Opposition Brief — Pataki v. Consolidated Edison Co. of New York

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Nos. 02-358 and 02-475

IN THE OCT 23 2002

ii. ia Court of the dAnited mietes, CLPRK

OcTOBERTERM,20022 = ——~—S~S

GEORGE E. PATAKI, Governor of the State of New York, ef al.,

Petitioners,

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., ef al.,

Respondents.

RICHARD L. BRODSKY, New York State Assembly Member,

Petitioner,

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., ef al.,

Respondents.

ON PETITIONS FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF IN OPPOSITION

CHARLES E. MCTIERNAN, JR. GUY MILLER STRUVE

4 Irving Place, Room 1810-S Counsel of Record

New York, New York 10003 JAMES D. LISs

(212) 460-2432 DAVIS POLK & WARDWELL

. 450 Lexington Avenue

New York, New York 10017

(212) 450-4192

Counsel for Respondent

Consolidated Edison Company

of New York, Inc.

Counter-Statement of Questions Presented

1. Does the Bill of Attainder Clause apply to corporations, as

every court that has considered the issue has held or assumed?

2. Did the courts below correctly find that the Indian Point

Law (Chapter 190 of the New York Laws of 2000) imposed

punishment, where (among other things) the deprivation man-

dated by the law was more than double the total amount of

additional costs caused by the alleged imprudence, and the

Senate sponsor of the law proclaimed that “[my] Law is going

to stop them and punish them”?

3. Independently of the Bill of Attainder Clause, was the

Indian Point Law also invalid as (a) a denial of equal protection,

(b) a denial of procedural due process, (c) an attempt to regulate

nuclear health and safety that was preempted by the Atomic

Energy Act, and (d) a violation of the Contract Clause?

Statement Pursuant to Supreme Court Rule 29.6

Respondent Consolidated Edison Company of New York,

Inc. is a wholly-owned subsidiary of Consolidated Edison, Inc.,

a publicly held company. There is no other publicly held

company that owns 10% or more of respondent’s stock.

iil

TABLE OF CONTENTS

Counter-Statement of Questions Presented ........

Statement Pursuant to Supreme Court Rule 29.6 .

NE rr

Counter-Statement ofthe Case ................

The Rates Set by the New York State Public

Service Commission (“PSC”) Which Authorized

Con Edison to Recover Replacement Power Costs

Unless the PSC Found Imprudence After a Hear-

ea ies bi kas geo 5 ti 9,5 65k ng os

The Indian Point 2 Nuclear Plant and the February

ee Teer ee eee ;

The PSC’s Investigation of the Outage and Its

Holding That There Was as Yet No Record Basis

for a Finding of Imprudence ................

The Assembly’s Condemnation of Con Edison and

Its Passage of the Indian Point Law ......... ,

The PSC’s Warning That There Was No Factual

Basis for the Indian Point Law and That It Was

Probably Unconstitutional ................ ;

The Senate’s Passage of the Indian Point Law and

the Senate Sponsor’s Avowal of His Intent to

0 Serre err reser

The Critical Differences Between the Indian Point

Law and the Substantive and Procedural Standards

of Imprudence Applied in All Other Cases .....

PAGE

10°

REASONS FOR DENYING THE WRIT .........

I. This Case Presents No Issue Calling for Review by

PE 5 8 aed OT ER eR Ree

There Is No Conflict Among Courts Concern-

ing the Applicability of the Bill of Attainder

Clause to Corporations ................

The Court of Appeals Correctly Applied the

Standards Articulated by This Court Under

the Bill of Attainder Clause, and Petitioners’

Argument to the Contrary Disregards the

Facts Found Below ..............5.8-:

The Decision Below Will Not Result in the

Ruinous Consequences Predicted by Petition-

ers, Because the Indian Point Law Is — for

Good Reason — Literally Unique in the Annals

of American Jurisprudence .............

II. The Issues Raised by Petitioners Are Not Determi-

native of This Case, Because the Indian Point Law

Is Invalid for Additional Reasons Which Were Not

Reached by the Court Below ...............

IIR 55k pays hw eden seems

Procedural Due Process ...............

Atomic Energy Act Preemption..........

Peer rere ee

ET kab nee nee so whaeers eo mewunee

PAGE

TABLE OF AUTHORITIES

Cases _

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234

c , PR PRU REN, neheiseal nt tien 15, 27, 28

BellSouth Corp. v. FCC, 162 F.3d 678 (D.C. Cir.

"ME rine ty er oy ores he 13, 20

BellSouth Corp. v. FCC, 144 F.3d 58 (D.C. Cir. 1998),

cert. denied, 526 U.S. 1086 (1999) ........... 2 14

Capital Tel. Co. v. New York Tel. Co., 750 F.2d 1154 (2d

Cir. 1984), cert. denied, 471 U.S. 1101 (1985) ... 2

Carmell v. Texas, 529 U.S. 513 (2000) ........... 15, 21

Chicago & Alton R.R. v. Tranbarger, 238 U.S. 67

CPP Ae eee ce ieee hes a

Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532

CROSD oss sca eswab win tuaesan een neers 24

Club Misty, Inc. v. Laski, 208 F.3d 615 (7th Cir.), cert.

denied, 531 U.S. 1011 (2000) ................ 13

Consolidated Edison Co., 34 N.Y.P.S.C. 663 (1994) . 4

Consolidated Edison Co., 22 N.Y.P.S.C. 98 (1982) .. 4

Consolidated Edison Co. v. Westinghouse Elec. Corp.,

594 F. Supp. 698 (S.D.N.Y. 1984) ............. 6

Consolidated Edison Co. v. Westinghouse Elec. Corp.,

567 F. Supp. 358 (S.D.N.Y. 1983) ............. 5

Cummings v. Missouri, 71 U.S. (4 Wall.) 277 (1866) . 15, 16

Duquesne Light Co. v. Barasch, 488 U.S. 299 (1989) . . 21

Energy Reserves Group, Inc. v. Kansas Power & Light

Ca, 0 US. GOCE) gc sscisvivcsies 15, 27, 28

English v. General Elec. Co., 496 U.S. 72 (1990) ... 25

First Nat’l Bank of Boston v. Bellotti, 435 U.S. 765

CIRO sows ne deeee seen eae eee eas

Fletcher v. Peck, 10 U.S. (6 Cranch) 87 (1810) .....

Gade v. National Solid Wastes Mgt. Ass'n, 505 U.S.

SU CRON sos ve Se ceckisa tens eves

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

(ROO o icn ssn awk 4 ue See ee ee

Kentucky Union Co. v. Kentucky, 219 U.S. 140

CSOEED os ib ca Wades cee ee ae ee

Long Island Lighting Co. v. Imo Indus. Inc., 6 F.3d 876

COR: CR oo od bace teen eerie

Long Island Lighting Co. v. PSC, 134 A.D.2d 135, 523

N.Y.S.2d 615 (3d Dep’t 1987) ................

Lujan v. G & G Fire Sprinklers, Inc., 532 U.S. 189

COED svc cs esas cee usa eres sree eee

McFarland v. American Sugar Refining Co., 241 U.S.

MIMS... eee

Navegar, Inc. v. United States, 192 F.3d 1050 (D.C.

Cir. 1999), cert. denied, 531 U.S. 816 (2000) ....

