Ebasco Services Inc. v. Pennsylvania Power & L. Co.

Decision Date28 August 1975
Docket NumberCiv. A. No. 72-1030.
Citation402 F. Supp. 421
CourtU.S. District Court — Eastern District of Pennsylvania



K. Robert Conrad, Jon A. Baughman, and Nancy J. Gellman, Philadelphia, Pa., for defendant Pennsylvania Power and Light.

Henry T. Reath, and Michael M. Baylson, Philadelphia, Pa., for third party defendant General Electric Co.


EDWARD R. BECKER, District Judge.

I. Preliminary Statement

This matter is presently before us on the motion of third-party defendant General Electric Company (GE) for partial summary judgment. The original defendant, Pennsylvania Power and Light Company (PP&L), is a public utility which furnishes electric power to large areas of eastern and central Pennsylvania. Brunner Island in the Susquehanna River south of Harrisburg, Pennsylvania is the site of a large PP&L power plant complex. In 1964, recognizing the need to augment its generating capacity to meet the growing electric power needs of consumers and of industry, PP&L determined to erect an additional generating plant on Brunner Island to be known as Brunner Island # 3. On previous occasions PP&L had superintended the erection of its own power plants, letting various contracts and subcontracts for the several portions of the work. However, on this occasion the decision was made to engage Ebasco Services, Inc. (Ebasco), the original plaintiff herein, as a contractor, to undertake complete responsibility for construction of the plant on a so-called "turnkey basis"; i. e., Ebasco was to assume the responsibility for design, selecting appropriate equipment and contractors, supervising the construction and testing, obtaining appropriate performance guarantees and overseeing all aspects of the project until the plant became operational, at which time the key might be turned over, as it were, to the owner PP&L. The PP&L-Ebasco agreement, entered into in 1964, was formally executed on March 10, 1966. Under the terms of the agreement PP&L was to pay Ebasco a total of $54,300,000 in installments over the construction period, with $3,640,000 retainage to be paid by PP&L only after it was satisfied that Ebasco had fulfilled the performance guarantees in the contract.

In March, 1964, Ebasco began the process of obtaining subcontractors for the plant. The remaining parties to this action, GE, Foster Wheeler Company (Foster Wheeler) and Combustion Engineering Company (Combustion), are firms which were engaged by Ebasco to furnish and install major components of the power plant. GE's principal contractual undertaking was to supply the steam turbine generator and boiler feed pump turbines, which could fairly be described as the heart of the power plant.

The power plant was ultimately completed in 1970. This litigation was commenced by Ebasco seeking some $1 million in retention moneys which PP&L had refused to disburse, plus an additional $1.6 million in expenses which Ebasco claimed it had incurred at PP&L's request, above the contract specification. PP&L counterclaimed against Ebasco for damages allegedly resulting from delay, use of unauthorized bidders, breach of warranty and negligence. PP&L, as third-party plaintiff, also joined GE, Foster Wheeler and Combustion as third-party defendants on its counterclaim.

PP&L's counterclaim against GE seeks damages allegedly resulting from (1) furnishing defective equipment; (2) negligence in the design and supervision of the installation of the steam turbine generator and boiler feed pump turbines; (3) breach of implied warranties; and (4) tortious interference by GE with certain of PP&L's contract rights. The total damages asserted by PP&L in its counterclaim approximate $64 million. The largest single element of damages is PP&L's claim against GE for the cost to PP&L of purchasing replacement power from other power companies in the Pennsylvania-New Jersey-Maryland Interconnection when Brunner # 3 did not function as anticipated.1

The litigation has become labyrinthine. It has also become massive in scope; indeed, there have already been produced for discovery some 100,000 documents, and depositions consuming hundreds of days have been taken. The present opinion addresses the motion of GE for partial summary judgment as to PP&L's claim against GE for alleged problems with the steam turbine generator and boiler feed pump turbines. More specifically, GE seeks to have us declare that it is not liable to PP&L on the steam turbine generator and boiler feed pump turbine contracts for: (1) cost of replacement power or lost profits; (2) breach of an alleged implied warranty of fitness for an intended use; and (3) tortious interference with the contractual rights of PP&L. Our decision on the motion must, of course, turn solely on the determination of whether genuine issues of material fact exist on the questions involved. The issues with which the motion deals evolve in large measure from the differing views of the parties as to what documents or acts form the contract between GE and Ebasco (the latter acting as agent for PP&L), and as to the terms of that contract. A brief preliminary background discussion is necessary in order to place the motion in perspective.

