Duke Power Company v. Carolina Environmental Study Group, Inc. – Oral Argument – March 20, 1978

Media for Duke Power Company v. Carolina Environmental Study Group, Inc.

Audio Transcription for Opinion Announcement – June 26, 1978 in Duke Power Company v. Carolina Environmental Study Group, Inc.

del

Warren E. Burger:

We will hear arguments next in Duke Power v. Carolina Environmental Study and the consolidated case.

Mr. Griffith, I think you may proceed whenever you are ready.

Steve C. Griffith, Jr.:

Mr. Chief Justice and may it please the Court.

The United States District Court for the Western District of North Carolina declared the limitation of liability provisions within the Price-Anderson Act to be unconstitutional.

Duke appeals to this Court on two questions.

The first is, is the cause justiciable under Article 3 of the constitution and two, whether the limitation of liability provisions is unconstitutional under the due process clause?

The Atomic Energy Act of 1954 was passed by Congress to encourage the wide bread application of a peaceful use of atomic energy in medicine, agriculture and industry, but particularly in the generation of electric power.

By 1957, Congress had determined that economics was the foremost obstacle to the development of nuclear power plants.

I say this because of the “but for” argument which is so central both in the plaintiff’s brief and in the opinion of the court below.

If there is a “but for” argument or cause in this matter, it is with the Atomic Energy Act of 1954 and not with the amendments that consist of the Price-Anderson.

But Congress determined that there was a further problem to the development of the nuclear power plant and that was the potentially great liability exposure for a large accident, although the probabilities of such an accident occurring were exceedingly small.

So small in fact that they were not being creditable although the possibility did exist.

The Price-Anderson amendments to the Atomic Energy Act of 1954 was the Congressional solution to this problem.

The Price-Anderson has two objectives.

The first is to protect the public against uncompensated loss resulting from the peaceful uses of atomic energy and second is to protect the industry against the risk of unlimited liability in the unlikely and remote event that a catastrophic accident might occur.

Limitation of liability provisions is not peculiar to the United States with respect to the nuclear power plants.

Nineteen nations have similar legislation as shown in our exhibit 19.

The objective of protecting the public in Price-Anderson was accomplished in two ways.

First through mandatory insurance and second through governmental indemnity.

William H. Rehnquist:

Mr. Griffith, did the Price-Anderson Act supersede all state law governing recoverability of damages in this area?

Steve C. Griffith, Jr.:

Yes, sir.

There were no state laws passed with respect to the Atomic Energy Act of 1954 nor were there any limitations or liability provisions or special acts to compensate.

William H. Rehnquist:

I presume under North Carolina law, if an atomic plant blew up, it would have not taken a special North Carolina statute to permit recovery for damages?

Steve C. Griffith, Jr.:

No, sir, it would not have.

William H. Rehnquist:

Did the Price-Anderson Act in effect preempt state damage remedies in the situation?

Steve C. Griffith, Jr.:

Yes sir, it removed the common law remedy of unlimited liability.

Warren E. Burger:

Could each state do that on its own?

Steve C. Griffith, Jr.:

I do not think so in this particular case.

Warren E. Burger:

I am speaking of, I should have narrowed it, not as to atomic energy, but could each state on its own simply provide that there would be no actions for injuries of the described character?

Steve C. Griffith, Jr.:

Yes, sir, I think so.

Steve C. Griffith, Jr.:

The Workman’s Compensation Law is a state law.

All states have those.

There are limitations on the common law rights.

Warren E. Burger:

Once the Price-Anderson Act had been enacted, then you indicate that there is preemption in this whole field?

Steve C. Griffith, Jr.:

Yes sir.

Lewis F. Powell, Jr.:

Does the Act say so in so many words?

Steve C. Griffith, Jr.:

Yes sir.

This Court has found that in the Northern States Power case that Congress has very clearly preempted this field.

Lewis F. Powell, Jr.:

My question was, does the Price–Anderson Act say that the extent of this limitation, it preempts all state law?

I say so in terms.

Steve C. Griffith, Jr.:

I do not recall any specific words with respect to that.

No, sir.

William H. Rehnquist:

Certainly, it would not have materially advance the purpose that you say was intended to serve, if it simply provided for a limitation of liability and diversity actions in federal district courts, but place no limitation of liability on state courts, would it?

Steve C. Griffith, Jr.:

No, sir.

What it did in effect was to create a federal fund, if I might, out of which claimants from a possible accident might proceed against rather than the individual industries involved if the accident were unlimited liability.

William H. Rehnquist:

Well, in doing that, does it not have to preempt the state?

Steve C. Griffith, Jr.:

Yes, sir, I think it does, absolutely.

In 1966, Congress created absolute liability for any substantial nuclear accident by requiring mandatory waivers of defenses.

Further amendments were made in 1975.

The statute of limitations waiver was extended further and a second self-insurance pool of liability insurance was established and this will phase out the governmental indemnity and will allow the limitation of liability currently $560 million to move upward.

By 1985, that limit could be $1 billion.

The Congress also expressly stated in the Act in 1975 with respect to the possibility that an accident might exceed $500 million, that it will “take whatever action is deemed necessary and appropriate to protect the public from the consequences of a disaster of such magnitude.”

There are now 62 operating nuclear power reactors in the United States producing approximately 10% of the nation’s electricity and there are approximately 150 either planned or under construction.

No accident had a licensed nuclear power reactor involving radiation, injury, disease or death to a member of the public has ever occurred.

A nuclear explosion at a power reactor is not possible.

The only way that a catastrophic accident could occur would be a core melt which breaches the containment building and releases a large amount of radioactive material.

Just like a coal-fired plant, a nuclear power reactor produces heat to turn water into steam to drive the turbines to produce electricity.

A nuclear power reactor obtains this heat from its uranium fuel in two ways.

Approximately a 93% of the heat is obtained by way of the nuclear chain reaction and the balance about 7% comes from the decay of nuclear materials.

The nuclear chain reaction maybe stopped in a fraction of a second so that it produces no further heat, but the decay heat cannot be so quickly terminated.

Steve C. Griffith, Jr.:

A core melt would take place if the fuel were deprived of its normal and emergency cooling waters so as to allow the heat to build up.

This could cause the fuel to melt.

The heat, thereby, created could be sufficient to melt through the bottom of the building or possibly lead to a breach of the containment building.

Because a breach of the containment building poses the threat of a large scale accident taking place in terms of damages to the outside public, the greatest care is taken in the design, construction and operation of the reactor in order to reduce to the absolute minimum, the attendant risk to the public.

Congress passed Price-Anderson on the findings that the risk of a very large accident occurring was exceedingly small.

This finding has been substantiated by further and extensive studies and the operating experience of the nuclear power reactors.

In 1965, the joint committee of the Congress reported that the likelihood of a major reactor accident was exceedingly low and that no reactor would be licensed in this country if there was “a reasonable likelihood that its operation might result in an accident of the severity contemplated by the Price-Anderson legislation.”

The reactor safety study, under the direction of Professor Rasmussen of MIT and a professional staff of 60 persons was published in October 1975.

