Niagara Mohawk Power Corp. v. Stone & Webster Engineering Corp.

125 F.R.D. 578, 14 Fed. R. Serv. 3d 1457, 1989 U.S. Dist. LEXIS 6059, 1989 WL 56687
CourtDistrict Court, N.D. New York
DecidedMay 25, 1989
DocketNo. 88-CV-819
StatusPublished
Cited by49 cases

This text of 125 F.R.D. 578 (Niagara Mohawk Power Corp. v. Stone & Webster Engineering Corp.) is published on Counsel Stack Legal Research, covering District Court, N.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Niagara Mohawk Power Corp. v. Stone & Webster Engineering Corp., 125 F.R.D. 578, 14 Fed. R. Serv. 3d 1457, 1989 U.S. Dist. LEXIS 6059, 1989 WL 56687 (N.D.N.Y. 1989).

Opinion

MEMORANDUM-DECISION AND ORDER

McCURN, Chief Judge.

I. Overview

The plaintiffs are five utilities who own, operate, and are tenants in common (together “the Cotenants”) of the Nine Mile Point 2 nuclear power plant in Scriba, New York. The Niagara Mohawk Power Corporation, (“Niagara Mohawk”) as the managing cotenant, has been the primary actor in coordinating efforts to develop the nuclear facility. The four other utilities, namely the Long Island Lighting Company, the New York State Electric & Gas Corporation, the Rochester Gas and Electric Corporation, and the Central Hudson Gas & Electric Corporation, played some lesser role in bringing Nine Mile Point 2 (“NMP2”) to completion. The plaintiffs have brought this action against Stone & Webster Engineering Corporation (“SWEC”), ITT Fluid Products Corporation, and ITT Fluid Technology Corporation (collectively “ITT”) for damages which allegedly resulted from the faulty design and construction of the Nine Mile Point 2 plant.

There are currently a number of motions pending before this court. This memorandum decision and order addresses the following: (1) the motion by plaintiff Niagara Mohawk for a protective order, pursuant to Fed.R.Civ.P. 26(c), to prevent the deposition by SWEC of attorney Steven J. Agresta; (2) the motion by defendant SWEC for a protective order, pursuant to Fed.R.Civ. P. 37(a), compelling William J. Donlon to answer certain deposition questions; (3) the cross motion by the plaintiffs, under Rule 26(c), for a protective order precluding the defendants use and/or retention of certain documents, and (4) the motion by ITT to compel the production of certain documents pursuant to Rule 37(a) Fed.R.Civ.P.

II. Background

In June of 1971 Stone & Webster Engineering Corporation was retained by the Cotenants as the architect/engineer and construction manager for a nuclear power plant planned to be built in upstate New York. The Nine Mile Point 2 nuclear power plant was to be owned by Niagara Mohawk and four other utilities. Construction commenced on the 1080 megawatt nuclear facility in 1975, the nuclear fuel was loaded in 1986, and NMP2 went into commercial operation in 1988. The plaintiffs hired ITT Grinnell Corporation in 1974 to perform field fabrication and erection of the piping at the nuclear facility. ITT Grinnell’s alleged successors in business, and the defendants in this suit, are ITT Fluid Products Corporation and ITT Fluid Technology Corporation (hereafter “ITT”).

On April 16, 1982, the New York Public Service Commission (the “PSC”) issued a decision stating that its future policy would be to permit Niagara Mohawk and the Co-tenants to recoup only those investments in NMP2 that were made prudently. Thereafter, Niagara Mohawk and the Cotenants retained Steven Agresta, a partner in the law firm of Swidler & Berlin, to represent it in an anticipated administrative proceeding before the PSC in which a determination would be made as to which of the capital costs of NMP2 were prudently incurred. This “prudence proceeding” would be of prime importance to the investor [582]*582owned utilities who were then in the process of constructing the Nine Mile Point 2 facility. Under the PSC’s regulatory scheme, investor owned utilities are only allowed to earn a profit and recoup costs on monetary disbursements which are “prudent.” Any non-prudent costs must be borne by the utilities’ shareholders rather than the customers. Moreover, the utilities bear the burden of proving the propriety of their capital investments. See generally, N.Y.P.S.C. Case 29124, Proceeding on the Motion of the Commission to Investigate the Prudence of Costs Incurred for the Construction of the Nine Mile Point 2 Nuclear Generating Facility, (July 3, 1985).

The PSC initiated a prudence proceeding into the costs of NMP2 on July 3, 1985. Attached to the PSC’s order were a number of interrogatories to which the utilities were required to respond within 120 days. The PSC staff and the utilities never actually litigated the matter before the Commission. Rather, on the 18th of September, 1985, the staff of the Public Service Commission and the Cotenants filed a joint motion proposing a settlement as to the amount of capital investment in NMP2 which would be deemed to have been prudently incurred.

Between November of 1985 and January of 1986 the Public Service Commission conducted evidentiary hearings on the proposed settlement. During these proceedings the Cotenants submitted testimony, discovery responses, and legal briefs. The PSC adopted a settlement on October 3, 1986, by which the utilities were permitted to place $4.16 billion of the costs of NMP2 into the rate base. According to the utilities this amounted to a disallowance of over $2 billion. The settlement is now on appeal to the Appellate Division of the New York State Supreme Court, preserving the possibility of remand to the PSC for a full prudence proceeding.

A key concern of the parties herein is the extent to which documents prepared in anticipation of the PSC prudence proceeding aré subject to discovery in this action. Many of the “prudence documents” are already possessed by defendant SWEC. In fact, SWEC, as the architect/engineer and construction manager of NMP2, was in possession of much of the factual information necessary to respond to the PSC prudence investigation. SWEC also participated in drafting substantial portions of these prudence documents. However, the ITT defendants did not assist in the drafting of any of these materials and currently possess only a limited number of same.

The Prudence Documents

A. The Project Management Book

In April of 1983, well before the PSC initiated the NMP2 prudence proceeding, the Co-tenants, Swidler & Berlin, and SWEC combined efforts to create documents which attempted to set forth facts and circumstances substantiating the costs of the Nine Mile Point 2 facility. This document, termed the “Project Management Book”, was to detail numerous aspects of the design and construction of NMP2 including: an overall description of the role of upper management; engineering and design; quality assurance; quality control; procurement; contract administration; document control; cost estimating and forecasting; construction management; the start-up process; testing, and planning. The Project Management Book (the “P.M. Book”) was created to assist the utilities in responding to any questions posed by the PSC as part of the prudence inquiry as well as in the affirmative assertion of their case before the Commission.

The P.M. Book was initiated by an April 1983 letter from Mr. William Donlon, the President of Niagara Mohawk, to Mr. Frank Reis, then President of SWEC, relaying the Co-tenants’ plans to assemble information in anticipation of the PSC prudence investigation. That letter stated in part:

We believe that the best way to document the prudent management of the project is to develop a book which would be a detailed history of the project management of NMP2. Such a book would describe, among other things, how engineering drawings were produced and processed, the methods for developing [583]

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Bluebook (online)
125 F.R.D. 578, 14 Fed. R. Serv. 3d 1457, 1989 U.S. Dist. LEXIS 6059, 1989 WL 56687, Counsel Stack Legal Research, https://law.counselstack.com/opinion/niagara-mohawk-power-corp-v-stone-webster-engineering-corp-nynd-1989.