Petition for Writ of Certiorari — Yankee Atomic Electric Co v. United States, 41 Fed. Cl. 2365 (1998) (No. 97-801)

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92% 801 NOV 1 21997

No. 97 ———

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1997

YANKEE ATOMIC ELECTRIC COMPANY,

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

PETITION FOR A WRIT OF CERTIORARI

WILLIAM E. RIETHLE JERRY STOUCK *

Corporate Counsel CATHERINE R. BAUMER

YANKEE ATOMIC DAVID R. LIPSON

ELECTRIC COMPANY SPRIGGS & HOLLINGSWORTH

580 Main Street 1350 I Street, N.W.

Bolton, MA 01740 Ninth Floor

(508) 779-6711 Washington, D.C. 20005

(202) 898-5800

Attorneys for Petitioner

Yankee Atomic Electric

Company

November 12, 1997 * Counsel of Record

WILSON - EPes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Whether the federal government, having entered

into fixed-price contracts to sell certain services, may

subsequently enact legislation that imposes additional

costs—incurred by the government in providing those

services—predominantly on the purchasers under the

previous fixed-price contracts?

2. May Congress impose retroactive financial liability

on companies based solely on the fact that they purchased

government services as much as thirty years ago?

RULE 29.6 STATEMENT

The parent companies of Petitioner Yankee Atomic

Electric Company are:

New Engiand Power Company

The Connecticut Light and Power Company

Boston Edison Company

Central Maine Power Company

Public Service Company of New Hampshire

Western Massachusetts Electric Company

Montaup Electric Company

Central Vermont Public Service Corporation

Commonwealth Electric Company

Cambridge Electric Light Company

Petitioner has no subsidiaries.

TABLE OF CONTENTS

Page

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CONSTITUTIONAL AND STATUTORY PROVI-

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REASONS FOR GRANTING THE PETITION ............. 7

I, TH# FEDERAL CIRCUIT IMPROPERLY DE-

TERMINED THAT A FEDERAL STATU-

TORY PROVISION THAT PREDOMINANTLY

IMPACTS THE GOVERNMENT’S' CON-

TRACTING PARTNERS [5 A “PUBLIC AND

GENERAL” SOVEREIGN ACT FOR WHICH

THE GOVERNMENT IS IMMUNE FROM

CONT OAs UA LJABILITY ..................-......-.. 9

Il. THE FEDERAL CIRCUIT MISTAKENLY

HELD THAT A THIRTY-YEAR RETROAC-

TIVE MONETARY ASSESSMENT IS JUSTI-

FIED BY NOTHING MORE THAN THE

PAST PURCHASE OF GOVERNMENT-

PRODUCED SERVICES .................................... 16

(iii)

TABLE OF CONTENTS—Continued

Page

Ill. THE FEDERAL CIRCUIT DECISION FUN-

DAMENTALLY ALTERS THE PROPER BAL-

ANCE BETWEEN THE GOVERNMENT'S

SOVEREIGN AUTHORITY AND THE CON-

TRACTUAL AND FIFTH AMENDMENT

RIGHTS OF THOSE WITH WHOM IT DOES

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Opinion of the United States Court of Appeals for

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Opinion of the United States Court of Federal

UN a cl a oe ae ae fei ERC a ae 33a

Order of the United States Court of Appeals for

the Federal Circuit (Aug. 15, 1997) ...0....0.0000... 44a

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TABLE OF AUTHORITIES

CASES Page

Concrete Pipe & Prods. v. Construction Laborers

Pension Trust, 508 U.S. 602 (1993) —....-00000.. 8,17

Eastern Enterprises v. Chater, 110 F.3d 150 (1st

Cir. 1997), cert. granted sub nom. Eastern En-

terprises v. Appel, 66 U.S.L.W. 3296 (U.S. Oct.

20, 1997) (No. 97-42) ..... Pita elt Sadie a) 8-9, 17, 18, 21

Horowitz v. United States, 267 U.S. 458 (1926)...... 11

Landgraf v. USI Film Prods., 511 U.S. 244 (1994).. 16

Lawrence v. Chater, 516 U.S. 193 (1996) ......... deceit 21

Lynch v. United States, 292 U.S. 571 (1934) .......... 13, 14

Murray v. Charleston, 96 U.S. 432 (1878) .....00002.... 13

Nichols v. Coolidge, 274 U.S. 531 (1927)... 19

Pension Benefit Guaranty Corp. v. R.A. Gray &

CO EE Rs UR REE) ois anes 18-19

Perry v. United States, 294 U.S. 330 (1935) ........... 13, 14

Puerto Rico v. Russell & Co., 315 U.S. 610 (1942).. 13

United States v. Carlton, 512 U.S. 26 (1994) .......... 18, 19

United States v. Darusmont, 449 U.S. 292 (1981)... 19

United States v..Winstar Corp., 116 S.Ct. 2432

Be} WOR Sapo sarees <td chiaarieates eats 8, 10, 11-13, 14, 20

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

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STATUTES AND RULES

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RES Ra BLS Ye » & RMR eeneen emi eeean ene mie Onan 6

fe Sis We UG Epi soi bcescencs gcse oe eee 3

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

106 Stat. 2776 (codified in scattered sections of

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TABLE OF AUTHORITIES—Continued

42 U.S.C. § 2297g-1(d)

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MISCELLANEOUS

H.R. Rep. No. 102-474(1) (1992), reprinted in

AES UIE states sciatic nccaesempumiipeieivensies

H.R. Rep. No. 102-474(II) (1992), reprinted in

BE Sia ates HIT chai bikes ckcccsilcs teh cmavedicons

Office of Envtl. Mgmt., U.S. Dep’t of Energy,

Uranium Enrichment Decontamination & De-

commissioning Fund Triennial Report 14 (May

8, 1996)

3,4

IN THE

Suprene Cont of the United States

OcTOBER TERM, 1997

No. 97

YANKEE ATOMIC ELECTRIC COMPANY,

. Petitioner,

UNITED STATES OF AMERICA,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

Yankee Atomic Electric Company respectfully petitions

for a writ of certiorari to review the judgment of the

United States Court of Appeals for the Federal Circuit in

this case.

OPINIONS BELOW

The opinion of the court of appeals (App. la-3la) is

reported at 112 F.3d 1569. The opinion of the Court of

Federal Claims (App. 33a-43a) is reported at 33 Fed.

Cl. 580.

JURISDICTION

The judgment of the court of appeals was entered on

May 6, 1997. The court of appeals denied a timely peti-

tion for rehearing and suggestion for rehearing en banc

on August 15, 1997. (App. 44a-45a).

The jurisdiction of this Court is invoked under 28

U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Fifth Amendment to the Constitution of the United

States provides: “[NJor shall any person . . . be deprived

of life, liberty, or property, without due process of law;

nor shall private property be taken for public use, without

just compensation.”

The relevant provisions of the Energy Policy Act of

1992, Pub. L. No. 102-486, 106 Stat. 2776, are set forth

in the Appendix to this petition. App. 46a-48a.

STATEMENT

In enacting the Energy Policy Act of 1992

(“EPACT”), Congress imposed a monetary assessment

falling primarily upon nuclear utility companies that pre-

viously had contracted with the government to purchase

uranium enrichment services. The assessment is ear-

marked to pay costs the government incurred in perform-

ing those enrichment services contracts.

As a result, Petitioner Yankee Atomic Electric Com-

pany (“Yankee”) is now required to pay the government

$15 million more than it previously paid under fixed-price

contracts for the same government enrichment services. In

the aggregate, over a fifteen-year period, EPACT requires

Yankee and other nuclear utilities to make “special assess-

ment” payments of more than $2 billion.

This case involves a challenge to EPACT’s special

assessment as a violation of Yankee’s fixed-price contract

rights and of Fifth Amendment due process principles.

The Court of Federal Claims held that the Act was “an

impermissible exercise of sovereign power.” App. 41a.

A divided Federal Circuit—finding that the imposition

of additional costs on the government’s prior fixed-price

contractors was protected by the “sovereign acts” doc-

trine—reversed.

A. Background

1. Beginning in the late 1950s, the government sold

uranium enrichment services to utility companies that

operated nuclear power plants.’ The government oper-

ated its uranium enrichment enterprise as a commercial

business and provided enrichment to its customers pur-

suant to contracts. See 42 U.S.C. § 2201(t) (authorizing

such contracts).

Between 1959 and 1985, Yankee purchased uranium

enrichment from the government under a series of fixed-

price contracts. Both parties agree that Yankee paid the

specified prices for all units of enrichment it purchased,

and that the contracts precluded the government from

increasing the per-unit enrichment prices. See App. 2a.

Yankee permanently shut down its only nuclear plant

in 1992. It therefore no longer purchases enrichment

services from any source.

2. By the 1980s, Congress recognized that the govern-

ment’s uranium enrichment business faced “rising com-

petition from other countries” and a “declining global

market share.” H.R. Rep. No. 102-474(1), at 142 (1992),

reprinted in 1992 U.S.C.C.A.N. 1954, 1965. Congress

addressed this problem by comprehensively restructuring,

and planning to privatize, the government’s enrichment

business. See H.R. Rep. No. 102-474(II), at 75 (1992),

reprinted in 1992 U.S.C.C.A.N. 2064, 2082.

One of the issues Congress faced in restructuring the

government’s uranium enrichment business was how to

address the costs of decontaminating and decommission-

——.

1 Those services were provided by a succession of federal entities,

including the Atomic Energy Commission and the Department of

Energy (“DOE”).

ing (“D&D”) the government’s uranium enrichment plants.

Congress concluded that a restructured uranium enrich-

ment business could not operate profitably or maximize its

long-term value if it remained responsible for the outstand-

ing D&D costs. See H.R. Rep. No. 102-474(1), at 142-

145, reprinted in 1992 US.C.C.A.N. at 1965-1968.

Ultimately, Congress (1) created the United States

Enrichment Corporation (“USEC”) to take over and

eventually privatize the government’s uranium enrichment

business, see 42 U.S.C. §§ 2297a, App. 48a, 2297d; and

(2) established a separate Uranium Enrichment Decon-

tamination and Decommissioning Fund (“D&D Fund”) to

pay the D&D costs. 42 U.S.C. § 2297g(a), App. 46a.

To finance the D&D Fund, Congress provided for annual

deposits of $480 million (adjusted for inflation). /d.

§ 2297g-1(a), App. 46a.

Up to $150 million annually is to be collected from

“domestic utilities” over a fifteen-year period, for a total

of approximately $2.25 billion. Jd. § 2297g-1(c), (e), App.

47a-48a.* To obtain the $150 million per year, Congress

imposed a “special assessment” based on “the total amount

of separative work units [“SWUs”]* [ea]ch utility has

purchased from the [government] . . . before October 24,

1992.” Id. § 2297g-1(c), App. 47a (emphasis added).

However, in apparent recognition of the small “secondary

market” in which purchasing utilities occasionally had

sold government-produced SWUs to others, Congress even-

tually added a definition of the statutory term “purchase,”

which provides that (1) a utility is considered to have

2? Congress authorized appropriations for the remainder. See 42

U.S.C. § 2297g-1(d), App. 47a. Between 1993 and 1995, Congress

actually appropriated only $331 million to the D&D Fund, $692

million less than authorized by the EPACT. Office of Envtl. Mgmt.,

U.S. Dep’t of Energy, Uranium Enrichment Decontamination &

Decommissioning Fund Triennial Report 14 (May 3, 1996).

8 The “separative work unit,” or “SWU,” is “the common measure

by which uranium enrichment services are sold.” 10 C.F.R. § 766.3.

purchased a separative work unit if it was produced by

the government but purchased by the utility from another

entity, and (2) a utility is not considered to have pur-

chased a government-produced separative work unit if it

was initially purchased by that utility but subsequently

resold. Id. § 2297g-1(c)(1) & (2), App. 47a.

All secondary market SWUs subject to the EPACT

assessment originally were purchased under a contract

with the government. The government concedes that at

most only 15% of the special assessment amounts relate

to secondary market SWUs. See App. 28a. Therefore, at

least 85% of the special assessment falls on enrichment

units purchased directs." under government contracts.*

3. From 1959 to 1985 Yankee purchased a total of

881,860.96 units of uranium enrichment under its con-

tracts with the government and paid prices ranging from

$26.00 to $153.00 per SWU. See J.A. 555.5 As a result

of the special assessment, Yankee now must pay the gov-

ernment approximately $1 million more each year for

fifteen years. Over the fifteen-year period, Yankee will

Pay approximately $17.00 more for each SWU that it

purchased and paid for long ago.*

* Yankee believes that all secondary market purchasers subject

to the EPACT assessment are utility companies that also had

direct purchase contracts with the government. The EPACT as-

Sessment thus falls: solely on this discrete group of contracting

utilities.

5 “J.A.” refers to the joint record appendix from the United States

Court of Appeals for the Federal Circuit.

® Other domestic utilities that purchased enrichment services from

the government also have been assessed substantia] additional sums.

Approximately 30 related cases, each involving claims similar to

Yankee’s, are currently stayed in the United States Court of Fed-

eral Claims pending the outcome in this case.

B. Proceedings Below

4. In 1994 Yankee filed suit in the Court of Federal

Claims under the Tucker Act, 28 U.S.C. § 1491(a)(1).

Yankee asserted that the special assessment is a retroactive

price increase that violates Yankee’s fixed-price contract

rights. The trial court agreed and granted summary judg-

ment to Yankee. App. 33a. It held that by imposing the

per-unit special assessmert, “the Government dishonors

the very promise it had earlier made: that the price to be

charged for its services would not exceed the contract-

stated maximum. Legislation so plainly directed at un-

doing a contract liability previously assumed by the

Government is an impermissible exercise of sovereign

power.” /d. at 41a.