On July 15, 1964, acting pursuant to Ebasco's request, GE issued quotations for the steam turbine generator and the boiler feed pump turbines by means of a letter to Ebasco which stated, inter alia: "The above prices are based on our Standard Conditions of sale, price policy and price data as shown in GE Handbook 4710, dated May 25, 1964." Six days later Ebasco placed purchase order NY-668001 for the generator and turbines2 and accompanied that order with a letter reading, in part: "A formal contract will be issued at a later date containing the terms and conditions of, and in the format of, the usual type of contract issued by Ebasco."

The GE terms and conditions differed significantly from those in the Ebasco standard contract in such important areas as warranties and remedies available to Ebasco (and therefore to its principal, PP&L), and negotiations continued between Ebasco and GE on these issues until December, 1967. At that time agreement was reached on language governing warranties and remedies, and the agreed upon language was included in Supplement 16 to the contract2a executed by GE and Ebasco on December 7, 1967. Significantly, while the negotiations were proceeding, GE had begun construction of the generator and by late 1967 that unit was nearing completion and delivery.

We have held an extensive hearing on GE's motion and have received voluminous briefs from both GE and PP&L with respect thereto.3 The main points at issue are:

1. Is the language of limitation contained in Supplement 16 sufficient to insulate GE from PP&L's claims for cost of replacement power and lost profits and from claims predicated upon alleged breach of implied warranty?

2. Is there a genuine issue of material fact on the question whether PP&L obtained contractual rights pursuant to § 2-207 of the Uniform Commercial Code (U.C.C.) by virtue of the GE quotation of July 15, 1964, the Ebasco purchase order of July 21, 1964, and the events occurring thereafter but prior to December 7, 1967, the date upon which Supplement 16 was executed. If the foregoing question is answered affirmatively, the question then arises as to whether Ebasco had authority to impair PP&L's § 2-207 rights by executing Supplement 16. Put differently, is there a genuine issue of material fact as to whether PP&L is even bound by Supplement 16?

3. Is there a genuine issue of material fact on the question whether GE tortiously interfered with the contractual and/or fiduciary relationship between PP&L and Ebasco; and if there is a genuine issue of material fact on the question of tortious interference, is there also a genuine issue of material fact on the question of GE's privilege to interfere?

The first question posed (i. e., sufficiency of the language of limitation in Supplement 16) presents a matter of contractual interpretation which is for the Court. Pittsburgh Ry. v. Equitable Life Assurance Soc'y, 288 F.2d 640 (3d Cir. 1961).4 The remaining questions require that we determine whether genuine issues of material fact exist, thus precluding the grant of partial summary judgment on those matters. The parties have dwelled longest on the proper construction of the language of limitation in Supplement 16, though that problem causes us the least difficulty. Notwithstanding the able, often ingenious arguments of PP&L, we are satisfied beyond peradventure that the language of Supplement 16 excludes claims for replacement power, lost profits, and breach of implied warranties. Indeed, although there are other clauses from which an argument contra can be constructed, we find it difficult to conceive how the contract — and particularly Supplement 16 — could have more clearly excluded these claims. However, partial summary judgment in GE's favor does not automatically follow, for we believe that there is a genuine issue of material fact: (1) on the question of whether PP&L obtained contract right pursuant to U.C.C. § 2-207 by virtue of the GE quotation, the PP&L purchase order and subsequent events; and (2) as to whether Ebasco possessed the authority to impair any such rights that may have existed, i. e., as to whether PP&L is bound by Supplement 16. Accordingly, with respect to PP&L's contractual claims against GE on NY-668001, partial summary judgment must be denied.

The remaining issue is tortious interference. On that point, we conclude that there exists a genuine issue of material fact on PP&L's tortious interference claim and on GE's defense of privilege thereto. This means that GE's motion for partial summary judgment as to the tortious interference claim must also be denied.

However, on the record as...

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