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

a

No. 01-1411

Supreme Court of the United States

COMMONWEALTH EDISON Co.,

Petitioner,

Vv.

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 CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA IN SUPPORT OF

PETITIONERS COMMONWEALTH EDISON CO., OMAHA

PUBLIC POWER DISTRICT, SACRAMENTO MUNICIPAL

UTILITY DISTRICT AND YANKEE ATOMIC ELECTRIC

COMPANY*

HERBERT L. FENSTER**

BARBARA J. BACON

MCKENNA & CUNEO, L.L.P.

1900 K Street, N.W.

Washington, D.C. 20006

(202) 496-7500

** Counsel of Record for Amicus

Curiae Chamber of Commerce

of the United States of America

Of Counsel:

Robin S. Conrad

NATIONAL CHAMBER LITIGATION CENTER, INC.

1615 H Street, N.W.

Washington, D.C. 20062

(202) 463-5337

* While filed in the captioned petition, the Amicus requests that its brief be

considered in the other three petitions (Case Nos. 01-1020, 01-1155 and 01-

1398) as well. All parties have been served.

24 er

II.

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i

TABLE OF CONTENTS

INTEREST STATEMENT OF AMICUS

REASONS FOR GRANTING THE WRIT

A.

CONCLUSION

THE UNIQUE NUCLEAR

“BUSINESS” IS NOT A LICENSE

FOR THE GOVERNMENT TO

AMEND ITS CONTRACTS............:00+

WINSTAR LAW IS UNFINISHED

BUSINESS IN ADDRESSING THE

GOVERNMENT’S RELATIONSHIP

WITH ITS CONTRACTING

IF xiatacctncoinsesirsaninsnnasccnnsanss

MATERIAL SELF INTEREST _

SHOULD REQUIRE THE COST OF

STATUTORY CHANGES TO BE

BORNE BY THE GOVERNMENT ......

GRANTING CERTIORARI WILL

ALLOW THIS COURT TO

RESOLVE RETROACTIVITY

ISSUES IMPORTANT TO THE

GOVERNMENT’S CONTRACTING

PE I aiinisidcrsisaicrcivicieinsiinnrasancnnses

THE PERVASIVE REGULATORY

ENVIRONMENT REQUIRES

STRICT ADHERENCE BY THE

UNITED STATES TO ITS

CONTRACT OBLIGATIONG................

SORES HSESE SHE SEHEEESE SESE SES SHEESESES SHE EEEESESEES

ll

TABLE OF AUTHORITIES

CASES Page

Art Metal USA, Inc., v. Solomon, 473 F. Supp. 1

CA. CA, DI aincesnctiedainnates nani ateaadiascsivinasncenai 4

Boyle v. United Technologies Corp., 487 U.S. 500

(DIRE) an xienrsssensiscneessiaiassbiainaataemtd aia Gna Mina ieebeidcnasles 1,17

Deming v. United States, 1 Ct. Cl. 190 (1965)... cceeeeeeeeeee 6

Eastern Enterprises v. Apfel, 524 U.S. 498 (1998)........ passim

FMC Corp. v. United Siates Dept. of Commerce,

2D F. Sak SS3 Ce Faia tsa itesinsaeesascvienes 18

Helene Curtis Industries v. United States, 160 Ct. Cl.

(1DGS) ....ncacnssiisssasenicanseliaiediiatiaisn nasi ial Rica talbscsiiacaanidiieticl 4

Horowitz v. United States, 267 U.S. 458 (1925)........... 6, 13-14

Landgraf v. USI Film Products, 511 U.S. 244 (1994) .....14, 15

Lichter v. United States, 334 U.S. 742 (1948) .......cccccceeeeeeee 10

Lynch v. United States, 292 U.S. 571 (1934) 0.0... cceeeeeees 9,14

Madera Irrigation District v. Hancock, 985 F.2d 1397

(9G Cit, TS cecisccsscsidcsnaactanigecaiamainiiataaaibcciianiabiaediales 16

Murray v. Charleston, 96 U.S. 432 (1877) ......cccccccceseeeeeeesesees 9

NL Industries v. United States, 12 Cl. Ct. 391, aff'd

S39 F.2d 1S TR, Cae, Coa teccthcterssessnsssanieceninccssvnencees 3

Penn Central Transport Co. v. New York City,

43S US. 1B CRF ccncticciensiieasiatenecibeaiaincdes 12

Perry v. United States, 294 U.S. 330 (1935) ........cceceeesesees 8,14

Torncello v. United States, 681 F.2d 756 (D.C. Cir.

