Northland Power v. General Elec., Co.

• Decision Date: 04 June 1999
• Docket Number: No. C-1-96-632.,C-1-96-632.
• Citation: 105 F.Supp.2d 775
• Parties: NORTHLAND POWER, et al., Plaintiffs, v. GENERAL ELECTRIC, CO., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

105 F.Supp.2d 775

NORTHLAND POWER, et al., Plaintiffs, v. GENERAL ELECTRIC, CO., et al., Defendants.

No. C-1-96-632.

United States District Court, S.D. Ohio, Western Division.

June 4, 1999.

COPYRIGHT MATERIAL OMITTED

Louis Francis Gilligan, Patrick F. Fischer, Joseph M. Callow, Jr., Keating Muething & Klekamp — 1, Cincinnati, OH, for Plaintiffs.

Robert Alexander Pitcairn, Jr., Katz, Teller, Brant & Hild, Cincinnati, OH, James Matthew Hall, Jr., Julia B. Meister, Taft Stetinius & Hollister, Cincinnati, OH, Todd Hunter Bailey, Frost & Jacobs, Cincinnati, OH, for Defendants.

ORDER

SPIEGEL, Senior District Judge.

This matter is before the Court on Motions for Summary Judgment by Defendant Kvaerner Hydro Power, Inc. d.b.a. Kvaerner Energy (hereinafter, "Kvaerner") (docs. 21 & 53) and Defendants Chromalloy American Corporation, Chromizing Company, and Chromalloy Gas Turbine Corporation (collectively, "Chromizing") (docs. 24 & 55); Plaintiffs' Memoranda in Opposition (docs. 28 & 58); Defendants' Replies (docs. 31 & 61); Notice of Filing Supplemental Authorities in Support of Motion for Summary Judgment by Defendant Chromizing (doc. 63); Plaintiffs' Supplemental Authority in Response to Defendants' Supplemental List of Authorities (doc. 73); Affidavits of Plaintiffs' and Defendants' Counsel in Support of Canadian Law Cited (docs. 75, 76, 78 & 79); and a Supplemental Memorandum in Response to Plaintiffs' April 26 Submission by Defendant Chromizing.

Also before the Court is a Motion by Third-Party Defendant General Electric Company for Leave to File Motion to Dismiss and Motion to Sever (doc. 62); Third-Party Plaintiff Chromizing's Memorandum in Response to Third-Party Defendant's Motion (doc. 67); and Third-Party Defendant's Reply (doc. 70).

The Court held hearings on Defendants' Motions for Summary Judgment on March 9, 1999 and April 27, 1999.

BACKGROUND

Canadian electrical-power suppliers and their subrogated insurance company bring this action to assert tort and contract claims arising from the 1994 failure of a gas generator engine being used to produce commercial electric power in Ontario, Canada. Jurisdiction in this matter is based on 28 U.S.C. § 1332.

Plaintiffs Northland Power, Northland Power Corporation, Cochrane Power Corporation, Kirkland Lake Power Corporation, and Boiler Inspection and Insurance Company of Canada (collectively, "Plaintiffs") originally filed a complaint on June 21, 1996 against Defendants Kvaerner, Chromizing, General Electric Company, GE Aircraft Engines, GE Marine and Industrial Engines and Service Division (collectively "GE"), and Stewart and Stevenson Services, Inc. (doc. 1).

Pursuant to Federal Rule of Civil Procedure 41(a)(1)(I), Plaintiffs voluntarily dismissed GE from the action without prejudice on October 4, 1996 (doc. 5) and they dismissed Stewart and Stevenson Services, Inc., without prejudice on January 7, 1997 (doc. 7). However, Defendant Chromizing filed a third-party complaint against GE on November 12, 1998 (doc. 47), bringing GE back into the action as a third-party defendant. GE filed an answer on December 7, 1998 (doc. 51) and a Motion for Leave to File Motions to Dismiss and Sever on February 26, 1999 (doc. 62). In addition, Defendant Kvaerner filed a crossclaim against Defendant Chromizing on July 1, 1998 (docs. 35 & 37). Defendant Chromizing filed an answer to the cross-claim on July 28, 1998 (doc. 38).

As mentioned above, the multitude of claims in this action arise out of the 1994 failure of a gas generator engine operated at Plaintiff Cochrane Power Corporation's generating station in Ontario, Canada (doc. 1). Plaintiffs Northland Power, Northland Power Corporation (collectively, "Northland Power"), Cochrane Power Corporation, and Kirkland Lake Power Corporation are affiliated entities who supply electrical power in Ontario (docs. 21 & 28). Plaintiff Boiler Inspection and Insurance Company of Canada (hereinafter, "BI & I") is a Canadian insurance company that provides certain insurance coverage to the above affiliated entities (doc. 1). BI & I is a party to this action as a subrogated insurer (Id.).

Defendant Kvaerner, which operates a facility in Ohio, is an affiliate of a Norwegian company that, among other things, tailors gas generator engines to meet the specifications of customers such as the electrical-power suppliers in this case (doc. 21). Defendant Chromizing operates an engine repair and refurbishment facility in California. In 1993, Kvaerner's Ohio facility subcontracted the refurbishment of a set of gas generator engine parts to Chromizing (doc. 31).