The study confirmed previous findings by Congress of the very low risk of a catastrophic accident occurring.

Plaintiffs and other critics differ with this study in terms of the extent to which the study estimates of an accident of such magnitude occurring might be an error.

Plaintiff’s own witness put the error at like a factor of 10 because he said, “for an error much in excess of 10, one would find a contradiction with the present operating experience.”

Now, that was more than a year-and-a half ago.

While the court below said “it is not a bookie,” the unblemished operating experience of 300 reactor years in this country and 1,000 years worldwide receive scant attention from the court below.

As one witness put it, “if there were any high probability of an accident scenario, we would at least have seen some damage to the public or the environment in all of the years a reactor operating experience.”

Addressing the questions in this case, first, as to the justiciability issue, we have discussed the case or controversy issues in our main brief, at pages 27-52 in our Appendix A.

We stand on our arguments there and would not further argue them except to say, in our view, the mere possibility of an injury from a postulated accident is not enough to give standing.

Turning now to the arguments on the merits; Congress has legislated in a field in which it has undoubted power.

It relied primarily upon the commerce power, but there are others, the national defense, the general welfare and the bankruptcy powers.

In the field of economic regulation once Congress has acted within its power, the presumption of constitutionality attaches and in a case like this, the burden is on the complaining party to demonstrate that Congress has acted in an arbitrary or irrational way.

Plaintiffs have failed to carry this burden and by implication, we suggest, admit that they cannot meet the rationality standard when they suggest a higher standard of review.

They first suggest that the issue here is similar to that decided in the sterilization case of Skinner v. Oklahoma.

They then retreat from that position advocating an intermediate level of review, but that position is not held for very long, for in the very next breath, they revive the test of Skinner when they say that Price-Anderson is the “but for cause” of a nuclear catastrophe that is certain to occur.

They say “the fact that the government is a principal cause of the injury also makes this case like Skinner, since it was the state in Skinner that ordered the sterilization.”

The implication of this argument is crystal clear and that is, that the decision by Congress to encourage the peaceful applications of atomic energy in the private promotion of nuclear power plants to provide a diverse energy source for this country was a reprehensible decision.

Therefore, they argue, this court should agree with them and substitute its judgment on this question of national policy for that of Congress.

The decisions of this Court are clearly to the contrary.

This Court has repeatedly said that it is only concerned with the power of Congress and not with its wisdom.

Only if the statute manifests a patently arbitrary classification, oddly lacking in rational justification, is it unconstitutional to test provided in Fleming v. NESDA (Ph), but even assuming for the sake of argument that a higher standard of review is necessary, the Price-Anderson amendments meet a carefully tuned-balancing of alternative considerations.

The Congress could have and did consider alternatives and among those were unlimited governmental liability and a direct insurance program with a compensation plan.

William H. Rehnquist:

You say it needs a carefully tuned-balancing of competing consideration?

Steve C. Griffith, Jr.:

Yes, sir.

William H. Rehnquist:

That is for the nine of us to decide?

Steve C. Griffith, Jr.:

Yes, sir.

That is, if you go to the highest standard of review than the rationality test, the rationality test, which I think and we urge very strongly in this case, is simply one, was there any basis on which a rational finding can be made for Congress legislating in this field and certainly, the evidence is clear that Congress had.

William H. Rehnquist:

But when it comes to the fine-tuning test, then it is our decision rather than Congress?

Steve C. Griffith, Jr.:

Yes, sir and we submit that the Act does meet that fine-tuning.

The answer to the problems perceived by Congress to the development of the nuclear power industry was Price-Anderson and that was to require industry to guard against accidents of a conceivable, though not expected magnitude, by available insurance, to assure the public of protection above that amount up to a point, but refuse to commit in advance public moneys to pay the cost of an almost inconceivable catastrophe.

That result is eminently rational and reasonable, but this Court has never applied either strict scrutiny or an intermediate standard of review to a statute which limits liability or otherwise modifies common law remedies for future torts.

It has, instead considered, whether the statute served a legitimate legislative purpose for dealing with a perceived problem.

This, we contend, is the rationality test, but if more than rationality is required such as the suggestions of this Court has required in the removal of common law remedies that a quid pro quo must be provided in its place, we do not subscribe to that view, but if that is assumed for argument’s sake, we suggest that the Act provides substantial quid pro quo.

It assures a fund to pay claims.

It imposes absolute liability.

It weighs short statutes of limitations.

It provides for payment of claims without releases.

It provides for fair treatment of latent injuries and it eliminates completely the rush to the courthouse door which would exist without the substitution of Price-Anderson for the common law state remedies.

It eliminates the rush to the courthouse door to establish a claim and to perfect the judgment lien and funds are available to pay claims without regard to who is liable.

Turning now to plaintiff’s argument that the remedy provided by Price-Anderson is inadequate.

This argument is based upon two fallacious assumptions.

The first assumption is that the catastrophic accident they describe is certain to occur.

The second assumption is that following such a catastrophic accident, Congress will do nothing.

The first assumption is contrary to the conclusion Congress reached in light of all the information which was before the district court and much more.

The second assumption is contrary to the pledge of Congress stated in the law, and also contrary to the history of Congressional appropriations with respect to national disasters, which it is interesting to note, plaintiffs acknowledge the context.

Plaintiffs also attempt to explain away the analogy of the limitation of liability in connection with ships and airlines by suggesting that in the case of ships, the injured bystander could have insured against the loss and with respect to airlines, the injured person may receive up to the limit of $75,000 per claim.

But in the case of Price-Anderson, the insurance is provided not by the innocent bystander, but by the industry and even with a limitation of liability of $560 million, an accident with 5,000 claims would yield up to $112,000 per claim.

William H. Rehnquist:

If a quid pro quo were under the constitutional law required in order to limit liability in this way, would you say that if all Congress had done was to say “we will take a careful look at this situation” after a catastrophic accident occurs would be enough?

Steve C. Griffith, Jr.:

Well sir, the quid pro quo would be provided if Congress acts after the fact.

William H. Rehnquist:

But we will never know.

Steve C. Griffith, Jr.:

That is precisely the question we raised in our jurisdictional argument.

William H. Rehnquist:

Well, that in effect goes to standing too.

Steve C. Griffith, Jr.:

Yes, sir.

Steve C. Griffith, Jr.:

We will never know, but if Congress does act, and I think it is more logical to assume that they will than they will not in the event of a catastrophe of the limits that is described in this case, then it satisfies the due process requirement.

Thurgood Marshall:

Can this define (Inaudible) Congress?

Steve C. Griffith, Jr.:

No, sir.

I do not think it can.

Thurgood Marshall:

You did not really answer my brother, Rehnquist’s, question as indicated by my brother Marshall.

Just to a statement his question was whether a statement of good intentions to consider this whole thing in the event of a catastrophe would be enough of a quid pro quo, assuming that a quid pro quo is constitutionally required and you said Congressional action would be, but that was not his question.

Steve C. Griffith, Jr.:

The direct answer, in my opinion, is no.

