Capricorn Power Co. v. Siemens Westinghouse Power, Civil Action No. 01-39J.

• Decision Date: 02 July 2004
• Docket Number: Civil Action No. 01-39J.
• Citation: 324 F.Supp.2d 731
• Parties: CAPRICORN POWER COMPANY, INC., Capricorn Power Partners, L.P., CE Colver I, Inc., CE Colver Limited Partnership, Inter-Power of Pennsylvania, Inc., and Inter-Power Resource Partners, L.P. trading as Inter-Power/Ahlcon Partners, L.P., Plaintiffs, v. SIEMENS WESTINGHOUSE POWER CORPORATION, Defendant.
• Court: U.S. District Court — Western District of Pennsylvania

324 F.Supp.2d 731

CAPRICORN POWER COMPANY, INC., Capricorn Power Partners, L.P., CE Colver I, Inc., CE Colver Limited Partnership, Inter-Power of Pennsylvania, Inc., and Inter-Power Resource Partners, L.P. trading as Inter-Power/Ahlcon Partners, L.P., Plaintiffs, v. SIEMENS WESTINGHOUSE POWER CORPORATION, Defendant.

Civil Action No. 01-39J.

United States District Court, W.D. Pennsylvania.

July 2, 2004.

COPYRIGHT MATERIAL OMITTED

Mark D. Shepard, Kevin L. Barley, Babst, Calland, Clements & Zomnir, Bruce E. Stanley, Arthur H. Stroyd, Michael G. Connelly, Pittsburgh, PA, Blair V. Pawlowski, Heath Long, Pawlowski, Homady & Long, Ebensburg, PA, for plaintiffs.

Frederick W. Bode, III, Steven W. Zoffer, Lisa M. Tumolo, Dickie, McCamey & Chilcote, Pittsburgh, PA, for defendant.

MEMORANDUM OPINION and ORDER OF COURT

GIBSON, District Judge.

SYNOPSIS

This case comes before the Court on the Defendant's Motion for Summary Judgment Pertaining to Plaintiffs' Remaining Claims. The Defendant's Motion is granted in part and denied in part.

Certain issues were previously submitted to the Court by way of a motion for summary judgment which was granted in part and denied in part by a Memorandum and Order of Court dated January 9, 2004. The Court will not repeat the background information set forth in the January 9th Memorandum and directs the reader to that Memorandum for an understanding of the background facts. Although, it must be added that during the January 2004 trial of this matter, a mistrial was declared. The basis of the mistrial concerned the Plaintiffs' failure to produce a report dated June 23, 2000 that was prepared by consultants at CTC Corporation, and an accompanying report dated July 19, 2000 prepared by Dr. LeMay and Dr. Bagnall regarding the failure of the blower blades in the generator at the Colver Power Plant. The Court granted a mistrial on the basis that the non-production of these reports was prejudicial to the Defendant in prosecuting a defense of the Plaintiffs' action.

The Defendant, consistent with local rule 56.1, has submitted a second Statement of Undisputed Material Facts relevant to the Defendant's Second Motion for Summary Judgment. The undisputed facts are as follows: Plaintiffs are the owners, partners and/or joint ventures that operate the Colver Power Plant. Defendant's Undisputed Statement# 1. Inter-Power/Ahlcon Partners, L.P. was organized in June 1992 pursuant to a partnership agreement between Capricorn Power Company, Inc., CE Colver I, Inc. and Inter-Power of Pennsylvania, Inc. as general partners and Capricorn Power Partners, L.P., Inter-Power Resource Partners, L.P. and CE Colver Limited Partnership as limited partners. Defendant's Undisputed Statement # 2. Defendant, Siemens Westinghouse Power Corporation (hereinafter "Defendant"), is the successor in interest to the Power Generation Business Unit of Westinghouse Electric Corporation. Defendant's Undisputed Statement# 3. Other than these three facts, all other facts material to this summary judgment motion are in dispute.

ANALYSIS

ECONOMIC LOSS DOCTRINE ANALYSIS OF THE JANUARY 9, 2004 OPINION

Before proceeding to the Defendant's argument in support of its second motion for summary judgment, the Court will first address its analysis of the economic loss doctrine from its Memorandum Opinion dated January 9, 2004 because of the now enlarged perspective the Court possesses on this issue as a result of the previous mistrial in this matter. To ensure that our previous analysis is correct and updated based upon the revelation of Dr. Bagnall's consultant report that was the basis for the granting of the Defendant's motion for mistrial, we will re-visit our previous analysis of this issue beginning with a condensed review of the applicable case law.

