ALABAMA POWER COMPANY et al v. USA

Filing 129

ORDER granting 113 Motion in Limine (Merrifield); denying 114 Motion in Limine (Funches); denying 117 Motion in Limine (Metcalfe); granting 118 Motion in Limine (evidence regarding Southern's private fuel storage claim). Signed by Senior Judge James F. Merow. (lae) Copy to parties.

In the United States Court of Federal Claims
No. 08-237 C
(Filed November 8, 2013)
ALABAMA POWER COMPANY,
GEORGIA POWER COMPANY,
and SOUTHERN NUCLEAR
OPERATING COMPANY, INC.
Plaintiffs,
v.
THE UNITED STATES,
Defendant.

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ORDER
On October 23, 2013, the government filed four motions in limine, asking
the court to exclude: (1) the testimony of Jeffrey S. Merrifield, see Doc. 113; (2)
the expert testimony of Jesse L. Funches, see Doc. 114; (3) the testimony of
Kenneth P. Metcalfe, see Doc. 117; and (4) evidence regarding Southern’s private
fuel storage claim, see Doc. 118. The court will address each in turn.
I.

MOTION TO EXCLUDE THE TESTIMONY OF JEFFREY S.
MERRIFIELD

The government asks the court to exclude the testimony of Jeffrey S.
Merrifield because: (1) the plaintiffs failed to disclose Mr. Merrifield as a possible
witness until six weeks before trial, and (2) his testimony is irrelevant. See Doc.
113.
Under Court of Federal Claims Rule 37(c)(1), “[i]f a party fails to . . .
identify a witness as required by RCFC 26(a) or (e), the party is not allowed to use
that . . . witness to supply evidence . . . at a trial, unless the failure was
substantially justified or is harmless.” Rule 26(a) requires the disclosure of
witnesses “that the disclosing party may use to support its claims or defenses,”
while Rule 26(e) imposes the obligation of supplementing initial disclosures as
necessary.

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It is undisputed that Mr. Merrifield was not disclosed in the plaintiffs’ initial
disclosures under Rule 26(a), or in response to any written discovery served by the
government. In fact, he was not disclosed as a witness until plaintiffs’ filed their
witness list pursuant to this court’s scheduling order, on September 30, 2013. See
Doc. 101; Doc. 104. In their filing, plaintiffs stated that: “Mr. Merrifield may
testify regarding the factors that caused the NRC to adopt the SFS/RD Fee. As
necessary, Mr. Merrifield may also testify about other areas that arise before or
during trial and about which he has knowledge.” Doc. 104 at 6; Doc. 112 at 6.
Because Mr. Merrifield was not disclosed as a witness during the normal
course of discovery, but has been included on plaintiffs’ list at this late date,
plaintiffs must show that his inclusion is either harmless or substantially justified.
The court finds plaintiffs have failed to make this showing.
First, the untimely disclosure of Mr. Merrifield has prejudiced the
government. Plaintiffs offer Mr. Merrifield as a witness to support their position
on the hotly contested issue of NRC fees, and “about other areas that arise before
or during trial and about which he has knowledge.” This statement opens the door
to a wide range of potential testimony that the government has not been given the
chance to explore. In order to fairly present evidence at trial, the government is
entitled to discovery relating to Mr. Merrifield’s knowledge and expected
testimony. See Court of Federal Claims Rules, Appendix A, ¶13(b) (“Any witness
whose identity has not been previously disclosed shall be subject to discovery.”).
Reopening discovery at this stage is impractical and would not afford the
government a meaningful opportunity to probe Mr. Merrifield’s relevant
knowledge.
Plaintiffs claim that because Mr. Merrifield’s existence was known to both
parties long ago, their failure to supplement initial disclosures was harmless. See
Doc. 121 at 8-9. The court disagrees. Rule 26(a) specifically requires the
disclosure of witnesses “that the disclosing party may use to support its claims or
defenses.” (emphasis added). As such, when the parties know of a potential
witness, and that witness is not disclosed, it is a reasonable inference that the
witness will not be used to support claims or defenses. It may be true that
plaintiffs did not intend to use Mr. Merrifield to support its claims or defenses until
the government filed its motion for summary judgment, see Doc. 121 at 9, but that
fact does not change the resulting handicap to the government’s case.
In addition, plaintiffs’ failure to disclose Mr. Merrifield was not
substantially justified. Plaintiffs argue that because they did not decide to use Mr.
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Merrifield as a witness until after the government filed its motion for summary
judgment, it should be excused from the disclosure deadlines. See id. The court is
not insensitive to the fact that the government’s argument on summary judgment
caused plaintiffs to re-assess their witness list. But in reality, the plaintiff knew of
Mr. Merrifield’s existence years ago, and could have included him long before
now if they considered his testimony potentially relevant to proving their claims.
On balance, the harm caused to the government by allowing Mr. Merrifield’s
testimony weighs more heavily than the justification plaintiffs have offered for
failing to disclose him as a witness before September 30, 2013.
For the foregoing reasons, the government’s motion in limine to exclude Mr.
Merrifield’s testimony is GRANTED.
II.