Surely the limitation of liability to promote additional and diverse energy supplies by encouraging the private development of nuclear power is at least as rational as are the limitations of liability found acceptable in the shipping and airline industries and in the workman’s compensation cases.

I will reserve the balance of my time for rebuttal.

Warren E. Burger:

We will not ask to fractionate the time.

We will resume at 1:00 with the next argument.

Mr. Solicitor General, you may proceed whenever you are ready.

Mr. Chief Justice and may it please the Court.

This appeal requires this Court to decide whether the provision of a comprehensive statutory program designed to protect the public and to encourage the development of nuclear powered electric generating facilities by providing for the licensing and regulation of such plans, by abolishing defenses and extending statutes of limitations, by providing for the establishment of financial protection for possible public liability that impose a limitation of liability is unconstitutional as repugnant to the Fifth Amendment.

William H. Rehnquist:

General McCree, when you say that this appeal requires this Court to decide the question I take it that is on the assumption that we adopt your view of standing?

Indeed and it was presumptuous to state it so categorically, but if the Court reaches the merits, that would be the issue that the Court would address.

My brother has discussed the grounds set forth in the decision of the district court for finding that this provision of Price-Anderson was unconstitutional, specifically the due process ground and the equal protection ground that is implied in the due process clause of the Fifth Amendment.

I would like to address myself to the issue that was not relied upon by the district court, but that appellees urge in their response at pages 22-26 in their brief that this limitation of liability constitutes a taking of private property for public use without just compensation.

First, we submit that there is no protectable property here within the meaning of the Fifth Amendment.

There is perhaps an expectation of recovery in the event of an actionable wrong that has not yet occurred and may not occur.

We submit that there is no vested right of recovery in something as supposititious as that and that this is not protectable property within the meaning of the Fifth Amendment.

Further, we submit that that there is no taking here by the enactment of the Price-Anderson legislation.

This is a regulatory measure and it does not even regulate property owned by appellees.

It regulates property that might conceivably, under some circumstances, affect property owned by appellees.

Warren E. Burger:

In your view, could the Act has equally well and equally in compliance with the constitution provided for no liability at all?

That is the question that really tests the rule.

I can conceive of circumstances under which it could, but with a different statutory scheme.

For example, the government initially had a monopoly if all fissionable material.

Indeed, the statute provided that possession of facilities for the use of fissionable material and possession or transportation of fissionable fuel was a crime.

I suppose if the government had kept its monopoly and had built these plants itself, it would not have had to provide for compensation.

I suppose, then the compensation would be obtained by anyone injured through the Federal Tort Claims Act and whether the Federal Tort Claims Act is mandated by the constitution, I am not quite sure.

Warren E. Burger:

Now, before the Federal Tort Claims Act, of course, there would have been no liability on the part of the government?

Indeed and if the court please, that is what I am suggesting.

If the development of nuclear powered electrical plants remained in the government, I think there is a way where, just to answer the Court’s question which as I had said I think goes to limit in testing the proposition —

Warren E. Burger:

If no Act had been passed at all then would they left to their state remedies in each case?

I would, of course suppose so if the Court please.

Potter Stewart:

If the whole business had been left with a federal government, there would not have been any state remedies presumably and there would have been an action against the federal government, but that would not have existed because of sovereign immunity in the absence of something like a Federal Tort Claims Act?

I do not understand that premise to have been implicitly the Chief Justice’s question, but I certainly agree with the Court.

If the federal government had retained its monopoly of atomic power, that certainly could have resulted.

But here, there is a regulation of property not owned by appellees in which appellees have no interest and so again, we say this is not a taking in addition to they are not being protectable property.

Finally, although appellees do not make this argument fully, it might be urged that if their property was taken or they were deprived of substantial enjoinment of it by the action of a regulated utility that that might constitute a taking.

This Court has suggested that the taking of private property by a state-regulated facility is not a taking by the state, and therefore, we think this argument that the district court did not make in support of its judgment, but that appellees make in their brief also must fail as their argument related to due process.

My brother spoke about the matter of whether there was an adequate quid pro quo and he was asked to suppose that a quid pro quo is required by due process.

If a remedy is to be abolished or altered, we submit that this Court has never stated that a quid pro quo must be provided, but that in the event it is required, that the Congress by providing for $560 million that are immediately available to enable anyone of these licensees to respond in damages for injury to person or property is more than an adequate quid pro quo for the limitation that is placed upon a common law remedy here.

We also suggest that there is more than just the $560 million of course.

There are venue requirements that are advantageous.

In partial response to the question put to my brother by Mr. Justice Rehnquist, there is not a preemption of state law by this litigation, but there is a grant of original, not exclusive but original jurisdiction, in the district court to hear actions arising out of incidence.

John Paul Stevens:

General, do you mean that the state courts have jurisdiction?

It is my understanding from my reading.

John Paul Stevens:

Do you also mean that the statute does not make the case governed by federal law?

I think the case is governed by federal law.

John Paul Stevens:

In whatever court?

In whatever court it is filed.

Lewis F. Powell, Jr.:

Something like the FELA seats?

I would think very much like FELA, if the Court please and this grant of original, but not exclusive jurisdiction is coupled with a grant of venue in a district in which the incident occurred or in the case of an overseas incident in the district court for the District of Columbia and it also interestingly provides for removal by any person from any other court to the appropriate district court, that is to say, the United States district in which the incident occurred or to the district court of the District of Columbia.

There, again, is something else that is given if a quid pro quo is required for whatever limitation has been imposed.

We believe that there is no requirement, however, of a quid pro quo and if there is, in a situation like this, its value cannot be calculated precisely to permit us to determine its adequacy.

We submit, in short, that the question here is whether this is a rational legislative means of removing a significant obstacle to the achievement of a valid federal governmental purpose.

We believe that it is and we believe that this is the test by which it should be measured and as such that it should be found constitutional.

Byron R. White:

Mr. General, is this a statute of commerce clause statute?

Byron R. White:

Is that the Congressional power, the basic provisional power?

Certainly that is one source constitutional of power, I would think.

Byron R. White:

What else might it be?

This is about power plants, is it not?

Yes and if memory serves and I may not be correct on this and I would like the privilege of correcting it if I am in error, but I am thinking of the TVA legislation.

I think this was partly under the war powers, if I am not mistaken.

William H. Rehnquist:

It would be hard to justify this statute today under the war powers, would it not?

I am not so certain about that.

If energy is necessary for national defense and the purpose of the statute is to encourage the creation of energy, I suppose that is the way I would make the argument.

I suspect, if I am correct about the TVA and when the Muscle Shoals dam was built, but I would like to look at that legislation and correct it if I have misinformed the court about it.

I had frankly, not thought of that.

Is there any attack on this statute on the ground that it was beyond the Congressional power of Congress to enact?

I am not aware of any.

As a matter of fact, as I understand appellees’ argument, it is not so much what Congress did.

It is that it did not do enough.

I think appellees would say that there is some point at which Congress might impose a cap on liability that was sufficient to take care of any anticipated harm.

I think the difficulty there proves the wisdom of the rule that requires the Court to uphold a rational legislative means of achieving a valid governmental policy, we are in a new area.

