Long Island Lighting Co. v. IMO Delaval, Inc.

• Decision Date: 20 August 1987
• Docket Number: No. 85 Civ. 6892 (GLG).,85 Civ. 6892 (GLG).
• Citation: 668 F. Supp. 237
• Parties: LONG ISLAND LIGHTING COMPANY, Plaintiff, v. IMO DELAVAL, INC., and Stone & Webster Engineering Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

668 F. Supp. 237

LONG ISLAND LIGHTING COMPANY, Plaintiff, v. IMO DELAVAL, INC., and Stone & Webster Engineering Corporation, Defendants.

No. 85 Civ. 6892 (GLG).

United States District Court, S.D. New York.

August 20, 1987.

Hunton & Williams, Richmond, Va. (Robert M. Rolfe, Douglas W. Davis, New York City, of counsel), for plaintiff.

Weil, Gotshal & Manges, New York City (James W. Quinn, Mindy J. Spector, of counsel), and Rosenman & Colin, New York City (Robert E. Smith, of counsel), for defendant Imo Delaval, Inc.

Mudge Rose Guthrie Alexander & Ferdon, New York City (Laurence V. Senn, Jr., Judith Lockhart, of counsel), for defendant Stone & Webster Engineering Corp.

OPINION

GOETTEL, District Judge.

INTRODUCTION

The history of this action is set forth in detail in this Court's prior decision, Long Island Lighting Co. v. Transamerica Delaval, Inc., 646 F.Supp. 1442 (S.D.N.Y. 1986) ("LILCO I"), familiarity with which is assumed. Defendant Transamerica Delaval, Inc. recently changed its name to Imo Delaval, Inc., and shall be refered to herein as "Delaval."

In LILCO I, we dismissed ten of the eleven counts of the original complaint. We subsequently denied the plaintiff's motion to reargue that decision. Long Island Lighting Co. v. Transamerica Delaval, Inc., 648 F.Supp. 988 (S.D.N.Y.1986) ("LILCO II"). The plaintiff thereafter filed an amended complaint asserting six counts against Delaval as follows: (1) violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"); (2) postcrankshaft failure fraud; (3) breach of future warranty of repair; (4) breach of services contract; (5) indemnity; and (6) contribution. Delaval now moves to dismiss counts one, two, four, five, and six of the amended complaint in their entirety, and portions of count three.

The amended pleading also names Stone & Webster Engineering Corp. ("Stone & Webster") as a defendant, and asserts claims against it for breach of contract and negligent performances of services in connection with the Shoreham Nuclear Power Station ("Shoreham"). Stone & Webster moves to dismiss the two counts against it (counts seven and eight) for failure to state a claim upon which relief can be granted.

Plaintiff Long Island Light Company ("LILCO") opposes both motions and moves to file a second amended complaint, adding claims for indemnity and contribution, and expanding its plea for damages against Stone & Webster.

DISCUSSION

I. Delaval's Motion to Dismiss Counts One, Two, Four, Five, and Six, and Part of Count Three

A. Count One — RICO

Delaval moves to dismiss count one of the amended complaint as barred by our prior ruling dismissing the plaintiff's original RICO claim as untimely. LILCO I, 646 F.Supp. at 1453-54. LILCO contends that additional allegations in the amended complaint state a timely RICO claim.

As noted in LILCO I, under federal law, a claim accrues when the plaintiff knows or should know of the injury that is the basis for the action. Id. at 1454. See Cullen v. Margiotta, 811 F.2d 698, 725 (2d Cir.), cert. denied sub nom. Nassau County Republican Committee v. Cullen, ___ U.S. ___, 107 S.Ct. 3266, 97 L.Ed.2d 764 (1987). LILCO previously alleged that it only discovered its injury in 1983, when the diesels failed. However, we ruled that LILCO knew or should have known of its injury in mid-1977, making its RICO claim untimely when filed in August 1985. LILCO I, 646 F.Supp. at 1454. This result is unchanged by the Supreme Court's recent ruling applying a four-year statute of limitations to RICO claims. Agency Holding Corp. v. Malley-Duff & Associates, Inc., ___ U.S. ___, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987).

LILCO now argues that a RICO claim accrues at the time of the last predicate act on which a plaintiff relies. The amended complaint alleges that, in 1983, Delaval actively concealed and misled LILCO about the cause of the diesel crankshaft failures, at which point LILCO was injured by having to expend additional time and money to analyze and correct the problem. The defendant, however, submitted papers just prior to argument of the instant motion that put LILCO in a rather awkward position regarding this argument.

In an action brought against LILCO by Suffolk County, and others, in the Eastern District of New York, LILCO, represented by different counsel, moved to dismiss by arguing as follows:

RICO Act claims are not saved merely because the plaintiffs have attempted to allege racketeering acts that purportedly continued to occur within four years of commencement of this lawsuit. The courts have rejected attempts to salvage untimely claims by RICO plaintiffs who argue that the statute of limitations does not begin to run until commission of the "last predicate act" upon which a RICO claim is based. Bowling v. Founders Title Co., supra, 773 F.2d 1175 at 1178 (11th Cir.1985); Compton v. Ide, supra, 732 F.2d 1429 at 1432-33 (9th Cir.1984); Cantor v. Life Alert, Inc., supra, 655 F.Supp. 673 at 677 (S.D.N. Y.1987); see also Long Island Lighting Co. v. Transamerica Delaval, Inc., supra, 646 F.Supp. 1442.

