/>iThe Federal Court of Claims recently ruled in favor of the operator of the Vermont Yankee nuclear power plant in its long-running dispute with the United States over the disposal of spent nuclear fuel (NorthStar Vermont Yankee, LLC v. United States, No. 18-1209C, 2024 WL 3563239 (Fed. Cl. July 29, 2024)). Pursuant to a statutory scheme created by Congress in 1982, nuclear operators paid fees into a nuclear waste fund set up by the U.S. government. In return, the United States contractually agreed with the nuclear operators to begin accepting their nuclear waste by January 31, 1998. The United States did not meet this deadline to accept nuclear waste. Indeed, to this day the U.S. government has not accepted nuclear waste from Vermont Yankee or any other utility.
The operator of Vermont Yankee brought breach of contract claims against the United States to recover costs incurred storing spent fuel. Prior to trial the court entered partial summary judgment in favor of Vermont Yankee to the tune of $136 million for undisputed mitigation costs. The case proceeded to trial on the Vermont Yankee’s remaining damages claim, which totaled over $55 million. Though certainly unique, Vermont Yankee’s claims were governed by the usual rules for recovering breach of contract damages, which the court helpfully summarized in its opinion:
The remedy for breach of contract, whether partial or otherwise, is “damages sufficient to place the injured party in as good a position as it would have been had the breaching party fully performed.” Portland Gen., 107 Fed. Cl. at 641 (quoting Ind. Mich., 422 F.3d. at 1373). To recover damages, Plaintiff must establish by a preponderance of evidence that: “(1) the damages were reasonably foreseeable by the breaching party at the time of contracting; (2) the breach is a substantial causal factor in the damages; and (3) the damages are shown with reasonable certainty.” Ind. Mich., 422 F.3d. at 1373 (citing Energy Cap. Corp. v. United States, 302 F.3d 1314, 1320 (Fed. Cir. 2002)).
A. Foreseeability
Damages are considered foreseeable when they “follow[ ] from the breach (a) in the ordinary course of events, or (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know.” Restatement (Second) of Contracts § 351(2) (1981). This principle safeguards a breaching party from liability for “damages that ‘it did not at the time of contracting have reason to foresee as a probable result of such a breach.’” Citizens Fed. Bank v. United States, 474 F.3d 1314, 1321 (Fed. Cir. 2007) (quoting Restatement (Second) of Contracts § 351 cmt. a). “Foreseeability is determined at the time the contract was executed,” and the “non-breaching party must demonstrate that both the magnitude and type of damages or injury were foreseeable at the time of contract formation.” Portland Gen., 107 Fed. Cl. at 641; see also Ind. Mich., 422 F.3d at 1373; Landmark Land Co. v. FDIC, 256 F.3d 1365, 1378 (Fed. Cir. 2001)).
Plaintiff need not demonstrate that a particular means of responding to the breach was foreseeable. Id. “What is required is merely that the injury actually suffered must be one of a kind that the defendant had reason to foresee and of an amount that is not beyond the bounds of reasonable prediction.” Citizens Fed., 474 F.3d at 1321 (quoting Joseph M. Perillo, 11 Corbin on Contracts § 56.7 at 108 (2005 rev. ed.)); see S. Nuclear Operating Co. v. United States, 77 Fed. Cl. 396, 405 (2007) (“While the general response to a breach must be foreseen, the particular way that a mitigating decision is implemented need not.”). In other words, the foreseeability prong “applies to the type of loss, not to the means of mitigation.” Sacramento Mun. Util. Dist. v. United States (SMUD I), 293 F. App’x 766, 771 (Fed. Cir. 2008) (citing Citizens Fed., 474 F.3d at 1321). As the Federal Circuit and this Court have consistently held, it was foreseeable that DOE’s nonperformance under the Standard Contract would result in utilities incurring costs related to storage of SNF. See, e.g., Ind. Mich., 422 F.3d at 1376; Duke Energy Progress, Inc. v. United States, 135 Fed. Cl. 279, 287 (2017); Sys. Fuels, Inc. v. United States, 79 Fed. Cl. 37, 59 (2007).
