ML20050C158

Brief Opposing Saginaw Valley Nuclear Study Group Exception to ASLB No Sanction Determination Re Util. Intervenor Failed to Preserve Appellate Rights.Notices of Appearance & Withdrawal & Certificate of Svc Encl

ML20050C158
Person / Time
Site:	Midland
Issue date:	04/05/1982
From:	Charnoff G CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.), SHAW, PITTMAN, POTTS & TROWBRIDGE
To:	NRC ATOMIC SAFETY & LICENSING APPEAL PANEL (ASLAP)
References
NUDOCS 8204080221
Download: ML20050C158 (87)

Text

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UNITED STATES OF AMERICA l NUCLEAR REGULATORY COMMISSICN ,

q' .a' M , ' -t BEFORE SHE ATOMIC SAFETY AND LICENSING APPEAL BOARD 1

)

In the Matter of )

)

) Docket Nos. 50-329 CCNSUMERS ECWER COMPANY ) 50-330

) (Remand Proceeding)

)

(Midland Plant, Units 1 and 2) )

)

9 E N Of BRIEF CF CCNSUMERS POWER CCEPANY Q,_ , s. . 7 IN OPPOSITICN TO INTERVENOR'S EXCEPTIONS ~C/P:

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Gerald Charnoff, P.C.

Dean D. Aulick, P.C.

Deborah B. Bauser Counsel for Consumers Power Company Shaw, Pittman, Potts & Trowbridge 180f! M Street, N.W.

Washington, D.C. 20036 (202) 822-1000 April 5, 1982

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BEFCRE THE AIOMIC SAFETI AND LICENSING APPEAL BCARD p e . .. - ,

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In the Matter of ) ...

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BRIEF CF CWSUMERS POWER COMPANY . . .

IN OPPOSITICH TO INTERVENOR'S EXCEPTIONS  :- /-

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Gerald Charnoff, P.C.  !

Dean D. Aulick, P.C. ,'!. .

Deborah B. Bauser

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Counsel for Consumers Power Company .

Shaw, Pittman, Potts & Trowbridge .-

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TABIE CF CCNTENTS Pace Table of Contents.......................................................... i Table of Authorities......................................................iii I. Introduction......................................................... 1 A. Events Preceding the Partial Initial Decision. . . . . . . . . . . . . . . . . . . . 2 B. Par tial Initial Decision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 C. Temple 's prefiled direct testimony. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 II. Intervenor has not preserved its right to appeal and the @ peal, accordingly, should be dismissed . . . . . . . . . . . . . . . . . . . . . 10 III. %e Licensing Board's no-sanction determination is proper en the record, including the facts as found by the Board................................................... 13 A. We Licensing Board's no-sanction determination is proper with respect to testimony preparation by Consumer s Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 B. We Licensing Board's no-sanction determination is proper with respect to affirmative disclosure by Consumers Power.............................................. 18

1. We scope of facts required to be disclosed by the Licensing Beard is extremely broad. . . . . . . . . . . . . . . . . . 19

2. 'Ihe Licensing Board required disclosure to the Board of all relevant and possibly relevant information and, hence, imaterial infor mation . . . . . . . . . . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3. We Licensing Board's disclosure requirements diverge from existing requirements so that no sanction is proper......................................... 27

4. Consumers Power did not proceed in bad faith on the matter of affirmative disclosure, which supports the no-sanction determination..................... 34

5. Concl us ion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 0 IV. Had the Licensing made entirely correct findings of fact, the no-sanction determination would be r e qu ir ed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 0 i

A. Consumers Power's attitude toward disclosure was proper...................................................... 41

1. %e Licensing Board's finding of unsatisfactory attitude from words spoken by Consumers is incorrect.................................................. 41

2. %e Licensing Board's finding of unsatisfactory attitude from actions taken by Consumers is incorrect.................................................. 45

3. Conclusion................................................. 48 B. %e Te@le prefiled direct testimony reflects a proper disclosure approach on the part of Consumers....................................................... 48 C. No sanctions are proper on the facts as correctly found........................................................... 52 V. %e new standards articulated by the Licensing Board are j unnecessary md unfounded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 A. We prior existing standard for assessing the role of counsel in preparing testimony fully serves its intended purpose in contrast to the likely deleterious igact of the Licensing Board 's new standards. . . . . . . . . . . . . . . . . . . 54 B. Parties should be required to disclose in their affirmative testimony simply those facts which are material; the contrary Licensing Board directive will wreak havoc upon the N.R.C. aininistrative process. . . . . . . . . . . . . . 58 VI. Conclusion........................................................... 64 Attachment A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Testimony of Joseph G.

l Temple, Jr., ff. Tr. 220 i (without attached exhibits)

Attachment B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D.C . Bar Ethics Comnittee Opinion No. 79 l

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TABLE OF AUIEORITIES Page(s)

Cases:

Aeschliman v. Nuclear Regulatory Comission, 547 F.2d 622 (D.C. Cir. 1976)............................................ 2 Boston Edison Co. v. Federal Power Comission, 557 F.2d 645 (D.C. Cir.), cert. denied, Norwood

v. Boston Edison Co. , 434 U.S. 956 (1977 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Carolina Power & Light Company (Shearon fiarris Nuclear Plant, Units 1, 2, 3 and 4),

LBP-78-2, 7 N.R.C. 83 (1978)......................................... 33 Cleveland Electric Illuminating Co. (Perry Nuclear Power Plant, Units 1 and 2), ALAB-294, 2 N . R.C . 66 3 , 6 6 4 ( 197 5 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Consolidated Edison Company of New York, Inc.

et al. (Indian Point Station Units 1, 2 and 3 ) , CLI-77-2, 5 N.R.C. 13, 15 ( 1977 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Consumers Power Company (Midland Plant, Units 1 and 2) , ALAB-123, 6 A.E.C. 331 (1973 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,12 Consumers Power Company (Midland Plant, Units 1 and 2), ALAB-282, 2 N.R.C. 9, 10 (1975).............................. 2 Consumers Power Company (Midland Plant, Units 1 and 2 ) , LBP-7 7-57, 6 N.R.C. 48 2 (1977 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,41 Consumers Power Company (Midland Plant, Units 1 and 2), AIAB-458, 7 N.R.C. 155 (1978)................. 1,3,4,26,34,36,52 Duke Power Conpany (Catawba Nuclear Station Units 1 and 2) , AIAB-355, 3 N.R.C. 397 (1976 ) . . . . . . . . . . . . . . . . . . 11,13,28,32,34 Duke Ibwer Conpany (William B. McGuire Nuclear Station, Units 1 and 2), AIAB-143, 6 A.E.C. 623 (1973)......................................... 13,28,29,30,33,58,60 Florida Power & Light Co. (St. Lucie Nuclear Power Plant, Unit No. 2), AIAB-280, 2 N.R.C.

3, 4 (1975).......................................................... 12 Geders v. United States, 425 U.S. 80, 90 n.3, 96 S.Ct. 1330, 1336 n.3 (1973).................................... 54,55

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Georgia Power Company (Alvin W. Vogtle Nuclear Plant, Units 1 and 2), ALAB-291, 2 N.R.C.

404, 411 (1975)...................................................... 30 Greenapple v. Detroit Edison Company, 468 F.Supp.

702 (S.D.N.Y. 1979).................................................. 52 Kansas Gas & Electric Company (Wolf Creek Nuclear Generating Station, Unit No. 1), ALAB-311, 3 N.R.C. 85, 88 (1976)............................................... 12 Northern States Power Co. (Prairie Island Nuclear Generating Plant, Units 1 and 2), AIAB-244, 8 A . E .C . 8 5 7 ( 197 4 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ,13 NRLB v. Bell Aerospace Co., 416 U.S. 267, 295 (1974)...................... 14 Pacific Gas and Electric Company (Diablo Canyon Nuclear Power Plant, Units 1 and 2), AIAB-583, 11 N.R.C. 447 (1980)................................................. 12 Pacific Gas md Electric Company (Diablo Canyon Nuclear Power Plant, Units 1 and 2),

CLI-82-1, 14 N.R.C. (February 10, 1982)......................... 14 Public Sc.rvice Company of New Hampshire (Seabrook Station, Units 1 and 2), ALAB-422, 6 N.R.C.

33, (1977), aff 'd. , CLI-78-1, 7 N.R.C. 1 (1978), aff'd. sub nom., New England Coalition cm Nuclear Pollution v. NRC, 582 F.2d 87 ( 1 st Cir . 197 8 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 3 3 Public Service Company of Oklahoma (Black Fox Station, Units 1 and 2), AIAB-505, 8 N.R.C.

527 (1978)........................................................... 33

)

l Public Service Company of Oklahoma (Black Fox Station, Units 1 and 2), ALAB-573, 10 N.R.C.

775, 789 (1979)...................................................... 2 I

Public Service Electric & Gas Co. (Hope Creek Generating Station, Units 1 and 2), AIAB-251,

! 8 A. E .C . 99 3 , 99 4 ( 197 4 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1

! Superior Oil Co. v. State of Mississippi, 280 U.S.

390, 50 S.Ct. 169 (1930)............................................. 42

( TSC Industries, Inc. v. Northway, Inc., 426 U.S.

l 4 38, % S .Ct . 2126 (1976 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,60,61,62

! Tennessee Valley Authority (Bellefonte Nuclear Plant, f Units 1 and 2) , ALAB-237, 8 A. E.C. 654 (1974 ) . . . . . . . . . . . . . . . . . . . . . . . . 12 i

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Tennessee Valley Authority (Hartsville Nuclear Plant, Units lA, 2A, 1B and 2B), AIAB-409, 5 N.R.C. 1391 (1977)................................................. 33 United States v. Diacs, 613 F.2d 988, 999 (D.C. Cir. 1979)..................................................... 25 Vermont Yankee Nuclear Power Corporation (Vermont Yankee Nuclear Power Station), AIAB-138, 6 A . E . C . 5 2 0 ( 197 3 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 , 31 Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 98, S.Ct. 1197 (1978)................................ 2,12 Virginia Electric and Power Company (North Anna Power Station, Units 1 and 2), AIAB-324, 3 N.R.C. 347, aff'd. in part, rev'd. in part, CLI-76-22, 4 N.R.C. 480 (1976), aff 'd. 571 F.2d 1289 (4th Cir . 1978 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,14,28,29,59,60 Weinsteck v. United States, 321 F.2d 699 (D.C.

Cir . 195 6 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 , 25 Statutes, Pequlations and Rules:

Atomic Energy Act 42 U.S.C. SS 2013(d), 2133(d)........................................ 59 42 U.S.C. SS 2236 and 2282..................................... 14,28,63 42 U.S.C. S 2273..................................................... 63 10 C . F . R . S 2. 75 4 ( b ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 10 C.F.R. S 2.754(c)...................................................... 11 Fed. Rules of Evidence Rule 401............................................................. 24 Rule 803(3).......................................................... 42 Miscellaneous:

Bodin, Civil Litigation and Trial Techniques, ch. V (1976)......................................................... 55 Fletcher's Cyclopedia of the Law of Private Corporations, S 505 (1981)........................................... 26

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1 Freedman, Lawyers' Ethics in an Adversary System, ch . 6 ( 19 7 5 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 Jeans, Trial Advocacy (West's Handbook Series 1975 ) , ch. 2, " Ethics of Advocacy, " S 2. 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 LaFave and Scott, Criminal Law, S 25 (1972)............................... 42 4 Weinstein & Berger, Weinstein's Evidence, S 803(3)[04] (1981).................................................. 42 Cyclopedia of Trial Practice, SS15-131 (2d ed.

1981)................................................................ 55 D.C. Ethics Opinion No. 79....................................... 16,55,56,57 N.R.C. Staff Memo (12-13-76).............................................. 16 N.R.C. Staff Memo to Board of December 30, 1976..................... 16,46,56 Professional Responsibility: Report of the Joint Conference, 44 A.B.A.J. 1159, 1160 (1958).......................................................... 54 l

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BRIEF OF CONSUMERS POWER CCMPANY IN OPPOSITICH 'IO INTERVENOR'S EXCEPTIONS I. Introduction In accordance with the directive of the Appeal Board, AIAB-458, 7 N.R.C.

at 177 n.87, the Licensing Board in this proceeding held an evidentiary hearing running from July 2-31, 1979 to investigate concerns that Consumers Power Company (" Consumers Power" or " Consumers") anc others had not affirma-tively disclosed all required information in a prior suspension hearing. Se purpose of the July 1979 remand proceeding was to insure that the disclosure issue was " fully aired and resolved." he Licensing Board in its Partial Initial Decision-Remand Proceeding ("P.I.D.") deterIrdned that Consumers Power and %e Dow Chemical Company ("Dow") had erred in certain respects in the suspension proceeding in the affirmative disclosure of facts to the Board and in witness preparation. Be Board also determined that no sanctions were necessary or appropriate in the circumstances. Saginaw Valley Nue: lear Study Group ("Intervenor") has taken exception to the Licensing Board's no-sanction determination as 'it applies to Consumers Power.W Intervenor's appeal must be denied on four grounds:

1. Intervenor did not preserve its appellate rights in the proceeding below, and on this ground its exceptions must be denied.

2. %e Licensing Board's no-sanction determination is well within its discretion and is appropriate on the facts, as found.

1/ Intervenor does not take exception to the no-sanction determination as it relates to Dow and its attorneys. In this brief we will address Licensing Board findings concerning Dow only to the extent they also relate to Consumers Power.

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3. h Licensing Board substantially erred in its findings of fact, and when the facts are correctly determined, the Licensing Board's no-sanction

determination is required.E

4. W Licensing Board erred in its determination and application of the governing leg'al standards, and Consumers Power fully complied with the governing legal standards as correctly determined. ,'

After a review of the background leading to the instant appeal, 'we will consider each of the above four points in turn.

A. Events preceding the Partial Initial Decision.

In Aeschliman v. Nuclear Reaulatory Comission, 547 F.2d 622 (D.C. Cir.

1976),E the Court held that the NEPA review in the 1972 construction permit proceeding for Consumers Power's Midland plant was defective. '1he Court remanded the case to the N.R.C. and further stated:

As this matter requires remand and reopening of the issues i of energy conservation alternatives as well as recalcula-l tion of costs and benefits, we assume that the Comission will take into account the changed circumstances regardiig i Dow's need for process steam, and the intended continued operation of Dow's fossil-fueled generating facilities.

d at 632. In late 1976-early 1977, an N.R.C. Licensing Board held hearings I_d.

l to determine whether to suspend the Midland construction permits pending consideration on the merits of the Aeschliman issues. By decision dated Septenber 23, 1977, the Licensing Board declined to suspend the construction l permits. 6 N.R.C. 482.

2/ Given Intervenor's appeal of the no-sanction determinatien, Consumers Power, of murse, is at liberty in its answer to take exception to the Licensing Board's findings of fact. Public Service Company of Oklahoma (Black Fox Station, Units 1 and 2), AIAB-573,10 N.R.C. 775, 789 (1979);

Consumers Power Company (Midland Plant, Units 1 and 2), AIAB-282, 2 N.R.C. 9, 10 (1975).

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( 3] h decision of the Court of Appeals for the District of Columbia Circuit was reversed and remanded by the Supreme Court in 1978. See Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 98 S.Ct. 1197 (1978).

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Intervenoa '. Other han Dow, including Intervenor herein, appealed this Gecicion, Lut the Appeal Board, approaching the issues "in a different manner than did the Board below," affirmed. 7 N.R.C. 155, 161. With respect to Dow'c need to take steam frcm 'te Midland plant, the Appeal Board found, in parc-

'lh current status of the contractual relationship tetwen Dow and the applicant was examined at great length at de wspension hearing. Although this is as it should be, m should repeat that no NEPA violation occurred here; rather, the court suggested that the record be brought up- o-date on this e

• only because the case was remar.ded m other . We evidence adduced thus far, which appears to L csaally comprehensive, can be fairly surmturized as follows: Tme officials in the local Dow managemant /iew Midland as a losing proposition and would abandon it, cut the senior corporate officers have decided, eubject to reconsideration if circumstances change, that Dow will honor the contract to buy steam from Midland, notwithstanding that in:ervening events have rendered its ter fat less attractive to Dow than they originally were.

For our purposes, then, that portion of the demand for Midland power attributable to Dow is a given. To be sure, financial and other considerations might result in .

Dow's being unwilling to enter into a similar arrangement if the choice were before it today. But that is true of many contracts viewed in the perspective hindsight affords. Whether or not it is in Dow's best financial interests to honor its contract is not for us but for Dow to determine. And, to repeat, extensive probing on this point at the suspension hearing yielded convincing evidence that Dow's present intention is to adhere to the contract's terms.

45/ We Board below seemed to share this appraisal, but it concluded by stating that "whether Dow will ever buy steam from that plant is, on the record, speculative."

6 N.R.C at 488,123. We intervenors make much of this finding . But our judgmcnt is that we must take Dow's present intention as controlling, so long as there has been sufficient probing to determine what that intention truly is.

7 N.R.C. at 167-68.

While tia record develognent of the Dow position was " unusually compre-hensive", id_., a question arose during the 1976-1977 suspension hearing whether there had been an attempt to prevent the required full disclosure of 4

facts relating to Dow's intentions. 'Ihe concerns focused on the contents and i przparation of the prefiled written direct testimony of Joseph Temple, then General Manager of Dow Michigan Division, a division of Dow.

