nuclear-power-plantA nuclear utilities company brought an action alleging breach of contract by the government for disposal of spent nuclear fuel and the fees involved. The utilities moved for permission to designate an additional expert and fact witness and to amend the pretrial schedule.

More than 18 months ago, the plaintiffs, a nuclear utilities company (“SFI”), agreed to submit all of its expert reports to the Government by May 11, 2012.

In the interim, in Consolidated Edison Co. v. United States (Fed. Cir. 2012), the U.S. Court of Appeals for the Federal Circuit reversed a decision by the U.S. Court of Federal Claims awarding damages for “generic fees” paid to the Nuclear Regulatory Commission (“NRC”).  “Generic fees” are defined as the fees that cover the costs of the NRC’s general industry-wide regulatory activities.

In April 2013, SFI filed a Motion to Permit Designation of an Additional Expert and Fact Witness and To Amend the Pre–Trial Schedule. SFI requested in the motion that the court allow it to designate JF, a retired Chief Financial Officer of the NRC, as an expert and fact witness to meet the evidentiary deficiencies identified in Consolidated Edison.

The Federal Rules of Civil Procedure Rule 16(b)(4) provides that “[a] schedule may be modified only for good cause and with the judge’s consent.”  Judge Susan G. Braden of the Court of Federal Claims, in the opinion of the court conceded that the Federal Circuit had not addressed the parameters of Rule 16(b)(4).  However, she noted that other Circuits provided guidance in the context of the rule as to a trial court’s discretion in modifying scheduling orders to allow an additional expert witness.  In 1997, the U.S. Court of Appeals for the Federal Circuit applied the law of the applicable regional circuit—the Fifth Circuit—on the question of modifying scheduling orders to allow additional expert witnesses under Rule 16(b)(4).

The Fifth Circuit stated that four factors should be considered by a trial court in determining whether “good cause” exists to modify a schedule under Federal Rules of Civil Procedure 16 to accommodate the designation of an additional expert witness:

(1) the reasons for the moving party’s failure to designate the witness in compliance with an existing schedule;
(2) the importance of the testimony;
(3) potential prejudice in allowing the testimony; and
(4) the availability of a cure for any prejudice.

In apply the four factors to SFI’s situation, Judge Braden wrote that a party’s realization that it elected to pursue the wrong litigation strategy was not good cause for amending a schedule. Although SFI contended that Consolidated Edison was an “intervening development in the applicable case law,” the court read that decision as simply reaffirming the plaintiff’s burden to establish causation in a breach of contract claim. SFI’s recent concern that their case may have evidentiary shortcomings, did not explain their failure to designate JF as an expert in a timely manner. As a result, SFI did not meet the first factor.

Judge Braden wrote that even if the Consolidated Edison decision was an unforeseeable change in the law, that still didn’t excuse SFIs’ failure to comply with the December 2011 Scheduling Order. The Federal Circuit ruled in Consolidated Edison on April 16, 2012—one month before SFIs’ deadline for submitting their expert reports. SFI, however, waited a year before deciding they needed to add an expert witness. Moreover, Judge Braden said, instead of directly addressing this issue, SFI blamed the Government for their lack of diligence.

The second factor is the importance of the proposed testimony. In spent nuclear fuel cases, this appellate court has suggested two ways that a plaintiff can establish a causal link between the Department of Energy’s breach and an increase in generic fees paid by SFI: (1) that NRC’s overall generic costs increased as a result of DOE’s breach, causing the NRC to assess increased generic fees on each of its licensees; or (2) that a 1999 rule changed the fee allocation method as a result of DOE’s breach and increased SFI’s share of generic fees.

SFI insisted that their expert was necessary to establish this causal link.  SFI claimed that JF was “directly involved in the decision to change the fees, and he was also involved in the computation of those fees on a going forward basis, and both of those issues have been the subject of dispute between the parties.”  As to whether DOE’s breach of the Standard Contract caused the increase in NRC’s overall “generic” costs, the court saw little probative value in the proposed expert’s testimony. The NRC rules are issued by a five-member Commission. FJ was not the Chairman or even a Commissioner.  As Chief Financial Officer, he had no authority to issue official interpretations of the reasoning behind the Commissioners’ actions.  Judge Braden explained that an agency’s contemporaneous official published statements evidenced an agency’s reasoning, but that post hoc assertions about an agency’s decision-making inherently were suspect.

JF’s proposed testimony as to why the NRC’s fees increased presented the same problem. As NRC’s CFO, he was an advisor, not a decision-maker.  The expert’s testimony—14 years after the rule change—would be neither contemporaneous nor official.  For these reasons, JF’s testimony would be hearsay and irrelevant since the reasons for the NRC’s 1999 rule and subsequent changes were published in the Federal Register.

The third factor is prejudice to the non-moving party. The Government conducted substantial discovery based, in part, on the expert reports that SFI produced by the court’s discovery deadline.  If the court granted SFI’s motion, the Government would be required to investigate JF’s assertions and might need to hire a new expert. Based on this,  Judge Braden saw no reason to impose the burden of any additional discovery on the Government.

The fourth factor is the court’s ability to cure any prejudice to the non-moving party. Although discovery deadlines can be extended, the appellate judge stated that the court could not compensate the Government for the added expense it would incur. Although SFI argued that the expense to the Government would be minimal because of access to JF’s expert reports in other decisions, this did not support SFI’s motion.  Instead, it underscored why JF’s expert testimony was not necessary. The court could always take judicial notice of the expert’s prior testimony, if it was deemed relevant.

As a result, SFI’s motion requesting to add the expert witness was denied.

By: Kurt Mattson, J.D.,  LLM

System Fuels, Inc. v. United States, 111 Fed.Cl. 381 (Fed.Cl. June 13, 2013)