Text

Litigation Rept 1990-10
	ML20033E057
Person / Time
Site:	Diablo Canyon
Issue date:	02/16/1990
From:	Cordes J; NRC OFFICE OF THE GENERAL COUNSEL (OGC)
To:	;
References
	TASK-AII, TASK-SE SECY-90-052, SECY-90-52, NUDOCS 9003060119
	Download: ML20033E057 (46)
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SECY-90-052 February 16, 1990 FOR:

The Commissioners FROM:

John F. Cordes, Jr.

Solicitor

SUBJECT:

LITIGATION REPORT 1990-10 Steven A. Hiett, et al., v. Pacific Gas & Electric Co.,

et al., No. 89-4569-FMS (E.D. Cal., Feb 5, 1990),

stay pending denied, No. 90-15131 (9th Cir., Feb 8, 1990)

As previously reported, this lawsuit challenges implementation of random drug testing for certain employees at PG b E's Diablo Canyon nuclear plant.

The district court on February 5 accepted our argument that only the court of appeals could consider the validity of NRC regulations and transferred the case to the United States Court of Appeals for the Ninth Circuit.

The district court's February 5 order also lifted a previously-entered temporary restraining order against random drug testing.

Petitioners thr.n asked the NRC to stay the drug testing requirement at Diablo Canyon pending appeal, and without waiting for the NRC's ruling also asked the Ninth Circuit for an emergency stay.

We filed our response in the Ninth Circuit the same day we received petitioners' stay motion.

On February 8 the Court (Fernandez and Thompson, JJ.)

denied the stay.

The Ninth Circuit panel initially indicated that the district court's attempted transfer of the case was improper because pe'itioners had filed their suit long after expiration or the 60-day period specified in the Hobbs Act for seeuug review of ERC regulations.

The court indicated, however, that it would treat the stay motion as an appeal of the district court's refusal to exercise jurisdiction.

The court then denied the emergency stay motion on the grounds that ' petitioners have neither shown a probability of success on the 0

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merits nor that tne balance of hardships tips sharply F

in their favor.'

CONTACT:

C. Mullinc x21606 Roger Clough, et al. v. United States Nuclear Regulatory

.i Commission, et al.,No. 99-CV-1496 (N.D.N.Y)

In this suit, involving implementation of the NRC's random drug testing requirements at the Fitzpatrick nuclear plant, the district court ruled on February 2 that it lacked $urisdiction and transferred.the case to the United States Court of Appeals for the Second Circuit.

We have been informed, however, that petitioners do not intend to pursue the case in the court of appeals and shortly will withdraw it.

CONTACT:

C. Mullins x21606 Altas Corporation, et al. v. United States, Nos. 89-1205, 89-1206, 69-1207, 89-1208, 89-1209, 89-1210, 89-1211, 89-1211, 89-1212 (Fed. Cir., February 2,-1990) plaintiffs in this case entered government contracts many years ago for the production of uranium or thorium.

The contracts said nothing about stabilizing L

the radiobctive ' tailings" left over from the uranium and thorium production, since the problem was not I

anticipated at the time the contracts were negotiated.

The government took the position that, the contracts being silent, it had no responsibility for stabilizing the mill tailings.

plaintiffs went to the United States Claims Court and argued that the contracts should be ' reformed' to require government payments.for the clean-up or that a provision requiring government payments should be implied.

The claims Court rejected plaintiffs' arguments, and an appeal was taken to the.

United States Court of Appeals for the Federal Circuit.

The Federal Circuit has just affirmed the claims Court i

juagment.

The Federal Circuit decision rejects the claim that the government has a contract duty to pay for the clean-up and also rejects the argument that the Uranium Mill Tailings Radiation Control Act (UMTRCA) --

which imposes costly statutory duties on certain licensed uranium producers -- constitutes an unconstitutional 'taking" of the producers' property without 'just compensation.'

NRC attorneys worked with

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Department of Justice and Department of Energy attorneys in preparing the government's claims Court and Federal Circuit briefs.

The government's victory i

saves the taxpayers millions of dollars in potential liability.

CONTACT:

C. Mullins x21606 f:~

hn F. Cordes, Jr.

olicitor Attachments:

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Order District Court 2.

Order Ninth Circuit 3.

Decision Fourth Circuit s

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IN THE UNITED STATES DISTRICT COURT 5

FOR THE NORTHERN DISTRICT OF CALIFORNIA 6

7 STEPHEN A. HIETT, et al.,

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No. 89 4569-FNS

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Plaintiffs, employees of Pacific Gas and Electric's 3

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(PG&E) Diablo Canyon nuclear power facility at Avila Beach,

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-3I California filed this action, challenging the randon i

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.g J 17 l 8 urinalysis drug testing program scheduled to go into effect

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18 at Diablo Canyon on January 3, 1990.

On December 29, 1989, 19 this court gr' anted a Temporary Restraining Order (TRO) to 20 prevent the random urine collection and testing.

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21 Nuclear Regulatory Commission (NRC) then filed a act, ion to 1

22 intervene and a notion to dismiss for lack of subject 23 matter jurisdiction.

