ML20079H835

Forwards Util Preliminary Pretrial Statement Filed in State of Mi Circuit Court for County of Midland.Statement Sent in Fulfillment of Obligation to Keep ASLB Informed of Developments Relevant to Proceeding

ML20079H835
Person / Time
Site:	Midland
Issue date:	01/19/1984
From:	Steptoe P, Steptor P ISHAM, LINCOLN & BEALE
To:	Bechhoefer C, Cowan F, Harbour J Atomic Safety and Licensing Board Panel
References
ISSUANCES-OL, ISSUANCES-OM, NUDOCS 8401240073
Download: ML20079H835 (7)

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ISHAM, LINCOLN & BEALE couNsnonsAruw 00CMETED USHRC THR(iFNtST NATIONAL PLAZA CMCAGO. LLIN01S tono, io-o. ,$ . ,m , , nugl= = '84 JAN 23 Pl2:3L-Too,nc.

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January 19, 1984 ,

>p In the Matter of )

) Docket Nos. 50-329-OM .

CONSUMERS POWER COMPANY ) 50-330-OM

) 50-329-OL (Midland Plant, Units 1 ) 50-330-OL and 2) )

Charles Bechhoefer, Esq. Dr. Jerry Harbour Atomic Safety & Licensing Atomic Safety & Licensing Board Panel Board Panel U.S. Nuclear Regulatory Com- U.S. Nuclear Regulatory Com-mission mission Washington, D. C. 20555 Washington, D. C. 20555 Dr. Frederick P. Cowan 6152 N. Verde Trail Apt. B-125 Boca Raton, Florida 33433

Dear Administrative Judges:

Pursuant to our obligation to keep the Board and partice informed of developments relevant to this proceeding, enclosed is a pleading in the Dow-Consumers lawsuit entitled

" Preliminary Pre-Trial Statement of Defendant and Counter-Plaintiff, Consumers Power Company". It provides a reasonably concise status report on the lawsuit, especially the status of document production.

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cc Service List 8401240073 840119 PDR ADOCK 05000329 0 PDR

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STATE OF MICHIGAN IN THE CIRCUIT COURT FOR THf COUf4TY OF MIDt.AND THE DON CHEMICAL COMPANY,' Case No. 83-002232-CX-D

j Plaintiff, Honorable David Scott DeWitt

-vs.

i CONSLMRS POWER COMPAhY, Defendant.

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. Offices of Herbert H. Edwards, P.C.

By: Herbert H. Edwards (P-13112) 26'2. Ashman, P.O. Box 1883 Midland, MI 48640

1. Kirkland & E111s *

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F200 E. Randolph Drive Chicago, I111nols 6C601 Attorneys for Plaintiff ard l'-

Cocater-Defendant.

Tha Dow Chemical Company i

Barris, Sott, Denn & Dr:ker By:, Eugene Drjker (P-12959) '

' Sharon M. Woeds VP--22542) .* ' '

2100 First Federal Building *

'i,001 Woodward Avenue Detrof t, MI 48226 ,

AttorEeys for DeTendant and Counter-Plaintiff, Consucces Peser Company

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... # PRELIMIdARYPRf-TRIkSTATEMENT05

, CEFEf DANT AND CCJNTER-PLAINTIFF, '

CON 5tThEM POWER COMPANY 1' 3 . ,

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l' In accordance witfi the discussion among the Cou?t and counsel on

' December 27, 1983, Consumtrs Power Company is sube! ting this as a preliminary Pre-Trial Statament, which will be suppitmeated and modified during the course of pre-trial proceedings and in accordance with the Court's future pre-trial orders. Nothing herein shd1= te deemed a walver cf

.any of the claims or defenses contained in the pleadings previously flied by Consumers, por h, deemed a waiver of any other right to which Consumers is entitled. '

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, 1. Factual statement of claim:

j Consumers Power. Company (* Consumers") seeks a money judgment against

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Dow Chemical Company ("Dow") for the amount Dow is required to pay Consumers fundertheircontractofJune 21, 1978 (the "1978 Contract"), together with

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!l Interest, costs and attorneys' fees. Consumers also seeks a declaratory 4

] judgment that Dow's purported termination of the 1978 Contract is 4

] ineffective.

