 99 U.S. 700 (1879).........ccccceeeseees 9
United States Fidelity & Guaranty Company v.

McKeithan, 226 F.3d 412 (Sth Cir. 2000)........0...0.000... 8
United States v. National Exchange Bank

of Baltimore, 270 U.S. 527 (1926)...........:cccccccceeesseees 12
United States v. Security Industrial Bank,

aes, Se ics daishisacactecapsibcbabiclidibsanccindepthinctianaenioite 4
United States v. Spearin, 248 U.S. 132 (1918) ................ 9
United States v. Sperry Corporation,

es Fe I vith iciicicecinssddsbpiadasnaadiesiaiesdadedaphaiiihonaen 8-9

United States v. Winstar Corporation,
Re ee Be iiecsetaibustincsaistiscisiceapbiceeoanh passim

we art Me a

Page
Washington Legal Foundation v. Legal Foundation
of Washington, 271 F.3d 835 (9th Cir. 2001) ........0... 9

Yankee Atomic Electric Company v. United States,
112 F.3d 1569 (Fed. Cir. 1997), cert. denied,

Dae NS SPR EAP sethsieccnadccuanecnabnaceascuacunees passim
DOCKETED CASES

Maine Yankee Atomic Power Company v.

CFG NE, TOD: GE EAD isconctanesssiatacemeanintdieanadicess ]
Omaha Public Power District v. United States,

BORK SIRE SUE. cssipidcstnonatsedaatmucannapeabuasianendineamen ]
Sacramento Mutual Utility District v.

United States, No. 01-1020 ............ccc.cccccccccccseccssesseseceee

STATUTE

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

POD OR. 27 Fe CE ccs ae passim

OTHER AUTHORITIES

Daniel E. Troy, Retroactive Legislation 20 (1998)........ 17

John Cibinic, Jr., & Ralph C. Nash, Jr.,
Formation of Government Contracts 1079 -
CUR OG, TEE wicassstcasninashacdesmsatinecnanateneeaionaaate 11

Vi
Page
Richard A. Posner & Andrew M. Rosenfield,
Impossibility and Related Doctrines in
Contract Law: An Economic Analysis,
© 5. BAI TOE, TP CBT 1 Pwesscnsstetertmtnttentntunddendsnsacs 15-16

MISCELLANEOUS

Petition for a Writ of Certiorari.

Commonwealth Edison Company vy.
CIE TINE; POD. GEWGES scincincesncsisisissnusinanbiniisdsiadiaie 10

INTEREST OF AMICUS CURIAE a

The Federal Circuit Bar Association (“FCBA”) is a
national organization comprising approximately 2,400
attorneys whose practices concern the United States Court of
Appeals for the Federal Circuit in all aspects of its
jurisdiction. The FCBA offers a forum for the discussion of
legal issues of common interest and dialogue between the bar
and the judges of the Federal Circuit. One purpose of the
FCBA is to offer assistance and advice to the federal courts,
including filing briefs amicus curiae, on matters affecting
practice before the Federal Circuit and lower tribunals.’

Pursuant to Supreme Court Rule 37.2(a), the FCBA
has conferred with the parties regarding the filing of this
brief amicus curiae, and both have consented to its filing.
The parties’ letters of consent are on file with the clerk.

The FCBA respectfully submits this brief in support
of the petition for certiorari filed by Petitioner
Commonwealth Edison Company.” The FCBA seeks to
offer a practitioner’s perspective on the impact of the Federal
Circuit’s decision in Commonwealth Edison Co. v. United
States, 271 F.3d 1327 (Fed. Cir. 2001) (“Commonwealth
Edison”) on the government’s contracting partners.

Pursuant to Supreme Court Rule 37.6, the FCBA states that no
counsel for a party authored this brief in whole or in part. No person or
entity, other than the amicus curiae, its members, or its counsel, made
any monetary contribution to the preparation or submission of the brief

; The FCBA likewise supports the petitions for certiorari in the
following related cases decided on the bases articulated in
Commonwealth Edison Co. v. United States. 27} F.3d 1327 (Fed. Cir.
2001): Omaha Pub. Power Dist. v. United States, No. 01-1398; Maine
Yankee Atomic Power Co. vy. United States, No. 01-1155: and
Sacramento Mun. Util. Dist. v- United States. No. 01-1020.

2

SUMMARY OF THE ARGUMENT

The decision below has sown and will sow
substantial confusion in an area of law where certainty is at a
premium—the myriad procurement and service contracts the
United States must enter with private enterprise.
Commonwealth Edison is at odds with this Court’s
jurisprudence regarding the constitutionality of retroactive
legislation and with the Court’s repeated pronouncements
that the government cannot use its power as sovereign to
rewrite its contractual relationships with private parties.