In his testimony, Mr. Temple set forth fully and accurately the position of Dow concerning its intent to take steam from the Midland Plant. Compare l prafiled Tegle testimony (Attachment A hereto) with Appeal Board sumary,

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supra. Mr. Temple did not include in his written testimony that an interim position-allegedly unfavorable to the Midland project--was advanced by the Michigan Division of Dow. Dow had internally reviewed this position at two higher levels-first, by an independent group of seven Task Forces and, finally,bytheDowU.S.A. Board.4I The Task Force group unanimously had recomended to 'the Dow U.S.A. Board and the Dow U.S.A. Board unanimously had decided for the corporation that, while less attractive than in the past, ct:am from the Midland plant continued to be the best alternative for Dow.

(Tr. 52382, 54149, 54224-5.) To the extent that the Michigan Division conclusions were inconsistent with the Dow U.S.A. Board determination, those conclusions were not adopted by Dow. (Tr. 53,468, 54,212-3.) Nonetheless, J

concern was expressed that the exclusion of the Dow Michigan Division position from the prefiled Tegle testimony was inappropriate.

4f Dow Chemical U.S.A. is the operating unit of Dow Gemical Company, responsible for all corporate activities within the United States. Dow Chemical U.S.A. is operated through its President and the Dow U.S.A.

Operating Board. One of the subordinate divisions of Dow Gemical U.S.A. is the Cow Michigan Division. See Dow Ex. 2.

Concern also was expressed with the manner in which Mr. hmple's testimony had been prepared. Se Consumers Power and Dow attorneys had prepared outlines and drafts of Mr. Temple's testimony, with Mr. Temple providing his coments to the Dow attorneys, rephrasing the testimony as he deemed necessary 'and approving and adopting the final filed testimony. he suggestion was that the attorneys should not draft the testimony of a witness cuch as Mr. Temple.

Following a preliminary inquiry, the Board decided to defer considera-tion of the disclosure issue until after the suspension hearing. Wese matters then became the subject of the July 1979 hecing and the December 1981 P.I.D.

B. Partial Initial Decision.

In the P.I.D. the Board mncluded that Coasumers Power and its attorneys had taken too narrow a view of a party's affirmative duty of full disc 1csure.M It held that Temple's direct testimony "should have included the Dow Michigan Division's recomandation, as well as a fair and candid description of the true relations between Dow and Consumers." P.I.D. at 40.

his was important, said the Board, because without it the " direct testimony could have created an unwarranted impression on the part of the Licensing Board that there was very substantial, perhaps even unanimous, satisfaction within Dow with the purchase arrangement. [he Dow Michigan Division position) would have disclosed deepseated unhappiness with the arrangement."

Sf At issue in the proceeding below was what should go into Consumers' affirmative case, not what should have been disclosed to other parties since, consistent with the traditional meaning of disclosure, Consumers made cva11able in discovery the Dow Michigan Division position. See N.R.C. Staff Brief below at 27, Consumers Brief below at 47-8.

M , at 27. Unlike the Appeal Board's perspective with respect to the difference between ;iews of " officials in the local Dow management" and those of " senior corporate officers", the Board was concerned that evaluation of Dow's intent required " knowledge of this substantial internal disagreement."

Id. at 27-28. %e Board acknowledged that the attorneys for Consumers Power and Dow concluded such information was imaterial. Id. at 34. We Board, nonetheless, found that the non-inclusion of this information in the Temple tIstimony and the active involvement of the lawyers in the preparation of that testimony was not consistent with the "nondelegable duty to adhere to the highest standards of disclosing relevant information." P.I.D. at 40 (enphasis added). He Board elaborated on this standard as follows:

It is not the function of attorneys to decide on what information the Board may properly rely. If there is any question as to whether disclosure of a particular piece of information might be required, that information must be disclosed.

Id. at 29. We Board then rigidly applied this standard to the present case.

In deciding Consumers had not properly followed the standard, the Board found it significant that:

Consumers' counsel found the question of materiality sufficiently close to hold a meeting specifically to address the issue. If counsel have any doubts whether disclosure of particular material is required, as they obviously had here, that information should be disclosed.

That Conwmer's counsel found it necessary to hold this meeting sufficiently demonstrates that counsel had such doubts.

M. at 34. Under the Board's standard, analysis of uether an item should be disclosed is improper, and if quite literally the question enters the mind of counsel that an item might be discloseable to the Board, that item must be disclosed.

With regard to witness preparation, the Board determined that the "Tenple testimony was prepared and massaged primarily by the lawyers" and that "his is the reverse of the proper procedure." Id.. at 38. In the 1

3 Board's view "Mr. Tenple was clearly qualified to be primarily involved in j the preparation o'f the entire spectrun of his own sworn testimony, and no f script conmittee abould have injected itself to the extent disclosed by the record." Id,.

d at 39.

While finding that Consumers and Dow thus erred in certain respects, i the Board determined that no sanctions were appropriate. It so concluded because (a) the parties had no intent to deceive and all pertir.ent facts i ultimately did come out in the suspension hearing,E and (b) the high i

I ctandards of testimony preparation and other conduct it applied had not i

4 j6 _By pre-hearing Order dated June 12, 1979, the Licensing Board framed j five issues for consideration at the July 1979 remand proceeding. These

! quistions are set out in the P.I.D. at 8. The first four questions asked

, whether any party had attempted to prevent full disclosure of relevant infor-

mation, had failed to make affirmative disclosure of material information, or had attenpted to mislead the Board concerning Cow's intentions or the Temple i

tsstimony. %e last question asked what sanctions, if any, should be imposed j as 'a result of an affirmative answer on the first four questions. In the P.I.D. the Licensing Board essentially ignored and did not expressly answer the first four questions it posed. All participants in the remand proceeding

j. concluded that with respect to Consumers and its attorneys, all four ques-i tions should be answered in the negative. It is far from clear that the

Licensing Board would give different answers to its own questions.

_7/ Se Licensing Board also observed that counsel and witnesses in the July i 1979 remand proceeding scrupulously followed restrictions on witness prepara-

! tions requested by the Board. P.I.D. at 41; see also Tr. 50065-70.

! Witnesses were limited in documents they revie6d not talk with each 4 cther about the case and, with certain authorized exceptions did not sit in on each other's depositions or testimony. See, e.g., Tr. 51974-7, 53755, 54247, 54245-5; Klonparens Dep. of May 14, T979, at 3-4. Contrary to the Licensing Board's observation, attorney discussion with and preparation of witnesses, while curtailed, was permitted and undertaken. See , e.g. , Tr .

50065-70, 51974, 52748.

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prsviously been specifically addressed by the N.R.C. or Appeal Boards and may not have been required or followed in other proceedings. d at 39-41.

I_d. It la from these conclusions that Intervenor, without warrant, takes exception.

C. Tenple's prefiled direct testimony.

This case has consumed an inordinate amount of time and effort and, as a result, there is substantial risk of failing to focus upon what in theory was to be the focus of the July 1979 hearing, namely, Temple's prefiled direct t:stimony. Possibly in reading the Licensing Board decision, and certainly in reading Intervenor's appeal, one can be left with the impression that Tenple's testimony painted an unqualified, rosy picture of the Dow/ Consumers rolation and amounted to little nore than a statement, "Yes, we intend to purchase steam." P.I.D. at 27. The Board pointed out that Dow's intentions were "a great deal more qualified than that." Id. Indeed they were, and those qualifications were fully and accurately set forth in the Temple t:stimony.

In addition to stating that Dow's present intent was to take Midland eteam, Temple testified as follows:

(a) [T]he difference in oost between the nuclear alterna-tive and the coal-fired alternative has narrowed appreciably due to the ntunerous delays already incurred and the consequent cost increases of the nuclear plant,....

(b) [T]he mst increases in nuclear steam which would be inherent in a delay caused by suspension of the construction license and the actual delay that would result...would force Dow management to evaluate whether the situation had not then been altered to such an extent that Dow must make other arrangements for a reliable supply of steam.

(c) Further, the matter will be kept under continuous review and Dow will keep all of its options open.

Attachment A hereto, at A2-A3. Mr. Temple also testified that Dow and Consumers were actively negotiating "possible modifications of the various contracts between them which relate to the nuclear plant", and he then d; tailed Dow's position in these negotiations. Dow's negotiating objectives, ctated in the Tenple testimony, well ilkstrate Dow's concerns with the then-cxisting contract relation. For instance, Dow's first negotiating objective was as follows:

1. 'Ihere must be a specifically stated deadline for the comencement of a reliable steam supply for Dow's Midland Plant by Consumers Power. A clearly understood timetable is required for the completion of the key aspects of the job of constructing and starting up of each of the reactor units. Dow cannot be expected to wait beyond a reasonable time for the completion of the nuclear power plant and comencement of the reliable delivery of contract quanti-ties of process steam. If that timetable is so changed that the stated deadline for delivery of process steam cannot be met, it must be clear that Dow can terminate the contract.

Id. at A4. In fact, the negotiations referenced by Mr. Temple resulted in a -

revised contract which continues in force today.

Given the breadth and candor of Temple's prefiled testimony, we simply are at a loss to understand some of the coments in the P.I.D., and in Intervenor's brief. For example, a key Board conclusion is that the above t:stimony, by not including the Dow Michigan Division interim position, could h;ve left the Board with the improper impression that there was "very substantial, perhaps even unanimous satisfaction within Dow" with the Dow/ Consumers purchase arrangement. P.I.D. at 27. Had not the Licensing Board so stated, we would have thought that such a misimpression from the Tenple testimony would have been impossible. Likewise, Intervenor ct tes-indeed, enphasizes as a key element in its appeal-that Consumers l

4 cxcluded certain information from the Temple testimony because it might " lose the case." See, e.g., Intervenor Brief at 8-9. 'Ihe information purportedly omitted was "that Dow was concerned about Consumer's reliability, or that Dow

! was seeking a date after which it would be tc11eved of all contractual obligations if steam was not forthcoming." Intervenor Brief at 5-6 quoting P.I.D. at 28. I fact, this information was included virtually verbatim in i

, the Tegle testimony. See Temple testimony, quoted at 9, supra.

We respectfully urge the Appeal Board to begin its review of this case by reading the Tegle prefiled testimony. See Attachment A. We believe that even a casual reading of this shows that it presents a candid-indeed rcmarkably candid-description not only of Dow's " bottom line" support for i

the Midland project, but also of the qualified nature of that support.

II. Intervenor has not preserved its appeal and 1 the speal, accordingly, should be dismissed.

i At the conclusion of the July 1979 remand hearing, the Licensing Board requested that the parties file briefs and proposed findings of fact and conclusions of law. Consumers, Dow, and the N.R.C. Staff did so. However, Intervenor failed to file any brief or proposed findings. Intervenor as well had failed to participate in the remand proceeding below. P.I.D. at 9.

On January 11, 1980, more than five months after the inquiry had been concluded, and- two months after Consumers, Dow and N.R.C. Staff had filed j their last post-hearing pleadings, counsel for Intervenor wrote a letter to the Board, characterized as being "in the nature of our post-trial memoran-

. dtu", setting forth his views and arguments on the remanded matters. P.I.D.

ct 9. Cursory examination of that letter reveals that it utterly fails to l

l t

-n .. _

conply with 10 C.F.R. 52.754(c), and thus cannot be characterized as proposed findings. Femarkably, some ten nonths later, the Board entered an order, sua sponte, granting Intervenor an opportunity to file proposed findings.Y P.I.D. at 9. Intervenor was "given to and including Decenber 29, 1980, to file written briefs and proposed findings which cite the record with spe-cificity in support of the conclusions and arguments set forth in their letter dated January 11, 1980." Board Order Granting Intervenors Other than Dow an Opportunity to File Proposed Findings, Nov. 14, 1980, at 3.

Intervenor failed to avail itself of the additional opportunity to file proposed findings; it filed no briefs or proposed findings. P.I.D. at 10.

hus, Intervenor defaulted twice. 10 C.F.R. S 2.754(b).

he egregious nature of Intervenor's defaults is underscored by the fact that both Intervenor and its counsel were explicitly reprimanded by the Appeal Board in an earlier review proceeding j a this same docket for seeking review after having failed to file findings below. Consumers Power Company (Midland Plant, Units 1 and 2), AIAB-123, 6 A.E.C. 331, 332-334 (1973); cf.

Duke Power Company (Catawba Nuclear Station Units 1 and 2), AIAB-355, 3 N.R.C. 397, 406 n. 26 (1976). Said the Board of the Intervenor's tactics in the earlier proceeding:

Participation in this manner, in our opinion, subverts the entire adjudicatory process. One of the justifications for public participation in that process is the additional input which intervenors may contribute to the identification and resolution of relevant issues, and the assistance they may provide an agency in fulfilling its statutory mandates. In short, the right of partici-pation in an administrative proceeding carries with it the l

_8/ he Board's order was directed to "Intervenors Other h an Dow." One of these intervenors is Saginaw Valley Nuclear Study Group, appellant in this Case.

_ = _ -.

obligation of a party to essist in " making the system work" and to aid the agency in discharging the statutory obligations with which it is charged.

6 A.E.C. at 332. See also Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 553-4, 98 S.Ct. 1197, 1217 (1978). l

'Ibe Appeal Board has generally declined to review the exceptions of a party who failed to file proposed findings on the issue with respect to which l cxceptions are taken. See, eg ., Florida Power & Light Co. (St. T.ucie Nuclear Power Plant, Unit No. 2), AIAB-280, 2 N.R.C. 3, 4 at n. 2 (1975);

Northern States Power Co. (Prairie Island Nuclear Generating Plant, Units 1 and 2) AIAB-244, 8 A.E.C. 857, 864 (1974).9I In the 1973 Consumers case the Appeal Board, after reprimanding Intervenor, ultimately determined not to dismiss Intervenor's appeal, since it was " obliged to review the Board's initial decision" in any event. Consumers Power Company (Midland Plant, Units 1 and 2), AIAB-123, 6 A.E.C. 331, 333 (1973). See also Pacific Gas and Electric Co. (Diablo Canyon Nuclear Power Plant, Units 1 and 2), AIAB-583,11 N.R.C. 447 (1980) .

Having completely failed to address the merits in the prescribed manner, Intervenor is " scarcely in a position, legally or equitably, to protest the 9f See also Public Service Co. of N.H. (Seabrook Station, Units 1 and 2, AIAB-422, 6 N.R.C. 33, 70 at n. 41 (1977), aff'd, CLI-78-1, 7 N.R.C. 1 (1978), aff'd sub nom. New Ehgland Coalition on Nuclear Pollution v. NRC, 582 F.2d 87 (1st Cir. 1978); c Nuclear Generating Station,f,., Unit Kansas No.1),Gas & Electric AIAB-311, Company 3 N.R.C. (Wolf 85, 88 Creek (1976)

(rajecting appeal of non-party vendor, citing failure of vendor "to have injected itself into the case to protect its own interest"); . Cleveland Electric Illuminating Co. (Perry Nuclear Power Plant, Uhits 1 and 2), ,

AIAB-294, 2 N.R.C. 663, 664 (1975) (dismissing exceptions of maker of limited  !

appearance); Public Service Electric & Gas Co. (Hope Creek Generating l Station, Units 1 and 2), AIAB-251, 8 A.E.C. 993, 994 (1974)(rejecting excep- I tions of non-party); Tennessee Valley Authority (Bellefonte Nuclear Plant, I Units 1 and 2), AIAB-237, 8 A.E.C. 654 (1974) (rejecting appeal of non-party) .

1

determinations made by the Board in connection with it." See Northern States Power Co. (Prairie Island Nuclear Generating Plant, Units 1 and 2), AIAB-244, 8 A.E.C. 857, 864 (1974) . Bis is particularly true where, as here, the l

would-be appellant failed to participate in the hearing before the Licensing Board, twice defaulted on opportunities to preserve its appeal, has been pr;viously reprimanded for such default, suggests yet another hearing in this matter and is the sole appellant. Intervenor's appeal accordingly should be dismissed.

III. %e Licensing Board's no-sanction determination is proper on the record, including the facts as found by the Board.

he Licensing Board, of course, has substantial discretion in determin-ing whether sanctions are warranted in the particular circurrstance. B us, on c number of occasions in N.R.C. cases involving failures to disclose, no sanctions have been ordered. See, e.g., Duke Power Company (William B.

McGuire Nuclear Station, Units 1 and 2), AIAB-143, 6 A.E.C. 623 (1973); Duke Power Cortpany (Catawba Nuclear Station, Units 1 and 2), AIAB-355, 3 N.R.C.

397 (1976). Intervenor in its brief would strip the Board of its discretion.

CitingNorthAnna,b Intervenor argues that any violation of a disclosure ctandard-whether advertent or inadvertent, whether in bad faith or not-requires sanction. Intervenor misreads North Anna and the law.

%e North Anna decision in no way mandates the imposition of sanctions.

10/

0 Virginia Electric and Power Company (North Anna Power Station, Units 1 and 2), AIAB-324, 3 N.R.C. 347, aff 'd in part, rev'd in part, CLI-76-22, 4 N.R.C. (1976), aff'd 571 F.2d 1289 (4th Cir.1978) (hereinafter " North Anna",

with reference to particular decision).

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

4 Even under the material false statement and civil penalty provisions of the Atomic Energy Act, 42 U.S.C. SS 2236 and 2282, the Comission is simply  !

