South Carolina Elec. & Gas v. Westinghouse Elec.

• Decision Date: 08 February 1993
• Docket Number: 2:90-0599-1 and 2:90-0636-01.,Civ. A. No. 2:90-0598-1
• Court: U.S. District Court — District of South Carolina
• Parties: SOUTH CAROLINA ELECTRIC & GAS COMPANY, Plaintiff, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant. DUKE POWER COMPANY, Plaintiff, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant. CAROLINA POWER & LIGHT COMPANY, Plaintiff, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant.

826 F. Supp. 1549

SOUTH CAROLINA ELECTRIC & GAS COMPANY, Plaintiff, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant.

DUKE POWER COMPANY, Plaintiff, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant.

CAROLINA POWER & LIGHT COMPANY, Plaintiff, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant.

Civ. A. Nos. 2:90-0598-1, 2:90-0599-1 and 2:90-0636-01.

United States District Court, D. South Carolina, Charleston Division.

February 8, 1993.

COPYRIGHT MATERIAL OMITTED

Randolph Reed Mahan, Edward C. Roberts, South Carolina Elec. & Gas Co., Harold Simmons Tate, Jr., Sinkler & Boyd, P.A., Columbia, SC, Ray S. Bolze, Howrey & Simon, Charles J. Engel, Washington, DC, P.T. Smith, South Carolina Elec. & Gas Co., Columbia, SC, for SCE & G.

W. Edward Poe, Jr., S.C. Griffith, Jr., Duke Power Co., Charlotte, NC, John C. Pierce, Margaret H. Fitzsimmons, John G. Calendar, Washington, DC, for Duke Power Co. in No. 90-CV-598.

William F. Austin, Sr., Columbia, SC, John H. O'Neill, Jr., Shaw Pittman Potts & Trowbridge, Washington, DC, Richard E. Jones, H. Ray Starling, Jr., Carolina Power & Light

Co., Raleigh, NC, Russell H. Putnam, Jr., Tyler, Cassell & Jackson, Columbia, SC, for Carolina Power & Light Co.

James Matthew Dillon, Young, Clement, Rivers & Tisdale, John Hamilton Smith, Timothy William Bouch, Young, Clement, Rivers & Tisdale, Michael A. Molony, Charleston, SC, Thomas S. Tisdale, Jr., Young, Clement, Rivers & Tisdale, Charleston, SC, James W. Quinn, Mindy J. Spector, Weil, Gotshal & Manges, New York City, Russell H. Putnam, Jr., Tyler, Cassell & Jackson, Columbia, SC, Robert Kaufmann, Westinghouse Corp., Pittsburgh, PA, Kevin P. Hughes, Weil, Gotshal & Manges, New York City, Scott Blake, Pittsburgh, PA, for Westinghouse Elec.

Steve Campbell Griffith, Jr., W. Edward Poe, Jr., Paul Robert Newton, Duke Power Co., Charlotte, NC, Harold Simmons Tate, Jr., Sinkler & Boyd, P.A., Columbia, SC, Ray S. Bolze, Robert J. Brookhiser, P. Todd Mullins, Howrey & Simon, Washington, DC, John C. Pierce, Yvette Benguerel, James M. Lamberth, Margaret H. Fitzsimmons, John G. Calendar, Washington, DC, for Duke Power Co. in No. 90-CV-599.

Morris D. Rosen, Charleston, SC, Randall M. Roden, Thomas J. Bolch, Raleigh, NC, Wallace E. Brand, Brand & Leckie, Washington, DC, for North Carolina Elec. Membership Corp.

Robert Watson Foster, Jr., Nelson, Mullins, Riley & Scarborough, Charleston, SC, Douglas M. Martin, Poyner & Spruill, Charlotte, NC, Robert Monroe Erwin, Jr., Nelson, Mullins, Riley & Scarborough, Myrtle Beach, SC, for North Carolina Mun. Power Agency Number 1 and Piedmont Mun. Power Agency.

Thomas J. Keaveny, II, Holmes & Thomson, Charleston, SC, Wade H. Logan, III, Holmes & Thomson, Charleston, SC, John T. Nesser, III, Elizabeth S. Wheeler, Liane King Hinrichs, New Orleans, LA, for Babcock & Wilcox Industries, Ltd.

Richard Ashby Farrier, Jr., Nelson, Mullins, Riley & Scarborough, John Hamilton Smith, Young, Clement, Rivers & Tisdale, Timothy William Bouch, Thomas S. Tisdale, Jr., Young, Clement, Rivers & Tisdale, Charleston, SC, James W. Quinn, Mindy J. Spector, Weil, Gotshal & Manges, New York City, Robert Kaufmann, Westinghouse Corp., Pittsburgh, PA, Kevin P. Hughes, Weil, Gotshal & Manges, New York City, Scott Blake, Pittsburgh, PA, for Westinghouse Elec. in No. 90-CV-599.

William F. Austin, Sr., Columbia, SC, Ray S. Bolze, Howrey & Simon, Charles J. Engel, Washington, DC, Russell H. Putnam, Jr., Tyler, Cassell & Jackson, Columbia, SC, for Carolina Power & Light Co. in No. 90-CV-636.

ORDER

HAWKINS, Chief Judge.