The test adopted by the en banc Federal Circuit
effectively gives the Government carte blanche to
retroactively alter its own contractual rights and obligations
in commercial transactions closed long ago. The lower
court’s focus on the “benefit” to the party complaining of the
retroactivity is misplaced in the area of government
contracts. Every government contractor will have received
some benefit as part of the mutuality of consideration
necessary to form a contract in the first place. Moreover,
rather than focusing on the reasonable expectations of the
parties under the contract, the Federal Circuit cited general
regulatory trends and the heavily regulated nature of the
industry to effectively trump express contractual terms. This
analysis is contrary to the approach of five Members of the
Court in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998),
where the lack of any contractual provisions for lifetime
health benefits at the time of the transactions was central to
the conclusion that Eastern Enterprises could not be forced to
bear retroactive liability for such costs. Where parties enter
into fixed-price contracts with the United States for services
or for the delivery of goods, they are entitled to rely upon
settled contract law which clearly provides that no. further
monetary liability can be assigned to the transaction.

These critical errors led the Court below to endorse
retroactive legislation—certain provisions of the Energy

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3

Policy Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776
(“EPACT”)—that is substantially more severe, especially in
monetary effect, than that rejected by the Court in Eastern
Enterprises. Because of these errors and the substantial
importance of the issues, this Court’s intervention is
essential. The Court need not and should not await a circuit
conflict where the exclusive jurisdiction of the Court of
Federal Claims under the Tucker Act makes such a conflict
unlikely. Moreover, much like the situation in United States
v. Winstar Corp., 518 U.S. 839 (1996), the Court’s guidance
is needed in order to resolve the dozens of related cases
pending in the Court of Federal Claims.

Finally, this case presents the Court with an excellent
vehicle to resolve several issues that have troubled the lower
courts after Eastern Enterprises and Winstar. The court
below issued a categorical ruling that the Takings Clause
does not apply to the exaction of money payments to the
United States. In addition, the lower court’s ruling that no
vested contract right is involved in this case rests ori a clear
misapplication of the sovereign acts doctrine as applied in
Winstar and numerous previous government contract cases.
For these reasons, the FCBA respectfully urges the Court to
grant review of the decision below.

ARGUMENT

I. COMMONWEALTH EDISON ENDORSES
RETROACTIVE SELF-DEALING BY THE
GOVERNMENT IN CONTRAVENTION OF
THIS COURT’S FIFTH AMENDMENT AND
GOVERNMENT CONTRACTS PRECEDENTS.

It is a fundamental principle of this Court’s Fifth
Amendment jurisprudence that the retroactive reassignment
of rights and duties is highly disfavored. This principle finds
expression in the emphasis the Court has placed on

4

reasonable, investment-backed expectations in its Takings
Clause jurisprudence, see Kaiser Aetna v. United States, 444
U.S. 164 (1979), and in due process cases that reject
retroactive laws that “change the legal consequences of
transactions long closed.” See Eastern Enterprises, 524 U.S.
at 548 (Kennedy, J., concurring in the judgment and
dissenting in part). Where the government rewrites the
obligations of a fixed class of persons based upon past
commercial activities or completed transactions, the danger
that the government is “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), is at its zenith. Moreover, because
the affected class had neither notice nor an opportunity to
alter its conduct to avoid liability, the Due Process Clause’s
protection against arbitrary and fundamentally unfair
government action is directly implicated.

These Fifth Amendment principles apply (and have
been repeatedly vindicated by this Court) where the party
affected by retroactive legislation is not in privity with the
United States. See Eastern Enterprises v. Apfel, 524 US.
498 (1998); United States v. Sec. Indus. Bank, 459 U.S. 70
(1982); Kaiser Aetna v. United States, 444 U.S. 164 (1979).
The dangers of retroactive legislation are vastly magnified
where the Government alters the obligations of its own
contracting partners after the fact. This Court has unfailingly
distinguished between legislation that is “relatively free of
government self-interest” and legislation that impermissibly
“seeks to shift the cost of meeting [the Government’s]
legitimate public responsibilities to private parties.” See
Winstar, 518 U.S. at 896; Perry v. United States, 294 U.S.
330, 350-51 (1935). “The greater the Government’s self-
interest . . . the more suspect becomes the claim that its
private contracting partners ought to bear the financial
burden of the Government’s own improvidence ... .”
Winstar, 518 U.S. at 898.