! l l " authorized" to revoke a license and levy civil penalties for material false '

cts.tements in license applications. North Anna, 571 F.2d 1289, 1291 (4th Cir . 1978) . Se decision as to what action to take against a party rests in the sound discretion of the Comission. Id. at 1291-92; see also Pacific Gas and Electric Company (Diablo Canyon Nuclear Power Plant, Units 1 and 2),

CLI-82-1,14 N.R.C. _ (February 10, 1982).

, In this case the Licensing Board, as indicated, determined not to impose sanctions because no bad faith was involved and because the standards as applied were new and diverged from existing practice. %is determination is

} correct and readily supports the Licensing Board's no-sanction dst::rmination.E a

i I s

_1_1/

1 It is fundamental that an agency may not, as a general rule, apply a new rulo or standard retroactively without having given proper notice to the affected party. Boston Edison Co. v. Federal Power Comission, 557 F.2d 845 (D.C. Cir.) cert. denied Norwood v. Boston Edison Co., 434 U.S. 956 (1977).

, An agency's power to apply retroactively a rule or standard is particularly limited where that rule has been made pursuant to adjudication and " fines or damages" are involved. NLRB v. Bell Aerospace Co., 416 U.S. 267, 295 (1974).

See also In re Carter, SEC Release No. 34-17597 (Feb. 28, 1981), Fed. Sec. L.

Rep. (CCH) 182,847 at page 84,169-70 (" ... elemental notions of fairness 3 dictate that the Comission should not establish new rules of conduct and e inpose them retroactively tpon professionals who acted at the time without a reason to believe that their conduct was unethical or improper.")

i Absence of bad faith is well-recognized as a factor dich can legiti-i mataly affect an agency's choice of remedies in a given case. Pacific Gas and Electric Conpany (Diablo Canyon Nuclear Power Plant, thits 1 & 2),

CLI-82-1,14 N.R.C. _ (February 10, 1982).(no sanctions imposed for viola-tion of material false statement provision of Atomic Energy Act, 42 U.S.C.

52236). See also North Anna, 571 F.2d 1289 (4th Cir. 1978) (no abuse of dis-crction where the agency mitigated the sanction due to the absence of " intent to deceive").

1 a

14-l

i l

l l

l A. The Licensing Board's no-sanction determination j is proper with respect to testimeny preparation ,

i by Consumers Power. I The Licensing Board correctly found that the lawyers for Consumers and Dow were largely responsible for preparing the drafts of the Temple testi-many, including the wording and format thereof. Temple, for his part, tsviewed the progress of the drafting, rephrased parts as he deemed neces-sary, and reviewed and accepted the final draft as his own testimony. (See Tr. 51094-5, 51938, 53380,. 53548-70). Temple emphasized at the July 1979 hearing that he carefully reviewed the final testimony, that he believed it to be cx>mplete and accurate the topics covered, and that he was not rastrained from including anything he thought necessary. Id.

The Board nonetheless found fault with the attorneys' procedure and held that Tenple should have had principal drafting responsibility for his tGatimony. P.I.D. at 38-39. In reaching this conclusion, the Board adopted t'he following principles of attorney conduct: (1) written testimony should i not be drafted by counsel; (2) the attorney's involvement in testimony preparation corresponds with the number of sources of information properly contributing to the testimony; and (3) the degree of attorney involvement in the preparation of testimony is inversely related to the knowledgeableness of the witness. _Id . Without addressing the wisdom of the Board's standard (which we cx)ver in Part V hereof), it is clear the Board correctly determined that no sanctions were appropriate in the circtanstances. First, the standard enunciated is new indeed. Second, Consumers Power did not proceed in bad faith, and the record abounds with mitigating circumstances.

That the standard is new hardly can be gainsaid. Certainly the pre-cxisting administrative standard allowed preparation of witness testimony not

l 1

only by the witness but, at first, also by the attornc7 %us, the Staff found the manner of the lawyers' preparation of Temple's testimony wholly proper and "not unusual, especially in view of the circumstances of th[e]

suspension proceeding (, particularly that] Mr. Temple was presenting a l corporate position, not a personal opinion..." N.R.C. Staff Memo of December 13, 1976 at 3-5. Likewise, attorneys in the July 1979 hearing testified that they understood the comon practice to be for attorneys to prepare a witness' t:stimony in administrative proceedings. (See, e.g., Tr. 51016-20, 52538-9, 53300.) Finally, the D.C. Bar Ethics Comittee, which is the professional body in the District of Columbia responsible for delineating proper attorney conduct, expressly addressed the type of testimony preparation used for the T;nple testimony in this case, and it concluded that such preparation not only is proper, but in some circumstances may be required. E 2e proper focus, said the Ethics Committee, is "on the substance of the witness's t:stimony which the lawyer has, in one way or another, assisted in shaping; and not on the manner of the lawyer's involvement." Opinion No. 79, at 170.E 12/ 2e D.C. Bar Ethics Comittee Opinion No. 79 was issued in response to an inquiry from o msel for Consumer's Power. % e opinion was filed with the Licensing Board and the parties on January 7, 1980; surprisingly, it was not Gven acknowledged in the P.I.D. For convenience, a copy of Opinion No. 79 is appended as Attachment B.

_13/ %e Staff made the same point as follows: '1he really significant factor with regard to the Temple testimony is whether or not Mr. Temple could adopt the final testimony as his own. He did review the final drafts and the final testimony itself....If he found that testimony to be true and correct to the best of his knowledge and belief, that is all that is required of a witness prsenting testimony. %is is the substance of the oath the witness takes. See Wigmore en Evidence. Vol. 6 Section 1818." N.R.C. Staff Memo to Board of Decenber 30, 1976, at 4.

Not cnly is the Licensing Board standard new, but there are mitigating circtznstances establishing the absence of bad faith by Consumers. 2e Licensing Board, having sat through the inquiry, was understandably aware of these circumstances when it exercised its discretion in the P.I.D. During the period of time during which the Temple testimony was being prepared, Consumers Power and Dow attorneys viewed each other and witness preparation from radically different perspectives. Consumers hearing counsel viewed the mitter simply as a cooperative effort to prepare for the N.R.C. hearing.

(Tr. 51501-2, 53273; N.R.C. Staff Brief below at 25.) On the other hand, the Dow attorneys, based on an admittedly erroneous perception of Consumer Power 's approach (Tr. 52,524-6, 52992-7; N.R.C. Staff Ex. 5, Doc. 5, No. 40),

trcated the Consumers Power attorneys as adversaries (Tr. 51129, 52492, 52524.) mus, while Consumers hearing counsel simply were trying to gather facts, Dow attorneys were engaged in what Mr. Wessel, outside Dow counsel, called " sporting" activities. (Tr. 52549.) t ese he defined as strategies and approaches which would embarrass him if they became known to others.

(Tr. 51493, 52492, 52975-6.) See generally Consumers Brief below at 88-94.

Mr. Wessel's approach dominated Dow's participation in the preparation of Temple's testimony, %us, Mr. Wessel testified that an early draft of the Tenple testimony was intentionally " lousy" (Tr. 52699-701, 52911-2) and that another draft " continued our effort not to let Consumers get the information that Consumers was seeking to get." (Tr. 52735.) Rex Renfrow for Consumers Power preferred the preparation approach herein required by the Licensing Board. (Tr. 51566-7, 51595.) As stated in Dow notes of an early meeting, Mr. Denfrow wanted " Joe Temple to give him an outline of what he, Joe, wants i

1 to say." N.R.C. Staff Ex. 4, Doc. 21, pp.15, 23. (See also Tr. 51781-2,

53210-1.) Dow attorneys, however, would not allow this approach; they required that Temple's testimony be prepared through them, not independently with Tenple. (Tr. 51018, 51567, 51583, 51934-5, 53210-2, 53398.) Given this state of affairs, and the fact that Temple was a Dow, not a Consumers Power enployee, the Consumers attorneys were ~xnpelled as a matter of practical necessity-and perhaps, too, as a matter of professional responsibility-to deal with Tenple through the Dow attorneys.

In light of the new standards for testimony preparation adopted by the Licensing Board, and the practical constraints placed on Consumers by Dow in t::timony preparation, it would be wholly improper-as the Licensing Board det:rmined-to sanction Consumers for the manner in which Temples' testimony was prepared. Indeed, where the Board correctly found that Dow took "such actions as not having a Dow employee write testimony", P.I.D. at 33 n.71, it would be an abuse of discretion to sanction Consumers because its attorneys participated with Dow attorneys in the developnent of the Dow witness' tatimony.

B. to Licensing Board's no-sanction determination is proper with respect to affirmative disclosure by Consumers Power.

As with testimony preparation, the Licensing Board sought to apply a new ctandard to the disclosure requirements applicable to the contents of direct t:stimony. Here too, Consumers Power did not proceed in bad faith and the Licensing Board's no-sanction determination is fully justified. Rese points I aro made clear from an analysis of the facts and the law.

1. 'Ibe scope of facts required to be affirmatively disclosed by the Licensing Board is extremely broad.

The Licensing Board found that the " Temple prefiled direct should have included the Dow Michigan recomendation, as well as a fair and candid description of the true relation between Dow and Consumers." P.I.D. at 40.N What the Board meant by this is broad indeed. Clearly, the Board concluded that the Dow Michigan Division position should have been fully and effirmatively disclosed. According to the Board, the circumstances establi-shing that Dow had " seriously" considered suing Consumers Power in the past and had not eliminated this option in the future should have been disclosed.

P.T.D. at 27-28, 37. Further, incredibly, Consumers should have " voluntarily and affirmatively disclosed" the drafts of Temple's testimony. Id. at 32.

Although somewhat less clear, 'Ibmple apparently also should have testified that one of the two major reasons Dow chose to stay with the nuclear option was that Consumers Power " threatened" to sue Dow if Dow arguably breached its contract with Consumers, a point Consumers was unaware of prior to trial.

See n.28, infra.

Consumers Power's required disclosure to the Board cannot stop simply with those items directly specified by the Licensing Board. If affirmative di: closure of the Dow Michigan Division position is required, then affirma-tive disclosure obviously is required of the higher level Task Force review and recomendation, and the input and rationale for all positions.l_5/ yf jl4 It is uncontested that the Dow Michigan Division position was in fact at closed in doctments which Consumers voluntarily made available to the N.R.C. Staff and Intervenor prior to and at the hearing. It is in fact from these doctanents that the Dow Michigan Division position become known to Intervenor and the Board.

, 1_5/ '1he Task Force was composed of seven different groups. M111e the groups i

unanimously agreed with the Task Pbece's recomendation to continue with (Continued Next Pagel drc.fts of Temple testimony are required, then so are drafts of all witnesses, for who is to predict what wording differences in drafts might be found cignificant at a later point in time by someone else. Iet there be no doubt-this is a new standard of disclosure. Indeed if Dow's past considera-tion of suing Con'sumers must be disclosed to the Board along with the Dow Michigan Division position, then the entire history of the Dow/ Consumers relations would have to be offered in testimony-the favorable as well as the unfavorable. Mr. Temple acknowledged that if the goal was through his t= timony to tell the whole story of the Consumers /Dow relations, "all 14 voltznes worth," his testimony did not do so. He did not think this was the objective; rather, he thought the objective was simply to tell Dow's current position. (Tr.53559-60.)b 2e Licensing Board in its P.I.D. Said that Mr. Tenple and Consumers were wrong, and that the whole story is required, cil fourteen voltnes of it.

We extent and complexity of affirmative disclosure under the standards of this case are well illustrated by the two topics the Board expressly held should have been disclosed: the Dow Michigan Division position and the possibility of Dow suing Consumers.

. (a) We Dow Michigan Division position: We Michigan Division concluded that there was "no longer the possibility or probability that the (Continued]

nuclear power (Tr. 52382), group members had many different underlying views.

(Tr. 53014-6). Presumably, all these views must be presented affirmatively

- they certainly are at least as important as the lower level Dow Michigan Division position.

16/ See Dow Reply Brief of March 22, 1982 at 8-10, quoting the pertinent transcript, showing the absurdity of the so-called admission by Mr. Temple that his testinony was "not open, not honest, and not consisting of all the talevant information."

nuclear plant would be good for Dow's Midland plant." N.R.C. Staff Ex. 3, Doc. 4, p. 9. h Board identified this conclusion as a "recomendation,"

and this of course it was rot. Dow Michigan Division's "recomendation" cimply was that this whole matter should be reviewed by the Dow U.S.A. Board.

(Tr. 53321, 53586-7; Board Ex. 1 at 3.)

h ultimate issue in the suspension proceeding as it related to Dow was whether Dow's present intent was to honor its contract obligations and take EtCam from the Midland plant. On this, the meaning of the Dow Michigan Division conclusion was far from clear. At a September 24, 1976 meeting between Dow and Consumers personnel, Mr. Aymond (then Chairman of the Board of Consumers Power) presented four alternative courses of action Dow might pursue, which he designated 3a, 3a(1), 3b and 3c. E (Tr. 54074-5; Staff Ex.

4, Doc. 9.) During the course of the July 1979 hearing, Dow and Consumers witnesses were asked their understanding of Dow Michigan Division's position going into the September 24, 1976 meeting in terms of Mr. Aymond's four citernatives. Dow sumatized the responses as follows:

Prior to entering the Septenber 24, 1976 meeting, Mr.

Aymond felt that the Michigan Division position was clo mst to 3b on his outline, Mr. Youngdahl thought it was closest to 3a(1), Mr. Falahee couldn't estimate and Messrs. Bacon and Howell expressed no opinion. Messrs.

Tenple, Nute and Hanes thought it was closest to 3b, while Mr. Klomparens thought it was closest to 3c.18/

_1_7/ h alternative courses of action were as follows: 3a-enthusiastic i

support for the nuclear project; 3a(1)-support for the project but with some l I recognition of its diminishing economic advantages; 3b-honor contractual l comitments but make clear Dow views the arrangements as no longer advan-tageous to Dow; 3c-outright repudiation of contracts with Consumers. N.R.C. !

Staff Ex. 4, Doc. 9.

l l 18/ h Dow position was subject to such confusion as to its meaning that i

the position even was understood differently at different times by one of Dow's key enployees, Mr. tAlte, who was closely associated with its formulation.. (Tr. 911-25.)

1 l

l Dow Brief below at 33. Bis sumary would be humorous, if the Board had not l enphasized Consumers' responsibility to set forth accurately the Dow Michigan

)

Division position. At the September 24 meeting, Mr. Aymond asked Mr. Temple l

point blank what the Dow Michigan Division position meant in terms of action.

Mr. Tenple refused to answer, saying that what mattered was the tp=hg i decision of the Dow U.S.A. Board. (Tr. 52276-7; 53904; see also 51833; Staff Ex. 4, Doc. 6, p.3.) While Consumers Power was interested in Dow Michigan Division's views, it agreed with the Division that the position of the Dow l

U.S.A. Board would be the official and determinative Dow position. Consumers j then assured that this position was fully and accurately set forth in the Tenple testimony. %e Licensing Board nevertheless found that Consumers l t

should have disclosed the Dow Michigan Division position in Temple's direct i i

testimony. In light of the perceptions of the personalities set out above, one can caly wonder what would safely have constituted " full disclosure" of l the Dow Michigan Division position. E 19/ 'Ihe Licensing Board's enphasis on inclusion of the Dow Michigan Division

po

ition is doubly ironic. First, a corporate review was undertaken by Dow-the task force review and Dow U.S.A. Board review and decision-in anticipation of the upm ming N.R.C. hearing and specifically to eliminate all anbiguity and confusion as to the Dow position. (Tr. 50563, 52609-10, i 52637.) ne wrporate review succeeded admirably in this respect. '

Unfortunately, the Licensing Board refused to accept Dow's resolution of the matter, instead finding that the inherently confusing and preliminary Dow 1

' Michigan Division position sould have been disclosed in Temple's direct.

Secondly, sile the meaning of the Dow Michigan Division position is unclear, Dow in its brief before the Board argued that the correct interpretation of the position was that Dow would take steam (presumably because of contract

, rrtraints) though this was no longer otherwise good for Dow. Dow Brief

. below at 24. (See also Tr. 50886-7, 51391.) In short, by Dow's analysis, Dow Michigan Division's position and the corporate position were the same on the ultimate issue, namely, Dow's intent to take steam. A necessary question arises in this context whether, indeed, this whole proceeding has addressed a tempest in a teapot.

i 1

.. _. _ _ - . , . - - . . - - . _ - . - _ . , . -_l

l l

l (b) Dow's consideration of suing consumers Power: 'Ihe undisputed facts rcspecting Dow's past consideration of suing Consumers are as follows: Milt Wessel, special munsel to Dow and not a part of Dow management (Tr. 52612, 52985), was an idea man for Dow who regularly fed numerous thon3h ts to Dow personnel. (Tr. 50548, 50986, 54304.) One such idea developed by Mr. Wessel was that Dow could argue Consumers had not satisfied its "best efforts" obligationa in the Dow/ Consumers Power contract and, accordingly, Dow could sue Consumers for breach. Mr. Wessel urged this position on Mr. Nute, Dow Michigan Division counsel, who did not give the idea serious consideration and who believed Dow had a legally binding contract with Consumers. (Tr.