Niagara Mohawk Power Corp., 31 N.Y.P.S.C. 1745

4: | Pee OP SSC ges

Niagara Mohawk Power Corp., 24 N.Y.P.S.C. 6205

ty Serer rrr ee eS

Niagara Mohawk Power Corp. v. PSC, 69 N.Y.2d 365,

507 N.E.2d 287, 514 N.Y.S.2d 694 (1987) ......

Nixon v. Administrator of General Services, 433 U.S.

tty) Oren ee

Pacific Gas & Elec. Co. v. State Energy Resources

Conservation & Dev. Comm’n, 461 U.S. 190

(i) rrr ran

17-20

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PAGE

Perez v. Campbell, 402 U.S. 637 (1971) .......... 26

Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995) . 14, 21,

Railway Express Agency, Inc. v. New York, 336 U.S.

1. een reser reer ere 24

Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d

62, 385 N.E.2d 566, 412 N.Y.S.2d 827 (1978) ... 27

RR Village Ass'n, Inc. v. Denver Sewer Corp., 826 F.2d

tof i: 8. |. ere eer sree 24

SBC Communications, Inc. v. FCC, 154 F.3d 226 (Sth

Cir. 1998), cert. denied, 525 U.S. 1113 (1999).... 13-14

Selective Service System v. Minnesota Public Interest

Research Group, 468 U.S. 841 (1984) .......... 17, 18

South Carolina v. Katzenbach, 383 U.S. 301 (1966) . 14

Texas Eastern Transmission Corp. v. FPC, 306 F.2d

345 (Sth Cir. 1962), cert. denied, 375 U.S. 941

tae ero Serer res reer es 28

Trustees of Village of Saratoga Springs v. Saratoga

Gas, Elec. Light & Power Co., 191 N.Y. 123, 83

PE EI vo cos tacscnnicevhexeearecs 2

United States v. Brown, 381 U.S. 437 (1965) ....... 16

United States v. Florida East Coast Ry., 410 U.S. 224

ES edad 65 cas ooh RRA COSA RP EEED Oe 24-25

United States Trust Co. of New York v. New Jersey,

Se By BPE eG 8 nek Sedna Medes eeeeesen 28

Village of Willowbrook v. Olech, 528 U.S. 562

RARE ey ee re ees err eT ey ee 23

Washington v. Confederated Bands & Tribes of

Yakima Indian Nation, 439 U.S. 463 (1979) ..... 22

Waters-Pierce Oil Co. v. Texas, 212 U.S. 86 (1909) . . 15

Vili

PAGE

Constitutional Provisions,

Statutes, and Rules

Ce OE Dg aca hewn bane 15, 16, 27

Pe ME MIE OD nw vnc tikes ccseowvanucees ee

N.Y. Public Service Law §§ 64-77 ............... 2

N.Y. Public Service Law § 66(12)(k) ............. 3

N.Y. Public Service Law §72 .................. 3

i ad oe Os an gc ies kab nae 3

Other Authorities

The Federalist No. 44 (C. Rossiter ed. 1961) (J.

DE ck che sas eee enteuses CiuNe rears oe 15

The Federalist No. 84 (C. Rossiter ed. 1961) (A.

SE ea ee aa Wh Pe a gan s WA oem 15

fey 6 ee ls ee eer 16

ee I, Bes is es Oe oo 6 ob veo ov voice eens 16

BS Sh Me, a PE o 6c n.0.06 cca ccatnedess 16

Memorandum for the Govertior From Attorney General

Robert Abrams, June 23, 1981, in Governor’s Bill

Pg Re ree 3-4

IN THE

Supreme Court of the United States

OCTOBER TERM, 2002

GEORGE E. PATAKI, Governor of the

State of New York, ef ai.,

Petitioners,

CONSOLIDATED EDISON COMPANY

OF NEW YORK, INC., ef ai.,

Respondents.

RICHARD L. BRODSKY, New York State

Assembly Member,

Petitioner,

CONSOLIDATED EDISON COMPANY

OF NEW YORK, INC., ef ai.,

Respondents.

ON PETITIONS FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF IN OPPOSITION

Before the Court are two petitions for a writ of certiorari to

review the judgment of the United States Court of Appeals for

the Second Circuit, filed by Governor George E. Pataki, et al.

(“Pataki Pet.”) and New York State Assembly Member Richard

L. Brodsky (“Brodsky Pet.”). The petitions should be denied.

Contrary to petitioners’ arguments, the decision below is not in

conflict with any decision of this or any other court. Rather, the

court of appeals carefully applied the standards articulated by

this Court under the Bill of Attainder Clause to the facts in the

record, most of which are omitted from the petitions.

Counter-Statement of the Case

A. The Rates Set by the New York State Public

Service Commission (“PSC”) Which Authorized

Con Edison to Recover Replacement Power Costs

Unless the PSC Found Imprudence After a Hear-

ing

The New York State Public Service Commission (“PSC’’)

regulates intrastate electric utility service in New York pursuant

to the New York State Public Service Law. See N.Y. Public

Service Law §§ 64-77. The Public Service Law is acompre- ~

hensive regulatory scheme which “encompasses virtually all

aspects of the [utility] business.” Capital Tel. Co. v. New York

Tel. Co., 750 F.2d 1154, 1160 (2d Cir. 1984), cert. denied, 471

U.S. 1101 (1985). The New York courts have repeatedly

emphasized the breadth of the Legislature’s delegation of power

to the PSC. See, e.g., Niagara Mohawk Power Corp. v. PSC,

69 N.Y.2d 365, 369, 507 N.E.2d 287, 289, 514 N.Y.S.2d 694,

696 (1987).'

In setting rates, the PSC has the power to disallow recovery

' The enactment of the Public Service Law followed the New York

State Legislature’s recognition that it was impracticable for it to set rates

individually for all of the various localities and types of utilities in the state.

See Trustees of Village of Saratoga Springs v. Saratoga Gas, Elec. Light &

Power Co., 191 N.Y. 123, 143-44, 83 N_E. 693, 699 (1908).

of utility expenditures caused by imprudence, but this power is

subject to both substantive and procedural safeguards. As a

substantive matter, a finding of imprudence cannot be based on

20/20 hindsight, but can only be made if the utility acted

unreasonably based on the circumstances as they existed at the

time it acted. Long Island Lighting Co. v. PSC, 134 A.D.2d

135, 143-44, 523 N.Y.S.2d 615, 620 (3d Dep’t 1987). Proce-

durally, it is necessary “to demonstrate a tenable basis for

raising the specter of imprudence before the utility can be called

upon to defend its conduct,” id. at 144, 523 N.Y.S.2d at 620,

and the utility has a right to an evidentiary hearing on the issue

of imprudence, followed by a reasoned determination by the

PSC which is subject to judicial review under Article 78 of

New York’s Civil Practice Law and Rules (“CPLR”). See,

e.g., N.Y. Public Service Law § 72. As the PSC acknowledged

in this case (A1379),” the issue of imprudence is an adju-

dicatory issue, akin to the issue of fault in an ordinary civil case.

See, e.g., Long Island Lighting Co. v. Imo Indus. Inc., 6 F.3d

876, 885-86 (2d Cir. 1993).

Fuel adjustment clauses (“FACs”) are used to adjust rates

automatically for changes in the costs of fuel and purchased

power and other expenses whose level is subject to fluctuation

(A128-A129). The PSC has approved the use of FACs in utility

tariffs since 1917. Niagara Mohawk Power Corp. v. PSC, supra,

69 N.Y.2d at 370, 507 N.E.2d at 290, 514 N.Y.S.2d at 697. A

1981 statute confirmed the PSC’s power to review for impru-

dence the charges that had been passed on pursuant to FACs.

