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LONG ISLAND LIGHTING CO. v. TRANSAMERICA DELAVAL

October 27, 1986

LONG ISLAND LIGHTING COMPANY, Plaintiff,
v.
TRANSAMERICA DELAVAL, INC., Defendant



The opinion of the court was delivered by: GOETTEL

GOETTEL, D.J.:

Much has already been written in the continuing saga of the Shoreham Nuclear Power Station ("Shoreham"). This, unfortunately, is yet another chapter.

BACKGROUND

 In 1965, plaintiff Long Island Lighting Company ("LILCO") initiated plans to construct a nuclear power plant on Long Island. Pursuant to requirements of the Nuclear Regulatory Commission ("NRC"), the plant had to include a reliable, independent onsite power source capable of running cooling and various other systems necessary to assure the safe shutdown of the reactor in case of emergency. In December 1973, LILCO issued specifications and invited defendant Trans-america Delaval, Inc. ("TDI") to bid on the design and manufacture of three emergency diesel generators (the "diesels") for the Shoreham facility. On May 20, 1974, LILCO issued a purchase order, awarding TDI the contract to manufacture the diesels. The diesels were delivered to Shoreham in 1976, but were not installed until 1981. *fn1" In August 1983, during preoperational testing, the crankshaft in one of the three diesels broke. The other diesels were then inspected and cracks were found in their crankshafts as well.

 LILCO retained a consultant who determined that the crankshafts were undersized and, as a result, the torsional stresses occurring at normal operating engine speeds were excessive. The consultant discovered additional defects in the diesels, including cracks in the connecting rod bearings and cylinders.

 The 1983 diesel failure came under scrutiny by the New York State Public Service Commission (the "PSC") as part of its investigation into the increased costs and delays in the construction of Shoreham. The PSC had initiated its investigation in 1979, but separated it into two phases. The phase regarding costs began in August 1981. Hearings were . held in November 1981 and supplemental hearings in November 1983. On March 13, 1985, two PSC administrative law judges (the "ALJs") issued their recommended decision ("ALJs' Recommended Decision"), in which they concluded that LILCO had imprudently managed the construction of Shoreham and should be held responsible for a substantial portion of the resulting cost increases. On December 16, 1985, the PSC issued an Opinion and Order Determining Prudent Costs (the "PSC Opinion"), affirming the ALJs' conclusion. The PSC Opinion noted, however, that its finding of imprudence by LILCO did not preclude a judicial finding that TDI failed to meet all of its legal obligations to LILCO.

 LILCO filed this action against TDI in August 1985. The complaint sets forth eleven causes of action, including breach of contract, breach of warranty, fraud, negligence, strict products liability, and violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968 (1982). *fn2" TDI moves to dismiss the complaint on a variety of grounds. It asserts that LILCO's claims are untimely, should be barred by judicial and collateral estoppel, and fail to state claims upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6). *fn3" As discussed below, the defendant's motion is granted in part and denied in part.

 DISCUSSION

 In challenging the sufficiency of the complaint, the defendant bears the burden of proving that under no interpretation of the facts set forth in the complaint can the plaintiff succeed. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). For purposes of this motion, all of the plaintiff's allegations are deemed true and no claim can be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id.; Hughes v. Rowe, 449 U.S. 5, 10, 66 L. Ed. 2d 163, 101 S. Ct. 173 (1980).

 TDI first asserts the affirmative defenses of judicial and collateral estoppel as overall bars to LILCO's claims. The defendant then challenges each cause of action on one or more grounds. We consider TDI's general estoppel defenses before proceeding to examine its arguments against the plaintiff's individual claims.

 I. Affirmative Defenses

 A. Judicial Estoppel

 The doctrine of judicial estoppel allows a court to preclude a party from asserting a position contrary to one upon which it prevailed in a prior proceeding. *fn4" This doctrine, sometimes called "[p]reclusion by inconsistent positions," lB J. Moore, J. Lucas & T. Currier, Moore's Federal Practice § 0.405[8] at 239 (2d ed. 1984), protects judicial integrity by preventing a litigant from playing "fast and loose" with the court. Id. at 240. "The concern is to avoid unfair results and unseemliness." 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure 4477 at 779 (1981).