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5 :

The decision below creates significant tension with
both settled Fifth Amendment principles against retroactive
legislation and the doctrine that the government should not
be able to employ its power as sovereign to advance its
nairow commercial interests at the expense of its contracting
partners. The Commonwealth Edison court decided that the
Nation’s utilities, which acquired or used enriched uranium
from their contracting partner, the United States, through
fixed-price contracts dating as far back as the 1950s, can
collectively be required to pay up to $2.25 billion for the
decontamination and decommissioning of the government
facilities that enriched the uranium. The Federal Circuit’s
decision has particularly grave consequences for those who
contract with the Government, as they can no longer rely on
the well-settled legal standards that have traditionally
governed those contractual relationships.

A. Commonwealth Edison Compounds The
Uncertainty Left By Eastern Enterprises
Over When Severely Retroactive Exactions
Violate The Fifth Amendment.

Commonwealth Edison represents a marked and
significant departure from the traditional standards for
assessing the constitutionality of retroactive legislation as
applied to the Government’s contracting partners. The
FCBA respectfully submits that this departure will invite the
Government to abuse its power as sovereign to rewrite its
contractual obligations with private parties, long after both
sides have fully performed them. In fact, the court expressly
declined to give any weight to the contractual relationship
between the Government and Commonwealth Edison in
assessing the merits of the utility’s Fifth Amendment claims.
See Commonwealth Edison, 271 F.3d at 1348.

This approach departs from settled law governing the
rights and obligations that arise from government contracts.

6

“(T]he power of the Congress to control or interdict the
contracts of private parties” differs significantly from “the
power of the Congress to alter or repudiate the substance of
its own engagements.” See Perry, 294 U.S. at 350-51.
Where, as here, retroactive liability is imposed on the basis
of privity with the Government, that contractual relationship
should be crucial to the due process analysis. Indeed, due
process challenges arsing out of the Government’s
“impairment of its own [contractual] obligations” may even
watrant a more stringent standard of review. See National
R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry.
Co., 470 U.S. 451, 471 & n.24 (1985). The Federal Circuit’s
decision to discount this cntical factor entirely cannot be
squared with the Fifth Amendment precedents of this Court.

In fact, Commonwealth Edison makes it easier for the
Government to rewrite its own contractual obligations than
to adjust contractual rights among private parties. Under the
Federal Circuit’s new test, even “severely retroactive and
costly” legislation targeting the Government’s own
contractual relationships must be upheld if the contractors:
(1) “benefited” from the Government’s performance, and
liability is not “disproportionately imposed”; and (2) had
“reasonable expectations” that their purchase of government
services would expose them to future liability for costs
incurred by the Government in performing the contracted
services. See Commonwealth Edison, 271 F.3d at 1346.

The first prong will be satisfied in virtually every
government contract case, no matter how arbitrary or unfair
the legislation: The mutuality of benefit that serves as
consideration to support every contract is sufficient, in the
Federal Circuit’s view, to justify the imposition of enormous
retroactive liability. See id. This cannot be the law. The
existence of a contractual relationship with the United States
(and the failure to assign this particular cost to the
contractor) should be a critical (if not decisive) factor against
allowing the Government to impose retroactive liability. The

5

Federal Circuit’s position means that government contracts
receive /ess protection against the retroactive alteration of
obligations than do contracts between private parties.”

Likewise, Commonwealth Edison's application of its
“reasonable expectations” test ignores that where, as here, a
private party has entered a contract with the Government,
vague considerations such as whether the party operates in a
“highly regulated industry” or could have “reasonably
anticipated” retroactive legislation, see Commonwealth
Edison, 271 F.3d at 1348, should be beside the point.
Rather, the contractor’s “reasonable expectations” should be
deemed to arise, as a matter of law, from the contract itself
Given that a contract need not contain any “second promise”
by the Government not to demand more for its services after
performance, see Winstar, 518 U.S. at 887, it makes little
sense to say that a contractor may nonetheless be deemed to
have “expected” retroactive liability imposed on the basis of
that contract. In other words, “[wJhile it is true enough...
that one who deals with the Government may need to “turn
Square corners,”’ . . . he need not turn them twice.” /d. at
922 (Scalia, J., concurring in the judgment).