Nobody really knows what is going to happen to this atomic genie that is out of the bottle and the Congress must necessarily be given latitude to experiment in ways of controlling it.

But nonetheless, our Congress is a legislative body of a government of limited and delegated power, but I had not understood that there was any attack upon the basic power of Congress under the constitution to enact this legislation?

I am not either.

I misunderstood the Court if my answer was not responsive.

Warren E. Burger:

Going back to the tangential reference, at least the war powers, suppose in this present energy crisis the President decided to seize all of the existing nuclear power plants on the ground that the whole matter had to be consolidated and coordinated with the energy program, in other words, reasserting its monopoly which it had surrendered piecemeal in the limited way, do you think war powers would sustain the seizure in the present time?

I would have difficulty with the proposition.

Warren E. Burger:

It would be pretty close to the Steel Mill’s case.

It would be very close to the Steel Mill’s case.

Warren E. Burger:

There is no imminent crisis that would give —

I would have difficulty with that.

Warren E. Burger:

What about reasserting the control simply not on the war power, but on the power of its basic monopoly?

I suppose if it did that, it would be required to afford compensation.

Warren E. Burger:

Yes, just taking —

Just taking and the utilities that have expended large sums of money would be entitled to compensation.

The argument I was endeavoring to make about the rationality of this plan in a field about which no one really knows anything is illustrated somewhat by some of the dollars involved here.

When the limitation was first provided and the limitation has three elements, the licensed plant must acquire the maximum amount of liability insurance available from private sources, then there is a secondary liability pool with a $5-million retroactive premium to be paid by every licensed facility and the balance of liability up to $560 million is to be taken up by the government.

When this was first started, the maximum amount of liability insurance available from private sources was $60 million.

Now, it is $140 million because the insurance industry in the light of its experience of no accidents of the magnitude that concerns appellees, also the retroactive premium pool has grown to $315 million.

So currently, there are 455 million private dollars available for compensation under this plan.

The government’s guarantee of the difference up to $560 million is only $105 million and it is projected that the government’s guarantee might be extinguished in 1980 and there is a further projection that by 1985 there will be $1 billion of private insurance as if the same trend continues and the same experience obtained.

We submit that this proves the wisdom of the rule annunciated by this Court of allowing the Congress a freedom to use its judgment as long as it is rationally informed to achieve legitimate governmental ends.

Warren E. Burger:

When this Act was passed, Mr. Solicitor General, would there have been power in the federal government to require any or all of these licensees or any other persons to construct and operate these plants?

Could the Congress have required them to do it?

I suspect not.

That gets close to the Thirteenth Amendment.

I do not know that anybody can be required to do something he does not want to do.

We encourage them by tax considerations.

Warren E. Burger:

Subsidies.

Subsidies, but I do not believe they could require it.

Warren E. Burger:

I at least caught an intimation that you had suggested before that this plan was in effect a subsidy indirectly, though you did not call it that, a quid pro quo if they were willing to take the risks?

It was a partnership between the Congress and the utilities community for the private development of nuclear fueled electric generating facilities with strict provisions for the protection of the public.

Not much has been said about these other provisions and if the Court please, one thing that disturbed me a great deal about appellees’ brief was a suggestion and by the judgment below was that this was an invitation to irresponsibility.

Before any plant can be constructed, it must have a construction license and the construction license is issued only after a very careful investigation, making certain that the very latest techniques are employed, but the construction license does not permit it to operate.

After the plant is constructed, another inspection or a series of inspections occur before an operation license is issued.

An operation license is not issued in either of these cases.

Warren E. Burger:

You are undoubtedly familiar with the Power Reactor Development case which came out of your old circuit —

The Enrico Thermal Plant, yes sir.

Warren E. Burger:

That was the first experimental, is it not?

Yes, sir.

Warren E. Burger:

That was a concretion of 40 or 50 utility companies.

Yes.

Warren E. Burger:

Was there any limit on liability that was not involved in that case but was there any contract limiting liability then?

I would prefer not to answer it without being certain of the dates.

Warren E. Burger:

It was not at issue in the case.

Price-Anderson began in 1957.

Warren E. Burger:

The only issue in the Power Reactor Development case was weather the Atomic Energy Commission had properly evaluated the risks, was it not?

I believe that was the question, but I would like to be more certain in responding.

If the Court please then the government ask that the judgment below be reversed.

Warren E. Burger:

Thank you, Mr. Solicitor General.

Mr. Schultz.

William B. Schultz:

Mr. Chief Justice and may it please the Court.

The fundamental flaw in appellees’ argument is that they view the Price-Anderson Act as simply another regulatory statute and argue that it is analogous to government regulation of such activities as mining or that it is analogous to government-imposed rent control.

However, a careful examination of the Act shows that it is not simply another regulatory statute and that it has four features which distinguish it from other limitations on liability.

William H. Rehnquist:

Mr. Schultz, are you going to address the standing questions sometime during your argument?

William B. Schultz:

Yes, I was and I will address it right now if you would like.

William H. Rehnquist:

No, you have 45 minutes to spend as you chose.

William B. Schultz:

With your permission, I will discuss the statute and then address standing before I reach the merits.

In fact, and this is the point that I would like to stress in my discussion of the statute, the Price-Anderson Act is a unique action by Congress which severely and arbitrarily limits recovery available to victims of a nuclear accident.

Rather than involving a regulation of a business such as Duke Power Company, the Price-Anderson Act creates a situation which could deprive persons of their homes and cause them serious health injuries while simultaneously precluding them from resorting to their state law remedies.

The thrust of the Act is two-fold.

First, it creates a pot of money, $560 million, to cover damages arising out of a nuclear accident.

Second, it limits all liability of all possibly responsible parties to that pot of money.

To explain how the statute would operate and this is important to the ultimate fairness and adequacy of the remedy, I would like to use an example of a hypothetical victim and look at the statute and ask two questions.

How much would that victim receive in the event of an accident and what are the chances that that hypothetical victim would be compensated?

For the purposes of the example, I will assume that the victim sustains $1,000 in property damage or personal injury.

First, let us look at how much money the victim would recover.

If the accident causes $560 million in damage or less, then the victim would recover $1,000.

This is an example of an accident where the limitation on liability would not come into play and if all accidents were under $560 million, the limitation on liability would not be necessary.

In fact, this case would not be necessary.

However, for a major accident, when exceeding $560 million, the victim share becomes proportionately smaller.

So that in the event of an accident causing $1 billion in damage, his share is half or $500.

If the accident causes $60 billion in damage, then his share would be $10 or less than a 1% recovery for the damages incurred.

Warren E. Burger:

What is your view on the question that the Solicitor General addressed if the government had maintained its own monopoly and had not licensed these plants, but had its self built all of these plans, could have it excluded all liability as a modification of the Federal Tort Claims Act?

William B. Schultz:

In that situation, in the event of an accident, there would be a taking.

No one could force the government to actually pay the money, but there would be a taking without just compensation and the constitution would place the same obligation on the federal government.

Warren E. Burger:

What about the great disasters that occurred before the Federal Tort Claims Act when sovereign immunity was absolute?