MOTION TO EXCLUDE THE EXPERT TESTIMONY OF JESSE L.
FUNCHES

Plaintiffs intend to call Jesse L. Funches as an expert regarding “the factors
that caused the NRC to adopt the SFS/RD Fee,” “the percentages of the SFS/RD
fee that are attributable to the NRC’s generic dry storage activities, generic wet
storage activities and reactor decommissioning activities for the years 2005-2010,”
and “the contents of and basis for his expert report and work papers.” See Doc.
104 at 4-5; Doc. 112 at 4-5.
The government seeks to exclude this testimony for three reasons: (1) the
testimony is irrelevant; (2) the testimony will not assist the court; and (3) the
testimony is unreliable. See Doc. 114 at 6.
A.

RELEVANCY OF MR. FUNCHES’S TESTIMONY

The government argues that Mr. Funches’s testimony is irrelevant because:
(1) the documents on which he relies were deemed insufficient to establish
causation by the Federal Circuit in Consolidated Edison, 676 F.3d 1331 (Fed. Cir.
2012); (2) that Mr. Funches, as the NRC’s CFO had no direct authority to affect
the rule change; and (3) the explanation for the rule change should be limited to the
official statement in the Federal Register. See Doc. 114 at 8-10. The court finds
that these arguments do not justify a finding that Mr. Funches’s testimony is
irrelevant.
As an initial matter, the government’s reading of Consolidated Edison’s
holding is unduly restrictive. While the court in Consolidated Edison did find that
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the evidence presented in that case was insufficient to establish causation, it did not
find, as a matter of law, that the rule change was not caused by DOE’s breach of
the Standard Contract. See Consolidated Edison, 676 F.3d at 1339 (“These
comments are insufficient as a matter of law to demonstrate that the new NRC
rules were the result of the government breach.”). The court will not assume,
before hearing the evidence, that plaintiffs here will also fail to prove causation.
The government next argues that because Mr. Funches was merely the
NRC’s CFO, and not an acting committee member, his testimony is essentially
meaningless. See Doc. 114 at 9. The court recognizes that as CFO Mr. Funches
was not in a position to make decisions about the rule change. This does not
necessarily mean, however, that his testimony has no value. Upon hearing the
testimony, the court will give it its due weight and consideration.
Similarly, the court rejects the government’s argument that it cannot
consider evidence other than the official statements that appear in the Federal
Register, to explain the NRC rule change. To support this proposition, the
government cites SEC v. Chenery Corp., in which the Supreme Court held that “a
reviewing court, in dealing with a determination or judgment which an
administrative agency alone is authorized to make, must judge the propriety of
such action solely by the grounds invoked by the agency.” 332 U.S. 194, 196-197
(1947). While the court may ultimately consider this reasoning in weighing Mr.
Funches’s testimony, it is not directly on point—this court is not reviewing an
agency decision in this case. The court will not, therefore, exclude Mr. Funches’s
testimony on this basis.
B.

ASSISTANCE TO THE COURT

The government argues that Mr. Funches’s testimony should be excluded
because it will not assist the court. See Doc. 114 at 10-11. The court disagrees
that matters relating to the NRC fees adoption are necessarily comprehensible to a
layperson. In any event, the court is perfectly capable of discounting the value Mr.
Funches’s testimony should it prove unhelpful.
C.