) In 1966 Dew approached Consumers with a suggestion that Consumers

, build a nuclear, power plant in Hldland to produce both electricity and -

l steam. The steam would be purchased by Dow for use in its chemical manufacturing plant. After a joint study. Consumers and Dow entered into a contract by which Consumers would build such a plant (the " Midland Nuclear Plant") and Dow would purchase the steam thus produced.

For a sarlety of reasons, including Consumers' difficulty in obtaining the necessary construction permit from the Nuclear Regulatory Commission, construction was delayed. These delays and other facters, such as design changes, increased the estimated cost of the Midland Nuclear Plant well beyond its tr.ttial level.

In 1977. Consumers and Dow, each believing that modifications to the

,1967 Contract were appropriate, entered into negotiations toward that end.

The negotiations were carried on by a high-level team from each company and involved numerous meetings over a period of some nine months. On June 21,

'1978, a new agreement (the "1978 Contract") was executed, superseding the 1967 Contract. The 1978 Contract provided that Consuraers was to use its best efforts to place Unit 2 (the electrical generating unit) in operailCn on or about March 1,1981, and to place the entire Hldland Nuclear Plant (including Unit 1, the steam generating unit) In operation on or about March l1,1982. It further provided that, so long as Consumers used its best .

efforts, it would have no liability to Dow if "far any reason" the plant was not put into operation. The contract provided that if Consumers became unable to produce steam for Dow by December 31, 1984, Dow could cancel the contract, provided it simultaneously paid to Consumers one-half of the Allocated Steam Invest =c.t ("ASI"). ASI 15 the dollar amount of Consumers' investment in the steam generating unit.

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The 1978 Contract contains a Force Majeure section. It states that, notwithstanding any other contract prov1ston, any delay or failure in performance by either party (other than in the payment of money) shall be qexcused if due to any of various specified causes - such as labor disputes

]or governmental action - or "any other cause or causes beyond the I

ireasonable control of the non-performing party."

] Dow nas invested no monies in the Midland Nuclear Plant, the entire cost having been borne by Consumers. The current cost of the Midland Nuclear Plant is' estimated to exceed $4 billion. Consurers has calculated that the Allocated Steam Investment as of July ta, 1963 1s $919.452,000; one-half ASI 1s $459,726,000.

In Aprli,1983 Consumers concluded that the Midland Nuclear Plant could not produce steam by the target date of December 31, 1984 It so advised Dow and the public. That announcement antitled Dow to cancel the 1978 Contract, provided it paid Consumers the amount called for under the

. contract. On JJ1y 14, 1983. Dow purported to cancel the 1978 Contract, while simultaneously repudiating its contractual obligations to make the required termination payment. Dow then commenced this suit seeking to be entirely relieved of its contractual obligation to make the termination payment to Consumers.

Dow's First Amended Complaint is in five counts. Count I alleges that Consumers made material misrepresentations and failed to disclose material facts to Dow during the course of the negotiations leaalng up to execution of the 1978 Contract. Dow asks that it be relieved of all obligations undar the 1978 Contract.

Count II alleges that Consumers breached the 1978 Contract and its alleged fiduciary duties to Dow by falling to use its best efforts to obtain commercial steam operation by March 1,1982. Again, Dow asks to be relieved of all obilgations under the 1978 Contract.

Count III claims that Dow should be excused from perfcrm! 9 under the 1978 Contract because of the occurrence of supervening contingencies, which were not caused by Dow, and which were not in contemplation of either Dow or Consumers at the time the 1978 Centract was executed.

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, In Count IV Dow asks that, to the extent its obligations under the 1g78 Contract are not o'therwise fully discharged or excused, Dow be required to pay to Consumers some amount less than one-half ASI.

In Count V Dow alleges that Consumers owed Dow a duty to exercise due

[I care in the planning, supervision and construction of the Midland Nuclear

,'[ Plant and that it negligently breached that duty. Dow asks for damages, 11aciuding the sum of $60 sillion allegedly expended by it for facilities to

' receive the steam from the Midland Nuclear Plant. .

