Project Posner

Lead opinion by POSNER

   MEMORANDUM OPINION AND ORDER

RICHARD A. POSNER, UNITED STATES CIRCUIT JUDGE, SITTING BY DESIGNATION:

   In this diversity action, governed by New York law, Commonwealth Edison ( "Edison") has sued defendant Allied-General Nuclear Services ("AGNS") for breach of an agreement for nuclear fuel recovery services ("the Contract"). Currently before me are a number of motions for summary judgment, a motion to vacate an order to bifurcate trial, a motion to order Edison to pay costs, and motions to exclude certain testimony and exhibits and trial. This order will dispose of these motions, representing all the motions currently pending in this case save for two final summary judgment motions, in anticipation of trial to begin on November 20, 1989.

   The motions before this court are as follows:

A. Defendants' Motions for Summary Judgment Based on Plaintiff's Failure to Meet Express Conditions Precedent; and Plaintiff's Cross Motion for Partial Summary Judgment or for Rule 16 Findings with Respect to Alleged Failure to Meet Express Conditions Precedent;

B. Defendants' Motion for Partial Summary Judgment on Damage Issues

C. Plaintiff's Motion for Summary Judgment on Defendants' Fraud 2 Counterclaim (Count III)

D. Defendants' Motion to Vacate Order Bifurcating Trial

E. Defendants' Motion for an Order Directing Plaintiff to Pay Costs and Fees

F. Defendants' Motion to Exclude Certain Exhibits

G. Plaintiff's Motion to Exclude Certain Expert Testimony

   A question concerning possible disqualification of Plaintiff's counsel had been brought to my attention by the parties, but Defendants have indicated that they have no intention of pursuing this matter.

I. DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT BASED ON PLAINTIFF'S FAILURE TO MEET EXPRESS CONDITIONS PRECEDENT; AND PLAINTIFF'S CROSS MOTION FOR PARTIAL SUMMARY JUDGMENT OR FOR RULE 16 FINDINGS WITH RESPECT TO ALLEGED FAILURE TO MEET EXPRESS CONDITIONS PRECEDENT

   Defendants allege that the "Facilities Contingency Plan", section 16 of the Contract, establishes at least two conditions precedent to any obligation of AGNS to take spent fuel and supply equivalent fissile material ("EFM"), and that Edison did not meet either of these conditions. Edison argues that these conditions were not conditions precedent; that if they were, that they were met; that if they were and were not met, Edison's failure to meet the conditions 3 is excused by AGNS's conduct. I find that AGNS has not sustained its burden for purposes of summary judgment, and I therefore deny both of AGNS's motions. Further, I will grant two of Edison's requests for findings pursuant to Rule 16 of the Federal Rules.

   Section 16 of the Contract provides in relevant part:

16.1(b) If Edison has requested, pursuant to the scheduling provisions of Section 3, that Recovered Products be made available . . . . on or before a date which, except for reasons of force majeure. . . is prior to the commencement of commercial operation of the Plant and has made fuel available on a basis timely for such recovery, then [AGNS shall deliver EFM and take title to spent fuel].

AGNS alleges that this subsection establishes at least two conditions precedent to any duty of AGNS's. These conditions are first, that Edison must request "Recovered Product", and second that Edison must have made "fuel available on a basis timely for such recovery."

   A. Edison's Request for Recovered Product

   The Contract specified procedures under which Edison was to notify AGNS when spent fuel would be available for reprocessing and when Edison would expect delivery of "Recovered 4 Product."^[1] The form of this notification was a "C.4" notice. Under the procedures of Section 3 of the Contract, AGNS was to respond to the C.4 notice with a confirmation, a "C.5". AGNS claims that for some fuel lots, Edison never requested reprocessing (never issued C.4's), and for those for which C.4's were issued, Edison's requests were not in good faith.

   There is no dispute that Edison did not issue C.4's for five fuel discharges.^[2] However, neither is it disputed that these discharges occurred after AGNS had notified Edison of its intention to terminate the Contract. It is established that any action that demonstrates a repudiation of a contract excuses performance of conditions precedent. Tenavision Inc v. Neuman, 45 N.Y.2d 145, 379 N.E.2d 1166, 1168 (1978); Phillips Puerto Rico Core Inc. v. Tradax Petroleum Ltd, 782 F.2d 314, 322 (2d Cir. 1985). Therefore, as to discharges after AGNS's purported termination, even assuming the condition is a condition precedent, Edison's 5 failure to perform the condition is excused.

   As to discharges prior to AGNS's purported termination of the Contract, there is no genuine dispute that Edison informed AGNS of its needs for reprocessing by issuing C.4 notifications. AGNS claims however that these requests were not made in good faith, since Edison knew that it was "legally impracticable" for AGNS to reprocess at the time delivery of recovered product was to have been made.