RELIABILITY OF MR. FUNCHES’S TESTIMONY

The government also claims that Mr. Funches’s testimony is so unsupported
by the facts as to be unreliable. See Doc. 114 at 7-11. In its motion, the
government cites to a handful of documents that it considers insufficient to support
Mr. Funches’s testimony, but does not offer a comprehensive review of the facts
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on which he relies to form an opinion. It also recycles its argument that the court
in Consolidated Edison found that reliance on certain documents alone was
insufficient. As explained above, the government’s interpretation of the holding in
Consolidated Edison is unduly limited. The court will not assume, before hearing
the evidence, that plaintiffs will fail to establish causation in this case simply
because the plaintiffs in Consolidated Edison failed to do so. If plaintiffs do not
lay the proper foundation for Mr. Funches’s testimony, the court will weigh the
testimony accordingly. See McLean v. 988011 Ontario Ltd., 224 F.3d 797, 801
(6th Cir. 2000) (“[W]eaknesses in the factual basis of an expert witness’ opinion
. . . bear on the weight of the evidence rather than on its admissibility.”) (citations
omitted).
The government next attacks Mr. Funches’s testimony as unreliable expert
testimony, claiming that it amounts, in reality, to fact testimony. Doc. 114 at 1516. Mr. Funches’s testimony has the markings of an expert—he has written an
expert report and provided the work papers on which he bases the opinions that
plaintiffs seek to present. See Doc. 104 at 4-5; Doc. 112 at 4-5. The critical
difference between fact and expert witnesses, is that expert witnesses are permitted
to offer opinions that are based on specialized knowledge, rather than the personal
knowledge to which fact witnesses are restricted. See Certain Underwriters at
Lloyd’s, London v. Sinkovich, 232 F.3d 200, 203 (4th Cir. 2000). The court
disagrees that NRC rulemaking is necessarily a matter that cannot involve expert,
specialized knowledge. And plaintiffs have made a sufficient showing that Mr.
Funches’s decades-long service at the NRC, including involvement with the rulemaking process, position him to speak as an expert on the issues in this case. See
Doc. 121 at 12-15. If the testimony Mr. Funches actually gives does not qualify as
expert testimony, the court will consider (or not consider) it in issuing its ruling
after trial.
The government’s motion to exclude the testimony of Mr. Funches, is
DENIED.
III.

MOTION TO EXCLUDE THE TESTIMONY OF KENNETH P.
METCALFE

Plaintiffs have designated Mr. Kenneth P. Metcalfe as their damages expert.
See Doc. 104 at 4; Doc. 112 at 4 (stating that Mr. Metcalfe “may testify regarding
Southern’s damages, application of the 1987 acceptance rate to the acceptance
allocations afforded to Southern, and the contents of and basis for his expert
reports, work papers and fuel management models.”). The government challenges
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this designation on the basis that “Mr. Metcalfe does nothing more than add up dry
storage costs that Southern personnel provided to him, without deducting the costs
that Southern would have incurred with DOE performance. This quantification
does not require expert testimony . . .” Doc. 117 at 7. The government then takes
issue with the content of Mr. Metcalfe’s testimony, arguing that his calculations do
not adhere to his own model, and that his conclusions are contrary to law. See
Doc. 17 at 11-14, 17-18.
The court rejects the government’s argument that the calculation of damages
does not require expert testimony, and tends to agree with plaintiffs that the
government’s position “over-simplifies Mr. Metcalfe’s role.” Doc. 121 at 16. The
costs involved in SNF cases are complex and an expert’s opinion as to what costs
should and should not be considered damages often proves very useful in sorting
out the monetary consequences of the government’s partial breach.
The remainder of the government’s arguments criticize the methodology that
Mr. Metcalfe employs. 1 See Doc. 117 at 11-14, 17-19. If the government believes
that Mr. Metcalfe’s calculations are improper or his methodology is flawed, it will
have the opportunity to establish that fact on cross-examination.
The government’s motion to exclude the expert testimony of Mr. Metcalfe is
DENIED.
IV.

MOTION TO EXCLUDE EVIDENCE REGARDING SOUTHERN’S
PRIVATE FUEL STORAGE CLAIM

The government asks the court to preclude plaintiffs from pursuing their
claim for private fuel storage costs on the basis of collateral estoppel because
recovery was denied in the first phase trial. See Doc. 118. Collateral estoppel
prevents parties from re-litigating issues provided that the following four
conditions are met:

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The government also seeks to exclude Mr. Metcalfe’s opinion on private fuel storage,
claiming that it lacks a sufficient factual basis. In its response, the government states that it is
not relying on Mr. Metcalfe for this opinion. See Doc. 121 at 20 n.7. Therefore, the court need
not rule on this portion of the government’s motion. If plaintiffs do ultimately rely on Mr.
Metcalfe’s testimony on this issue, the government may raise this objection at that time.