50688-9, 50545-9, 50848-52, 52475, 53583.) Likewise, Wessel pressed it on Mr. Hanes, General Counsel of Dow U.S.A., who in turn obtained the opinion of an outside law firm, Kaye, Scholer, Fierman, Hayes & Handler. Mr. Hancs also concluded that Dow had a valid, binding contract and his view in this respect became stronger over time. (Tr. 52365-6, 52391-2.) Kaye Scholer was the most negative of all on Wessel's position. (Tr. 52491.) At the time of its consi6eration, the Dow Michigan Division decided not to pursue it. (Tr.

51150; Board Ex. 2) Mr. Wessel in the July 1979 hearing acknowledged that rcsponsible Dow officials were much less enamored of his contention than he and that he "was having some quite considerable difficulty persuading others of the viability of exploring the potential for a best efforts case." (Tr.

52491, 52845-8.) Further, Wessel testified that his purpose in pushing the suit was not to get Dow out of its contract with Consumers, but to use it as a lever against Consumers for concessions in the then pending contract negotiations. Said Mr. Wessel: "There's an implication in the document that l this renegotiation is an alternative to a suit, and all I wanted to do was t i

renegotiate. %e suit was a last resort. I didn't want to have a lawsuit.

My goodness. Bat's the worst possible thing that could happen." (Tr.

52863-4.)

2ere is no suggestion in the record whatsoever that Dow held aaything approximating a f'ixed and serious intent to sue Consumers. (Tr. 51150-51, 52385.) Indeed, on the general subject of lawsuits, Mr. Oreffice, then President of Dow U.S.A., stated the corporate position as follows: "We're not a litigious company, and I think that muld be by far our last recourse."

(Tr. 54188, 54205.)

Even now, even with hindsight, we fail to see any possible significance that all or any portion of the above facts concerning possible suit by Dow had for the suspension 1976 hearis 1 We point is this: If information such as this nust be put into an applicants' affirmative case, what can be left out?

In sum, the Board found that Consumers should have disclosed in its t:stimony the unclear position of a Division of Dow as well as the viewpoint of an outside attorney not accepted by Dow officials. Clearly, this is an cxtremely broad and new affirmative disclosure requirement. Under the circtzustances, it is little wonder that the Licensing Board decided to forego sanctions.

2. Se Licensing Board required disclosure to the Board of all relevant and possibly relevant information and, hence, imaterial information.

ne Licensing Board below was fully aware of the distincticn between materialityE and relevance, and indeed, in the P.I.D. it cited Weinstock l ' 2y While the Federal Rules of Evidence, Rule 401, do not use or define the tcrm materiality, the terminology of the new Federal rule does not affect the 1

(Continued Next Page]

v. thited States, 321 F.2d 699 (D.C. Cir.1956), which crisply articulated

,' the distinction between the terms as follows:

To be " relevant" means to relate to the issue. To be l 4 " material" means to have probative weight, i.e., rea- '

i sonably likely to influence the tribunal in making a determination required to be made. A statement may be j relevant but not material.

4 Weinstock, supra, at 701. With this distinction before it, the Board nevertheless held the parties "to the highest standards of disclosing rslevant imformation." P.I.D. at 40 (emphasis added). 'Ibe Board's express affirmative disclosure standard thus is " relevance." In fact, the standard appears substantially broader than relevance, since the Board expressly I prohibits analysis by a party of a disclosure question - according to the Board, if the thought crosses a party's attorney's mind that perhaps j something diould be disclosed to the Board, it must be disclosed.

) Nhether the Board's standard is relevance or something broader, the specific information required by the Board to be affirmatively disclosed by Consumers Power clearly shows that its standard encompasses imaterial information. While the limits of materiality are not easily defined, a i

cimple rule of thumb will identify a substantial portion of the information that is imaterial, namely, a fact is imaterial when one can compare it to the ultimate issue and say "So what?" In sum and substance, the Licensing Board is taking the broad disclosure standard used for discovery and applying  !

it to the disclosure required of a party in its affirmative case at a (Continued)

, dictinction made herein. See, e.g., United States v. Diqqs, 613 F.2d 988, 999 (D.C. Cir. 1979) (court favorably cites Weinstock for test of mate-riclity).

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hearing. In this respect the two items specifically identified by the Licensing Board-the Dow Michigan Division position and Dow's asserted l 1

contenplation of suing consumers-again are instructive.

S e Dow Michigan Division position clearly is not material, as all participants in the remand proceeding readily agreed. (N.R.C. Staff Brief at 27, 36, 43-4; Consumers Brief at 67-8; Dow Brief at 64-9.) he position of a corporation is defined by its corporate board. See Fletcher's Cyclopedia of the Law of Private Corporations, S 505 (1981). If in this case the Licensing Board had taken the position of the Dow Michigan Division as the corporate position, and rehected that of the Dow U.S.A. Board, it would have comitted rsversable error.E %us, the Appeal Board sumarized Dow's position as follows:

Some officials in the local Dow management view Midland as a losing proposition and would abandon it, but the senior corporate officers have decided, subject to reconsideration if circtanstances change, that Dow will honor the contract to buy steam from Midland, notwith-standing that intervening events have rendered its terms far less attractive to Dow than they originally were.

7 N.R.C. at 166 (emphasis added). If the underlined worda are deleted, and one substitutes simply the words "Dow has decided", the Dow position remains precisely the same, and one truly can say of the change, "So what?", i.e.,

the Dow Michigan Division position was not material.

We same can be said of Dow's contemplation of suing Consumers. Temple in his testimony stated that while taking steam from the Midland nuclear 2_1f As discussed above, Dow contends in its brief below, and certainly a trasonable argtanent can be made in this respect, that had the corporation adopted the Dow Michigan Division position, Dow's intent still would have been to abide by its contract obligations and take steam from Consumers. In this context, acceptance of the Daw Michigan Division position and rejection of the Dow U.S.A. Board position would have led to the same conclusion: Dow intended to take steam from Midland.

l plant remained Dow's preferred aEproach, it was less attractive than it had been and tow was " keeping its options open." One option Dow was keeping open, obviously-and the one if selected that could be important to the N.R.C.-was the option not to take steam from the Midland plant. The N.R.C.

was concerned with whether Dow would take steam from Midland; it would seem of no importance whatsoever to the N.R.C. whether Dow in fact sued Consumers before, during or after deciding whether to take steam from Midland. Temple did not state in his testimony that as a hypothetical possibility Dow might cua Consumers, but again one can ask, so what?

Presumably the Licensing Board was not unaware of these considerations when it determined that its standard was a new one and therefore no sanctions should be imposed.

3. We Licensing Board's disclosure requirements diverge from existing requirements so that no sanction is proper.

Not only is the Licensing Board's requirement very broad, and not only does it require disclosure to the Board of imnaterial facts, but it also c1:arly goes well beyond existing requirements, as the Licensing Board recognized in reaching its no-sanction decision.

Se Licensing Board's discussion of the duty to disclose begins with the ctctement that "[t]he nature and extent of the duty concerning affirmative disclosure must be analyzed in exploring the conduct of parties and counsel in this proceeding." P.I.D. at 12. Licensee agrees. Unfortunately, what fellows in the Board's decision is a brief factual description, rather than a legal analysis, of a number of cases bearing on the duty of affirmative disclosure in prefiled testimony. This does not suffice because in these cases the terms " materiality" and " relevance" are used loosely, l

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interchangeably and even inconsistently; accordingly, a consistent standard cannot be derived merely from the words used in the decisions. See, e.g., ,

, North Anna, 4 N.R.C. at 488-89 (1976) (standard variously described as

" material"," relevant"and"arguablyrelevant").E A review of 'the pertinent N.R.C. case law, however, clearly establishes that parties have been required to put in their testimony all facts which are material to the issue (s) in controversy. On the other hand, information which is relevant, but not material, need not be so disclosed.

North Anna was the first Comission decision applying the material false Etatement provision of the Atomic Energy Act, 42 U.S.C. S 2236. At issue in North Anna was the accuracy of the seismic information provided to the Staff by the licensee in connection with the construction permit application. One of the fundamental safety questions requiring satisfactory resolution in a construction permit proceeding is the geologic suitability of the designated cite. VEPCO was sanctioned in North Anna 2 or failing to represent accurately inportant geologic mnditions at North Anna. In affirming the Appeal Board's imposition of sanctions for four VEPCO statements, and adding to it y See also Duke Power Company (William B. McGuire Nuclear Station, Units 1 and 2), AIAB-143 6 A.E.C. 623, 625 (1973) (emphasis added) (" parties must inform the presiding board and other parties of new information which is relevant and material to the matters being adjudicated"); Duke Power Company (Catawba Nuclear Station, Units 1 and 2), AIAB-355, 3 N.R.C. 397, 406 (1976)(enphasis added)("In Comnission proceedings as in judicial ones, the tribunal 'must rely on counsel to present issues fully and fairly, and counsel have a mntinuing duty to inform the Court of any develognent which may conceivably affect an outcome.' Fusari v. Steinberg, 419 U.S. 379, 391 (1975) (concurring opinion of Ch. J. Burger)."); Consolidated Edison Company rf New York, Inc. et al. (Indian Point Station Units 1, 2 and 3), CLI-77-2, 5 N.R.C. 13, 15 (1977) (enphasis added) ("2he staff has the obligation to lay all relevant materials before the Board to enable it to adequately dispose of all issues before it.")

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additional civil penalties for missions drich resulted in other material misrepresentations, the Commission emphasized:

In each of these cases the seismic information involved would clearly have been considered by a reasonable agency expert. Indeed the Comission's ultimate seismic inquiry concerning North Anna included a careful consideration of these and other factors.

CLI-76-22,4N.R.C.480,492.E

'1he lesson of North Anna is that material facts must be affirmatively disclosed to the Staff; logically, the same standard should apply when a case is pending before a Licensing (or Appeal) Board. Moreover, other N.R.C.

precedents establish tne same disclosure requirement.

In Duke Power Company (William B. McGuire Nuclear Station, 0 hits 1 and 2), ALAB-143, 6 A.E.C. 623 (1973), information concerning modifications to applicant's quality assurance organization - a vital safety-related compo-nent of an applicant's organization - was not brought to the attention of the licensing board although the hearing had been completed on the basis of other information and the board had not yet issued the initial decision.

While not sanctioning the applicant, the Appeal Board made clear that the applicant had been in error in failing to bring these new facts to the c.ttention of the licensing board. In such circumstances, involving the licensing board's judgment of an important safety issue on the basis of a 23/ In North Anna, the Comission placed significant emphasis on the health and safety-related nature of the seismic information VEPCO had failed to l disclose, a factor which arguably distinguishes that case from the need for ct:am issue in controversy here. See CLI-76-22, 4 N.R.C. 480, 488-90.

Certainly in the case of safety-related facts, one would anticipate at least as stringent a standard as the agency would apply in other circunstances.

panoply of facts, the Board should have in front of it accurate information, so that its judgment will be sound. E Perhaps the most obvious example of the application of a materiality ctandard of disclosure is the Appeal Board decision in Vermont Yankee Nuclear Power Corporation (Vermont Yankee Nuclear Power Station), AIAB-138, 6 A.E.C. 520 (1973), a case which the Board quoted favorably. In that case, appli-cant's counsel was comended for directing the licensing board's attention to a factual error in a board memorandum and order. ne error in question involved the maximum calculated peak cladding temperature of the reactor fuel. Applicant's witness had testified that plant operation would not compromise the emergency core cooling system criterion that the calculated peak cladding temperature in the event of a loss-of-coolant accident not exceed 2300* F. We Board also had found that the criterion would be met.

Consequently, the Board had determined that the facility did not need to be shut down pending the outcome of a reopened hearing. In its crder, however, it erroneously stated that the peak cladding temperature was 2280'. In fact, the precise maximum calculated peak cladding temperature of the reactor, disclosed during the proceeding, was 2298* F. It was this relevant fact of record to which applicant's counsel directed the attention of the Board.

Of even greater significance in Vermont Yankee is the fact that in comending counsel, the Board noted in passing that the actual peak y See also Georgia Power Company (Alvin W. Vogtle Nuclear Plant, Units 1 and 2), AIAB-291, 2 N.R.C. 404, 411 (1975) ("McGuire establishes no more than a reporting requirement: as previously seen, it imposes a duty tw n the parties to a still uncompleted licensing proceeding to bring to the attention of the appropriate tribunal - the Licensing Board or the Appeal Board as the case may be - the new information which is relevant and material to the matters being adjudicated.")

tenperature had rot been' disclosed in applicant's direct testimony which had only stated generally that the calculated peak cladding temperature met the st, 2300* criterion. Father, the figure was disclosed during cross-examination of applicant's witness. 1.pplicant's initial failure to provide this figure was. rot deemed inproper; counsel was approbated for his candor in subse-Ssi quenQ.y calling the Board's attention to the correct fact of record.

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'yer_mcnt Yankee pointedly illustrates that, prior to this case, parties calyMve been'.pquired to disclose material facts in affirmative testimony.

i

%e pivotal,or material fact in the Board's assessment of the safety of continued operacions in Vermont Yankee was the fact that the peak cladding tenverature of the reactor fuel did not exceed the applicable limit, which was 2300'F. ihile the precise calculated temperature was relevant, it was not material. nus, counsel was not chastised for failing to put into applicant's direct testimony the calculated temperature; rather, it was perfectly sufficient for applicant to state in its' affirmative case the

" bottom-line," viz., that the cladding temperature met the criterion.

A more analogous case to the facts at issue here is difficult to imagine. In both instances, the fact at issue was a straight-forward objective question: in Vermont Yankee, was the 2300' criterion met; here, did Dow still intend to take steam? In both cases, the applicant provided in testimony the complete answer to the question at issue. In both instances, the information subsequently subject to controversy came out through the cross-examination process: In Vermont Yankee, that the calculated tempera-ture was 2298'; here, that there was a Dow Michigan Division interim position which was possibly more negative than the Dow Board's final position. In both instances, the information subsequently subject to controversy was not 31-

necessary for the Board to know in order to fully resolve the issue in controversy.

Despite the parallelisms between Vermont Yankee and this case, the results could hardly be note inconsistent. In Vermont Yankee, failure to put this information into the direct testimony was of no concern, and counsel subsequently was praised for directing the Board's attention to it. Here, in contrast, Consumers is faulted for not affirmatively disclosing the subordi-nate Dow position. In sum, if the staMard adopted by the Board below was consistent with prior practice, the attorney in Vermont Yankee would have been condemned, not praised. In fact, the prior standard was materiality and the Board below radically departed from that standard by requiring the affirmative disclosure of all relevant facts.

Finally, in Duke Power Company (Catav.ba Nuclear Station, Units 1 and 2),

MN3-355, 3 N.R.C. 397 (1976), applicant failed to bring to the attention of the Licensing Board a post-decision announcement by applicant's president that Catawba's completion would be deferred two years due to a reduction in the demand for electricity even though this statement of changed circum-ctances had rendered obsolete the testimony of applicant's witnesses who testified cn the need for power issue. Id.. at 406 and n.2. In chastising (but not sanctioning) counsel for this nondisclosure, the Appeal Board  :

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focused cn parties' obligation to keep abreast of changed circumstances and 1 to relay to the Board developnents "which are of such significance that they can affect the outcome of the case." Id. at 406 n.2, citing Fusari v.

Steinberg, 419 U.S. 379, 391 (1975)(concurring opinion of Ch. J. Burger).

Cliarly, the standard which is to be derived from the facts in Catawba is materiality, where the applicant's revised estimate of its need for the power

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generated by the facility - the ultimate issue in controversy - was the l fact required to be disclosed.E In sumary, prior to the Board's decision, the standard for determining what facts must go into a party's direct testimony in an N.R.C. licensing proceeding has been materiality. E In every instance where a party has been tcken to task for not disclosing information, that information is not 35/ 2e Licensing Board refers to a number of other decisions which, in Licensee's view, provide little additional insight to the question of the Comission's past disclosure requirements. In Public Service Company of New Hampshire (Seabrook Station, Units 1 and 2) AI.AB-422, 6 N.R.C. 33 (1977), the Appeal Board considered whether to reopen the record based on the arguable inconsistency between a statement made by an applicant witness before the Licensing Board and his statement before the FPC and a state legislative comittee. %e Appeal Board declined to reopen the record, finding "nothing in the statements made by Mr. Harrison before either the FPC or the New Ha@ shire legislative comittee which undercut the conclusions we have reached on the basis of the record adduced below." AIAB-422, 6 N.R.C. 33,

81. If anything, the Seabrook decision suggests that only subsequent facts which specifically undercut a licensing board's conclusions need be dis-closed.

In Public Service Company of Oklahoma (Black Fox Station, Units 1 and 2), AIAB-505, 8 N.R.C. 527 (1978), decided after the suspension proceeding at istue in this case, applicant's counsel was chastised by the Appeal Board for misstating the legal posture of an opposing party seeking to stay .the effectiveness of a licensing board decision. Similarly, in Tennessee Valley Authority (Hartsville Nuclear Plant, Units lA, 2A, 1B and 2B), AIAB-409, 5 N.R.C.1391 (1977), counsel was criticized for improperly misquoting an N.R.C. regulation by excising a pertinent clause, in support of its motion to strike an intervenor's exceptions to the initial decision. Both of these cases, involving the alleged nischaracterization of the existent record, are  ;

inapposite to the case at bar and the issue of the standard of affirmative l disclosure.

