Public Service Ent. Group v. Philadelphia Elec.
| Decision Date | 24 August 1989 |
| Docket Number | Civ. A. No. 88-3214,88-3286. |
| Citation | 722 F. Supp. 184 |
| Court | U.S. District Court — District of New Jersey |
| Parties | PUBLIC SERVICE ENTERPRISE GROUP, INCORPORATED, and Public Service Electric and Gas Company, Plaintiffs, v. PHILADELPHIA ELECTRIC COMPANY, Defendant. ATLANTIC CITY ELECTRIC COMPANY, and Delmarva Power & Light Company, Plaintiffs, v. PHILADELPHIA ELECTRIC COMPANY, Defendant. |
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John B. LaVecchia, Kevin R. Gardner, Connell, Foley & Geiser, Roseland, N.J., J.A. Bouknight, Jr., Douglas G. Green, Michael F. Healy, Newman & Holtzinger, P.C., Washington, D.C., for plaintiffs Public Service Enterprise Group, Inc. and Public Service Elec. and Gas Co.
Richard C. Warmer, John H. Beisner, Saone B. Crocker, Stuart L. Fullerton, O'Melveny & Myers, Washington, D.C., Warren W. Faulk, John J. Mulderig, Brown & Connery, Westmont, N.J., for defendant Philadelphia Elec. Co.
George G. O'Brien, Bruce W. Clark, Dechert, Price & Rhoads, Princeton, N.J., Richard C. Rizzo, Fred T. Magaziner, Lawrence J. Goode, James P. Weygandt, Dechert, Price & Rhoads, Philadelphia, Pa., for plaintiffs Atlantic City Elec. Co. and Delmarva Power & Light Co.
This case involves a clash among powerful business interests. The four corporate parties have had a lengthy history of cooperation, but have now directed their energy to litigating claims against one another.
This litigation was fueled by the Nuclear Regulatory Commission's ("NRC") suspension of power operations at the Peach Bottom Atomic Power Station ("Plant" or "Station") in Delta, Pennsylvania. These operations were suspended on March 31, 1987 after the NRC was informed that operators at the plant were sleeping on duty; the NRC did not authorize their resumption until April 17, 1989, some time after oral arguments on this motion were heard.
This power outage darkened the demeanor of the plant's co-owners: Philadelphia Electric Company ("PECO"); Public Service Electric and Gas Company and its wholly-owned subsidiary Public Service Enterprise Group, Incorporated (collectively "PSE & G"); Atlantic City Electric Company ("Atlantic City"); and DelMarVa Power & Light Company ("Delmarva").
The Peach Bottom Nuclear Plant was built and continues to operate pursuant to an agreement among these four companies. The plant commenced commercial operations in 1974, and consists of two 1,065 megawatt nuclear reactors. The companies' respective ownership shares are, as established by the Owners Agreement entered into on November 21, 1971, as follows: PSE & G (42.49%), PECO (42.49%), Atlantic City (7.51%), and Delmarva Power (7.51%). Agreement at Article 2.1 (Appended to PSE & G's Complaint as Exhibit C).
The shutdown of the plant ignited the lawsuits sub judice. Under the agreements among the owners, PECO pledges to "operate and maintain the station" for the owners as if it were owned solely by PECO. Agreement Art. 12, § 12.1. In performing this role PECO is to "act as an independent contractor responsible for the result to be obtained, i.e., generation of power and energy at the Station, as economically and reliably as is practicable...." Id. PECO is the licensed operator for the Peach Bottom plant, and therefore subject to all applicable statutes and regulations, especially those administered by the NRC. PECO's Answer to PSE & G's Complaint at ¶¶ 13, 14, and 15.
On July 27, 1988, PSE & G filed a lawsuit alleging, inter alia, that PECO's conduct of the operations at Peach Bottom was in breach of the Owners Agreement and was also tortious. That same day a similar complaint was filed by Atlantic City Electric and Delmarva Power. The cases have been consolidated for most pre-trial purposes.
Jurisdiction over both complaints is founded on diversity of citizenship. 28 U.S.C. § 1332. Plaintiff Delmarva is a Delaware and Virginia corporation having its principal place of business in Wilmington, Delaware. Plaintiff Atlantic City Electric is a New Jersey corporation with its principal place of business in Pleasantville, New Jersey. Plaintiff PSE & G collectively consists of two New Jersey corporations having their principal places of business in Newark, New Jersey. Defendant PECO is a Pennsylvania corporation having its principal place of business in Philadelphia, Pennsylvania. Venue is proper because PECO is doing business and is licensed to do business in this district. 28 U.S.C. § 1391(c).