   Whether it is possible for AGNS to prove legal impracticability depends upon what the performance was for which AGNS was obligated under the Contract, and that question depends upon which interpretation of the Contract--Edison's or AGNS's--is accepted. If the required 6 performance was reprocessing, then there may be evidence of impracticability; but if performance meant simply taking spent fuel and supplying EFM, then nothing AGNS alleges shows that that performance was legally impracticable. The question rests upon whose interpretation of the Contract is adopted, and since the Contract has been held to be ambiguous between these two interpretations, construing the facts in the light most favorable to the nonmoving party Edison must prevail.

   Even if one adopts Edison's view of the Contract, there could be an issue of good faith if it were shown that Edison had no need for EFM or for the removal of spent fuel. However, there is no genuine dispute that Edison had continuing needs for reusable fissile material and for disposal of spent fuel. Given these needs, Edison's request for performance cannot, in the present posture, be shown to be in bad faith.

   Therefore, even assuming that the request for Recovered Product is a condition precedent, Edison properly notified AGNS of its need for Recovered Product. AGNS motion for summary judgment on this condition therefore fails.

   Plaintiffs request a finding that "Edison notified AGNS of its request for performance 7 by sending its C.4 Discharged Fuel Reports." Based on the facts about which there is no genuine dispute, I make the finding that:

Edison notified AGNS of its request for performance by sending its C.4 Discharged Fuel Reports for all fuel lots except Zion 1, Lot 3&4, Dresden 2, Lot 6, Zion 2, Lot 3, Quag Cities 2, Lot 5, which were discharged after AGNS's purported termination of the Contract pursuant to section 17.1(b).

I cannot however make plaintiffs second requested finding, that "Edison properly requested that AGNS perform its obligations under the Contract either by reprocessing or by delivering equivalent fissile material and assuming responsibility for Edison's spent fuel." That finding would imply that Section 16.1(b) properly interpreted provides an alternative performance obligation rather than a remedy, the very question upon which this whole case turns. This second finding is therefore denied.

   B. Edison's Ability to "Make Fuel Available"

   AGNS next argues that Section 16.1(b), even under Edison's interpretation of the Contract, required Edison to make fuel available as a condition precedent to any obligation of AGNS to supply EFM or take spent fuel. AGNS claims 8 that at no relevant time was Edison capable of making spent fuel available within the limits of governmental regulation, and that therefore AGNS had no duty to supply EFM or remove spent fuel.

   The relevant language of Section 16.1(b) is as follows:

If Edison has requested [Recovered Product] . . . and has made fuel available on a basis timely for such recovery. . . [then AGNS shall provide EFM and take the spent fuel]

AGNS contends that under either Edison's or AGNS's interpretation of the Contract, this language places a condition upon its obligation which Edison did not meet.

   Whether or not the Contract as a whole is ambiguous between two interpretations, I do not believe this clause bears both interpretations. For the language of the clause refers explicitly to the purpose for which fuel must be made available: namely, "for recovery." To evaluate whether Edison's performance was "timely", therefore, I look to Edison's behavior in light of the procedures for reprocessing fuel.

   There is no genuine dispute that Edison, for the relevant spent fuel lots, provided AGNS with the required C.4 notifications. Section 3 of the Contract established procedures that required AGNS, within 9 30 days of the receipt of C.4 notices, to reply to Edison's notification with a C.5 response. The C.5 acknowledged the receipt of the C.4 notice, acknowledged the fuel availability date, and informed Edison of the date it could expect receipt of casks for shipping the spent fuel. It is undisputed that AGNS never responded to any C.4 notice with the required C.5 acknowledgment.

   AGNS argues that "timely" availability is to be determined only by reference to the definition of "Fuel Availability Date" in the Contract. Using this definition, AGNS calculates the latest date possible for Edison to make fuel available and then argues that at no point during this time was Edison able to make fuel available in conformity with governmental regulations.

   The Contract, however, does not compel this reading, and in a motion for summary judgment, I am unable to adopt it. Instead, as Edison argues, the Contract appears to establish a regime of cooperation between Edison and AGNS for the purpose of scheduling delivery both of spent fuel and recovered product, or alternatively, EFM. Given this expectation of cooperation, and AGNS's failure to cooperate, either by responding to Edison's C.4 notices or 10 establishing alternative shipping dates for spent fuel alone, Edison was entitled to interpret "timely" in light of AGNS's behavior. AGNS's failure to cooperate need not have constituted an anticipatory repudiation for it to excuse Edison from any delay caused by its failure to meet the condition precedent. Sayour & Co. v. J.P. Stevens & Co, 130 N.Y.S.2d 492 (1954). See also UCC 2-311(3)(a); Cole v. Melvin, 441 F. Supp. 193, 204 (S.D. 1977). Without determining whether the condition is a condition precedent, therefore, I conclude that even if it is, Edison's alleged failure to satisfy the condition does Rot in itself allow AGNS to escape liability.

   I do note, however, that the "for recovery" clause appears to undermine Edison's contention that the Contract contemplated AGNS's performance by either reprocessing spent fuel, or storing spent fuel and providing EFM. While in its present posture I am constrained to rule against AGNS on whether these purported conditions precedent excused AGNS from liability, AGNS's argument does add strength to their interpretation of the Contract. In another context, that strength might be determinative.