5. A split panel of the Federal Circuit reversed. /d. at

la. The panel majority held that, under the “sovereign

acts” doctrine, the EPACT special assessment “constitutes

a general exercise of Congress’s taxing power . . . rather

than an act that retroactively increases the price charged

to contracting parties.” Jd. at 14a. It based this conclu-

sion largely on the fact that, in view of the secondary

market purchases, “the scope of the Act is not coincident

with those domestic utilities that had previously entered

into contracts with the DOE for uranium enrichment serv-

ices.” Id. at 10a." Following the same logic with respect

to the “unmistakability doctrine,” the panel majority found

that the fixed-price contract terms “[a]t most” gave

Yankee “a vested right to be immune from later attempts

to retroactively increase the prices charged.” It concluded

that “[t]his right has not been taken because . . . the

7 The Court found that, because the EPACT assessment did not

fall exclusively on the government’s contract partners, (1) Con-

gress’ “main purpose” was to “spread the costs” of decontami-

nating and decommissioning the government’s enrichment plants

among “the ultimate beneficiar[ies] of the DOE’s services,” and

(2) Congress was not “acting for the purpose of retroactively in-

creasing the price of its earlier contracts.” Id. at 9a, 10a.

assessment is a general, sovereign act rather than a retro-

active price increase.” Id. at 21a n.8.

In dissent, Judge Mayer found that “the government

retroactively abrogated the essence of the contracts at

issue.” Jd. at 27a. Given the government's acknowledg-

ment that at least 85% of the special assessment falls on

SWUs purchased directly under government contracts, the

dissent concluded that the “sovereign acts” doctrine did

“not insulate the government from liability because the im-

pact of the special assessment falls so substantially and

directly on Yankee and the government’s other contrac-

tors.” Id. at 29a.* Therefore, “Yankee needed no more

than the fixed-price contract terms to insulate itself from

a post-performance price hike.” Jd. at 30a.

REASONS FOR GRANTING THE PETITION

This case presents an important question regarding the

government’s power to retroactively impose additional

costs on its contracting partners. A divided panel of the

Federal Circuit upheld the retroactive cost-shifting effected

by the EPACT assessment, finding it persuasive that “the

special assessment does not reach only those utility com-

panies that previously contracted with the Government;

it also reaches those utilities that purchased the services

through the secondary market but had no contracts with

the Government.” App. 12a (emphasis added and omit-

ted). Thus, despite the fact that the assessment falls pre-

dominantly on the government’s contracting partners, the

majority below concluded that it was a “general tax.”

This striking holding merits review for several reasons.

First, by allowing the government to single out its con-

tracting partners for particular added burdens, the court

® See also id. at App. 29a (dissent) (“That a small fraction of

others who indirectly purchased enrichment services from the gov-

ernment also must pay the assessment does not mask its true iden-

tity as a retroactive price increase.”’).

of appeals has seriously altered the proper balance be-

tween the obligation of the federal government to respect

the terms of its own contracts and the power of the fed-

eral government as sovereign to legislate for the public

good. See United States v. Winstar Corp., 116 S.Ct. 2432

(1996). Although the fixed-price terms of a contract to

purchase goods or services from the government would

not typically shield purchasers from exactions imposed by

general laws, such contract terms should provide a bar-

rier to targeted legislation, like that involved here, which

has the substantial effect of shifting the government’s

performance costs as seller onto the purchaser. That

principle not only sets reasonable boundaries for the

“sovereign acts” defense, it also accords most naturally

with the common-sense expectations of those contracting

with the government: namely, that the government, al-

though not contracting away its sovereign powers, is

nevertheless bound not to legislate to shift the very risks

it assumed in the contract back onto the other party. By

treating the legislation here as a “general tax”—on the

ground that its impact was not exclusively on the govern-

ment’s contracting partners—the Federal Circuit has

given far too much leeway to the government to evade its

own contractual responsibilities. See pp. 9-16, infra.

The decision below suffers from a second flaw as well:

it forces petitioner (and other utility companies) to retro-

actively shoulder costs of resolving a problem for which

they bear no responsibility. Although this Court has up-

held a number of retroactive laws against challenges

under the Due Process and Taking Clauses, see e.g.,

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1 (1976);

Concrete Pipe & Prods. v. Construction Laborers Pen-

sion Trust, 508 U.S. 602 (1993), it never has allowed

retroactive assessment of costs “that [are] due to causes

other than the . . . conduct” of those being assessed.

Turner Elkhorn, 428 U.S. at 25.°

®See Eastern Enterprises v. Chater, 110 F.3d 150 (ist Cir.

1997), cert. granted sub nom. Eastern Enterprises v. Appel, 66

sath blind ian jit hel ey te

Here, the government is seeking to require retroactive

payment for the cleanup of its enrichment plants based

solely on the utilities’ purchase of uranium enrichment

services performed at those plants. If that conduct is

deemed sufficient to support the imposition of retroactive

liability, then the power of the government to reorder

past events would be virtually limitless. Moreover, the

thirty-year retroactive application of the EPACT assess-

ment is particularly egregious and well beyond periods

involved in this Court’s previous cases. See pp. 16-19, infra.

These issues are of both particular and general im-

portance. Most directly, the law at issue here requires

petitioner and other utilities to pay up to $150 million

annually for a fifteen-year period, a total in excess of $2

billion. More generally, the decision below has a poten-

tial effect on any government contractor where the gov-

ernment subsequently decides that it has paid too much

or charged too little. According to the court of appeals,

the government is then free to increase the obligations

of its contracting partners, or presumably to reduce its

own obligations, as long as it structures its later actions

so that they do not fall exclusively on those contracting

partners. That holding marks a significant step backward

from principles recently reaffirmed by the Court in Win-

star. Further review therefore is warranted.

I. THE FEDERAL CIRCUIT IMPROPERLY DETER-

MINED THAT A FEDERAL STATUTORY PROVI-

SION THAT PREDOMINANTLY IMPACTS THE

GOVERNMENT’S CONTRACTING PARTNERS IS

A “PUBLIC AND GENERAL” SOVEREIGN ACT

FOR WHICH THE GOVERNMENT IS IMMUNE

FROM CONTRACTUAL LIABILITY.

In upholding the EPACT assessment, the Federal Cir-

cuit did not dispute that purchasers like Yankee had paid

the full contract prices for the enrichment services. App.

U.S.L.W. 3296 (U.S. Oct. 20, 1997) (No. 97-42) (challenging basis

for imposing retroactive assessments): see also pp. 17-18, infra

(discussing Eastern Enterprises).

, 10

2a. Nor did the court question that the government would

be barred by traditional pringipies of contract law from

simply demanding that its contracting partners pay more

for the previously-sold services. Id. at 18a. Rather, the

court below held that the government was entitled to com-

pel additional payments from its contracting partners to

clean up its own enrichment plants because its action

was protected by the “sovereign acts” doctrine.

Applying a “purpose”-based test—to “determine

whether the Act is designed for the purpose of affecting

or altering the Government’s prior coniracts”’-—the court

found it “[ijmpcrtant[]” that the EPACT assessment,

while falling predominanily on the government’s con-

tracting partners, did not fall exclusively on them. Id. at

9a-10a. The court thus concluded that the law was not

a violation of any contract rights, but merely a “general

tax.” Id. at 12a.

i. The Federal Circuit’s analysis has several serious

flaws. Initially, it wrongiy transforms the sovereign acts

defense into a purpose-based inquiry. Nothing in this

Court’s prior cases declares that inquiry inte legislative

purpose is determinative of whether the government has

breached its prior contracts. Rather, the decisions look

to the effects on the government’s contract obligations

of its later actions. See pp. 11-14, infra. Moreover, as

the Court has frequently recognized, inquiry into legis-

lative purpose often is unreliable. Indeed, in this very

case the Federal Circuit’s focus on legislative “purpose”

led it to attribute dispositive importance to a provision

added simply to accommodate the small secondary market

for SWUs “purchased from” the government under

contracts.

10 See Winstar, 116 S.Ct. at 2468 (plurality opinion) (“Legisla-

tion can almost always be written in a formally general way, and

the want of an identified target is not much security when a meas-

ure’s impact nonetheless falls substantially upon the Government’s

contracting partners.’’).

2. The court of appeals then compounded its error by

wholly distorting the standards for determining whether

later government actions are “public and general” with

only an “incidental” effect on persons contracting with

the government. See Horowitz v. United States, 267 U.S.

458, 461 (1925). In finding that the special assessment

was a “general tax,” because it purportedly did not apply

only to the government’s contracting partners, the court

below essentially ignored the standards set forth in

Winstar.

In the principal opinior. in Winstar, Justice Souter ex-

piained that the key factor in determining whether a gov-

ernmental act is “public and general” for purposes of the

“sovereign acts” defense is whether “a substantial part

of the impact of the Government’s action . . . falls on its

own contractual obligations.” Wéinstar, 116 S.Ct. at 2466

(plurality opinion); see alse id. at 2467 (“the Govern-

ment’s capacities must be ireated as fused when the Gov-

ernment acts in a non-general way”); id. at 2467 (“a

governmental act will not be public and general if it has

the substantial effect of releasing the Government from

its contractual obligations”).

When a statute, like the EPACT provision involved

here, falls predominantly (at least 85%) on the govern-

ment’s contracting partners, a “substantial part of [its]

impact” is plainly upon the government’s contractual

obligations. Justice Souter also explained that in eval-

uating impact, “[t]he 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.” Jd. at

2466. Here the EPACT assessment, by enabling the gov-

ernment to divert its old D&D liabilities away from its

new corporation (USEC), reflects precisely the kind of

“governmental object of self-relief”’ that Justice Souter

described.

The decision below is also at odds with Justice Scalia’s

analysis in Winstar."’ Justice Scalia found that although

generally “contract law imposes upon a party to a con-

tract liability for any impossibility of performance that is

attributable to that party’s own actions,” id. at 2477

(Scalia, J., concurring in the judgment), when the gov-

ernment is a contracting party, a reverse presumption is

more appropriate:

[I]t is reasonable to presume (unless the opposite

clearly appears) that the sovereign does not promise

that none of its multifarious sovereign acts, needful

for the public good, will incidentally disable it or

the other party from performing.

Id. (third emphasis added).

A statute like EPACT that is so substantially directed

at the government’s own contracts easily overcomes this

“reverse presumption.” As Justice Scalia explained, gov-

ernment contractors must necessarily accept that the

government’s “multifarious sovereign acts, needful for the

public good,” may “incidentally disable” performance. Id.

It is completely untenable to suppose, however, that the

government’s contracting partners understand and accept

that the government can release itself from contractual

liability simply by enacting legislation that is principally

directed at its own contracts. Yet that is precisely the

understanding that the Federal Circuit decision attributes

to Yankee (and the other contracting utilities).”

11 Justice Scalia discussed the government’s sovereignty-based de-

fenses primarily in terms of the “unmistakability” doctrine, noting

that the “sovereign acts” doctrine is essentially the same and “is

avoided whenever [the unmistakability doctrine] would be.” 116

S.Ct. at 2478 (Scalia, J., concurring in the judgment).

12 Justice Breyer, who joined Justice Souter’s opinion for the

plurality in Winstar, also separately advocated an approach to un-

mistakability similar to that of Justice Scalia. 116 S.Ct. at 2472

(Breyer, J., concurring).

——=_

3. The Court’s prior cases also make clear that a law

is not “public and general” for purposes of the sovereign

acts defense merely because it affects some persons other

than the government’s contracting partners. In Perry v.

United States, 294 U.S. 330 (1935), the statute voided

gold payment clauses in “every obligation,” public and pri-

vate, id. at 349, and in Lynch v. United States, 292 U.S.

571 (1934), the statute was a sweeping repeal of “all

laws granting or pertaining to” renewable term insurance.

Id. at 575."* In both cases, however, the Court held that

those broad-reaching statutes improperly abrogated fed-

eral contracts—in Perry a government bond and in Lynch

a veteran’s insurance policy. Indeed, in Winstar also, the

statute required deduction of “goodwill” from the regula-

tory capital of all thrifts, whether or not they had a con-

tract with the government. 116 S.Ct. at 2446; see 12

U.S.C. § 1464(t)(1)(A), (9) (A) & (C); see also App.

28a.

The Court’s Contract Clause cases also emphasize that

the proper inquiry is the impact of legislation on govern-

ment contract rights. In Puerto Rico v. Russell & Co.,

315 U.S. 610, 619 (1942), for example, the Court held

that a statutory assessment imposed on the Common-

wealth’s prior contractors “was not a general tax” but

“a clear violation of the obligation of the contracts.” In

Murray v. Charleston, 96 U.S. 432 (1878), the Court

struck down a municipal statute taxing interest paid

on the city’s own debt, noting that “the tax must be upon

all the money of the community, not upon the particular

portion of it which is paid to the public creditors.” Id.

at 446.

4. The panel majority’s determination that “the fixed-

price terms of the contract{[s here] do not constitute an

13 Perry and Lynch were, prior to Winstar, the “two principal

cases of this century holding that the Government may not simply

repudiate its contractual obligations.” 116 S.Ct. at 2478 (Scalia, J.,

concurring in the judgment).

unmistakable promise on behalf of the Government that

it will not impose a general assessment,” App. 20a (em-

phasis added), is entirely beside the point. For reasons

explained above, the EPACT special assessment is not a

“public and general” sovereign act. It follows that the

fixed-price terms of Yankee’s contracts do protect it from

the assessment, without need for any special, more “un-

mistakable,” language. The Federal Circuit panel major-

ity acknowledged as much in a footnote. See App. 21a

n.8.

To require special language in government contracts

protecting against governmental acts that are not “public

and general” would contravene the bedrock principle of

contract law that the intent of the parties to a contract

controls its interpretation. As discussed above, see p. 12,

supra, neither party to a government contract under-

stands that the government may later avoid its contract

obligations through legislation that is squarely directed at

the government’s contracting partners and that falls pre-

dominantly (at least 85%) on them. To imply such an

understanding, as the Federal Circuit in effect did here,

makes the sovereign acts doctrine superfluous and makes

most government contracts illusory.”

