American Society Of Mechanical Engineering (ASME) Versus Hydrolevel Corp.

Conflicts Of Interest And Engineering Codes Of Ethics

Introduction To The Case

"A conflict of interest is like dirt in a sensitive gauge," one that cannot only soil one person's career, but can also taint an entire profession. Thus, as professionals,engineers must be ever alert to signs of conflict of interest. The case of the American Society of Mechanical Engineers (ASME) vs. Hydrolevel Corp. shows how easily individuals, companies, and professional societies can find themselves embroiled in expensive legal battles that tarnish the reputation of the engineering profession as a whole.

In 1971, the engineering firm of McDonnell and Miller requested an interpretation of the ASME Boiler and Pressure Vessel ("BPV") Code from the ASME Boiler and Pressure Vessel Codes Committee. Although initially undisclosed by them, McDonnell and Miller used the response to their inquiry to show that a boiler control device competitor, the Hydrolevel Corp., was selling a device not in compliance with the ASME BPV Code.

T.R. Hardin, chairman of the ASME committee and employee of the Hartford Steam Boiler Inspection and Insurance Company in Connecticut, wrote the original response to McDonnell and Miller's inquiry. ASME's interpretation was used by McDonnell and Miller salesmen as proof of Hydrolevel's noncompliance. Subsequently, Hydrolevel never acquired sufficient market penetration for sustaining business, and eventually went bankrupt.

As a result, Hydrolevel sued McDonnell and Miller, the Hartford Steam Boiler Inspection and Insurance Company, and ASME on the basis of restraint of trade. Hydrolevel's lawyers argued that two key ASME subcommittee members acted not only in the self-interest of their companies, but also in violation of the Sherman Anti-Trust Act.

McDonnell and Miller and the Hartford Steam Boiler Inspection and Insurance Company settled out of court, but the litigation against ASME went all the way to the Supreme Court where, on a 6-3 decision, the Court found in favor of Hydrolevel on the liability issue. Following a damages retrial, the case was settled for $4.75 million in favor of Hydrolevel.

Essays #1 through #4 available on the web site in RESOURCES will have relevant background information.

Questions:

(1) How could McDonnell and Miller have avoided the appearance of a conflict of interests (both Eugene Mitchell and John James)?

(2) What was T.R. Hardin's responsibility as chairman of the BPV Code Heating Boiler Subcommittee? How could he have handled things differently to protect the interests of ASME?

(3) What can engineering societies do to protect their interests once a conflict of interest is revealed?

(4) Was the final judgment against ASME fair? Why or why not?

(5) Have ASME's revised conflict-of-interest procedures addressed the problem fully? Why or why not?

(6) What are the responsibilities of each individual engineer as a professional?

(7) What role can societies play in protecting the integrity of the engineering profession as a whole?

American Society Of Mechanical Engineers (ASME)

B-PV Code Heating Boiler and Pressure Vessel Committee

Secretary, Committee - W. Bradford Hoyt

Chairman, Heating Boiler Subcommittee - T.R. Hardin

Member, Heating Boiler Subcommittee - John James

Hartford Steam - McDonnell

Boiler Inspection - Miller

Insurance Company

Vice President for Sales - Eugene Mitchell

Vice President - T.R. Hardin

Vice President for Research - John James

ASME vs. Hydrolevel Cast Of Characters

Eugene Mitchell: Mitchell was Vice President for Sales, McDonnell and Miller. He initially had the idea of appealing to ASME BPV Committee, and he took this idea to John James, Vice President for Research at McDonnell and Miller.

John James: James was Vice President for Research, McDonnell and Miller. He was also on the ASME BPV Code Subcommittee which was responsible for heating boilers. He recommended that he and Mitchell discuss their idea with T.R. Hardin, Chairman of the ASME BPV Code Heating Boiler Subcommittee, at a dinner meeting in Chicago. The meeting was originally scheduled for other business.

T.R. Hardin: Hardin was both Chairman of the BPV Code Heating Boiler Subcommittee and Vice President for Hartford Steam Boiler Inspection and Insurance Company. He wrote the original response to McDonnell and Miller's inquiry. McDonnell and Miller salesmen used Hardin's response to imply that the Hydrolevel cutoff valve was dangerous.

