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Singer Co., Link Simulation Systems Division v. Baltimore Gas & Electric Co.

Court of Special Appeals of Maryland
9 U.C.C. Rep. Serv. 2d (West) 41, 558 A.2d 419, 79 Md. App. 461 (1989)
ELI5:

Rule of Law:

Electricity contained in a utility's distribution system prior to metering does not constitute 'goods' under the Uniform Commercial Code (UCC). Furthermore, limitation of liability clauses in utility tariffs requiring 'willful default or neglect' shield utilities from liability for ordinary negligence, requiring proof of intentional acts or knowing disregard of duty.


Facts:

  • In 1982, Singer Company opened a manufacturing facility in Columbia, Maryland, which utilized computer simulators dependent on a constant supply of electricity.
  • Singer contracted with Baltimore Gas & Electric (BG&E) to supply power to the facility.
  • From 1984 through 1986, Singer experienced numerous power outages and interruptions at the facility.
  • Singer regularly reported these outages to BG&E, but BG&E initially did not disclose the specific cause.
  • In August 1986, BG&E sent a letter to Singer admitting the outages were caused by failures in an underground cable and lightning damage to transformers.
  • BG&E's service tariff, approved by the Public Service Commission, contained a provision stating BG&E was not liable for supply interruptions unless due to 'willful default or neglect.'

Procedural Posture:

  • Singer filed a complaint against BG&E in the Circuit Court for Howard County alleging breach of contract, negligence, and breach of UCC warranties.
  • BG&E filed a motion to dismiss or, alternatively, for summary judgment on all counts.
  • The Circuit Court dismissed the UCC implied warranty claims.
  • The Circuit Court granted summary judgment in favor of BG&E on the common law contract and negligence claims, ruling they were barred by the statute of limitations.
  • Singer appealed the judgment to the Court of Special Appeals of Maryland.

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Issue:

1) Is electricity within a utility's distribution system considered a 'good' under the UCC? 2) Does the statute of limitations bar claims for ongoing service interruptions if the initial breach occurred outside the statutory period? 3) Does a tariff exempting a utility from liability except for 'willful default or neglect' require a showing of more than ordinary negligence?


Opinions:

Majority - Judge Garrity

No to the first issue, Yes to the second, and Yes to the third. Regarding the UCC claim, the Court held that electricity remaining in a distribution system, having not yet passed through a meter to be converted into a usable voltage, is not a 'good' under Title 2 of the UCC, and thus implied warranties do not apply. Regarding the statute of limitations, the Court determined that because BG&E had a continuing contractual obligation to supply power, each specific power outage constituted a separate breach; therefore, the statute of limitations runs anew for each breach, allowing Singer to sue for damages incurred within the three-year window. Finally, regarding the tariff, the Court reasoned that 'willful default or neglect' is ambiguous, but public policy dictates limiting utility liability to keep rates reasonable. Consequently, the Court construed the phrase to require 'intentional omission' or 'knowing disregard' of duty, rather than simple negligence.



Analysis:

This decision is pivotal in Maryland commercial and utility law for three reasons. First, it establishes a bright-line rule that raw, unmetered electricity in distribution lines is not a 'good,' protecting utilities from strict UCC warranty claims regarding infrastructure failures. Second, it clarifies the 'continuing breach' doctrine, ensuring that plaintiffs are not time-barred from suing for recent failures of an ongoing service simply because problems began years ago. Third, and perhaps most significantly, it interprets ambiguous liability shields in utility tariffs in favor of the utility to protect the public interest in low rates, raising the bar for plaintiffs to prove 'willful' or 'knowing' misconduct rather than simple negligence to recover damages for outages.

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