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(1) the issue is identical to the one decided in the first action; (2) the
issue was actually litigated in the first action; (3) resolution of the
issue was essential to a final judgment in the first action; and (4) the
plaintiff had a full and fair opportunity to litigate the issue in the first
action.
Laguna Hermosa Corp. v. United States, 671 F.3d 1284, 1288 (Fed. Cir. 2012).
First, the issue presented in the second phase of litigation is the same as the
issue presented in the first phase—whether plaintiffs may recover costs for
investing in and developing private fuel storage and an alternative storage option to
on-site dry storage. See S. Nuclear Operating Co. v. United States, 77 Fed. Cl.
396, 443 (2007); Doc. 103 at 14 (stating as an unresolved issue for trial “[w]hether
Southern’s $700,000 investment in PFS is a cost that is directly attributable to the
Government’s partial breach and therefore recoverable as damages”). That
plaintiffs seek a different set of damages in this trial does not change the
underlying issues of causation and foreseeability that were decided in the first
phase of this case.
Second, the issue was actually litigated in the first phase of the case. As this
court’s opinion explains at length, several witnesses testified on the issue,
documentary evidence was admitted and extensive arguments by the parties were
considered. See S. Nuclear, 77 Fed. Cl. 443-446. After considering all of the
evidence and argument, the court concluded that “on this record, foreseeability and
substantial causation were not established.” Id. at 445.
Third, the determination of this issue was clearly essential to the final
judgment in the first trial because after concluding that foreseeability and causation
were not proven, the court held that “the investments in PFS are not included in the
mitigation damages awarded herein.” See id. at 446. This decision resulted in the
denial of nearly $8.5 million of plaintiffs’ requested damages. See id. at 443. Such
a significant amount does not implicate the concern that the court’s previous
decision was an “incidental or collateral determination of a nonessential issue.”
See Mother’s Rest., Inc. v. Mama’s Pizza, Inc., 723 F.2d 1566, 1569 (Fed. Cir.
1983).
Finally, plaintiffs had a fair opportunity to litigate this issue in the first trial,
and they do not claim otherwise. As noted above, during the lengthy trial, the
court heard testimony from several witnesses and reviewed documentary evidence

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supporting plaintiffs claim. Therefore, each requirement for collateral estoppel is
met.
Plaintiffs claim that, even if all four requirements for collateral estoppel are
met, the court should not preclude its evidence relating to private fuel storage due
to changes in the facts and the law since the time of the first trial. See Doc. 121 at
21. Plaintiffs argue that “changes in facts essential to a judgment . . . will render
collateral estoppel inapplicable in a subsequent action raising the same issues.” Id.
(quoting 440 U.S. 147, 159 (1979)). They also contend that “a judicial declaration
intervening between the two proceedings may so change the legal atmosphere as to
render the rule of collateral estoppel inapplicable.” Doc. 121 at 21 (quoting
Comm’r v. Sunnen, 333 U.S. 591, 600 (1948).
As an initial matter, plaintiffs have not demonstrated a change in the facts
such that ignoring the principal of collateral estoppel is justified. To support the
claim that the facts have changed, plaintiffs cite to actions taken in 2006 and 2008.
See Doc. 121 at 22. The problem with this reasoning is, primarily, that
foreseeability is determined based on the time of contracting. See Indiana
Michigan Power Co. v. United States 422 F.3d 1369 (Fed. Cir. 2005) (stating that,
to be recoverable, damages must have been “reasonably foreseeable by the
breaching party at the time of contracting”) (emphasis added). The parties entered
into the contracts at issue in 1983. See Doc. 103 at 11. As such, facts or actions
that arose after those times are necessarily irrelevant. The plaintiffs have failed to
establish any reason to revisit the court’s foreseeability decision based on new
facts.
Plaintiffs then argue that the intervening decisions in Pacific Gas & Electric
Co. v. United States, 668 F.3d 1346 (Fed. Cir. 2012), and Dairyland Power Co-op.
v. United States, 645 F.3d 1363 (Fed. Cir. 2011), justify revisiting this court’s
earlier decision. The court disagrees. It is clear that both of these cases were
decided on the facts relevant to each, and did not change the framework within
which such claims should be considered. See Pacific Gas, 668 F.3d at 1353
(stating that “[i]n this case, the record contains plausible evidence to support the
trial court’s determination to award damages for PG & E’s evaluation of off-site
PFS storage”); Dairyland Power, 645 F.3d at 1376 (noting the importance of
carefully reviewing the facts to determine whether the utility proved “how much, if
any, of its PFS investment was speculative as opposed to mitigation-oriented,”
because damages resulting from speculation are not recoverable). Plaintiffs also
point out that this court allowed damages for private fuel storage in Wisconsin

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Electric Co. v. United States, but again, this decision was made on the specific
facts presented to the court at trial. 90 Fed. Cl. 714 (2009).
For the foregoing reasons, the government’s motion to preclude evidence
regarding plaintiffs’ private fuel storage claim is GRANTED.

SO ORDERED.

s/ James F. Merow
James F. Merow
Senior Judge

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