1 SGZ)......0.+asisieninniiaiiipelgateleli alain atanlina taal inseam iaaaia 10

United States v. Carlton, 512 U.S. 26 (1994).......eecceeeseeeees 14

United States v. Shell Oil Co., 2817 F.3d 812 (9th Cir.

y | DR SpE em a aie aie 18

United States v. Speed, 75 U.S. 77 (1868) ........:cssscssseeeseeeeees 10

United States v. Winstar Corp., 518 U.S. 839 (1996).... passim

Westinghouse Electric Corp. v. United States,

S96 F208 75D Gnd Cie SR catneitcinemectnereniconer 2

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

1569

(Fed. Cir. 1997), cert. denied, 524 U.S. 957

see ee ee ee —r

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STATUTES AND REGULATIONS

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

NTT dt hesictdinchiciainebethteesndesnendeacsiminpinnbontnstanscntlacss passim

Lice vtsthites gee a © i, 10

licen esa sccntbeintncchelinensaceslntnauaiaenssansenr cease. 10

SIT iaisdstaiahseemntsisctadesenshensisensitvennsastnnnsenasenseneceeces css: 17

MISCELLANEOUS

Gilbert A. Cuneo and Eldon H. Crowell, impossibility of

Performance — Assumption of Risk or Act of

Submission?, 29 Law and Contemporary Problems:

Government Contracts Part II, 531, 548-49 (1964)... 3

James Madison, Property (1792), reprinted in 6 The

Writings of James Madison 101,

(Gaillard Hunt ed., 1906) o.......ccccccccccccsesesecececesececeseceeeeecen. 8

I. INTEREST STATEMENT OF AMICUS

CURIAE

The Chamber of Commerce of the United States of

America (“the Chamber”) is the world’s largest business

federation.! It represents an underlying membership of more

than 3 million businesses and business organizations of every

size, industrial sector, and geographic region. Many of the

Chamber’s members provide goods and services to, or

purchase goods and services from, the United States under

government contracts. The Chamber regularly advocates its

members’ views in Supreme Court and other appellate

forums. It initiates and enters litigation involving issues of

national concern to the American business community.

We write to address the interests of the government

contracting community many of whose number are members

of the Chamber. Our interest in critical government

contracting issues has led to amicus presentations to the

Court in the past not only in United States v. Winstar Corp.

518 U.S. 839 (1996) but also in other cases such as Boyle v.

United Technologies Corp., 487 U.S. 500 (1988) and

Landgraf v. USI Film Products, 511 U.S. 244 (1994).

Few issues affecting contracting with the United States

government are more fundamental to our members’ interests

than the very sanctity of those contracts. The seemingly

narrow context of this case is wholly offset by the flagrant

abuse here of the statutory process to amend, abrogate, and

repudiate contract terms. The license given to the Executive

1 Pursuant to Supreme Court Rule 37.6, the Chamber hereby affirms that

no counsel for any party authored any part of this brief, and that no person

or entity other than the Chamber and its legal affiliate, the National

Chamber Litigation Center, Inc., provided financial support for its

preparation or submission.

2

Branch and Congress by the Circuit decision transcends the

abuse that this Court struck down in Winstar. Winstar,

unfortunately left open, and clearly unresolved, some of the

mechanisms to breach a contract upon which the government

defends and the Circuit has allowed. We believe a significant

clarification of the parameters of Winstar is critical at this

time. This is a plea for the sanctity of contracts for those who

would do business with the government. In this context we

invoke this Court’s admonition in Winstar: “We have also

recognized, however, that “‘[i]t is no less good morals and

good law that the Government should turn square corners in

dealing with the people than that the people should turn

square corners in dealing with their government.’” Winstar,

518 U.S. at 886 n.31 (quoting Heckler v. Community Health

Services. of Crawford Cty., Inc., 467 U.S. 51, 61 n. 13,

(1984) paraphrasing Holmes, J., Rock Island, A. & L. R. Co.

v. United States, 254 U.S. 141, 143 (1920)).

Il. REASONS FOR GRANTING THE WRIT

A. THE UNIQUE NUCLEAR

“BUSINESS” IS NOT A LICENSE FOR THE

GOVERNMENT TO AMEND ITS CONTRACTS

The nuclear business in the United States is uniquely a

pervasive creature of law and regulation. It is the proximate

product of the efforts during World War II to create a nuclear

weapon. The obvious ability of nuclear energy to provide

power generation was not lost on the government and, under

the Eisenhower administration, a program called “Atoms for

Peace” was begun that had as its objective stimulating the

development of commercial uses of nuclear energy, primarily

in the development of commercial power generation.