Those motions, along with plaintiffs' 24 motion for a preliminary injunction, were set for hearing 25 on January 10, 1990.

26 At the January 10 hearing, the Court requested 27 supplemental briefing on the issue of jurisdiction.

28 Specifically, the parties were asked to address whether the

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Hobbs Act, 28 U.S.C.

I 2342(4), which vests exclusive 2

jurisdiction over challenges to final orders of the NRC in

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3 the circuit courts of Appeal, precludes this court from 4

exercising jurisdiction over this matter.

After full and careful consideration of the many arguments raised by all 6

parties, and a further hearing on January 31, 1990, this court cor,cludes that subject matter jurisdiction properly 8

lies ~in the Ninth circuit court of Appeals.

Accordingly, 9

7 this case is transferred and the TRO in effect since i

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o-December 29, 1989 is dissolved.

11 The Hobbs Act 12

'j Title 28, i 2342, in relevant part, provides as follows:

I 14 The court of appeals.

. has exclusive

,g 15 jurisdiction to enjoin, set aside, suspend (in

[' f whole or in part), or to determine the validity 16 of--

17 (4) all final orders of the Atomic Energy commission made reviewable by section 3

18 2239 of title 42.

1 19 Plaintiffs' complaint is clear about one aspect of the drug 20 testing at Diablo canyont PG&E instituted the program 21 strictly at the behest of the NRC.

NRC regulations mandate 22 that nuclear power facility licensees conduct randon 23 urinalysis drug testing of all employees with unescorted 24 access to specified areas.

ERA 10 C.F.R. I 26.24.

25 Plaintiffs do not challenge the constitutionality of any

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26 discretiona'ty acts of PG&E; if plaintiffs alleged, for 27 example, that PG&E determines which particular employees 28 2

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1 are subject to urinalysis or otherwise exercises meaningful l

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discretion in the execution of NRC directives, this might 3

1 be a different-case.'

As it stands, however, PG&E is 4

i simply a conduit for the implementation of a program 5

created and mandated by the NRC. By naming PG&E as the solo 6

i defendant and challenging the constitutionality of the drug 7

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testing program at Diablo Canyon, plaintiffs do no more and no less than mount a facial challenge to NRC regulations.

3 This Court lacks subject matter jurisdiction over such 10 challenges.

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Bivens Cause of Action j

l Plaintiffs argue that, despite the Hobbs Act, aivana v.

13 l l giv Unknown Named Aaents, 403 U.S. 388 (1971), allows then 2

14 to assert a private cause of action against PG&E for l!

15 violation of their fourth amendment rights.

Plaintiffs 16 Ll3I-rely principally on two cases in which courts have allowed J'

17 Bivans claims to go forward in the context of NRC 3

18 directives.

Ett summunhana Vallev Alliance v. Three Mile i

19 Island, 619 F.2d 231 (3d Cir. 1980); Mathis v. nacific Gan 20 s

and Electric connanv, __ F.2d __, 89 CDOS 9223 (9th Cir.

21 1987).

Each of the cases is distinguishable from the 22 1

instant case, however.

The Bivens actions permitted in 23 i

both pusquehana and Mathis arose before the NRC issued a 24 final order mandating the challenged acts.

Thus, 25 plaintiffs in those cases could not have brought their 26 i

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For purposes of this action, PG&E is presumed to 28 act under color of state law.

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claims to the Court of Appeals.

Plaintiffs cite no cases q

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in which a Bivens action has gone forward against either j

3 the NRC or a third party once the NRC regulation which gave j

4 rise to the cause of action is final and, therefore, 5

subject to Hobbs Act review by the Court of Appeals.

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Both logic and sound public policy compel the 7

conclusion that a Rivens action does not exist under the 8

present facts and circumstances.

First, Rivens held that j

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an action for money damages arising from the violation of 10 fourth amendment rights by federal officials could be 11 brought in federal district court.

Plaintiffs filed this i

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action seeking injunctive and declaratory relief, however, s

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not compensatory damages.

Plaintiffs argue that a court i

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with authority to award damages after a harm occurs also 15 has power to prevent the harm by granting equitable relief.

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No authority supports such an inference.

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17 Even if this Court were to concur with plaintiffs'

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assessment of the equitable power available to federal 19 l

district courts in Bivens cases, however, plaintiffs would 20 fail in the argument that this Court has subject matter jurisdiction over this action.

To state a cause of action 22 under Bivans, plaintiffs would have to show that PGEE 23 officials violated " clearly established.

24 constituticy.a1 rights of which a reasonable person would 25 have known."

Egg Marlow v. Fittaerald, 457 U.S. 800, 818 26 (1982).

By bringing suit against PG&E, and yet admitting 27 that PG&E exercises no meaningful discretion in the 28 4

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i application of the NRC rules, plaintiffs in effect mount a i

2 facial challenge to the NRC directives while attempting to j

circumvent the requirements of the Hobbs Act.

It stands to i

4 reason that this court could not hold that PG&E violated 5

plaintiffs' constitutional rights without first passing judgment on the constitutionality of the regulations 7

themselves.