William B. Schultz:

Your Honor, it is true that even under the taking clause —

Warren E. Burger:

Was anyone allowed to make a case on the taking concept before the Federal Tort Claims Act or injury of the kind we are talking about?

William B. Schultz:

I do not know that anyone did make that case.

I am aware of no cases which say that they were prohibited.

William H. Rehnquist:

The Texas City disaster case where the government was claimed to be liable for millions and millions of dollars in damage, the majority of the court held that it was within the discretionary exception, the government was not liable for anything, did it not?

William B. Schultz:

Yes, under the Federal Torts Claims Act, but the decision was not on the taking issue.

Warren E. Burger:

Were you finished with your answer to Justice Rehnquist?

William B. Schultz:

Yes sir.

Warren E. Burger:

When the suits were brought against the United States for negligence arising out of the Kansas City flood disasters for something like $1 billion back in the late 40s or early 50s, no recovery was allowed?

William B. Schultz:

Mr. Chief Justice, I am not familiar with the facts of that case.

Warren E. Burger:

The claim was that the Weather Bureau was negligent in predicting the rainfall and the engineers were negligent in not predicting the flood level?

William B. Schultz:

The argument for a taking here would be much stronger than it would in that case because here it is not simply a matter of government negligence, it is a matter of government promotion, regulation and licensing of nuclear power and the most important difference is the limitation of liability in the Price-Anderson Act.

Warren E. Burger:

On your theory of taking, when the Kansas City floods came, it took hundreds of thousands of acres of land that were under cultivation and destroyed all the crops and destroyed all kinds of plants and homes.

Is that basically different?

The Solicitor General said the atomic genie was let out of the bottle.

Here, it was the Mississippi River and its tributaries that were let out of the bottle allegedly by the government’s negligence?

William B. Schultz:

On our taking argument, assuming that the government were building and operating nuclear power plants or looking at this case, we are not arguing that simply because the government is a factor in damage that it is a taking every time, but in a situation where the government passes the limitation on liability in the Price-Anderson Act which was a precondition to nuclear power, then there the government involvement is much more substantial and Mr. Chief Justice, I would submit it is not dissimilar from two cases which we cite in our brief.

The first of those is Richards v. Washington Terminal Company.

There the government passed a statute authorizing a railroad company to build a railroad through the City of Washington.

The statute also had the effect of nullifying the State or the District of Columbia Nuisance Laws of protecting the railroad from those actions.

In that case, the railroad built the railroad, it built a tunnel, Mr. Richards was a nearby property owner.

He was unhappy because the soot and smoke from the railroad tunnel came onto his property and depreciated its value.

The Court held that there was a taking there.

In other words, even though Congress did not actually build a railroad just as Congress has not built nuclear power plants, what it did in authorizing the railroad and most important in immunizing the railroad company from nuisance actions is precisely analogous, I submit, to what has happened here where the government has immunized Duke Power Company from nuisance actions or from any actions by persons injured from a nuclear accident.

I would submit that Griggs v. Allegheny County is also similar.

There, the Court held there to be a taking when a private airplane caused damage from noise to private property and the Court held there to be a taking because the airport was owned by the county and the county’s involvement in building the airport and marketing the routes for the airline was sufficient government involvement for there to be a taking.

If I may, I would like to return to my example of the hypothetical victim and I want to look at what the recovery would be to a victim in the event of an accident.

William B. Schultz:

I had just described the extremely minimal recovery in a case of a $60-billion accident.

While $60 billion may sound like an incredibly high figure, but it is not unrealistic in light of the most recent government study on this subject, that study which had been referred to previously, the reactor safety study.

Thurgood Marshall:

It had more than Duke Power had?

William B. Schultz:

Yes.

It is more than Duke Power has.

Thurgood Marshall:

If you just had nobody else, it would be just Duke Power?

William B. Schultz:

Mr. Justice Marshall, if we did not have the limitation on liability, we would not have nuclear power.

If we did not have the limitation, we could not have these accidents.

While $60 billion is more than Duke Power has, $560 million is very close to what Duke Power has.

If the point is that it is well off under the Act, I submit that in the event of an accident victims could sue not only Duke, but they could sue the manufacturer of the reactor, which in this case is Westinghouse and in all cases is a corporation with billions of dollars in assets.

Thurgood Marshall:

They could sue us too on the merits.

John Paul Stevens:

Mr. Schultz, let me ask you a question about your basic theory.

Presume our coal mines run out and the oil wells run dry and the only major source of energy is atomic power.

Assume further that we cannot have atomic power plants without a limitation of a liability statute.

Would you still say that Congress does not have the power to pass such a statute and make that source of power available?

William B. Schultz:

It would be a more difficult case.

I do not think we have to make the assumption that the limitation on liability is necessary.

John Paul Stevens:

You just told us it was.

William B. Schultz:

It is necessary for nuclear power, but it is not the only alternative for promoting nuclear power.

John Paul Stevens:

What other alternative is there?

William H. Rehnquist:

Excuse me.

John Paul Stevens:

I am sorry.

William H. Rehnquist:

I think your answer is inconsistent to Justice Steven’s question, is it not?

You say it is necessary to have this in order to promote nuclear power and yet you are saying it is not the only alternative?

William B. Schultz:

If I said it that way, I was not as precise as I might have been.

The limitation on liability, and you can see this in the briefs of the industry, in this case in the government’s briefs, in the district court’s findings, the limitation in 1957 was a preconditioned to nuclear power and some system today would be necessary.

Some system to protect these companies from this potentially huge liability would be necessary in order to have additional nuclear power plants built, but the system does not have to be the system in the Price-Anderson Act.

May I ask this question?

Suppose the government assumed total responsibility for all damage, would you still object?

William B. Schultz:

No.

Your position is you are not opposing the construction of nuclear power plants?

William B. Schultz:

That is precisely correct.

But you have, from the outset of these plans, have you not?

William B. Schultz:

It is true that my clients are opposed to nuclear power and they are opposed to the Price-Anderson Act.

But they are opposed to both?

William B. Schultz:

They are opposed to both.

And they oppose the initial licensing in this case?

William B. Schultz:

Yes, that is correct.

Your basic objective is to stop the operation of this plant?

William B. Schultz:

No.

What is it?

William B. Schultz:

Our basic objective is to get a system where our clients would receive full compensation in the event of a nuclear accident.

In response to Mr. Justice Stevens’ question, I think your question is a response to that question.

One alternative system would be for the government to assume this liability.

Another alternative would be to have a system which spreads it among the industry so that each company which owns reactors would be required to pay $50 or $100 million to the victims of a disaster of this nature.

Warren E. Burger:

Suppose for the moment that the government tried to solve this problem by taking over all of the plants which they have licensed to obtain just compensation so that all the plants were being operated and owned by the United States government as a monopoly.

Then, the Tort Claims Act was modified if that were thought necessary to say that “for purposes of the Tort Claims Act, this is a discretionary governmental operation and no liability whatever,” any problem about the constitutionality of that?

In other words, the restoration of the old sovereign immunity?

