All Energy Corp. v. Energetix, LLC

• Decision Date: 14 November 2012
• Docket Number: No. 4:11–CV–00617–JEG.,4:11–CV–00617–JEG.
• Citation: 985 F.Supp.2d 974
• Parties: ALL ENERGY CORPORATION, Plaintiff, v. ENERGETIX, LLC; Energetix Holdings II, LLC; and Mitch Miller, Defendants.
• Court: U.S. District Court — Southern District of Iowa

985 F.Supp.2d 974

ALL ENERGY CORPORATION, Plaintiff,

v.ENERGETIX, LLC; Energetix Holdings II, LLC; and Mitch Miller, Defendants.

No. 4:11–CV–00617–JEG.

United States District Court,

S.D. Iowa,

Central Division.

Nov. 14, 2012.

J. Mark Brewer, Sondra Jones, Jurica Brewer & Pritchard, P.C., Houston, TX, Jonathan M. Gallagher, Sean P. Moore, Brian P. Rickert, Brown Winick Graves Gross Baskerville & Schoenebaum PLC, John David Hartung, Bradley Philip Schroeder, Hartung & Schroeder, Des Moines, IA, for Plaintiff.

Sarah Elizabeth Crane, Joseph A. Happe, Stanley J. Thompson, Davis Brown Koehn Shors & Roberts PC, Des Moines, IA, for Defendant.

ORDER

JAMES E. GRITZNER, Chief Judge.

Now before the Court are Motions to Dismiss for lack of personal jurisdiction and failure to state a claim and a Motion to Strike brought by Defendants Energetix Holdings II, LLC (Holdings), and Mitch Miller (Miller). Plaintiff All Energy Corporation f/k/a All Fuels and Energy Company (All Energy) resists. No party has requested a hearing, and the Court finds that none is required. The matter is now fully submitted and ready for disposition.

I. BACKGROUND¹

All Energy, a Delaware corporation with its principal place of business in Iowa, is engaged in the business of developing ethanol production facilities. Defendant Energetix, LLC, an Indiana limited liability company with its principal place of business in Michigan, is engaged in the biofuels industry. Holdings, of whom All Energy contends Energetix, LLC, is a subsidiary, is an authorized limited liability holding company in Indiana.²

On July 7, 2011, All Energy entered into a Non–Disclosure Agreement (NDA) also signed by Miller, a Michigan resident, manager of Energetix, LLC, and member of both Energetix, LLC, and Holdings (collectively, Energetix Entities). The NDA pertains to an ethanol production plant located in Rosholt, South Dakota (Rosholt Plant), a plant All Energy identified as an acquisition target in 2008. In preparation for its acquisition, All Energy's CEO and president, Dean Sukowatey (Sukowatey), and All Energy's COO and director, James Broghammer (Broghammer), extensively investigated the Rosholt Plant including its operations, finances, and profitability. Prior to the NDA's enactment, All Energy obtained a firm and binding commitment for $5,000,000 in financing from Community Business Lenders (CBL). All Energy also assembled a team of experienced managers for the operationof the plant consisting of Thomas Lane, Leon Anderson, Timothy Simonson, and Broghammer in March of 2011.

At the time of the NDA's execution, the Rosholt Plant was operated by United States Bankruptcy Trustee Thomas Stalnaker (Stalnaker) for the Tri–State Financial, LLC, bankruptcy estate in the United States Bankruptcy Court for the District of Nebraska (Bankruptcy Court). Stalnaker had issued, on June 30, 2011, a Notice of Abandonment indicating his intent to abandon the Rosholt Plant on July 21, 2011, if not sold.

At the July 7 meeting, in reliance on the NDA, All Energy first shared its confidential information regarding the Rosholt Plant with Miller and his brother, Mick Miller (Mick), both of whom were serving as agents for the Energetix Entities. The information shared included the plant's expected purchase price, deficiencies in the plant, capital required for repairs and maintenance, financial pro formas, lender-related materials, and confidential information received from Stalnaker. All Energy also introduced the key management personnel it had assembled. Following this meeting, on July 9, 2011, Miller authored and sent a document to All Energy containing the essential terms for the purchase of the Rosholt Plant.