Thus, this Oourt cannot entertain this action 8

without, at some point, doing that which the Hobbs Act i

9 proscribes-- determine the validity of a final order of the NRC.

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,j Cases that address the issue are cleart district

!j courts should avoid exercising what amounts to concurrent 13

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I jurisdiction with the courts of appeals.I If this Court i

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In Florida Power & Licht Co. v. Lorion, 470 U.S.

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16 729 (1985), the Supreme Court held that, even in the

_sI absence of an agency hearing, exclusive jurisdiction to

'j"8 17 review final orders of the NRC rested'in the courts of s

appeals, not the district courts.

The Court was concerned 3

18 that if courts of appeals did not have exclusive jurisdiction over all NRC final orders, some cases would be 19 reviewed initially in the district court, while others would go directly before the courts of appeals.

It noted 20 that such a situation would result in " duplication of judicial review in the district court and court of appeals, 21 with its attendant delays."

Idi at 740.

See also Public Utility commissioner of oreson v. Bonneville Power 22 Administration, 767 F.2d 622, 626-27 (9th Cir. 1985)

("where a statute commits review of final agency action to 23 the court of appeals, any suit seeking relief that might affect the court's future jurisdiction is subject to its exclusive review."); Natural Resources Defense Council, t

24 Ing. v. Thomas, 689 F.Supp. 246, 255, (8.D.N.Y. 1988),

25 aff'd, 885 F.2d 1067 (2d Cir. 1989) (since the. Clean Air Act gave exclusive jurisdiction over Environmental 26 Protection Agency final orders to the appellate courts, a r

challenge to the scope of EPA's discretion must be brought 27 in the court of appeals because "(a)ny other conclusion i

l would create the risk of inconsistent judgments and 28 resulting confusion that Congress sought to avoid by 5

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were to exercise jurisdiction over plaintiffs' clain 2

against PG&E and, at a later time, a direct challenge to i

3 the NRC regulations were mounted in the appellate court, 4

the very same regulations upheld by the Court of Appeals l

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might be found unconstitutional by this Court, or vice-6 versa.

Moreover, it district courts allowed cases like 7

this one to go forward, NRC regulations would be subject to S

piecemeal challenge all over the country-- something the Hobbs Act was clearly designed to avoid, For all the reasons discussed above, this action is i

transferred to the Ninth Circuit Court of Appeals.

Counsel j

5 for all parties are commended for their expert treatment of-C 13 i

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these close and difficult issues.

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SO ORDERED.

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DATED:

February 5, 1990 3

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22 23 24 25 26 27 28 vesting exclusive jurisdiction.")

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FILED i

UNITED STATES COURT OF APPEA:s FEB 08 890 FOR THE WINTH CIRCUIT CATWY A.CAfftRSON.cugg r

U.S. COURT OF M STEVEN A. NIETT, et al.,

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No. 90-15131

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Plaintiffs / Petitioners,

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THE FAC2FIC GAS AND ELECTRIC COMPANY,

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ORDER

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Defendant / Respondent,

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THE UNITED STATES NUCLEAR REGULATORY

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COMMISSION,

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Intervenor/ Respondent.

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Before:

THOMPSON and FERNANDEZ, circuit Judges On February 5, 1990, the dis'trict court ruled that it lacked jurisdiction over this action challenging the constitutionality of Nuclear Regt htcry Commission regulations promulgated on June 7, 1989.

Consequently, the district court' transferred the action to this court pursuant to the Hobbs Act, 28 U.S.C. $ 2342(4).

However, I

a transfer may be properly made only to a court "in which the action l

or appeal could have been brought at the time it was flied."

28 U.S.C. $ 1631.

Petitions seeking judicial review of agency orders

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1 m eet/1990 11:44 FROM PGtE 30TH FLOOR TO 913014921673 P.83 l

.No. 90-15131 I 1

must be filed within 60 days of the date they beceme final.

28 U.S.C. 5 2344.

Because the petitioners filed their action more than 60 days following the date that the challenged regulations were f

promulgated, the district court's transfer was improper.

Egg 28-U.S.C. $ 1631.

Therefore, this court lacks jurisdiction over the action on the basis of the transfer.

Egg California Ass'n of Physically Nandicaoped v. PCC, 833 F.2d 1333 (9th Cir.1987).

Petitioners' emergency motion to stay random drug testing filed with this court signifies petitioners' intent to appeal from the district court's February 5, 1990 order.

Egg cel-A-Pak v.

California Agricultural Labor Relations Bd., 680 F.2d 664, 667 (9th

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Cir.), Etr12 denied, 459 U.S. 1071 (1982).

Accordingly, the-

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emergency motion is construed as a notice of appeal, get San Dieoo l

Comm. Acainst Recistration and the Draft v. Governino 54. of Grossment Union Nich school Dist., 790 F.2d 1471, 1474 (9th Cir.

t 1986).

Appellants shall perfect their appeal within fourteen days i

by paying the docket fee in the district court.

L Finally, petitioners have neither shown a probability of success on the merits nor that the b;1ance of hardships tips sharply in their favor.