William B. Schultz:

There would be no problem about the constitutionality of it, but if there were an accident, I would submit that victims of such an accident could sue the government for just compensation.

Warren E. Burger:

On what theory, of taking?

William B. Schultz:

Yes.

Warren E. Burger:

In other words, you have taken my life.

If I were one of the victims, you have taken my life and you must be my widow?

William B. Schultz:

Excuse me.

They could only sue for their property damage.

We are not arguing that they could sue for anything other than their property damage, but in that situation victims who incurred property damage could sue the government for just compensation.

Warren E. Burger:

In the face of the limitation that I placed in my hypothetical question of no liability on the government, on what basis —

William B. Schultz:

If the government specifically provided that it would not pay.

I am not certain that there is anything victims could do to make the government actually pay out the money, but nevertheless, I would submit that they would have a constitutional claim.

For example, if the government specifically withdrew the Tucker Act remedy for these individuals or for any individuals, then there would be no recourse that they would have.

Warren E. Burger:

It would follow that if they can eliminate all liability, then they can define the liability and put the limits on it, is that not so?

William B. Schultz:

Mr. Chief Justice, I do not think that is so.

I think the interest of federalism and the prior cases of this Court require that if the government chooses to withdraw a state tort remedy, if the federal government chooses to withdraw a state tort remedy, particularly when it is simultaneously encouraging the activity which would cause the damage that it is required under the due process clause to provide some adequate remedy.

In the Workman’s Compensation cases, this Court went through the analysis, it looked at the legislative judgment and it determined that there was an adequate remedy.

Here, Congress did not even pretend to make a legislative judgment.

Senator Anderson, for whom the bill is named, claimed authorship of the $560-million figure which limits all liability and he testified in 1957 that he literally picked that figure out of the air.

In his words, he chose it as a figure that would not scare the country to death.

Representative Holyfield, also a charter member of the Atomic Energy Committee, testified in 1975 that he recognized and everyone recognized that the figure of $560 million was an arbitrary figure.

There is no legislative judgment here that $560 million would be adequate in the event of an accident.

One alternative to Congress would be to make that legislative judgment and adequately provide in any number of ways for the victims of such an accident.

William H. Rehnquist:

Do you think there is the same inadequacy in legislative judgments in State Workman’s Compensation Acts where you have $60 a week for loss of three fingers for the rest of your life and that sort of thing?

Do you think that necessarily represents a very particular determination that that is just what the loss of three fingers is worth?

William B. Schultz:

I think it represents a rough determination and the schedules for Workman’s Compensation increase as the severity of the injury increases.

I think it does represent a rough judgment.

The legislature makes that judgment and in the cases of this Court, even where the legislature has made a judgment which I submit it did not make here, the Court has looked at that judgment to see if there is a fair exchange, to see if the remedy provided is adequate.

William H. Rehnquist:

I take it your position then, you are probably too young to remember this, but in the late 30s and early 40s a number of states had actions for alienation of affections, breach of promise of marriage, seduction and a number of civil legislatures simply repealed those actions by legislative act, feeling they were being abused.

Now, is it your position that they would have to provide an alternative remedy?

William B. Schultz:

No.

William H. Rehnquist:

Why is that case different from this?

William B. Schultz:

In those cases and in the case of almost every tort statute that the legislature passes, it is looking at the law and adjusting the remedies with the eye to providing a fair system of compensation for the victims of the remedy and a fair way of distributing the loss and I submit that that was what was involved there.

The legislature determined that the remedy was being abused and that it just was too inefficient to provide this remedy.

William H. Rehnquist:

What if a state tomorrow decides that an action for libel just threatens First Amendment interest so much that we are not going to allow a libel action in the state anymore, is that constitutional or not?

William B. Schultz:

Yes.

William H. Rehnquist:

How does that differ from this case?

William B. Schultz:

I guess the primary difference is that regardless of what the legislature does, you are going to have libels and you are going to have injuries caused by negligence and so on.

But here, the legislative action was a necessary precondition to the injuries.

Here, without any legislative action, you could have no injuries from a nuclear power plant.

William H. Rehnquist:

What if the newspapers went to the legislatures and said “unless you abolish libel laws, we will not be able to publish anymore.

We are getting stuck with so many libel judgments.”

Would that change your answer to the question about a state abolition of libel?

William B. Schultz:

The point I am trying to make is that the libel law either way has very little effect on what people say unless it has very little effect on the injuries, just as I think a law making it illegal to commit an assault.

If anything, it deters assaults, but none of those legislative actions actually encourage assaults or encourage libels.

William H. Rehnquist:

If a bunch of newspapers in the state, in fact, went out of business, I think there will probably a lot fewer libels, would there not?

John Paul Stevens:

Well, our changing, Mr. Schultz, does the existence of a libel remedy not exercise some kind of deterrent effect on newspapers in what they say, I always thought it did, that element?

William B. Schultz:

I would think it does.

The point I am trying to make is, in most cases, the existence of these remedies has a deterrent effect.

Here, the legislative action had just the opposite effect.

It is the same thing.

You repeal the libel law, you give the newspaper Cart Blanche to say what it wants to, it is going to say a lot more reckless and injurious things.

It is quite clear.

Here, you repeal the damage limitation, you build some comic plans and one fails and somebody is going to get hurt.

It is the same thing, at least I do not see the difference?

Warren E. Burger:

Do you see any parallel with the efforts of some state legislatures to unite statutes?

Is it absolute that limited liability for all personal injuries applying in general the Workman’s Compensation principle to all automobile injuries?

William B. Schultz:

Those actions I see as being parallel to the workman’s compensation statutes.

Warren E. Burger:

But some of them limit the liability, do they not?

William B. Schultz:

Yes, they do.

Warren E. Burger:

Much below the verdicts which are currently being rendered by juries in common law actions.

William B. Schultz:

Yes, they do, but the ones that I am familiar with provide for recovery of the limits of $500,000 or $200,000, but the point is —

Warren E. Burger:

But, there is a limit?

William B. Schultz:

There is a limit and we are not arguing that any limit would be unconstitutional.

The point is that, in those cases, the recovery provided is substantial.

It is not dependent on the total injuries to all victims of the accident as it is here.

Moreover in every other case, and I believe it would include certain libel injuries also, victims can purchase insurance to protect themselves.

Let me follow through on that.

There has been a lot of talk about limitation by statute on medical malpractice liability?

William B. Schultz:

Yes.

Constitutional?

William B. Schultz:

If it does not, the statutes I have seen are constitutional.

A limit to zero, which I submit, is not far from what happened here would raise serious questions.

Where do you get off that slippery slope between half-a-million dollars and zero?

William B. Schultz:

Here, I think that at a minimum the legislature is required to make a judgment that the money provided is substantial.

Moreover, in the medical malpractice analogy, at least the victims have the option to buy insurance, at least it is a consensual relationship.

There are limitations on the availability of insurance.

We even have a case here.

William B. Schultz:

To doctors, but to patients there is no limitation on the availability of insurance to patients.

Of course there have been many instances of physicians giving up practice because of malpractice threats?