Westinghouse Electric Corp. v. United States, 598 F.2d 759

(3rd Cir. 1979).

Throughout, however, the government retained near total

control over every aspect of the nuclear business. This

3

obsession with control was certainly justified by the national

defense and safety risks inherent in virtually every aspect of

the creation of nuclear energy, including the enrichment of

fuel for purposes of power generation. But the government

has been an uncertain partner in commercializing nuclear

energy. It has, in many cases planned its participation poorly;

it has changed its policy “mind” about activities critical to

making commercial uses of nuclear energy cost effective and

even feasible; and it has strung out the commercial power

industry in determining costs, providing a consistent

regulatory pattern for designs, safety, storage of spent fuel

and nearly every other component of design and operation for

which the government exercises near-absolute control. See,

e.g., NL Industries v. United States, 12 Cl. Ct. 391

(Appendix) (1987), aff'd 839 F.2d 1578 (Fed. Cir. 1988).

Against this background, it is important to recognize that

in virtually no other industry are the commercial participants

so dependent on the government to “do the right thing.” The

regulatory process controls every aspect of the business, from

cradle to grave; sources of fuel and the disposal of spent fuel

and wastes are tightly controlled by the government. And

nowhere is the government’s control more absolute then in

the contracting process. Not only are the contracts with the

government in this enterprise contracts of adhesion, as are all

government contracts, but here, the contracts are, literally,

Statutory contracts, their creation and terms having been

prescribed to an extraordinary extent by statutes and

implementing regulations. Gilbert A. Cuneo and Eldon H.

Crowell, Impossibility of Performance — Assumption of Risk

or Act of Submission?, 29 Law and Contemporary Problems:

Government Contracts Part II, 531, 548-49 (1964). The

authors conclude that “[cJonditions and clauses in a

government contract are on a take-it-or-leave-it basis; there is

no Freedom of choice.” /d. at 549.

4

-From this picture, the Circuit seemingly drew the

conclusion that the petitioners were on notice that the terms

of their contracts might change and that the government was

entirely justified in unraveling the contracts retroactively.

Thus, the court found that, not only were there no

unmistakable terms of obligation, but, somehow, the

contractors should have anticipated that their contracts would

be reopened to address some additional consideration that the

government concluded it desired but had purposefully

omitted from the contracts.

We suggest to this Court that the Circuit reached an

erroneous conclusion. It misconstrued the obligations of

“regulatory dependence,” and it improperly violated the

sanctity of the contracts: Obligations of regulatory

dependence are not a license for the government to abrogate

its contracts. First, contracts of adhesion, generally, impose

on the dominant party an obligation not to overreach the

other contracting party and to assure that the terms and

conditions are both clear and unchanging. Where, moreover,

the government’s dominant position is nearly absolute, we

believe it has an enhanced duty of fairness. Art Metal USA,

Inc., v. Solomon, 473 F. Supp. 1, 3 (D.C. 1978). In Helene

Curtis Industries v. United States, 160 Ct. Cl. 437 (1963),

Judge Oscar Davis wrote:

Although it is not a fiduciary toward its

—~——eontractors, the Government — where the

balance of knowledge is so clearly on its

side — can no more betray a contractor into a

ruinous course of action by silence than by

the written or spoken word.

Id. at 444.

Here, “betrayal” may be replaced by “entrapment.”

“Silence” is represented by the government’s intentional

er

5

failure to include its D&D costs in its contract negotiations

with petitioners. The facts in this case demonstrate the

following: (1) the government had operated the enrichment

facilities for many years solely for purposes of national

defense; (2)in the course of those operations it had

contaminated the facilities, to some extent through its own

negligence; (3) at the creation of the supposedly for-profit

United States Enrichment Corporation (USEC), the

government was well aware of the contamination, its need to

remediate the facilities and the fact that including the cost of

such remediation in the liabilities of USEC would make the

creation of USEC a certain failure; (4) with this knowledge,

the government retained the obligation of remediation in its

creation of USEC and, the concomitant costs of such

remediation, there being no means in law or equity to lay off

such costs on anyone else; (5) starting in the 1970s, the

government faced fierce price competition from foreign

suppliers and could not possibly have competed successfully

if its contracts had sought to impose liability for remediation

costs on its customers; (6) the government testified before

Congress that it omitted those remediation costs from the

commercial enrichment contracts intentionally; (7) after

inducing customers to purchase enriched uranium with

promises of fixed prices, the government thereafter went to

Congress and secured legislation that effectively increased

the costs of those purchases by requiring these same

customers to pay for the remediation services. These facts

have, somehow, engendered the utterly despotic notion that,

rather than owing duties to the contractor similar to parens

patriae, the government can exercise an Orwellian power to

twist funds from its contracting partners. The government

here had a heightened obligation of fealty to those it had

induced by contract into a relationship with it.