Accordingly, the emergency motion to stay random r

drug testing pending appeal is denied.

Ege Loper v. Neckler, 713-F.2d 1432, 1440 (9th Cir.), rev'd in part on other arounds, 463 U.S. 1328 (1983).

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-1209, -1210, -1211, and -1212 ATLAS CORPORATION,.

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'KERR-McGEE CHEMICAL CORPORATION, l-QUIVIRA MINING COMPANY, WESTERN NUCLEAR, INC.,

ATLANTIC RICHFIELD'COMPAN*t, UNETCO MINERALS CORPORATION and i

UNION CARBIDE CORPORATION, P

HOMESTAKE MINING COMPANY OF CALIFORNIA, INC., and PATHFINDER MINES CORPORATION, F1aintiffs-Appellants,

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v.

THE UNITED STATES, Defendant-Appelles.

Peter J. Nickles, Covington & Burling, of Washington, D.C.,

Harley W.

Shaver, Shaver & Licht, of Denver, Colorado and Ramsay D.

Potts, P.C., Shaw, Pittman, Potts & Trowbridge, of Washington, D.C.,

argued for plaintiffs-appellants. Also on the brief were Theodore Voorhees Jr., Elliott Schulder, Jay T. Smith, Covington

& Burling, of Washington, D.C.,

R.

Kenley Webster, P.C.

and Jonathan S.

Baker, Shaw,

Pittman, Potts Trowbridge, of Washington, D.C.

l Peter D.

Dickson, Van Ness, Feldman, Sutcliffe & Curtis, of l

Washington, D.C., represented Umetco Minerals.

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Jon J.

Indall, Carpenter, Crout & Clasted, of Santa Fe, New l

' Mexico, represented Homestake Mining Co. of California, Inc.

l-Sunny J.

Nixon, Carpenter, Crout & Olmsted, of Santa Fe, New l

-Mexico, represented Pathfinder Mines Corp.

u Mary Mitchelsen, Assistant Director, Commercial Litigation Branch, Department of Justice, of Washington, D.C.,

argued for 1

' defendant-appelles. With her on the brief were Stuart E. Schiffer, Acting Assistant - Attorney General and David M.

Cohen, Director.

Also on the brief were Leonard Krcitzbera, Department of Energy, Washington, D.C.

and Charles

Mullins, Nuclear Regulatory i

Commission, Washington, D.C.,

of counsel.

l Appealed from: U.S. Claims Court L

Judge Herow j

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)(nitch fetates (Court of Appeals for il e feberal (Circuit l

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89-1205, -1206, -1207, -1208

-1209, -1210, -1211, and -1212 l

ATIAS CORPORATION, i

KERR-McGEE CHEMICAL CORPORATION, 1

QUIVIRA MINING COMPANY, WESTERN NUCLEAR, INC.,

ATIANTIC RICHFIELD COMPANY, UMETCO NINERALS CORPORATION and UNION CARBIDE CORPORATION, HOMESTAKE MINING COMPANY OF CALIFORNIA, INC., and PATHFINDER NINES CORPORATION, Plaintiffs-Appellants, V.

THE UNITED STATES, Defendant-Appellee.

i ii DECIDED: February 2, 1990 i

Before MARKEY, Chief Judae,

BENNETT, Senior circuit Judae,*/

and NEWMAN, circuit Judae.

BENNETT, Senior circuit Judae.

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This appeal is from the final judgment of the Claims Court (Norow, J.) granting the government's notion for judgment on the.

pleadings and dismissing the complaints.

15 C1. Ct. 681 (1988).

We affirm.

/

Due - to the recusal of another judge, the author was not assigned to the panel until after oral arguments in this The author has reviewed the audio tapes of the oral argu-case.

nents.

Counsel were given the opportunity to object to this procedure in open court, but did not.

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l BACKGROUND The plaintiffs are corporations, or successors to corpora-l tions, which entered into contracts with the government for the production of uranium or thorium.

Following the Second World War, uranium production in the

~ United States was practically nonexistent, and the military was i

dependent on foreign sources.

In the late 1940's, the Atomic

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Energy commission (AEC) began a major program to encourage the i

domestic production of uranium and alternative sources of atomic l-t i

energy, such as thorium.

The AEC encouraged private companies to enter the uranium milling industry by contracting with them L'

for the production of uranium.

The contracts contained pricing provisions designed so that the private companies could recover i

their costs, plus a reasonable profit.

In addition, the govern-p ment funded substantial research and development efforts to l

l improve uranium milling technology, and it provided substantial L

technical services to the industry.

The Atomic Energy Acts of l

1946 and 1954 each provided that the federal government could be the sole owner of uranium products.

Through statutes and regula-tions, licensing, administrative oversight, and its contracts, the federal government maintained pervasive control over all aspects of uranium and thorium procurement, production, sales and disposal, starting in the late 1940's and continuing through the 1950's.

The plaintiffs were awarded uranium production contracts by the AEC or have acquired or merged with the original contractor 89-1205 through -1212 -

and have succeeded to the interests and obligations of the l

original contractor.

Plaintiff Xerr-McGee is the successor in

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interest to thorium production contracts.