: The inquiry into whether the retroactive liability is

“disproportionate” to the benefit is similarly misplaced in this context.
The contract itself assigned burdens and benefits regarding the
transaction at issue—any subsequent reassignment of risks and benefits
that were known to exist at the time of the contract is “disproportionate.”
In Kaiser Aetna, a government permit to develop a pond,
although not a contractual undertaking, was a government promise
sufficient to create reasonable, investment-backed expectations that the
government was bound to respect. See 444 U.S. at 179. A fortiori an
express contract between the government and a private party concerning
the very transaction at issue should be the central factor in judging the
expectations of the parties to the contract.
’ In Eastern Enterprises, five Members of the Court concluded
that retroactive liability violated the Fifth Amendment in large part
because Eastern Enterprises itself had exited the coal mining business
before any contractual promises of lifetime benefits had been made to the
miners. See 524 U.S. at 535 (plurality opinion); id. at 550 (Kennedy, J.,

These errors are symptomatic of the confusion that
has reigned in the lower courts since Eastern Enterprises
issued. Courts have had great difficulty in applying both the
Takings Clause and the Due Process Clause to retroactive
legislation in light of Eastern Enterprises and have not been
able to distill any core principles from Justice O’Connor’s
plurality opinion combined with Justice Kennedy’s
concurring opinion. Compare United States Fid. & Guar.
Co. v. McKeithan, 226 F.3d 412, 420 (Sth Cir. 2000)
(“Justice Kennedy’s due process analysis focuses on
retroactivity and is essentially harmonious with the reasoning
of the other four justices.”), with Ass'n of Bituminous
Contractors v. Apfel, 156 F.3d 1246, 1254-55 (D.C. Cir.
1998) (“[T]he only binding aspect of Eastern Enterprises is
its specific result.”). Because the retroactive liability in
Commonwealth Edison is even more severe than that at issue
in Eastern Enterprises and because past privity with the
Government raises the issue of the taking of a vested
contract nght, this case provides an excellent vehicle for a
majority of the Court to provide guidance on the proper
factors to be considered in assessing retroactive legislation
under both the Due Process and-Takings Clauses.°

(Continued . . .)

concurring in the judgment and dissenting 1n part). The retroactivity
there violated reasonable expectations because of the lack of notice of
potential obligations. See id. at 530-31 (plurality opinion); id. at 550
(Kennedy, J., concurring in the judgment and dissenting in part). Here,
the combination of fixed-price contracts and the 1984 Settlement
Agreement created a contractual right not to be exposed to further costs
for enriched uranium paid for and delivered decades before. The court
below essentially ignored these contractual expectations in contravention
of the views of a majority of the Court in Eastern Enterprises.

: The decision below also categorically held that the Takings
Clause never applies to legislation requiring the payment of money,
unless a specific fund of money is involved. See Commonwealth Edison,
271 F.3d at 1340. This conclusion rests, at least in part, on a stray
foomote in United States v. Sperry Corp., 493 U.S. 52, 62 n.9 (1989), to

9

B. Commonwealth Edison Erodes The Finality
And Protection That Fixed-Price Contracts
Afford Buyers.

The Government and its contracting partners have
long understood that “[w]here one agrees to do, for a fixed
sum, a thing possible to be performed, he will not be excused
or become entitled to additional compensation, because
unforeseen difficulties are encountered.” United States vy.
Spearin, 248 U.S. 132, 136 (1918). Ina fixed-price contract,
the seller bears the risk that the actual cost of performance
will be greater than anticipated. Dalton v. Cessna Aircraft
Co., 98 F.3d 1298, 1305 (Fed. Cir. 1996). Once the contract
has been fully performed, the rights, obligations, and risks
set forth in the contract become vested property rights
because contracts are property. See Ruckelshaus vy.
Monsanto Co., 467 U.S. 986, 1003 (1984). Accordingly, the
Government cannot deprive its business partners “of the
fruits actually reduced to possession of contracts lawfully
made.” Sinking-Fund Cases, 99 U.S. 700, 720 (1879).

(Continued .. .)

the effect that money is “fungible.” But as Judge Kozinski has noted
regarding Sperry, “[njowhere . . . does the Supreme Court suggest that
the government’s obligation to pay compensation is eliminated because it
takes money rather than real or personal property.” Washington Legal
Found. v. Legal Found. of Wash., 271 F.3d 835, 867 (9th Cir. 2001)
(Kozinski, J., dissenting). Moreover, in the FCBA’s view, the taking in
this case is properly conceptualized as the taking of a vested contract
right to pay a fixed price for certain goods. Of course, contract rights
themselves are property under the Fifth Amendment. See Lynch v.
United States, 292 U.S. 571, 579 (1934); see also Brooks-Scanlon Corp.
v. United States, 265 U.S. 106, 121 (1924). Even putting the contract
aside, the fact that EPACT liability follows possession and use of
discrete property (e.g., government-enriched uranium) distinguishes this
case from cases like Eastern Enterprises. Thus, this case offers the Court
a vehicle to address which government actions should be evaluated under
the Takings Clause and which are subject to due process analysis.