[

Finally, the Licensing Board decision in Carolina Power & Light Company

(Shearon Harris Nuclear Plant, Units 1, 2, 3 and 4), IBP-78-2, 7 N.R.C. 83 j (1978), sig ly stands for the proposition that counsel does not concede a fact's relevance or materiality by disclosing the information. No disclosure ctandard, other than a reference to the McGuire standard, is provided by the Licensing Board.

l _2._6f Intervenor too appears to acaulowledge the prior materiality standard.

13ee Intervenor Brief at 17-19. l l

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background information underlying analysis or reasons, or prior drafts of tortimony.b Rather, the undisclosed facts constitute information which the Staff or the licensing board required in order to decide the issue in controversy.

In contrast,' in this case, the Board mncluded that Licensee should have disclosed the underlying reasons why Dow chose to reaffirm its contract with Consumers Power, the dissenting views of staff members of Dow, and the substance of prior drafts of testimony - facts which all parties agreed were not material to the need for power issue in controversy. 'Ihese fcces bear on the question - that is, they are relevant - but they certainly are not facts which the Board had to consider in evaluating Licensee's need for powr . See Consumers Power Company (Midland Plant, Units 1 and 2), AIAB-458, 7 E.R.C. 155, 168 (1978). Accordingly, under the prior standard, Licensee had no obligation to affirmatively disclcse this information. For these reasons the Licensing Board correctly acknowledged that its standard had "not i

pr:viously been specifically addressed by the Appeal Boyd or the Comission", and Intervenor, to the extent he argues otlierwise,' is in error.

4. Consumers Power did not proceed in bad faith on the matter of affirmative disclosure, which Supports the no-sanction determination.

In support of its no-sanction determination, the Licensing Board fwad Consumers Power had no intent to deceive, although' the company did not fully set forth the Dow/ Consumers Power relation. Intervenor strenuously objects 27 In Duke Power Company (Catawba Nuclear Station, Units 1 and 2),

-355, 3 N.R.C. 397, 416 (1976), not only was a Staff working paper, i.e.,

a draft, not deemed material, but the Licensing Board properly excluded consideration of the document since, as a draft, unendorsed by the agency, it was " irrelevant" to the issues in controversy.

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to the Board's finding of fact. 'Ihe record, of which the absent Intervenor is understandably and patently unaware although the Board was not, shows that with respect to craissions in the "emple direct testimony, Consumers Power and it , attorneys, far from acting in bad faith, acted in good faith.

There is no ' indication in the record that anyone even had the thought-the Licensing Board's litmus test-that Dow's consideration of suing Consumers possibly should be affirmatively disclosed. 'Ihe Dow Michigan Division position-the point of greatest interest to the Licensing Board in the P.I.D.-was considered for inclusion in the affirmative testimony by the Consumers and Dow attorneys. All attorneys involved deemed the information imaterial, as it in fact was. See N.R.C. Staff Brief below at 36, 43-44.

Consumers Power attorneys nonetheless considered putting Dow Michigan Division's position in the direct b35timony of Temple as a tactical matter.

(Tr. 51494, 51794-5, 53162-4.) Mr. Renfrow for Consumers felt this to be the best tactic, since the position was relevant although not material and since it could be expected to come out on cross (as it did). _Id . Dow attorneys, however, adamantly objected to inclusion of this position because they thought it might impede the ongoing contract negotiations between Dow and l Consumers (Tr. 50924, 52755-6, 52923-4, 52943), and Temple of course was a l

Dow employee. In the end, Consumers' attorneys, recognizing the imateriality of the Dow Michigan Division position, acceded to Dow's concern and decided to leave out the information. (Tr. 51549-50, 51597-8, 51790-5, 53005-6.)

At the same time, Consumers Power voluntarily made available to the Staff and Intervenor, weeks before the suspension hearing, documentation in Consumers' possession-including the Temple memos which became Board Exhibits 1 and 2-regarding the Dow Michigan Division position. N.R.C. Staff Memo of December 30, 1976 at 6-7. Moreover, the Staff concluded that Consumers acted reasonably in not including the Dow Michigan Division position in direct, but 1 caving it for cross. Id_. at 5-6. Whether deemed correct or incorrect in the end, Consumers' action at the least must be seen as not being in bad faith.E Intervenor purports to take no exception to the Board's findings of fact. However, the heart of Intervenor's brief is that the Board erred in its factual finding that Consumers did not intend to deceive. In support of 8

_2_8/ We have been focusing on the points clearly required by the Licensing Board to be disclosed in Temple's direct, namely the Dow Michigan Division position and Dow's thoughts of suing Consumers. Consumers' good faith, however, carries beyond these items and encompasses others as well. Rus ,

Consumers did not include in Temple's direct testimony that Consumers'

" threat" of suing Dow for breach of contract was one of the two major reasons Dow determined to continue with the nuclear option. We " threat" as found by the Board consisted only of representations to Dow that if Dow " arguably breached" the Dow/ Consumers contract, it could expect to be sued. P.I.D. at

32. Again, as the Appeal Board's decision correctly reflects, this informa-tion is not material. 7 N.R.C. at 167. It was simply another input or reason for the ultimate position. Beyond this, the record demonstrates, and the Licensing Board knows, that Consumers' attorneys did not know what in fact motivated Dot' to decide as it did. Only Dow personnel could have provided this information to Consumers' atorneys, but they declined to do so.

In this case, the first time the Consumers' attorneys learned the importance Dow gave to the Consumers " threat" was when this information was volunteered by Temple on cross-examination at the suspension hearing. (Tr.

51893, 51952-55, 53274, 53318, 53154.) Before that, Dow personnel had daliberately avoided conmunicating this information to Consumers' attorneys.

Thus, in prehearing practice cross-examination, Consumers' attorneys asked Temple the reason for the Dow corporate decision, and in his answer Temple omitted any reference to the " threat." Nute, an attorney present at the time for Dow, noted to himself to tell Temple later to include the " threat" in any question at the hearing addressir.g corporate reasons. (Tr. 51369-71, 51392-5, 53064-6, 53521-31; N.R.C. Staff Ex. 5, Doc. 30 at 6-7, 12; N.R.C.

Staff Ex. 5, Doc. 29.) His L1 formation, however, was not conmunicated to the Consumers' attorneys. In the circumstances, Consumers' attorneys certainly were in no position to suggest inclusion of this particular fact in Tenple's prefiled direct.

this exception, Intervonor summarizes the Board's findings as follows:

Consumers deliberately suppressed information-the Dow Michigan position and Dow's contemplation of suing Consumers-it knew to be highly material; and when Dow resisted this suppression, Consumers' officials and attorneys "were prepared to

nclusion as it relates to Dow. In reviewing Dow's contention, the Board found that Consumers informed Dow that if Consumers believed Dow had " arguably breached" its contract with Consumers, Consumers "would" sue, and that Consumers went into detail as to the extent of Dow's potential liability and the actions of Dow that would c use Consumers to sue. M1ile we might quibble with elements of this finding (e.g., more accurately, Consumers said it "well might" sue), the Board's finding in essence is accurate. See generally, Consumers Brief below at 28-35. Se Board, however, went on to make additional findings and characteri-l zations which are singly wrong. Rus, the Board stated Consumers made the i statement "several times" and that it did so as a " threat." P.I.D. at 32. I %e Board is incorrect. Se statements were made twice and in a matter-of-fact manner, with Mr. Aymond for Consumers providing the detail referenced by .ths Board. More significantly, Consumers made its conments at meetings called by Dow inviting Consumers' input on the potential consequences, including legal, of alternative actions being considered by Dow. In short, Consumers was doing what Dow requested. Idd ; Tr. 51179-80, 52250-2, 52261-4, 52396, 53691-3, 52239-42, 52323-4. W e Board also found that the detail of Consumer's con 1ments "go bey 4d tha usual bounds for asserting that contractual rights will be pursued." P.I.D. at 32, n.68. For this utterly remarkable statement, the Board gave no citation, and we confess total perplexity as to where the Board found its " usual bounds" for asserting contract rights. We detail provided was exactly what Dow wanted. Mr. Klonparens, head of the Dow Task Force review, made this quite clear. Of the seven points covered by the Task Force, Mr. Klonparent; was personally responsible for Item 6 " Consider the impact of the

Michigan Division position and a similar Dow Olemical Company position on

! Consumers Power Company." As to this itam, Mr. Klomparens testified as j follows (Tr. 53691): Q. Now, what did you understand your assignment was with respect to that particular item? Ans: Sat was to develop the understanding of what t'le impact of Dow's position,'or Michigan Division position would be on Consumers Power. And that was very well sticulated by Mr. Aymond in the Septenber 27th (actually 24th] meeting. So he did a lot of of the work for ne right there. l j. - - - - - - - -+e---y w+m- -- --

3. Conclusion. l In sum, the Licensing Board cited a number of factors, aside from the  !

contents of the Temple testimony, in support of the conclusion that Consumers' tendency was to disclose to the Board as little as possible. On investigation, eai:h of these points is shown not to support the asserted conclusion. Indeed, they tend to show that Consumers proceeded with complete propriety. %ese findings reinforce the conclusion that no sanctions are appropriate. B. %e. Tegle prefiled direct testimony reflects a proper disclosure approach on the part of Consumers. The Licensing Board concluded that Consumers' supposed niggardly approach to disclosure is reflected in the Temple testimony itself. It does so through a " comparison" of the outlines and drafts of the testimony with the final testimony, and through a discussion of the "important" points missing from the Tegle direct. Again, the Board's support for the conclu-sion is without substance. Se Dow position is fully disclosed in the Temple direct testimony, and the omissions are not important. %e Board went through a strained " analysis" of the outlines and drafts I of the Tegle testimony in an effort to show that the outlines and drafts became progressively less informative as to the Dow position. % e Board's effort produces a peppercorn. After roaming randomly through the outlines ~ and drafts, the Board came to its big conclusion: 2e first outline of tratimony (Septenber 29, 1976), prepared by Dow, indicated that " changes in circtnstances might possibly, even proba5'y lead to a reversal by Dow." However, Tegle's testimony does not contain comparable wording. P.I.D. at

38. %e sigle answer is that the language is not included because it was

not a part of the Dow U.S.A. Board decision. P.I.D. at 35, 79 (Tr. 52908, 54138, 54150-2.) te Temple te stimony thus in this respect more, not less, accurately reflected the Dow U.S.A. Board decision. Further, we do not see how the very general language referenced by the Board, even if included in the Tenple testimony as a part of the Dow decision (which it was not), would have added markedly to the Board's understanding of the Dow position. 1 Finally, the Board ignored Dow attorney Nute's testimony that the September l 29 write-up was not supposed to be an actual draft of testimony, but only a l working cbetnent for use by consumers attorneys. Tr. 50964-5, 51043-4. In mother portion of its decision the Board again tried to use the Septenber 29 outline to suggest that the filed Temple testimony was l inconglete. Se Board states the following: Dow md Consumers argue that the only information necessary for the Board to make such a determination was the testimonial conclusion of Dow U.S.A. that Dow intended to purchase steam from Consumers if en===ars were able to sell steam from the Midland plant on schedule. mis argument overlooks the fact that intentions may be more couplicated and more qualified than would be expressed through a simple statement, "Yes, we intend to purchase steam." he evidence developed in this hearing and in the suspension hearing makes it apparent that Dow's intentions in this situation were, indeed, a great deal more quali-fled than that. P.I.D. at 26-27. Se Board's point apparently is that the parties were negotiating changes in their contract. We Board relies here in part on a portion of the Septenber 29 outline which addressed the parties' on-going negotiations. Se better citation would have been to the prefiled Temple  ! te:timony. A comparison of the Board citation with Temple's filed testimony clearly shows, we believe, that the latter discloses Dow's negotiating 1 W ---W -- po ition in a much clearer, more detailed and useful manner. See generally, Consumers Brief below at 37-55 for a discussion of outlinss and drafts.E Pcview of the substance of the Dow testimony, like a comparison of the drcfts, shows that there were no important missions. h e Board strains to show the mntrary, but does not succeed. Its focus-as we have discussed before-is Temple's omission of the Dow Michigan Division position and of Dow's conte @lation of suing Consumers. Neither omission is important. As to the former, the Board states: Failure to include the reconmendat ?.on of the Michigan Division of Dow in Temple's direct testimony could have created an unwarranted impression on the part of the Licensing Board that there was very substantial, perhaps even unanimous, satisfaction witnin Dow with the purchase arrangement. In fact, the Michigan Division recom-I mendation that there was "no longer the possibility or l probability that the nuclear plant would be good for Dow's Midland plant" would have disclosed deepseated unhappiness with the ar rangement. P.I.D. at 27. We observation, as we stated at the outset of this brief, leaves one almost speechless. We fail to see how myone, let alone three Licensing Board members, could avoid being alerted by the Temple testimony to Dow's mncern if not unhappiness with the existing purchase arrangement. To belabor the painfully obvious, Temple testified that the attractiveness of ,3,4/ 4 In its discussion of the outlines and drafts, the Licensing Board stated in passing that "Dow complained that Consumers (October 22] draft was ' misleading and disingenuous'" P.I.D. at 37. We Board gave this point no particular significance regarding Consumers' intent, nor could it. First, "Dow's complaint" was that the draft "could be said to be" simply so under-etood. Second, it is clear from the record that the draft in question was merely a working paper from which Dow personnel could formulate a redraft. As for the Dow attorneys who used the words, one did it for effect and had objections only as to form, and the other's concern, to the extent it can be understood at all, arose from an honest misunderstanding of preliminary and ckttchy information. See generally, Consumers Brief below at 51-53, 81-85; N.K.C. Staff Brief below at 38-44. the nuclear option had narrowed considerably; Dow was concerned over schedule delays and cost increases; Dow was continually reviewing the matter and keeping its options open; and, Dow was negotiating contract changes of great importance to Dow, including a change allowing Dow to terminate if steam would not be available on a date certain. See Attachment A. In short, assuming it is important whether Dow was happy with its existing arrangement with Consumers, the Temple testimony expressly showed that Dow was unhappy, and the Dow Michigan Division position at most is cumulative on the point. In our view this matter has been greatly exaggerated by the Board's excessive preoccupation with an imnaterial consideration, i.e., whether there was within Dow " satisfaction", "deepseated unhappiness" or " substantial internal disagreement". None of these establish corporate intent. 'Ihe Appeal Board, on the other hand, was properly aware of the hierarchical nature of American corporations and looked to the decision of " senior corporate officials" for purposes of determining corporate intent. While acknowledging that "many contracts viewed in the perspective ' hindsight affords" may be less attractive than at the outset, the Appeal Board recog-nized that the material fact is the corporate decision to honor its contract. See 3, supra. l In explaining the significance of Dow's contemplation of suing Consumers, the Board stated: "Since Dow continued to consider suing Consumers as an option available to it, Dow's intent to take steam from Consumers could appear to be questionable." P.I.D. at 28. As best we can determine from the Board's citation for this statement, this means that the possibility of suit by Dow against Consumers rendered speculative whether Dow ' 1 l in fact ever would take steam from Consumers. Again assuming speculation to .s be inportant, the Appeal Board found to the contrary, see 7 N.R.C. at 166, n.45, the uncertainty is apparent on the face of the Temple testimony, and the hypothetical possibility that Dow might sue Consumers was, at most, cmulative.E C. No sanc't ions are proper on the facts as correctly found. In reviewing disclosure case law, the Licensing Board relied in part on standards adopted by the S.E.C. for disclosure to members of the public. Even in this area, where disclosure standards are intended to be very high, sanctions have been found inappropriate when there has been an omission of a ctynulative material statement. Greenapple v. Detroit Edison Company, 468 i.Supp. 702 (S.D.N.Y. 1979). In the instant case, the facts the Licensing l Board found mitted and required to be disclosed are not even material. Assuming the facts are material, however, they are-when properly found and interpreted-cumulative on the points for which the Board contended they might be used. In this context it would be wholly inappropriate to call for sanctions because of the missions. Likewise, the correct findings concerning Consumers' disclosure attitude rainforce that sanctions would be inappropriate. 'Ihus, as discussed above, -and contrary to the Board's findings, the facts do not show a disturbing

t

ndency on Consumers' part to disclose as little as possible. Rather, the oIposite is demonstrated. Consumers produced a knowledgeable witness; 35/ We note that the principle citation relied on by the Board for the proposition that "Dow seriously considered bringing suit against Consumers",

P.I.D. at 27, does not support that proposition; to the contrary, it reflects Dow's acknowledgment of valid centracts between the parties. See N.R.C. Staff Ex. 4, Doc. 11. Consumers did not finesse the Consumers /Dow dispute, but expressly disclosed to the Board Dow's great concern with the existing arrangement and Dow's specific objectives in getting it changed; and Consumers disclosed to the Board information that one report contended would " lose the case" for Consumers. Further, Consumers in good faith, disclosed the Dow Michigan Division position to the other parties through voluntary discovery. Finally, Consumers asserted a credible claim of work product privilege concerning the drafts of the Temple testimony, while disciosing the drafts to the suspension hearing Board for its resolution of the claim. V. Se new standards articulated by the Licensing Board are unnecessary and unfounded. Se Licensing Board articulated three standards which, if left uncorrected, would intolerably burden all future N.R.C. licensing proceedings and all parties thereto:

1) Attorneys, the Board cautioned, may select questions to be asked of witnesses, but should refrain from participating actively in the preparation of responses except in certain particular situations; P.I.D. at 38-39;

2) "If there is any questions as to whether disclosure of a particular piece of information might be required, that information must be disclosed".