L. 1981, c. 304, adding N.Y. Public Service Law § 66(12)(k).

This statute recognized and “in no way change[d] the important

safeguards of due process for the utilities already set forth in the

Public Service Law.” Memorandum for the Governor From

Attorney General Robert Abrams, June 23, 1981, at 3, in

2 “A” citations are to the joint appendix in the court of appeals.

Governor’s Bill Jacket for L. 1981, c. 304.

In a number of proceedings over the years, the PSC has

considered the prudence of replacement power costs associated

with nuclear plant outages. These proceedings have established

several important principles. First, the standard of imprudence

in cases dealing with nuclear plant outages is the same standard

that applies in imprudence proceedings generally — reasonable-

ness under the circumstances as they existed at the time the

utility acted. See, e.g., Niagara Mohawk Power Corp., 24

N.Y.P.S.C. 6205, 6211 & nl, 6226 (1984); Consolidated

Edison Co., 22 N.Y.P.S.C. 98, 105-08 (1982). Second, even

where imprudence is found, no disallowance will be made for

those portions of outages that would have been necessary in any

event for maintenance, refueling, or installation of new equip-

ment. See, e.g., Niagara Mohawk Power Corp., 31 N.Y.P.S.C.

1745, 1765-68 (1991); Consolidated Edison Co., 34N.Y.P.S.C.

663, 678 (1994). Finally, the PSC’s consideration of this issue

has included all of the procedural safeguards which apply in

imprudence proceedings generally. See, e.g., Niagara Mohawk

Power Corp., supra, 24 N.Y.P.S.C. at 6209.

During the relevant period, the electric rates of respondent

Consolidated Edison Company of New York, Inc. (“Con

Edison”) were fixed by an agreement entered into by Con

Edison, the PSC staff, the New York State Department of Law,

and many other parties (A427-A546), which was approved by

the PSC in 1997 (A417-A425, A553-A669). This agreement

provided for rate reductions of more than $1.1 billion (A441-

A443), as well as the divestiture of Con Edison’s fossil fuel

generating plants (A477-A479). As part of the overall agree-

ment between the parties, the agreement provided that Con

Edison would recover through the FAC the cost of purchasing

energy in the volatile and now unregulated wholesale market

(A158-A166, A467-A468, A1359). The FAC expressly pro-

vided that cost increases or savings relating to the operation of

Con Edison’s Indian Point 2 nuclear plant would be charged or

credited to customers through the FAC, except that Con Edison

would retain or bear 30% of such cost changes up to a maxi-

mum of $10 million per year (A130-A131, A163).’

B. The Indian Point 2 Nuclear Plant and the Febru-

ary 2000 Outage

Beginning in 1974, Con Edison operated the Indian Point 2

nuclear power plant (“Indian Point 2”) in Westchester County,

New York (A30). Indian Point 2 is a pressurized water reactor

plant, in which hot, pressurized, radioactive primary water from

the nuclear reactor vessel is pumped through tubes in four

steam generators, where it is used to vaporize nonradioactive

secondary water into steam which is used to generate electricity

(A40-A41, A267-A268).

Westinghouse manufactured two models of steam generators

(Models 44 and 51) that had tubes made of the same metal

alloy, Inconel 600 (A41, A726-A727). Westinghouse delivered

these models to approximately 30 nuclear plants in the United

States (A42). In the 1970s, it was discovered that Inconel 600

was susceptible to corrosion in certain environments (A41,

A727). Asa result, Con Edison and many other utilities sued

Westinghouse. See, e.g., Consolidated Edison Co. v. Westing-

house Elec. Corp., 567 F. Supp. 358, 360 (S.D.N.Y. 1983).

Because petitioner Brodsky wrongly claims that it is “undis-

puted” that Con Edison was negligent in not replacing the steam

generators sooner than it did (Brodsky Pet. 27), it is important

to note that Con Edison carefully considered whether this

would be in the best interests of its customers. Premature

installation would have cost customers over $100 million in

3 The Brodsky petition asserts that Com Edison was the only New

York utility with a fuel adjustment clause covering nuclear plant outages

(Brodsky Pet. 3), but this is inaccurate (A673, A1359).

construction costs, plus the cost of purchasing replacement

power during the installation (A43). Con Edison, like many

other nuclear plant operators, was successful in combating

corrosion in the steam generators by making changes in water

chemistry and other aspects of plant operation (A42).* Indeed,

Con Edison’s success in stopping the corrosion was used

against it by Westinghouse in defending against Con Edison’s

warranty claim. See Consolidated Edison Co. v. Westinghouse

Elec. Corp., 594 F. Supp. 698, 699 (S.D.N.Y. 1984) (“[t]he

corrosion of the steam generators at Indian Point Unit 2 is

essentially arrested” and “if the current condition of the steam

generator continues, the steam generator should serve the life of

the plant”).

Con Edison’s operation of the Indian Point 2 plant, including

its steam generators, was subject to extensive regulation by the

Nuclear Regulatory Commission (“NRC”) (see A46-A54). As

required by the NRC, the steam generator tubes were inspected

by highly trained specialists every two years, and the inspec-

tions were reported in detail to the NRC (see A43-A44, A1229-

A1282).

On February 15, 2000, one of the 13,000 steam generator

tubes at Indian Point 2 experienced a two-inch crack, allowing

a small quantity of radioactive primary water to leak through

the tube wall (A40, A44, A56). The leak was immediately

detected, and the plant was manually shut down by the opera-

tors (A44, A56-A58). It is undisputed that the incident did not

affect the health or safety of any member of the public (A59-

* As of January 1997, approximately 16 of the 30 plants built with

Westinghouse Model 44 and 51 steam generators in the United States were

still using their original steam generators (A42). Petitioners’ statement that

Con Edison was the only utility that did not replace the Model 44 steam

generators (Pataki Pet. 3; Brodsky Pet. 2) is misleading because it ignores the

15 plants still using Model 51 steam generators, which used the identical

Inconel 600 alloy (see A1359).

EN EE |

A61, A72). Indeed, the releases represented a small fraction of

the normal amount of background radiation (A59-A60).

Shortly after the incident, Con Edison found the leak and

plugged the affected tube (A44). During the period from

February through June 2000 (a substantial portion of which

coincided with a pre-planned refueling and maintenance

outage), Con Edison inspected all of the steam generator tubes

at Indian Point 2, and reported its findings to the NRC (A44-

A45, A1360; A1375). In August 2000, Con Edison decided to

install new steam generators before restarting the plant (A37).

Following installation of the new steam generators, the plant

resumed operations in January 2001.

Because the cost of generating electricity at the Indian Point

2 plant was substantially less than the price of replacement

power,’ the unavailability of the plant during the outage resulted

in increased energy costs of about $250 million. It is undis-

puted in the record that more than haif of this amount was

attributable to the time required for refueling, maintenance, and

installation of the new steam generators, all of which would

have been required even if the new steam generators had been

installed earlier, as the petitioners argue they should have been

(A1360, A1375). Under the legal standards applied by the PSC,

the time required for these purposes would not be included in

any disallowance (see p. 4 supra).

C. The PSC’s Investigation of the Outage and Its

Holding That There Was as Yet No Record Basis

for a Finding of Imprudence

Immediately after the February 15, 2000 outage, the PSC

staff began to investigate the outage (A55-A69, A213). On

> It is estimated that Con Edison’s operation of the Indian Point 2

plant saved customers more than $3 billion in electricity costs since it

commenced service in 1974 (A124-A125, A223).