EE

6

B. WINSTAR LAW IS UNFINISHED BUSINESS IN

ADDRESSING THE GOVERNMENT?’S

_ RELATIONSHIP WITH ITS CONTRACTING

COMMUNITY

It was not long after this Court’s decision in Winstar that

the concepts articulated therein were in serious trouble before

the Federal Circuit. The ink was barely dry on Winstar when

the Federal Circuit handed down its decision in Yankee

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

Cir. 1997), cert. denied, 524 U.S. 957 (1998). This was the

precursor of the cases presently before this Court.

A major problem left unsolved in Winstar is the lack of

parameters for the application of either the sovereign acts

doctrine or its companion the unmistakability doctrine. The

latter is particularly unmanageable. The application of these

two doctrines is left uncertain and, apparently from the

Circuit decision, not well understood on the basis of this

Court’s Winstar opinion.

Even before reaching the question of the application of

these two doctrines, however, in the context of this case, the

Winstar result finds additional strength. Here, there was a

clear intent to enter into express contracts, a starting

assumption that the government contested in Winstar.

Winstar at 862. The importance of this fact is that there is an

attendant merger presumption that all the terms intended by

the parties are present in the subject instruments. Similarly,

there is an unrebutted presumption that the contracts fully

expressed their intended considerations, that is, they had

complete mutuality. After Winstar, this is a case where the

government simply breached its contracts by inducing

Congress to pass a contract-specific law, the objective of

which was abrogation.

Sovereign Acts is a concept that is applicable where the

statute in question is intended to function as a “public and

7

general” law. Horowitz v. United States, 267 U.S. 458, 461

(1925). Stated otherwise, “[t]he United States as a contractor

are not responsible for the United States as a lawgiver.”

Deming v. United States 1 Ct. Cl. 190, 191 (1865). But these

statements do not inform particularly because it can be said

that ALL statutes are “public and general.” It has become

clear, however, that the intended dichotomy has to do with

the breadth of the statute. On the one hand a statute may be

of broad expanse in intended application, such as in the case

of general revenue taxation. Or, at the other extreme, it may

intend to effect some specialized purpose that would limit its

application to a narrow sector...which is perhaps previously

the subject of other enactments. This is now understood to

encompass the amendment of a previously enacted statutory

program the effectuation of which is carried on by contract.

About such statutory amendments to contracted programs,

this Court warned in Winstar that “[l]egislation can almost

always be written in a formally general way, and the want of

an identified target is not much secur:ty when a measure’s

impact nonetheless falls substantially upon the Government’s

contracting partners.” Winstar 518 U.S. at 902-903.

The clear suggestion here was that, if the intended focus

of the legislation falls “substantially” on a contracted

program, it will not meet the criteria for “public and general.”

It is not unfair to assume that this Court intended some

linkage between a statute and an objective to modify a

particularized prior government program undertaking,

especially where the program’s objectives are effectuated in

the form of contracts. This kind of linkage classically self

serves. Far more clearly even then the statute at issue in the

Winstar case itself, the EPACT was intended to fall

“substantially” upon the enrichment contracting

partners...solely in fact.

The notion of umistakability appears to have meaning

only if a statute first passes a “public and general test.” This

8

is so because if a statute is singularly focused on a contracted

program, it is not only not public and general, it bespeaks an

actionable intent to breach the contracts. If it is necessary,

however to reach unmistakability at all, we suggest that

umistakability, applied to fixed terms contracts with the

United States is an anachronism and should be abandoned

expressly by this court. Our analysis starts with Madison’s

admonition, repeated by the trial court in Winstar:

If the United States mean to obtain or

deserve the full praise due to wise and just

governments, they will equally respect the

rights of property, and the property in rights:

they will rival the government that most

sacredly guards the former; and by repelling

its example in violating the latter, will make

themselves a pattern to that and all other

governments.

James Madison, Property (1792), reprinted in 6 The

Writings of James Madison 101, 103 (Gaillard Hunt ed.,

1906), quoted in Winstar Corp. v. United States, 25 Cl. Ct.

541, 553 (1992).

