On Appeal From the United States District Court For the Western District of Pennsylvania (Pittsburgh), Civil Action No. 86-448.
Seitz,*fn* Stapleton, and Cowen, Circuit Judges.
This appeal presents a modern version of an age-old problem: reconciling the mutually exclusive interests of riparian landowners. See generally Morton J. Horwitz, The Transformation of American Law 32-53 (1977). Pursuant to a contract with the Pennsylvania Department of Transportation (PennDOT), National Engineering & Contracting Co. (National), an Ohio corporation, built a bridge on the Beaver River, downstream from Beaver Valley Power Corp.'s (Beaver Valley) hydroelectric power station. After construction was completed, Beaver Valley, a Pennsylvania corporation, brought a diversity suit against National claiming trespass, negligence, and breach of contract. Beaver Valley asserted that, in building a dam for the bridge construction, National raised the level of the river, flooding Beaver Valley's station and otherwise impeding its ability to generate power. National prevailed on its motion for summary judgment on the ground that, under Pennsylvania law, the government contractor defense barred Beaver Valley's claims. The district judge also denied Beaver Valley's cross-motion for summary judgment, which was premised on the theory that National's construction of the dam was negligent per se and that Beaver Valley was a third-party beneficiary of the contract between National and PennDOT. These cross appeals followed. We will reverse the summary judgement granted in favor of National and affirm the denial of Beaver Valley's motion.
In the early 1980s, PennDOT decided to replace a bridge on the Beaver River, near the city of Beaver Falls. PennDOT hired Michael Baker Jr., Inc. (Baker) to draft plans for the project. The plans drafted by Baker (the Baker Plans) encompassed, among other things, a provision for the building of one or more cofferdams -- temporary structures used in bridge-building to "dewater" the area around piers under construction and for use as a working platform. The Baker plans were sent to PennDOT by Baker in October 1982, and PennDOT thereafter forwarded them to the Pennsylvania Department of Environmental Resources (DER) to obtain a permit for constructing the bridge.*fn1 The permit was required by the Pennsylvania Dam Safety and Encroachment Act (the Dam Act), 32 P.S. § 693 et seq. In January 1983, the DER approved PennDOT's application based on the Baker plans, "with the understanding that the work shall be performed in accordance with the maps, plans, profiles and specifications filed with and made part of the application." App. at 224. The DER permit was also conditioned upon approval by the Army Corps of Engineers. The permit stated that if work was not completed before December 31, 1985, the permit would become "null and void." App. at 226.*fn2
After obtaining this permit, PennDOT solicited bids on the project. Appellee National was awarded the job, and a written contract was finalized on October 13, 1984. The contract did not incorporate by reference the Baker plans or any other plans. The contract did, however, contain a provision concerning the building of a cofferdam. National was required to submit a plan "detailing the location of the cofferdam and the materials to be used in its construction." Further, National had to "re-apply for any permits required by the appropriate regulatory agencies" if the submission "[differed] substantially" from the plans previously approved by the Army Corps of Engineers.*fn3 App. at 222.
National submitted narrative descriptions and drawings indicating the size, materials, location, and timing of the cofferdams it proposed to build. PennDOT, in a response to this submission dated January 24, 1985, "[concurred] with the general cofferdam sequence scheme submitted" but asked National to address various comments it had written on the plans and noted generally that the plans did not "describe [the] work in sufficient detail." App. at 519. On February 7, 1985, National submitted amended plans regarding the cofferdams. Among other things, these plans stated that the "present time schedule" called for the removal of the East-bank cofferdam by the end of July 1986. App. at 240. These amended plans were approved by PennDOT on February 26.
National began construction in March 1985. Beaver Valley claims, and has support in the record for, two kinds of damage caused by the cofferdams. In November 1985, heavy flooding of the Beaver River occurred, causing damage to Beaver Valley's power station and occasional shutdowns. The record supports Beaver Valley's position that the cofferdams exacerbated the flooding. National does not categorically deny this, but argues that the "contribution of the cofferdam to the flooding [was] questionable" because the flooding was caused by heavy rains that breached the dam. App. at 213.
Beaver Valley's other form of damage is entirely uncontested. To generate hydroelectric power, the water must fall from an upper pool (above the hydroelectric dam) to a lower pool (below the hydroelectric dam). The amount of hydroelectric power generated by a plant is directly proportional to the vertical distance, or "head," between those pools. When a cofferdam is in place downstream from a dam, it raises the level of the water upstream, thereby raising the level of the lower pool, while the level of the upper pool remains the same. The "head" is thus reduced. It follows that Beaver Valley generated less power as long as a cofferdam was in place and this, of course, would adversely affect its revenues. National does not controvert these assertions.
