The Federal Circuit Court of Appeals has ruled that the U.S. Department of Energy (DOE) could not avoid the consequences of breaching its contracts to provide nuclear waste disposal capacity. Entergy Nuclear Fitzpatrick, LLC v. United States, No. 2012-5059 (Fed. Cir. 4/2/13). At issue were contracts entered under the Nuclear Waste Policy Act. These contracts required nuclear utilities to pay fees and called for DOE to begin disposing of high-level radioactive waste or spent nuclear fuel “not later than January 31, 1998.”

The statute required nuclear utilities to enter such a contract, or engage in negotiations for one, to obtain a license or license renewal. In 1994, DOE notified licensees that it could not meet the January 1998 deadline and had made a “preliminary finding” that it had no obligation under the statute to accept the waste “in the absence of an operational repository.” Multiple parties challenged this proclamation, and in 1997, the D.C. Circuit Court of Appeals determined that the statute obliged DOE to meet the 1998 deadline “without qualification or condition.” Still, DOE informed the utilities that it would not begin accepting waste by the January 1998 deadline.

Additional challenges ensued, and the D.C. Circuit confirmed that the statute imposed an unconditional obligation. Eventually, DOE asserted that it was not liable for its failure to meet the deadline under its Standard Contract’s “unavoidable delays” provision, which eliminates liability for either party’s failure to perform, “if such failure arises out of causes beyond the control and without the fault or negligence of the party failing to perform.” The court found, however, that DOE had waived this defense by failing to timely raise it.

In 2003, Entergy sued DOE in the Court of Federal Claims, asserting that DOE had breached its contractual duty to dispose of nuclear waste and seeking damages. The case was stayed for five years, after which the government reasserted the unavoidable delay defense. The Court of Federal Claims granted a motion to strike the defense, holding that the D.C. Circuit had already concluded that the government waived the defense. DOE appealed, asking the Federal Circuit to rule that, while it could not assert unavoidable delay as a defense to the contract breach, it could use the defense to “circumscribe” the damages.

The Federal Circuit held that the contract’s unavoidable delay provision either excuses the lack of performance (i.e., eliminates the breach of contract) or does not and that DOE’s effort to craft a middle path was unavailing. The court reaffirmed the findings that DOE could not rely on the defense and affirmed the Court of Federal Claims’ decision to strike it.