Nor does the concept of unmistakability find any home

in the principal contract case precedents of this Court. The

fundamental problem created by pinning the concept to a

contract with fixed terms is that it makes the contract

illusory. This Court stated in Perry that such a result is

unacceptable:

On that reasoning, if the terms of the

government’s bond as to the standard of

payment can be repudiated, it inevitably

follows that the obligation as to the amount

to be paid may also be repudiated. The

contention necessarily imports that the

9

Congress can disregard the obligations of the

government at its discretion, and that, when

the government borrows money, the credit

of the United States is an illusory pledge.

Perry v. United States, 294 U.S. 330, 350 (1935).

While the Court there was dealing with “money” there

appears little distinction between the contracts in which the

Perry borrowing took place and the contracts here. Both

were contracts with fixed terms which established the

reasonable expectations of the parties. See also Murray v.

Charleston, 96 U.S. 432, 445 (1877) (“It is against the rules,

both of law and of reason, to admit by implication in the

construction of a contract a principle which goes to the

destruction of it.”’)

And Lynch v. United States, 292 U.S. 571 (1934), is no

different in its strict adherence to the preservation of the

sanctity of contracts with the government. If anything Lynch

presents a setting very close to the instant case:

Congress was without power to reduce

expenditures by abrogating contractual

obligations of the United States. To

abrogate contracts, in the attempt to lessen

government expenditure, would not be the

practice of economy, but an act of

repudiation.

Lynch 292 U.S. at 580.

The Lynch court stated precisely the motive of the statute

in the instant case. And there is nothing in this Court’s

decision in Lynch to suggest that the outcome was predicated

on an express undertaking by the United States not to

abrogate its obligations.

The application of “unmistakability” to fixed terms

contracts turns the principles of contract law on their head,

—

10

even those applicable to the government as a contracting

party. It is not the contractor who must beware of the

absence of an umistakable nights provision in a contract in

order to avoid an illusory result, it is the government that

- must put into a law enabling a contract or into the contract

itself a reservation of a right to make changes in terms and

conditions later. Lynch, 292 U.S. at 578, 579.

Indeed, the government does have regulations that

reserve to it the right to make changes when such “changes”

are desired. See, Federal Acquisition Regulation (“FAR”)

Part 43, Subpart 43.2 but such reserved authority is

meaningfully limited to “changes” within the “scope” of the

contract and does not include a unilateral right to change

payment terms or the amour of revenue that can be

generated from the contract. It is, moreover, accepted that

absent even this limited reservation of a “changes” right, a

material, unilateral imposition on contract terms would be a

breach. Torncello v. United States, 681 F.2d 756 (Ct. Cl.

1982).2 Similarly, the government, in terms prescribed by

regulation, may avoid breaching its contracts by

“terminating” them. (See, FAR Part 49. But, even here, the

right to rely on a “termination” clause is limited. See also,

United States v. Speed, 75 U.S. 77 (1868).

The history of government contracting demonstrates the

government’s understanding that it is obliged to contract for

terms that will allow it to alter its obligations. This

understanding is certainly consistent with this Court’s several

statements on the subject. This understanding is not

consistent with the notion that the absence of such

2 For a period of years the government did have a statutory right literally

to renegotiate the profit terms of its contracts. That right to

“renegotiation” however, was engraved in an express !aw and in the

contract terms themselves. Lichter v. United States, 334 U.S. 742 (1948).

11

reservations nevertheless suggests the presence of such rights

of change. Yet this is the essence of “unmistakability” when

applied to contracts with fixed terms. This Court should

address this open issue the impact of which threatens the

underpinnings of the Government’s relationships with its

contracting patrons.

C. MATERIAL SELF INTEREST SHOULD

REQUIRE THE COST OF STATUTORY

CHANGES TO BE BORNE BY THE

GOVERNMENT

This Court has stated that: 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. .

Under these terms, it would be hard to imagine an act

more dictated by pure self interest then one which legislated a

change in contract terms to force a contracting party to clean

up the government’s self-made mess. There is no universe of

considerations to add which suggests that the national good

was ai stake or even that the new statutory obligation was a

quid pro quo for services rendered. Those services rendered

were compensated fully under the terms of the contracts

themselves. The obligation to remediate was one which the

government had owned, prior to the contracts in issue, as a

result of its operation of the enrichment facilities solely for

purposes of national defense.

But the issue of self interest does not stop with this

remarkable law mandating that a stranger to the mess clean it

up. It is equally important to look back at the making of the

contracts in the first place. As the Petitioners have described

to this Court, the enrichment facilities were created singularly

for purposes of national defense and operated on that basis

for a number of years during which the contamination was

12

generated, in part by the government’s own negligence.