Beaver Valley asserts that it contacted National on numerous occasions, but that National refused to take any steps to alleviate Beaver Valley's problems. National admits conversations with some of Beaver Valley's employees, but denies that it was asked to provide "relief from the cofferdam." App. at 213.
After several months of construction, in an undated submission to PennDOT, National asked to revise its East-bank cofferdam plans. The submission called for widening this cofferdam to 24 feet and lengthening it one pier-width (about 120 feet). Although National's submission noted the last step to be the "complete [removal]," App. at 269, of the East-bank cofferdam, no deadline was articulated. In a response dated July 25, 1986, PennDOT approved the revision "as noted," app. at 268, the quoted phrase an apparent reference to comments (presumably those of a PennDOT employee) written directly on National's submission indicating approval and further noting that National "must have standby equipment to breach [the] dam in case of high water." App. at 269.
The record supports Beaver Valley's contention that the last use of the East-bank cofferdam occurred in October 1986. Beaver Valley also asserts, and National acknowledges, that the entire East-bank cofferdam was not removed until June 1987, although National argues that part of the delay was caused by PennDOT.
In September 1986, Beaver Valley brought suit in the United States District Court for the Western District of Pennsylvania. It sought damages, as well as a mandatory injunction requiring the removal of river obstructions, based on three theories: trespass, negligence, and breach of contract, the latter based on the premise that Beaver Valley was a third-party beneficiary of National's contract with PennDOT. National impleaded Baker, claiming that if National was liable to Beaver Valley, Baker was liable to National because of its design of the cofferdams. National also moved for dismissal on the ground that PennDOT was an indispensable party that could not take part in the lawsuit on account of the eleventh amendment. The motion was denied.
The district judge requested the parties to file motions for summary judgment to narrow the issues for trial. Baker filed a motion for full summary judgment, and Beaver Valley and National filed motions for partial summary judgment. Beaver Valley contended that it was entitled to judgment as to liability as a matter of law. It argued that the contract between National and PennDOT made Beaver Valley a third-party beneficiary, and that the contract was breached when National's construction of the cofferdams caused damage to Beaver Valley. Beaver Valley also argued that National had committed negligence per se through its violation of certain provisions of the Dam Act.
National's brief in opposition to Beaver Valley's motion asserted that any damage Beaver Valley may have sustained was the result of aspects of the bridge construction that were specified by PennDOT and that the government contractor defense therefore defeated Beaver Valley's claims. National's own motion for partial summary judgment argued that Beaver Valley, in constructing its power station, had not complied with a local ordinance. Accordingly, National urged that the latter, rather than any negligence on National's part, was the proximate cause of any flood damage incurred by Beaver Valley.
Baker argued that summary judgment should be entered in its favor because any damage incurred by Beaver Valley was the result of National's noncompliance with the Baker plans, not any fault in the Baker plans themselves.
The district judge granted summary judgment in favor of National solely on the basis of the government contractor defense. It concluded as follows:
It is undisputed that defendant's contract with a governmental agency, PennDOT, mandated the placement of the cofferdams, and that the cofferdams were constructed in accordance with the plans and specifications supplied by PennDOT. Therefore, plaintiff can recover only by establishing negligence or willful misconduct. There is no suggestion that the cofferdams were erected in other than a competent and workmanlike fashion; it is the fact that they were constructed, rather than the manner of construction, which caused plaintiff's injuries.
Mem. & Order at 3, No. 86-448 (W.D.Pa. June 16, 1988) (citations omitted; emphasis in original).
The district judge then rejected Beaver Valley's claim that, if PennDOT violated the Dam Act by continuing construction with an expired DER permit, or by failing to abide by the terms of the permit, the government contractor defense did not apply. The district judge also dismissed Beaver Valley's assertion that National had not complied with the DER permit by failing to have standby equipment capable of breaching the cofferdams in the event of high waters. Finally, the district court rejected Beaver Valley's third-party beneficiary theory on the ground that the contract between PennDOT and National did not suggest an intent by the contracting parties to confer third-party beneficiary status upon Beaver Valley.
Accordingly, the district judge granted National's motion, treating it, however, as a motion for full, rather than partial, summary judgment. The judge denied Beaver Valley's ...