GULF STATES UTIL. v. NEI PEEBLES ELEC. PRODUCTS, 88-898-A-M2.

• Decision Date: 09 March 1993
• Docket Number: No. 88-898-A-M2.,88-898-A-M2.
• Parties: GULF STATES UTILITIES COMPANY v. NEI PEEBLES ELECTRIC PRODUCTS, INC., et al.
• Court: U.S. District Court — Middle District of Louisiana

819 F. Supp. 538

GULF STATES UTILITIES COMPANY v. NEI PEEBLES ELECTRIC PRODUCTS, INC., et al.

No. 88-898-A-M2.

United States District Court, M.D. Louisiana.

March 9, 1993.

COPYRIGHT MATERIAL OMITTED

L. Richard Westerburg, Jr., Baton Rouge, LA, on the motion for plaintiff, Gulf States Utilities Co.

Thomas E. Balhoff and Judith R. Atkinson of Mathews, Atkinson, Guglielmo, Marks & Day, Baton Rouge, LA, for defendants, NEI Peebles Elec. Products, Inc. and Northern Engineering Industries.

RULING

NOLAND, United States Magistrate Judge.

This matter comes before the Court on a motion for summary judgment filed by defendants Northern Engineering Industries and NEI Peebles Electric Products, Inc. on June 29, 1992 as well as on a crossing motion for partial summary judgment filed by the plaintiff, Gulf States Utilities Company ("GSU"), on August 3, 1992. See Rec.Doc. Nos. 74 & 111. Northern Engineering Industries also has sought summary judgment in its favor on the ground that it is not liable for the acts of NEI Peebles Electric Products, Inc., which is a wholly-owned subsidiary of Northern Engineering Industries. The issues regarding the parent company's potential liability for the acts of its subsidiary will be addressed by the Court in a separate ruling. Further, in the present ruling, for ease of reference, the Court will refer to NEI Peebles Electric Products, Inc. and all of its predecessors-in-interest simply as "Peebles" without regard to the particular timeframe involved.

GSU brings redhibition, products liability and negligence claims against Peebles arising out of alleged defects in a diesel generator assembly manufactured by Peebles and sold to Transamerica Delaval, Inc. ("TDI") for incorporation into a standby emergency diesel generator system sold by TDI to GSU. The plaintiff further seeks recovery, in the alternative, as a third party beneficiary of the sales contract between TDI and Peebles. Peebles seeks summary judgment in its favor on the ground that the TDI-Peebles contract waived all implied warranties as well as recovery of consequential damages and contends that GSU has no greater rights against Peebles than would TDI. GSU seeks partial summary judgment in its favor striking this defense, on the ground that any waiver or limitation contained in the TDI-Peebles contract is not effective against GSU and further on the ground that the TDI-Peebles contract does not in any event waive implied warranties or limit recovery of damages against Peebles.

Relevant Factual Background

In the late 1970's, GSU began the construction of the River Bend Nuclear Power Plant ("River Bend") near St. Francisville, Louisiana. During the course of the River Bend project, GSU directed the project engineers, Stone & Webster Engineering Corporation ("Stone & Webster"), to seek bids for the design and manufacture of diesel generators. These generators would be used in a diesel generator system that would provide the backup electrical power necessary for a safe shutdown of the nuclear facility if the normal supply of electrical power were interrupted.

TDI was one of the concerns asked to bid on the diesel generators by Stone & Webster. TDI, in turn, by letter dated March 1, 1974, requested a proposal from Peebles for the sale of four 3500 KW, 450 RPM generators or, alternatively, of two 3500 KW/450 RPM generators and two 4200 KW/450 RPM generators. The request for a proposal reflected that it was made in connection with the GSU project. The request further directed that Peebles "include a statement in your proposal to the effect that you are quoting in accordance with the project specifications," which were attached to TDI's request. The TDI request also reflected specifically that warranty for the sale would be "per spec." The enclosed project specifications provided that "the Seller's equipment will be subjected to the following warranties: one year from initial operation as mutually agreed upon by both parties."¹

By letter dated April 12, 1974, Peebles submitted an unpriced quotation to TDI for the sale of diesel generators in response to the March 1, 1974 TDI request for proposals. The April 12, 1974 letter acknowledged receipt of the project specifications and submitted the Peebles quotation "in accordance" therewith. On page 4 of the letter, the Peebles quotation stated:

Our normal warranty on nuclear power plant equipment is 18 months from date of shipment, or one year from startup, whichever occurs first. If it is necessary for us to extend the warranty on this equipment beyond this normal period it will be necessary that we review the period of time involved, and the facilities for storage, in advance of receipt of award.