March 30, 2000, the PSC commenced a formal proceeding to

investigate the prudence of the outage (A71-A76). The PSC

emphasized that the standard of prudence to be applied in the

proceeding would be the standard that it had previously applied

in such cases, namely, “how reasonable people would have

performed the tasks that confronted the company” (A75).

Westchester County petitioned the PSC to suspend the

operation of Con Edison’s FAC, arguing that Con Edison was

imprudent because it was the only utility that had not replaced

its Westinghouse Model 44 steam generators (A347-A353) —

exactly the argument accepted by the Legislature in the Indian

Point Law. The PSC rejected the Westchester County petition

(A167-A173). The PSC held that “there is, as yet, no record

basis on which one could conclude that there is a substantial

likelihood that Con Edison acted imprudently” (A172). The

PSC emphasized that Westchester County’s argument failed to

take account of the established iegal standard of imprudence:

“The unanswered allegations in the Westchester

Petition do not address the circumstances existing at

the time the decisions were made, nor do they mea-

sure those decisions against the ‘reasonableness’

standard.” (Id.)°

-D. TheAssembly’s Condemnation of Con Edison and

Its Passage of the Indian Point Law

On March 3, 2000, three committees of the New York State

Assembly held a joint hearing, which was chaired by petitioner

Brodsky (A783-A979). Although the Brodsky petition implies

that this hearing gave the Legislature a factual basis for the |

° Petitioners incorrectly state that the PSC proceeding has been

informally stayed during the pendency of this case (Pataki Pet. 5 n.2). In

fact, the parties are involved in extensive discovery proceedings, and the

filing of testimony is scheduled for February 14, 2003.

<<< °° °° — |

Indian Point Law (Brodsky Pet. 3-4), the notice of the hearing

did not include any issue relating to imprudence (see A215-

A217), and at the hearing petitioner Brodsky referred to the

subject of imprudence only as an “assumption” that he had “no

reason” to think was true:

“Assume for a second — and I’m putting it out as an

assumption — I have no reason to think it’s true — but

assume that Con Ed itself would have acted negli-

gently in some way with respect to the cause or

control of the incident, would that change your legal

ability to collect from ratepayers the fuel adjustment

charge?” (A919-A920.)

Although petitioner Brodsky had no reason to think Con

Edison was imprudent on March 3, 2000, he had changed his

mind by March 20, 2000, when he co-sponsored a bill, together

with 56 other Assembly members, which declared that “the

Consolidated Edison Company failed to exercise reasonable

care on behalf of the health, safety and economic interests of its

customers” (A77). The accompanying sponsors’ memorandum

explained that this finding of imprudence was based on Con

Edison’s failure to replace its Model 44 steam generators when

other nuclear plant operators had replaced theirs (A79) — the

exact same rationale which the PSC rejected as incompatible

with the established legal standard of imprudence (see p. 8

supra).

On March 27, 2000, only one week after the bill was intro-

duced, it passed the New York State Assembly by a lopsided

vote of 137 to 10 (A1045). Assembly members voting for the

bill condemned Con Edison’s conduct (e.g., “ConEdison has

not kept the safety of the people in the surrounding areas and

beyond upper most in their mind” (A89)), stressed safety issues

that are within the exclusive jurisdiction of the NRC under the

Atomic Energy Act (e.g., “the implications when a plant is not

running safely has great implications for the rest of the State”

(A88)); and expressed a lack of confidence in the PSC and the

NRC (e.g., “And I would just like to say that the systems that

we have in place, be they the PSC, the NRC, ConEdison, they

really have not been working for us” (id.)).

E. The PSC’s Warning That There Was No Factual

Basis for the Indian Point Law and That It Was

Probably Unconstitutional

At this point, the PSC issued an extraordinary and unprece-

dented warning to the Legislature about the bill which had

already passed the Assembly.

In a letter to members of the Legislature (A8 1-A82), the PSC

stated that there was no factual basis for the bill’s finding of

imprudence on the part of Con Edison:

“A. 10096, a bill introduced by Speaker Silver and

passed by the Assembly, would prohibit Consolidated

Edison from recovering any costs of replacement

power. This prohibition is based on a proposed .

legislative finding that failure to replace IP 2 genera-

tors caused increased risk of radioactive leakage or

plant outages. Until the investigations and proceed-

ings are completed, there is no basis for such a

finding. We, therefore, request that the Assembly

recall the bill from the Senate and reconsider its

passage pending the Commission’s prudence investi-

gation.” (A81.)

The PSC further explained that the bill was not needed to

fulfill its stated purpose, because the PSC already had the power

to disallow imprudent fuel adjustment expenses (A81). Finally,

the PSC issued a thinly veiled warning that the bill was

probably unconstitutional because of the manner in which it

targeted a single incident involving Con Edison (A82).

F. The Senate’s Passage of the Indian Point Law and

the Senate Sponsor’s Avowal of His Intent to

Punish Con Edison

The PSC’s warning did not deter the New York State Senate

from approving the bill by a margin even more lopsided than

the Assembly’s. On May 24, 2000, the Senate voted 57 to | in

favor of the bill (A1045-A1046).

Members of the Senate who voted for the bill roundly

condemned Con Edison’s conduct (e.g., “they choose to do it

any way they want” (A96)), and declared that Con Edison

should be punished (e.g., “they should certainly be penalized for

taking our health and toying with it” (A109)).”_ Especially

telling were the statements of the Senate sponsor of the bill,

Senator Velella. Senator Velella declared that “Con Edison has

done a terrible thing here” and that “they put lives at risk”

(A103). What is more, he proclaimed that “Velella’s Law is

going to stop them and punish them” (A104). It would be hard

to imagine a more forthright or emphatic declaration of con-

demnation and punitive intent.

Governor Pataki approved the bill on August 8, 2000 (A414-

A415). In approving the bill, the Governor made clear that he

would not normally approve “legislation that usurps the PSC’s

authority in this area,” but he said that he would do so in this

“exceptional case” (A415).

On August 9, 2000, the day after the Governor's approval of

the Indian Point Law, the PSC issued an order implementing

the law (A116-A122). The PSC held that, because the law

mandated the disallowance of al/ Indian Point replacement

power charges, it could not reduce the disallowance to take

7 In fact, both the state and the NRC investigations concluded that

there was no offsite release of radioactivity and no risk to the public health

(Pataki Pet. 3a).

account of refueling or repair outages (A120), as it normally

does (see p. 4 supra). This alone more than doubled the

magnitude of the deprivation (see p. 7 supra).

G _ The Critical Differences Between the Indian Point

Law and the Substantive and Procedural Stan-

dards of Imprudence Applied in All Other Cases

There are crucial differences between the Indian Point Law

and the substantive and procedural standards applied by the

PSC in other cases.

Among the substantive differences between the Indian Point

Law and the legal standards applicable in all other cases are the

following:

¢ The legal standard of prudence applied by the PSC is a

standard of reasonableness based upon the circumstances as

they existed at the time the utility acted (see pp. 3, 4 supra).

The Indian Point Law did not apply this standard, but instead

was based upon post hoc reasoning of a kind which the PSC

held did not even establish a substantial likelihood of

imprudence in this case (see pp. 8, 9 supra).

¢ The PSC has held that no disallowance will be made for

outages that would have been necessary in any event for

refueling, maintenance, and installation of new equipment

(see p. 4 supra). The Indian Point Law mandated the

inclusion of such outages in the disallowance (see pp. 11-12

supra). As noted above, this alone more than doubled the

magnitude of the deprivation (see pp. 7, 12 supra).