5. That the EPACT special assessment violates

Yankee’s fixed-price contract rights does not mean that

14 Lynch and Perry both involved legislation that had a substan-

tial impact on federal contract rights, and in neither case did the

contracts contain—or did the Court even look for or mention—

any special “unmistakable” protective contract language. No such

language is necessary, as Justices Souter and Scalia also recognized

in Winstar, where, as in this case too, the government contravenes

its own contractual obligations through legislation that is not

“public and general.” Conversely, to protect against a legitimately

“public and general” sovereign act, a government contract would

have to contain special “unmistakable” language because the parties

would not ordinarily understand the basic promissory language to

provide such protection.

the government is powerless to raise funds necessary to

decontaminate and decommission its uranium enrichment

plants. To the contrary, as both the trial court and the

Federal Circuit dissent recognized, the government re-

mains free to finance its D&D effort through broader, more

general taxes. App. 31a, 40a. How broad those taxes

must be is not the issue here. Because the impact of this

particular “tax” falls so substantially and directly on

Yankee and the other utilities that were the government's

contracting partners, and because that impact is so clearly

contrary to the reasonable expectations of the contracting

parties, the EPACT special assessment cannot possibly be

considered a “public and general” act for purposes of the

sovereign acts defense.

* * * *

The standard the Federal Circuit has adopted for

determining when legislation is “public and general” turns

the sovereign acts defense on its head. As interpreted by

the court below, the sovereign acts doctrine is no longer

a limited exception to the general principle that federal

contracts are governed by ordinary contract law principles.

Rather, by making application of the doctrine turn on

wuether the later law is coincident with the scope of the

government’s prior obligations, the decision below invites

Congress to enact legislation that directly and deliberately

impairs the rights of a majority of the government's con-

tracting partners. The government, in that event, still can

claim the defense of sovereign acts based on such a sup-

posedly “public and general” law.

Drawing the proper line between the government's

sovereign authority and its contractual obligations is often

complex and difficult. In this case the task is straight-

forward, and the Federal Circuit has patently drawn the

wrong line. A statute that targets and hits the overwhelm-

ing majority of the government’s contracting partners is

not a “public and general” act. The Federal Circuit’s

contrary holding represents a dramatic expansion of the

sovereign acts defense and conflicts with precedent of this

Court.

Il. THE FEDERAL CIRCUIT MISTAKENLY HELD

THAT A THIRTY-YEAR RETROACTIVE MONE-

TARY ASSESSMENT IS JUSTIFIED BY NOTH-

ING MORE THAN THE PAST PURCHASE OF

GOVERNMENT-PRODUCED SERVICES.

In 1992, Congress specifically imposed the EPACT

special assessment based on the number of government-

produced uranium enrichment units that utilities previously

had purchased. 42 U.S.C. § 2297g-1(c), App. 47a. Under

the Federal Circuit’s analysis, the sole justification for the

statute’s retroactive application is that Yankee and other

nuclear utility companies purchased, and therefore were

the “ultimate beneficiar[ies]” of, government-produced

enrichment services. App. 10a."*° Even putting aside the

fact that the utilities already had paid the agreed prices

for any “benefit” they obtained from the enrichment serv-

ices, the mere purchase of a government-produced product

or service is not enough to justify a new monetary assess-

ment that reopens otherwise long-settled transactions.

In prior due process decisions regarding the constitu-

tionality of retroactive legislation, the Court has empha-

sized the importance of a nexus between the liability im-

posed by the statute and the conduct the statute targets—

such as an employment relationship, which justified impos-

ing On mine operators the retroactive requirement to pay

benefits to disabled miners, Usery v. Turner Elkhorn Min-

ing Co., 428 U.S. 1, 19-20 (1976); or participation in a

multi-employer pension plan, which increased the pension

18 EPACT’s effect is clearly retroactive because it imposes a new

liability in respect of past events. See Landgraf v. USI Film Prods.,

511 U.S. 244, 280 (1994).

wpe nanaci cate O aRCRa i ea

0 eee ee nee

plan’s liability and justified imposition of retroactive with-

drawal liability, Concrete Pipe and Prods. v. Construction

Laborers Pension Trust, 508 U.S. 602, 637-38 (1993).

The Court thus has allowed retroactive cost spreading only

to parties whose conduct makes them “responsible” for the

conditions that prompted enactment of the remedial legis-

lation. Indeed, in Turner Eikhorn, the Court pointed out

that any legislative attempt to award retroactive compen-

sation to workers for harm “unrelated to [a coal] oper-

ator’s conduct” would present a different magnitude of

constitutional “difficulties.” 428 U.S. at 24.

The purchase of government-produced uranium enrich-

ment services obviously has some “connection” to the D&D

costs arising from the government’s contamination of its

enrichment plants. But it would be a considerable step to

say that the purchasers can be held legally responsible for

the D&D costs. Those costs, like the underlying conduct

leading to contamination of the plants, were at all times

within the control of the government. The government, as

producer of the uranium enrichment services—not the util-

ities as purchasers of those services—was responsible both

for the plant conditions and for assuring that the prices it

charged were adequate and available to cover the costs of

production.

Whether Yankee’s purchase of government-produced

enrichment services in these circumstances alone is suffi-

cient conduct to support the retroactive EPACT assess-

ment, even under the deferential standards recognized by

the Court, is a question warranting further review. Indeed,

the Court recently granted review in a case that directly

raises the issue of what constitutes a sufficient nexus to

justify legislative imposition of retroactive liability. See

Eastern Enterprises v. Chater, 110 F.3d 150 (1st Cir.

1997), cert. granted sub nom. Eastern Enterprises v.

Appel, 66 U.S.L.W. 3296 (U.S. Oct. 20, 1997) (No. 97-

42). The Court thus has squarely before it the important

question “whether retroactive cost-spreading legislation

violates the Due Process Clause of the Fifth Amendment

as applied to a party whose conduct did not cause the eco-

nomic burden the statute was designed to address.” Reply

Brief in Eastern Enterprises, No. 97-42 at 1-2.

This case is even starker, given the implications for

those who do business with the government. First, unlike

Eastern Enterprises, this case involves the government’s

retroactive rearrangement of its own financial liabilities

rather than private liabilities. Under the decision below,

the government can impose a retroactive monetary assess-

ment (or other retroactive legislation) upon any person

simply because he or she previously has purchased a

government-produced product or service. If that conduct

is sufficient to permit the imposition of retroactive liability

for costs generated by the government in providing the

purchased products or services, as the court below held,

there would seem to be no limit on the government’s

power to reorder responsibility for its own past conduct.

Second, the extraordinary period of retroactivity in the

Energy Policy Act goes far beyond what the Court has

allowed. Indeed, the thirty-year reach-back of this statute

works a particular hardship on petitioner, given that

Yankee ceased operation of its only electricity-generating

facility before EPACT was enacted. See App. 4a. The

Act thus assesses liability for engaging in a business that

petitioner does not even conduct anymore—the kind of

mismatch between past and present activities that is

likely to become more pronounced as the period of retro-

activity lengthens.

Even in upholding retroactive legislation, the Court has

specifically noted that the relevant periods of retroactivity

were quite limited. See, e.g., United States v. Carlton,

512 U.S. 26, 32 (1994) (“Congress acted promptly and

established only a modest period of retroactivity [slightly

greater than one year]”); Pension Benefit Guaranty Corp.

PE Ae on eae a ee Se oe Ee

vy. R.A. Gray & Co., 467 U.S. 717, 731 (1984) (“Con-

gress advanced the effective date chosen so that it would

encompass only that retroactive time period [five months]

that Congress believed would be necessary to accomplish

its purposes”).’* Where, as here, the statute reaches back

far beyond a “modest period of retroactivity,” the power

of Congress to reorder responsibility for completed trans-

actions or events should be viewed with skepticism. See

United States v. Carlton, 512 U.S. at 38 (O’Connor, J.,

concurring in the judgment) (period of retroactivity

longer than a year “would raise . . . serious constitutional

questions” ).

Ill. THE FEDERAL CIRCUIT DECISION FUNDAMEN-

TALLY ALTERS THE PROPER BALANCE BE-

TWEEN THE GOVERNMENT'S SOVEREIGN AU-

THORITY AND THE CONTRACTUAL AND FIFTH

AMENDMENT RIGHTS OF THOSE WITH WHOM

IT DOES BUSINESS.

Further consideration of the significant issues presented

in this case is of special importance for several additional

reasons. First, the Federal Circuit's decision directly

affects approximately thirty similar cases currently stayed

in the Court of Federal Claims and awaiting the outcome

of this case. The pending cases collectively involve more

than $2 billion in special assessment amounts to be paid

until the year 2007.

Second, the decision below also will have a more gen-

eral impact because it is the first interpretation of Win-

star by the only court of appeals with special jurisdiction

over Tucker Act claims. The extreme views of the Fed-

16 See also United States v. Darusmont, 449 U.S. 292, 296-97

(1981) (per curiam) (the passage of retroactive legislation “con-

fined to short and limited periods required by the practicalities of

producing national legislation” is a “customary congressional prac-

tice”); cf. Nichols v. Coolidge, 274 U.S. 531 (1927) (invalidating

tax legislation reaching back twelve years).

eral Circuit panel majority—regarding both the sovereign

acts defense and Congress’ retroactive powers—should at

least be reviewed before they are applied more generally

by the Federal Circuit and the Court of Federal Claims,

the courts charged with responsibility over Tucker Act

cases, and by other lower courts that may also be seeking

authoritative guidance on the meaning of Winstar.

Finally, this case presents contract and constitutional

issues significantly affecting all who do business with the

federal government (and, by extension, with state and

local governments as well). To the extent the decision

below invites the government to retroactively rewrite the

financial or other terms of its own contracts, the decision

impairs the government’s reliability as a contracting part-

ner. Contractors will be deterred from dealing with the

government under such circumstances. At a minimum,

the decision below will “undermin[e] the Government’s

credibility at the bargaining table and increas[e] the cost

of its engagements,” results that are contrary to “the Gov-

ernment’s own long-run interest as a reliable contracting

partner in the myriad workaday transaction of its

agencies.” Winstar, 116 S.Ct. at 2459 (plurality opin-

ion). The court of appeals’ approval of the thirty-year

retroactivity of the EPACT assessment also has far-

reaching implications, making it difficult to discern any

limit on the power of the government to attach new legal

consequences to remote historic events.

The consequences of the Federal Circuit’s decision are

clear and alarming. Further review is therefore war-

ranted.

CONCLUSION

For all these reasons, the petition for a writ of certiorari

should be granted.’

Respectfully submitted,

WILLIAM E. RIETHLE JERRY STOUCK *

Corporate Counsel CATHERINE R. BAUMER

YANKEE ATOMIC DAVID R. LIPSON

ELECTRIC COMPANY Spriccs & HOLLINGSWORTH

580 Main Street 1350 I Street, N.W.

Bolton, MA 01740 Ninth Floor

4 (508) 779-6711 Washington, D.C. 20005

4 (202) 898-5800

Attorneys for Petitioner

Yankee Atomic Electric

Company

November 12, 1997 * Counsel of Record

esis tials st Sin Tae}

17 Alternatively, if the Court elects not to grant plenary review

in this case, Yankee requests that the Court defer ruling on its

petition pending disposition of Eastern Enterprises, and then re-

. mand this case to the Federal Circuit for consideration in light of

: that decision. See Lawrence v. Chater, 516 U.S. 193 (1996).

APPENDICES

APPENDIX A

UNITED STATES COURT OF APPEALS

FEDERAL CIRCUIT

Nos. 96-5021, 96-5025

YANKEE ATOMIC ELECTRIC COMPANY,

Plaintiff /Cross-A ppellant,

Vv.

THE UNITED STATES,

Defendant-A ppellant.

May 6, 1997

Before MAYER, LOURIE, and CLEVENGER, Cir-

cuit Judges.

Opinion of the court filed by Circuit Judge CLEVEN-

GER. Dissenting opinion filed by Circuit Judge MAYER.

CLEVENGER, Circuit Judge.

This case requires us to decide whether, in light of

prior contracts specifying the price to be paid for uranium

enrichment services, the Government may impose upon

domestic utilities a special assessment to aid in funding

the clean-up costs associated with the facilities that pro-

vided those enrichment services.

The United States appeals the decision of the United

States Court of Federal Claims, Yankee Atomic Electric

Co. v. United States, 33 Fed. Cl. 580 (1995), granting

summary judgment to Yankee Atomic Electric Company

(Yankee Atomic). In that decision, the court deter-

mined that the assessment imposed upon Yankee Atomic

to fund clean-up costs constitutes an unlawful exaction

because it violates the Government’s earlier contractual

agreements to supply enriched uranium at fixed prices.

We conclude that the assessment was lawful and therefore

reverse.

As both parties acknowledge, the salient facts are not

in dispute. Yankee Atomic was organized in 1954 by a

number of existing utility companies in an effort to par-

ticipate in the use of atomic energy as an alternative-

source fuel for generating electricity. Yankee Atomic pro-

duced electricity using nuclear fuels and sold the resulting

electricity to the organizing utilities, which, in turn, sold

it to retail customers.

Yankee Atomic’s operations required an enriched form

of uranium, which was produced by separating useful

isotopes of uranium from other isotopes. Beginning in

1963, Yankee Atomic purchased the uranium enrichment

(or separation) services from the Government through

a series of contracts. Those services were provided at

enrichment plants operated first by the Atomic Energy

Commission (AEC or Commission) and later by the

Energy Research and Development Administration and

the Department of Energy (all collectively DOE). AIl-

though these contracts varied somewhat from one to

another, they each stated that the price paid by Yankee

Atomic for the enrichment services would be based on

“established Commission pricing policy,” which was de-

fined. as the price in effect at the time the service was

provided. There is no dispute that the Government ful-

filled its contractual obligation to provide the enrichment

services, and that Yankee Atomic fulfilled its obligation

to pay the price in effect at that time.

In the late 1980s, Congress determined that it had to

restructure the Government’s uranium enrichment services

in order to remain competitive with enrichment services

aT Peet. eee

Gi aaa ha At nae Sti te RS

provided by other parties. It did so by creating a new,

for-profit, governmental corporation called the United

States Enrichment Corporation. At the same time, Con-

gress realized that there would be large costs associated

with decontaminating and decommissioning the facilities

that had previously been used to provide enrichment serv-

ices. The Department of Energy 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. H.R.Rep. No. 474, pt. VIII, at 77

(1992), reprinted in 1992 U.S.C.C.A.N. 2282, 2295.

Because this decontamination and decommissioning fiscal

problem was not recognized until the 1980s, the prices

charged in the Government's past uranium enrichment

contracts had not accounted for the problem.