10

Commonwealth Edison erodes these vital principles
in the law of government contracts. “The bargain struck
between the government and [utilities] was simple.” Yankee
Atomic Elec. Co. v. United States, 112 F.3d 1569, 1582 (Fed.
Cir. 1997) (Mayer, C J., dissenting), cert. denied, 524 U.S.
951 (1998). The Government provided enriched uranium to
the utilities and they paid a fixed price in return. The fixed
price was required to capture all performance costs. See
Barseback Kraft AB v. United States, 121 F.3d 1475, 1478
(Fed. Cir. 1997) (“[T]he Atomic Energy Act of 1954...
provided that ‘any prices established under this subsection
shall be on a basis of recovery of the Government’s costs
over a reasonable period of time.’”). When the contracts at
issue were formed, the need to decontaminate and
decommission the Government’s enrichment facilities was
well understood. Commonwealth Edison, 271 F.3d at 1332,
1349; see also Petition for a Wnt of Certioran,
Commonwealth Edison Co. v. United States, No. 01-1411 at
3-4 n.3 (citing government study that clean-up obligation
was known at contract execution and contamination was no
greater in 1992 than in the 1960s). Indeed, clean-up costs
were an element of the fixed price. Barseback Kraft AB, 121
F.3d at 1483.

The utilities were entirely rational in expecting that
the Government’s price included clean-up costs, or at the
very least, that the risk that the fixed prices would cover
those costs resided with the Government as the fixed-price
seller. This view was confirmed in 1984, when the utilities
terminated their existing contracts to replace them with a
new “Utility Services Contract.” Commonwealth Edison,
271 F.3d at 1331. The parties terminated the prior,
outstanding contracts through a “Supplemental Agreement of
Settlement,” id., which provided the utilities with a waiver of
liability and further obligation: ““‘the Government agrees that
all obligations arising under the [previous] contracts or by

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reason of their termination shall be deemed to be
concluded,’” id. at 1332 n.3.

Under longstanding contract interpretation and Fifth
Amendment principles, Commonwealth Edison had every
reason to believe that as a commercial customer of the
Government, it bore no obligation beyond the fixed price it
had negotiated and paid. It had no reason to believe that it
would be the victim of a massive exaction to fund the
Government’s clean-up of the enrichment plants it had
neglected for years after military uses had polluted them.
Maine Yankee Atomic Power Co. v. United States, 271 F.3d
1357, 1364 (Fed. Cir. 2001) (Friedman, J., concurring). But
that is exactly what EPACT did.

Whether viewed through the lens of ordinary contract
law or the Fifth Amendment, the risk that the clean-up costs
would be greater than anticipated resided squarely with the
Government. While this risk assumption embraces increased
costs “in the event of unforeseen circumstances,” Dalton, 98
F.3d at 1305; see also John Cibinic, Jr., & Ralph C. Nash,
Jr., Formation of Government Contracts 1079 (3d ed. 1998)
(fixed-price government contract “places the risk of
incurring unforeseen costs on the [seller]””), here the costs
were actually foreseen; they simply may have been
underestimated by the party that agreed to bear them.’

Commonwealth Edison compromises years of settled
legal principles concerning the exchange of risk under fixed-
price contracts. The Government may not “simply shift
costs of legislation onto its contracting partners who are
adversely affected by the change in the law, when the
Government has assumed the risk of such change.” Winstar,
518 U.S. at 883. This Court should reaffirm the fundamental

-

The Federal Circuit’s suggestion that the foreseeability of these
costs somehow works to the utilities’ detriment, see 271 F.3d at 1349, is
also confusing. That the government knew of the risk and nonetheless
offered fixed-price terms only confirms that it knowingly accepted the
risk that clean-up costs might exceed its estimates.

12

principle that “(t]he United States does business on business
terms,” United States v. Nat’l Exch. Bank of Baltimore, 270
U.S. 527, 534 (1926), and this includes assuming the same
risks any seller does in a fixed-price contract. Contractors
negotiating billions of dollars in contracts with the
Government are entitled to clear rules about fixed-price
contracts, so that they can adjust their behavior accordingly.
Otherwise, Commonwealth Edison will have “the untoward
result of compromising the Government’s practical capacity
to make contracts[.]” Winstar, 518 U.S. at 884.