This matter is before the court on Defendant Westinghouse Electric Corporation's ("Westinghouse") motions to dismiss certain claims in the amended complaints filed by South Carolina Electric and Gas Company (SCE & G), Duke Power Company (Duke), and Carolina Power and Light Company (CP & L). The suits were brought under the diversity jurisdiction¹ of this court and under 28 U.S.C. § 1331 for the injuries arising under federal claims based on 18 U.S.C. §§ 1961-1964.

The underlying suits brought by SCE & G, CP & L, and Duke against Westinghouse have been consolidated for consideration by this court. Plaintiffs seek to recover damages for contract and tort claims related to the purchase of a nuclear power plant system known as the Nuclear Steam Supply System (NSSS) and for violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).

Plaintiffs claim that the NSSS failed as a result of a corrosion problem and that the system failure shortened the operating life of the nuclear power plants. Plaintiffs further allege that Westinghouse knew of the corrosion problem and misrepresented the durability of the system to plaintiffs and to others. Plaintiffs allege that they relied on Westinghouse's representations that the systems were viable for forty years.

The contracts for the equipment and the installation of the equipment were entered into in the late 1960's and the early 1970's. Plaintiffs seek repair and replacement of the equipment, actual and consequential damages, punitive damages on certain counts of fraud, and treble damages as available by statute. They also seek to recover court costs and attorneys fees as provided by deceptive trade practices statutes.

Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Westinghouse moves to dismiss Counts I, III, IV, V, VIII, IX, and X of the Duke Amended Complaint; Counts I, III, IV, V, VII, X, XI, and XII of the SCE & G Amended Complaint; and, Counts I, II, III, V, VII, VIII, and IX of the CP & L Amended Complaint.² Westinghouse submitted only one brief to support its motions to dismiss the above-enumerated causes of action in each of the three amended complaints because the allegations of the three plaintiffs are similar and in some instances are identical.

All plaintiffs have alleged fraudulent inducement, negligent design and manufacture, negligent misrepresentation, and RICO claims, which Westinghouse seeks to have dismissed. CP & L and Duke have also alleged claims under the North Carolina Deceptive Trade Practices Act, which are the subject of Westinghouse's motions to dismiss. Finally, SCE & G alone asserts claims for breach of contract and breach of express warranty, which Westinghouse moves to dismiss. The motions to dismiss were heard on November 4, 1991. Federal Rule of Civil Procedure 12(b)(6) permits the court to dismiss causes of action that fail to state a claim upon which relief can be granted. In the complaint, Plaintiffs are only required to make a short plain statement that will give the defendant fair notice of the claim and the grounds upon which it rests. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). All allegations are taken as true and all reasonable inferences are drawn in favor of the plaintiffs.

CP & L entered into a written contract with Westinghouse on February 19, 1968, with an effective date of January 27, 1966, for the construction of a nuclear power plant, known as the Robinson plant, near Hartsville, S.C. The contract terms encompassed the supply of a Nuclear Steam Supply System (NSSS) to CP & L. (Hereinafter the CP & L contract will be referred to as the Robinson contract). CP & L subsequently entered into a written "Tolling Agreement" with Westinghouse which allegedly provides that any statute of limitations, statute of repose, or laches, or estoppel applicable to CP & L's claims arising under the Robinson contract would be tolled between April 1, 1985 and March 31, 1986. CP & L further alleges that by subsequent amendments to the Tolling Agreement, the tolling period was extended to March 31, 1990. The Robinson plant began commercial operation in March of 1971.

SCE & G and Westinghouse entered into a written contract dated June 4, 1973, but effective December 18, 1970, for the sale and purchase of an NSSS and related services for an SCE & G site known as the Summer Plant. (Hereinafter the SCE & G contract will be referred to as the Summer contract). The plant began commercial operation on June 10, 1983.

Duke purchased two NSSS systems from Westinghouse for its McGuire plant, located in North Carolina, by contract dated January 30, 1970 (McGuire contract). The McGuire contract provided Duke with an option to purchase two additional NSSS systems for Duke's Catawba plant located in South Carolina. Pursuant to the option, Duke purchased the additional NSSS systems for the Catawba plant by contract dated January 25, 1975 (Catawba contract). The two McGuire units began commercial operation in December 1981 and March 1984, respectively. The Catawba units began commercial operation in June 1985 and August 1986, respectively.

SCE & G is the only plaintiff alleging a breach of express warranty. Specifically, SCE & G relies on Article V of the Summer contract. See, Westinghouse Mot. to Dismiss, App. A, Part D, the Summer contract. The warranty provides that the equipment furnished under the contract "will be free from defects in workmanship and material and will be suitable for operation as part of the NSSS sold hereunder." Id., p. 9.

Westinghouse moves to dismiss this breach of express warranty claim because the warranty period expired without SCE & G having given notice to Westinghouse of any claim under the warranty. SCE & G admits that the equipment warranty expired by the terms of the contract on December 1, 1983, and admits that SCE & G did not discover and had not given notice to Westinghouse of any defect prior to that date. However, SCE & G contends that the notice period of the equipment warranty was unreasonable and unconscionable and caused the warranty clause to fail in its essential purpose because the design of the equipment prevented discovery of the defect before the expiration of the warranty period.

Contract terms are not generally found to be unconscionable in contracts which have been negotiated at arms-length between two sophisticated parties such as the corporate...