## Facts

- Several electric utilities jointly owned and operated the Beaver Valley Nuclear Power Station; Westinghouse designed and supplied the Nuclear Steam Supply Systems, including steam generators, under contracts executed in 1967 and 1972 after extensive negotiations by sophisticated parties.
- Each unit used three steam generators with Inconel “U”-tubes carrying radioactive water; Unit 1’s generators were installed in 1972 and Unit 2’s in 1981.
- Duquesne contended the parties bargained for steam generators with an expected service life of roughly 40 years, citing technical specifications referencing design considerations “based on a minimum station life of 42 years” and the difficulty of replacement.
- In the 1980s, Duquesne discovered corrosion and cracking in the tubes, with significant performance loss and the asserted need to replace the generators in less than 15 years of operation.
- Duquesne sued for breach of contract, breach of warranty, breach of the UCC duty of good faith, fraud, negligent misrepresentation, and civil RICO under 18 U.S.C. § 1962(b) and (c).

## Issues

1. Whether the contracts and incorporated technical specifications created an express warranty or contractual guarantee that the steam generators would last 40–42 years, such that early deterioration constituted delivery of nonconforming goods under the UCC.
2. Whether tort claims for fraud and negligent misrepresentation were barred or otherwise failed where the alleged injury was economic loss arising from contractual expectations in a negotiated commercial transaction.
3. Whether the RICO claims plausibly alleged a qualifying pattern of racketeering activity, causation, and an enterprise distinct from Westinghouse.
4. Whether the district court erred in granting summary judgment, entering judgment as a matter of law under Rule 50(a), or in trial rulings affecting the jury verdict.

## Decision

- The Third Circuit affirmed all district court orders and the final judgment for Westinghouse.
- The court held the contract did not include an enforceable 40–42 year life guarantee; the “station life” language functioned as a design assumption, not a warranty term.
- Without a proven longevity warranty, early degradation did not establish nonconformity under the UCC beyond the contract’s defined specifications and warranties.
- The court upheld dismissal of fraud and negligent misrepresentation claims because they did not rest on an independent duty or sufficiently proven actionable misrepresentations separate from the contractual allocation of risk, and the claimed harm was economic loss.
- The court upheld dismissal of the RICO counts for failure to establish required elements, including a qualifying pattern, causation, and structural requirements such as a distinct enterprise.
- The court found no reversible error in the jury instructions, evidentiary rulings, or denial of post-trial relief on the one claim tried to a jury.

## Legal Principles

- Express warranties under the UCC require specific affirmations of fact or promises that become part of the basis of the bargain; design-life references in technical specifications do not, by themselves, create a contractual guarantee of useful life.
- In complex commercial contracts negotiated by sophisticated parties, courts generally enforce the written allocation of risk and are reluctant to infer additional warranties beyond the contract’s terms.
- Economic-loss principles limit tort recovery for purely economic harm where the asserted wrong is not independent of the parties’ contractual relationship and negotiated remedies.
- Civil RICO liability requires proof of statutory elements, including predicate acts forming a pattern, proximate causation of injury, and compliance with enterprise requirements; generalized allegations tied to a contract dispute are insufficient.

## Conclusion

The court affirmed judgment for Westinghouse because the contracts did not expressly warrant a multi-decade steam generator lifespan, the asserted losses were contractual economic expectations not supporting separate tort remedies, and the RICO theories failed to satisfy statutory elements.


Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604 (3d Cir. 1995)