court rejected LILCO's argument that the type of economic damages it was seeking was somehow not encompassed by VII.E.3.
A. The Doctrine of Collateral Estoppel Prevents LILCO From Relitigating Whether the Contract Bars Recovery for the Damages it Seeks in this Litigation
The doctrine of collateral estoppel, or issue preclusion, prevents relitigation of an issue which is identical to one necessarily decided in a prior action and which the parties were afforded a full and fair opportunity to litigate. Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 44 (2d Cir. 1992). At issue in this case, is whether LILCO is seeking the same types of damages here as it sought in Imo.
At oral argument and in its papers to the Court, LILCO strenuously argues that collateral estoppel should not apply because in Imo, LILCO only sought damages relating to "losses in connection with Shoreham's operation or nonoperation," whereas no such damages are claimed in the case at bar. Accordingly, LILCO suggests that the Imo case did not necessarily decide whether the contract language at issue bars the types of damages LILCO now seeks from SWEC.
A review of the types of damages sought by LILCO against SWEC in Imo and the types of damages sought against SWEC in this case belies LILCO's position. In Imo, LILCO sued SWEC for breach of contract, breach of warranty, professional malpractice and negligence. In the case at bar, LILCO is suing SWEC for breach of contract, professional malpractice, negligence and gross negligence. Additionally, in Imo, LILCO alleged the following damages: (1) the purchase price of the diesel generators; (2) the cost of investigating the diesel problems; (3) the cost of repairing and testing; (4) increased licensing costs; (5) increased costs of construction of Shoreham caused by the delays resulting from the diesel problems; (6) costs of replacing the defective diesels with alternative power generators; (7) costs of defending an action before the PSC and penalties assessed against LILCO as a result of the diesel problems; and (8) costs of future testing and monitoring of the diesel generators.
In the present case, LILCO alleges the following damages: (1) the cost of redesign and reconstruction of systems and components; (2) the cost of excessive labor and material charges; (3) additional overhead charges resulting from redesign, reconstruction and excess labor charges; (4) the cost of financing these LILCO expenditures; and (5) additional financing costs incurred by LILCO resulting from delays. Unlike LILCO, this Court cannot discern any meaningful distinction between the types of damages it alleged in Imo and the types of damages it now alleges against SWEC.
In Imo, LILCO alleged that SWEC misdesigned diesel generators and sought as damages the cost to repair that equipment together with increased construction and delay costs. In this case, LILCO alleges that SWEC misdesigned other systems and components and seeks as damages the repair costs together with increased construction and delay costs. Thus, this Court comes to the inescapable conclusion that collateral estoppel does apply to this case and LILCO cannot relitigate whether the contract language at issue bars the damages it seeks. Accordingly, the claims for damages that LILCO now asserts against SWEC must be dismissed
B. The 1973 Amendment Applies to Damages Incurred Prior to 1973
LILCO argues that even if this Court finds that collateral estoppel applies, it should not dismiss those claims for damages that arose prior to 1973. In 1973, the parties amended the contract to add the risk allocation language ruled on by the Imo court. The amendment, however, was not signed until 1975. Although signed in 1975, the amendment contains language indicating that it is "effective as of May 1, 1973." LILCO maintains that this language means that the limitation of liability found in the amendment only applies to breaches by SWEC that occurred after May 1, 1973.
There is nothing in the relevant provisions to support LILCO's position. To the contrary, the provisions contain no language imposing such a temporal limitation. VII.E.1 clearly and unambiguously states that "SWEC's liability . . . for personal injury . . . and property damage . . . arising out of SWEC's performance of services under the Agreement shall be limited . . . to proceeds of insurance." There is no language limiting this clause to SWEC's services after May 1, 1973. Likewise, VII.E.3 contains no language limiting this provision to damages caused after May 1, 1973. Had the parties intended such a temporal limitation to apply, they could have said so. They did not. This court will not read into these provisions a time limitation that is not there. See Collard v. Incorporated Village of Flower Hill, 52 N.Y.2d 594, 439 N.Y.S.2d 326, 331, 421 N.E.2d 818 (Ct. App. 1981) (where the language chosen by the parties contains no inherent ambiguity, courts will not, under the guise of judicial construction, imply additional requirements to relieve a party from a disadvantage resulting from the express terms of the contract).
The effective date language that LILCO relies on had its genesis in the fact that the amendment was negotiated in 1973,
but was not executed until 1975. LILCO cannot now transform the plain meaning of this language to create an ambiguity where none exists. This Court therefore finds, as a matter of law, that the risk allocation language found in the 1973 amendment applies to all damages alleged herein, no matter when they arose.
C. Under New York Law. LILCO Cannot Maintain a Claim for Gross Negligence Where the Damages it Seeks are Economic in Nature
Finally, LILCO argues, that at the least, its claims against SWEC stemming from its allegations of gross negligence must survive, because New York law does not allow parties to contract away claims of gross negligence. See Gross v. Sweet, 49 N.Y.2d 102, 424 N.Y.S.2d 365, 367, 400 N.E.2d 306 (Ct. App. 1979); but see Calvin Klein, Ltd. v. Trylon Trucking Corp., 892 F.2d 191, 195 (2d Cir. 1989) (Under New York law, "carriers can contract with their shipping customers on the amount of liability each party will bear for the loss of a shipment, regardless of the degree of carrier negligence."). However, even if LILCO is correct, its claims must still be dismissed because New York does not allow a party to transform a breach of contract action into a tort action.
LILCO cannot avoid the clear and unambiguous contractual limitations of liability simply by casting it contract claims in tort garb. As the Second Circuit has definitively held, New York law does not recognize a tort cause of action when only economic loss is sought. County of Suffolk v. Long Island Lighting Co., 728 F.2d 52, 63 (2d Cir. 1984); see also Carmania Corp. v. Hambrecht Terrell Int'l, 705 F. Supp. 936, 938-39 (S.D.N.Y. 1989) (buyer under contract for architectural services could only recover in contract where only economic loss alleged); Bellevue South Assoc. v. HRH Constr. Corp., 78 N.Y.2d 282, 574 N.Y.S.2d 165, 170, 579 N.E.2d 195 (Ct. App. 1991).
Moreover, this rule applies regardless of whether the claim is couched in terms of negligence or gross negligence. See Clark-Fitzpatrick, Inc. v. Long Island R.R., 70 N.Y.2d 382, 521 N.Y.S.2d 653, 657, 516 N.E.2d 190 (Ct. App. 1987) (gross negligence claim dismissed where only economic damages claimed). Since LILCO has characterized all of its damages as economic, its gross negligence claim must therefore fail as a matter of law.
LILCO's argument that New York recognizes tort causes of action where the defendant owes a duty of care independent of the contract misses the point. If LILCO had alleged tort-like injuries, instead of economic damages, SWEC's status as architect/engineer, with its independent duty of care imposed by law, would have allowed for a tort recovery, regardless of the fact that a contract exists between LILCO and SWEC. But LILCO did not and apparently cannot allege the type of injury necessary to support a tort recovery. Accordingly, LILCO's gross negligence claim must be dismissed.
For the above-stated reasons, defendant's renewed motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is hereby granted. The Clerk of the Court is directed to close the above-referenced case.
LEONARD D. WEXLER
UNITED STATES DISTRICT JUDGE
Dated: Hauppauge, New York
December 13, 1993