This clean-up problem was one of many energy-related

issues that Congress addressed in the Energy Policy Act

of 1992 (Energy Policy Act or Act). The Act estab-

lishes an account to be known as the Uranium Enrichment

Decontamination and Decommissioning Fund (Fund),

which, over a 15-year period, would accumulate the

monies required to clean up the old uranium enrichment

plants. The Act provides that the annual deposits of $480

million (adjusted for inflation), will come from two

sources: (i) up to $150 million is to be collected as a

special assessment from domestic utility companies; and

(ii) the balance, at least $330 million, is to come from

public funds appropriated by Congress.

The Act further provides that each utility is responsible

for a pro-rata share of the total annual assessment based

on the percentage of uranium enrichment work units it

previously purchased from the DOE relative to the total

number of work units previously produced by the DOE.

The Act states that a utility is considered to have pur-

chased a work unit from the DOE if the work unit was

originally produced by DOE, even if the utility actually

purchased it from another source. Similarly, a utility is

not considered to have purchased a work unit from the

DOE if it resold that work unit to another utility.’ In

sum, the Act imposes the assessment upon whichever

utility company eventually uses the enrichment services.

Following the passage of the Act in October 1992, the

DOE sought to assess Yankee Atomic’s share of the an-

nual special assessment. Yankee Atomic responded by

arguing to the DOE that it should be exempted from the

assessment because its facilities had shut down before

passage of the Act. When the DOE rejected this argu-

ment, Yankee Atomic paid approximately $3 million pur-

suant to three annual assessments, and filed a lawsuit in

the Court of Federal Claims seeking recovery of those

payments.

Upon cross-motions for summary judgment, the Court

of Federal Claims ruled in favor of Yankee Atomic. The

court rejected the Government’s contention that the spe-

cial assessment was a lawful exercise of Congress’s taxing

power under the sovereign acts doctrine. The court ex-

plained that although the sovereign acts doctrine would

have some force if the case involved a general tax that

fell on all utilities alike, it had no impact in the present

case which involves an assessment that “reaches only those

utility companies that previously had contracted with the

Government for the purchase of uranium enrichment serv-

ices.” Accordingly, the court viewed the special assess-

ment as a unilateral retroactive increase in the price pre-

viously charged by the Government for its uranium en-

richment services.

1 These provisions were designed to take into account the second-

ary market that existed for uranium enrichment services, wherein

some utilities purchased uranium enrichment work units from the

Government and resold them to other utilities. Yankee Atomic pur-

chased a portion of its uranium enrichment services through this

secondary market, but does not assert any breach of contract, taking,

or unlawful exaction claim concerning its monetary liability under

the Act for those purchases.

The court explained that such a retroactive price in-

crease would constitute an unlawful exaction in view of

the prior contracts between the Government and Yankee

Atomic. Because those prior contracts specified a fixed

price for the uranium enrichment services, the “economic

benefit which [Yankee Atomic] gained by virtue of the

Government’s promise, being a benefit enforceable at law,

thus became a property interest that fell beyond the reach

of the Government’s power to take away.” 33 Fed. Cl.

at 585.

Based on this conclusion, the court granted Yankee

Atomic’s motion for summary judgment without address-

ing Yankee Atomic’s argument that it was exempt from

the assessment because its facilities had closed before

passage of the Act. We review the Government’s appeal,

and Yankee Atomic’s cross-appeal, from the judgment of

the Court of Federal Claims pursuant to 28 U.S.C.

§ 1295(a)(3) (1994).

The decision of the Court of Federal Claims is driven

by its characterization of the special assessment as a retro-

active price increase rather than an exercise of the sover-

eign’s taxing power, and the parties’ dispute over this

characterization frames the dispositive issue of this appeal.

The Government’s principal argument is that the special

assessment is entirely distinct from the prior contracts be-

tween the DOE and utility companies such as Yankee

Atomic. The Government notes that those earlier con-

tracts concerned uranium enrichment, whereas this assess-

ment concerns decontamination and decommissioning. As

a result, the Government asserts that the assessment can-

not constitute a breach of those earlier contracts unless

those contracts contained an express provision that pre-

cluded the Government from imposing an assessment to

fund decontamination and decommissioning costs.

Yankee Atomic disagrees with the Government’s char-

acterization of the assessment and contends that it is di-

rectly related to the earlier contracts. Yankee Atomic

contends that the fixed-price nature of those contracts

expressly limited its obligation to the price already paid,

and shifted the risk of any additional costs (including de-

contamination and decommissioning costs) onto the Gov-

ernment. Yankee Atomic argues that the assessment

breaches those contracts by, in effect, retroactively in-

creasing the price that it must pay for the previously

supplied uranium enrichment services.”

Resolution of this disputed characterization requires us

to consider and apply two related bodies of law: the sov-

ereign acts doctrine and the unmistakability doctrine. We

consider each in turn.

The sovereign acts doctrine stems from a series of deci-

sions by the Court of Claims, and was first recognized by

the United States Supreme Court in Horowitz v. United

States, 267 U.S. 458, 45 S.Ct. 344, 69 L.Ed. 736 (1925).

In that case, Horowitz submitted a bid to buy certain

Habutai silk offered for sale by the Government. The

Government agreed that Horowitz would be given the

Opportunity to re-sell the silk before paying the purchase

price, and agreed to ship the silk within a day or two after

shipping instructions were given. Id. at 459, 45 S.Ct. at

344, Horowitz sold the silk to a silk company, paid the

balance of the purchase price, and requested that the silk

* Throughout its briefs, Yankee Atomic contends that the special

assessment constitutes a breach of its contracts with the Govern-

ment. Technically, however, this does not appear to be a case involv-

ing a breach of contract. Typically, a contract breach occurs while

the contract is being performed, whereas the contracts in the present

case have been fully performed by both parties. This appears to

have been the view of the Court of Federal Claims, as indicated by

the notable absence in its opinion of any reference to breach of

contract. This distinction does not affect our decision, however.

Regardless of whether the situation is characterized as a breach of

contract, an unlawful taking, or an unlawful exaction, the arguments

stem from Yankee Atomic’s prior contracts with the Government.

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be shipped to the silk company at once. Because of a

governmental embargo placed on the shipment of silk

by freight, however, the silk was not shipped for several

weeks. By the time it arrived, the price of silk had

dropped significantly, and the consignee refused to accept

delivery. As a result, Horowitz was forced to sell the silk

at a loss. Id. at 460, 45 S.Ct. at 344.

Horowitz sued the United States, contending that the

embargo breached the valid contract he had for sale and

shipment of the silk. The United States Supreme Court

rejected this argument because “[i]t has long been held

by the Court of Claims that the United States when sued

as a contractor cannot be held liable for an obstruction

to the performance of the particular contract resulting

from its public and general acts as a sovereign.” Id. at

461, 45 S.Ct. at 344. The Court adopted the reasoning

of the Court of Claims:

The two characters which the government possesses

as a contractor and as a sovereign cannot be thus

fused; nor can the United States while sued in the

one character be made liable in damages for their

acts done in the other. Whatever acts the govern-

ment 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 to be held liable

only within the same limits that any other defendant

would be in any other court. Though their sovereign

acts performed for the general good may work injury

to some private contractors, such parties gain nothing

by having the United States as their defendants.

Id. (quoting Jones v. United States, 1 Ct.Cl. 383, 384

(1865)) (emphasis added).°

8 The Court of Claims expressed this same philosophy in O’Neill

v. United States, 231 Ct.Cl. 823, 826 (1982), as follows:

The Supreme Court recently discussed Horowitz, and

the sovereign acts doctrine in general, in United States v.

Winstar Corp., US. , 116 S.Ct. 2432, 135

L.Ed.2d 964 (1996).* In Wéinstar, the plurality ex-

plained that the doctrine is designed to distinguish between

the Government's twin roles as contractor and sovereign.

Id. at , 116 S.Ct. at 2463. When the Government

enters into a contract, “its rights and duties therein are

governed generally by the law applicable to contracts

between private individuals.” Jd. at - , 116

S.Ct. at 2464-65. The Government-as-contractor cannot

exercise the power of its twin, the Government-as-sovereign,

for the purpose of altering, modifying, obstructing or

violating the particular-contracts into which it had en-

tered with private parties. Such action would give the

Government-as-contractor powers that private contracting

parties lack.

From its earliest days ... application of the sovereign act/s]

doctrine has proceeded from the recognition that in governing

the country, the Government’s actions, otherwise legal, will

occasionally incidentally impair the performance of contracts.

Were those contracts exclusively between private parties, the

party hurt by such governing action could not claim compensa-

tion from the other party for the governing action. Given the

large number of contracts the Government enters, its contracts

will sometimes be affected by those same governing acts. The

policy underlying the sovereign acts] doctrine is that in those

circumstances, the Government in its contracting role, like its

private counterpart, should not incur liability for its act done

in the governing role.

* The sovereign acts doctrine has also been cited in several other

cases since Horowitz. See, e.g., Merrion v. Jicarilla Apache Tribe,

455 U.S. 130, 145-46, 102 S.Ct. 894, 905-06, 71 L.Ed.2d 21 (1982)

(discussing that the petitioners confuse the Tribe’s role as commer-

cial partner with its role as sovereign) ; Atlas Corp. v. United States,

895 F.2d 745, 754 (Fed.Cir.1990) (explaining that the Uranium Mill

Tailings Radiation Control Act was a sovereign act undertaken for

the public good and, therefore, could not form the basis for a

party’s breach of contract claim).

On the other hand, the plurality explained, the Govern-

ment-as-sovereign must remain free to exercise its powers.

For this reason, the early Court of Claims cases “thought

it ‘grave error’ to suppose that ‘general enactments of Con-

gress are to be construed as evasions of [the plaintiff's]

particular contract.’” Jd. at , 116 S.Ct. at 2464

(quoting Deming v. United States, | Ct.Cl. 190, 191,

1865 WL 2004 (1865)). The sovereign acts doctrine at-

tempts to “balance[] the Government’s need for freedom

to legislate with its obligation to honor its contracts by

asking whether the sovereign act is properly attributable

to the Government as contractor.” ° Id. at , 116 S.Ct.

at 2465. Thus, it is not a hard and fast rule, but rather

a case-specific inquiry that focuses on the scope of the leg-

islation in an effort to determine whether, on balance, that

legislation was designed to target prior governmental

contracts.

Under the sovereign acts doctrine, therefore, we must

decide whether the Government, in enacting the relevant

provisions of the Energy Policy Act of 1992, was (i) act-

ing for the purpose of retroactively increasing the price of

its earlier contracts with Yankee Atomic (i.e., the legisla-

tion was passed for the benefit of the Government-as-con-

tractor) or (ii) acting for the purpose of solving the prob-

lem of decontamination and decommissioning of uranium

enrichment facilities (i.e., the legislation was passed for

the benefit of the public). We conclude it was the latter.

As explained above, we must begin by examining the

scope of the Energy Policy Act: only then can we deter-

mine whether the Act is designed with the purpose of

5 The concurring and dissenting justices agreed with this general

statement of the doctrine. Under the facts of Winstar, see infra

section IV.A, only three justices concluded that the congressional

act was not a sovereign one (i.e., the act was attributable to the

Government-as-contractor). The remaining justices either viewed

the act as a sovereign one or decided the case on another basis.

10a

affecting or altering the Government’s prior contracts. The

Energy Policy Act requires contribution to the Fund from

any domestic utility that purchased separative work units

from the DOE before the Act’s passage. 42 U.S.C.

§ 2297g-1(c) (1994). Importantly, however, the scope

of the Act is not coincident with those domestic utilities

that had previously entered into contracts with the DOE

for uranium enrichment services, because the Act does not

require contribution from a utility that contracted with the

DOE if that utility re-sold the purchased services to an-

other utility. See 42 U.S.C. § 2297g-1(c)(2). In con-

trast, the Act does require contribution from any utility

that did not have a contract with the DOE but nonetheless

benefited from the DOE’s services by purchasing through

the secondary market. See 42 U.S.C. § 2297g-1(c)(1).

Thus, some utility/Government contracts are not em-

braced by the Act, while some purchases from private

entities are covered. The key is whether the purchaser was

the ultimate beneficiary of the DOE’s services.

The reach of the Act, therefore, makes clear that Con-

gress was not focused on a retroactive increase in the price

of the Government’s prior contractual agreements. Rather

than targeting those utility companies that had prior con-

tracts with the Government, the Act targets whichever

utility eventually used and benefited from the DOE’s en-

richment services. Congress’s main purpose was to spread

the costs of a problem that it realized only after the con-

tracts had been performed. Cf. Atlas Corp., 895 F.2d at

748 (noting that the dangers and clean-up costs associated

with uranium milling operations were not fully recognized

until the late 1970s). It did so by dividing the costs be-

tween: (i) the Government, which was responsible for at

least $330 million per year to be raised through general

appropriations, and (ii) those domestic utilities that bene-

fited from the DOE’s uranium enrichment services. Any

impact that this approach may have on those utilities with

which the Government had prior contracts is “merely. in-

lla

cidental to the accomplishment of a broader governmental

objective.” See Winstar, U.S. at ——, 116 S.Ct. at

2466.

In characterizing the essence of the Act, Yankee Atomic

focuses only on the provisions that impact those utilities

that contracted with the Government and that themselves

used the enrichment services. While it is true that Yankee

Atomic has no quarrel with the Government over its liabil-

ity on consumption of enrichment services supplied by non-

governmental entities through the secondary merket, that

fact cannot render irrelevant the Act’s prewsons that

reach even those utilities that did not contract with the

Government. When construing an act of Congress, and

especially when determining the essential characteristic of

a particular statute, we must observe and understand the

statute as a whole. See Crandon v. United States, 494

US. 152, 158, 110 S.Ct. 997, 1001, 108 L.Ed.2d 132

(1990) (“In determining the meaning of the statute, we

look not only to the particular statutory language, but to

the design of the statute as a whole and to its object and

policy.”); Richards v. United States, 369 U.S. 1, 11, 82

S.Ct. 585, 591-92, 7 L.Ed.2d 492 (1962) (“We believe

it fundamental that a section of a statute should not be

read in isolation from the context of the whole Act.”);

In re Nantucket, Inc., 677 F.2d 95, 98 (C.C.P.A.1982)

(“Each part or section of a statute should be construed in

connection with every other part or section so as to pro-

duce a harmonious whole, and it is not proper to confine

interpretation to the one section to be construed.” (cita-

tion omitted) ). Statutory provisions that are relevant, or

as here, controlling, to our interpretation cannot be ignored

simply because they are not dispositive to the facts before

us.