Then, the facilities were opened to commercial enrichment

services. Why? The answer is very simple: the government

was serving its (not the petitioners’) interests thereby. It is

clear that the operation of these facilities was extraordinarily

expensive. It is also obvious that. the facilities had

considerable unused capacity.

The objective of providing commercial enrichment was

simply to enlarge the operating base and thereby to spread the

fixed and semi-variable operating costs over that larger base,

making each unit of production thereby less expensive to the

government. It follows that the government elected not to

attempt to price the remediation costs into the contracts for

the simple reason that the government’s attempts to self serve

by reducing its unit costs of production would have been lost.

The Circuit’s. decision vaguely suggests that the

imposition of this statutory payment obligation “... would not

be contrary to that party’s reasonable expectations.” This is

entirely contrary to the realities of the then existing

contracting environment. In addition, however, the analogy

may properly be drawn to this Court’s pronouncements

relating to “investment backed expectations.” See, e.g., Penn

Cent. Transp. Co. v. New York City, 438 U.S. 104, 124

(1978). This exact analogy was drawn by this Court in

Eastern Enterprises v. Apfel, 524 U.S. 498, 532 (1998), and

was amplified by the Circuit in the instant case.

Commonwealth Edison Co., 1347-1349. In a contract setting,

the expectations are far more easily defined then in the

classic takings setting. The expectations may generally be

found on the face of the contract, defined in the services to be

provided and the price to be paid. For the Circuit, under such

circumstances, to reach out beyond the contract and attempt

to identify “reasonable expectations” that were plainly not

part of the contract was sheei speculation; and it was

profoundly wrong at that. The Circuit seemed not to

13

understand that the contract nexus set this case apart from its

strained attempt to connect the Petitioners to their regulated

environment.

The petitioners changed position in reliance on the terms

of the contract: they abstained from alternative sources of the

enrichment services the prices for which were certainly

competitive. They relied on contemporaneous oral promises

from their counterpart government officials. They relied on

the knowledge that the contracts were negotiated in a

competitive market place wherein the government was

constrained to offer its best price. The “investment” that the

petitioners made in the execution and performance of them

obligations under the contract was contractually predicated

on the “expectation” that the government would not abrogate

the negotiated terms. It is clear that, had the Petitioners not

changed their position in reliance on the terms of their

contracts, they would have no liability under this statute.

Arguably, the government would not have had this

convenient base against which to relieve itself of the cost» of

contamination that it had itself generated. -

The contrary view suggests a cynicism borne of the

assumption that regulated industries members have no

unimpeachable contract rights when dealing with their

regulators and should be prepared for all manner of

impositions. This is not ever the law in non-socialist

democracies and here, it also seriously imposes upon a

relationship that was initiated and fostered by the government

over a period of five decades, always with the assumption

that the contractor-Petitioners were materially dependant on

the government adhering to its contracts and otherwise

treating its nuclear energy partners fairly.

14

D. GRANTING CERTIORARI WILL ALLOW

THIS COURT TO RESOLVE RETROACTIVITY

ISSUES IMPORTANT TO THE GOVERNMENT’S

CONTRACTING PARTNERS

As this Court held in the seminal! case of Horowitz:

Whatever acts the government may do, be

they legislative or executive, so long as they

be public and general, cannot be deemed

specially to alter, modify, obstruct or violate

the particular contracts into which it enters

with private persons. *** In this court the

United States appear simply as contractors;

and they are held to be liable only within the

same limits that any other defendant would

be in any other court.

Id. at 461 (emphasis added) (quoting Jones v. United

States, 1 Ct. Cl. 383, 384 (1865)). Accordingly, the

government may agree by contract to assume certain risks.

When it does, the terms of its bargain will be enforced. See

Winstar, 518 U.S. at 843; Lynch, 292 U.S. at 580; Perry, 294

U.S. at 353 (“[T]he right to make binding obligations is a

competence attaching to sovereignty”).

Nevertheless, the Federal Circuit in this case permitted

the government to abrogate its contractual obligation to

assume the risk of increased costs that the government

assumed by virtue of its fixed price contracts. If the decision

is allowed to stand, it will not only upset the expectations of

Petitioners and the other utilities who entered into fixed price

contracts with the government, but also the expectations of

every other company or individual who has ever contracted

with the government.

