Quality Technology v. STONE & WEBSTER ENGINEERING

• Decision Date: 01 June 1990
• Docket Number: No. CIV-1-87-054.,CIV-1-87-054.
• Citation: 745 F. Supp. 1331
• Court: U.S. District Court — Eastern District of Tennessee
• Parties: QUALITY TECHNOLOGY COMPANY, Plaintiff, v. STONE & WEBSTER ENGINEERING COMPANY, INC., Stemar Corporation, Beta, Inc., and Steven A. White, Defendants.

745 F. Supp. 1331

QUALITY TECHNOLOGY COMPANY, Plaintiff, v. STONE & WEBSTER ENGINEERING COMPANY, INC., Stemar Corporation, Beta, Inc., and Steven A. White, Defendants.

No. CIV-1-87-054.

United States District Court, E.D. Tennessee, S.D.

March 27, 1989.

Opinion on Motion to Alter or Amend June 1, 1990.

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Harry L. Dadds and W. Ferber Tracy, Spears, Moore, Rebman & Williams, Chattanooga, Tenn., and Donna Keene Holt, Gilreath & Associates, Knoxville, Tenn., for plaintiff.

Edward S. Christenbury, Gen. Counsel, James E. Fox, Deputy Gen. Counsel, Justin M. Schwamm, Sr., Asst. Gen. Counsel, Robert C. Glinski, Asst. Gen. Counsel, Brent R. Marquand, Thomas C. Doolan, Helen de Haven, Tennessee Valley Authority, Knoxville, Tenn., for defendants.

MEMORANDUM

EDGAR, District Judge.

The defendants in this civil action have filed a motion to dismiss the plaintiff's complaint, or in the alternative, for summary judgment as to those claims therein. (Court File No. 31). In support of their motion, defendants have filed the affidavits of two present, and one former, TVA Office of Nuclear Power employees, as well as that of a TVA attorney. (Court File Nos. 32-35). The plaintiffs have responded in opposition to the defendants' motion (Court File No. 86), filing supporting affidavits and deposition exhibits. (Court File Nos. 89-93). This case was originally filed in the Circuit Court of Hamilton County, Tennessee and removed by the diverse defendants pursuant to 28 U.S.C. § 1441 upon their representations that the plaintiff's complaint alleges claims governed by federal law, and that the parties are diverse. 28 U.S.C. §§ 1331 and 1332. See Court File No. 2.

Factual Background

In 1985, the Tennessee Valley Authority (hereinafter "TVA") hired the plaintiff, Quality Technology Company (hereinafter "QTC"), to perform various contract services specifically related to interviewing TVA employees of the Watts Bar Nuclear Plant pursuant to an employee concern program established by TVA. This program was created in response to the many complaints the Nuclear Regulatory Commission ("NRC") received from TVA/Watts Bar employees regarding safety violations alleged to have occurred during construction of that nuclear facility. The contract between TVA and QTC, Contract No. TV-66317A (Exhibit 30, Court File No. 92) was entitled "Tennessee Valley Authority Contract for Personal Services," and provided that the contractor, QTC, would perform certain services for TVA "when and as requested by the Director of TVA's Nuclear Safety Review Staff (NSRS)...." The term of the contract was for one year, beginning on April 26, 1985. As indicated from the contract, those services included generally: conducting interviews of present and former TVA employees at Watts Bar, developing and implementing procedures for gathering and processing employee interviews confidentially, certain investigatory work necessitated by employed interviews and complaints, and reporting those results to the TVA while maintaining employee confidentiality.

As the TVA/QTC contract and working relationship progressed, QTC made its reports and answered to the TVA Nuclear Safety Review Staff, which in turn reported directly to the TVA Board of Directors. With regard to certain complaints of intimidation and harassment, QTC reported to the TVA Office of the General Counsel. As the employee concerns program developed, the volume of complaints and issues raised in the interviews drastically increased. As a result of the unexpected number of issues and complaints received, TVA and QTC modified the personal services contract to include additional funds and time for the performance of more investigatory services by QTC, necessitated by those complaints. See Exhibits 31-33.

In late 1985, TVA began to consider the alternative of creating its own internal program for identifying and addressing nuclear employee concerns. In an effort to establish its own program, TVA and QTC entered into a second contract for the services of QTC. This contract, No. TV-68705A, was separate and distinct from the original one-year contract to respond to employee complaints, and provided that QTC was to aid TVA in the development of its own in-house system for dealing with employee safety concerns. During this same period, TVA began to contemplate the need to modify the investigatory functions being performed by QTC under the original contract. In an effort to facilitate the investigation and resolution of the large number of employee safety concerns, the TVA General Manager proposed a change in the structure of the review program to create a "management review group." It was the purpose of this change to coordinate all pending investigations of safety-related concerns and complete their review within a six-month period. It is QTC's position that it was to be heavily involved in this new program, being assigned new responsibilities for investigating pending employee concerns pursuant to an agreement with TVA's general manager. QTC was asked by TVA's general manager to submit a contract modification proposal incorporating QTC's additional responsibilities, and did so in December of 1985.