W. Bradford Hoyt: Hoyt was Secretary of the Boiler and Pressure Vessel Committee. He directed the letter of inquiry from McDonnell and Miller to the Subcommittee Chairman, T.R. Hardin.

Chronology Of The Boiler and Pressure Vessel Codes

1971: Hydrolevel receives contract from Brooklyn Union Gas.

McDonnell and Miller, Inc., request an interpretation of the ASME Boiler and Pressure Vessel (B-PV) Code from the ASME Boiler and Pressure Vessel Codes Committee.

April 1971: Dinner meeting between James, Mitchell, and Hardin, where discussion of code interpretation was discussed.

April 12, 1971: McDonnell and Miller make a formal request, in writing, for ASME code interpretation.

April 29, 1971: Hardin responds to McDonnell and Miller request.

March 23, 1972: Hydrolevel requests an ASME review and ruling correction.

May 1972: ASME Subcommittee meets to discuss Hydrolevel inquiry.

June 9, 1972: ASME makes a second response to code in question.

August 23, 1975: Hydrolevel files suit against McDonnell and Miller, Inc., ASME and the Hartford Steam Boiler Inspection and Insurance Company, charging them with conspiracy to restrain trade under the Sherman anti-trust law. All but ASME settle out of court.

February 2, 1979: Jury returns guilty verdict. Hydrolevel Chief Executive Officer dies of heart attack when the news reaches him in the hospital.

April 1981: ASME takes the case to the Supreme Court.

May 17, 1982: High Court votes 6-3, finding ASME guilty of anti-trust violations.

ASME Code Of Ethics Of Engineers

The Fundamental Principles

Engineers uphold and advance the integrity, honor, and dignity of the Engineering profession by:

I. using their knowledge and skill for the enhancement of human welfare;

II. being honest and impartial, and serving with fidelity the public, their employers and clients; and

III. striving to increase the competence and prestige of the engineering profession.

The Fundamental Canons

1.Engineers shall hold paramount the safety, health and welfare of the public in the performance of their professional duties.

2.Engineers shall perform services only in areas of their competence.

3.Engineers shall continue their professional development throughout their careers and shall provide opportunities for the professional development of those engineers under their supervision.

4.Engineers shall act in professional matters for each employer or client as faithful agents or trustees, and shall avoid conflicts of interest.

5.Engineers shall build their professional reputation on the merit of their services and shall not compete unfairly with others.

6.Engineers shall associate only with reputable persons or organizations.

7.Engineers shall issue public statements only in an objective and truthful manner.

Board, Professional Practice and Ethics

IEEE Code Of Ethics (Revised October 1990)

We, the members of the IEEE, in recognition of the importance of our technologies in affecting the quality of life throughout the world, and in accepting a personal

obligation to our profession, its members and the communities we serve, do hereby commit ourselves to the highest ethical and professional conduct and agree:

1.to accept responsibility in making engineering decisions consistent with the safety, health, and welfare of the public, and to disclose promptly factors that might endanger the public or the environment;

2.to avoid real or perceived conflicts of interest whenever possible, and to disclose them to affected parties when they do exist;

3.to be honest and realistic in stating claims or estimates based on available data;

4.to reject bribery in all its forms;

5.to improve the understanding of technology, its appropriate application, and potential consequences;

6.to maintain and improve our technical competence and to undertake technological tasks for others only if qualified by training or experience, or after full disclosure of pertinent limitations;

7.to seek, accept, and offer honest criticism of technical work, to acknowledge and correct errors, and to credit properly the contributions of others;

8.to treat fairly all persons regardless of such factors as race, religion, gender, disability, age, or national origin;

9.to avoid injuring others, their property, reputation, or employment by false or malicious action;

10.to assist colleagues and coworkers in their professional development and to support them in following this code of ethics.

ASME vs. Hydrolevel: Ethical Issues Of The Case

1.Be on the lookout for conflict of interests: what are the responsibilities of every engineer?

2.What are the roles of professional societies and their codes of ethics in protecting the integrity of the engineering profession?