Memorandum of Law in Support of Motion For Dismissal and For Summary Judgment at 66-67, County of Suffolk, et al. v. LILCO, et al., No. 87 Civ. 646 (LDW). LILCO's counsel here denies any knowledge of that memorandum prior to receiving it from these defendants. We accept that representation. However, since we agree with the substance of the above-quoted paragraph, we reject LILCO's attempt to salvage an untimely RICO claim by arguing that the limitations period does not begin until commission of the last predicate act upon which the claim is founded. Consequently, we grant Delaval's motion to dismiss count one of the amended complaint.

B. Count Two—Post-Crankshaft Failure Fraud

Delaval moves to dismiss count two of the amended complaint for failure to state a timely or adequate claim for fraud. LILCO contends that its fraud claim has been repleaded to cure the defects in the original complaint. It is hard to cure untimeliness, which was the primary basis for dismissing this claim. LILCO I, 646 F.Supp. at 1452.

We ruled that LILCO knew or should have known of the diesel defects and Delaval's alleged fraud in mid-1977. The amended complaint adds nothing to change that ruling. LILCO alleges continuing concealment and misrepresentations by Delaval in 1983. But, Delaval could not conceal what LILCO should have long since known about and remedied. Thus, any claim of subsequent concealment lacks the necessary element of justifiable reliance. Id.

LILCO also fails to state a cause of action for fraud because New York does not recognize an independent claim for fraud when the only allegations of fraud relate to a breach of contract. Id. at 1449.

Consequently, Delaval's motion to dismiss count two of the amended complaint is granted.

C. Count Three—Punitive Damages on Breach of Contract/Warranty

Count three of the amended complaint restates the one claim not dismissed in LILCO I, breach of future warranty to repair and replace. However, the plaintiff has appended to that count a claim for punitive damages. LILCO contends that punitive damages may be sought if the alleged breach of contract or warranty was sufficiently egregious to state morally culpable conduct on the part of Delaval. LILCO stresses that Delaval concealed defects in the diesels, falsified and suppressed records, lied, and concealed vital information. This intentionally dishonest conduct, says LILCO, justifies punitive damages.

New York law does not allow recovery for punitive damages in breach of contract cases when the case involves only a private wrong and not a public right. Brink's Inc. v. City of New York, 717 F.2d 700, 704 (2d Cir.1983) (citing Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354, 353 N.E.2d 793, 795, 386 N.Y.S.2d 831, 833 (1976)). "This is true even if the breach results from a deliberate breach of good faith." Id. (citing Van Valkenburgh, Nooger & Neville, Inc. v. Hayden Publishing Co., 33 A.D.2d 766, 306 N.Y.S.2d 599, 601 (1st Dep't 1969), aff'd, 30 N.Y.2d 34, 281 N.E.2d 142, 330 N.Y.S.2d 329, cert. denied, 409 U.S. 875, 93 S.Ct. 125, 34 L.Ed.2d 128 (1972)). See Jacobson v. New York Property Insurance Underwriting Association, 120 A.D.2d 433, 501 N.Y.S.2d 882, 884 (1st Dep't 1986).

LILCO seems to be relying on an argument we previously rejected, i.e., that the defective diesels created a public safety hazard because of their intended use in a nuclear power plant. See LILCO I, 646 F.Supp. at 1457. Here, LILCO contends that Delaval's marketing of a product it allegedly knew was inherently dangerous constitutes "morally culpable" conduct. Regardless of how LILCO attempts to dress up its claim, the injury alleged in this suit is economic. See LILCO I, 646 F.Supp. at 1457. LILCO seeks to recover the costs it incurred as a result of repair and replacement of the Delaval diesels, and its increased expenses in constructing Shoreham. The Public Service Commission ("PSC") found a substantial portion of these costs to be attributable to LILCO's imprudent management of the Shoreham construction, and refused to allow LILCO to unload the costs onto its ratepayers. The fact that LILCO is responsible to its ratepayers does not convert Delaval's alleged breach, a private wrong, into morally culpable conduct aimed at injuring the public generally. See Purdy v. Consumers Distributing Co., 648 F.Supp. 980, 983 (S.D.N.Y.1986) (citing Halpin v. Prudential Insurance Co., 48 N.Y.2d 906, 401 N.E.2d 171, 425 N.Y.S.2d 48, 49 (1979)). Consequently, we grant Delaval's motion to dismiss plaintiff's claim for punitive damages in count three.

D. Count Four—Breach of Services Contract

Count four of the amended complaint asserts a claim for breach of contract based upon Delaval's alleged failure to provide promised services. This new claim seems to restate count two of the original complaint, which alleged negligent failure to perform services under a contract. We...