For the purposes of this litigation, the parties have not alleged any significant l

differences between uranium and thorium production.

The con-tracts between the government and the plaintiffs were amended several times and spanned the period from 1950'to 1970.

Begin-f 11 ning in 1964, the uranium producers were permitted to sell their products to private parties without government permission.

Uranium and thorium milling operations produce a sand-like i

residuo called " tailings."

Typical domestic uranium ore usually contains only about two to eight pounds of uranium per ton of oro, so the residual tailings may be quite extensive.

The tail-ings are ordinarily stored in large tailings piles, usually located on the land adjacent to the mills.

Tailings from the production of uranium pursuant to the contracts with the govern-ment have been commingled with the tailings from the production of uranium for private parties.

While nearly all -of the uranium is extracted from the ore, the tailings continue to emit residual low-level radiation, pri-marily in the form of radon gas.

According to the appellants, this fact was known to the parties to the contracts, but its significance was not fully understood at the time of the con-(

tracts.

It was not until the late 1970's that the long-term potential health hazards associated with mill tailings and the radon emissions were widely recognized.

To alleviate those 89-1205 through -1212 !

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hazards, costly measures are required to stabilize existing f

t tailings piles.

such measures include seepage control, regrading the piles and covering them with clay and soil, and revegetating the piles or covering them with crushed' rock.

I Because of the potential health hazards associated with uranium mill tailings, Congress enacted the Uranium Mill Tail-ings Radiation Control Act (UNTRCA), Pub. L. No.95-404, 92 stat.

l 3021 (Nov.

O, 1978), codified at 42 U.S.C.

Il 2022, 2113, 2114, 7901-7942 (1982).

Title I of the Act provides that the federal government has responsibility for the stabilization and decom-missioning of all inactive mill sites which were not licensed on January 1, 1978.

42 U.S.C.

Il 7912-7919.

Title II of the Act authorizes the Environmental Protection Agency to develop regu-lations for the stabilization and decommissioning of mill sites q

which remained active after January 1, 1978.

42 U.S.C. Il 2022, 2113.

Under title II of the UNTR'!A, the licensees are respon-3 sible for complying with the federal regulations concerning i

stabilization of the mill tailings piles, decontamination and decommissioning of the mill plants, and reclamation of the plant site.

42 U.S.C.

I 2113.

The EPA and the Nuclear Regulatory commission have issued regulations governing the stabilisation of the licensed mill sites.

40 C.F.R. Pt. 192 (1988); 10 C.F.R.

pts. 40, 150 (1989).

In addition, some states have enacted laws directed to the hazards of radon gas.

The plaintiffs held licenses on January 1, 1978, for active facilities.

As a result of the UNTRCA and the regulations 89-1205 through -1212,

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- issued pursuant to that Act, and also possibly as a result of the plaintiffs' recognition of general obligations to conduct their business in a manner that does not expose the public to harm, the plaintiffs have undertaken costly measures to stabilize the tailings piles and to decontaminate and reclaim the uranium and thorium mill sites.

In their complaints, the plaintiffs sought recovery of the costs associated with stabilization of the mill tailings that were generated from the uranium and thorium production under the completed contracts with the government.

The plaintiffs based their complaints on various theories.

All M the plaintiffs sought reformation of the contracts due to mutual mistake.

All of the plaintiffs other than Atlas alleged breach of express contract.

Western Nuclear, Honestake, and

. Pathfinder alleged breach of an implied-in-fact contract.

Western Nuclear included allegations of agency and that the UMTRCA is a co.tpensable Fifth Amendment taking, violates the 3 qual protection clause, and is an ex nest facto law.

The government noved, pursuant to RUScc 12(c) and 12(h),

for judgment on the pleadings arguing that the plaintiffs had failed to state a claim for relief.

The claims court granted the government's notion and dismissed the complaints, except for Western Nuclear's equal protection and ex nost facto claims, t

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which it transferred to the United states District court in l

1 colorado.

All of the plaintiffs filed appeals.

On appeal, Western Nuclear abandoned its agency claim.

89~1205 through -1212,

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'l issue I

t The issue in this appeal is whether the claims court erred

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i in granting judgment on the pleadings and in dismissing the

-plaintiffs' reformation, breach of express contract, breach of

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implied-in-fact contract, and taking claims.

i OPINION i

We review claims court decisions for errors of law and clearly erroneous findings of fact.

cooner v.

United states, 827 F.2d 762, 763 (Fed. Cir. 1987):

M11 mark services. Yne.

v.

United states, 731 F.2d 855, 857 (Fed. Cir. 1984).

Because this j

case was before the Claims Court on the government's motion for I

judgment on the pleadings, each of the well-pled allegations in f

the conplaints is assumed to be correct, and the court must i

indulge all reasonable inferences in favor of the plaintiffs.

i Leheuer v.

Rhodes, 416 U.S.

232, 236 (1974);

Owen v.

United States, 851 F.2d 1404, 1407 (Fed. Cir. 1988).

I.

The Contract claims The claims court held that the plaintiffs could not establish reformation or breach claims on the facts pled.