Cc. Commonwealth Edison Magnifies
Uncertainty About The Unmistakability
And Sovereign Acts Doctrines.

As with its treatment of fixed-price contracts,
Commonwealth Edison leaves tremendous uncertainty in its
wake about the applicability of the sovereign acts and
unmistakability doctrines. This, in turn, makes it
exceedingly difficult for government contractors to negotiate
and enter contracts with the Government, because the rules
governing them are now unsettled.

By relying on the sovereign acts and unmistakability
doctrines to reject Commonwealth Edison’s claims that the
United States breached its contracts or abrogated vested
contract rights under the Fifth Amendment, the Federal
Circuit has extended their application to situations they were
never intended to address. These doctrines are inextricably
tied to situations in which the Government’s performance of
a contract has been rendered impossible by a public and
general governmental act. See Winstar, 518 U.S. at 895-96
(plurality opinion); id. at 921, 923 (Scalia, J., concurring).

In those circumstances, the Government (like any
private contractor) will not be held liable for its
nonperformance, unless its own actions caused the
impossibility. Jd. at 895-96. The sovereign acts and

|

13

unmistakability doctrines place the Government in the same
position as a private contractor by permitting the defense of
impossibility where the Government as sovereign has
rendered contract performance impossible by the
Government as contractor, unless it has contractually waived
that defense in unmistakable terms. More specifically, the
sovereign acts doctrine provides that the impossibility
defense is available where a “public and general act{]”
prevents the Government’s performance of a commercial
contract. See Horowitz v. United States, 267 U.S. 458, 461
(1925). The unmistakability doctrine, in turn, states that
even where the act is a sovereign one, if the Government by
contract forfeited in unmistakable terms its excuse for
nonperformance, the excuse is lost, and the Government
must answer in damages. Winstar, 518 U.S. at 877-78.

These doctrines have no application here because the
contracts were fully performed by both parties. Neither
nonperformance nor impossibility is at issue. Rather, the
question is whether, after the contracts have been fully
performed, the Government may charge the utilities for its
increased performance costs, when it expressly assumed that
very risk. In concluding that these doctrines apply, the
Federal Circuit has “adopt[ed] [a] rule of construction that
would weaken the Government’s capacity to do business by
converting every contract it makes into an arena for
unmistakability litigation,” a result against which this Court
wamed. /d. at 886. These doctrines were never intended to
apply to “humdrum [fully performed] contracts” like these.
Id. at 880. See also id. at 911 (Breyer, J., concurring)
(“[b]oth common sense and precedent make clear that an
‘unmistakable’ promise to bear the risk of a change in the
law is not required in every circumstance’’).

The Federal Circuit’s specific application of these
doctrines causes further confusion for contractors and their
counsel. The Federal Circuit has effectively held that the
sovereign acts doctrine will a/ways attach to legislation and

14

insulate the Government from breach unless the legislation
(or other sovereign act) applies solely to the government’s
contracting partners. Commonwealth Edison, 271 F.3d at
1340; Yankee Atomic Elec. Co., 112 F.3d at 1575. The
FCBA respectfully suggests that this is not the proper test.

In Winstar itself, the legislation did not apply solely
to the Government’s contracting partners. Winstar, 518 U.S.
at 902. Nor would the Federal Circuit’s test be appropriate:
“Legislation can almost always be written in a formally
general way, and the want of an identified target is not much
security when a measure’s impact nonetheless falls
substantially upon the Government’s contracting partners.”
Id. at 902-03. The test articulated in Winstar’s principal
opinion focuses, not on the legislative aim, but on its impact
and effect: “[A] governmental act will not be public and
general if it has the substantial effect of releasing the
Government from its contractual obligations.” Jd. at 899
(emphasis added).

This test is clearly met here. EPACT’s assessment
attaches to “purchases” of enriched uranium from the
Government. Commonwealth Edison, 271 F.3d at 1333. At
least eighty-five percent of EPACT’s assessments fall on
those that procured enriched uranium- directly from the
Government, with the balance falling on those that bought it
from the original puchaser. In fact, unlike the statutory
scheme at issue in Winstar, EPACT is entirely retroactive.
The Federal Circuit’s conclusion that “[a]ny impact that this
approach may have on those utilities with which the
Government had prior contracts is merely incidental to the
accomplishment of a broader governmental objective,”
Yankee Atomic Elec. Co., 112 F.3d at 1576 (internal
quotations omitted), cannot withstand scrutiny.*

Even assuming that EPACT was a sovereign act, the Federal
Circuit's application of the unmistakability doctrine will create further
confusion in the world of government contracts. Given the fixed-price
nature of the contracts, the Government’s knowledge of its clean-up

15

Il. COMMONWEALTH EDISON WILL
PROFOUNDLY AND ADVERSELY AFFECT
TRANSACTIONS BETWEEN THE

GOVERNMENT AND ITS CONTRACTORS.