   Edison requests that I find "the Contract 11 terms concerning fuel availability have been complied with to the extent necessary for Edison to maintain this action." In light of the conclusions above, I conclude that this finding is unnecessary.

II. DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUES AND PLAINTIFF'S CROSS-MOTION FOR RULE 16 FINDINGS

   Next up is AGNS's motion for partial summary judgment on various damage issues and Edison's cross motion for Rule 16 findings on the same issues. Judge Aspen disposed of the issue of Edison's alleged "cover," see Commonwealth Edison Co. v Allied Chemical Nuclear Products, Inc. 684 F. Supp. 1434 (N.D. Il. 1988); the remaining issues involve whether Edison's spent fuel conformed to Contract specifications and what bearing, if any, § 17.4(b) of the Contract (a clause limiting AGNS's liability for "any claim . . . as to Recovered Product(s) delivered hereunder") has on this case.

   A. Whether Edison's Spent Fuel Conformed to Contract Specifications

   AGNS claims that some lots of Edison's fuel assemblies failed to conform to contract specifications and that as to other lots, Edison will not be able to prove that the lots would be subject to reprocessing. First, AGNS notes 12 that some Edison fuel assemblies contained "getters" made out of a zirconium alloy that is not included in the list of substances of which component parts may consist. Under the Contract "non-standard fuel" was to be processed at AGNS 's option and since AGNS clearly never exercised its option as to these fuel assemblies, it claims it is entitled to a summary judgment precluding any damages for these fuel assemblies. Second, AGNS points out that several of Edison's fuel assemblies were "leakers" (meaning that there was a breach in the fuel rod's cladding). A contractual provision provided that if any of the fuel assemblies leaked at a higher rate than a level to be mutually agreed upon, AGNS could add a supplemental charge for accepting the fuel assemblies. Edison, however, had the right to reject the charge and get such "failed fuel" reprocessed elsewhere or, one supposes, not at all. AGNS argues that any damage claim as to these fuel assemblies is too speculative because: 1) Edison cannot show that the leakage from many of its fuel assemblies would have been lower than the maximum level, because that level was left unspecified; and 2) Edison cannot prove that it would have accepted 13 the supplemental charges AGNS would have levied, because they were to be set solely at AGNS's discretion and thus Edison cannot know what the price would have been.

1. The "Getters"

   Eight of Edison's fuel assemblies contained "getters," a mechanical component that protects the fuel cladding from being damaged by hydrogen released during the fission process.^[3] AGNS's argument as to these fuel assemblies is straightforward. The getters are made of zirconium alloy. Exhibit B.1-1, para. 3(b) of the Contract provides that mechanical components shall consist only of "Inconel, Incolloy, stainless steel, or sintered Al2O3." Section 2, para. 1 of the contract obligated AGNS to process fuel meeting the requirements of Exhibit B.1-1, but § 2, para. 5 of the Contract gave AGNS the option to process "Non-Standard Fuel" (ie. fuel that failed to meet the specifications of Exhibit B.1-1). Thus, since zirconium alloy is not one of the listed components in Exhibit B.1-1, AGNS had the option to process it or not; since it never exercised that option, Edison cannot recover damages for those fuel assemblies.

   Edison responds that Exhibit B.1-1 was amended in 1975 to include among the list of component materials, "zircalloy." According to Edison, the zirconium alloy out of which the getters are made is identical in all relevant respects to "zircalloy." Thus, Edison's fuel assemblies substantially complied with the contract specifications and AGNS could not reject them. Further, even if the getters technically don't comply with the Contract specifications, AGNS has given no reason why this "defect" is material--how it would hinder AGNS's ability to reprocess the fuel or raise AGNS's costs. Absent a material non-conformity, AGNS had no right to reject the fuel assemblies.

   I hold that AGNS is not entitled to summary judgment precluding damages as to the eight fuel assemblies containing getters. If the zirconium alloy is identical to "zircalloy" in all relevant respects, AGNS could not reject the fuel assemblies. Additionally, that AGNS fails to point out how it would have been prejudiced in even the most minor way by the zirconium alloy; so there is at the very least an issue as to whether AGNS would have any right of rejection.

2. The Failed Fuel

   In negotiating the Contract, the parties 15 realized that some fuel assemblies would develop cladding defects during irradiation in the nuclear reactor core--in industry lingo would become "leakers"--and provided for this contingency in § 8.1(g) of the Contract. That provision reads as follows:

(g)(1) Fuel assemblies which are not deformed but with leakage that results in a radioactivity level at time of commencement of Transport which does not exceed a percentage, to be mutually agreed upon, of regulatory limits permitted during Transport of spent fuel assemblies, shall be shipped unencapsulated at no additional charge to Edison, and handled and processed at Allied-Gulf's supplemental costs therefor; provided, however, that supplemental charges to Edison shall not exceed $ 240 per assembly. At the time of initial loading hereunder, said percentage shall be fifty (50) percent for water cooled Transport and as mutually agreed for gas cooled Transport as sampled at Site prior to departure and subsequently shall be modified based on experience hereunder such that Shipment will not exceed such regulatory limits upon arrival at the Plant. For any water-cooled Transport, such limit will be based on 10 CFR 71.36(a)2; for any gas-cooled 16 Transport such limit will be based on 10 CFR 71.35(a)(4).