Moreover, the mere thought that information might be discloseable makes disclosure mandatory. P.I.D. at 29 and 34; and

3) With respect to the preparation of direct testimony, parties have "a non-delegable duty to adhere to the highest standards of disclosing relevant informa-tion." P.I D. at 40.

With respect to all three standards, we respectfully submit that the Licensing Board overshot the mark. Se Board's standards are not consistent with professional practices, mistake the law, are misguided and likely to be counterproductive. 'Ihe Appeal Board should reject the Licensing Board's approach and reaffirm preexisting standards. Under those standards, Consumers Power was in full compliance with the law. A. 'Ih'e prior existing standard for assessing the role of counsel in preparing testimony fully serves its intended purpose in con-trast to the likely deleterious impact of the Licensing Board's new standards. Prior to the decision reached by the Licensing Board in this case, tha role of an attorney in testimony preparation in an N.R.C. proceeding was not significantly different in substance from the attorney's role as his client's representative in other legal contexts; namely, the attorney was to be an advocate for his client's position and was permitted-and arguably required within the fairly straight-forward ethical mandates of the legal profession-to be as personally involved in the preparation of the case as necessary.E 'dere, for the first time, the N.R.C. hcs articulated a much more restrictive role in testimony preparation for counsel of participants in N.R.C. adjudicative hearings. In Geders v. United States, 425 U.S. 80, 90 n.3, 96 S. Ct. 1330, 1336 n.3 (1973), the Supreme Court referred to "the important ethical di:: tinction between discussing testimony and seeking improperly to influence _36f Canon 7 of the Code of Professional Responsibility states: "A Lawyer Should Represent a Client Zealously Within the Bounds of the Law." 'Ihis obligation is no less binding when counsel represents a client in an adminis-trctive proceeding. "A lawyer appearing before an administrative agency, regardless of the nature of the proceeding it is conducting, has the continu-ing duty to advance tne cause of his client within the bounds of the law." Ethical Consideration 7-15. It is the deciding tribunal that "comes to the hearing unco:tmitted." Professional Responsibility: Report of the Joint Conference, 44 A.B.A.J. 1159, 1160 (1958). I

n- . ;;- ._, . g. 7. . 4 ,-4g

,4 ., .,. , ,,7 _ .. ,. 27 g y 7- .- it."N In Opinion No. 79 issued by the District of Colusia Comittee on I4 gal Ethics cn Deceter 18, 1979, this distinction was analyzed in detail.E Opinion No. 79 specifically addressed and endorsed the practice of cttorney preparation of written prefiled testimony. In the Ethics Comittee's view, an attorney's involvement in the preparation of his client's case, whatever that preparation may entail, is governed by the "= ingle prohibitory principle . . . that a lawyer may not prepare, or assist in preparing, testimony that he or she knows, or ought to know, is false or misleading." Opinion No. 79, at 170. %us, "[s]o long as this prohibition j37 Ctwiously, then, counsel properly can influence testimony; in fact, that fcirly describes counsel's function. Compare Licensing Board decision, P.I.D. at 39 n.89, which cites Geders inaccurately for the proposition that "an attorney must distinguish between discussing testimony and seeking to influence it." It is only when such influence is " improper" that counsel transgresses his ethical code of conduct. See generally 1 Schweitzer, Cyclopedia of Trial Practice, SS15-131 (2d ed. 1981); Bodin, Civil Litigation and Trial Techniques, ch. V (1976); Jeans, Trial Advocacy (West's Handbook Series 1975), ch. 2, " Ethics of Advocacy," S2.9. As a leading comentator plainly stated: l Let us begin by observing those aspects of the lawyer's counselling function that appear to be beyond controversy .... In discussions with nonlawyers I have been surprised to find how comon the belief is that it is improper for an attorney to prepare or coach a witness prior to trial. As Professor Cleary says: "No competent attorney dreams of calling witnesses who have not pre-viously been interviewed." he lawyer must try to elicit all relevant facts and to help the client - who, typi-cally, is not skilled at articulation - to marshall and to express his or her case as persuasively as possible. Freedman, Lawyers' Ethics in an Adversary System, ch. 6 at 62 (1975)(citation omitted). 38/ Opinion No. 79 is contained in the Code of Professional Responsibility and Opinions of the D.C. Bar Iegal Ethics Comittee at 169-72. See Attachment B. is not transgressed, a lawyer may properly suggest language as well as the substance of testimony, and may - indeed, should - do whatever is feasible to prepare his or her witnesses for examination." I_d d . As a logical conse-quence of this rule, the Ethics Comittee found it " wholly without signifi-cance" that a particular point of substance was initially suggested by the lcwyer rather than the witness, as long as the witness is willing and able honestly so to testify. M. at 171. Opinion No. 79 rejected a shifting standard such as the Licensing Board adopted, which changes according to the number of witnesses involved, the level of expertise or knowledge of the witness (es), the specific task at hand, such as drafting testimony compared to preparing interrogatory responses, and the initial source of the information. In all such testimony praparation mntexts, the Ethi :s Comittee concludes: In any event, it seems to us clear that the proper focus is indeed on the substance of the witness's testimony which the lawyer has, in one way or

another, assisted in shaping; and not on the manner of the lawyer's involvement.

M. at 170. 'lhus, short shrift is given to limiting the specific role of counsel. Rather, "the only touchstones are the truth and genuineness of the t::stimony to be given." M. at 171. ~ '1he views of the District of Columbia Bar Comittee on Iegal Ethics confirm the propriety of existing attorney practices and the Appeal Board has every reason to endorse the standards enunciated in Opinion No. 79. Indeed, the imposition of the Licensing Board's more restrictive standard would impede the N.R.C. adjudicative process. 'Ihe safeguards existent in an N.R.C. proceeding, which the Lic nsing Board below failed to recognize, are those which traditionally have protected md enhanced the efficacy of the Anglo-American legal process. Full discovery, consistent with practice in the Federal courts, is afforded. Witnesses testify under oath. A trained, impartial tribunal serves as neutral decision-maker. We availability of cross-examination to ferret out anbiguities and, 'indeed, " probe the extent of the lawyers' participation in the actual drafting of the direct testimony," constitutes another protection against distortion of or imprecision in a witness' testimony. Jd. d It is only if one ignores all of these safeguards, in addition to counsel's ethical obligations to not knov. V .y assist in the preparation of false or misleading t=timony, that the ner J for limiting counsel's role even arises. Moreover, preventing counsel, as the Licensing Board would do, from performing the traditional function of proposing lines of testimony, up to and including drafting language for a witness to consider and adopt or modify, as he sees fit, would likely result in the production of utterly ^ unfocused testimony, as well as testimony which excludes information which a Icyman might not recognize as important for the decision-maker's considera-tion. "We fact that a lawyer suggests particular language to a witness means only that the lawyer may be affecting the testimony as respects its clarity and accuracy; and not necessarily that the effect is to debase rather than improve the testimony in these respects." Jd. If the Comission adopts tha rules of conduct proposed by the Board in this case, it would be very risky for counsel to attempt to influence the content of prefiled testimony in any way and particularly, to suggest that draft testimony be narrowed in scope. Yet in the absence of a focused presentation by parties to the proceeding, the responsibility for defining and resolving the issues in controversy will rest exclusively on the Board. 'Ihus, while the Licensing 1 I Board below was concerned with counsel's impeding its ability to reach an informed decision, the Board's proposal for avoiding this problem will surely do more to produce this result than the practice originally prompting it. In sumary, any decision-making process involves getting the right information befor'e the cecision-maker. Cbviously, the decision can be faulty if important information is not presented, or if so much information is presented that the significance of important facts is obscured. But it is the role and responsibility of counsel to assist in the decision-making process. As long as the traditional safeguards of the adjudicative process exist, and counsel acts within the bounds of the law and legal ethics, his participation in the process - including preparing testimony - aids, rather than impedes, the tribunal's job of informed decision-making. B. Parties should be required to disclose in their affirmative testimony simply those facts which are material; the contrary Licensing Board directive will wreak havoc with the N.R.C. administrative process. 'Ihe Board's second standard, at least as applied here, would not allow for the exercice of professional judgment or professional responsibility. Rather, seizing literally on footnote 15 in the McGuire decision, ALAB-143, cited in the P.I.D. at 16, this Board would equate the mere fact of consider-ation of whether to include a matter in testimony to that level of

• uncertainty" covered by McGuire footnote 15. E Prcg,srly construed, the McGuire footnote 15 exhortation can only be reasonably understood to allow professional judgment and responsibility to be exercised. Once exercised, if 39/ Footnote 15 of McGuire states: "Any uncertainty regarding the relevancy and materiality of new information should be decided by the presiding judge."

6 A.E.C. at 625. the conclusion in the information is material or there is uncertainty as to its materiality, the matter should be placed before the Bom-d. 'Ihe mere fact that a meeting is held by counsel to discuss materiality-a fact we dispute here-does mt without more bring footnote 15 into play. For example, circumstances fre@ently arise where the facts are complex and only after seaching through them can counsel determine-perhaps easily-what the issues and, therefore, what the material facts are. Beyond this, of course, we can envision circumstances where there may be uncertainty whether a matter is material but it is not incladed in affirma-tive testimony. If the matter is later disclosed and it is concluded that, in fact, it was not material, the failure of counsel to abide by the exhorta-tion in Footnote 15 should not lead to sanction. If the matter was material, of course, it would be appropriate to consider sanctions. 'Ibe Licensing Board's third standard is such an extraordinarily broad test for determining facts which must be included in prefiled testimony that licensing boards will be buried in "an avalanche of trivial information-a result that is hardly conducive to informed decisionmaking." TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 448-49, 96 S. Ct. 2126, 2132 (1976). 'Ihe N.R.C. is responsible for ensuring that nuclear power plant licenses are issued only to applicants who demonstrate that construction and operation of a proposed facility is consistent with the p1blic's health and safety. 42 U.S.C. SS 2013(d), 2133(d). In North Anna, the Comission was particularly conscious of this statutory mandate in its analysis of whether unissions of - fact can constitute material false statements under the Atomic Energy Act. See CLI-76-22, 4 N.R.C. 480, 488-93. Clearly, an N.R.C. licensing board is l l entitled to affirmative disclosure of facts it needs to know; however, to so state the issue simply begs the question at issue here, viz,, what facts does en adjudicatory board need to know?4 0/ In TSC Industries v. Northway, Inc., 426 U.S. 438, 96 S.Ct. 2126 (1976), the Supreme Court determined what kinds of facts a stockholder would need to know in order to vote intelligently cn a proxy wlicitation.E At issue in TSC Industries was the proper formulation of a definition of materiality, the critical statutuy term involved in determining the sufficiency of disclosure in a proxy statement. Specifically, the Court was required to determine whether material facts, for purposes of proxy statement disclosures, include "all facts which a reasonable rhareholder micht consider important," or " facts which a reasonable shareholder would consider important." 426 U.S. at 445, 449, 96 S.Ct. at 2130, 2132. 40/ While cne cne can argue thrt an affirmative disclosure requirement should encompass more than those facts the Comission "needs to know", this argument is more cne of semantics, than substance; for it is the breadth of the disclosure requirement the Comission uses which defines the agency's "need". Bus, if material facts "must" be disclosed, McGuire, supra, AIAB-143, 6 A.E.C. 623, 625 n.15 (1975), counsel generally will provide the Licensing Board with clearly material facts, as well as information the materiality of which a party is uncertain. h is is simply a reasonable " conservative" approach to one's own uncertainty and a recognition of the Board s need to know (and counsel's obligation to disclose) all material information. his approach to the issue does not, however, broaden the affirmative disclosure standard to a requirement to disclose facts one finds imaterial, even t% ugh quite relevant.. If such a lesser standard did exist, d licensing board generally would receive a,much broader scope of information than it would find useful since it would be similarly prudent for counsel to disclose even more information than was required in order to ensure compli-ance with that standard. 41/ It is in the securities field that disclosure requirements probably have generated the greatest controversy and, hence, detailed legal analysis. hus, for example, the Comission in North Anna turned to securities cases for judicial guidance. See CLI-76-22, 4 N.R.C. at 490; see also P.I.D. at 14 and n.29 and 20. (It should be noted, however, that while the Board below referenced S.E.C. cases, it failed to discuss TS" Industries, the leading securities disclosure case.) In deciding in favor of the narrower standard in TSC Industries, the Supreme Court made a number of observations all of which are applicable here. b First, the Court observed, in defining the proxy statement disclo-sure requirement, [W']e are guideC, of course, by the recognition ... of the Rule's broad remedial purpose. Rat purpose is not merely to ensure by judicial means that the transaction, when judged by its real terms, is fair and otherwise adequate, but to ensure disclosures by corporate management in order to enable the shareholders to make an informed choice. See Mills, 396 U.S., at 381, 90 S.Ct., at 620. 426 U.S. at 448, 96 S.Ct., at 2132. Rus, as in N.R.C. contexts, the goal of ensuring informed decision-making was of paramount concern to the Court. Recognizing thie goal, the Court stated: Doubts as to the critical nature of information misstated or canitted will be comonplace. And particularly in view of the prophylactic purpose of the Rule and the fact that the content of the proxy statement is within management's control, it is appropriate that these doubts be resolved in favor of thom the statute is designed to protect. Mills, suora, at 385, 90 S.Ct., at 622. Id,. Similarly, in the instant case, the standard must ensure, to the extent practicable, that licensing boards are privy to important information. Although these enumerated factors support a broad disclosure require-ment, and even though the rule in question was " promulgated by the S.E.C. pursuant to a broad statutory authority to promote 'the public interest' and 42/ Formulation of the disclosure issue in terms of the definition of materiality, the TSC Industries question, is not substantively different from defining materiality in the first instance, and then determining whether a disclosure requirement should encompass other, imaterial (but relevant) facts. In both instances, a determination must be made as to what facts must be disclosed. 'the protection of investors'", 426 U.S. at 449 n.10, 96 S.Ct. at 2132 n.10, the Court opted for the narrower definition, reasoning as follows: We are aware, however, that the disclosure policy enbodied in the proxy regulations is not without limit. Some information is of such dubious significance that insistence on its disclosure may accomylish more harm than good. . . . (I]f the standa.rd of materiality is unnecessarily low, not only may the corporation and its management be subjected to liability for insignificant omissions or misstatements, but also management's fear of exposing itself to substantial liability may cause it simply to bury the shareholders in an avalanche of trivial information-a result that is hardly conducive to informed decisionmaking. 426 U.S. at 448-49, 96 S.Ct. at 2132. The reasoning of the Supreme Court in TSC Industries applies with even greater force here. Licensing boards have been and will continue to be presented with all of those facts which have a natural tendency or capability to influence a reasonable agency expert. See TSC Industries, supra, 126 U.S. at 449, % S.Ct. at 2132. Cross-examination provides a ready opporte.irr to another party or the Board to go behind the material facts at issue, e.g., to 5 further understand them or their context. Broad discovery is available to the parties, including the Staff, to flush out this kind of information. Moreover, one party to the proceeding, the N.R.C. Staff, is expressly designated to represent the public interest. If the standard for disclosure is broadened, as stated by the Licensing Board below, P.I.D. at 40, innaterial but relevant information will have to be disclosed by a party in prefiled testimony. As a result, direct testimony will include nountains of unimportant information.E In effect, a party 43/ ' Die scope of information to be included under the materiality standard, of course, will vary from issue to issue. Where the issue is compliance with (Continued Next Page] will be required to put in its direct case facts it anticipates could be elicited cn cross-examination, as well as any other relevant f Tcts which might conceivably be of interest to the Board and probably also facts which are cnly arguably relevant. Today in N.R.C. proceedings, licensing boards are faced with the task of sorting through and integrating tremendous quantities of information. To broaden the disclosure requirement to the board will complicate this task by orders of magnitude, given the enormous amount of information generated in connection with the licensing of a nuclear power plant. Cbviously, this change will obscure rather than clarify the facts on which a licensing board's attention ought to be focused. In sumary, recognizing the public interest function of the Comission generally, and the specific responsibilities of a licensing board in an N.R.C. adjudicating proceeding, there must nevertheless be a reasonable limit on affirmative disclosure in prefiled testimony or the litigation process will quickly become unmanageable and unproductive. 'Ihe Atomic Energy Act protects against uninformed judgments by the Comission through its material falm statement and civil penalty provisions, 42 U.S.C. SS 2236 and 2273, (Continued] a clear objective criterion, e.c ., does the peak cladding temperature, calculated as prescribed, exceec or comply with a defined regulatory limit, the affirmative testimony could be quite brief. Similarly, as set out above, whether Dow intended to take the steam from Midland lent itself to brief exposition of the ultimate fact by a ranking Dow official without regard to the reservations in either direction of subordinate fiefdoms or employees within the Dow enterprise. On the other hand, other issues, such as seismic acceptability of a site, involve ultimately subjective determinations by the trier-of-fact. For this purpose, the matariality standard could involve affirmative disclosure of all significant assumptions and data which must be considered by an informed decisionmaker. Simple declarations of standards will not substitute for considered judgment by practicing professionals and adjudicators. Nevertheless, the standards merit precise articulation. which subject applicants to license revocation and civil penalties for material false statements or omissions. 'Ihe N.R.C. Rules of Practice protect the decision-making process through its discovery provisions, and its rules for the mnduct of the hearing. Finally, applicant and the staff are repre-rented by counsel', who are ethically bound to not knowingly participate in the making of false or misleading testimony. It is through these safeguards, along with the materiality standard of disclosure, that a licensing board can have mnfidence in the soundness of its decision. Expanding the affirmative disclosure requirement to encompass relevant but imaterial facts will simply confound the process. VI. Conclusion while we quarrel with the facts as found by the Licensing Board, even if the facts as determined by the Board are left undisturbed, sanctions would be inappropriate here because of the evident good faith of Consumers, the mitigating circumstances described above, and the application here of new standards for attorney wnduct, testimony preparation and affirmative disclosure. Before the P.I.D., attorneys were permitted to drr' prefiled witness testimony and materiality was the N.R.C. standard for equired disclosure in a party's affirmative case. 'Ihe standards set forth by the Board radically depart from prior N.R.C. law and practice. With respect to the standard for preparation of testimony, it is the resulting testimony which should be of concern to the Comission. Permitting both attorneys and witnesses to prepare prefiled direct testimony enhances, not retards, the Board's processes. Under the proper affirmative disclosure standvd-materiality--Consumers provided full disclosure in its affirmative case. 'Ihe material question in t:ie suspension hearing as related to Dow, was Dow's then present intent to abide by its contract obligations and take steam from the Midland plant. Mr. Tenple in his prefiled direct testimony fully disclosed the Dow corporate position as formally and officially determined by the Dow U.S.A. Board. He further disclosed that Dow and Consumers were negotiating changes in the existing contract which were crucial to Dow and he summarized in detail Dow's negotiating objectives. 'Ihis was all that was necessary or required in Temple's direct testimony. Documents relevant to Dow's position-including the views of the Dow Michigan Division--were made available to N.R.C. Staff and Intervenor for use as they saw fit in cross-examination to probe the Dow corporate position. As the Appeal Board found, this probing " yielded convincing evidence that Dow's intention is to adhere to the contract terms." The suspension hearing, except for the distractions associated with this matter, occurred exactly as it should have and as it was designed. Consumers violated no disclosure standards, and obviously therefore, no sanction against Consumers is appropriate. Having defaulted below, Intervenor should not be allowed to pursue this appeal. Accordingly, its appeal should be denied for this reason alone, as well as its erroneous perceptions of the facts and the law. Nevertheless, we respectfully suggest that the Appeal Board carefully review the standards for attorney conduct, testimony creparation and affirmative disclosure put forth l by the Licensing Board, and reject them in the interest of assuring orderly and meaningful decisionmaking by licensing boards in future proceedings. Respectfully submitted, SHAW, PIT 1 NAN, POITS & 'IROhBRIDGE ~ L L -/l . i:: i if Gerald Charnoff, P.C. Dean D. Aulick, P.C. , Deborah B. Bauser Counsel for Consumers Power Company 1800 M Street, N.W. Washington, D.C. 20036 Tel: (202) 822-1000 Dated: April 5, 1982 g_ . ATTACIMNT A TESTIbONY OF JOSEPH C. TEMPLE, JR., ff. Tr. 220 (without attached exhibits) Q. Please state your name and business address. A. Joseph G. Tenple, Jr. My business address is 47 Building, Michigan Division,. The Dow Chemical Conpany, Midland, Michigan. Q. What is your position with The Dow Cbomim1 Ccxrpany? A. I am General Manager of the Michigan Division of Dow Chemical USA, an operating unit of 'Ihe Dow Chemical Capany. Q. What is your educational background and business experience? A. My educational background and business experience primarily has been in the chemical industry. I received a Bachelor of Science Degree in Chemical Engineering frun Purdue University in 1951, and was enployed by The Dow Chenical Company that sans year in its research and develognent area. In 1954, I entered the Plastics Marketing Department and served as a field salesman in Boston, Massachusetts, a product sales nanager in Midland, Michigan, and a plastics district sales manager in Camden, New Jersey. I returned to Dow heactI uarters in Midland in 1964 as a product group sales manager. In 1965, I became business manager for polyolefins. I then advan d to the position of sales manager for the Plastics Department in 1967 and was appointed general manager of that department in 1970. I was named to my present position in January 1973. In that position, I am in charge of the nenagenent of the Michigan Division, which includes chemical plants in Midland, Bay City and an industrial site in Freeland, all of which are in Michigan. 4 Q. Would you describe for us your involvement with the contracts between Dow and Consuners Power Conpany with regard to the Midland nuclear plant? A. In January of 1973, there was in existence a General Agreenent that had been executed by Consumers Power and Dow in 1967. Shortly after my arrival, I hamma involved in negotiations between the parties which resulted in certain amendments to the 1967 contract and the execution of contracts for water supply, electric service, and steam service, which have been included as part of Consumers Power Exhibits 7(a)-(c) . I also have been in charge of the current negotiations between Consuners Pcrer and Dow. Q. Has Dow's management conducted reviews of these contracts subsequent to 19677 A. Yes. Since 1957 when the General Apriisit was signed, the Michigan Divisicn has periodically reviewed the situation with regard to the iO . . A-2 economics of nuclear steam as compared to a Dow alternative whenever Consumers has announced a new projected total capital cost or a new com-pletion date for the Midland nuclear plant, or has announced any other I increase in a significant cost factor. in addition, the contracts have been subjected to continuous review since May of 1974, when Dow was first informed of a probable ' anstruction delay at the Midland nuclear plant j because of the financial difficulties of Consuners Power. A further review of the project and the contracts between the parties was cmmenced in August 1976, as a direct result of the Court of Appeals deci-sion on July 21, 1976, and the new projected capital cost of the project of $1,670,000,000 given to me by telephone on August 5,1976. 'Ih.is last review, which was concluded in September of 1976, resulted in a conclusion that at the present '_ime circumstances have not changed suf-ficiently to call for a nnlification of Dow's conmitment to nuclear pro-duced steam to te supplied by Constrners Power in March of 1982. Under the present circumstances as known to Dow, the nuclear alternative remams , the nost attractive one economically. Further, the matter will be kept under continuous review and Dow will keep all of its options open. ?. What alternative sources of steam did Low consider in its review? A. The opt'ons which Dow considered as alternative sources of steam to the , nuclear plant were: Conventional coal-fired steam turbine plants utilizing i either high sulfur or low sulfur coal producing electricity and process I steam; package boilers fired by coal, gas, oil, or a combination of the three; and a coal gasification unit in mmbination with gas turbines and ! package boilers. Q. How is Dow currently obtaining steam and electricity for its Midland Plant? i l A. Dow is currently producing all of the steam and sone of the electricity for its Midland Plant with its own fossil-fired units. l l l Q. Did Dow consider continued production frcrn these existing fossil-fired units as an alternative to 1.ne nuci. ear supply? A. No, because Dow had previously determined that these units must be replaced as soon as possible for two reasons:

1. 'Ihese facilities are quite old, with major pieces of equipment that will be 30 to 50 years old in 1982. Dow is concerned that scme of these turbogenerators and boiles already may have been stretched

beyond their meaningful life. Dow has studied as carefully as it can i

how much further these powerhotses can be pushed, and it has concluded that there is simply no way in which they can be made to operate safely and reliably beyond 1984 at the outside. Dow will be mntintrusly reviewing the situation to see whee 1984 itself isn't indeed too j far. 'Ihis means that whatever ex;.. J ares Dow may make in the next l few years to assure safety and reliability and to comply with Dow's Consent Order with the Michigan Air Pollution Control Oxmtission are down the drain as far as use after 1984 is concerned. l l A-3

2. These powerhouses are currently being operated under a consent order with the Michigan Air Pollution Control Conmission which permits con-tinued operation until 1980. (Copies of this consent order and related documents identified as Consumers Power Company's proposed Exhibit j 8 (a)-(g) , are attached hereto. ) In all probability, Dow will be able to operate these facilities in the present fashion until 1980. Ccntinued operation of these units beyond 1980 will be dependent upon obtaining a further consent order from the MAPCC. It is not pcssible to predict at this time whether such an order can be obtamed or for that matter what new regulatory or statutory provisions Dow may be faced with at that time.

'Ihe problems of the nuclear plant, its completion date and Dow's obliga-tions under the Consent Order are undoubtedly interrelated. hhat the l Comnission will do, to sone extent, may be predicated on what the Licensing ) Board does. If, for exanple, there were to be an order to abandon the nuclear plant, the MAPCC probably would no longer consider interim arrangenents, but would be looking towards some kind of order which would contemplate a permanent alternative for the Midland nuclear plant. On the other hand, if this Licensing Board reaffirms the construction permits with no suspension, the MAPCC will probably consider the 1982 scheduled date for steam supplies and what alternatives seem most { feasible under the circumstances :f the availability of steam frm the l nuclear plant in Kirch of 1982. It must be enphasized that the tiretable of the Midland nuclear plant is the critical factor in all of this and that in the near-term this timetable is Dow's nest critical problem. Dow sinply cannot rely on its antiquated, existing fossil-fired units for much longer, certainly not beycnd 1984. Dow believes it is stretching the useful life of these units to their limits. Nor can Dow rely on any continued variances frm the air pollution regulations beyond 1980. In addition, the cost increases in nuclear steam which would ) be inherent in a delay caused by suspension of the construction license and the actual delay that would result in the amnercial operation dates of nuclear Units 1 and 2 would force Dow management to evaluate whether the situation had not then been altered to such an extent that l Dow must make other arrangcraents for a reliable supply of steam. l i Q. As a result of its recent review, what is Dow's conclusion as to the cun-parative c3sts of nuclear produced steam and steam produced by the alterna-tives considered? A. Althotgh the difference in cost betwean the nuclear alternative and the coal-fired alternative has narrowed appreciably due to the numerous delays already incurred and the consequent cost increases of the nuclear plant, Dow's latest analyses show that the nuclear alternative still retains scrue cost advantage, assuning that Dow would require a return on investment of greater than 15% before taxes. (Dow would expect to receive a return of greater than 15% before it could justify capital expenditures for any facility it might build including an electrical and steam supply system. Dow could not justify the investment required to generate adequate steam and electricity at its Midland Plant without including all of the cost i factors attributable to a return on the investment. 'Ihus, such an in-vestment must yield a return comparable to that which the same funds would earn in another investment by Dow bearing sin'ilar risks.) ( A-4 Q. Does Dow intend to construct and operate a facility to act as a backup or auxiliary for the steam from the Midland nuclear plant? A. Dow has the right, under the terns of the steam service contract, upon retirment of its existing fossil-fuel fired generating units, to generate and utilize in its Midland Plant an anount of steam not exceeding 1,000,000 B/hr at a pressure not exceeding 175 psig frm any facilities owned and operated.by Dow, as standby or auxillary to the steam to be provided by Consumers. Dow has not yet decided what type of facilities to install to generate this steam. Whatever facilities are chosen, they will be installed under a permit frcm the MAPCC and, of course, will meet the air pollution standards applicable to such a facility. Q. You previously referred to continuing negotiations between Dow and Consuners Power. Would you please state Dow's position in these negotiations? A. Since 1975, there have been active negotiations between Dow and Consumers Power concerning possible modifications of the various contracts between th m which relate to the nuclear plant. Dow's position on scme of the principal issues is:

1. There must be a specifically stated deadline for the conmencement of a reliable steam supply for Dow's Midland Plant by Consumers Power.

A clearly understood timetable is required for the completion of the key aspects of the job of constructing and starting up each of the reactor units. Dow cannot be expected to wait beyond a reasonable time for the completion of the nuclear power plant and cxmnencement of the reliable delivery of contract quantities of process steam. If that tinetable is so chaaged that the stated deadline for delivery of process steam cannot be met, it must be clear that Dow can terminate the contract.

2. As a direct result of Consumers' announced delays, Dow will not receive process steam and power from Consumers in 1980, but at scme time in 1982. Because or enis, Dow will be forced to secure process steam and power frcm sources other than the nuclear plant or forfeit markets for its products. 'Iherefore, there can be no contractual restrictions on Dow's right to make, purchase and utilize process steam and elec-tric power at any time at the Midland Plant. 'Ihis includes elimination of any restrictions on how Dow may use the steam supplied by Consumers when the nuclear plant is in camercial operation. If the contract is so modified, Dow will still be obligated to purchase a minimum of 2,000,000 pounds per hour of 175 psig steam frm Consumers Power if the nuclear plant is in conmercial operation in conformance with the stated deadline.

3. Modification of the terms and conditions of the Contract for Electric Service, including changing the term of the contract fran five years to one year. Dow's current estimated nonthly average total electric d e and for the Midland Plant in 1982 is between 175-200 megawatts.

If the contract is so modified, part of this demand may be supplied by Consumers Power, and the rmainder supplied by self generation. A-5

4. Other issues i. hat were discussed in the negotiations included a defini-tion of contnercial operation date for each unit; provisions for Dow to recover frcxn Consumers expenditures Dow must make to keep present fossil units in operation after July 1,1980, until the present target camercial operation date; a restatement of when and under what conditions the "nonrecovernhlpe:" associated with the direct steam costs are payable to Consumers by Dow; financial protection for Dow should the Midland nuclear plant operate below industry experience for simi-lar units; and revision of certain provisions dealing with the alloca-tion of costs arising out of the supply of water to the Midland nuclear plant.

Q. In suntnary, Mr. Tenple, what are Dow's present intentions with regard to its agreement with Consumers Power? A. Dow intends to purchase process steam from Consumers beginning the first year of operation (1982) . In that year, the amounts will range from the contractual minin= requirenent of 2,000,000 lb/hr of 175 psig steam and 400,000 lb/hr of 600 psig steam. Dow has the right under the contract to increase its reserved capacities for steam up to the maximum " team generating capacity of the plant by giving Consuners Power 1x years' notice of its intent to do so. At the present time, Dow's contract demand in 1982 for electric service from Consumers Power is established at 300,000 kilowatts, which will be supplied in accordance with Consuuers Power's Rate F. Dow's current total electric denand for the Midland Plant in 1982 is estimated to be between 175,000 - 200,000 kilowatts. If the contract is nodified, part of this dsund may be supplied by Consuners Power. Dow will install and operate, pursuant to its rights under the contract, the capability to generate 1,000,000 lb/hr of steam at Midland. ATTACKENT B Codeof Professional Responsibility and Opinionsofthe D.C.BaPlegalEthics Committee i District of Columbi Bar 1426 treet N.W. . Eighth Floor I ~ ~ EOPINIONS ' 16) 870 DISTRICT OFCOLUMDIA RAR y,, y pmasion of usch irgiaasi,e uniemenes and sens- " spony also. gag Enselngly use regjened tesehnany or false Dit 1-st2tARea,14 and f78; f.C TWIJnelta- la aJJision, lawyns cosnaionly, and quhe pro- 3,,,,. sions on a lawyer's Partidpation in the Prepara- pesty, psepast mitnesses for seulmony that is so be em paesmeew in she creashin er evewr'adan tion of a Whness's Tessiniony gi.cn orally in hs emisesy. Is consequence, q=es- ,# evksence when he annes or a h atmein elons of whethes a lawyer assy propesty suggest shas ehe edsenre is fahe. We have been ashed to dcEnesse she ethical thelanguage in uhkh a mitness's scuhmony will be gyg c, net ,e n.no hk stene in conj d that limisaikms upon a lawyee'. participation in case, or suygest subjects foe incluske in snah the sa.tu knees se be HWal a pseparing the sesseniony of shnesses. snomy, do not avi e solely in connecsion ohh weit- feaudweene, the specific inquity before us ariws out of ad- een testimony. For this reason aho, the inquence's Curioudy, ohne appear to be no dechisms of judicatory hearings before a federal reselsiory queuions atwas " practice cross <aamination ence- bar ethics conomissees dire.dy sadsessing the bne agenry.1he agency's rules of peaceke psevide eises"is navio.cr than is needs so be: ehere may of deniancasion bei.cen permi ulle and insper-that dacct testanony of wienesses is so be submk- equally wc5 he psactice direct cuandnasion. snhsible lawyer participateose in st.e prepar avinn of n' eed in msitaen form prior to the hessing sessinn as i in sum, the ethkalissues sahed by she inquiry eenkar,ny frone the perspectis e involved in this in-u hk b the sestimony is offered; as that session, the before us apply enore broadly than is implied by q,/.y focusing on she laeyer's conduct rasher l mkness aJopes the ecstimony and assests that k is i y the particular quetilons put by etw inquires. la than on she naiure of she scstimony; sad =hile eroe and cosrect so the bess of his or her know- ' order ao presens chose issues in a snore inclusive these is some amhmhy fiore other sources, it is { leJgr and leforniation and then is offered tog setting. she quesaions may usefully be rephsased as scant, and not brittuly ilundesung ' la any , esass-esaminatina on she testimony thus sut, mis- follows: evens, is seems so us clear s'eas the proper focus is a sed. The particular questions put ety slee inquiser (Il % het a,e alie ethical findsations on a law- indeed on the subsaance of she miences's truiniosey are whether la is cihkally twoper ,or a lawyer ac- yer's supseuing the actual language in ehkb a which the laeper has, in one may es another, as-5 swally so wehe the testimocy the whness mill adore ohness's sculmony is to be prewrsed, whether in sined in shaping; and not on she enanner of the - anJer oeib; whether, il so, she la wyer snay include wrissen foren or otherwisei la.yes *s involvement. In shes regard, the pereinent la such sessienony infos masion that the lawyer has (2) What a e the ethical limisations on a law- provisions of the Code, geoecd above, do not call  ! inielally secured from sources other chan she mis-yer's suggeuing than a ohness's testirnony include for an escessively close asialysis. They employ the ness; and whether, afice the wehten disect gestl-inforenailon that e as not ishtially furnished to the tessns " false," "frauduless" and " perjured " the ! many has been peps:ed, she lawyer may engage lawyer by the whness? ecenes " testimony" and " evidence," anJ the e in " practice cross esamination esercises"Insend- g3) What are she ethical limitalions on a law- teams **silegal" and "fraudulene," in a spanner ed to prepare the witness for questions shat snay yes's preparing a mitness for the pesentation of that suggests, nos that fine differences are intend- ' be asked as the hensing. gessimony under live esandnasion, eheiher dhect ed, but that the seines are escJ casually and inses-Ahhous se the pasticular questions posed by she or cross, and ehether by practice queestioning o' changeably. We think ein.: fore, that all of shese f inquiry are appropriate so the proceduval back. otheralsei posisions, so far as hes* peilin nt, ase to the ground againse ehech they ashe, she issues shey A single prohibitory principle governs the sanw effect: that a lawyer nsay not ethically parei-j saise have becader significance. Submission of di- . answer so all shree of these quesalons:it is, sienpl Y , cipate in the prepasation of aestunony shat he or ) e sect sessimony in wretien forni in ads mace of a that s lawyes may notprepare. or assist in prepar* she knows, or ought to taow, is fel e or mis- , hearing as shkh the ohness is sub)cca to ques- ing, sessimony that he or she knows, or ought so leading. , lioning about she ecsticanny is a frequent and fa- & now,is false or ndsleading. Sa long as this prchi- la foelons, eherefore-to addsess the firse ques- , miliar patievn. Ist it is by no means the only kind bition is nos 6sansgresseJ, a lawyer may properly tion here enhed-that she fact that the particular e of setting in which 'awyers . are cahed upon to as- suggest lan'g uage as well as she subuance of tesel- mords in uhkh gewimony, whether writien or sist in the perpara los of a wieness's sesalmony- anony, and may-Indeed, shoulJ -do m hatever is oral,is cast originased whh a lawyer rather than f Wrkien testimony is offered in a vasiety of forms feasible so prepare his or her whnesses for es* the whness whose testimony it is has no signifi-and circumteances: In anseers to mikeen intersog - amination. i cance so long as the subuame of shal tesdnn'ay is stories, for instance; and in all sores of alikfavies. The governing etlJcal p ovisions, whkh are east n.n, so far as the lawyer k no s or ought so know, l L awyers are ainsoss invariably involved in the pre-he quise general seems, appear to be f C 7-26 and fahe or misleading. If the particular words sus-passinin of the former, and Isequently in she lat- g>R 7-lo2(AM4), (6) and (7). The Dhical Co, geseed by the lawyer. even shough nos hactally eer as weR.1here is aho a paiteen, somewhat par