From a practical standpoint, the Federal Circuit’s
decision in Commonwealth Edison is “at odds with the
Government’s own long-run interest as a reliable contracting
partner in the myriad workaday transactions of its agencies.”
See Winstar, 518 U.S. at 883. As this Court has recognized,
“expanding the Government’s opportunities for contractual
abrogation” can have the untoward effect of “undermining
the Government’s credibility at the bargaining table and
increasing the cost of its engagements.” See id. at 884. We
respectfully suggest that Commonwealth Edison will have
precisely that effect.

A. Commonwealth Edison Will Adversely
Impact The Negotiation And Execution Of
Government Contracts.

The Government and its contracting partners
“generally rely on contract law ‘to reduce the costs of
contract negotiation by supplying contract terms that the
parties would probably have adopted explicitly had they
negotiated over them.’” Winstar, 518 U.S. at 884 n.27
(quoting Richard A. Posner & Andrew M. Rosenfield,

(Continued . . .) .

obligations, the requirement that prices recoup expenses, and the 1984
Settlement Agreement releasing Commonwealth Edison of its obligations
under its existing contracts, it is difficult to imagine what more it needed
to protect against an exaction triggered by having done business with the
Government. See Winstar, 518 U.S. at 887 (plurality opinion) (there is
“no need for an unmistakably clear ‘second promise.””); id. at 921
(Scalia, J., concurring) (there is no need for “a further promise not to go
back on the promise to accord favorable regulatory treatment”).

16

Impossibility and Related Doctrines in Contract Law: An
Economic Analysis, 6 J. Legal Stud. 83, 88-89 (1977)).
Indeed, “judicial interpretations of a contractual provision
form part of the background against which parties make their
contract.” Salsbury Indus. v. United States, 905 F.2d 1518.
1523 (Fed. Cir. 1990) (Duff, J., dissenting). By creating
increased uncertainty in an already unsettled area of the law,
Commonwealth Edison will force the Government and its
contracting partners to incur potentially significant additional
expenses in negotiating and executing their contracts.

After Commonwealth Edison, the fixed-price terms of
a government contract no longer support the expectation that
the buyer will pay only that amount, and that the seller
assumes the risk that additional expenses may be incurred.
Now, a company that has purchased goods or services from
the Government may be exposed to liability for additional
exactions 40 to 50 years after the transaction. Likewise, a
company that purchases a government product from another
private company is exposed to that same liability. This is
true even if the Government had actual knowledge of the risk
at the time it contracted to sell that product.

Nor is it enough, after Commonwealth Edison, to rely
on a “Settlement Agreement,” entered with the Government
at the conclusion of performance, indicating that all
obligations have been fulfilled. Even where a contractor has
paid the agreed price for the Government’s goods and
services, it will be deemed to have received sufficient
“benefit” to expose it to new, massive and wholly retroactive
assessments. This is especially true if the area is one of the
many in which the Government generally “regulates.”

Now government contractors and their counsel must
seek to exact concessions to insulate against the risk of
future assessments. The contractor must seek, at a
minimum, the following agreements: (1) the price is fixed;
(2) the contractor will not be subject to any future fee or
exaction based on its contract with the Government or its use

17

of products delivered under such contracts; (3) in the event
an exaction is nevertheless imposed, the Government
unmistakably agrees to indemnify the contractor; and (4) the
government official with whom it negotiates has actual
authority to bind the Government to these concessions.
Indeed, this last concession alone imposes an onerous
burden. See Commonwealth Edison, 271 F.3d at 1355
(stating that even if Government officials had represented
that “regulatory legislation would not be enacted,” that
would not suffice because “those authorities had no authority
to bind the Government’). This list of new issues raised by
the Commonwealth Edison decision demonstrates the extent
to which it departs from standard contract principles and will
deter parties from doing business with the Government.

B. Commonwealth Edison Will Adversely
Affect The Government’s Interests.

Given the difficulty of negotiating and drafting
contractual provisions to address all of the contingencies
created by Commonwealth Edison, the decision will
undoubtedly compromise the Government’s ability “‘to
obtain needed goods and services from parties who might
otherwise, quite nghtly, be unwilling to undertake the risk of
government contracting.” See Winstar, 518 U.S. at 913
(Breyer, J., concurring).