The essence of both complaints is as follows: (1) that the Owners' Agreement required PECO to efficiently maintain and operate the plant; (2) that PECO failed to do so and therefore the plant was shut down by the NRC for a lengthy period of time and suffered physical damage; (3) that PECO was aware of various problems at Peach Bottom, or should have been, and did not, as it was required to do, apprise the co-owners of the problems and, in fact, affirmatively misrepresented the status of the plant; and (4) as a result of PECO's actions the co-owners not only lost the power output they usually derive from Peach Bottom but incurred additional and substantial maintenance and repair costs, and fines from regulating authorities.
The plaintiffs seek redress in tort and contract. The Atlantic City/Delmarva complaint consists of two counts: count one, a breach of contract count, and count two, a tort count which includes allegations of negligence, gross negligence, wilful and wanton misconduct, fraudulent misrepresentation and negligent misrepresentation. PSE & G's complaint contains five self-styled "claims for relief": breach of contract, tort, failure to disclose, fraudulent misrepresentation and negligent misrepresentation. Compensatory damages and interest thereon are sought with respect to each of these tort claims, punitive damages are sought on the gross negligence, wilful and wanton misconduct, and fraud claims. PECO now moves to dismiss the tort claims contained in the plaintiffs' complaints.
PECO's argument on this motion to dismiss is that tort remedies do not exist under the applicable law, either that of Pennsylvania or New Jersey, when misfeasance in the performance of a contract is the basis for plaintiffs' claims and the only damages suffered are economic in nature. PECO contends that the plaintiffs' complaints fail to allege facts upon which a claim for relief in tort may be granted. Fed.R.Civ.P. 12(b)(6).
In ruling upon PECO's motion "we follow, of course, the accepted rule that a complaint should not be dismissed unless it appears beyond doubt that plaintiffs can prove no set of facts in support of their claims which would entitle them to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). The question before us becomes whether, after viewing the facts pleaded in the complaints in the light most favorable to the plaintiffs and resolving every doubt in their favor, their complaints state any valid claim for relief in tort. 5 C. Wright & A. Miller, Federal Practice and Procedure: § 1357, at 601 (1969). To the extent parties have presented factual evidence to support or oppose this motion to dismiss, we have excluded it from consideration and will not rely upon it, with the exception of the owners' agreement which was appended as an exhibit to the complaints. In any case, the exhibits submitted have primarily consisted of pleadings or opinions filed or produced for other cases the parties believe are analogous to this one.
The agreement essentially apportions the benefits and burdens of building and operating the plan in accordance with the ownership shares. That is, expenses, such as operations and maintenance costs, are allocated on the basis of ownership shares, as is the "hourly energy generation"; i.e., the power produced. Atlantic City/Delmarva Complaint ¶¶ 9, 15 ("ACE/DPL Complaint"), Agreement Art. 3, Art. 4. The agreement among the power companies leaves primary responsibility for the operation of Peach Bottom to PECO. However, Article 16 of the agreement establishes an owners' committee comprised of one representative from each company, the responsibilities of which include "coordinating the administration of all matters pertaining to the ... operation and maintenance of Peach Bottom...." Agreement Art. 16. The owners also established an "Operations and Maintenance Committee" ("O & M") to "review general performance and operations at Peach Bottom as well as proposed capital expenditures and expense budgets and to make recommendations on these matters to the Owners' Committee." PSE & G Complaint ¶ 11. These committees meet on a quarterly basis by telephone conference. Id.
PECO provides them with a daily status report on the plant's operations. Id.; Agreement Art. 13, § 13.1 ) In addition, PECO is required to assign "sufficient trained personnel to operate the Station in a reliable and economical manner, such personnel to be employees solely of PECO." Agreement Art. 12, § 12.1.
Moreover, under the agreement PECO is the NRC licensed operator of Peach Bottom and, as such, is responsible for the safe operation of the plant. ACE/DPL Complaint ¶ 16. As the licensed operator, PECO has a duty to the public and its co-owners to comply with the laws and regulations covering nuclear power facilities. ACE/DPL Complaint ¶ 17; PSE & G Complaint ¶ 13. Among its other legal duties PECO must comply with 10 C.F.R. §§ 55.54(k) by having a licensed or senior operator "present at the controls at all times during the operation of the facility." ACE/DPL Complaint ¶ 18; PSE & G Complaint ¶ 14, and with NRC Regulatory Guide 1.114 which provides:
In order for the operator at the controls of a nuclear power plant to be able to carry...
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