Canal Elec. Co. v. Westinghouse Elec. Corp.

Decision Date01 February 1991
Docket NumberCiv. A. No. 85-2902-Y.
Citation756 F. Supp. 620
PartiesCANAL ELECTRIC COMPANY, Commonwealth Electric Company, Cambridge Electric Light Company, Montaup Electric Company, Boston Edison Company, Massachusetts Municipal Wholesale Electric Company and New England Power Company, Plaintiffs, v. WESTINGHOUSE ELECTRIC CORPORATION, Defendant.
CourtU.S. District Court — District of Massachusetts

Sander A. Rikleen, Widett, Slater & Goldman, Boston, Mass., Mark Bruckmann, cocounsel, Wendy Millman, Mendes & Mount, New York City, for plaintiffs.

Jeffrey N. Stevens, John A. Walsh, Boston Edison Co., Boston, Mass., for Boston Edison Co.

Ralph E. Loomis, Robert J. Brill, Cheryl LaFleur, Westborough, Mass., for New England Power Co. Edward P. Leibensperger, Nutter, McClennen & Fish, Boston, Mass., John Ferriter, Begley, Ferriter, Lavelle & Welch, Holyoke, Mass., for defendant.

MEMORANDUM AND ORDER

YOUNG, District Judge.

The procedural device of certifying unsettled but controlling questions of state law to the highest court in a state for definitive resolution is a development of creative federalism, one that has worked well in this circuit, see, e.g., Ocasio-Juarbe v. Eastern Airlines, Inc., 902 F.2d 117 (1st Cir.1990) (certification to Supreme Court of Puerto Rico); Aetna Casualty and Surety Co. v. Curley, 902 F.2d 1034 (1st Cir.1990) (certification to Supreme Court of Rhode Island); Chroniak v. Golden Investment Corp., 887 F.2d 361 (1st Cir.1989) (certification to the New Hampshire Supreme Court); Gagne v. Carl Bauer Schraubenfabrick, GmbH, 595 F.Supp. 1081 (D.Me. 1984) (certification to Maine Supreme Judicial Court). See generally, Holloway, Certifying Questions to State Supreme Courts, The Federal Appellate Judiciary in the 21st Century 93 (1990), and Wilkins, Certification of Questions of Law: the Massachusetts Experience, 74 Mass.L.Rev. 256 (Dec. 1989) noting the thoughtful treatment such certified questions have received from the Massachusetts Supreme Judicial Court.

In this case, however, this Court must recognize that it resorted to certification too soon upon a record that was not fully developed. The upshot is that, regretfully, despite the complete cooperation of the Supreme Judicial Court which thoroughly addressed the certified questions notwithstanding the inadequacies of the record, Canal Electric Co. v. Westinghouse Electric Co., 406 Mass. 369, 372, 548 N.E.2d 182 (1990), still more remains to be done, a trial must be held, and a further appeal is in the offing.

The original certification grew out of a 1987 hearing on the motion of Westinghouse Electric Corporation ("Westinghouse") for summary judgment. Today, after receipt of the opinion of the Massachusetts Supreme Judicial Court, that motion is again pending before this Court.

I. PROCEDURAL BACKGROUND

This contract action was commenced on July 19, 1985 by Canal Electric Company ("Canal") and other utility companies ("other Utilities")1 against Westinghouse alleging breach of warranty, negligence, and violation of Mass.Gen.L. c. 93A, based on Westinghouse's sale of goods and services to Canal. On July 8, 1987, Westinghouse moved for summary judgment. On September 2, 1987, following oral argument, the Court took Westinghouse's motion for summary judgment under advisement and thereafter certified two questions of Massachusetts law to the Supreme Judicial Court. This Court asked whether the Limitation of Liability provision in the contract at issue was enforceable, assuming that the Westinghouse exclusive remedy provided by the contract had failed of its essential purpose and, if so, whether relief under Mass.Gen.L. c. 93A was barred as well. On January 9, 1990 the Supreme Judicial Court answered both questions affirmatively but restricted its analysis to the undisputed facts of the case. A second hearing on the motion of Westinghouse for summary judgment was held on February 13, 1990. Canal and the other Utilities argued that, notwithstanding the answers to the certified legal issues provided by the Massachusetts Supreme Judicial Court, factual issues still remained in dispute regarding whether Westinghouse's actions were willfully dilatory or a repudiation of warranty obligations, whether the contract provided a minimum adequate remedy as matter of law, whether incidental and direct damages are available to Canal and the other Utilities, and whether the other Utilities not in privity with Westinghouse can advance their claim pursuant to Mass.Gen.L. c. 93A.