Similarly, the opinion of the Court of Federal Claims

seems to have been mistaken in reasoning: “The [sov-

ereign acts doctrine] argument would have some force if

we were dealing with a general tax that fell on all utilities

12a

alike. That, however, is not our case. Rather, this specia!

assessment reaches only those utility companies that previ-

ously had contracted with the Government for the pur-

chase of uranium enrichment services.” 33 Fed. Cl. at

585 (emphasis added). As explained above, the special

assessment does not reach only those utility companies

that previously contracted with the Government; it also

reaches those utilities that purchased the services through

the secondary market but had no contracts with the Gov-

ernment. Ironically, then, the assessment appears to be

very similar to what the Court of Federal Claims thought

it was not: a general tax that falls proportionally on all

utilities that benefited from the DOE’s uranium enrich-

ment services.°

The broad reach of the Energy Policy Act also distin-

guishes the present case from two cases upon which

®* To the extent that the Energy Policy Act is designed to spread

the costs of a societal problem, it is not unlike other instances where

Congress has enacted legislation to spread societal costs. One such

example involves the costs of cleaning up hazardous waste under

the Comprehensive Environmental Response, Compensation, and

Liability Act of 1980 (CERCLA), 42 U.S.C. § 9601 et. seq. (1994).

See, e.g., United States v. Northeastern Pharmaceutical & Chemical

Co., 810 F.2d 726 (8th Cir.1986). The defendants in those lawsuits

have frequently challenged the retroactive application of CERCLA

as a violation of their due process rights and as an unconstitutional

taking. The courts, however, have rejected those arguments. See

id at 734 (rejecting due process challenge because “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’).

Yankee Atomic contends that the CERCLA cases, and others like

them, are inapposite because they involve the impact of legislation

on private parties and therefore do not implicate the Government’s

self-interest. See Perry v. United States, 294 U.S. 330, 350-51, 55

S.Ct. 432, 434-35, 79 L.Ed. 912 (1935). We cite the CERCLA cases

not for their insight as to Congress's motives in enacting the Energy

Policy Act, but rather for their general proposition that the costs

of large, unrecognized societal problems are frequently spread

among those who benefited from the source of the problem.

ale) re ee

Sohlaendie rk

Baste b vi mar, pat

13a

Yankee Atomic and the Court of Federal Claims relied:

Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78

L.Ed. 1434 (1934), and Perry v. United States, 294 US.

330, 55 S.Ct. 432, 79 L.Ed. 912 (1935).

In Lynch, the plaintiffs had entered into agreements

with the United States for War Risk Insurance and had

paid the prescribed monthly premiums. 292 U.S. at 576,

54 S.Ct. at 842. Congress subsequently enacted the Econ-

omy Act which included a clause stating: “All laws grant-

ing or pertaining to yearly renewable term insurance are

hereby repealed.” /d. at 575, 54 S.Ct. at 842. The Su-

preme Court held the legislation unlawful without dis-

cussing the sovereign acts doctrine, which is not surprising

given that the clause was clearly directed to abrogating

past war risk insurance contracts for reasons of economy.

As the Court stated: “No doubt there was in March,

1933, great need of economy. ... But Congress was with-

out power to reduce expenditures by abrogating contract-

ual obligations of the United States.” Jd. at 580, 54 S.Ct.

at 844.

In Perry, the plaintiff owned a $10,000 government

bond which, when redeemed, required the United States to

pay in “gold coin of the present standard of value.” 294

US. at 346-47, 55 S.Ct. at 433. Congress later passed a

joint resolution which stated that payment of obligations

in gold was against public policy and, therefore, all obliga-

tions shall be discharged by payment in currency that is

legal tender. Id. at 349, 55 S.Ct. at 434. The enactment

specifically stated that “provisions for payment in gold,

‘contained in any law authorizing obligations to be issued

by or under authority of the United States,’ were repealed.”

Id. Based on this clear expression of an intention to abro-

gate past contracts, the Court again held the act unlawful

without discussing the sovereign acts doctrine.

In sum, Lynch and Perry both involved situations where

the congressional act made clear that its purpose was, at

14a

least in part, to abrogate past public contracts. The

Energy Policy Act, in contrast, reveals no such purpose

of targeting past contracts. Instead, the Act taxes all bene-

ficiaries of the DOE’s uranium enrichment services.

Given the focus of the relevant provisions of the Energy

Policy Act, we conclude that it constitutes a general exer-

cise of Congress’s taxing power for the purpose of address-

ing a societal problem rather than an act that retroactively

increases the price charged to contracting parties for ura-

nium enrichment services. This conclusion does not end

our inquiry, however. We must further consider whether

the Government, by contract with Yankee Atomic, has

surrendered the right to exercise this sovereign power “in

terms which admit of no other reasonable interpretation.”

Merrion, 455 U.S. at 148, 102 S.Ct. at 907. This requires

us to consider and apply the unmistakability doctrine.

As the Supreme Court plurality recently explained in

Winstar, the modern unmistakability doctrine “marks the

point of intersection between two fundamental constitu-

tional concepts.” Wéainstar, USS. at , 116 S.Ct.

at 2453. One concept, which developed in England, is

that of parliamentary sovereignty. This concept posits that

because the legislature has absolute authority and acknowl-

edges no superior power, it cannot be bound by acts of a

prior legislature. Jd. The other concept, which developed

in the United States, is that legislative power may be lim-

ited under certain circumstances. Unlike the absolute

power enjoyed by the Parliament in England, the legisla-

ture in the United States is “subject to the overriding dic-

tates of the Constitution and the obligations that it author-

izes.” Id. at - , 116 S.Ct. at 2453-54. One such

limitation is that embodied in the Contracts Clause, which

prohibits a state from passing any law that impairs the

obligation of contracts. See U.S. Const., Art. I, § 10, cl. 1.

PC a eye Le Ne TNS ie ern ae TE See <i POW tee

SPY APES FP AS.

15a

Although the Contracts Clause does not apply to acts of

the United States, “it is clear that the National Govern-

ment has some capacity to make agreements binding future

Congresses by creating vested rights. . . . The extent of

that capacity, to be sure, remains somewhat obscure.”

W instar, U.S. at , 116 S.Ct. at 2455 (citations

omitted).

The modern unmistakability doctrine is a Canon of con-

struction that attempts to balance these two somewhat

competing concepts by allowing the Government to make

agreements that bind future Congresses, but only if those

contracts contain an unmistakable promise. Thus, the

plurality in Winstar summarized the almost 160-year his-

tory of the unmistakability doctrine as follows:

[A] contract with a sovereign government will not be

read to include an unstated term exempting the other

contracting party from the application of a subse-

quent sovereign act (including an act of Congress),

nor will an ambiguous term of a grant or contract

be construed as a conveyance or surrender of sov-

ereign power.

Id. at , 116 S.Ct. at 2456."

7The remaining justices in Winstar essentially agreed with this

formulation of the doctrine, although they disagreed with its appli-

cation to the facts of that case. The two dissenting justices viewed

the doctrine to embody the notion that “a waiver of sovereign

authority will not be implied, but instead must be surrendered in

unmistakable terms.” Jd. at , 116 S.Ct. at 2480 (Rehnquist, J.,

dissenting). The three concurring justices stated the doctrine as

follows:

[I]t is reasonable to presume (unless the opposite clearly

appears) that the sovereign does not promise that none of its

multifarious sovereign acts, needful for the public good, will

incidentally disable it or the other party from performing one

of the promised acts. ... Governments do not ordinarily agree

to curtail their sovereign or legislative powers, and contracts

16a

In Winstar, the justices were divided as to whether or

not the unmistakability doctrine was even applicable, given

the facts of that case. Therefore, we next address the issue

of whether the doctrine is applicable under the facts of the

present case.

The plurality of justices in Winstar decided that the un-

mistakability doctrine was not applicable. Wéinstar in-

volved the fallout from the crisis involving the savings and

loan indusiry in the late 1970s and early 1980s. The Gov-

ernment induced healthy thrifts to merge with ailing ones

by agreeing to provide favorable regulatory treatment,

which would allow the healthy thrifts to count towards

their capitalization requirements certain “supervisory good-

will” generated by the mergers. Wéinstar, U.S. at

- , 116 S.Ct. at 2442-43. This scheme, however,

was ultimately unsuccessful in resolving the thrift industry

crisis. As a result, Congress enacted the Financial Institu-

tions Reform, Recovery, and Enforcement Act of 1989

(FIRREA), which required that all thrift institutions no

longer use “supervisory goodwill” to meet their capitaliza-

tion requirements. This immediately caused several thrifts

to fall out of compliance with capitalization requirements,

thereby making them subject to seizure by thrift regula-

tors. Id. at , 116 S.Ct. at 2446. The thrifts filed suit

claiming breach of contract.

After reciting the history of the unmistakability doc-

trine, the Winstar plurality stated:

The cases extending back into the 19th-century thus

stand for a rule that applies when the Government

is subject either to a claim that its contract has sur-

rendered a sovereign power (e.g., to tax or control

must be interpreted in a common-sense way against that back-

ground understanding.

Id. at , 116 S.Ct. at 2477 (Scalia, J., concurring).

1h So ari cet da A WAS NS GAL Bi AEE a Ie 8) SAE ORRIN

Pee es te

PO eee

17a

navigation), or to a claim that cannot be recognized

without creating an exemption from the exercise of

such a power. . . . The application of the doctrine

thus turns on whether enforcement of the contractual

obligation would block the exercise of a sovereign

power of the Government.

Id. at - , 116 S.Ct. at 2456-57 (footnote

omitted; emphasis added). The plurality held that the

doctrine was inapplicable because the contracts with the

thrifts did not preclude the Government from later exer-

cising its sovereign powers. Instead, the contracts merely

shifted the risk of loss onto the Government, thereby re-

quiring it to “indemnify its contracting partners against

financial losses arising from regulatory change.” /d. at

, 116 S.Ct. at 2461.

Five justices disagreed with the plurality’s conclusion

that the unmistakability doctrine was not available simply

because the contracts were risk-shifting agreements. The

three concurring justices pointed out that the plurality’s

approach was inconsistent with precedent, which had “not

made the availability of these sovereign defenses (as op-

posed to their validity on the merits) depend upon the na-

ture of the contract at issue.” J/d. at , 116 S.Ct. at

2476. Moreover, “[v]irtually every contract operates, not

as a guarantee of particular future conduct, but as an

assumption of liability in the event of nonperformance.”

Id. Despite this difference, these three justices concurred

because they believed that the contracts contained unmis-

takable promises to continue the favorable regulatory

treatment. 7d. at - , 116 S.Ct. at 2477-78. The

two dissenting justices concluded that the doctrine applied

and that the contracts did not contain an unmistakable

promise against future regulatory change.

Based on the reasoning contained in the Winstar opin-

ions, we conclude that the unmistakability doctrine applies

in the present case. This conclusion respects the views of

18a

the five justices who stated that the application of the

doctrine is unrelated to the nature of the underlying con-

tracts. In addition, our conclusion is in harmony with the

views of the plurality justices. To be sure, the contracts

at issue in the present case may be viewed as risk-shifting

agreements, similar to those that the Wéinstar plurality

found not to implicate the unmistakability doctrine. As

mentioned above, the contracts at issue are fixed-price con-

tracts, and the Supreme Court has held that “[w]here one

agrees to do, for a fixed sum, a thing possible to be per-

formed, he will not be excused or become entitled to addi-

tionai compensation, because unforeseen difficulties are

encountered.” United States v. Spearin, 248 U.S. 132,

136, 39 S.Ct. 59, 61, 63 L.Ed. 166 (1918). Similarly,

our predecessor court has stated that “the [seller] in a

fixed-price contract assumes the risk of unexpected costs.

In firm fixed-price contracts, risks fall on the [seller], and

the [seller] takes account of this through his prices.” /TT

Arctic Servs., Inc. v. United States, 207 Ct. Cl. 743, 524

F.2d 680, 691 (1975) (citations omitted).

Importantly, however, the plurality also expressly stated

that application of the unmistakability doctrine turns on

whether enforcement of the contractual obligation would

effectively block the exercise of a sovereign power of the

Government. Wéinstar, U.S. at - ae eo

S.Ct. at 2457-58. As explained above, the assessment at

issue in the present case is a general, sovereign act. Al-

though Yankee Atomic seeks money damages, its argu-

ment would effectively block the exercise of this sovereign

power to tax, for if Yankee Atomic were to prevail, the -

Government would be required to refund the entire amount

assessed. This is akin to a tax rebate, which even the

plurality seemed to recognize as a block to the exercise of

sovereign power. See id. at , 116 S.Ct. at 2458

(“Granting a rebate, like enjoining enforcement, would

simply block the exercise of the taxing power.”).

en Sig oR

Licelne S astinls aen Rs RC

tise ioe

19a

Having decided that the unmistakability doctrine ap-

plies, we next address the merits of the arguments on that

issue. This requires us to decide whether the contracts

between Yankee Atomic and the Government unmistak-

ably precluded the Government from subsequently exer-

cising its sovereign power to assess a tax. We conclude

that no such promise existed in the contracts.

We begin by noting that none of the contracts expressly

states that Yankee Atomic will be immune from any future

assessments made by the Government upon the industry as

a whole. Yankee Atomic acknowledges the lack of any

such express statement, but instead relies on the fixed-

price nature of the contract. Yankee Atomic argues that

“Itthe fixed-price contract terms are hardly implicit, and

they forbid a future price increase.” Although the con-

tracts include fixed-price terms, we must determine whether

those terms unmistakably encompassed future taxes or

assessments.