The procedural differences between the Indian Point Law and

the legal standards governing the PSC in other cases are equally

striking. Among the procedural rights which were denied here

are the following:

¢ The right to notice of the asserted grounds for a finding of

imprudence (see pp. 3, 9 supra);

* The right to an evidentiary hearing at which the utility is able

to present and cross-examine evidence on all issues of

imprudence (see pp. 3, 9 supra); and

¢ The right to a reasoned decision by the PSC and to judicial

review of any disallowance pursuant to Article 78 of the

CPLR (see pp. 3, 11-12 supra).

REASONS FOR DENYING THE WRIT

I. This Case Presents No Issue Calling for Review by

This Court

A. There Is No Conflict Among Courts Concern-

ing the Applicability of the Bill of Attainder

Clause to Corporations

Petitioners argue that this Court should grant certiorari to

settle the issue of the applicability of the Bill of Attainder

Clause to corporations (Pataki Pet. 8-17; Brodsky Pet. 19-29).

But there is no conflict on this issue for this Court to resolve.

Every court that has considered the issue has held or assumed

that the Bill of Attainder Clause applies to corporations — an

assumption which has typically been shared by all of the parties

before them, despite the fact that they disagreed sharply on the

other issues raised.* No court has ever suggested that the Bill

® See, e.g., Club Misty, Inc. v. Laski, 208 F.3d 615, 617 (7th Cir.)

(assuming, without deciding, that corporations as well as individuals are

protected by the Bill of Attainder Clause), cert. denied, 531 U.S. 1011

(2000); Navegar, Inc. v. United States, 192 F.3d 1050, 1065 (D.C. Cir.

1999) (stating that a bill of attainder is a law that “specifically singles out

individuals (or businesses) and imposes punishment on them”), cert. denied,

531 U.S. 816 (2000), BellSouth Corp. v. FCC, 162 F.3d 678, 684 (D.C. Cir.

1998) (parties assumed “that the Bill of Attainder Clause protects corpora-

tions as well as individuals”); SBC Communications, Inc. v. FCC, 154 F.3d

of Attainder Clause does not apply to corporations.

In light of this broad consensus on the issue, there is simply

no conflict calling for resolution by this Court.’ It will be time

enough for this Court to intervene if any court should ever hold

that the Bill of Attainder Clause does not apply to corporations. |

As the court of appeals noted (Pataki Pet. 12a), this Court has

twice indicated that the Bill of Attainder Clause protects

corporations and other entities as well as individuals. See Plaut

v. Spendthrift Farm, Inc., 514 U.S. 211, 239 n.9 (1995) (“Even

laws that impose a duty or liability upon a single individual or

firm are not on that account invalid — or else we would not have

the extensive jurisprudence that we do concerning the Bill of

Attainder Clause... .”); South Carolina v. Katzenbach, 383

U.S. 301, 324 (1966) (Bill of Attainder Clause protects

“individual persons and private groups, those who are pecu-

liarly vulnerable to nonjudicial determinations of guilt”).

As this Court explained in First Nat’l Bank of Boston v.

Bellotti, 435 U.S. 765, 779 n.14 (1978), the only constitutional

provisions that do not extend to corporations are those “‘purely

personal’ guarantees” whose “‘historic function’ has been

limited to the protection of individuals,” such as the privilege

against self-incrimination. The Bill of Attainder Clause is not

226, 234 & n.11 (Sth Cir. 1998) (assuming “that the Bill of Attainder Clause

applies to corporations” and citing six similar constitutional provisions which

have been applied to corporations), cert. denied, 525 U.S. 1113 (1999);

BellSouth Corp. v. FCC, 144 F.3d 58, 63 (D.C. Cir. 1998) (“We assume, as

do the parties, that the Bill of Attainder Clause protects corporations as well |

as individuals”), cert. denied, 526 U.S. 1086 (1999).

* The strength of the consensus that exists on this issue is indicated by

the fact that the petitioners’ argument that the Bill of Attainder Clause does

not apply to corporations represents an afterthought on their part. None of

the petitioners made this argument in the district court (see Pataki Pet. 43a

n.4), and petitioner Brodsky was the only petitioner who advanced the

argument in the court of appeals (see Pataki Pet. 8-9 n.4).

such a “purely personal guarantee.”

“To prohibit legislative Acts ‘contrary to the first principles

of the social compact and to every principle of sound legisla-

tion,’ the Framers included provisions they considered to be

“perhaps greater securities to liberty and republicanism than any

{the Constitution] contains.” Carmell v. Texas, 529 U.S. 513,

521 (2000) (quoting The Federalist No. 44, at 282 (C. Rossiter

ed. 1961) (J. Madison) and id. No. 84, at 511 (A. Hamilton)).

These provisions, all embodied in Article I, § 10 of the Consti-

tution, are the Bill of Attainder Clause, the Ex Post Facto

Clause, and the Contract Clause. Carmell v. Texas, supra, 529

U.S. at 521; see also, e.g., Fletcher v. Peck, 10 U.S. (6 Cranch)

87, 137-38 (1810). The Bill of Attainder Clause, like “its

textual and conceptual neighbor” the Ex Post Facto Clause,

“aims to ensure that legislatures do not meddle with the judi-

Ciary’s task of adjudicating guilt and innocence in individual

cases.” Carmell v. Texas, supra, 529 U.S. at 566 (Ginsburg, J.,

dissenting); see also, e.g., Cummings v. Missouri, 71 U.S. (4

Wall.) 277, 323-25 (1866).

Thus the Bill of Attainder Clause, like the Ex Post Facto

Clause and the Contract Clause, is a limitation on legislative

power, not a purely personal right. For this reason, this Court

has repeatedly entertained claims by corporations under the Ex

Post Facto Clause and under the Contract Clause."' By the

same token, corporations are entitled to invoke the protections

of the Bill of Attainder Clause.

(1915); Kentucky Union Co. v. Kentucky, 219 U.S. 140, 152-53 (1911);

Waters-Pierce Oil Co. v. Texas, 212 U.S. 86, 107-08 (1909).

"See, e.g., General Motors Corp. v. Romein, 503 U.S. 181, 186-91

(1992); Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S.

400, 410-19 (1983); Allied Structural Steel Co. v. Spannaus, 438 U.S. 234,

250-51 (1978).

That the Bill of Attainder Clause is not merely a personal

right is also clear from the text of the Constitution itself. The

Constitution does not say merely that individuals have a right

not to be victimized by bills of attainder. Instead, it says,

categorically and without exception, that “[n]o State shall . . .

pass any Bill of Attainder... .” U.S. Const., Art. I, § 10

(emphasis supplied). It follows that any victim of a bill of

attainder — whether a natural or a juridical person — may invoke

the constitutional prohibition.

The teaching of history is to the same effect. Historically,

bills of attainder have been directed not only against individu-

als, but also against groups and against corporate entities such

as boroughs.’ And this Court has struck down bills of attainder

directed against groups, as well as against named individuals.

See, e.g., United States v. Brown, 381 U.S. 437, 461 (1965)

(striking down bill of attainder directed against the Communist

Party); Cummings v. Missouri, 71 U.S. (4 Wall.) 277, 323-35

(1866) (striking down bill of attainder directed against ex-

Confederates).'* There is no reason why the constitutional

protection against being singled out for punishment without the

safeguards of a judicial trial should not apply to all.