• sideration stads as follows: false, are calculaird to convey a misleadies inn-allel so shat of she adminharative agency in the present haquiry, to be found in legislative hea'* The ta= sad Disciphneer It.ies pechib s she use of reession, this woulJ be equally imswends6ble faaediilesie, fahe, sie peepseed sessinuiny or evideme. from the cihical point of view, lecrcin,indeed, hes Ings, mhese minnesses are comenonly espected so A la.ges s ho kno=insty panicipases in hurodumion the psincipal huard (Icasing aside cuisight sub-submh weisten statelnents in advance of their op- ,t s.ti,nsimony ce eslJence ls antiest oo discithne. ordinatkin of perjury) in a lawyes's sugreuing rearances before the legislative cornmittees mhese j A laeser shoe:J. homeier, peesene any ade lisel' particular forms of language so a ohness insteaJ

ehey then elaborale upon their seuimony ofwr esideme hes ehens desires se l,ase psme ed walest he 4

were.' Lawyers are frequently involsed in the tire-4 kao=s. or ham f an .hhin his kno ledge should of leaving the misness to articulsee his or Icr e nnoe, ahat such sessienieny or evidence is false. shought wholly mial.oiet pompting- there may be l e The premipal difference bes*een this pence and freedulem ne enJwed. e e ,m, ews i.picine ( nun has sefeesed so I C g hos of the aJpmJicanosy proceedens of the kind gi. sag The desuchnary remnions are these: rise *o albf tasaans IsNgtsif y is, medinatliy, that meeshes the y 2s and tsR 7 tor as entlediias "the aapaisa' ch=a8 DR 3 ggy. Repregemopg A (hens Wielun The dnumthm tiet*een dmusemg testimony and seek 6pg 6 *duen ummems nor she osal sesehmany are end" eseh. T his differeme h not neceseasily a signiferans one sta==ts of the t an. a tecre Iy to enneence it " Ordess . UmseJ senses, i f<u chame pueroses,lueme=er- I la hn eepenemaison of a shem, a lasper shen 421 U 5. 30, 90 m 3 (19763. t,us she ( owe did eine ,g etal.oemee on she datesweeun (D l 1 to e . m in i I E i I I f I $ , ~~- - - -s g g - - _ 173 g DISTRICT OF COL UMill A EAR disinences in meance enuma varians phrasings of a passicular paisa of subsaance was inhiaNy ses-che manic sub=eansive poins, which art so sig. gesaed by she lawyer raaber skan she mkness seems g ,, , ac,e c. c.,,siees ..a mficans as se snake one =cesion meisicading whale sw us eheiy wkhous signifkance. These are two ,g , , , wo ,,,,,,g .,,,,,,,en me g,,, g, ,,,,,, ,,,,,,,,, ,, h, e,peos s. p.e se amenber is ac.c. Yes at is obvinus shas by the same pinc6 pal inessds here. One bezard h the possibil-sonen. choece of words niay aho isnprove she clar- hem on the uand see -c use, pan!cuasely la a e ity of undwe sugg seien: that is, the risk that abe ,,,,he , ,,,,pavased seanssosons and memnows ny anJ pecision of a casenerne: even subele ohness may shough lessly ac'. ope sessissiony of- documems, re le= *nn de =nnes* 'he Pr"inr"' <hanges of A= i g may as readdy inopsove aesen fesed by the lawyer simply because k is so offned, darancais, book fa et PP**e 'I "I'nhas er nasass, as inipaar as. The f act skas a lawyer suggenas mislooes considesing whether is is testinsony that

• tuness' **81e"*on and se f anwh8'IM ha" *n j parsecular language to a enness means only that he or sier may app opesately give under oath the 1

the lanser snas be aficceing the sessimony as re-thene eh see earnwd to k eN b "h oqher barard is the possibelley of a suggesteosi or ihn sans of purassum h nM to

• N speces us clsea y and arenseacy; and not necessardy imphcateon in the wieness's resenhing scubnony P'"'"*** * * *

• thae the ef fecs h to debase rather than improve she shat she annen is testifying on a particislar master l le setaeaces seos at all chas the preparasirm of such neuunose, 6n these respects le is men, we slinik, a of hes own haus= ledge when this es not in fact the ecstime sakes she form of "practke" cuamina.

snaiw. of endae delTheehy los a reasonably coin- casef for reasons explained cbove, shese hasards tion or cross-eneminaaion. What does maner is preens and conwientious lawyer to descern the line ere hkely so be some hat less serious in a caw hhe thee ehateser the mode of *4tness preparesson of unpermin.bility, where ereth shades inao on-the one giving slw so she prewns kiquiry, .here ceu,wn, she la.yee does run engage ks supgwesu,ng, umah, and so refram leoen crossing is? cross esaminanon can is-see inao the source of dhsorting oe faldlying the nummny Aa Hw We note chas 6sn the pariscular <iscumummes she seuimony, and lest hs stieth and genusmeness, mitness *ill give. i reveng one to this inquiry, eheve is some budi in than he the namesous shmations where esitlen averance againq harasds of this kind, to lie sessienomy self swobably nos be followed by any Inquiry No 79 8 27 found en the face tha We ecstimony eiu be subject esamenaemn of the .4: ness as all Even in alw las- December 18,1979 en crou emaininanon-w hn h. ni courw. may pro- ier snession, homeser, there should be no dif-rnt, peohe the estens of she lamyce's parskips- ficulty, for a reasonably shalled and scsupulous

non m she actual deafsing of the disert sesuneony, la=>ce, in avoeding the harards in question.

inchsdeng =hether language wwd by she meaness We emen, fatally, so the casern of a lawyer's originated =hh she lawyes easher shan the witness, proper parlicipacioriin preparing a minness for geving mbas oeher language eas consejered bus rejected, hve tenimony-whether the sesslipony is only to the semances involved, and so fosth. T he ehk of be under cross esaminat60si, as in the particular destorston, whether insensiosial or isresneensional, circumssances gising rise so the presene inq eiry, is ohvenudy gr aver where las ein often be the or, as is more usually she case, direcs esamination ' case enh af'edavhs or weistese ans**ers to inace. as well. llere aga'.s it appears to us thas she only rosasorees) she seuimony is not gung to be sub- souchuones ave the erwah and genuinessess of the jn se e osstsaminasion Nonetheless, even in lessimony to t e given. T he encre fact of a le*,cr's that consene there shoe kl he no undue difficulty having prepared she ohness for the psewasatium for a la yer in avoiding such distorsion. of sest6 mony is simply ir relevant: indeed, a la s yer

• t he second queuiose raised by the inquisy-as mho del not prepase hes or her wiiness for testi-to she penpricef of a lawyer's suggening the isuhs- snony, hasing had an oppossunisy to do so, mould

• Ihe cours in Hamd4 *em on so sav:

uon en a ohness's ecuinumy of information noe not be doeng his or her professionaljob procesly. ihue h no doubt shav these recikn ese ofeea imeeally secuecd fruna she wheets-nsay, again, t his is so if the =ieness is also a clieve; but h 65 no abused T he hoe is not essdy d's.n bet.een purer seise noe only wish respect to *rinen wssienomy less so if the wasness is merely <ine who es offered revie* of Ihe 1** " **d 'e88"h**"' 'I 'h' '""""' bus =seh cost testimony as well. In either case, it by the la=)ct on the thend's behalf. See flemd, d alon of a ohness and rule 6ag omds in the semush of appenes so us shat she governing considerallon for Ibre4/m Afango (o v. fiire Assoriorirm of Ac ohnns os ihas in his mmd ne um mag de ettwcal purposes is ehether she substance of the Phr/adelphse, 20 F lt D.181,182-83 (S D.N.Y. sessinnin; 6s sonicshing the ekness can taushfully 1917F ',",}*""'g; , *,' ,,"'*f, ,,' fe',$"' ami propenly sestify so. If he or she is eilling and Ahhough thh passage neight be read benadly so mean th! sould scarcely be suggeued thes k mee.id lie em . (as respects his or her sense of &nonledge) aMe thm ang suggestion by the enamey of language or bicas honessly to to leuify, she fat t that the incluuon of poper far emeinet W coued me ohnu m wh .hh him pekn so ehe depouston she eenenson, to be a m m g h 4 % w w nsisnevecmenely read hi se euro es senw of s ie.Dee's suggeschir Id* ensued. h h useat and leghesmase prsoire im rehical - - - - - - - seu6miony 1 hes, heiniediately else, else passare he gaes

• 1he t enseed 5sases ('oins ud Appeals fue she f ouesh and deksent sounsel se confer =hh e eisness ahone alon the court giented ) H sgniser Os i andree Isd af I i

( w mes has avskudseed she hae of isspessenessebilny (in he h abrien so ca5 prkse to lin giving wuesnosey, whether he eeuwsiesev h so k given on deposhion or i g sier omiseu of she wqercusasson of e defendans d,eing a es " * ' *a g .gwm o

• ,es enns in .e co.a.e of a ee a.l .im .e c ca.ty e. h o,naal,. Wigmo,re recogsdses ",the absoluse nues.sity um +e a-w *, an *g -e -g, 5ce,n, .c .

'an be done- ,m , , ,on ee_e ,or ,,, ,i,,,e,e - ,, p.,6 of snoellegesis and shorough pieperasis,n for " I hr danger . . k thee counwl's advice nie, seial I N sgasore en findense, f)4 Edisiont 9 788. h would won,88teseeme, eat naheng shem W en ugmsiaami, sape or ahn the so6ns of imihee ses ~ *d"*88'**d"k"'""""""'"*"'"*" " oneinny . shee ein he unsewe ce e east wed divoe.

• (f. Riele 802 of she f edesal Roles of E 6deswe. num, could twopph be taken ah 4 h n me non ce e.esson el she erweh specific sole of behawkw ceratile of l' ems subsenessed A =seness sna, noe sess,fy se a maner einien cklence timied keecs . Allen, 342 f 2d 410, 611 tesh (ir. for de por f of unsh facn la sneecduced swifeoene to seppare a fienting than he 19 4). sere dresed. 410 U $ wie (197F1 has peewmal kno=8coge of the snesses H*""" * *h"" M*"8* I* ' g 5 hiladelpaies, sortire. 20 i R D as all W l

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-' UNITED STATES OF AMERICA't ' I NUCLEAR REGULATORY COMMISSION ) I ) 7 nFP. -7 NO 23 BEFORE THE ATOMIC SAFETY AND LICEN ING APPEAL BOARD L , In the Matter of ) E' - Nd, .' ) CONSUMERS POWER COMPANY ) Docket Nos. 50-329 ) 50-330 (Midland Plant, Units 1 and 2) ) (Remand Proceeding) ) NOTICE OF APPEARANCE + The undersigned, being an attorney at law in good standing admitted to practice before the courts.of the District of Columbia, hereby enters her appearance as counsel on behalf . of Consumers Power Company in proceedings related to the above-captioned matter. Respectfully submitted, i t h. A Deborah B. Bauser SHAW, PITTMAN, POTTS & TROWBRIDGE 1800 M Street, N.W. Washington, D.C. 20036 (202) 822-1215 I . April 5, 1982 1 l UNITED STATES' OF 4J4 ERICA NUCLEAR REGULATORY COMMISSION .m em -7 N0 :23 BEFORE THE ATOMIC SAFETY AND LICENSING APPEAL BOARD In the Matter of I'- E CONSUMERS POWER COMPANY ) Docket Nos. 50-329 ) 50-330 (Midland Plant, Units 1 and 2) ) (Remand Proceeding) ) NOTICE OF APPEARANCE The undersigned, being an attorney at law in good standing admitted to practice before the courts of the District of Columbia, hereby enters his appearance ar counsel on behalf of Consumers Power Company in proceedings related to the above-captioned matter. Respectfully submitted,

SM O. L%k, Q j&y2 yfb '

Dean D. Aulick, P.C. SHAW, PITTMAN, POTTS & TROWBRIDGE 1800 M Street, N.W. Washington, D.C. 20036 (202) 822-1115 I April 5, 1982 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION '%. BEFORE THE"MTOMIC SAFETY AND LICENSING APPEE BOARD In the Matter of ). ) CONSUMERS POWER COMPANY ) Docket Nos. 50-329 ) 50-330 (Midland Plant, Units 1 and 2) ) (Remand Proceeding) ) NOTICE OF WITHDRAWAL Notice is hereby given that Wm. Bradford Reynolds and Alan C. Weisbard have withdrawn their appearances as counsel for Consumers Power Company in this proceeding.  ; ( . f@{N(f,';- I TN ?  ! f h / 'd 's. s 1 1 f Gerald Charnoff, P.C. q'l SHAW, PITTMAN, POTTS & TROWBRIDGE 1800 M Street, N.W. Washington, D.C. 20036 (202) 822-1032 g ./ l April 5, 1982 UNITED STATES OF AMERICAi '3I NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICEbqbNG "nna _7 Ma :'1'l APPEAL ' BOARD In the Matter of ) , ) CONSUMERS POWER COMPANY ) Docket Nos. 50-329 ) 50-330 (Midland Plant, Units 1 and 2) ) (Remand Proceeding) ) CERTIFICATE OF SERVICE I hereby certify that copies of "Brief of Consumers Power Company in Opposition to Intervenor's Exceptions" with Attachments, Notices of Appearance of Deborah B. Bauser and Dean D. Aulick, and Notice of Withdrawal of Wm. Bradford Reynolds and Alan C. Weisbard were served this 5th day of April, 1982, by U.S. mail, first class, postage prepaid, upon the following: Christine N. Kohl, Esq., Chairman Atomic Safety and Licensing Appeal Board U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Gary J. Edles, Esq. Atomic Safety and Licensing Appeal Board Panel U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Dr. W. Reed Johnson Atomic Safety and Licensing Appeal Board Panel U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Docketing and Service Section l Office of the Secretary i U.S. Nuclear Regulatory Commission Washington, D.C. 20555 l qe o William C. Potter, Jr., Esq. Fischer, Franklin, Ford, Simon & Hogg 1700 Guardian Building Detroit, Michigan 48226 R. L. Davis, Esq. Michigan Division Legal Dept. Dow Chemical Midland, Michigan 48640 William J. Olmstead, Esq. William D. Paton, Esq. Office of the Executive Legal Director U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Myron M. Cherry, Esq. One IBM Plaza, Suite 4501 Chicago, Illinois 60611 bM M . Deborah B. Bauser e'MC - - ,.