The court referred to its limited contractual jurisdiction and stated that jurisdiction is conferred only where the government has agreed; to be bound.

It observed that it had no authority to write contracts, or contract clauses, for the United States by l

means of reformation where there has been no agreement, citing American PresidgAt Lines. Ltd.

v.

United States, 821 F.2d 1571, L

1582 (Fed. Cir. 1987).

89-1205 through -1212 '

- --~

I o

o i

i i

The Claims Court stated that it is undisputed that there was i

no agreement between the parties with respect to the now required i

tailings stabilization.

Because the existence of the tailings i

hazard was not knowable at the time of the contract negotiations, i

there was-no mutual mistake and no agreement between the parties that could be placed into effect through reformation.

The court i

observed that'only those costs that were knowable and subject to

. actual negotiation formed the basis for the fixed prices that the AEC agreed to pay.

The claims Court also dismissed the plaintiffs' breach

claims, holding that because no agreement on the tailings stabilization was or. could have been negotiated, the plaintiffs l

have no breach claims to assert.

The court dismissed Western Nuclear's implied-in-fact contract

clain, stating that an inplied-in-fact contract theory is not a viable claim in the L

absence of an agreement that would support reformation.

More-over, the court held that Western Nuclear could not show there was an.inplied-in-fact tailings hazard contract unrelated to the

. negotiated uranium purchase agreements.

A.

Reformation The plaintiffs all seek recovery of the costs of tail-

'ings disposal on the theory of contract reformation.

According to the plaintiffs, the parties to the uranium and thorium con-tracts made a. mutual mistake concerning the necessary tailings disposal, and that mutual mistake requires equitable reformation of the contracts to provide that the government will pay for 89-1205 through -1212.

l

~

\\

p tailings stabilization.

In the Joint Appellants'

Brief, the l

plaintiffs describe the mistake:

"(T]he parties were autually f

i mistaken concerning whether the tailings piles posed potential long-tern health hazards and thus whether extensive and costly 1

l aill stabilization and plant decommissioning seasures were

(

necessary to eliminate those potential hazards."

Joint Br. at i

23.

We hold that the plaintiffs' allegations are insufficient l

because they have failed to allege a mistake that can support reformation.

A party seeking to state a claim for reformation of a contract under the doctrine of mutual mistake must allege four elements:-

t (1) the parties to the contract were mistaken in their l

belief regarding a fact; (2) that mistaken belief constituted a basic assumption-underlying the contract; (3) the mistake had a material effect on the bargaint and (4) the contract did not put the risk of the mistake on the party seeking reformation.

3,3,3 Restatement (Second) of contracts il 151-152, 155 (1981);

National Presto Indus..

Inc.

v.

United States, 338 F.2d 99, 107-09-(Ct. C1. 1964), cert. denied, 380 U.S. 962 (1965).

A " mistake" that can support reformation is a belief that is not in accord with the facts.

Restatement (second) of Contracts 5 151.

To satisfy this element of a reformation claim, a plaintiff must allege that he held an erroneous belief as to 89-1205 through -1212 8-

__--__--__.__-_______.______,_.__.,.m r.,,,,_,%w,e g

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1 I

i cn existing fact.

If the existence of a fact is not known to the - contracting parties, they cannot have a belief concerning that factt therefore, there can be no " mistake."

Reformation serves to bring the parties' written contract in accord with their agreement.

Professor Corbin statest i

Reformation is not a proper remedy for the enforcement

~

of terms to which the defendant never assentedt it is a f

remedy the purpose of which is to make a mistaken writing conform to antecedent. expressions on which the parties agreed.

These antecedent expressions of agreement may have been such as to constitute a valid inforaal contract, in which case reformation is merely a step in the enforcement of that contract.

The written document was intended to be no more than the integration in writing of the terms already agreed upon.

In so far as it differs from those terms it -

is mistaXen and will be corrected.

3,Qorbin on contracts 5 614 at 723 (1960).

He emphasises that l

"a court wili not decree reformation unless it has convincing l

evidence that thes parties expressed agreement and an intention to be bound in accordance with the terms that the court is. asked to establish and enforce."

& at 725.

In Arnerian President Lines, W21 F.2d 1571, we stated, "The purpose and function of the reformation of a contract is to make it reflect ths true agreamsnt cf the parties on which there was i

a meeting of the minds."

& at 1582.

In the absence of mistake, fraud, accident, or illegality, a cou-t cannot change the terms of a contract.

This court cannot reach the equities of the reformation question.

It is clear that reformation can be ordered only where there is an agreement to be given offact.

The circumstances l~

alleged by the plaintiffs are such that there could have been no P9-1205 through -1212 I a.-

f f

f cgreement regarding the tailings costs because the existence of f

the tailings hazard was not recognized by the parties.

The.

parties could not have formed a mutually mistaken belief concern-l

_ing a fact whose existence they could not recognize.

Therefore, l

there has been no mistake that can support reformation.

j In. the ' cases where courts have reformed a contract, the parties recognize the existence of a fact about which they could j

negotiate, they mutually form a belief concerning that fact, but their belief is erroneous.