For all these reasons, there is no need for this Court to take

up the issue of the applicability of the Bill of Attainder Clause

2 See, e.g., Cummings v. Missouri, 71 U.S. (4 Wall.) 277, 323 (1866);

see also, e.g., 1 & 2 Geo. 4, c. 47 (1821) (stripping a borough of its seats in

Parliament on a finding of bribery and corruption); 22 Geo. 3, c. 31, § 1

(1781) (changing the qualifications for voting in a borough on a finding of

bribery and corruption); 11 Geo. 3, c. 55, § 2 (1771) (same).

'3 Petitioners argue that the Bill of Attainder Clause was intended to

protect “disfavored” persons (Pataki Pet. 16; Brodsky Pet. 21-23). As the

district court observed (with considerable understatement), Con Edison,

“although not the prototypical powerless victim of constitutional overreach-

ing by any stretch of the imagination, is clearly politically unpopular” (Pataki

Pet. 49a).

cenenieaemneaaeemaa ei tea

to corporations — an issue on which there is no conflict among

courts, and on which not a single judge of any court has

espoused petitioners’ position.

B. The Court of Appeals Correctly Applied the

Standards Articulated by This Court Under

the Bill of Attainder Clause, and Petitioners’

Argument to the Contrary Disregards the

Facts Found Below

Petitioners argue that review by this Court is necessary

because the court of appeals supposedly departed from the

standards articulated by this Court under the Bill of Attainder

Clause, and allegedly created a new test focusing on “less

burdensome alternatives” (Pataki Pet. 17-25; Brodsky Pet. 8-

15).

Nothing could be further from the truth. Petitioners’ argu-

ment is based on a palpable misreading of the decision of the

court of appeals. Far from creating a new legal standard, the

court of appeals correctly applied the Bill of Attainder Clause

standards set forth by this Court in Selective Service System v.

Minnesota Public Interest Research Group, 468 U.S. 841

(1984), and Nixon v. Administrator of General Services, 433

U.S. 425 (1977), to the facts it found based on the uncontra-

dicted record in this case.

The three essential elements of a bill of attainder, as defined

by this Court, are “specification of the affected persons,

punishment, and lack of a judicial trial.” Selective Service

System v. Minnesota Public Interest Research Group, supra,

468 U.S. at 847.

Petitioners do not dispute (see Pataki Pet. 7; Brodsky Pet. 6)

that the first and third elements of a bill of attainder — “specifi-

cation of the affected persons” and “lack of a judicial trial” -

are present in this case, as both courts below found (Pataki Pet.

10a, 16a-17a, 46a). The sole element disputed by petitioners is

whether the Indian Point Law imposed “punishment,” as both

courts below also found (Pataki Pet. 17a-28a, 47a-54a).

This Court has formulated a tripartite inquiry for use in

assessing whether a statute imposes punishment within the

meaning of the Bill of Attainder Clause:

“(1) whether the challenged statute falls within the

historical meaning of legislative punishment; (2)

whether the statute, ‘viewed in terms of the type and

severity of burdens imposed, reasonably can be said

to further nonpunitive legislative purposes’; and (3)

whether the legislative record ‘evinces a congressio-

nal intent to punish.” Selective Service System v.

Minnesota Public Interest Research Group, supra,

468 U.S. at 852 (quoting Nixon v. Administrator of

General Services, supra, 433 U.S. at 473, 475-76,

478).

These factors are to be weighed together in determining

whether a statute imposes punishment, and it is not essential

that all three factors be satisfied. See Nixon v. Administrator of

General Services, supra, 433 U.S. at 475-76.

The court of appeals carefully weighed each of the three

factors identified by this Court (Pataki Pet. 19a-28a). Petition-

ers assert that the court found that the first and third factors

were not satisfied (Pataki Pet. 18; Brodsky Pet. 7, 12), but this

is not so. Rather, the court held that it did not need to decide

whether the historical test was met because the functional test

was Clearly satisfied (Pataki Pet. 20a). And, while the court

stated that it did not rely on the evidence of legislative intent ~

alone, it found that some legislators (including the Senate

sponsor of the law) “unquestionably intended to punish Con

Ed,” and that this reinforced its independent conclusion based

on the functional test (Pataki Pet. 28a).

aa mF

Addressing the functional test, the court of appeals stressed

— as had the district court (Pataki Pet. 53a) — that the record

showed that a “quite substantial proportion” of the costs that the

Legislature disallowed by the Indian Point Law would have

been incurred even if the steam generators had been replaced

earlier, and that their disallowance therefore could not be said

to serve a compensatory function (Pataki Pet. 24a-27a).'

Petitioners argue that the court of appeals thereby required “a

precise fit” between the statute and its supposedly compensa-

tory goals (Pataki Pet. 20; emphasis in original).

This argument is flatly contrary to the record facts. The

record established that 60% of the total period of the outage —

that is, $150 million of the total deprivation of $250 million

mandated by the law — was accounted for by a pre-planned

refueling and maintenance outage and by the installation of the

new steam generators, both of which would have taken place

even if the steam generators had been installed earlier (A1360,

A1375). The petitioners did not contest this crucial Jact;

indeed, they waived an evidentiary hearing in the district court

(Pataki Pet. 6). Thus, far from requiring a “precise fit” between

the law and the quantum of compensatory damages, the court

below simply made the obvious finding, based on the uncontra-

dicted record, that a deprivation that exceeded compensatory

damages by roughly $150 million imposed punishment (Pataki

Pet. 25a-26a).

In so finding, the court of appeals followed the teaching of

this Court in Nixon v. Administrator of General Services, supra,

433 U.S. at 482, that “[i]n determining whether a legislature

sought to inflict punishment on an individual, it is often useful

to inquire into the existence of less burdensome alternatives.”

‘* These are precisely the costs that would not have been disallowed

by the PSC even if it had made a finding of imprudence (see p. 4 supra), but

whose disaliowance was mandated by the Legislature (see pp. 11-12 supra). .

While the petitioners try to argue that this statement applied

only to the purpose test (Pataki Pet. 22-23; Brodsky Pet. 13),

this Court made clear in Nixon that the same principle applies

to the functional test. See Nixon, supra, 433 U.S. at 475-76 (in

applying the functional test, the law under challenge must be

“viewed in terms of the type and severity of burdens imposed”

(emphasis supplied)). Thus the court of appeals did not create

a new “less burdensome alternatives” test, but simply applied

the teaching of this Court that a law that imposes a deprivation

of property going far beyond compensation must be viewed as

imposing punishment.

Thus petitioners’ argument that the court of appeals applied

a new “less burdensome alternatives” test is founded on a

misreading of the decision below and of this Court’s decision

in Nixon, and is contrary to the uncontradicted facts established

by the record in this case."°

C. The Decision Below Will Not Result in the

Ruinous Consequences Predicted by Petition-

ers, Because the Indian Point Law Is — for

Good Reason - Literally Unique in the An-

nals of American Jurisprudence

Petitioners vie with each other to predict disastrous conse-

quences if the decision below is not reversed, saying, for

example, that it will “expose numerous laws regulating busi-

nesses to constitutional challenge” (Pataki Pet. 12), and that it

will “endanger economic regulatory decisions made by legisla-

'S Petitioners try to manufacture a conflict between the holding of the

court below and the statement of the District of Columbia Circuit in

BellSouth Corp. v. FCC, 162 F.3d 678, 689 (D.C. Cir. 1998), that “it does

not matter that Congress arguably could have enacted different legislation”

(Pataki Pet. 24; Brodsky Pet. 9, 10), but there is no such conflict, because the

BellSouth court was not confronted with a statute that imposed a deprivation

of property that was concededly far in excess of compensatory damages.