 LILCO took the position before the PSC that it should not be held responsible for the cost of the diesel-related delays at Shoreham because, regardless of the diesel problems, Shoreham could not operate without an emergency evacuation plan, which the relevant authorities refused to approve. Because approval of the emergency plan was beyond its control, LILCO disclaimed liability for the delay costs, and sought to pass these costs along to its customers.

 Initially, we note that LILCO was not successful in its position. The PSC barred LILCO from including in its rate base both the direct cost of the diesel failure and the cost of delays related thereto, since it found that the "failure of the diesels had a direct bearing on subsequent delays." PSC Opinion at 124. The direct cost of the diesel failure was estimated at $95 million. Id. at 103, 126. As for delay costs, the PSC concluded that Shoreham would have become operational in April 1984, had the diesels not failed in August 1983. Id. at 119 n.2. Therefore, the PSC required LILCO, not its customers, to absorb the delay costs from April 1984, to March 1986, by which time the diesels had been approved and Shoreham could have commenced operation had LILCO been able to obtain approval of an emergency evacuation plan. Id. at 119-25. The total diesel delay adjustment, not counting the $95 million direct costs, was calculated as $524 million. *fn5" Id., Appendix D at 2.

 Success in the prior proceeding is a necessary part of the doctrine of judicial estoppel. See Universal City Studios, Inc. v. Nintendo Co., 578 F. Supp. 911, 921 (S.D.N.Y. 1983), aff'd, 746 F.2d 112 (1984). Since LILCO did not previously succeed, it should not be estopped from asserting a position that may vary from its position before the PSC.

 Furthermore, we do not find LILCO's position before us particularly contrary to its argument to the PSC. A "superficial inconsistency must not be allowed to obscure an underlying consistency." 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4477 at 783-84 (1981) (foot-note omitted). LILCO argues that, since the PSC held it liable for diesel-related delay costs, it should be allowed to recover its loss from the party it claims was responsible for the diesel problems, TDI. Simply stated, LILCO is still asserting that someone other than itself is responsible for the delays in Shoreham becoming operational, and should bear the related expenses. This is not inconsistent with its argument to the PSC. It may seek to skin the cat two ways, but does not necessarily constitute playing "fast and loose" with the Court. Hence, we deny that part of TDI's motion to dismiss the complaint based on judicial estoppel.

 B. Collateral Estoppel

 TDI next asks us to give collateral estoppel effect to two decisions by panels of the Atomic Safety and Licensing Board ("ASLB"). On June 14, 1985, one ASLB panel approved the diesels for use at Shoreham. On August 26, 1985, another panel declined to grant LILCO an operating license for commercial operation at Shoreham because state and local authorities refused to cooperate in an evacuation plan. TDI contends that these findings preclude any liability on its part for the cost of delay in commercial operation of Shoreham. *fn6"

 In New York, the invocation of collateral estoppel requires "'an identity of issue which has necessarily been decided in the prior action and ... a full and fair opportunity to contest the decision said to be controlling.'" Murphy v. Gallagher, 761 F.2d 878, 882 (2d Cir. 1985) (quoting Schwartz v. Public Administrator, 24 N.Y.2d 65, 246 N.E.2d 725, 298 N.Y.S.2d 955, 960 (1969)). The proponent of estoppel must demonstrate the identicality of the issue, while the opponent must establish the absence of a full and fair opportunity to litigate. Ryan v. New York Telephone Co., 62 N.Y.2d 494, 467 N.E.2d 487, 478 N.Y.S.2d 823, 827 (1984).

 We find it unnecessary to analyze each segment of the test for applying collateral estoppel to the ASLB decisions because TDI has failed to meet its initial burden of demonstrating an identity of issue. The ASLB panels did not address the issue of responsibility for the increased costs at Shoreham. The fact that the diesels are now approved for use at Shoreham has no bearing on whether their previous failure caused increased construction costs. Similarly, the denial of an operating license because Shoreham lacks an approved emergency evacuation plan, does not resolve the issue of whether the diesel problems contributed to the difficulty of getting an emergency plan approved. *fn7" Consequently, the ASLB findings do not preclude LILCO from pursuing this suit against TDI for expenses incurred due to diesel-related problems. We therefore deny that part of TDI's motion to dismiss that rests on the purported collateral estoppel effect of the two ASLB decisions.

 TDI also asks that we give collateral estoppel effect to a finding by the PSC regarding LILCO's knowledge of the diesel problems. Since this particular collateral estoppel question is intimately linked with TDI's statute of limitations defense to ...


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