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Boston Edison Co. v. United States

ELR Citation: 41 ELR 20303
Nos. 2010-5136, -5137, (Fed. Cir., 09/28/2011)

The Federal Circuit affirmed in part and reversed in part a lower court decision granting the buyer and seller of an energy company damages for the U.S. government's ongoing breach of its contractual obligation to collect and dispose of spent nuclear fuel (SNF) generated at a nuclear plant in Plymouth, Massachusetts. The seller sold the plant for $80 million, and the buyer agreed to accept decommissioning responsibilities for $428 million. The lower court reasoned that due to the ongoing breach, the government had directly caused the seller to pay a larger sum in order to relieve itself of its decommissioning responsibilities. It therefore awarded the seller $40 million in damages, which represented the portion of the decommissioning fund corresponding to the projected post-decommissioning SNF-related costs that would be attributable to the government's continuing breach. But a sale of assets by a non-breaching party does not alter the settled common-law principle that when the breaching party has not repudiated the contract and is still expected to perform, damages are not recoverable until they are incurred as a result of the breach. The court therefore reversed the lower court's award of damages to the seller. But the court affirmed the lower court's award of $4 million in mitigation damages to the buyer. A non-breaching party contracting with the government has a right to recover indirect overhead costs, but not financing costs, associated with mitigation activities.