General Elec. Co. v. Sargent & Lundy
| Citation | 916 F.2d 1119,18 Fed. R. Serv. 3d 201 |
| Decision Date | 14 December 1990 |
| Docket Number | 89-5738,Nos. 89-5291,s. 89-5291 |
| Parties | GENERAL ELECTRIC COMPANY, General Electric Environmental Services, Inc., Plaintiffs-Appellees, v. SARGENT & LUNDY, Lowell E. Ackmann, William A. Chittenden, David C. McClintock, Wilbert G. Hegener, Richard I. Gavin, George C. Kuhlman, Eugene V. Abraham, Robert F. Scheibel, Richard X. French, Donald L. Leone, Robert J. Mazza, John M. McLaughlin, Henry M. Sroka, Kenneth T. Kostal, John A. Werhane, Carment M. Chiappetta, Paul L. Wattelet, Donald E. Wolniak, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
Charles S. Cassis, Victor B. Maddox (argued), John L. Dotson, Brown, Todd & Heyburn, Louisville, Ky., for General Elec. Co.
Charles S. Cassis, Victor B. Maddox, Louisville, Ky., for General Elec. Environmental Services, Inc.
James D. Ishmael, Jr., Wyatt, Tarrant & Combs, Lexington, Ky., Steven P. Handler (argued), James E. Betke, Lawrence E. Zabinski, Jane M. Simon, McDermott, Will & Emery, Chicago, Ill., for defendants-appellants.
Before KEITH and KRUPANSKY, Circuit Judges, and ENGEL, Senior Circuit Judge.
This diversity action controlled by Kentucky law is based upon a tort generally known as "injurious falsehood." Sargent & Lundy, an engineering firm, and its individual partners appeal a judgment entered upon a jury verdict awarding $500,000 plus interest and costs to General Electric Company and General Electric Environmental Services, Inc. ("GEESI") on their claims of injurious falsehood. In the district court, General Electric and GEESI essentially claimed that a third party, Kentucky Utilities Company, filed suit against them as a result of misrepresentations by Sargent & Lundy which blamed them for damage to Kentucky Utilities' power-generating facilities. General Electric and GEESI, a wholly owned subsidiary of General Electric, sought punitive damages and compensatory damages to recover the cost of defending against Kentucky Utilities' suit allegedly brought in reliance on Sargent & Lundy's false statements.
Sargent & Lundy primarily argues on appeal that the statements were absolutely privileged, or immune, since they were made preliminary to a judicial proceeding. Sargent & Lundy contends that the district court therefore erred in denying its pre-trial motion to exclude the evidence. The controlling issue in this appeal is whether Kentucky applies an absolute immunity from suit to statements made preliminary to but in anticipation of litigation. We hold that it does and that it applies under the facts of this litigation. Accordingly, we reverse.
On January 27, 1976, Sargent & Lundy, the principal architect-engineer for Kentucky Utilities since 1910, entered into an agreement with Kentucky Utilities. Sargent & Lundy agreed to furnish all architectural and engineering designs, studies, estimates, specifications, and contracts to put in operation electrostatic dust precipitators for Units 3 and 4 of Kentucky Utilities' coal power-generating station in Ghent, Kentucky. Under this agreement, Sargent & Lundy recommended that the Ghent facilities use hot-side electrostatic dust precipitators as the system for controlling the pollution produced during the generation of power. A precipitator removes fly ash or particulate matter from gas produced from burning coal. Impure flue gas flows from the boiler through inlet ductwork to the precipitator where the dust or fly ash is removed. The "clean" gas then flows through outlet ductwork to the chimney.
Kentucky Utilities also contracted with the Buell Division of Envirotech Corporation to supply the electrostatic precipitators and to perform model air flow studies of the proposed facilities. Sargent & Lundy prepared the specifications and the contracts for the design, development, manufacture, and delivery of the precipitators from Buell and also designed the inlet and outlet ductwork associated with these precipitators.
In July 1978, prior to the construction of the facility, Buell performed the model study known as the "Buell Test." The study, which used a scale plexiglass model of the precipitator and the inlet and outlet ductwork, was conducted largely to demonstrate that the ductwork designed by Sargent & Lundy would provide uniform gas flow distribution. Rather than using fly ash, Buell introduced cork dust into the model precipitator and the associated ductwork to simulate the conditions of an actual unit. At that time, Buell and Sargent & Lundy were satisfied with the test results.
In April 1981, after the model tests were conducted and Unit 3 was manufactured and in the testing phase, General Electric purchased the Buell Division of Envirotech. General Electric, pursuant to a letter agreement, accepted responsibility for certain obligations to Kentucky Utilities with respect to the Ghent project. Kentucky Utilities permitted the arrangement with the understanding that Envirotech would remain liable for the project along with General Electric. General Electric then incorporated the Buell Division into GEESI, a wholly-owned subsidiary (collectively, "General Electric").
In May 1981, Kentucky Utilities placed Unit 3 of the coal-burning plant in operation. By September 1981, however, approximately three to five feet of fly ash had accumulated in the inlet ductwork of Unit 3, which forced a shutdown. Tears and cracks were observed in the metal inlet and outlet ductwork of the precipitator as well as in the precipitator itself. The repair and redesign of Unit 3 and Unit 4 cost Kentucky Utilities approximately $6 million.