To determine the scope of those fixed price terms, we

look to the language of the contracts. Although the lan-

guage of the several contracts varies somewhat, the con-

tract executed on March 9, 1971, entitled “Agreement For

Furnishing Uranium Enrichment Services” is representa-

tive. Article III of that agreement provides, in part:

1. The charges to be paid to the Commission for

enriching services provided to the Customer here-

under shall be determined in accordance with the es-

tablished Commission pricing policy for such services;

provided, hcwever, that the unit charge for enriching

services during the term of this agreement shall in no

event exceed a ceiling charge of $30.00 (subject to

possible adjustment [for labor and power costs] pur-

suant to Section 3 of this article) per Kg unit of

20a

separative work for separation of U-235 from U-238,

as defined in the established Commission pricing

policy.

from examining the contracts, we decide that the fixed-

price terms of the contract do not constitute an unmistak-

able promise on behalf of the Government that it will not

impose a general assessment upon all utility companies

that benefited from the DOE’s uranium enrichment ser-

vices. The language of the contract is directed at the

prices charged for providing enriched uranium to Yankee

Atomic, and not to any decontamination or decommis-

sioning costs which may subsequently arise. Thus, the

contract states that “[t]he charges [are] to be paid to the

Commission for enriching services provided,” and sets a

ceiling price of $30 per Kg unit “for separation of U-235

from U-238.”

The Government complied with this provision by pro-

viding the enriched uranium at the agreed-upon price. At

that point, the contract was fully performed by both par-

ties. This gave Yankee Atomic a vested contract right

which would then bar the Government from deliberately

attempting to charge more for performance of those con-

tracts. As explained above in the sovereign acts doctrine

discussion, however, the subsequent assessment is not a

deliberate retroactive increase in the price of those con-

tracts. Instead, it is the Government's way of spreading

the costs of the later discovered decontamination and de-

commissioning problem on all utilities that benefited from

the Government’s service, whether or not those services

were acquired by contract from the Government.

The opinion of the Court of Federal Claims is not clear

as to whether or not it discerned an unmistakable promise

that barred the subsequent special assessment. On the one

hand, after reciting several unmistakability doctrine cases,

the court stated: “But even where a contract does not con-

tain language securing protection from the potentially dis-

ruptive effects of subsequent legislation, exercise of the

2la

sovereign power does not proceed unchecked.” 33 Fed. Cl.

at 584. The underscored portion of this statement indi-

cates that the court viewed the contracts as containing no

unmistakable promise that precluded the Government

from later imposing an assessment.

On the other hand, the court’s opinion can be read to

indicate that it found such an unmistakable promise. The

court explained that the congressional acts required the

AEC to charge prices that assured reasonable compensa-

tion to the Government, which was later defined as recov-

ery of the Government’s costs over a reasonable period of

time. Based on these legislative mandates, the court

stated: “[i]n short, there was no want of authority in the

administering agency to price the Government’s services

so as to recapture, over time, all costs associated with the

delivery of those services.” 33 Fed. Cl. at 584. This indi-

cates that the court implied an unmistakable promise from

legislative mandates. To the extent that the Court of Fed-

eral Claims implied an unmistakable promise from the

legislative acts, we conclude it erred. Put simply, a

specific promise implied from general legislative acts is

not an unmistakable one.

Therefore, we conclude that the contracts between

Yankee Atomic 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.*

’ Orr conclusion on this point also resolves Yankee Atomic’s tak-

ings argument. Because the contracts did not contain an unmistak-

able promise against a future assessment, Yankee Atomic had no

property right (via a vested contract right) which was subsequently

taken by the assessment. At most, Yankee Atomic has a vested

right to be immune from later attempts to retroactively increase

the prices charged. This right has not been taken because, as ex-

plained in the sovereign acts discussion, the assessment is a general,

sovereirn act rather than a retroactive price increase, For the samc

reason, Lynch and Perry are inanrosite. In each of those cases, the

22a

Yankee Atomic also contends that even if we should

rule against it on its contractual arguments, it should none-

theless prevail on its statutory argument. Yankee Atomic

argues that the Energy Policy Act applies only to “domes-

tic utilities,” and that the meaning of that term is pro-

vided by the following language:

Any special assessment levied under this section on

domestic utilities for the decontamination and decom-

missioning of the Department’s gaseous diffusion

enrichment facilities shall be deemed a necessary and

reasonable current cost of fuel and shall be fully re-

coverable in rates in all jurisdictions in the same

manner as the utility’s other fuel cost.

42 U.S.C. § 2297g-1(g). Yankee Atomic argues that this

language plainly indicates that “domestic utility” encom-

passes only those utilities that are currently generating and

selling electricity. Because Yankee Atomic ceased opera-

tion eight months before passage of the Act, it is not a

“domestic utility.” As a result, Yankee Atomic asserts

that the entire assessment, including that levied on Yankee

Atomic’s purchase in the secondary market, would con-

stitute an unlawful exaction. We disagree with this argu-

ment.

The plain language of the Energy Policy Act explains

which utilities are covered by its scope. The Act clearly

states that “[t]he Secretary shall collect a special assess-

ment from domestic utilities.” 42 U.S.C. § 2297g-1(c).

The Act further states that a utility is responsible for con-

tribution to the Decontamination and Decommissioning

Government’s action directly abrogated prior vested contractual

rights. See Winstar, U.S. at , 116 S.Ct. at 2455 (stating

that “it is clear that the National Government has some capacity

to make agreements binding future Congresses by creating vested

rights,” and citing Perry and Lynch).

Jains ean

Laat atl

23a

Fund if it purchased uranium enrichment services from

the DOE, either directly or indirectly, but utility company

[sic]. 42 U.S.C. §§ 2297g-1(c)(1), (2). Thus, the plain

language of the statute sets the parameters of its scope.

Because Yankee Atomic purchased uranium enrichment

services from the DOE, both directly and indirectly, it

falls within the Act’s scope.

The provision cited by Yankee Atomic, § 2297g-1(g),

does not contradict this plain meaning. That provision

merely addresses the issue of how the special assessment

should be treated in determining utility rates. By defining

the assessment as a current cost of fuel, Congress clears

the path for the domestic utilities to pass through the as-

sessment to current customers. This avoids any complica-

tions from the Federal Energy Regulatory Commission,

which has ruled that although customers can be charged

for current fuel costs, they cannot be charged for certain

prior costs. See, e.g., Northern States Power Co., 58

FERC € 61,119 (Feb. 6, 1992). Section 2297g-1(g)

does not, however, sub silentio create an exception which

takes certain utilities out of the reach of the assessment.

Therefore, we conclude that Yankee Atomic is not

exempt from the assessment by virtue of its nonoperating

status at the time the Act was passed. The Act plainly de-

fines the scope of the assessment, and Yankee Atomic has

not cited any contrary intention by Congress.

Vil

In conclusion, the provision of the Energy Policy Act

which imposes the special assessment is a sovereign act

because it is designed to spread the costs associated with

the decontamination and decommissioning over all domes-

tice utilities that used the DOE’s uranium enrichment ser-

vices, rather than targeting only those utilities that had

contracts with the Government. Moreover, the contracts

between Yankee Atomic and the Government did not con-

24a

tain an unmistakable promise which precluded the Govern-

ment from exercising this sovereign power. Finally,

Yankee Atomic is not exempt from the assessment by

virtue of the fact that it ceased operations before the Act’s

passage. Accordingly, the judgment of the Court of Fed-

eral Claims is reversed.

No costs.

REVERSED.

25a

MAYER, Circuit Judge, dissenting.

More than a century ago, the Supreme Court held that

the government cannot deprive a party with which it con-

tracts “of the fruits actually reduced to possession of con-

tracts lawfully made.” Sinking Fund Cases, 99 U.S. 700,

720, 25 L.Ed. 496 (1879); see also Bowen v. Public

Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41,

55, 106 S.Ct. 2390, 2398, 91 L.Ed.2d 35 (1986). In

levying the special assessments required by 42 U.S.C.

§ 2297g-1 against Yankee Atomic Electric Company

(Yankee), the government improperly diminished the

value of Yankee’s contractual “fruits.” The Court of Fed-

eral Claims held that this was an “unlawful exaction,” and

I agree. I would affirm.

The parties do not dispute that the contracts at issue

were fixed-price contracts. “Where one agrees to do, for

a fixed sum, a thing possible to be performed, he will not

be excused or become entitled to additional compensa-

tion, because unforeseen difficulties are encountered.”

United States v. Spearin, 248 U.S. 132, 136, 39 S.Ct. 59,

61, 63 L.Ed. 166 (1918); Dalton v. Cessna Aircraft Co..,

98 F.3d 1298, 1305 (Fed.Cir.1996) (“Because fixed-price

contracts do not contain a method for varying the price of

the contract in the event of unforeseen circumstances, they

assign the risk to the [seller] that the actual cost of per-

formance will be higher than the price of the contract.”).

As the seller of uranium enrichment services, the govern-

ment bore the risk of any unforeseen difficulties or in-

creased costs that might arise out of its performance of the

contracts.

The parties also agree that the contracts were fully and

satisfactorily performed. Once a contract is completed,

the contractual relationship ends and there is no privity

between the parties. M. Bianchi of Cal. v. Perry, 31 F.3d

1163, 1167-68 (Fed.Cir.1994); John J. Kirlin, Inc. y.

United States, 827 F.2d 1538, 1541 (Fed.Cir.1987).

26a

Consequently, Yankee cannot prevail on its claim that the

government breached the contracts at issue years after they

were finished. See Mulholland v. United States, 175 Ct.Cl.

832, 361 F.2d 237, 239-40 (1966) (at the latest, a

breach of contract claim accrues when the contract is com-

pleted); cf. Henke v. United States, 60 F.3d 795, 799-800

(Fed.Cir.1995).

Contracts, however, are property, “whether the obligor

be a private individual, a municipality, a State, or the

United States. Rights against the United States arising out

of a contract with it are protected by the Fifth Amend-

ment” of the United States Constitution. Lynch v. United

States, 292 U.S. 571, 579, 54 S.Ct. 840, 843, 78 L.Ed.

1434 (1934); see also Bowen, 477 U.S. at 52, 106 S.Ct.

at 2396-97 (the government “has the power to enter con-

tracts that confer vested rights, and the concomitant duty

to honor those rights”); Ruckelshaus v. Monsanto Co.,

467 U.S. 986, 1003, 104 S.Ct. 2862, 2873, 81 L.Ed.2d

815 (1984) (“[V]alid contracts are property within mean-

ing of the Taking Clause.”); Thorpe v. Housing Auth. of

Durham, 393 U.S. 268, 278 n. 31, 89 S.Ct. 518, 524

n. 31, 21 L.Ed.2d 474 (1969). The Fifth Amendment

prohibits the federal government from depriving a person

of property “without due process of law” and from taking

private property “without just compensation.” U.S. Const.

amend. V; Lynch, 292 U.S. at 579, 54 S.Ct. at 843; cf.

Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S.

155, 163-64, 101 S.Ct. 446, 452, 66 L.Ed.2d 358 (1980)

(where state collected a service charge, subsequently-

imposed fee for the same service was an unconstitutional

taking).

The government does not contend that its contracts with

Yankee were invalid. So, there can be no doubt that once

Yankee’s contracts had been satisfactorily performed, its

rights under those contracts were fully-vested property

rights. Consequently, the government cannot deprive

;

acini abr Litter

ee aT or ee ee Re pe eee

27a

Yankee of the benefits of those contracts. See Sinking

Fund Cases, 99 U.S, at 720.

To ascertain Yankee’s vested property rights, we must

look to the contracts themselves. The bargain struck be-

tween the government and Yankee was simple. The gov-

ernment, through the Atomic Energy Commission and its

successor agencies, was to provide uranium enrichment or

separation services for Yankee. In return, Yankee was

to pay a fixed price per separative work unit, the common

measure by which uranium enrichment services are sold.

Between 1963 and 1983, Yankee purchased approximately

804,000 separative work units at prices ranging from less

than $26 to more than $149 per unit. Because of the

fixed-price nature of these contracts, Yankee was entitled

to pay no more than the agreed-upon price. The govern-

ment, on the other hand, was assigned the risk for any

unforeseen difficulties that might arise or the risk that

actual performance costs would be higher than the con-

tract price.

The sole basis upon which Congress imposed the special

assessments which Yankee seeks to recover is that Yankee

had purchased uranium enrichment services from the gov-

ernment. These assessments were calculated based on the

percentage of the total separative work units produced by

the government which Yankee had purchased directly.

This is tantamount to a retroactive price increase. It levies

a charge on Yankee solely because it had previously pur-

chased enrichment services from the government. But

those purchases were made via fixed-price contracts. The

assessment effectively requires Yankee to pay for the addi-

tional costs the government incurred as a result of perform-

ing uranium enrichment services; the very same costs for

which the government assumed the risk. Thus, the govern-

ment retroactively abrogated the essence of the contracts

at issue. “But Congress [is] without power to reduce ex-

penditures by abrogating contractual obligations of the

United States. To abrogate contracts, in the attempt to

28a

lessen government expenditure would be not the practice

of economy, but an act of repudiation.” Perry, 294 U.S.

at 352-53, 55 S.Ct. at 436.

It is of no moment that the reason for the assessment

is to relieve the government from shouldering entirely the

unforeseen costs incurred in providing those services, from

which Yankee had benefited. Yankee fully paid the gov-

ernment for those benefits, and as the seller of the enrich-

ment services, the government bore the burden for any

unforeseen costs. The Fifth Amendment “was designed

to bar Government from forcing some people alone to bear

public burdens which . . . should be borne by the public

as a whole.” Armstrong v. United States, 364 U.S. 40, 49,

80 S.Ct. 1563, 1569, 4 L.Ed.2d 1554 (1960); cf. United

States v. Winstar Corp., U.S. : , 116 S.Ct.

2432, 2459, 135 L.Ed.2d 964 (1996) (the government

may not “simply shift costs of legislation onto its contrac-

tual partners who are adversely affected by the change in

the law, when the Government has assumed the risk of

such change”).

Nor is it of any great import that the assessment is

levied on some utilities that did not contract directly with

the government. First, that is not the case before us.

Yankee seeks to recover only assessments based on its

direct purchases from the government. It does not chal-

lenge charges based on secondary market purchases, which,

according to the government at argument, constitute just

15% of the total assessments. Moreover, the same argu-

ment, that legislation was not targeted solely at those with

whom the government had contracted, was made by the

government and rejected by the Court in Winstar. “Legis-

lation 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 sub-

stantially upon the Government’s contracting partners.”