In those cases, the court may reform the contract to bring the parties' agreement in accord with the true state of the facts.

For eyample, in National Presto, 338 F.2d 99, the Court of

[

f Claims granted reformation of a contract to permit reimbursement for the cost of an additional step in a process of manufacturing ortillery shells.

Before the parties entered into the contract, 1

they discussed whether an additional step was needed in which oxcess metal was shaved from the shells.

Their contract did not 5

include provision for the equipment for this additional step, but during the performance of the contract, it was determined that l-the additional step was in fact necessary.

The plaintiff was required to obtain additional equipment.

The court permitted reformation of the contract.

Although the parties did not know of the need for the additional equipment,

16. at 107, they clearly recognized that the equipment might be needed.

They recognized the existence of a fact on which they could reach an 89-1205 through -1212.

I a

f agreement, and they formed an erroneous belief concerning that fact.

Therefore, there was a mutual mistake, and reformation could bring their agreement in accord with the true state of the facts.

i similarly, in R.M.

Hollinashead corn.

v.

United statan, 111 F. Supp. 285 (Ct. C1. 1953), the plaintiff agreed to sell DWf f

in metal containers to the government under a contract which required the chemical to be a clear, stable' liquid.

When the DDT I

subsequently turned cloudy, the government refused payment.

The i

Claims Court denied the government's motion to dismiss, stating 3

that when the parties entered into the contract, neither knew that it was impossible to store DDT in metal containers without i

a resulting loss of clear color.

The clear color requirement was p, art of the government's specifications, and the parties considered that fact when contracting.

Their erroneous belief l

concerning that fact was their mistake.

f other cases in which courts have permitted reformation of contracts similarly show that the parties held an erroneous belief concerning a fact whose existence the parties recognized and about which they could reach agreement.

133, m, Southwest Weldina ti Mfa co. v. United states, 373 F.2d 982 (Ct. C1. 1967)

(the parties mistakenly believed the price of steel was lower than it actually was);

Walsh v. United States, 102 F. Supp. 589 1

(Ct.-C1. 1952) (the parties erroneously believed the minimum wage l

rate was a certain amount, even though it had increased earlier) t, Aluminum Co. of America v.

Essex Groue.

Inc.,

499 F.

Supp. 53 89-1205 through -1212.

t-(W.D. Pa. 1980) (the parties erroneously believed that the Whole-sale Price Index would accurately represent nonlabor production costs for the purpose of a contractual escalation clause).

Saa

,1 AlRR rov *n-McLaunhiin-York co.

v.

tinited stataa, 813 F.2d 1221 h'

(Fed. Cir. 1987) (reformation permitted where the parties errone-ously omitted certain price items that were in existence _ and could have been included in ' the contract).

Maeke ee. v.

tinited Etatag, 467 F.2d 1323 (Ct. C1. 1972), does not show a different rule.

The epinion in that casa does not indicate whether a

" mistake" was made by the parties.

Rather, the court " inter-prated" or " reformed" the contract to conform to the parties' practical construction.

& at 1328.

Appellants argue that the claims court's distinction between

" knowable" and " unknowable" facts has no bearing on whether a plaintiff has properly stated a claim for relief by reformation.

The ' appellants cite Aluminum co. of America in 'which the dis-trict court observed "[t]he law of mistake has _not distinguished-between facts which are unknown but presently knowable, and facts which presently exist but are unknowable.

Relief has been granted for mistakes of both kinds."

499 F. Supp. at 64 (cita-tions omitted).

It is true that even though the putcome of a fact is unknowable, the parties can make a mistake concerning that fact.

But where the existenea of a fact is unknowable, the parties-cannot have a belief concerning that fact, and they can-not make a mistake about it.

Thus, in the famous case sherwood 89-1205 through -1212 1

l y

J i

l v.

Walker, 66 Mich. 568, 33 N.W.

919 (1887), the contract for the sale of a cow was held to be voidable where the cow was assumed to be barren but later was discovered to be pregnant, j

i The axistance of the fact as to whether the cow was barren or l

l I

fertile'was known to the parties even if the outcome of that fact i

was unknown.

In this case, the plaintiffs' allegations of their " mistake" do not show that they held an erroneous belief concerning a fact whose existence the parties could recognize and about which they could negotiate agreement.

The statements the plaintiffs make t

i in their complaints and briefs demonstrate that the parties could i

not have contemplated the potential tailings hazard when they entered into - the contracts.

Therefore, they could not have reached an agreement 9n the now-required tailings stabilization, and they could not have held a mutually alataken belief concern-ing the' abatement of the tailings hazard.

The plaintiffs state, "Thus, as alleged in the complaints, when appellants' contracts were negotiated and performed the parties did not fully appreciate the extent and consequences of the potential health hazards posed by the uranium and thorium

(

mill tailings, or that such hazards could not be abated absent extensive and costly remedial measures."

Joint Sr. at 12.

They

state, "It was not until the late 1970's that the long-tors potential health hazards associated with ~ mill tailings became widely recognized."

Joint Br. at 13.