(2) Failed fuel which does not meet the description therefor set forth in (1) above, shall be encapsulated by Edison prior to Transport hereunder. Such fuel shall be transported, handled and processed by Allied-Gulf subject to supplemental charges based on Allied-Gulf's experience. If such supplemental charges are unacceptable to Edison and the parties are unable to negotiate mutually satisfactory Charges, Edison may have such failed fuel reprocessed at another facility at Edison's expense, and Edison's commitment hereunder shall be reduced accordingly.

   AGNS's argument is again straightforward. The Contract leaves unspecified: 1) the applicable percentage of regulatory limits for gas-cooled transports; and 2) the amount of the supplemental charge for those "leakers" that exceed the applicable percentages. Based on this, AGNS advances an attack on two fronts. First, Edison cannot show that many of its fuel assemblies would have met the limits in § 8.1(g)(1) because the limits are unspecified and were never mutually agreed upon. Second, for that fuel that exceeded whatever the unspecified limit would have been, Edison cannot 17 prove that the fuel would have been subject to reprocessing. AGNS was unilaterally to set the supplemental charge, and without knowing what that charge would be, Edison cannot prove that it would have accepted the charge and not exercised its option to forego reprocessing with AGNS.

   AGNS's argument has considerable force, but as discussed below summary judgment is inappropriate. Edison's first response is that AGNS was obligated under the contract to reprocess failed fuel and that the supplemental charge provision did not give AGNS carte blanche to avoid that obligation. This misses the thrust of AGNS's argument, however, which focuses not on AGNS's ability to avoid an obligation but on Edison's option to reject AGNS's supplemental charge. The very existence of Edison's option indicates that the parties anticipated that in certain circumstances Edison might find the supplemental charge too high and reject it (possibly even if the charge were in some objective sense "reasonable"). Since the charge was to be based on AGNS's experience, Edison argues that it can be ascertained with a reasonable degree of certainty, and this may be true. Whether Edison would have accepted the charge 18 is another matter, but it is not necessary at this time to reach the question whether all this makes the damage calculation too speculative because there are other grounds upon which AGNS's motion must be rejected.

   I also need not reach Edison's argument that the supplemental charge pro vision does not apply to the EFM provision but only applies when AGNS actually reprocessed fuel. I do note however that while if one accepted Edison's view of the Contract it might not have to pay any added reprocessing charges if AGNS failed to reprocess, the provision also covers transportation and handling charges. It would make little sense, even under Edison's view of the Contract, to make AGNS pick up these costs when providing EFM but to shift them to Edison when reprocessing. Additionally, as AGNS points out the EFM provision calls for invoicing pursuant to § 8, para. 7, which includes among the charges any supplemental charges for failed fuel.

   Edison's most telling argument is that the purpose of § 8.1(g) was to make sure that the costs of complying with federal regulations applicable to transportation of the "leakers" were borne by Edison. Edison points out that the fuel assemblies, even 19 if they leaked above the applicable level, could have been shipped unencapsulated in casks that were exempted from the regulations adverted to in § 8.1(g). Edison claims that AGNS had access to these casks, bud even if it did not Edison did, so that the fuel assemblies could have been shipped in compliance with the federal regulations regardless of what level they leaked at. Thus, § 8.1(g) could have been substantially complied with.

   AGNS's response is that compliance with federal regulations was not the only purpose of § 8.1(g), and that even if the casks would have complied with federal regulations, AGNS had its own worries about radioactivity once the fuel arrived at its plant. The language of the Contract seems to support Edison's view here and at best the Contract is ambiguous on the point. I hold that there is an issue as to whether § 8.1(g) could have been substantially complied with regardless of whether the leakage exceeded the unspecificied maximum and as to the meaning of § 8.1(g) on this point.

   Last, I note Edison's argument that AGNS cannot complain now about the unspecified provisions of the Contract; but for AGNS's breach, all of the relevant figures would have been 20 ascertainable, and a contract breaker should not be able to profit from conduct that makes computation of damages more difficult. See, e.g., Bigelow v RKO Radio Pictures, Inc., 327 U.S. 251, 264-65 (1946); Olympia Equipment Leasing Co. v Western Union Telegraph Co., 797 F.2d 370, 383 (7th Cir 1986); Locke v United States, 283 F.2d 521, 524-25 (Ct. Cl. 1960); Farnsworth, Contracts 882 (1982). There is considerable merit in this argument and Edison will be entitled to show during the damages phase of the trial, if necessary and if there is one, that difficulties in calculating damages were caused by AGNS's breach, and thus argue that AGNS should not be allowed to escape liability because of them.