—- US. at , 116 S.Ct. at 2468. The government

a ile

29a

concedes that 85% of the special assessment falls on utili-

ties that had procured enrichment services directly from

the government. Clearly then, the assessment’s impact falls

substantially on the government’s contracting partners.

That a small fraction of others who indirectly purchased

enrichment services from the government also must pay

the assessment does not mask its true identity as a

retroactive price increase.

The government invokes the familiar sovereign acts and

unmistakability doctrines in support of its position that

the special assessment did not abrogate Yankee’s vested

contract rights. Neither shields the government.

The sovereign acts doctrine provides that “the United

States when sued as a contractor cannot be held liable for

an obstruction to the performance of the particular con-

tract resulting from its public and general acts as a sov-

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

45 S.Ct. 344, 344, 69 L.Ed. 736 (1925). “[T]he essen-

tial point [of the doctrine is] to put the Government in the

same position that it would have enjoyed as a private con-

tractor.” Wéinstar, U.S. at , 116 S.Ct. at 2463.

This doctrine is wholly inapplicable. Properly understood,

it is a government defense to breach of contract and other

contractor claims that a governmental act adversely af-

fected contract performance. But this is not a breach of

contract case. Nor did Congress’ enactment of the special

assessment obstruct performance of the contracts, as con-

templated by Horowitz. The contracts were fully and suc-

cessfully performed by both parties. But even assuming

the doctrine applied, it would not insulate the government

from liability because the impact of the special assessment

falls so substantially and directly on Yankee and the gov-

ernment’s other contractors. See Wéinstar, U.S. at

-——, 116 S.Ct. at 2469 (“[T]he extent to which [the

legislation there at issue] relieved the Government of its

own contractual obligations precludes a finding that the

30a

statute is a ‘public and general’ act for purposes of the

sovereign acts defense.”’).

The unmistakability doctrine, on the other hand, is

simply a “canon of contract construction,” Winstar,

USS. at , 116 S.Ct. at 2448, which says that “a con-

tract with a sovereign government will not be read to

include an unstated term exempting the other contracting

party from the application of a subsequent sovereign act

(including an act of Congress),” id. at , 116 S.Ct. at

2456. Its application “turns on whether enforcement of

the contractual obligation alleged would block the exercise

of a sovereign power,” such as the power to tax. Id. at

, 116 S.Ct. at 2457. But this doctrine too is inap-

plicable. It is not enforcement of a “contractual obliga-

tion,” per se, that is at issue. Rather, Yankee seeks reim-

bursement for the improper abrogation of its vested prop-

erty rights, which happened to arise out of the completed

contracts. That is, it seeks money damages for the gov-

ernment’s deprivation “of the fruits actually reduced to

possession” of the contracts at issue. See Sinking Fund

Cases, 99 U.S. at 720.

Even assuming, for the sake of argument, the unmis-

takability doctrine applied, it adds little. The parties

agree that the contracts, out of which Yankee’s property

rights arose, had fixed prices and that the government bore

the risk of unforeseen costs that might arise. They merely

disagree about the legal consequences that flow from this

interpretation. But Yankee needed no more than the

fixed-price contract terms to insulate itself from a post-

performance price hike. It did not need an additional,

second promise not to have the contract price increased

after completion. See Winstar, U.S. at ; ane

S.Ct. at 2461 (there is “no need for an unmistakably

clear ‘second promise’ ”’); id. at , 116 S.Ct. at 2477

(Scalia, Kennedy, Thomas, JJ., concurring) (there need

be no “further promise not to go back on the promise”

made).

ee ee ee ee ee

3la

That is not to say that Yankee would be immune from

every assessment or tax relating to decontaminating and

decommissioning the government enrichment facilities, no

matter how general or broad its application, solely because

it had a fixed-price contract. But where, as here, the im-

pact of the tax falls so substantially and directly on Yankee

and the government’s other contracting partners, it

amounts to a retroactive price increase, which cannot

stand.

When the government improperly exacts or takes one’s

a money “‘in contravention of the Constitution, a statute,

| or a regulation,’” an illegal exaction has occurred, and

the payor is entitled to recoupment. Aerolineas Argentinas

v. United States, 77 F.3d 1564, 1572-73 (Fed.Cir.1996):

Eastport S.S. Corp. v. United States, 178 Ct.Cl. 599, 372

F.2d 1002, 1007 (1967). In other words, “an illegal

exaction has occurred when ‘the Government has the citi-

zen’s money in its pocket.’” Aerolineas Argentinas, 77

F.3d at 1573 (quoting Clapp v. United States, 127 Ct.Cl.

505, 512, 117 F.Supp. 576, 580 (1954)). The govern-

ment has Yankee’s money in its pocket. It illegally exacted

that money in contravention of Yankee’s rights under the

Fifth Amendment. Yankee is entitled to recover it.

ne eee vee

Gite Rs Bites Ae

32a

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

96-5021

YANKEE ATOMIC ELECTRIC COMPANY,

Plaintiff /Cross-A ppellant,

THE UNITED STATES,

Defendant-A ppellant.

JUDGMENT

On Appeal from the United States Court of Federal

Claims in Case No(s). 94-555

This CAUSE having been heard and considered, it is

ORDERED and ADJUDGED:

REVERSED

DATED May 6, 1997

ENTERED BY ORDER

OF THE COURT

‘'s/ Jan Horbaly

JAN HORBALY

Clerk

ISSUED AS A MANDATE: August 22, 1997

33a

APPENDIX B

UNITED STATES COURT OF FEDERAL CLAIMS

No. 94-555 C

YANKEE ATOMIC ELECTRIC COMPANY,

Plaintiff,

. 2

THE UNITED STATES,

Defendant.

June 22, 1995

OPINION

WIESE, Judge.

Title 42 of the United States Code. section 2297g-1(c)

(1988 & Supp. IV 1992), authorizes the Secretary of

Energy to collect a special annual assessment from those

domestic utilities which, in prior years, had utilized en-

riched uranium, produced by the Government. as a fuel in

the operation of their nuclear-powered electricity generat-

ing facilities. The assessment is paid into a fund intended

to meet the costs of decontaminating and decommissioning

the industrial facilities that the Government used in pro-

ducing the enriched uranium.

Plaintiff is among the utilities subject to this special

assessment; its suit here seeks recovery of a portion of the

approximately $3,000,000 it has thus far paid the Govern-

ment.’ Three theories of recovery are advanced. First.

1 The statute authorizes the assessment to be calculated on the

basis of all Government-produced enriched uranium utilized by a

34a

plaintiff maintains that the assessment amounts to a

breach of contract, in that it retroactively increases the

cost of the Government’s uranium enrichment services,

thereby violating the “fixed-price” character of the con-

tracts under which those services initially were obtained.

Second, even if imposition of the assessment does not

amount to a breach of contract, plaintiff claims, it con-

stitutes the deprivation of a contract-based advantage and

hence, the taking of a property right. Finally, putting both

contract and taking theories aside, plaintiff argues that

Congress intended the assessment to apply only to those

domestic utilities able to recover the cost involved through

their rate base, that is, as a pass-through of a necessary

and reasonable cost of fuel. And inasmuch as plaintiff

ceased operations in early 1992, some eight months prior

to the passage of the legislation authorizing the special

assessment, it argues that the assessment represents an

unlawful exactitude.

Defendant disagrees with these contentions; it maintains

that the assessment represents a legitimate exercise of legis-

lative authority that does not transgress plaintiff's contract

rights or implicate the Takings Clause of the Fifth Amend-

ment or violate the terms of the statute authorizing the

special assessment.

Both sides have moved for summary judgment sup-

ported by written briefs, later supplemented by oral argu-

ment. At the conclusion of the argument, heard June 1,

1995, the court issued a tentative ruling in plaintiff's favor

and indicated its intention to address the issues more com-

pletely in a written decision. This opinion proceeds in

accordance with the court’s earlier ruling.

domestic utility, whether purchased from the Government directiy

or from secondary market sources, 42 U.S.C. § 2297g-1(c)(1). In

this suit, however, plaintiff seeks repayment only of that portion

of the annual assessment attributable to its direct purchases from

the Government pursuant to contracts entered into in 1963, 1969,

and 1971.

i a et

‘

35a

FACTS

Until the shutdown of its operations in early 1992,

plaintiff operated as a domestic utility engaged in the

wholesale distribution of electrical power generated from

nuclear fuels. The company, located in Rowe, Massachu-

setts, was organized in 1954 by a number of existing elec-

tric utility companies to facilitate their joint participation

in the then-emerging use of atomic energy as an alternate-

source fuel for the generation of electricity. The electricity

produced by plaintiff was soid to its shareholder members

(the organizing utilities) for redistribution to retail cus-

tomers, both residential and commercial.

In the conduct of its business, plaintiff purchased ura-

nium enrichment services from the Government. These

purchases, which began in 1963, were carried out through

successive multi-year contracts between plaintiff and the

Atomic Energy Commission (AEC) and successor agen-

cies, including the Department of Energy (DOE). AI-

though the types and terms of the contracts varied over

time, their constant feature was a pricing provision which

set the charge for the Government’s services in accordance

with “established Commission pricing policy,” that is, at

the-price in effect at the time the service was provided,

subject, however, to a stated maximum amount.

Typical of this contract language was the provision that

appeared in the “Agreement For Furnishing Uranium En-

richment Services” which the parties executed on March

9, 1971. Article III of this agreement specified in relevant

part that:

1. The charges to be paid to the Commission for

enriching services provided to the Customer here-

under shall be determined in accordance with the

established Commission pricing policy for such serv-

ices; provided, however, that the unit charge for

enriching services during the term of this agreement

36a

shall in no event exceed a ceiling charge of $30.00

(subject to possible adjustment [for labor and power

costs] pursuant to Section 3 of this article) per Kg

unit of separative work for separation of U-235 from

U-238, as defined in the established Commission pric-

ing policy.

The term “established Commission pricing policy” was

defined in the contract to mean “any applicable price or

charge in effect at the time of performance of any services

under this agreement (i) published by the Commission in

the Federal Register for material or services subject to

this agreement, or (ii) in the absence of such a published

figure, determined in accordance with the Commission’s

Pricing Policy. ...”

The regulatory agencies involved in managing the Gov-

ernment’s uranium enrichment program (the Atomic En-

ergy Commission and successor agencies), either failed to

price, or were competitively disabled from pricing, their

services high enough to pay for the future cleanup of the

radiation contamination at the facilities where the enrich-

ment services were being performed. H.R.Rep. No. 474,

102d Cong., 2d Sess., pt. I, at 142, 144; pt. VIII, at 76,

78 (1992), reprinted in 1992 U.S.C.C.A.N.1953, 1965,

1967, 2294, 2296.

This problem was one of many energy-related issues

that Congress addressed in the Energy Policy Act of 1992,

Pub.L. No. 102-486, 106 Stat. 2776 (the Act). Specifi-

cally, Title XI of the Act (106 Stat. 2951) amended the

Atomic Energy Act of 1954 to provide, inter alia, for

the creation of a fund—the Uranium Enrichment Decon-

tamination and Decommissioning Fund—to accumulate,

over a fifteen year period, the monies necessary for the

cleanup costs of the uranium enrichment plants. (This

amendment is now codified at 42 U.S.C. § 2297g.) The

Act further provided that contributions to the fund,

amounting to $480,000,000 annually, were to come from

two sources: up to $150,000,000 annually was to be

FBLA San ne 8

health. Suni kr Oat

37a

collected by “special assessment” from domestic utilities;

the balance, from general appropriations. The Act also

provided that each domestic utility’s share of the total

annual assessment was to be determined on a per-unit

basis (called a separative work unit) representing the

measure of that utility’s past use of uranium enrichment

services provided by the Government. (This amendment

is now codified at 42 U.S.C. § 2297g-1.)

Following passage of the Act in October 1992, the

Department of Energy proceeded to assess plaintiff a share

of the annual special assessment. Plaintiff took the position

that it was not liable for the assessment because it no

longer was an operating utility—the Rowe, Massachusetts

facility having been shut down permanently in February

1992—and therefore did not come within the intended

reach of the Act. Essentially, it was plaintiff's view that

because the Act specifically authorized recovery of the

special assessment through a utility’s rate base, it neces-

sarily contemplated an assessment that was meant to apply

only to operating utilities.*

DOE rejected the position urged by plaintiff. The

Agency concluded that the Act applied to all utilities that

had used government-enriched uranium in their generating

facilities without regard to their current operating status.

The Agency saw the statutory language relied on by

plaintiff as simply an accounting authorization designed

to overcome the potential rate-making problems inherent

in having present utility consumers bear costs more logi-

cally assignable to past consumption.

2The argument was founded on the language of 42 U.S.C.

§ 2297g-1(g), a section titled “Treatment of Assessment.” That

language reads as follows:

“Any special assessment levied under this section . . . 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.”

38a

On August 19, 1994, four days after the rejection of

plaintiff's bid for exemption, plaintiff filed suit in this

court. As of that date, the Government had collected

from plaintiff, pursuant to the authority of 42 U.S.C.

§ 2297g-1, three annual assessments amounting to ap-

proximately $3,000,000.00. Plaintiff seeks recovery of a

portion of this sum together with interest, costs and attor-

neys’ fees.

DISCUSSION

Our analysis of this case begins with the rule that con-

tracts with the United States, like contracts between pri-

vate parties, “remain subject to subsequent legislation by

the presiding sovereign.” Merrion v. Jicarilla Apache

Tribe, 455 U.S. 130, 147, 102 S.Ct. 894, 907, 71 L.Ed.2d

21 (1982). As the Court explained in Bowen v. Public

Agencies Opposed to Social Security Entrapment, 477

U.S. 41, 106 S.Ct. 2390, 91 L.Ed.2d 35 (1986), “ ‘sover-

eign power, even when unexercised, is an enduring pres-

ence that governs all contracts subject to the sovereign’s

jurisdiction, and will remain unless surrendered in un-

mistakable terms.’” Jd. at 52, 106 S.Ct. at 2397 (quot-

ing Merrion, 455 U.S. at 148, 102 S.Ct. at 907). Thus,

“one who wishes to obtain a contractual right against the

sovereign that is immune from the effect of future changes

in law must make sure that the contract confers such a

right in unmistakable terms.” Transohio Sav. Bank v.