The leading case in Pennsylvania on the subject of the economic loss doctrine is REM Coal Company v. Clark Equipment Company, et al., 386 Pa.Super. 401, 563 A.2d 128 (1989) The Superior Court in the REM Coal opinion adopted the current version of the economic loss rule utilized in Pennsylvania from the rule found in East River S.S. Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986) which focuses upon "the actual harm for which the plaintiff seeks recovery" and "not on the type of risk" posed by the product. REM Coal, p. 133. In East River Steamship Corp. v. Transamerica Delaval, Inc., the Supreme Court adopted the economic loss doctrine in the context of admiralty actions and concluded that the realms of tort and contract must remain distinct and to preserve that distinction, tort recovery for a defective product should not be permitted where there is no damage to "other property" or personal injury. East River at 2302, 870-871. The ruling in REM Coal specifically adopted an approach that allows recovery in negligence and strict liability, in a civil action among commercial enterprises, if the bargained for product causes personal injury or injury to property other than the defective product. REM Coal at 132-134. However, recovery in negligence and strict liability will not be allowed if the only injury that occurs is injury to the bargained for product because the law governing breach of warranty would be the appropriate cause of action. Id.

REM Coal's companion case, New York State Electric & Gas Corporation v. Westinghouse Electric Corporation, 387 Pa.Super. 537, 564 A.2d 919 (1989) (hereinafter "NYSEG" in reference to the case name and "NYSEG" in reference to the specific party) also addressed the economic loss doctrine. In NYSEG, under factual circumstances that are similar to the case sub judice, Westinghouse informed NYSEG that its blower spacer on the turbine generator "should be inspected during the next scheduled shut down" and that "the seal on the blower spacer should be replaced." NYSEG at p. 922. This work was completed in January 1984 but Westinghouse requested an immediate reinspection of the blower spacer in April 1984. Id. This inspection revealed that there was an indication of "a possible inception of an early stage crack in the blower spacer flange." Id. The generator was taken off-line to repair the blower-spacer in accordance with a "specific purchase order" that contained warranties and limitations of liability. Id. NYSEG subsequently filed a civil action alleging, inter alia, negligence and strict liability, breach of contract and breach of warranty. Summary judgment was granted to the defendant on these counts and NYSEG appealed. The Superior Court concluded that NYSEG's argument that other property was damaged in that parts of the generator were damaged by defective parts in the same generator was meritless; the court considered the generator a "complete and integrated package" and thus no damage was visited upon "other property." NYSEG at p. 925.

More recently, the Supreme Court further clarified the limits of the economic loss doctrine found in East River in its opinion in Saratoga Fishing Company v. J.M. Martinac & Company, 520 U.S. 875, 117 S.Ct. 1783, 138 L.Ed.2d 76 (1997). There the Supreme Court examined another admiralty issue that concerned the economic loss doctrine: whether equipment added to a vessel by its initial owner after its sale to that initial owner is considered part of the vessel itself after a subsequent sale of the vessel, or does the equipment remain "other property" so as to be excepted from the economic loss doctrine? Justice Breyer, writing for the Court, concluded that when equipment is added to a vessel and that vessel is subsequently sold, the subsequent sale does not prevent that added equipment from remaining "other property." As a result, the subsequent owner of the vessel could take action against those alleged liable (manufacturer and/or component part supplier) for the loss suffered as to the "equipment added after the initial sale, despite the presence of a resale by the Initial User." Saratoga at 884, 117 S.Ct. 1783, 1789, 138 L.Ed.2d 76, 85. Saratoga lends guidance to our analysis:

Respondents make two other important arguments. First, they say that our reasoning proves too much. They argue that, if a Subsequent User can recover for damage a defective manufactured product causes to property added by the Initial User, then a user might recover for damage a defective component causes the manufactured product, other than the component itself. Saratoga Fishing, for example, could recover the damage the defective hydraulic system caused to any other part of the ship. But the lower courts, following East River, have held that it is not a component part, but the vessel — as placed in the stream of commerce by the manufacturer and its distributors — that is the "product" that itself caused the harm. See Shipco 2295, Inc. v. Avondale Shipyards, Inc., 825 F.2d 925, 928 (C.A.5 1987); see also, e.g., National Union Fire Ins. Co. of Pittsburgh v. Pratt & Whitney Canada, Inc., 107 Nev. 535, 539-542, 815 P.2d 601, 604-605 (1991). As the Court said in East River:

"`Since all but the very simplest of machines have component parts, [a contrary] holding would require a finding of "property damage" in virtually every case where a product damages itself. Such a holding would eliminate the distinction between warranty and strict products liability.'" 476 U.S., at 867, 106 S.Ct., at 2300 (quoting Northern Power & Engineering Corp. v. Caterpillar Tractor Co., 623 P.2d 324, 330 (Alaska 1981)).

Our holding here, however, does not affect this rule, for the relevant relations among initial users, manufacturers, and component suppliers are typically different from those at issue here. Initial users when they buy, typically depend upon, and likely seek warranties that depend upon, a manufacturer's primary business skill, namely, the assembly of workable product components into a marketable whole. *884 King v. Hilton-Davis, 855 F.2d 1047, 1052 (C.A.3 1988); Shipco 2295, supra, at 929; National Union...