Northern States Power v. Intern. Tel. & Tel. Corp.
| Decision Date | 27 October 1982 |
| Docket Number | Civ. No. 4-80-280. |
| Citation | 550 F. Supp. 108 |
| Parties | NORTHERN STATES POWER COMPANY, a Minnesota corporation, Plaintiff, v. INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION, a Delaware corporation, Defendant. |
| Court | U.S. District Court — District of Minnesota |
John L. Devney, Michael H. Streater, Briggs & Morgan, St. Paul, Minn., for plaintiff.
Jack M. Fribley, Faegre & Benson, Minneapolis, Minn., for defendant.
Plaintiff Northern States Power Co. (NSP) brings this action for damages against defendant International Telephone and Telegraph Corp. (ITT) alleging breach of warranties, contract breach, misrepresentation, strict liability in tort,1 negligence, and fraudulent inducement to contract. Diversity jurisdiction is alleged under 28 U.S.C. § 1332. The matter comes before the court on ITT's motion to dismiss NSP's tort claims (Counts III, IV, V, and VI of the Amended Complaint) for failure to state a claim upon which relief can be granted and for partial summary judgment dismissing NSP's claims for consequential damages.
NSP contracted with Meyer Industries of Red Wing, Minnesota (Meyer), a division of ITT.2 Meyer was to manufacture, and NSP to buy, certain 16,000 ft. lb. screw anchors and extensions for use in the installation and erection of power line towers by contract was negotiated in Minnesota. It was largely executed in Minnesota, but the screw anchors were assembled in Wisconsin.
The screw anchors were to be emplaced in the ground and attached by guy wires to a point near the top of a power line tower. Four anchors were to be placed around each tower to hold the tower firmly in place. Each screw anchor consisted of 10' long lead sections capable of being augured into the ground. Extensions either 5' or 10' long could be added so that the extended anchor was emplaced deeply enough into the ground to adequately anchor the towers. Numerous extensions could be added if necessary. Each anchor extension had a coupling welded to one end to attach to a connecting section of anchor by bolting them together.
On June 9, 1978, NSP sent a "Request for Quotation" to Meyer and others for the manufacture of the screw anchors. Meyer responded with a proposal on July 6, 1978, which included an attachment entitled "Provisions of Proposal." This provided in part:
2) Reference RFQ Form3, Additional Instructions, Section 1, Paragraph 6. "In accepting an order, Seller/Contractor agrees ...". Delete this paragraph and replace with Item 16, Meyer Industries Warranty and Limitation of Liability Clause.
An attached document, entitled , contained "Item 16" which states in part:
After contract discussions in July and August of 1978 (during which no discussion of the limitation of liability took place), NSP issued a "Purchase Order" on August 17, 1978 which made no specific mention of the liability limitations of Meyer's proposal. It did contain the general reference "Confirming Verbal Order of 8-11-78 Per Your Proposal # 780049 of 7-16-78." In response, Meyer issued a "Sales Acknowledgment" showing an "acceptance date" of September 5, 1978 and providing a statement of the "Basis of Acceptance" which included the "Meyer Terms and Conditions of Sale as stated in Proposal 780049 dated July 6, 1978." On the reverse side of the acknowledgment appeared the Among those listed was "Item 16." NSP made no additional response, and the parties proceeded to carry out the contract.
In December, 1978, the screw anchors were manufactured and in February and March of 1979, about 1,000 were emplaced in the ground by NSP contractors. About five months later, aluminum power line towers were flown into place and attached by guy wires to the anchors.
In late September, shortly after the guy wires were tightened and the installation completed, four towers fell to the ground. In each case a coupling at the end of a screw anchor extension had come apart at the weld.
NSP asserts that Meyer was immediately apprised of the fallen towers and that it learned shortly thereafter that tests conducted by Twin City Testing showed the anchors were defective. NSP claims Meyer failed to take remedial action at its own cost and denied that the anchors were defective.
Two or three weeks after the towers fell, NSP determined that all of the previously installed screw anchors needed repair by replacing the welded couplings with a bolted connector. NSP had contractors remove each anchor and had various other contractors, including defendant, replace the welded couplings. The anchors were then reinstalled.
NSP claims a total cost of repair of $2,404,016, including approximately $100,000 in cost to repair the damaged towers. The total cost breaks down as follows: NSP's own labor, transportation and equipment rental costs $148,647; contract labor costs for anchor removal, repair of damaged towers, transportation and installation of modified anchors — $731,093; material rework including material costs, heat treatment, testing, galvanizing, transportation — $316,545; contract cost with ITT for reworking— $207,731. NSP seeks to recover these costs, together with interest, costs, and attorney's fees in this lawsuit.
ITT bases its motion to dismiss plaintiff's tort claims upon the ground that Superwood Corporation v. Siempelkamp Corporation, 311 N.W.2d 159 (Minn.1981), bars recovery of tort damages for actions arising from a commercial transaction primarily involving economic loss. This decision of the Minnesota Supreme Court is being frequently cited for a variety of propositions. Its import and precedential value are a topic of debate.4
This case differs from Superwood in two respects: plaintiff seeks to recover damage to other property in addition to claiming economic loss, and plaintiff alleges tort liability for fraud and misrepresentation.
Although Superwood states that its rule is limited to commercial transactions not involving "damage to other property," the court's rationale appears to be much broader. It reasoned that 311 N.W.2d at 162. The court also noted that "limiting the application of strict products liability to consumers' actions or actions involving personal injury will allow the U.C.C. to satisfy the needs of the commercial sector and still protect the legitimate expectations of the consumers." Id.
To allow a plaintiff to recover over two million dollars in negligence or strict liability because of some $100,000 in damage to the fallen towers5 would appear to thwart the policy implications of Superwood, and application of its rule here limits plaintiff's recovery for negligence or strict liability to the damage sustained to other property,6 one of the explicit exceptions to the rule.
Defendant also seeks to have Superwood applied as a bar to all tort claims. ITT has shown no reason, other than some broad dicta used in the opinion, to extend the Superwood rule to bar claims for misrepresentation and fraudulent inducement to contract. Superwood only limited the use of negligence and strict liability, the tort theories most commonly used in the consumer/personal injury setting. At best, it is arguable that recovery for merely negligent misrepresentation should not be allowed since Superwood disallowed negligence actions for economic loss in commercial transactions. Misrepresentation is a distinct tort, however, and Superwood did not address whether this right of action should be discontinued in commercial settings. It is well established in Minnesota that claims for fraudulent inducement to contract and misrepresentation may be brought in addition to claims in contract and warranty. See e.g. Clements Auto Co. v. Service Bureau Corp., 444 F.2d 169 (8th Cir.1971); Fischer v. Division West Chinchilla Ranch, 310 F.Supp. 424 (D.Minn. 1970); General Corp. v. General Motors Corp....
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