   B. The Applicability of the Contractual Limitation on Liability

   The last damages issue on which AGNS moves for summary judgment involves the contractual provision that limits both sides' liability. That provision, § 17, para. 4(b) provides that:

Except where a specific remedy is provided in this Agreement. . . , no claim against Edison as to irradiated fuel, and no claim against Allied-Gulf as to Recovered Product(s) delivered hereunder, shall be greater than the applicable 21 charge defined in Section 8, Paragraphs 1.(c) and 5.(a) for like quantities.

(emphasis added). AGNS claims that while it views § 16 as another "specific remedy provided in this agreement," under Edison's view of § 16 as an alternative performance provision, § 17 limits AGNS's liability to $ 19,701,017. According to AGNS, Edison cannot have it both ways. If as Edison claims the EFM provision is the functional equivalent of reprocessing, then § 17.4 limits AGNS 's liability.

   Edison sensibly points to the language "delivered hereunder" and argues that the provision was intended to apply only when Edison complained about defects in the fissile material delivered to it. Since Edison's complaint is not about the delivered product but is instead about the absence of delivery and AGNS's failure to take Edison's spent fuel, Edison argues that the provision by its terms has no application to this case.

   The Provision is plain on its face and the language supports Edison's reading. Section 17.4(b) by its terms does not apply to limit AGNS's liability, if any, for failure to deliver EFM or for failing to take Edison's spent fuel. Thus, I grant Edison's motion for a Rule 16 finding that: "The 22 limitation of liability provision in Section 17.4(b) is inapplicable to damages for failure to perform under the Facility Contingency Plan."

III. PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ON DEFENDANTS' FRAUD COUNTERCLAIM (COUNT III)

   The next motion is Edison's motion for summary judgment on AGNS's counterclaim charging Edison with fraud. Since most of this opinion deals with Edison's breach of contract claim, a summary of AGNS's allegations is in order.

   AGNS's basic theory appears to be that at every step along the way--from the contract negotiations to the filing by Edison of its C.4 notices committing itself to have its fuel reprocessed--Edison represented that it had fuel reprocessing requirements when in fact it did not. AGNS points to no direct evidence of this, but instead to indirect evidence that may be consistent with the allegations. First, it notes that Edison performed various economic analyses of nuclear fuel reprocessing and determined that, at least in certain circumstances, reprocessing spent fuel would be less economical than storing it indefinitely. The results of these studies were confirmed by further Edison studies from 1974 through 1976.

   According to these studies, 23 reprocessing would be economical for Edison if it recovered uranium and plutonium for which it had a use at a value exceeding the cost of reprocessing or if reprocessing was the most feasible way for it to dispose of its spent fuel assemblies. According to the studies, reprocessing should be delayed if possible until Edison had a use for the recovered fissile material. Despite the fact that Edison's studies indicated that Edison would probably not have a use for the uranium and plutonium until 1981, Edison represented during negotiations that it had a near term need for reprocessing. It even represented after the Contract was signed that it would be willing to renegotiate the Contract with AGNS when AGNS proposed this in mid 1974 (the Contract was signed in February, 1974).

   According to AGNS, Edison's fraudulent misrepresentations continued with Edison's performance under the Contract. First, Edison sent C.1 notices indicating Edison's initial forecast of reprocessing needs. It sent C.2 notices accelerating the earlier requested delivery dates from its C.1 notices. Finally, it sent C.4 notices contractually committing itself to have its fuel reprocessed. All this, according to AGNS, 24 despite Edison's undisclosed "secret plan" to delay reprocessing.

   AGNS must of course also show that it relied to its detriment on Edison's "misrepresentations." AGNS claims that it discovered cost overruns in its Barnwell, South Carolina reprocessing plant in March of 1974 (one month after signing its Contract with Edison). Edison was AGNS's largest potential customer. Relying on Edison's claimed reprocessing needs, AGNS decided to go ahead and complete its Barnwell plant, at a cost of $ 58 million.

   In order to survive a motion for summary judgment, AGNS must show that if all reasonable inferences from the evidence are drawn in its favor, AGNS would have a fair chance of receiving a favorable verdict from a rational trier of fact. Palucki v. Sears Roebuck, 879 F.2d 1568, 1573 (7th Cir. 1989). And the Supreme Court has decided that courts should analyze the strength of the nonmovant's case through the "prism" of the burden of proof he will have to shoulder at trial, Anderson v. Liberty Lobby, 477 U.S. 242, 254 (1986). In this case, since the claim is fraud, that standard is clear and convincing evidence.

   When viewed in this light, drawing all reasonable inferences in AGNS's 25 favor, it is clear that AGNS's evidence falls woefully short at every turn.