Inserted along with the text of the quotation letter was an additional page of printed boilerplate terms and conditions. This inserted page of small print included the following terms and conditions regarding warranties, limitation of recoverable damages, terms of acceptance and modification and waiver of terms:

Warranties —

Seller warrants to Buyer that at the time of the delivery of the goods described in this quotation, it will rightfully transfer title therein to Buyer and that such goods will be of merchantable quality, and Seller warrants the goods quoted against defects in material and workmanship for a period of one year from the date of their delivery.

Any description of goods other than goods manufactured by Seller contained in this quotation is for the sole purpose of identifying them and shall not be the basis of any bargain between Seller and Buyer and does not constitute a warranty that the goods shall conform to that description; likewise the use of any sample or model in connection with this quotation or negotiations relating thereto is for illustrative purposes only and is not intended to be part of the basis of any bargain between Seller and Buyer and is not to be construed as a warranty that the goods will conform to such sample or model. No representative of Seller is authorized to make any guarantee or representation not strictly in accordance with the terms of this quotation and Seller makes no warranty as to the fitness of any of the goods described in this quotation for any purpose.

. . . . .

Seller shall not be liable to Buyer for the breach of any warranty unless Seller receives written notice thereof within one year from the date of delivery as defined in this quotation.

Damages and Remedies —

If any goods or parts of goods delivered by Seller to Buyer are defective in such a manner as to breach any warranty or warranties by which Seller is bound to Buyer, Seller may, at its option, either repair any such defective goods or parts of goods or make available f.o.b. Seller's plant a repair or replacement part to correct any such defect. ....

In no event, whether liability is based upon Seller's breach of warranty, failure to perform any agreement or part of its agreement for the sale of the goods here quoted upon, negligence, strict liability under the laws of any state, tort, or any other cause, shall seller be liable to Buyer or to any other person except for the repair or replacement of defective or nonconforming goods or parts of goods and Seller shall not be liable under any circumstances to Buyer or any other person for consequential damages or special damages of any nature.

The foregoing shall constitute the sole remedies of Buyer and the sole liabilities of Seller.

Terms of Acceptance —

Seller shall not be bound under any order placed by Buyer under the terms of this quotation unless and until such order by Seller is formally acknowledged and accepted in writing by one of Seller's authorized officers at its main office in Cleveland, Ohio. Seller shall not be bound by any term or condition contained in Buyer's purchase order not consistent with the terms of this quotation except as may be expressly agreed upon in Seller's acknowledgment of such order.

Modification and Waiver —

No waiver, modification, or alteration of any of the terms or conditions of this quotation shall be binding upon the Seller unless accepted by Seller in writing and signed by one of Seller's authorized officers at its main office in Cleveland, Ohio.

There are no understandings or agreements, oral or written, relative to Seller's quotation that are not stated herein.²

Peebles followed this quotation letter with an April 17, 1974 letter that supplied prices for the proposal as well as additional information concerning the equipment. The April 17, 1974 letter concluded with the statement that "all of the other terms, conditions, etc., outlined in our April 12, 1974 proposal shall remain unchanged."³

Thereafter, GSU awarded TDI the contract to furnish the diesel generators. Stone & Webster advised TDI that it had been awarded the contract by a telex dated July 23, 1974.⁴

By letter dated August 16, 1974, Peebles wrote to TDI "to acknowledge your subject purchase order and to confirm the information conveyed during our meeting of August 12, 1974." Paragraph 1 of the letter provided price escalation information and then stated that "all other technical information, and terms and conditions should be in accordance with our April 12, 1974 formal proposal." The letter further included another copy of the page of boilerplate terms and conditions that had been included with the earlier April 12, 1974 quotation letter. This page included the same provisions regarding warranties, limitation of recoverable damages, terms of acceptance and modification and waiver of terms that have been set out in detail above in the text in connection with the April 12, 1974 letter. Paragraph 8 of the August 16, 1974 letter stated that Peebles "would appreciate receipt of your confirming purchase order and engineering procurement specifications as soon as possible." The letter closed with the following: "We thank you for your purchase order and we would appreciate if you would expedite the necessary...