Consumers timely answered the First Amended Complaint. Consumers dectes that it was ;ullty of fraud or misrepresentation, breach of contract or neg11gence. Consumers dentes that Dow is excused from its obligations under the 1978 Contract by any claimed failure of fundamental assumptions.

Consumers denies that Dows ob11gatten to pay one-half of the calculated ASI should be reduced.

Consumers simultaneously filed a three count counterclaim against Dow.

In Count I Consumers seeks a declaratory judgment that Dow, by

. repudiating its obligation to make the termination payment required by the 1978 Contract, has failed to exercise its option to terminate in accordance with its terms and that its purported termination is therefore ineffective.

In Count II Consumers alleges that Dow's purported termination of the 1978 Contract was undertaken in bad faith, in breach of Dow's common law and contractual obilgations to Consumers to perform its obilgations under the l 1978 Contract in good faith.

l In Coun*. III Consumers asks for money judgment against Dew for the amount of the termination payment which, as of July 14,1983 15 Sc59,725.000.

2. Legal issues:

At this stage of the proceedings, the legal issues have been adequately framed by the First Amended Complaint, Answer and Counter-Claim.

As the parties proceed through discovery and towards trial, there will be opportun1ttes to narrow the legal and factual issues and to provide the Court, through pre-trial motions, stipulations, renuests for admissions and trial briefs, with comprehensive statements of the respective factual and legal Issues.

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3. Additional cleadinos, motions. additional defenses or amendments desired. If nieadtn s are satisfacton . so state:

At this stage of the proceedings, the pleadings are satisfactory.

During the course of discovery it may become necessary or appropriate to amend or supplement the pleadings. During the course or at the conclusion

'of discovery. It may be appropriate for one or more dispositive motions to be flied dealtr3 with one or more of the claims or defenses of the parties.

4. What depositions or discovery is yet to be done?

Since the filing of the Ccaptaint, the parties have proceeded expeditiously to exchange documents. Consumers has produced approximately 590.000 pu es of documents to Dow and Dow has produced approximately 140,000 pagas of docusents to Consumers. Under Pre-Trial Order No. 1 the date for completion of first-wave document production is February 29, 1984, subject to the right of either party to move the Court for good cause for an extension of time. Consumers has agreed to produce in excess of one million additional documents to Dow as,part of first-wave discovery. That

production cannot physically be completed by February 29, 1984 On eJanuary 13. 1984 Consumers advised Dow that it will need an additional 90

days in which to complete document production. In the event Dow does not stipulate to grant the needed additional time, Consumers will, at the January 23rd pre-trial conference, flie a motion, for hearing at a later date, requesting an appropriate extension of time.

It was initially agreed among counsel for the parties that depositions of party representatives would await completion of first-wave document production. Consumers believes that this procedure should be continued. In the interim, the parties can proceed with depositions of third parties, a number of which have already been noticed.

5. Any jury demands?

None.

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6. Any consolidation, other carties to be icined or droceed, separation of issues. or adotttonal claims?

None at this time.

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7. Admissions of fa'ct reauested.

There are numerous facts which, during the course of discovery and in advance of trial, can be sttoulated to by the parties. No requests for admissions have yet been filed by either party.

8. Occuments you anticipate cuttino in evidence which you would like authenticated.

He contemplate that authentication of documents can prcceed largely by stipulation In advance of trial. To the extent that questions of authentic!ty or admissibility may be raised, we anticipate that they can be presented to the Court in an orderly fashion in advance of trial.

9. Exhibits crocosed.

There will no doubt be a great many physical exhibits at trial. It is premature to describe or list them at this time.

10. Estimated time of trial:

We are presently unable to estimate the time of trial.

The remaining items called for under the Pre-Trial Statement cannot be answered at this time. It is respectfully suggested that the Court conduct periodic pre-trial conferences, either on its own motion or at the request of the parties, when they deem such conferences advisable.

Prepared By:

BARRIS, OTT,DENN&DRdE By:

Eugene Ortker W

Attorney for Defen nt and Counter-Plaint' f Consumers Power Company 2100 First Federal Building 1001 Woodward Avenue Detroit, MI 48226 (313) 965-9725 DATE: January 14, 1984

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