   On whether misrepresentations were made, the only evidence AGNS points to is Edison's studies indicating that under some circumstances reprocessing would be less economical than storing the fuel indefinitely. This is hardly a stunning conclusion and it is one that was known to AGNS both through its own studies and from Edison's telling AGNS of Edison's views during contract negotiations. In negotiating the Contract, Edison refused to obligate itself to have even one fuel assembly reprocessed. The only obligation that Edison assumed was to have its reprocessing done by AGNS if it had reprocessing done. Edison attempted to give itself greater flexibility in delaying reprocessing in the Contract--and told AGNS why--but finally acceded to the requirement that it bind itself to have fuel reprocessed at a relatively early time through the C.4 notice provision. There is no evidence that Edison ever misled AGNS as to its view of the economics of reprocessing. Indeed, two of the Edison reports which AGNS claims show Edison's "secret" plan were produced during discovery from AGNS's own files.

   The very studies that 26 AGNS points to indicate that Edison realized that whatever the economics of reprocessing were, Edison's hands might be tied by the requirements of any reprocessing contracts into which it entered. AGNS points to no evidence that when Edison negotiated the Contract with AGNS, Edison intended not to live up to its contractual commitments and attempted to fraudulently induce AGNS to finish the Barnwell plant. AGNS does not even suggest what Edison's motive for doing this would have been in early 1974 when there were few if any, indications that the reprocessing industry would not be licensed (a two-edged sword from Edison's point of view).

   Additionally, AGNS points to no evidence that Edison's professed willingness to renegotiate its Contract with AGNS, in the wake of AGNS's Barnwell cost overruns, was fraudulent. Edison conditioned the renegotiation on AGNS making three concessions, including agreeing to forego any right of cancellation in the new contract--conditions AGNS never accepted.

   A jury could not find by clear and convincing evidence based only on Edison's studies--the results of which were known to AGNS--that Edison misrepresented its reprocessing needs to AGNS. What other 27 evidence there is points sharply the other way because when Edison sent C.4 notices to AGNS, Edison contractually bound itself to reprocess the fuel or pay damages for breach of contract. AGNS attempts to explain away the C.4 notices by contending that Edison sent the notices only when AGNS's ability to reprocess seemed most unlikely-after an NRC announcement favoring deferral of reprocessing licenses on May 8, 1975; after the Second Circuit vacated the NRC's decision to permit interim licensing in May, 1976, etc. The C.4 notices, according to AGNS, manifested Edison's opportunistic plan to defraud AGNS of EFM through the Facility Contingency Plan. But contrary to AGNS's statement that no C.4 notices were sent until after the NRC announcement, it is undisputed that four C.4 notices were sent well before it--on June 13, 1974; August 16, 1974; February 3, 1975; and March 26, 1975--all binding Edison to have fuel reprocessed. Similarly, C.4 notices were sent both before and after the key 2nd Circuit decision. Thus, while some C.4 notices were sent at times when the future of reprocessing seemed grim, many were sent at other rosier times. The C.4 notices do not line up in a significant 28 enough pattern to allow a rational jury to draw an inference of fraud by clear and convincing evidence.

   Despite the paucity of evidence of misrepresentations by Edison, there is even less evidence that AGNS relied on Edison's representations in deciding to complete the Barnwell plant. AGNS points only to the fact that Edison was AGNS's largest customer to support its claim that if Edison had not represented that it had reprocessing needs and that it would renegotiate the Contract, AGNS might not have invested the $ 58 million to finish the Barnwell plant. Any reliance on Edison's willingness to renegotiate was unreasonable considering that Edison's willingness was conditional, and AGNS did not accept Edison's conditions. Edison 's mere "bigness" as a customer does not support a reasonable inference that without Edison, AGNS might have decided to give up on the Barnwell plant; on the contrary, AGNS's own studies show that it considered itself to have considerable market power because reprocessing needs would soon outstrip reprocessing capacity. At bottom AGNS's contention that it might have mothballed the Barnwell plant is an assertion, and an unreasonable one at that. In order to survive 29 a motion for summary judgment, AGNS must point to evidence of reliance, which it has failed to do.

   Thus, I grant Edison's motion for summary judgment and dismiss the fraud counterclaim.

IV. DEFENDANTS' MOTION TO VACATE ORDER BIFURCATING TRIAL

   On September 29, 1989, I ordered this case bifurcated, limiting the trial that is to commence on November 20 to issues of liability, and postponing litigation of damages. My concern was that a jury would be overburdened by the proof necessary to establish the precise damages under the various theories of liability, and that by resolving first what if any liability can be charged to AGNS, the jury could more intelligently calculate the resulting damages.

   AGNS has asked me to vacate this order, arguing that for it to be able to defend fully against Edison's interpretation of the Contract the jury must be able to compare AGNS's potential exposure under Edison's reading of the Contract with the exposure AGNS contends it actually undertook. Without being able to reflect on these alternative scenarios, AGNS contends that the jury would be unable to evaluate fully which interpretation is the more reasonable.