While Congress has broad authority to adjust the burdens

of economic life, its powers are not unlimited. See Eastern

15

Enterprises, 524 U.S. at 523-529. For example, this Court

has long recognized that the Due Process Clause “protects the

interests in fair notice and repose that may be compromised

by retroactive legislation.” Landgraf v. USI Film Prods., 511

U.S. 244, 266 (1994). Moreover, “provisions affecting

contractual or property rights [are] matters in which

predictability and stability are of prime importance.” Id. at

271. Because EPACT attaches new legal consequences to

contractual relationships completed decades before its

enactment, Congress has overstepped the bounds of its

legislative authority. Cf United States v. Carlton, 512 US.

26, 38 (1994) (O’Connor, J., concurring) (“In every case in

which we have upheld a retroactive federal tax statute against

due process challenge, however, the law applied retroactively

for only a relatively short period prior to enactment”). The

Chamber submits that when Congress acts to repudiate the

government’s contracts, it is not entitled to the same degree

of deference accorded Congress when it enacts economic

legislation benefiting third parties.

By granting certiorari in this case, the Court will be able

to resolve this issue — which is of grave importance but not

addressed in either Landgraf or Eastern Enterprises —

namely, what level of scrutiny applies where Congress has

legislated for its own benefit.

Even applying the limited judicial scrutiny enunciated in

Eastern Enterprises, however, EPACT fails to meet the

constitutional challenge. The plurality and concurring

justices in Eastern Enterprises agreed that the Coal Industry

Retiree Health Benefit Act of 1992 (“Coal Act”) was

unconstitutional as applied to Eastern Enterprises. If the

Coal Act is unconstitutional, there can be no doubt that

EPACT is also unconstitutional.

In Eastern Enterprises the plurality determined that Coal

Act was unconstitutional as applied to Eastern because the

16

Coal Act imposed a severe retroactive liability on Eastern

that Eastern could not have anticipated and because the

liability imposed on _ Eastern was _ substantially

disproportionate to Eastern’s experience. 524 U.S. at 528-

537. As such, the plurality concluded that the Coal Act

violated “fundamental principles of fairness underlying the

Takings Clause.” Jd at 537. As shown by Petitioners’

briefs, EPACT imposes as severe, if not more severe,

retroactive liability on utilities than what the Coal Act sought

to impose on Eastern.

Justice Kennedy agreed that the Coal Act was

unconstitutional, but based his opinion on the Due Process

Clause, not the Takings Clause. Jd. at 539-547. The dissent

agreed that the question of retroactivity should be addressed

under the Due Process Clause, but found that the statute was

constitutional. The dissent concluded that it was not

fundamentally unfair and unjust to require Eastern to pay the

health care costs of its own retired employees because: (1)

the statute only imposed liability on Eastern for miners which

Eastern itself employed; (2) Eastern benefited from the

miners labor and created the health risks of the miners; and

(3) Eastern helped create the miners’ expectations of

continued future health benefits. 524 U.S. at 559-567.

First, in contrast, EPACT imposes liability for

decontamination and decommissioning costs associated with

the government’s national defense programs. Second,

Petitioners did not create the conditions requiring

decontamination and decommissioning. As noted above, the

government contaminated the facilities while enriching

uranium for its own use and, in part, because of its own

negligence. Moreover, Petitioners exercised no control over

the facilities or the enrichment process. Third, Petitioners

and the other utilities played no part in the government’s

expectation that it would be reimbursed by its contacting

partners for these costs. In fact, because the contracts at issue

17

were fixed price contracts, the risk of increased costs was

borne by the government as the seller of the services.

Madera Irrigation Dist. v. Hancock, 985 F.2d 1397, 1402 (9"

Cir. 1993). Thus, even assuming that the more deferential

standard of review applies, there can be no doubt that

EPACT is unconstitutional. In sum, the Federal Circuit has

given Congress a virtually unrestricted license to enact

wholly retroactive legislation and for the singular purpose of

improving the government’s position in its pre-existing

contracts. Given that the government, not Petitioners, created

the problems addressed by EPACT, the imposition of

retroactive liability on Petitioners is “arbitrary and irrational.”

As such, it cannot be sustained under the Due Process

Clause.3

The Federal Circuit’s decision invites Congress

retroactively to impose price increases on many of the

Chambers members and the government’s other contracting

partners.4 Contractors must, however, know with a

reasonable degree of certainty what risks they are undertaking

3 While the facts of Eastern Enterprise were susceptible of the different

interpretations that led to the different conclusions reached by Justice

Kennedy and the dissenting justices, the facts of this case are not. The

facts clearly show the government entered into fixed price contracts and

then acted in its own singular self-interest by shifting the financial burden

of the decontamination and decommissioning costs associated with its

operation of enrichment facilities from the public to the government's

contract partners.

