A federal judge ruled yesterday that Westinghouse Electric Corp. is liable for uranium supply contracts it signed with seven major utilities before the Arab oil embargo sent uranium prices soaring.
In U.S. District Court in Richmond, Judge Robert R. Merhige Jr. ruled that none of the defenses raised by Westinghouse excused it from performing the disputed contracts, which call for delivery of about 50 million pounds of uranium at prices ranging from $8 to $12 a pound to the utilities.
Uranium, now more than $40 a pound, is used to fuel their nuclear power plants.
Westinghouse had contended it was excused from fulfilling the contracts under a section of the Uniform Commercial Code that excuses a breach of contract when unforseen events occur making fulfillment "commercially impracticable."
The Arab oil embargo, the existence of a worldwide uranium cartel, and various governmental actions were the unforseen events that pushed the price so high that delivery was impracticable, Westinghouse claimed.
The judge disagreed, and resolved every disputed issue between Westinghouse and utilities in favor of the utilities even deciding that there had been a valid and binding contract with Long Island Lighting Co. Westinghouse had contended there wasn't.
The ruling from the bench opens the way for a second part of the case in which damages would be assessed. In an attempt to avoid protracted litigation over the damages, Judge Merhige directed Westinghouse and utilities to spend the next 45 days trying to settle their disputes. He warned the utilities that they could not expect to recover everything they had sued for, and therefore, it was to their advantage to try to work out settlements.
The utilities had sued for the maximum amount of damages they could conceivably get, assuming the highest possible price anyone could expect uranium to reach.
Although Westinghouse lawyers contended that forcing the company to delivery the uranium called for in the contracts at world prices could devastate the company, for the utilities contended Westinghouse had exaggerated the amount of loss it would suffer.
The utilities contended that Westinghouse had gambled and lost when it promised to supply far more uranium that it had or could get. The utilities argued that Westinghouse led them to believe it had supply commitments for the uranium it was offering to supply, that it concealed from the utilities its abandonment of a policy of offering uranium for sale only when it had a backup supply, and that it had declined to buy uranium to meet it obligations when it had the chance.
If Westinghouse and the utilities fail to reach agreements, new court proceedings will be scheduled on the issue of damages.
Westinghouse's chairman Robert E. Kirby termed the judge's ruling a disappointment but said he felt "as a result of today, we may get more settlements."