Director, Office of Thrift Supervision, 967 F.2d 598, 618

(D.C.Cir.1992) (quoting Western Fuels-Utah, Inc. v.

Lujan, 895 F.2d 780, 789 (D.C.Cir.), cert. denied, 498

U.S. 811, 111 S.Ct. 47, 112 L.Ed.2d 24 (1990) ).

But even where a contract does not contain language

securing protection from the potentially disruptive effects

of subsequent legislation, exercise of the sovereign power

does not proceed unchecked. That power, the Court has

also declared, may not be relied upon to “take away

property already acquired under the operation of [a con-

tract], or to deprive [a] corporation of the fruits actually

reduced to possession of contracts lawfully made.”

39a

Bowen, 477 U.S. at 55, 106 S.Ct. at 2398 (quoting

Sinking-Fund Cases, 99 U.S. 700, 720, 25 L.Ed. 496,

25 L.Ed. 504 (1878)). And, as the Bowen decision

further points out, in other decisions the Court has held

“that Congress does not have the power to repudiate its

own debts, which constitute ‘property’ to the lender, sim-

ply in order to save money.” Id. Cited in support of this

proposition are the decisions in Perry v. United States,

294 U.S. 330, 55 S.Ct. 432, 79 L.Ed. 912 (1935) and

Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78

L.Ed. 1434 (1934).

There are, then, recognized limits upon Congress’

power to enact legislation that impairs rights created

under contracts with the Government. The question is

whether those limits have been exceeded here. Is this a

case in which the Government’s actions amount to a de-

privation of property “already acquired”? The answer is

yes.

The several contracts between plaintiff and the United

States were essentially requirements-type contracts under

the terms of which plaintiff had the right to order uranium

enrichment services from the Government at published

market prices that were not to exceed a stated per-unit

amount. Significantly, those contracts contained no pro-

vision permitting the Government to reprice its services

if, upon a post-performance evaluation, the prices charged

were found to have been too low. Nor would such a pro-

vision have been called for. It was the AEC’s mandate

from the start to price its services so as to assure “reason-

able compensation to the Government.” Act of August

26, 1964, Pub.L. No. 88-489, 78 Stat. 602, 606 (1964)

(formerly codified at 42 U.S.C. § 2201(v)(B) (1964):

current version at 42 U.S.C. § 2201(v) (1988 & Supp.

IV 1992)). Subsequent legislation made clear that this

pricing standard was intended to accomplish a “recovery

of the Government’s costs over a reasonable period of

time.” Act of December 14, 1970, Pub.L. No. 91-560,

40a

84 Stat. 1472, 1474 (1970) (formerly codified at 42

U.S.C. § 2201(v)(B) (1970); current version at 42

U.S.C. § 2201(v) (1988 & Supp. ITV 1992)). In short,

there was no want of authority in the administering

agency to price the Government’s services so as to recap-

ture, over time, all costs associated with the delivery of

those services.

Given this statutory background and the fixed-price

character of the Government’s undertaking, plaintiff was

justified in concluding that, upon payment to the Govern-

ment for services ordered, the transactions involved would

become final. That conclusion is founded on the principle

that one who undertakes to perform at a fixed price there-

by assumes the burden of all unanticipated costs. United

States v. Spearin, 248 U.S. 132, 135-36, 39 S.Ct. 59,

60-61, 63 L.Ed. 166 (1918). Simply put, the Government

bargained away the right to demand additional compen-

sation from plaintiff (for the same services) to meet risks

not foreseen at the time the contracts were made. Cor-

respondingly, the economic benefit which plaintiff gained

by virtue of the Government’s promise, being a benefit

enforceable at law, thus became a property interest that

fell beyond the reach of the Government’s power to take

away. Lynch, 292 U.S. at 579, 54 S.Ct. at 843-844

(“Rights against the United States arising out of a con-

tract with it are protected by the Fifth Amendment.”)

The Government endeavors to avoid this result by

claiming that the special assessment represents an exercise

of the sovereign’s taxing power and, as such, cannot be

abridged in favor of private contract rights. We do not

accept this contention. The argument would have some

force if we were dealing with a general tax that fell on

all utilities alike. That, however, is not our case. Rather,

this special assessment reaches only those utility com-

panies that previously had contracted with the Govern-

ment for the purchase of uranium enrichment services,

and it taxes them according to the number of separative

work units purchased. Clearly, then, the assessment is

i a

4la

an add-on to the price previously paid to the Government.

Thus, by imposing the assessment in the manner here

described, the Government dishonors the very promise it

had earlier made: that the price to be charged for its

services would not exceed the contract-stated maximum.

Legislation so plainly directed at undoing a contract lia-

bility previously assumed by the Government is an im-

permissible exercise of sovereign power. “The doctrine of

‘public and general’ ‘sovereign acts’, laid down in Horowitz

v. United States, 267 U.S. 458, 45 S.Ct. 344, 69 L.Ed.

736 (1925), does not relieve the Government from

liability where it has specially undertaken to perform

the very act from which it later seeks to be excused.”

Freedman v. United States, 162 Ct.Cl. 390, 402, 320

F.2d 359, 366 (1963).

Indeed, the Government’s actions are tantamount to an

abrogation of contract rights akin to that declared unlaw-

ful in Perry and Lynch. In Perry the Court struck down,

as beyond congressional power, a joint resolution of the

Congress that included language repealing the Govern-

ment’s obligation to repay its bondholders in gold coin.

And in Lynch, the Court found a similar want of au-

thority in Congress’ attempted repeal of the Government’s

obligation to pay in accordance with the terms of a war-

risk insurance policy. Though, in each case, the action

taken by the Government was prompted by concerns for

the Nation’s economy and the need to save money, this

reason was held insufficient to sanction the extinguish-

ment of vested contract rights. The reasoning went as

follows:

No doubt there was in March, 1933, great need of

economy. In the administration of all government

business economy had become urgent because of

lessened revenues and the heavy obligations to be

issued in the hope of relieving widespread distress.

Congress was free to reduce gratuities deemed exces-

sive. But Congress was without power to reduce

expenditures by abrogating contractual obligations

42a

of the United States. To abrogate contracts, in the

attempt to lessen government expenditure, would be

not the practice of economy, but an act of repudia-

tion. “The United States are as much bound by their

contracts as are individuals. If they repudiate their

obligations, it is as much repudiation, with all the

wrong and reproach that term implies, as it would

be if the repudiator had been a State or a municipal-

ity or a citizen.” Sinking-Fund Cases, 99 U.S. 700,

719.

Lynch v. United States, 292 U.S. at 580, 54 S.Ct. at 844.

During the oral argument of the case, counsel for the

Government sought to distinguish Perry and Lynch on

the ground that there the content of the promises under-

taken by the Government was spelled out in statute *

whereas here the substance of the commitment was deter-

mined by an Executive agency. In counsel’s view, only the

former can give rise to a vested right; the latter, it is

argued, remains subject to the risk of impairment by sub-

sequent legislation unless secured against that possibility

by specific protective language.

We do not accept this distinction. A contract with the

United States is not of lesser dignity because its terms

originate in Executive judgment rather than legislative

prescription. Commitments made by the Executive, when

authorized by statute, are no less sovereign in character

than commitments made by the Legislature itself. It is not

the source of the Government’s promise that determines

the existence of a vested right, but the extent to which

the bargain between the parties has been carried out. A

contract that has been performed to the extent of giving

8 The statutory authorizations underlying the obligations addressed

in Perry and Lynch are, respectively, Act of September 24, 1917, ch.

56, 40 Stat. 288 (authorizing issuance of war bonds) and Act of

October 6, 1917, ch. 105, 40 Stat. 398 (establishing Bureau of War

Risk Insurance).

43a

the Government all that it bargained for creates a vested

right in the other party to the return performance prom-

ised by the Government. Texas Pacific Coal & Oil Co.

v. Honolulu Oil Corp., 241 F.2d 920, 922 (Sth Cir.1957).

Similarly, when a contract between citizen and Govern-

ment is fully performed on each side, the resulting ex-

change of values amounts in substance to an exchange of

property interests. The interests acquired become vested

interests—the “fruits actually reduced to possession of

contracts lawfully made,” Sinking-Fund Cases, 99 US.

at 720, that are entitled to protection under the Takings

Clause of the Fifth Amendment. Lynch v. United States,

292 U.S. at 579, 54 S.Ct. at 843-844.

CONCLUSION

For the reasons stated, the court concludes that, as

applied to plaintiff, the special assessment amounts, in

part, to an unlawful exaction because it violates the Gov-

ernment’s earlier commitments to supply enriched uranium

at contract prices not to exceed a stated amount and thus

improperly diminishes the value of the property (the eco-

nomic advantage) that plaintiff acquired pursuant to those

commitments. Plaintiff is entitled to the benefit of its

bargain; hence, those portions of the annual assessments

that relate to plaintiff's 1963, 1969, and 1971 contract

purchases of enriched uranium from the Government must

be refunded together with interest. The amount of the

judgment to be entered shall be based on a stipulation to

be filed by the parties within 30 days from the date of this

opinion.*

*In view of the conclusion reached, we deem it unnecessary to

address plaintiff’s separate contention that the special assessment

was intended only to apply to operating utilities.

44a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

96-5021, -5025

YANKEE ATOMIC ELECTRIC COMPANY,

Plaintiff /Cross-A ppellant,

THE UNITED STATES,

Defendant-A ppellant.

ORDER

A combined petition for rehearing and suggestion for

rehearing in banc having been filed by the CROSS-

APPELLANT, and a response thereto having been invited

by the court and filed by the APPELLANT, and the peti-

tion for rehearing having been referred to the panel that

heard the appeal, and thereafter the suggestion for rehear-

ing in banc and response having been referred to the cir-

cuit judges who are in regular active service,

UPON CONSIDEP TION THEREOF, it is

ORDERED that the petition for rehearing be, and the

same hereby is, DENIED and it is further

ORDERED that the suggestion for rehearing in banc

be, and the same hereby is, DECLINED.

The mandate of the court will issue on August 22, 1997.

Circuit Judge NEWMAN would rehear the appeal in

banc.

45a

Five Briefs were filed by Amici Curiae.

FoR THE COURT,

JAN HORBALY

Clerk

Dated: August 15, 1997

By /s/ Alex Van Veen

ALEX VAN VEEN

Staff Law Clerk

46a

APPENDIX D

STATUTORY PROVISIONS

1. Section 2297g of Title 42, U.S.C., provides in

relevant part:

§ 2297g. Uranium Enrichment Decontamination and

Decommissioning Fund

(a) Establishment

There is established in the Treasury of the United

States an account to be known as the Uranium En-

richment Decontamination and Decommissioning

Fund (referred to in this subchapter as the “Fund”).

The Fund, and any amounts deposited in it, includ-

ing any interest earned thereon, shall be available

to the Secretary subject to appropriations for the

exclusive purpose of carrying out this subchapter.

2. Section 2297g-1 of Title 42, U.S.C., provides:

§ 2297g-1. Deposits

(a) Amount

The Fund shall consist of deposits in the amount

of $480,000,000 per fiscal year (to be annually

adjusted for inflation using the Consumer Price In-

dex for all-urban consumers published by the Depart-

ment of Labor) as provided in this section.

(b) Source

Deposits described in subsection (a) of this sec-

tion shall be from the following sources:

(1) Sums collected pursuant to subsection (c)

of this section. -

(2) Appropriations made pursuant to subsec-

tion (d) of this section.

47a

The Secretary shall collect a special assessment

from domestic utilities. The total amount collected

for a fiscal year shall not exceed $150,000,000 (to

be annually adjusted for inflation using the Con-

sumer Price Index for all-urban consumers published

by the Department of Labor). The amount collected

from each utility pursuant to this subsection for a

fiscal year shall be in the same ratio to the amount

required under subsection (a) of this section to be

deposited for such fiscal year as the total amount

of separative work units such utility has purchased

from the Department of Energy for the purpose of

commercial electricity generation, before October 24,

1992, bears to the total amount of separative work

units purchased from the Department of Energy for

all purposes (including units purchased or produced

for defense purposes) before October 24, 1992. For

purposes of this subsection—

(1) a utility shall de considered to have pur-

chased a separative work unit from the Depart-

ment if such separative work unit was produced

by the Department, but purchased by the utility

from another source; and

(2) a utility shall not be considered to have

purchased a separative work unit from the De-

partment if such separative work unit was pur-

chased by the utility, but sold to another source.

(d) Authorization of appropriations

There are authorized to be appropriated to the

Fund, for the period encompassing 15 years after

October 24, 1992, such sums as are necessary to

ensure that the amount required under subsection

(a) of this section is deposited for each fiscal year.

(e) Termination of assessments

The collection of amounts under subsection (c)

of this section shall cease after the earlier of—

48a

(1) 15 years after October 24, 1992; or

(2) the collection of $2,250,000,000 (to be an-

nually adjusted for inflation using the Consumer

Price Index for all-urban consumers published

by the Department of Labor) under such sub-

section.

(f) Continuation of deposits

Except as provided in subsection (e) of this sec-

tion, deposits shall continue to be made into the

Fund under subsection (d) of this section for the

period specified in such subsection.

(g) Treatment of assessment

Any special assessment levied under this section

on domestic utilities for the decontamination and

decommissioning of the Department’s gaseous dif-

fusion enrichment facilities shall be deemed a neces-

sary 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.

3. Section 2297a of Title 42, U.S.C., provides in rele-

vant part:

§ 2297a. Purposes

The Corporation is created for the following purposes:

(1) To operate as a business enterprise on a profit-

able and efficient basis.

(2) To maximize the long-term value of the Corpor-

ation to the Treasury of the United States.

* * * *

(7) To conduct the business as a self-financing cor-

poration and eliminate the need for Federal Govern-

ment appropriations or sources of Federal financing

other than those provided in this division.

= ee ee reer Ween een ee ee fe ee ee eS

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.