4 By granting Congress the authority to disrupt settled expectations long

after the transactions at issue have closed, the Federal Circuit’s decision

could impact not only the expectations resulting from the type of fixed-

price contracts at issue here, but also the expectations derived from the

government’s acceptance of certain risks set forth in the assumption-of-

risk clauses that the government has adopted as part of the FAR. See, for

example, FAR, Part 50.

18

in agreeing to contract with the government so that those

risks can be addressed appropriately. The failure by the

government to account for these risks contractually compels

the contractors to include substantial contingency costs in

their pricing of contracts and increases greatly the ultimate

costs to the government. Boyle, 487 U.S. at 507-512. This

Court should grant certiorari to correct the grave errors by the

Federal Circuit.

E. THE PERVASIVE REGULATORY

ENVIRONMENT REQUIRES STRICT

ADHERENCE BY THE UNITED STATES TO ITS

CONTRACT OBLIGATIONS

Substantial reliance for its decision is placed by the

Circuit on the fact that the context of this case included a

highly regulated business. It should have been the

“reasonable expectation,” said the Circuit, that the

government would return and demand that the Petitioners

participate in the cleanup of the government’s contaminated

facility. These conclusions, ill-founded in the reasoning and

case law cited by the Circuit, are a fundamental denial of the

law of contracts and, furthermore are even inconsistent with

environmental law.

No case, not one, even suggests that an owner of a

contaminated facility may, without a prior contract

reservation, visit upon its former customers the costs of

remediation of the facility. And, when the government is

involved, this is also the case. Thus, where the government

has been a predominant customer and has exercised plenary

control even over a privately owned facility, the Circuits have

found that the government is liable, at least as an “arranger.”

See, FMC Corp. v. United States Department of Commerce,

297 F.3d 833 (3d Cir. 1994); cf. United States v. Shell Oil

Co., 2817 F.3d 812 (9th Cir. 2002), Petition for rehearing en

banc, pending).

19

But the more critical error of the Circuit lies in its

pointed sidestepping of the contract relationship in

concluding that pervasive regulation is the natural predicate

to breaching the four walls of a contract. Such a notion is not

supported by any case citation or logic path suggested by the

Circuit. The cases imported by the Circuit for its analysis

simply were not contract cases in which the government, as a

contracting party, directly or indirectly either assumed or

projected the costs of remediation. To the contrary, the

analysis and the cases cited stand only for the unremarkable

proposition that one cleans up one’s own mess. In the instant

case, the “mess” was not only owned exclusively on the

government, it was created exclusively by the government.

What is quite remarkable in this analysis is the suggestion

that the Petitioners’ generic admission that their industry

always carried a D&D burden could be applied to facilities

that were never owned nor controlled by the industry. There

is no doubt that this industry is well aware of its remediation

burdens. Those burdens are substantial enough when viewed

simply from the perspective of the facilities that the industry

owns and controls. But, those facts hardly suggest that the

industry should have anticipated assuming the government’s

burden too.

Ii. CONCLUSION

The capstone on these poorly constructed notions by the

Circuit is its failure even to acknowledge the presence of

contractual agreements in which the government, as a

contracting party, had purposefully excepted from the

contract price and the negotiations for such contracts any

undertaking to participate in the D&D. This fact requires us

to return to the basic premise of these Petitions: the

government is bound by its contracts, fully, as would be any

other contracting party. Under the facts in this case, it is

hardly necessary even to reach the subtle concepts of

sovereign acts or unmistakability because the objectives

20

which those notions would reach, the imposition of D&D

costs on the contracting Petitioners, were actually considered

and rejected in the making of the contracts themselves. At its

root, this case involves little more than the sanctity of a

contract in the face of an after-discovered effort to entrap the

private contracting parties in a poorly orchestrated effort to

rewrite the contracts include obligations that would have

been rejected in the first place.

To the extent that this Court’s decision in Winstar

appeared to leave open a window to enabie the government to

pass contract and program specific laws reopening

purposefully fixed terms, that window should be closed.

There was no material public interest served here that would

warrant a precedent disturbing the sanctity of these contracts;

this precedent should not be allowed to stand.

Respectfully submitted,

Herbert L. Fenster*

Barbara J. Bacon

McKENNA & CUNEO, L.L.P.

- 1900 K Street, N.W.

Washington, D.C. 20006

(202) 496-7500

*Counsel of Record for Amicus

Curiae Chamber of Commerce of the

United States of America

Of Counsel: _

Robin S. Conrad

NATIONAL CHAMBER

LITIGATION CENTER, INC.

1615 H Street, N.W.

Washington, D.C. 20062

(202) 463-5337