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LONG ISLAND LIGHTING CO. v. STONE & WEBSTER ENGG.

December 13, 1993

LONG ISLAND LIGHTING COMPANY, Plaintiff,
v.
STONE & WEBSTER ENGINEERING CORPORATION, Defendant.



The opinion of the court was delivered by: LEONARD D. WEXLER

 WEXLER, District Judge

 Long Island Lighting Company ("LILCO"), plaintiff in the above-referenced action, brought suit against Stone & Webster Engineering Corporation ("SWEC") for breach of contract, negligence, professional malpractice, and gross negligence in connection with SWEC's work as the Architect-Engineer and as the Construction Manager and Constructor of the Shoreham Nuclear Power Station ("Shoreham"). Presently before the Court is SWEC's renewed motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons stated below, defendant's motion is granted.

 I. BACKGROUND

 This action continues a long line of litigation stemming from the failure of Shoreham. In 1967, LILCO entered into a written agreement with SWEC, in which SWEC was obligated to provide engineering, design, management and supervisory services on all phases of the Shoreham project. In 1973, the contract was amended and SWEC was made the Constructor of the project instead of the Construction Manager. At the same time, the amendment added language limiting SWEC's liability under the contract. Section VII.E.1 states:

 
SWEC's liability irrespective of fault or negligence for the loss or damage to LILCO's property including the plant, or to any third party for personal injury or death and property damage, occurring during construction or thereafter and arising out of SWEC's performance of its services under the Agreement shall be limited at contract or at law to the proceeds from the insurance placed by SWEC and LILCO. . . . Upon completion of construction of the Project, LILCO agrees to, and does hereby release Stone & Webster, its employees, agents, contractors and subcontractors from any liability, whether or not caused by negligence, for loss or damage to LILCO's property including the plant. . . .

 Section VII.E.3 states:

 
Neither SWEC nor vendors, contractors or subcontractors shall be liable to LILCO, either individually or jointly and irrespective of whether caused by negligence, for loss of anticipated profits, interest, loss by reason of shutdown or nonoperation of the Project or other facilities, or special or consequential loss or damage, arising from any cause whatsoever. . . .

 LILCO sought damages from SWEC for all injuries it claimed to have suffered as a result of the diesel problems. These damages included: (1) the price of the diesels; (2) the cost of investigating the diesel problems; (3) the cost of repair and testing; (4) increased licensing costs; (5) the cost of replacing the defective diesels with alternate power generators; and (6) the cost of future testing and monitoring to insure reliable operations of the diesels. LILCO also sought to amend its complaint to allege the following types of damages against SWEC: (1) the increased costs of construction of Shoreham allegedly caused by the diesel problems; and (2) the cost of defending an action before the Public Service Commission ("PSC") and the "penalties" assessed against LILCO by the PSC as a result of the diesel problems.

 SWEC successfully moved to dismiss the claims against it in the district court on the ground that the contract language found in the amendment barred LILCO's suit. The Second Circuit summarily affirmed the district court stating only that they had

 
reviewed LILCO's claims against SWEC, and conclude that they were properly dismissed in view of the unambiguous language in the parties' contract. Accordingly, we affirm the dismissal of LILCO's claims for substantially the reasons stated by the district court in LILCO III, 668 F. Supp. at 242-44.

 SWEC argued in the Imo case that clauses VII.E.1 and VII.E.3 operated to shift the risk of loss to LILCO. LILCO, on the other hand, contended that it sought only direct economic damages from SWEC and therefore neither section was applicable. According to LILCO, section VII.E.1 was inapplicable because that section applies only to injury to property and persons. LILCO argued that there is a distinction between the economic damages it was Suing for and the property damage referred to in VII.E.1. *fn1" Moreover, LILCO also argued that VII.E.3 only limits SWEC's liability for consequential damages, not for the direct economic damage it was seeking.

 The district court disagreed with LILCO and dismissed all of LILCO's claims against SWEC. Long Island Lighting Co. v. Imo-Delaval Inc., 668 F. Supp. 237, 244 (S.D.N.Y. 1987) (Goettel, J.). Although the district court found that the bulk of LILCO's claims were for economic damages, it recognized that at least some of LILCO's claims were for property damage. Thus, the court stated that, "Lilco's remedy for any claims for property damage, i.e., damage to the diesels themselves, whether caused by negligence, malpractice or otherwise, is limited to the insurance placed by it and SWEC." Id. Accordingly, to the extent that LILCO was attempting to recover for damage to the diesels themselves, the court held that VII.E.1 barred such recovery. ...


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