Commonwealth Edison compromises the vital
predictability that previously attached to fixed-price, fully
performed government contracts. This, in turn, will increase
the risk and costs of government contracting. On one hand,
“(flear of post-investment opportunism by the government
may well deter parties from relying on the government’s
promises as much as they should for the sake of efficiency.”
See Daniel E. Troy, Retroactive Legislation 20 (1998).
Some contractors will simply elect not to contract with the
Government, and instead turn to other market sources for

18

supplies, services, and customers. In fact, the option existed _
here to obtain enriched uranium from alternate sources, an |
option that utilities likely would have exercised had they
believed they would be subjected to EPACT’s exaction.

On the-other hand, those contractors willing to deal
with the Government will demand compensation for
assuming the risk that the price paid today for a service or
purchase may be significantly raised by the Government
tomorrow, thereby factoring that risk into the cost of the
contract. Ultimately, of course, it is the Government (i.e.,
the taxpaying public at large) that must bear these increased
costs in government contracting.

In Boyle v. United Technologies Corp., 487 U.S. 500
(1988), the court acted to mitigate precisely these risks.
There, the Court held that federal law preempted state tort
law in actions against government contractors who comply
with government design specifications, because the
application of state tort law “will directly affect the terms of
government contracts: either the contractor will decline to
manufacture the design specified by the Government, or it
will raise its price. Either way, the interests of the United
States will be directly affected.” Jd. at 507. The same
practical reasons require the Court’s intervention here.

c. Commonwealth Edison Disrupis
Investment-Backed Expectations Based
Upon Settled Law.

The new test fashioned by the Federal Circuit may
permit severely retroactive and costly legislation to
withstand constitutional challenge even if the government
contractor could not reasonably have expected such
legislation. See Commonwealth Edison, 271 F.3d at 1345-
46. Commonwealth Edison thus has immense consequences
for government contractors that have already made business
decisions—some, like tuose in this case, involving hundreds

19

of millions of dollars—in reliance on the well-established
principle that the Government cannot retroactively impose
liability where none could be reasonably expected. This is
especially true where, as here, the underlying contract was
for a fixed price and was fully and Satisfactorily performed.

Commonwealth Edison noted that even though
foreign suppliers of uranium enrichment services emerged in
the late 1970s and early 1980s, Commonwealth Edison
“elected . . . to continue to use government processing
facilities even though . . . foreign alternatives became
available.” See Commonwealth Edison, 271 F.3d at 1331.
That decision was informed in large part by the relative costs
of foreign and domestic enrichment services. By essentially
raising the price paid by Commonwealth Edison for the
Government’s enrichment services retroactively, EPACT
reaches back to alter_quite substantially a factor that played
no small role in Commonwealth Edison’s decision to
continue purchasing enrichment services from _ the
Government even after foreign competition arose.

Likewise, the Court of Federal Claims emphasized
that the utilities received a “benefit” in that “by purchasing

the government’s service, the utilities avoided the cost o:

building and cleaning up its [sic] own plant.” See
Commonwealth Edison Co. v. United States, 46 Fed. Cl. 29,
45 (2000). If anything, this observation underscores the
negative consequences that flow from severely retroactive
legislation. Any decision by Commonwealth Edison not to
invest in “building and cleaning up its own plant” would
have been based on whether it would have been more cost-
effective at the time to “contract out” that service to the
Government based on the Government’s price. By raising
the cost of the Government’s services ex post, EPACT may
well have nullified the utility’s original value assessment.
This upsetting of investment-backed expectations is
precisely what the general prohibition on severely retroactive
laws serves to guard against.

20

CONCLUSION

For these reasons, amicus curiae Federal Circuit Bar
Association respectfully urges this Court to grant the Petition
for a Wnit of Certiorari.

Respectfully submitted,

GEORGE E. HUTCHINSON ANDREW G. MCBRIDE

EXECUTIVE DIRECTOR {Counsel of Record)

FEDERAL CIRCUIT SCOTT M. MCCALEB

BAR ASSOCIATION ALLYSON P. NEWTON
1300 I Street, NW WILEY REIN & FIELDING LLP
Suite 700 1776 K Street, NW
Washington, DC 20005 Washington, DC 20006
202.408.4000 202.719.7000

Counsel for Amicus Curiae
- Federal Circuit Bar
Association
Dated: Apmil 24, 2002

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386010_1619%3A5. Public record. Not legal advice.