William B. Schultz:

Yes, I have heard of those, but as far as the patient is concerned and it is the patient who is analogous to the victim to a nuclear accident, there is limitation on availability of insurance to a patient.

It is a consensual relationship if the patient chooses to go to the doctor.

Moreover, those are all state statutes.

William H. Rehnquist:

Could your clients not take out insurance if they wanted to?

William B. Schultz:

No, Mr. Justice Rehnquist, they could not.

William H. Rehnquist:

Why not?

William B. Schultz:

Because every home insurance policy contains an exclusion, excluding radiation caused by a nuclear accident.

William H. Rehnquist:

There is nothing that government has done that prevents them from taking out insurance.

William B. Schultz:

In the Price-Anderson Act, the scheme of providing this $560 million in insurance requires the utilities to purchase the maximum insurance available.

The insurance industry has given that as its reason why it is unwilling to sell insurance to home owners or any property owner.

Thurgood Marshall:

Mr. Schultz, let me try another one.

Suppose North Carolina passed a law that said that in its state courts, in any major catastrophe, no single person would be subject to more than $560 million in damages.

William B. Schultz:

The question is would that be constitutional?

Thurgood Marshall:

Would there be anything wrong with it?

William B. Schultz:

No single person?

Thurgood Marshall:

No, the total.

William B. Schultz:

The total damages would be?

Thurgood Marshall:

In any single catastrophe.

William B. Schultz:

If that statute did not have the precise purpose in effect of promoting nuclear power or a catastrophe that would cause damages many times the limitation, then I think it probably would be constitutional.

Thurgood Marshall:

Let us take it to the next step.

Could the federal government say “Dear State of North Carolina, we will pick that tab up, the $560 million tab”?

William B. Schultz:

It depends on whether the purpose and effect of the legislation is to promote an activity which as is recognized can cause injuries many times in excess of that figure.

If it does not promote such an activity, then you have a completely different case from this case.

Thurgood Marshall:

You have what I have told you.

That is all you have.

If North Carolina passed this bill in 1910, would that be okay?

William B. Schultz:

Pass this bill in 1910?

Thurgood Marshall:

North Carolina said in 1910 that no single catastrophe should subject anybody to more than $560-million worth of damages.

Would that be okay?

Congress in 1911 said “we will pick up the tab,” any utility that incur a $560 million, we are going to pay it?”

William B. Schultz:

You would still have a taking there, but it is such a different case.

Thurgood Marshall:

You take something that cost you $560 million.

You would take it?

William B. Schultz:

No, I apologize.

I think you have to look at the facts of each case and look to see how involved the government’s role is in the accident.

It is simply difficult to answer the question without knowing whether the government’s role is critical to the injuries to the victims of the accident.

To keep my commitment to Mr. Justice Rehnquist, I suppose I better address rightness and standing.

William H. Rehnquist:

You can keep your commitment to me if you will answer a question which I am about to pose to you.

It is in connection with the malpractice cases.

Supposing that a doctor’s office is located across the street from your client’s house and your client thinks it is in violation of the zoning laws.

Can he come into a federal court and claim that the state’s malpractice limitation law is unconstitutional on the grounds that if the malpractice limitation law did not exist, the doctor would never have opened up a practice because he could not afford to do it?

William B. Schultz:

I think that that patient was just with some injury.

William H. Rehnquist:

This is just a client who lives across the street.

William B. Schultz:

He lives across the street.

William H. Rehnquist:

He is in perfect health.

William B. Schultz:

He is in perfect health, but he does not like having a doctor —

William H. Rehnquist:

He does not like having a doctor’s office instead of another residence across the street?

William B. Schultz:

It would not matter whether it would be a doctor or a nuclear power plant.

William H. Rehnquist:

Except, in each case, you are relying on some statute that you see is necessary to enable that particular individual to function in the capacity to function?

William B. Schultz:

Yes.

That individual would show some small injury and would show a connection between the injury and the act.

The question would be whether and I submit there would not be in the case and there are here, are there prudential considerations which make it important to decide the case and which should impel the Court to reach the issue.

In other words, at a very basic matter, the issue of standing is a question of whether you have shown some injury and it can be very small.

William H. Rehnquist:

You say that constitutionally my hypothetical is a case of controversy?

William B. Schultz:

The Court would have the power, yes, but I am not suggesting that the Court should decide that question in that case.

Here, the prudential considerations strongly militate towards reaching the merits, as the Nuclear Regulatory Commission has stated in its brief.

The primary prudential consideration here is that the worst time for a reasoned decision on the constitutionality of the Price-Anderson Act would be after a nuclear accident.

William H. Rehnquist:

This is just a quick fix, is it not?

Typically, you will find parties vigorously opposed to one another on the merits, but they will both want a decision on the merit and nonetheless, we have held in some cases that Article 3 precludes such a decision.

Even though, perhaps, at a time when Article 3 would not preclude it is by no means an ideal time in the sense that you use though in that phrase to decide it?

In fact, Mr. Schultz, would it not be the best time after the accident because then we would know whether the fit was good or not and also if the statute should then be held unconstitutional, the limitation held invalid, all the victims would recover their entire damages.

Is it not the utility that takes the risk of unconstitutionality?

William B. Schultz:

I think there are two questions there.

Yes, there are.

William B. Schultz:

Can you give me one?

The first point is, would we not be better able to decide whether the $560-million limitation is reasonable after we know the facts?

William B. Schultz:

Because we would know the size of the particular incident, but the problem is that most of the damages here are health injuries that the government study showed that as many as 40-some thousand people could die from cancer, but they would not actually incur that cancer for 10-40 years after the accident.

I do not understand how that responds to the question?

William B. Schultz:

I am trying to say that we would not know the size of the injuries after an accident.

But you would have better and certainly more knowledge about it after than you do before, before there has ever been one?

William B. Schultz:

Yes, we would have somewhat more knowledge after the accident.

So that the extent there is a difference before and after, it is better to litigate it after, that is —

William B. Schultz:

I think that is when we are looking at prudential considerations, that is on the side of waiting.

That one is, but I think that in that situation there would be immense pressure on the Court to —

Thurgood Marshall:

To invalidate the limitation?

William B. Schultz:

Yes.

Now, is that not a reason why the plaintiffs would prefer to wait also?

Does that (Voice Overlap) on your opponent’s —

William B. Schultz:

We are not guaranteed, the Court would invalidate the limitation.

No, but there is a greater likelihood, you say?

William B. Schultz:

But here, if the Court invalidates the limitations, the likelihood is that Congress will enact further legislation to provide substantial recovery for the victims.

So if we get the issue decided now, the industry will know where it stands, the plaintiffs will know where they stand —

Thurgood Marshall:

And you will stomp the building of atomic energy plants, which is what you want?

Byron R. White:

I thought perhaps if you were going to lose, you would rather lose on standing rather than on the merits?

William B. Schultz:

Mr. Justice White, I have often thought that it is certainly in the industry’s interest to have the merits of this case decided.

Byron R. White:

Yes, how about yours, for your clients?

William B. Schultz:

I also think it is in our client’s interests to have the Court declare the statute unconstitutional because then either this nuclear plant will not be completed or Congress will act and provide a system of full compensation.

