Cincinnati Gas & Elec. Co. v. General Elec. Co.
| Decision Date | 04 September 1986 |
| Docket Number | No. C-1-84-988.,C-1-84-988. |
| Citation | 656 F. Supp. 49 |
| Court | U.S. District Court — Southern District of Ohio |
| Parties | The CINCINNATI GAS & ELECTRIC COMPANY, et al., Plaintiffs, v. GENERAL ELECTRIC COMPANY, et al., Defendants. |
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Robert G. Stachler, Cincinnati, Ohio, for Cincinnati Gas & Elec. Co.
Stephen E. Koziar, Dayton, Ohio, for Dayton Power & Light Co.
Michael P. Graney, Simpson, Thatcher, & Bartlett, Columbus, Ohio, for Columbus & Southern Ohio Elec. Co.
Kenneth R. Logan, Robert Cusumano, Simpson, Thatcher & Bartlett, New York City, James N. Nowacki, James C. Munson, Chicago, Ill., for plaintiffs.
James R. Adams, Elizabeth K. Lanier, Cincinnati, Ohio, Wm. Bruce Hoff, Jr., William A. Gordon, John M. Carroll, Harley Hutchins, Chicago, Ill., for General Elec. Co.
Bruce M. Allman, Cincinnati, Ohio, for Sargent & Lundy Engineers; Mary Ellen Hogan, Walter M. Jones, Frank M. Covey, Jr., Chicago, Ill., of counsel.
Table of Contents to Opinion and Order
Page
General Electric's Motion
Counts I through IX ............................................................ 55
A. Plaintiffs' Tort Claims Against General Electric ?€” Counts III through IX. 55
(1) Strict Liability .......................................................... 56
(2) Negligence ................................................................ 60
(3) Implied Warranty to Perform in a Safe and Workmanlike Manner .............. 61
(4) Failure to Perform as an Expert ........................................... 61
(5) Negligent Misrepresentation/Willful Wanton Misconduct ..................... 62
(6) Wrongful Inducement ....................................................... 63
B. Plaintiffs' Contract Claims Against General Electric .......................... 64
Sargent and Lundy's Motion ?€”
Counts X through XV ............................................................ 66
A. Plaintiffs' Tort Claims Against Sargent and Lundy ............................. 66
B. Plaintiffs' Contract Claims Against Sargent and Lundy ......................... 68
General Electric's Motion ?€”
Counts XVI and XVII ............................................................ 70
A. Fraud ......................................................................... 70
B. Racketeer Influenced and Corrupt Organizations Act ............................ 74
(1) Acts of Racketeering Activity .......................................... 76
(2) Pattern of Racketeering Activity ....................................... 78
(3) Statute of Limitations ................................................. 80
(4) Sufficiency of Pleading a Violation of ? 1962(a) .................. 82
(5) Sufficiency of Pleading a Violation of ? 1962(b) .................. 84
(6) Sufficiency of Pleading a Violation of ? 1962(c) .................. 86
Conclusion ............................................................................. 88
This matter came on for consideration of the motion to dismiss by defendant, Sargent and Lundy and its individual partners (doc. 80), motion for judgment on the pleadings by defendant General Electric Co. (doc. 81), plaintiff Cincinnati Gas and Electric Company's (CG & E) memorandum in opposition to defendant Sargent and Lundy's motion to dismiss (doc. 86), memorandum in opposition to defendant General Electric Company's motion for judgment on the pleadings (doc. 87), reply in support of motion for judgment on the pleadings by defendant General Electric Company (doc. 95), and the reply in support of motion to dismiss by defendants Sargent and Lundy and its individual partners (doc. 95). Plaintiffs have also submitted a motion to file a surreply (doc. 229) to which General Electric has responded (doc. 239). The object of that motion is to address additional points brought out by defendants in their reply. In the interests of justice, we grant plaintiffs' motion to file a surreply and will consider it herein.
