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POTOMAC ELEC. POWER CO. v. WESTINGHOUSE ELEC. CORP

November 21, 1974

POTOMAC ELECTRIC POWER COMPANY, Plaintiff,
v.
WESTINGHOUSE ELECTRIC CORPORATION, Defendant



The opinion of the court was delivered by: PARKER

 PARKER, District Judge.

 Potomac Electric Power Co. (PEPCO), a District of Columbia corporation, seeks compensatory and punitive damages from Westinghouse Electric Corporation (Westinghouse), a Pennsylvania corporation, arising from an alleged contract breach for the manufacture and sale of a steam turbine-generator. The dispute stems from the failure and malfunction of the unit located at PEPCO's Morgantown Generating Station at Newberg, Maryland.

 The complaint alleges negligence, gross negligence, misrepresentation, breach of contract to repair or replace, breach of warranties, and breach of express guarantees. In response to the complaint, Westinghouse relies upon various defenses and contends particularly that the pleading fails to state a cause of action and that the plaintiff is estopped from asserting any claim and has waived any right to consequential damages by virtue of the express provisions of the contract. This Court has jurisdiction pursuant to 28 U.S.C. ยง 1332, there being diversity of citizenship and the amount in controversy exceeding the sum of $10,000.

 Following extensive discovery by the parties the defendant moved for summary judgment pursuant to Rule 56, Federal Rules of Civil Procedure, contending that the pleadings, depositions, answers to interrogatories and admissions show that there was no genuine issue as to any material fact and that accordingly, it was entitled to judgment. Memoranda of law in support of and in opposition to the motion have been considered together with the pleadings, depositions, affidavits and oral argument of counsel.

 The Court concludes that there is no genuine issue as to any material fact and that the defendant is entitled to summary judgment as a matter of law.

 The contract negotiations between the parties began in 1966, extended over several years, and in 1970 were finally consummated in the State of Pennsylvania. *fn1" The machinery was manufactured and delivered to PEPCO in Pennsylvania.

 In the summer of 1970 the turbine generator was placed in commercial operation in the State of Maryland. A few months later, on November 29, 1970, a malfunction developed causing substantial damage to the turbine portions of the unit. As a consequence, the unit was out of service until June of 1971. While other problems subsequently developed in 1971 and 1972, causing the unit to be shelved from service for short periods of time, PEPCO's major claim stems from the breakdown of the machinery in November 1970.

 THE CONTRACT PROVISIONS

 
". . . for special, or consequential damages, such as, but not limited to, damage or loss of other property or equipment, loss of profits or revenue, loss of use of power system, cost of capital, cost of purchased or replacement power, or claims of customers of Purchaser for service interruption. . . ."

 Within the framework of this commercial transaction the Court perceives no valid legal reason why PEPCO should not be held to the clear and express provisions of the written agreement between the parties. Warranty and limitation of liability clauses such as found in the present contract, which restrict PEPCO's remedies to the repair and replacement of non-conforming parts and limit Westinghouse's liability, regardless of its negligence in causing such nonconformities, are valid and enforceable and have been consistently upheld by the courts. They are also consistent with Sections 2-316(4) and 2-719(1)(a) and (3), Uniform Commercial Code. *fn4" Provisions such as those precluding PEPCO from recovering consequential damages have likewise been upheld as valid and enforceable. Applying Pennsylvania law, the following cases are instructive: Southwest Forest Industries, Inc. v. Westinghouse Electric Corp., 422 F.2d 1013 (9th Cir.), cert. denied, 400 U.S. 902, 91 S. Ct. 138, 27 L. Ed. 2d 138 (1970); Wyatt Industries, Inc. v. Publicker Industries, Inc., 420 F.2d 454 (5th Cir. 1969); K&C, Inc. v. Westinghouse Electric Corp., 437 Pa. 303, 263 A.2d 390 (1970). Other courts have reached the same conclusion: United States ex rel. Westinghouse Electric Corp. v. Marietta Manufacturing Co., 339 F. Supp. 18 (S.D.W.Va. 1972); Fire Association of Philadelphia v. Allis Chalmers Manufacturing Co., 129 F. Supp. 335 (N.D.Iowa 1955); McGregor & Werner Graphics, Inc. v. Cottrell Co., C.A. No. 517-72 (D.D.C., Dec. 21, 1972), aff'd (D.C.Cir., No. 73-1213, Feb. 14, 1974).

 THE NEGLIGENCE CLAIMS

 PEPCO charges Westinghouse with tortious conduct in: designing, planning and manufacturing of the malfunctioning unit; advising, monitoring and rendering technical services in connection with its operations, repairs and adjustments; and failing to warn of incidents previously disclosed to defendant relating to a similar unit.

 But, again the express and certain language of the contract should be noted. The warranty and limitation of liability provisions specifically relieved defendant from any liability based on negligence or tort. The "WARRANTY" clause provided in part that

 
"Correction of nonconformities, . . . shall constitute fulfillment of all liabilities . . . to the Purchaser, whether based on contract, negligence or otherwise with respect to, or arising out of such equipment." (emphasis added).

 Likewise, the "LIMITATION OF LIABILITY" clause of the contract provided that

 Exculpatory clauses, such as those agreed to by Westinghouse and PEPCO, have been held valid and enforceable by the courts of the State of Maryland *fn5" where the generator is located as well as by the courts of the State of Pennsylvania and of this jurisdiction. Winterstein v. Wilcom, 16 Md.App. 130, 293 A.2d 821 (1972); Eastern Avenue Corp. v. Hughes, 228 Md. 477, 180 A.2d 486 (1962); Southwest Forest Industries, Inc., supra, (applying Pennsylvania law); Dilks v. Flohr Chevrolet, Inc., 411 Pa. 425, 192 A.2d 682 (1963); McGregor & Werner Graphics, Inc., supra, (applying District of Columbia law). In Eastern Avenue Corp., supra, the Court of Appeals of Maryland observed, "Almost all of the courts that have passed on the question have held exculpatory clauses valid . . ." (citations omitted). 180 A.2d at 488.

 Furthermore, the testimony of PEPCO's negotiating officers, Herbert (pp. 69-70) and Cadwallader (pp. 181-183), shows clearly that PEPCO was aware of those provisions of the contract that Westinghouse would not be responsible for any damages suffered by PEPCO arising from negligence by Westinghouse.

 PEPCO asserts that its claim should be upheld despite the exculpatory clauses because defendant's conduct was grossly negligent and/or willful and wanton. Neither of the PEPCO officials who testified, however, could point out any facts sustaining a claim that Westinghouse acted in a deliberate, willful, wanton, reckless or grossly negligent manner for the purpose of causing injury to PEPCO (Herbert, pp. 78-80; Cadwallader, pp. 235-239). *fn6"

 Additionally, there appears to be little doubt that in a civil negligence case, the Maryland courts do not accept the concept of gross negligence. *fn7" In Eastern Shore Public Service Company v. Corbett, 227 Md. 411, 177 A.2d 701 (1962), the appeals court considered an instruction by the trial court that it was the jury's "function 'to determine whether or not the said defendant fulfilled its duty of exercising the very highest degree of care (italics ours) practicable ...


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