B. Causation
Plaintiff must also prove that DOE’s breach caused each of the claimed costs. Causation, like foreseeability, is a question of fact. Bluebonnet Sav. Bank, F.S.B. v. United States, 266 F.3d 1348, 1356 (Fed. Cir. 2001). There are two standards employed by this Court for determining causation—the “but for” test and the “substantial factor” test. Portland Gen., 107 Fed. Cl. at 641. Under the but-for test, the breaching party is liable for those damages that it directly and entirely caused. Id. at 641–42. Plaintiff “bears the burden of showing that but for the breach, the purported damages would not have occurred by ‘submit[ting] a hypothetical model establishing what its costs would have been in the absence of breach.’” Duke Energy, 135 Fed. Cl. at 287 (alteration in original) (quoting Vt. Yankee Nuclear Power Corp. v. Entergy Nuclear Vt. Yankee, LLC, 683 F.3d 1330, 1350 (Fed. Cir. 2012)).
“Causation must be ‘definitely established,’ but the breach need not be the sole cause of the damages.” Duke Energy, 135 Fed. Cl. at 287 (quoting Cal. Fed. Bank v. United States, 395 F.3d 1263, 1267–68 (Fed. Cir. 2005)). “The existence of other factors operating in confluence with the breach will not necessarily preclude recovery based on the breach.” Portland Gen., 107 Fed. Cl. at 642 (quoting Cal. Fed. Bank, 395 F.3d at 1268). Under the substantial-factor test, the breaching party is “liable if the breach was a substantial causal factor of the damages.” Id. (citing Ind. Mich., 422 F.3d at 1373).
The Court has the discretion to apply the appropriate causation standard, Citizens Fed., 474 F.3d at 1318, but the Federal Circuit has stated that “the substantial factor test is not preferred,” Yankee Atomic Elec. Co. v. United States, 536 F.3d 1268, 1272 (Fed. Cir. 2008). Accordingly, the Court will apply the “but for” test.
C. Reasonable Certainty
Finally, Plaintiff must prove its claimed damages with reasonable certainty. Ind. Mich., 422 F.3d at 1373. A fair and reasonable approximation of damages is sufficient. See, e.g., Energy Cap., 302 F.3d at 1329; Hughes Commc’ns Galaxy, Inc. v. United States, 271 F.3d 1060, 1067–68 (Fed. Cir. 2001). “Absolute certainty is not required … because ‘the risk of uncertainty must fall on the defendant whose wrongful conduct caused the damages.’” Dominion Res., Inc. v. United States, 84 Fed. Cl. 259, 270 (2008) (quoting Energy Cap., 302 F.3d at 1327), aff’d, 641 F.3d 1359 (Fed. Cir. 2011). “If ‘a reasonable probability of damages can be clearly established, uncertainty as to the amount will not preclude recovery.’” Id. (quoting Glendale Fed. Bank, F.S.B. v. United States, 378 F.3d 1308, 1313 (Fed. Cir. 2004)); see Ind. Mich., 422 F.3d at 1373 (explaining that the amount of damages need not be “‘ascertainable with absolute exactness or mathematical precision’ ” (quoting San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557, 1563 (Fed. Cir. 1997))). However, “recovery for speculative damages is precluded.” Ind. Mich., 422 F.3d at 1373. To assess certainty, “the court may ‘act upon probable and inferential as well as direct and positive proof.’” Dominion Res., 84 Fed. Cl. at 270 (quoting Locke v. United States, 283 F.2d 521, 524 (Ct. Cl. 1960)).
Applying these principles to the facts, the court ruled in favor of Vermont Yankee as to several categories of disputed costs. This included wet pool storage costs, dry cask storage costs, and decommissioning costs in excess of what would have otherwise been incurred. A copy of the court’s 94-page written opinion is available here.