The following facts are not in dispute (see docs. 21, 28, 31, 53, & 58). In 1992, executives from Northland Power, the corporate manager of Plaintiffs' operations, and executives from Kvaerner began to discuss Plaintiffs' need for a spare gas generator engine. At the time, Plaintiffs operated a total of four gas turbines at their Cochrane and Kirkland Lake generating stations. A gas turbine is comprised of a gas generator engine and a power turbine, also known as a low-pressure turbine (see doc. 61, Att. 1). Within each gas generator engine is an interchangeable module known as the "hot section." The hot section consists of two rows of nozzles and two rows of rotating high-pressure turbine ("HPT") blades. These rows of nozzles and blades are identified separately as "Stage 1" and "Stage 2."

Whenever the hot section of one of these gas generator engines needed maintenance or repair, Northland Power temporarily leased replacement engines. However, these leasing arrangements were expensive, and Northland Power decided the purchase of a spare engine would be more cost-effective. To that end, Northland Power and Kvaerner negotiated the purchase of a used gas generator engine. The gas generator engine that the Parties negotiated for purchase had originally been manufactured in 1984 by GE and was identified by the number 691-025 (hereinafter, "Spare Engine 691-025"). Kvaerner thereafter began to tailor Spare Engine 691-025 to meet Northland Power's specifications.

Meanwhile, one of the gas generator engines Northland Power already owned (hereinafter, "Engine 481-615") developed a crack in its compressor rear frame. Northland Power removed Engine 481-615 and sent it to Kvaerner's Norway facilities for repair. A contract, referred to by Plaintiffs as "Purchase Order 6811" and entered into on December 19, 1992 (hereinafter, "1992 Purchase Order"), explained the work to be performed on Engine 481-615 (see doc. 28, Ex. 4, McKay Aff., Exs. A & B). This repair included the refurbishment of Engine 481-615's hot section and its Stage 2 HPT blades (Id.). Northland Power hoped to save money by refurbishing the blades rather than replacing them (Id., Ex. 3, Focke Dep.). Therefore, in January 1993, Kvaerner began the repair of Engine 481-615's hot section, shipping the blades to Chromizing's California facilities for refurbishing.

The repair and refurbishment of Engine 481-615's hot section was expected to take some time, and since Spare Engine 691-025 was not yet completely adapted for Northland Power's use, Northland Power was one engine short at its generating stations. Nevertheless, knowing that the new hot section for Spare Engine 691-025 was available for use, Northland Power conceived of a plan to avoid entering into a lengthy lease arrangement. The plan involved the interchange of hot sections from Spare Engine 691-025 and Engine 481-615.

First, Northland Power asked Kvaerner to install the new hot section components Kvaerner had just finished assembling for Spare Engine 691-025 into the engine it currently owned, Engine 481-615. With the new hot section installed, Engine 481-615 could go back into operation as early as February 1993. Then, once Kvaerner and Chromizing finished their repair and refurbishment of the old hot section from Engine 481-615, that old hot section from Engine 481-615 would be placed into Spare Engine 691-025.

The Parties signed a Purchase Agreement related to Spare Engine 691-025 on June 16, 1993 (hereinafter, "1993 Purchase Agreement") (see doc. 21, Ex. A), and Kvaerner delivered Spare Engine 691-025 to Northland Power on June 22, 1993. Northland Power placed the engine into service at its Cochrane generating station. One year and two days later, on June 24, 1994, Spare Engine 691-025 stopped running. Within hours, a Northland Power employee determined that the engine had failed due to a broken Stage 2 HPT blade. Between June 25 and June 27, 1994, an investigator for Northland Power's insurance carrier, BI & I, inspected the failed engine and confirmed the Northland Power employee's original finding.

Northland Power then shipped the failed engine from Ontario to Kvaerner's Ohio facility where, on July 7 and 8, 1994, Kvaerner employees disassembled the engine in the presence of Northland Power and BI & I representatives. Northland Power's insurance claim, submitted to BI & I on March 21, 1995, described the preliminary findings of this group:

The incident was caused by the failure of a Stage 2 HPT blade at 2/3 of its length, measured from the root. This blade destructed all of the other Stage 2 HPT blades and the Stage 2 HPT nozzle assembly beyond salvage. The incident caused compressor blade tip rubbing which resulted in aluminum splatter potentially obstructing the cooling passages of Stage 1 HPT nozzles and blades. Additionally Stage 2 HPT debris moved upstream damaging Stage 1 HPT blades and downstream damaging the turbine midframe (TMF) and the [Low Pressure Turbine (LPT) ].

(doc. 21, Ex. B). Later, investigators determined that GE had originally manufactured this blade and that Chromizing had refurbished the blade as subcontractors for Kvaerner in 1993.

While the investigation of the failed blade continued, Northland Power asked Kvaerner to repair the failed gas generator engine. Kvaerner completed the repair, and Northland Power reinstalled Spare Engine...