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R. Civ.P. 56(c). "The burden is upon the moving party to establish the lack of a genuine, material, factual issue ... and the court must view the record in the light most favorable to the nonmovant, according the nonmovant all beneficial inferences discernable from the evidence." Public Service Co. v. Westinghouse Electric Corp., 685 F.Supp. 1281, 1283 (D.N.H.1988) (citing Finn v. Consolidated Rail Corp., 782 F.2d 13, 15 1st Cir.1986; Knight v. Mills, 836 F.2d 659, 664 1st Cir.1987; Ismert & Assoc. v. New England Mut. Life Ins. Co., 801 F.2d 536, 537 1st Cir.1986).

II. FACTUAL BACKGROUND

An examination of the entire record pursuant to the standard just set forth reveals the following undisputed facts: In July, 1968, Canal Unit No. 1, a steam turbine generator manufactured by Westinghouse, began operating at the Canal Electric Station. Westinghouse sold rotating blades to Canal for use in the steam turbine generator.

Both parties agree that the written contract governing the sale of the blades was one of two Westinghouse Selling Policies, either Policy 1270 or Policy 1701 (formerly 1710). Since the parties disagree regarding which policy governs the sale, this Court will analyze the issues under Policy 1701 ("the Policy") — the policy that Canal asserts to govern here. The Policy provides an exclusive warranty for one year to the effect that Westinghouse's equipment and services would be free of defects. Under the warranty, Westinghouse is liable to repair or replace any defective products discovered within the warranty period. The Policy also contains a Limitation of Liability provision.2

From 1968 until 1981 Canal did not experience any difficulties with the rotating blades in the high pressure section of the turbine. In March, 1981, Westinghouse performed a routine scheduled maintenance outage and discovered cracks in the row eleven rotating blades in the turbine. Canal told Westinghouse to replace the entire set of row eleven rotating blades pursuant to the terms of the Westinghouse Policy. Canal issued a written purchase order for the replacement blades and Westinghouse manufactured and installed them without charge.

Westinghouse performed another scheduled outage for maintenance in early 1983. Westinghouse noticed that some of the row eleven blades replaced in 1981 had developed cracks. Canal ordered another set of replacement blades pursuant to the terms of a Westinghouse Policy and issued a written purchase order dated March 7, 1983. The blades were manufactured and installed in the turbine generator by Westinghouse. Westinghouse invoiced Canal on April 19, 1983 in the amount of $40,750 for the price of the replacement blades, a sum which Canal paid.

On July 20, 1983, Canal's turbine was shut down due to high vibration levels. Cracks were discovered in the row eleven blades installed in March, 1983. The parties immediately began a joint investigation into the cause of the cracking and the possible options for repair. Three meetings took place during the summer of 1983. On August 8, 1983, Westinghouse issued to Canal a full credit for the price of the failed blades including the cost of opening and closing the turbine.

Canal alleges that Westinghouse had determined the extent of the damage caused by the blade failure by July 27, 1983 but refused to offer any repair options until September 7, 1983. Canal opted to replace the blades with new blades having an expanded and strengthened root. Canal's turbine Unit 1 was returned to service on November 21, 1983 with replacement blades designed, manufactured, and installed by Westinghouse. Canal alleges that it incurred a total of $2,300,000 in repair costs over the years to obtain reasonably reliable row eleven blades, which sum includes $1,800,000 in engineering and consulting fees.

Westinghouse alleges that the return of the order price and the manufacture and installation of new blades constitute full and complete performance of its warranty obligations under the Policy. Conversely, Canal claims that it incurred substantial losses as a result of the turbine blade failure and Westinghouse's inability to perform the exclusive remedy contemplated under the Policy. Canal seeks damages from Westinghouse for breach of warranty, negligence, and violation of Mass. Gen.L. c. 93A. In addition, Canal seeks $66,020 in damages for the cost of purchasing replacement power during the 124 day outage period in 1983 while the blades were being replaced, the cost of opening the turbine before the return to service on November 21, 1983 and the costs related to outages of the turbine in 1985, 1986, and 1987. Regarding the breach of warranty claim, Westinghouse alleges that their actions in response to the shut down of the turbine on July 20, 1983 were diligent and timely, and its investigation and presentation of options for returning the turbine to service were satisfactory. In addition, Westinghouse denies that it acted negligently or that the blades were defective.

Canal operates the electric power generating plant on behalf of the other Utilities. The other Utilities purchased power, either directly or indirectly, from...

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