89-1205 through -1212 i

b g N;'

3u,pg,7

(,

hp.

r:

Atlas states in its supplemental brief, "The full record q put.before the Claims Court by ' Atlas' underscores the critical i

b

' fact that neither the Government nor Atlas appreciated the extent f or ~ consequences of the potential health hazard posed by this i

radiation."

Atlas Br. at 5.

Quivira's complaint states, "These l

costs were not and could not have been anticipated at the time Quivira Complaint 1 29.

the Contract was entered into.

Wes' tern Nuclear alleged that "[w) hen the original contracts and.

L modifications thereto 'were entered into between Western and the Government acting through the AEC, the then existing technology did not recognize any-reason to perform any Reclamation or Decom-(

= 1

.missioning on: mill tailings or mills."

Western Nuclear complaint

-1129.

Atlantic Richfield stated that "neither party' considered ~

radiation' levels in the produced wastes to represent a potential

-hazard or matter of concern" (Atlantic Richfield Complaint 1 14)-

. and ; that "[the reclamation) costs were.not and could not have

~been anticipated at the time the 1951-or the 1959 Contracts were 4

l Atlantic Richfield Complaint 1 40.~

Umetco entered into.

1 alleged that "the, parties to those contracts'did not contemplate l

that any ' extraordinary efforts to stabilize or manage the tail-g i

ings would be necessary."

Umetco complaint 1 27.

They also

]

allege that "the state of scientific knowledge at the times the Union Carbide contracts were entored into and performed had not pormitted adequate understanding of the effects of uranium mill tailings."

Umetco complaint 1 30.

Homestake,

also, alleged i

I 3 89-1205 through -1212 '

L i-2 i N i.

b.

e m-

.,. +- -. -

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P t'

7

,y

7. -

')

)

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' that "[the reclamation) costs were not and could not have - been anticipated at the time the contracts which are the subject of a'

,this Complaint, or any of the modifications or amendments there-to, were executed."

Homestake Complaint 1 27.

Pathfinder stated

.j

.that *[the reclamation) costs were not and ~ could not have been anticipated at the time the contracts were executed."

Pathfinder Complaint 1~20.

3.

The plaintiffs' ' own statements and allegations demonstrate

i

.that the. hazard associated with tailings was not, and indeed i

could not have been, within.the contemplation of the parties when they entered 'into the - contracts.

Their statements clearly show the correctness of the claims court's ruling that the existence of the-hazard was not-knowable at the time of the negotiations.

The claims court correctly stated that because it was not pos-sible : for the hazard to have been known to ' the parties, no agreement could have been reached on this matter which can. now be put into effect through reformation.

If the existence of tho' hazard was beyond the contemplation of the parties, they.could.

1 form no belief concerning that fact.

There can be no " mutual l

mistake" to support reformation here.

l' B.

Breach of Exeress-contract All of the plaintiffs other than Atlas' asserted breach' of express contract claims.

In their complaints, they ellege

.that the government has breached the uranium and thorium. con-p, tracts by not paying for the cost of tailings stabilization and mill decommissioning.

The parties alleged that the contracts 89-1205' through -1212,

g,

-_,z l

tware designed to reimburse the milling companies for all~ reason-able costs associated with the production of uranium and thorium-concentrate.

Also, the parties alleged that tailings disposal q

.was.a reasonable cost, as -shown by ' certain contract provisions allowing reimbursement for tailings disposal.

The latter alle---

i

gation is based on - the " stretch-out" agreements between the j

i government and the parties under which the uranium deliveries were

" stretched - out" past the contract termination date to l'

' account for decreased demand for the concentrate.

As the plain-i tiffs have alleged in their complaints, the price of the:concen-

~

trate for-the " stretch-out" period was to be determined based on past costs incurred by the producer, includiny the past costs of tailings disposal.

The claims court did not err in granting judgment on the i

pleadings dismissing the plaintiffs' breach of express contract t

claims.-

The plaintiffs have failed to allege. any contract pro-l L

vision that the government breached in not paying the costs of i

-tailings stabilization.

The complaints admit that the contracts i

't Q

were-fixed price contracts, although the price was determined by obtaining or forecasting the producer's costs for the contract period plus a reasonable profit.

Quivira Complaint 11 8,

12; h

= Western Nuclear Complaint 11 14, 21; Atlantic Richfield Con-plaint 11.11, 15; Umatco Complaint 11 18, 21; Homestake Coa-plaint 11 s, 12; Pathfinder-Complaint 11 8, 11.

The plaintiffs have not alleged that the government has not paid the prices agreed to in the contracts.

e

?

189-1205 through -1212 n

. _ -... _ _ _ _ _ _. _. _ _ ~.

f j

+

t.

1 id i

More-importantly, the plaintiffs alleging a breach 1of con-

[

. tract admitted - in their complaints that the contracts contained Lno provision concerning tailings stabilization costs.

Kerr-McGee Complaint il 24, 25; Quivira Complaint i 13; Western l

. Nuclear-Couplaint 1 21; Atlantic Richfield Complaint 1,16; Umetco Complaint 1 27.

ML20033E057

Text

SUBJECT:

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