———

tive bodies across the nation” (Brodsky Pet. 14). There is no

basis for these hyperbolic claims.

The fact is that the Indian Point Law is literally unique in the

annals of American jurisprudence. Petitioners have cited — and

we have found — no other case since the ratification of the

Constitution in which a legislative body has (1) tried and

determined the issue whether a specific person was at fault in

connection with a specific past occurrence, (2) imposed a

deprivation far exceeding the amount of compensation, and, to

make matters worse, (3) retrospectively applied different

substantive standards than those applicable to all other persons

and occurrences.’* Only a law that does all of these things — or

at least the first two of them — has anything to fear from the

decision below. The court of appeals rightly stressed “the

extraordinary scarcity of legislation of [this] type” which is not

only “so exceptionally narrow in scope,” but also “manifestly

retrospective in focus, and unavoidably punitive in operation”

(Pataki Pet. 29a).

In particular, contrary to petitioners’ argument (Pataki Pet.

25-26; Brodsky Pet. 16-18), the decision below does not

threaten the legislative power to set utility rates which this

Court reaffirmed in Duquesne Light Co. v. Barasch, 488 U.S.

299, 313 (1989). As the court of appeals correctly emphasized

(Pataki Pet. 17a), the Indian Point Law was not a prospective

measure setting utility rates for the future, but rather was a

retrospective adjudication of Con Edison’s supposed impru-

dence in the context of the electric rates which had already been

set by the PSC for Con Edison back in 1997 (see pp. 2-3, 4-5

' Before the adoption of the Constitution, as this Court explained in

Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 219-22 (1995), such instances

of legislative overreaching were not uncommon, but it was one of the

fundamental goals of the Framers of the Constitution to end such abuses. See

id. at 222-25; see also, e.g., Carmell v. Texas, 529 U.S. 513, 521 (2000).

aN io cere ee are

supra).'’ When these facts are combined with the punitive

nature of the deprivation imposed by the law, it becomes

obvious that the decision below poses no threat to any legisla-

ture that wishes to return to the 19th-century practice of setting

utility rates itself. The decision below simply reminds us that,

whatever power it purports to exercise, the Bill of Attainder

Clause requires a legislature to avoid punitive deprivations

based on retrospective adjudications of guilt in individual cases.

Il. The Issues Raised by Petitioners Are Not Determina-

tive of This Case, Because the Indian Point Law Is

Invalid for Additional Reasons Which Were Not

Reached by the Court Below

In addition to the Bill of Attainder Clause, which was the

ground on which both courts below invalidated the Indian Point

Law, Con Edison also contended below that the law is invalid

as (a) a denial of equal protection, (b) a denial of procedural due

process, (c) an attempt to regulate nuclear health and safety that

is preempted by the Atomic Energy Act, and (d) a violation of

the Contract Clause (A22-A27). Although the court of appeals

found it unnecessary to reach these additional grounds, their

presence makes it even more clear that the issues sought to be

raised by petitioners are not determinative of the result in this

case."®

A. Equal Protection

In addition to finding that the Indian Point Law violated the

'7 Tt was conceded below that the Legislature’s action here was an

adjudication (A1379).

18 Tt is well established that a respondent in this Court may “defend its

judgment on any ground properly raised below whether or not that ground

was relied upon, rejected, or even considered by the District Court or the

Court of Appeals.” Washington v. Confederated Bands & Tribes of Yakima

Indian Nation, 439 U.S. 463, 476 n.20 (1979).

Bill of Attainder Clause, the district court also found that it

violated the Equal Protection Clause (Pataki Pet. 35a-42a). The

Court of Appeals did not reach this question, although it

expressed doubt that the law denied equal protection (Pataki

Pet. 8a-9a n.2).

The Indian Point Law singles out a single utility — Con

Edison — and a single past incident — the February 2000 outage

at Indian Point. This alone does not necessarily mean that the

law denies equal protection, because “[e]ven laws that impose

a duty or liability upon a single individual or firm are not on

that account invalid... .” Plaut v. Spendthrift Farm, Inc., 514

U.S. 211, 239 n.9 (1995). However, a law that defines a “class

of one” is not automatically valid either. The question here, as

in most equal protection cases, is whether there is a rational

basis for having one set of substantive and procedural rules

applicable only to Con Edison, and a different set applicable to

all other utilities in the state. See, e.g., Village of Willowbrook

v. Olech, 528 U.S. 562, 564 (2000).

The law created two classes of utilities. One class (all other

utilities) has substantive and procedural rights with respect to

the issue of imprudence (see pp. 12-13 supra). The other class

(Con Edison) has none of these rights (see id.).'° The petition-

ers argued below that the use of different rules for Con Edison

was rational because it was the only utility in the state that still

used Westinghouse Model 44 steam generators (Pataki Pet.

39a-40a). But, as the district court pointed out (id.), there is no

reason why the legal standards governing imprudence should be

changed for a single outage merely because the outage involved

one type of equipment rather than another.

'* The critical importance of these differences is demonstrated by the

fact that the very factors which the PSC had held were insufficient to give

rise to a substantial likelihood of imprudence formed the basis for the

Legislature’s finding of imprudence (see pp. 8, 9 supra).

iii earl

This case exemplifies the wisdom of Justice Jackson’s now-

classic observation in his concurring opinion in Railway

Express Agency, Inc. v. New York, 336 U.S. 106, 113 (1949),

that “[c]ourts can take no better measure to assure that laws will

be just than to require that laws be equal in operation.” See

also, e.g., McFarland v. American Sugar Refining Co., 241

U.S. 79, 86-87 (1916) (Holmes, J.) (if the legislature were to

declare a single company presumptively guilty of monopoliza-

tion, “we suppose that no one would contend that the [com-

pany] was given the equal protection of the laws”).

B. Procedural Due Process

Procedural due process analysis proceeds in two steps: “we

inquire whether the State has deprived the claimant of a

protected property interest, and whether the State’s procedures

comport with due process.” Lujan v. G & G Fire Sprinklers,

Inc., 532 U.S. 189, 195 (2001) (citation omitted).

As the court of appeals found (Pataki Pet. 20a), the Indian

Point Law clearly deprived Con Edison of a property interest,

because the FAC in Con Edison’s tariff approved by the PSC in

1997 entitled Con Edison to recover a specified portion of the

increased energy costs caused by an outage, unless the PSC

made a finding of imprudence after a hearing (see pp. 2-5

supra). “A state-created entitlement that cannot properly be

eliminated except for cause is a property right of which the

holder may not be deprived without procedural due process.”

RR Village Ass'n, Inc. v. Denver Sewer Corp., 826 F.2d 1197,

1201 (2d Cir. 1987) (citing, inter alia, Cleveland Bd. of Educ.

v. Loudermill, 470 U.S. 532, 538-39 (1985)). Indeed, a utility’s

due process right to a hearing on the issue of imprudence has

been expressly recognized by the New York State Attorney

General (see pp. 3-4 supra).

In United States v. Florida East Coast Ry., 410 U.S. 224, 245

(1973), this Court, after reviewing its prior decisions, formu-

lated the following general standard differentiating the policy-

type proceedings in which no hearing is required by due process

from the quasi-adjudicatory proceedings in which a hearing is

required:

“[T]hese decisions represent a recognized distinction

in administrative law between proceedings for the

purpose of promulgating policy-type rules or stan-

dards, on the one hand, and proceedings designed to

adjudicate disputed facts in particular cases on the

other.”