   I agree that the jury must be allowed 30 to consider the differences in exposure entailed by the alternative theories of liability at issue in this case and to this degree, AGNS must be permitted to present evidence on that question. I do not agree, however, that this evidence can be presented only to a jury empaneled to determine both liability and damages. There is no reason AGNS could not present the evidence sufficient to demonstrate its exposure under Edison's and its own theory of the Contract in the context of a bifurcated trial on liability alone.

   If Edison prevails on the liability issue, there will be an overlap in proof between the two trials, but the loss in efficiency caused by that overlap would not outweigh the concern I have that the jury be able to competently evaluate the complex issues before it. Therefore, I deny AGNS's motion to vacate the order to bifurcate, on the understanding that AGNS will not be foreclosed from presenting evidence that establishes the different exposures under the various theories of liability contended for in this action.

V. DEFENDANTS' MOTION FOR AN ORDER DIRECTING PLAINTIFF TO PAY COSTS AND FEES

   Defendants move for an order directing plaintiff to pay certain costs and fees 31 associated with additional discovery caused by plaintiff's late addition of claims for storage and disposal costs of spent fuel. I deny this motion.

   Late in the game, Edison, in a response to an interrogatory, claimed damages flowing from the storage and disposal costs of spent fuel, which, under its interpretation of the Contract, AGNS should have borne. AGNS moved to strike those claims. Judge Getzendanner denied that motion, but held that Edison should amend its complaint to include these additional items of damage. In dicta she stated:

It is probable that leave to file an amended complaint, on the condition that Edison reimburse AGNS for the costs of any additional non-expert discovery necessary to the new claims, properly should be granted under Rule 15(a).

Edison subsequently filed an amended complaint, offering to reimburse AGNS for the incremental cost due to the lateness of the addition of the claims; that amendment was accepted by Judge Getzendanner.

   The dispute here arises from the apparent difference between the two standards for evaluating the costs Edison must bear - between the "incremental cost due to the lateness of the addition of the claims" and the "cost of 32 any additional non-expert discovery necessary to the new claims." The law in this circuit is that a court may order a party bringing late claims to bear the costs of other parties that are due to the lateness of the claims, but not those due to the claims themselves. As Judge Shadur has suggested:

The measure of damages must be the expenses caused by the lateness of notice of the [new] theory, not the expenses caused by the theory itself, which is a totally proper subject for suit.

Ovitz v. Jefferies & Co., Inc., 102 F.R.D. 242, 244 (N.D. Ill. 1984). If this standard is the base line, the question is whether Judge Getzendanner intended to tax Edison beyond this standard, and if so, whether she had any such authority.

   I need not reach this latter question, since I am convinced she did not intend to require taxation greater than the incremental expenses caused by the lateness of Edison's claims. Her apparent statement to the contrary arises not in the motion to amend itself, but in her denial of a motion to strike claims belatedly asserted. In that context they were dicta, and had she intended to require taxation of the full costs against Edison she could have so required when 33 she granted the motion to amend the complaint. Instead she allowed the amendment, which explicitly offered to reimburse only the incremental costs due to lateness. I don't consider her dicta in the earlier case sufficient to overturn the offer made by Edison in its motion to amend or to alter the law of this circuit.

   I therefore deny AGNS's motion for an order directing Edison to pay costs and fees as AGNS has calculated them under its total cost approach. Instead, AGNS is to present to Edison a fee statement covering the incremental costs incurred because of the lateness of Edison's new claims; if AGNS and Edison cannot agree on an amount, then AGNS can present to this Court a fee petition covering these costs.

VI. DEFENDANTS' MOTION TO EXCLUDE EXHIBITS AT TRIAL

   Defendants have moved to exclude certain exhibits from trial because of Edison's failure to produce these exhibits in a timely manner. This motion was originally predicated upon a September 29, 1989, trial date, which of course has been moved. AGNS contends that Edison has to date still not supplied the materials in question, but it is not clear from the motion whether the exhibits relate exclusively to issues of liability 34 or to issues of damages.

   Because the trial date for this case has been moved to November 20, it is not possible from the motions themselves to determine whether a continuing burden on AGNS remains. If the exhibits in question relate to damage questions, then the delay would not necessarily prejudice AGNS, since the trial beginning November 20 will address liability only. The shift in trial dates as well as bifurcation have made the motion now moot, and I therefore will deny it. If delays by Edison persist, however, and burden AGNS's ability to present a complete defense in the liability stage of trial, AGNS should feel free to refile the motion

VII. MOTION TO EXCLUDE EXPERT WITNESS TESTIMONY

   Edison has moved to exclude the testimony of certain expert witnesses, both because of the lateness of their addition to AGNS's witness list, and because of alleged duplication in testimony. AGNS contends that the witnesses have been added to testify to the possibility of the Barnwell plant coming on line after the recent turnaround in government policy towards reprocessing.