It was during the following months of January and February of 1986 that defendant Steven White assumed his duties as Manager of TVA's Office of Nuclear Power pursuant to a contract between TVA and defendants Stone & Webster Engineering Co. and Stemar Corp. See Exhibits 49-55, Court File No. 92. White assumed the job of operating TVA's nuclear power program as a "loaned employee" (Exhibit 49), with his responsibilities and authority defined by the "Memorandum of Understanding" between the TVA Board of Directors and White. See Attachment to Exhibit 49, Court File No. 92. It is clear from this document that TVA clothed Steven White with very broad and "direct authority for the management, control and supervision of TVA's entire nuclear power program...." Id. at ¶ 2. As a result of White assuming control of TVA's nuclear power program, QTC asserts that drastic changes in the scope of QTC's responsibility under the original contract occurred. It is QTC's treatment by the Manager of the Office of Nuclear Power and those working directly for him pursuant to contract that gives rise to QTC's claims.

QTC's Claims

In its complaint, QTC alleges four causes of action against these individual and corporate defendants. QTC asserts state law causes of action based on the defendants' alleged inducement of TVA to breach its contract with QTC for continued personal services under contract No. TV-66317A. See T.C.A. § 47-50-109. QTC further alleges that the defendants tortiously interfered with QTC's business relationship with the TVA. QTC's third cause of action alleges that the defendants engaged in trade disparagement, an injury alleged to have resulted from certain remarks defendants White and a representative of Beta, Inc. made regarding QTC's job performance and White's dissatisfaction therewith. This is a claim of defamation under Tennessee law. Lastly, QTC asserts as its fourth cause of action that the defendants' alteration or termination of the TVA/QTC personal services contract resulted in a violation of QTC's Fifth Amendment rights under the Constitution to due process, where the defendants' actions denied QTC a property right in the performance of the contract in bad faith.

Plaintiff also seeks to amend its complaint to add a claim for deprivation of "liberty" interests under the Fifth Amendment. See Court File No. 84. The Court has not yet acted on this motion.

Defendants' Motion for Summary Judgment

Defendants' motion seeking dismissal of QTC's case, or in the alternative, summary judgment, will be treated as a motion for summary judgment pursuant to Fed.R. Civ.P. 56(c) due to the parties' and the Court's reliance upon affidavits and documents outside the pleadings. 10 C. Wright, A. Miller and M. Kane, Federal Practice and Procedure § 2713 (1983).

QTC asserts that the defendants failed to timely raise their affirmative defense of official and qualified immunity under Fed. R.Civ.P. 8(c). Professor Wright has stated the general rule that "a failure to plead an affirmative defense results in the waiver of that defense and its exclusion from the case." 5 C. Wright and A. Miller, Federal Practice and Procedure § 1278 (1969). However, he goes on to note that some federal courts limit this waiver provision to only those affirmative defenses noted in Rule 12(h). Id. In this circuit, it has been held "that immunity, whether qualified or absolute, is an affirmative defense which must be affirmatively pleaded; ... the failure to do so can work a waiver of the defense." Kennedy v. City of Cleveland, 797 F.2d 297, 300 (6th Cir.1986) (emphasis added). However, "where the matter is raised in the trial court in a manner that does not result in unfair surprise, ... the technical failure to comply precisely with Rule 8(c) is not fatal." Allied Chemical Corp. v. Mackay, 695 F.2d 854, 855-56 (5th Cir.1983), quoted in Lucas v. United States, 807 F.2d 414, 417 (5th Cir.1986). As noted in Lucas, "the defendant does not waive an affirmative defense if `he raised the issue at a pragmatically sufficient time, and the plaintiff was not prejudiced in its ability to respond.'" 807 F.2d at 418, quoting Mackay, 695 F.2d at 856.

As noted by other courts, "liberal pleading rules are equally applicable to the pleading of affirmative defenses." Baker v. City of Detroit, 483 F.Supp. 919, 921 (E.D.Mich.1979). The key to this analysis is apparently whether, absent asserting immunity as an "affirmative defense" in the pleadings, the parties otherwise had notice of the issue. As Professor Wright notes, "another highly relevant consideration is whether plaintiff will be taken by surprise by the assertion at trial of a defense not pleaded affirmatively by defendant." C. Wright and A. Miller, Federal Practice...