John Paul Stevens:

Mr. Schultz, I understand one of your theories of standing that seem to me to have some possible merit is that the district judge found present injury in fact, as I understand it?

William B. Schultz:

Yes.

John Paul Stevens:

Now, granted there is no nexus to use noble word, where between that injury and a Price-Anderson Act, but there is a nexus between your basic objective.

The court also found that if you win, these plants will not be completed and will not operate, and therefore, the present injury would be relieved, is it not?

William B. Schultz:

Yes, either the plants will not be operated or if they are operated, it will be under a system that provides the plaintiffs substantial compensation.

So they will be better off that way.

In the alternative, either they will be better off because there were no environmental injuries.

William H. Rehnquist:

Is that not just like the house across the street from the doctor’s office?

William B. Schultz:

A theory on the environmental injuries as a matter of injuries, I think, yes.

Warren E. Burger:

Is there not another realistic limitation on my ability?

Let me give you this hypothetical.

However, many millions of dollars are invested into an atomic energy plant, and many millions and millions would be, and then let us assume these dire predictions that have been mentioned to occur and the terribly tragic results which would be a series of rings would produce liability far beyond the total assets of the particular corporation, is that not highly probable?

William B. Schultz:

Yes, of the particular owner.

Warren E. Burger:

Is there not an economic limit on the liability already that you cannot get any more money out of that plant that it has and if their plant has been destroyed or badly damaged in the process, what chance has any claimant got of getting full recovery?

William B. Schultz:

The claimant would have two protections.

The first would be the state tort laws would have deterred the construction of the nuclear power plant, so that without this limitation on liabilities the state tort laws would have —

Warren E. Burger:

My hypothetical was that you had a very daring enterpriser who had a lot of money, a Howard Hues type, so he did not care where he put in $1 billion to build the plant.

The plant did damage that costs $3-billion worth of injury?

William B. Schultz:

With the understanding that that part of the hypothetical is inconsistent with the facts of this case —

Warren E. Burger:

It is not inconsistent with reality, is it, that the damage coming from this hypothetical plant could vastly exceed the claims?

William B. Schultz:

No, but the judge below and Congress found that the limitation on liability was a necessary precondition.

This is very clear from the legislative history.

For example, the Vice President of General Electric which was one of the two major manufacturers of nuclear reactors came to Congress in 1957 and testified that even though his company was in the middle of constructing the first reactor, that unless Congress acted to limit the liability, his company would simply walk away from its project and not make the investment.

But Mr. Chief Justice, the second part of the answer is that the victim could sue the manufacturer of the reactor which, here, is Westinghouse which is a company that would have suffered no loss and would have billions of dollars in assets.

The Price-Anderson Act takes away not only the victim’s right to sue Duke, but also the right to sue the manufacturer or any other responsible party.

Moreover, I think it is important to point out that under the Price-Anderson Act it may be as much as 20 years before these victims would receive any recovery.

William B. Schultz:

This is because the Act requires that before any compensation beyond a small amount of emergency funds may be paid out, a district court judge must come up with a plan of distribution to provide for the late claimants, these are the health injuries that would not appear for 10-20 years after the accident.

If you do not know what those injuries are going to be, it may be simply impossible to pay the early claimants until you know what the injuries of all the claimants are.

I think, Mr. Chief Justice, that the point you made earlier in the argument is critical and that is if Congress had the power to promote nuclear power by limiting the liability to $560 million, then that argument would lead to the proposition that it would have had the power to limit the liability to $0.

In fact, it would lead to the proposition that the federal Congress could eliminate all state law remedies for torts.

John Paul Stevens:

Mr. Schultz, on that very question, the corporate device itself is a method of limiting liability that promotes capital investment and the like.

Supposing we held the statute unconstitutional and Congress passed a new statute and said that the power company convey the plant assets into a separate corporation whose liability shall be limited to its own assets and there shall be no piercing of corporate veil or anything like that.

Would that be unconstitutional?

The corporation shall not be liable for anything over and above its own net worth.

William B. Schultz:

That would be, I think, precisely the same as the effect of the Price-Anderson Act.

John Paul Stevens:

That would be unconstitutional for Congress to pass a statute that a corporation’s liability is limited to its net worth.

William B. Schultz:

No.

That is what the corporations would say.

John Paul Stevens:

If it is engaged in hazardous occupations and enterprises?

William B. Schultz:

But to say that a nuclear industry may convey, to encourage them to convey their reactors to corporations so that they can escape liability and to do that —

John Paul Stevens:

So they can limit liability just like every other corporation does.

New York Central has a lot of people that is hurt, it is not going to be able to pay them 100 cents on the dollar?

William B. Schultz:

No, but I submit that the remedy provided by the corporate limitation statutes, if you look at it as a whole, is a substantial remedy.

In most case victims are able to —

John Paul Stevens:

$560 million times the number of nuclear plants is a lot of money too.

I take it that it is per incident, is it not, not just 560 nationwide?

William B. Schultz:

Yes.

it is per client —

John Paul Stevens:

Per client?

William B. Schultz:

If there were three accidents, it is unclear what would happen, but for the first two anyway, in a year it is per incident.

If you look at the corporate limit as a whole and look at its fairness, not to just a particular individual, but to the group of victims that would be injured, that could be injured by the corporation.

Most of those victims are going to be able to recover.

If the corporation is specifically organized for the purpose of avoiding liability, they have the option of piercing the corporate veil and because of that, and I think this brings us back around, the nuclear industry here on its own could do this.

It could simply incorporate each nuclear reactor and limit its liability that way.

Warren E. Burger:

It is the economic limit that I was suggesting to you before?

William B. Schultz:

But it is not willing to take the risk.

William B. Schultz:

This comes back around to the fact that the federal action here, the limitation on liability, is absolutely necessary for the construction in these nuclear reactors.

Even though the particular system chosen here is not necessary, there are other ways that the federal government could do this and substantially provide for state citizens.

The fact remains that the limitation here is necessary for the construction of nuclear reactors.

Warren E. Burger:

Your time is expired now, Mr. Schultz.

William B. Schultz:

Thank you.

Warren E. Burger:

Do you have anything further on this side of the table?

You have two minutes remaining.

Steve C. Griffith, Jr.:

It simply boils down as the plaintiffs suggest in their argument that there were alternatives available to Congress, which Congress considered such as writing a blank check on the treasury of the United States, but Congress decided that that was not in the public interest.

They did have the power to limit the amount available for a creditable accident, one that they thought might have a chance of occurring, but for the uncreditable accident, Congress did not feel that it had to go that far to cover that eventuality.

There is where Congress promised to act in the event, although extremely unlikely, that it would then consider the matter in an after-the-facts situation.

Similar, in fact, I think where plaintiffs admit that the act would be constitutional if the Tucker Act remedies were available.

The Tucker Act remedies for injuries more than $100,000 requires a Congressional appropriation after the fact which is, we think, they have managed a way, the realistic way, the way in the public interest that Congress acted in a rational manner.

Warren E. Burger:

Thank you, Gentlemen.

The case is submitted.