   For the following reasons, however, I will deny Edison's motion. First, once again, this motion was predicated upon a 35 September trial date, and to the extent the burden of that date has been lifted, Edison's need for relief has been reduced. Second, the testimony at issue would be relevant only to the damages portion of the trial, and since a trial date for that phase has not been set, there is no need at this time to determine what, if any, duplication these experts would create. Both parties are of course reminded that testimony at the first stage of the trial should be as narrowly tailored to issues of liability as possible, and I will not hesitate to exclude duplicative testimony. However, given both the change in trial dates and the nature of the trial to commence, I am unable from these motions to determine whether duplication will result from allowing these experts to testify.

   Again, if Edison still believes duplication in the liability stage of the trial is inevitable, I would consider a motion excluding these experts more precisely argued in this present posture of the case. But at this time, the motion is denied.

VIII. PRE-TRIAL ORDERS

   Having cleared the decks of all remaining motions save for the final summary judgment motions, the parties should now be in a better position to structure 36 their proposed pre-trial orders. In the spirit of bifurcation, I want to structure this trial so as to isolate dispositive issues and try them first, sensitive to the capacity of a jury to adjudicate complex commercial litigation.

   To this end, I have decided to structure the trial as follows. The first phase will address whether § 16 of the contract provides an alternative performance obligation or is a remedy provision. The answer to this question will in large part determine the course of the rest of the trial--an answer one way or the other will obviate a great deal of the evidence on other issues. The jury will reach a special verdict on this interpretive question after hearing evidence relating to events leading up to and contemporaneous with the signing of the contract. With the interpretive question answered, the second stage of the trial will determine whether AGNS is liable for breaking the contract. If necessary, the final phase of the trial will focus on the calculation of damages.

   For each of these stages of the trial, proof should be marshaled to answer the question at issue alone. I will try to preserve the same jury through the course of the trial, but circumstances 37 may require the empanelment of a new jury for the damages phase. It is hoped, however, that by allowing the case to be litigated in this logical sequence, the parties will have a full opportunity to evaluate proposals for settlement, while preserving the right of each party to a full hearing on its claim.

   The parties are ordered to submit pretrial orders consistent with this plan. These orders should include a short description of the proposed testimony of the witnesses each side intends to call, for each stage of the trial, as well as each side's proposed jury instructions for each stage. The pretrial orders shall include proposed special verdict forms for each phase of the trial and a list of any undecided motions that they desire a ruling on. The orders shall be submitted according to the following schedule: First, on November 1, 1989, the parties shall submit pretrial orders limited to the first question to be tried, the meaning of § 16 of the contract. On November 15, 1989, the parties shall submit pretrial orders relating to all other issues. The November 15, 1989, orders shall be divided into two parts--one that assumes that § 16(b) is an alternative performance obligation 38 and one that assumes that it is a remedial provision.

   The briefing schedule for the pending summary judgment motions will be as follows: October 27, 1989--responses due; November 3, 1989--replies due.

To summarize:

1) Defendants' motions for summary judgment based on plaintiff's failure to meet express conditions precedent are DENIED.

2) Defendants' motion for partial summary judgment on damage issues is DENIED.

3) Plaintiff's motion for summary judgment on defendants' fraud counterclaim (Count III) is GRANTED and Count III is dismissed.

4) Defendants' motion to vacate the order bifurcating the trial is DENIED.

5) Defendants' motion for an order directing plaintiff to pay costs and fees is DENIED. Defendants are to submit to Edison a fee statement covering incremental costs incurred because of the lateness of Edison's new claims.

6) Defendants' motion to exclude certain exhibits is DENIED.

7) Plaintiff's motion to exclude certain expert testimony is DENIED.

8) I make the following findings of fact pursuant to Fed. R. Civ. P. 16:

a) "Edison notified AGNS of its request for performance by sending its C.4 Discharged Fuel Reports for all fuel lots except Zion 1, Lot 39 3 & 4, Dresden 2, Lot 6, Zion 2, Lot 3, Quag Cities 2, Lot 5, which were discharged after AGNS's purported termination of the Contract pursuant to Section 17.1(b)."

b) "The limitation of liability provision in Section 17.4(b) is inapplicable to damages for failure to perform under the Facility Contingency Plan."

9) The parties are ordered to submit pretrial orders consistent with the schedule detailed in this opinion.

It is so ordered.

Dated: October 19, 1989

Footnotes

[1]

   Recovered Product is defined in the contract as "(1) uranium, (2) plutonium, and (3) neptunium, to be recovered hereunder, and any other products which the parties hereto agree to so recover."

[2]

   These discharges include Dresden 2, lot 6, Quad Cities 2, lot 5, Zion 1, lots 3 & 4, Zion 2, lot 3. AGNS alleges that in addition to these live discharges, Edison issued no C.4 notification for Dresden 3, lot 2. Edison, however, has provided sufficient evidence that it did issue a C.4 for Dresden 3, lot 2, and AGNS has not met its burden of coming forward to demonstrate the existence of a genuine issue of fact on this question. Celotex Corp. v Catrett, 477 US 317, 324 (1986).

[3]

   The eight fuel assemblies are GEH 006, GEB 122, GEB 131, GEB 150, GEH 009, GEH 016, LJ 2702, LJ 2743.