In September 1981, Sargent & Lundy, at the request of Kentucky Utilities, undertook to investigate the cause of the damage. Kentucky Utilities and Sargent & Lundy also retained Boyle Laboratories in October 1981 to perform further model studies designed to determine possible remedies. In late December 1981, after reviewing the results of tests conducted by Boyle Laboratories, Sargent & Lundy met with Kentucky Utilities in January 1982 to present a report outlining the cause of the damage. Sargent & Lundy reported that an unexpected buildup of fly ash in the ductwork acted as an insulator and caused temperature differentials in the ductwork. Sargent & Lundy concluded that the ductwork failed because the thermal stresses had exceeded design limits. Although Sargent & Lundy admitted that it had not designed for these temperature differentials, General Electric states that "Sargent & Lundy told Kentucky Utilities that a host of factors had united to cause [the] damage including Sargent & Lundy's design deficiencies and that although Kentucky Utilities had expended several million dollars on the repair and redesign of the Ghent facilities, significant backcharges would not be possible."
In August 1982, Kentucky Utilities informed Sargent & Lundy that it was considering litigation against Sargent & Lundy, GEESI and Envirotech to recover the costs of the repair and redesign of the Ghent facilities. Kentucky Utilities then requested from Sargent & Lundy a waiver of the statute of limitations, which Kentucky Utilities believed might expire in September 1982. Sargent & Lundy executed the waiver on August 26, 1982. General Electric alleges that at this point Sargent & Lundy began to "head off a possible lawsuit" by convincing Kentucky Utilities management that Sargent & Lundy's work was done in accordance with generally accepted engineering principles, but that the work of the Buell Division of Envirotech was negligent.
On October 27, 1982, Sargent & Lundy made a second presentation to Kentucky Utilities concerning the cause of the damage and responsibility for the repairs to the Ghent facilities. General Electric claims Sargent & Lundy's presentation differed dramatically from the earlier January presentation, and that rather than accepting responsibility for the damage, Sargent & Lundy blamed Envirotech. General Electric argues that Sargent & Lundy accomplished the deception by concealing the differences between the Buell Test conducted prior to the construction of the Ghent facilities and the Boyle Test designed to determine what went wrong with the constructed facilities.
General Electric claims that Sargent & Lundy represented that the subsequent Boyle Test had predicted that fly ash would accumulate in the inlet ductwork and that the Buell Test was negligently conducted since it did not similarly predict this result. General Electric alleges that Sargent & Lundy therefore misled Kentucky Utilities by not informing them that the Boyle model had been "forced" to accumulate ash so that remedies could be tested, unlike the pre-construction Buell Test. Sargent & Lundy denies that any false statements were made, and contends that Kentucky Utilities was aware of the differences in the two model studies. General Electric states, however, that Kentucky Utilities relied upon Sargent & Lundy for the interpretation of the two model studies and that Sargent & Lundy intentionally misrepresented that Envirotech and GEESI were liable for the damages.
In May 1984, Kentucky Utilities retained another architect and engineering firm, Black & Veatch, to review the design of the precipitators and ductwork. Although the August report was critical of both Sargent & Lundy and Envirotech, the parties appear to agree that Kentucky Utilities' decision to sue pre-dated the report.
In August 1984, Kentucky Utilities filed suit against General Electric, GEESI, Envirotech, and Sargent & Lundy seeking recovery of the $6 million in repairs. General Electric and GEESI cross-claimed against Sargent & Lundy as the designer of the facility. Through discovery, Kentucky Utilities allegedly learned that Sargent & Lundy had misrepresented who was at fault for the damage to the facility and that Sargent & Lundy was solely responsible. On February...
To continue reading
Request your trial
-
Schobert v. CSX Transp. Inc.
... ... Ohio Dec. 12, 2019) (citing Gen. Elec. Co. v. Sargent & Lundy , 916 F.2d 1119, 1130 (6th Cir. 1990) ). When ... Further confirming this view, as a general matter FMLA leave is afforded to a broader class of employees than just ... ...
-
Rowe v. Marietta Corp.
... ... 12(c). Cf. General Elec. Co. v. Sargent & Lundy, 916 F.2d 1119 (6th Cir.1990) (motion in ... ...
-
Hawkins v. Harris
... ... to foster judicial and extra-judicial resolution of disputes." General" Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1129 (6th Cir.1990) ... \xC2" ... ...
-
Kefgen v. Davidson
... ... 327, 332-333, 347 N.W.2d 741 (1984) (citations omitted).] General allegations that privileged statements were false and malicious are ... v. Sargent & Lundy, 916 F.2d 1119, 1125-1128 (C.A.6, 1990) ... ... ...
-
Commercial Disparagement and Defamation
...the branches of government”). 94. See RESTATEMENT (SECOND), supra note 5, §§ 585-89; see also General Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1125-27 (6th Cir. 1990). 95. See RESTATEMENT (SECOND), supra note 5, §§ 590, 590A. 96. See id. § 591. 97. See id. § 592. 98. See id. § 592A. 99.......