This litigation arises out of the construction of the William H. Zimmer Nuclear Power Station (hereinafter the "Zimmer Plant") in Moscow, Ohio. In August 1969, defendant General Electric Company agreed, pursuant to a written contract to supply a nuclear reactor and related services including information concerning the magnitude and number of loads that would be generated by the nuclear steam supply system (hereinafter "NSSS"), to CG & E, Dayton Power and Light Company, and Columbus and Southern Ohio Electric Company (hereinafter "the plaintiffs") for the proposed plant. The defendant, Sargent and Lundy, provided the architectural and engineering services for the plant and incorporated the information supplied by defendant General Electric into the design of the Zimmer Plant. Plaintiffs allege that the Zimmer containment is unable to withstand the violent forces generated by General Electric Company's NSSS or contain its radioactive steam. As a result, plaintiffs have expended millions of dollars in an effort to determine how to repair the Zimmer Plant and operate it safely.
Plaintiffs have sued General Electric and Sargent and Lundy on a variety of legal theories in both tort and contract. In plaintiff's second amended complaint, they also allege certain violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. ?? 1961 et seq. The second amended complaint is directed toward General Electric alone.
Article X of the contract between plaintiffs and defendant General Electric specifically limits liability "for all claims of any kind, including negligence, for any loss or damage arising out of, connected with, or resulting from this contract, or from the manufacture, sale, delivery, resale, installation or technical direction of installation, repair or use of any equipment covered by or furnished under the contract" to the contract price, which is $55 million.
To summarize what follows, in our view, CG & E has attempted to circumvent the specific limitation on damages set forth in the contract by pleading numerous tort theories of recovery in Counts III through IX. Plaintiffs allege similar tort theories against Sargent and Lundy. We conclude that, since all of the parties entered into a written contract, the plaintiffs should be, for the most part, limited to such remedies that are available to them under contract law, and any tort remedies or tort claims arising out of those contracts should be dismissed. Therefore, as to Counts I through XV, this action will proceed upon plaintiffs' contract claims alone (Counts I, II, X, and XI).
We find that the second amended complaint (Counts XVI and XVII) is a different matter. Unlike the first amended complaint, which charges that General Electric should have disclosed important information that it should have known, akin to negligence, the second amended complaint alleges that General Electric actually knew certain facts and intentionally withheld and misrepresented those facts for the purpose of deceiving plaintiffs. These causes of action, if successfully litigated, would entitle plaintiffs to punitive damages, attorneys' fees, and treble damages, far in excess of the contract damages, as "in an action to recover damages for a tort which involves the ingredients of fraud, malice, or insult, a jury may go beyond the role of mere compensation to the party aggrieved, and award exemplary or punitive damages." Roberts v. Mason, 10 Ohio St. 278 (1859). Therefore, this action will also proceed on plaintiffs' fraud (Count XVI) and RICO (Count XVII) claims.
Counts one through nine of plaintiff's amended complaint raise several theories of recovery against General Electric Company because of problems that developed from the design and manufacture of the NSSS: Breach of contract and warranty (Counts I and II), strict liability (Count III), negligent misrepresentation (Count IV), willful and wanton misconduct (Count V), wrongful inducement (Count VI), negligence (Count VII), breach of implied warranty of safe and workmanlike construction (Count VIII), and failure to perform services as an expert (Count IX).
General Electric argues that Counts III through IX of plaintiffs' amended complaint should be dismissed because, although sounding in tort, such claims arise out of alleged breach of contractual duties and purely economic loss. Moreover, General Electric argues that privity of contract and the sophistication of the parties concerning nuclear matters does not necessitate this Court's application of tort law in this action as a matter of public policy. Although both parties have eloquently argued their position, and the law of Ohio on the subject of products liability and economic loss is unsettled, we agree that Counts III through IX should be dismissed.
Before we begin the difficult task of determining the types of losses for which Ohio law provides a remedy under the various tort theories of recovery and which claims presented in plaintiffs' amended complaint arise out of contract, we must address the threshold issue of what type of loss have plaintiffs suffered? Since there is no allegation of personal injury in this case, we confine our discussion to situations which involve economic loss or damage to the defective product itself. One commentator, attempting to shed light upon the murky distinction between property damage and pure economic loss, has noted:
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