The issue of imprudence raised in this case is quintessentially

a quasi-adjudicatory issue on which a hearing is required,

because it is a “proceeding[] designed to adjudicate disputed

facts in [a] particular case[].” As the PSC admitted below,

“[t]his was an adjudicatory act” (A1379). New York law

explicitly recognizes the utility’s right to an evidentiary hearing

on this issue (see pp. 3-4 supra).

The procedures followed by the State Legislature in enacting

the Indian Point Law clearly did not comport with due process,

as both courts below found (Pataki Pet. 10a, 46a). The law thus

violated Con Edison’s due process rights.

C. Atomic Energy Act Preemption

As the court of appeals noted (Pataki Pet. 23a-24a), “the

Federal Government has occupied the entire field of nuclear

safety concerns, except the limited powers expressly ceded to

the States.” Pacific Gas & Elec. Co. v. State Energy Resources

Conservation & Dev. Comm'n, 461 U.S. 190, 212 (1983).

Therefore, state regulation of nuclear power plant safety is

preempted if either the purpose or the effect of the state

regulation is to regulate nuclear power plant safety. See, e.g.,

English v. General Elec. Co., 496 U.S. 72, 84 (1990). The

Indian Point Law is preempted under both of these tests.

First, the Indian Point Law proclaimed on its face its purpose

to regulate nuclear power plant safety, saying, for example, that

“(rjate regulation of nuclear operators should discourage the

taking of risks with regard to potential threats to public health

and safety” (Pataki Pet. 2; emphasis supplied). Both the

Assembly and the Senate debates contained repeated accusa-

tions that Con Edison had endangered the public health and

safety, despite the undisputed fact that the February 2000 leak

did not result in any such danger (see pp. 6-7 supra). See, e.g.,

A89 (“ConEdison has not kept the safety of the people in the

surrounding areas and beyond upper most in their mind”); A109

(“they should certainly be penalized for taking our health and

toying with it”). Thus the Indian Point Law clearly had the

forbidden purpose to regulate nuclear power plant safety.”°

Second, any state statute that “seek[s] to regulate the con-

struction or operation of a nuclear powerplant” is preempted

because, “even if enacted out of non-safety concerns, [it] would

nevertheless directly conflict with the NRC’s exclusive

authority over plant construction and operation.” Pacific Gas

& Elec. Co. v. State Energy Resources Conservation & Dev.

Comm'n, supra, 461 U.S. at 212. In the present case, the Indian

Point Law effectively mandated the replacement of the existing

steam generators, whether or not their use was consistent with

the NRC’s regulations and directives, by the simple but

effective device of disallowing all replacement power costs

“until the conciusion of such outage, or incurred at any time

until all defective steam generation equipment at the facility has

economic purpose as well as a safety purpose, but comparable questions have

been addressed by this Court under other federal statutory schemes, and have

been answered in the negative. See, e.g., Gade v. National Solid Wastes Mgt.

Ass'n, 505 U.S. 88, 104-08 (1992); Perez v. Campbell, 402 U.S. 637, 651-52

(1971).

been replaced, whichever occurs later” (Pataki Pet. 2; emphasis

supplied). Thus the Indian Point Law is preempted for this

reason as well.

D. Contract Clause

The Contract Clause of the Constitution — which, like the Bill

of Attainder Clause, is found in Article I, § 10 (see p. 15 supra)

— provides that “{n]o State shall . . . pass any . .. Law impairing

the Obligation of Contracts... .”

Whether a state law violates the Contract Clause is deter-

mined by a three-step analysis, which asks in turn: (1) whether

the law is a substantial impairment of a contract; (2) whether it

serves a significant and legitimate public purpose, such as

remedying a general social or economic problem; and, if such

a public purpose is established, (3) whether the means chosen

to accomplish the purpose are reasonable and appropriate. See,

e.g., Energy Reserves Group, Inc. v. Kansas Power & Light

Co., 459 U.S. 400, 411-13 (1983); Allied Structural Steel Co.

v. Spannaus, 438 U.S. 234, 242-44 (1978).

The substantial impairment inquiry has three subparts: (1)

whether there is a contract; (2) whether the law impairs the

contract; and (3) whether the impairment is substantial. See,

e.g., General Motors Corp. v. Romein, 503 U.S. 181, 186

(1992). The agreement approved by the PSC in 1997, which

fixed the rates for Con Edison during the relevant period after

reflecting rate reductions of more than $1.1 billion (see pp. 4-5

supra), plainly fits within the definition of a contract as “a

bargained-for exchange between the parties,” Rowe v. Great

Atlantic & Pacific Tea Co., 46 N.Y.2d 62, 67, 385 N.E.2d 566,

569, 412 N.Y.S.2d 827, 830 (1978), because it was the product

of lengthy negotiations in which Con Edison made very signifi-

cant concessions in return for, among other things, an FAC to

protect against the vicissitudes of the newly volatile energy

market (see pp. 4-5 supra).”' Clearly, the Indian Point Law

substantially impaired Con Edison’s rights under the agreement,

because it swept away $250 million in replacement power costs

to which Con Edison was entitled under the agreement.

If a substantial impairment of contract is to be upheld despite

the Contract Clause, there must be “a significant and legitimate

public purpose behind the regulation, such as the remedying of

a broad and general social or economic problem.” Energy

Reserves Group, Inc. v. Kansas Power & Light Co., supra, 459

U.S. at 411-12 (citation omitted). In applying this requirement,

this Court has distinguished between generally applicable

legislation and legislation singling out a narrow category of

persons for distinct treatment. See, e.g., Allied Structural Steel

Co. v. Spannaus, supra, 438 U.S. at 248-49. The Indian Point

Law bears no resemblance to the statutes that have been held to

serve a broad societal interest. On the contrary, it is narrowly

focused upon a single occurrence and a single utility. As the

PSC told the Legislature, it “prohibits Con Edison, but no other

utility, from recovering power replacement costs — even if they

are found prudent’ (A82; emphasis supplied). Therefore, the

law does not serve a substantial public purpose within the

meaning of the Contract Clause.

Even if legislation has a significant public purpose — which

was not the case here — courts must still determine whether the

means chosen to achieve the goal were reasonable in light of,

among other things, less drastic alternatives. See, e.g., United

States Trust Co. of New York v. New Jersey, 431 U.S. 1, 31

(1977). Here, the Legislature clearly had a less drastic alterna-

21 A long line of federal cases has held that settlement agreements

between utilities and their regulatory commissions are binding contracts.

See, e.g., Texas Eastern Transmission Corp. v. FPC, 306 F.2d 345, 347 (Sth

Cir. 1962), cert. denied, 375 U.S. 941 (1963). The PSC argued below that

this is not true of settlement agreements approved by it, but no New York

case so holds.

tive: to rely upon the PSC to perform its historic role of

adjudicating a claim of imprudence. Since a generally applica-

ble means for protecting the public interest without impairing

contract rights was available, the Indian Point Law was unnec-

essary to advance a legitimate public purpose, and therefore

violated the Contract Clause.

CONCLUSION

For the reasons set forth above, the petitions for a writ of

certiorari should be denied.

Dated: New York, New York

October 22, 2002

Respectfully submitted,

GUY MILLER STRUVE

Counsel of Record

JAMES D. Liss

DAVIS POLK & WARDWELL

450 Lexington Avenue

New York, New York 10017

(212) 450-4192

CHARLES E. MCTIERNAN, JR.

4 Irving Place, Room 1810-S

New York, New York 10003

(212) 460-2432

Counsel for Respondent

Consolidated Edison Company

of New York, Inc.

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