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General Atomic v. Commonwealth Edison

OPINION FILED APRIL 26, 1976.

GENERAL ATOMIC COMPANY, PLAINTIFF-APPELLANT,

v.

COMMONWEALTH EDISON COMPANY, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of La Salle County; the Hon. THOMAS R. FLOOD, Judge, presiding.

MR. JUSTICE STOUDER DELIVERED THE OPINION OF THE COURT:

This action was brought by plaintiff, General Atomic Company ("General"), by its partners Gulf Oil Corporation and Scallop Nuclear, Inc., for a declaration that a nuclear fuel contract was terminated by General pursuant to a power created by the contract, and as a result of commercial impracticability within the meaning of the Uniform Commercial Code. General sought a declaration that no agreement to arbitrate exists, and accordingly sought a stay of arbitration proceedings previously initiated by defendant, Commonwealth Edison Company ("Edison"). General contended that in any event, disputes concerning the termination of the contract were not within the scope of the arbitration clause.

The trial court granted the motion of defendant Edison to dismiss the complaint and to compel arbitration and denied the motion of General for a temporary stay of arbitration pending trial. No evidence was taken, and all issues arise from the pleadings.

Plaintiff General is a partnership composed of Gulf Oil Corporation and Scallop Nuclear, Inc. General manufactures and markets an advanced nuclear reactor for use in the generation of electricity known as the high temperature gas-cooled reactor.

Edison is an Illinois public utility engaged primarily in the business of generating, distributing and selling electricity in northern Illinois.

General succeeded to certain nuclear fuel fabrication and supply business formerly conducted by Gulf United Nuclear Fuels Corporation (GUNF) which had merged with Gulf Oil Corporation on November 30, 1973. The nuclear fuel business was operated as a division of Gulf Oil Corporation until the assets and liabilities of this division were transferred to General effective January 1, 1974. Among the transferred assets and liabilities was a Reload Fuel Contract dated May 25, 1971, between United Nuclear Corporation (UNC) and Commonwealth Edison Company, which had been assigned by UNC to Gulf United Nuclear Fuels Corporation with the consent of Edison as of July 1, 1971.

The Reload Fuel Contract concerned nuclear fuel for Units 1 and 2 of a new nuclear power plant being constructed by Edison near Seneca in Brookfield Township, La Salle County, Illinois. Each unit was originally scheduled for refueling approximately once a year at which time spent fuel would have been removed and fresh fuel inserted.

At the time the Reload Fuel Contract was made, the Atomic Energy Commission (AEC) had taken the position, in regulations issued in December, 1970, that its consideration of environmental impact in licensing nuclear power stations such as Edison's La Salle units was limited. However, on July 23, 1971, two months after the Reload Fuel Contract was signed, the United States Court of Appeals for the District of Columbia held in Calvert Cliffs' Coordinating Committee, Inc. v. Atomic Energy Commission, 449 F.2d 1109 (D.C. Cir. 1971), that the full scope of environmental review contemplated by the National Environmental Policy Act of 1969 must be implemented by the AEC in its licensing process.

This decision required the AEC to examine environmental issues in much greater detail in connection with nuclear power plant licensing proceedings, and significantly delayed action by the AEC in virtually all such proceedings, including then pending applications such as those for Edison's La Salle Units 1 and 2. The public, which theretofore had rarely participated in nuclear power plant licensing proceedings, was thus encouraged to participate, and public demands grew for extensive proof of safeguards for the environment in nuclear power plant design and construction. Thus, the time required to conclude all public hearings, including those affecting Units 1 and 2, was substantially increased.

Subsequent to the making of the Reload Fuel Contract, new concerns were raised about the safeguarding of plutonium and other special nuclear materials, not only to protect humans from dangerous exposure, but also to prevent the theft of plutonium for illicit use. As a result, the AEC proposed various new safeguard regulations governing the control, packaging and physical protection of plutonium.

Both the licensing delays attributable to Calvert Cliffs' and the new proposed AEC regulations concerning plutonium had the effect of increasing costs and delaying the construction schedule.

Under the contract either party could terminate upon the occurrence of force majeure circumstances affecting the ability of the other to perform. The relevant provision of Section 13 of the Reload Fuel Contract stated as follows:

"* * * Purchaser (Edison) shall (not) be liable for delay in performance hereunder if purchaser is rendered unable to accept delivery of fuel hereunder or use such fuel by causes beyond its reasonable control including, but not limited to: fire, work stoppage, acts of civil or military authority, including delays or failures to act by any government authority, federal, state or local, insurrection or riot, embargoes, car shortages, wrecks or other delays in transportation, or inability to obtain necessary labor or manufacturing facilities due to such causes. In the event that an excusable delay occurs with respect to Unit 1 or Unit 2 or both, and it is reasonably foreseeable that such excusable delay will delay Purchaser's ability to use the fuel or UNC's (General's) ability to deliver it by more than 30 months, the party not suffering the force majeure may terminate and neither party shall have further obligation to the other with respect to fuel not yet delivered."

Accordingly, on July 22, 1974, General sent a letter to Edison whereby it asserted that it was terminating the contract pursuant to the ...


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