Approximately one week after this initial meeting, Sukowatey met with Mick and Warren Anderson (Anderson), an attorney licensed in South Dakota, at an ethanol plant in Minnesota that is operated by the Energetix Entities and in which Holdings holds ownership interest. Though initially introduced to Sukowatey as an investor, Anderson ultimately disclosed that he represented a group of investors called the Breckenridge Group. At this meeting, which was held to further discuss the purchase of the Rosholt Plant, Miller and Jason Jerke (Jerke), another member of the Energetix Entities, participated by telephone.

Based on these communications and the NDA, the parties verbally entered into a joint venture to purchase the Rosholt Plant. The specifics of the arrangement, including the parties' respective ownership interests, management roles, and fees, were then negotiated and memorialized in a Final Term Sheet drafted and sent by Mick to Sukowatey on July 18, 2011. Pursuant to the Final Term Sheet, All Energy was responsible for providing its $5,000,000 financing commitment from CBL, and “Energetix” was to provide $4,000,000 in cash from investors it selected. Final Term Sheet ¶ 2, ECF No. 41–2. The parties also expressed their understanding that Stalnaker's authority to sell the plant expired on July 21, 2011; thus, the parties were to perform their respective obligations by July 20, 2011.

On July 19, 2011, All Energy and its attorney, Eric Newlan, participated in a telephone conference with Stalnaker, Miller, and Anderson—who then said he was appearing as counsel for Energetix, LLC, and on behalf of himself and the Breckenridge Group as investors. During the call, Stalnaker informed the parties that the Rosholt Plant's first secured creditor was meeting with another buyer. The following day, Miller wrote Sukowatey to disclose that the sought investors would not provide the requisite funds under the agreed upon ownership structure and fees; thereafter, the Energetix Entities failed to provide the promised $4,000,000. That same day, Stalnaker notified All Energy that he had entered into an agreement with another party, later identified as Red River Energy, LLC (Red River Energy), and its founders, Jack and Greg Carlisle, with whom he now was exclusively negotiating. On August 8, 2011, Red River Energy executed a Purchase Agreement for the Rosholt Plant at an agreed purchase price of $4,500,000, which Stalnaker represented to the Bankruptcy Court as the best purchase price available. The sale was finalized on September 21, 2011, at which time Anderson held himself out as the attorney for Red River Energy. Members of All Energy's intended management team—Thomas Lane, Leon Anderson, and Timothy Simonson—were then solicited to work for and are presently employed at the Rosholt Plant.

In the fall of 2011, Energetix, LLC, entered into a short-term Cold Idle Management Agreement with Red River Energy under which it presently operates the Rosholt Plant on a month-to-month extension. All Energy asserts that both Miller brothers and Holdings also manage the Rosholt Plant and that Defendants, along with Anderson, Robert Yaggie, and Mike Yaggie of the Breckenridge Group, have ownership interest in the plant. All Energy further asserts that Defendants had an existing relationship with Red River Energy's founders, Jack and Greg Carlisle.

Based on the NDA, All Energy filed its Complaint on December 27, 2011, alleging breach of contract, breach of implied covenant of good faith and fair dealing, civil conspiracy, intentional interference with a contract, and that Defendants were unjustly enriched.

The NDA contains a forum selection clause stipulating that “[a]ll actions in connection with [the NDA] shall be brought only in the state or federal courts sitting in Des Moines, Iowa,” and further provides that the NDA “shall be governed by and construed in accordance with the laws of the State of Delaware.” Mutual Non–Disclosure Agreement (NDA) ¶ 14(a), ECF No. 41–1. Also included in the NDA are non-solicitation, non-circumvention, and confidential information provisions. The non-solicitation provision provides as follows:

During the term of this Agreement and for a period of twenty four (24) ³ months thereafter, neither party hereto shall, directly or indirectly, recruit, solicit or otherwise induce or influence any person or entity which is, or was at any time during the term of this Agreement, a customer, supplier, employee, consultant, sales agent or independent contractor of the other party hereto or any other person or entity which has a business, agency or employment relationship with such other party or its affiliates to discontinue or reduce the extent of such relationship.

Id. ¶ 12. The parties further agreed under the non-circumvention provision that the parties would not, without the written consent of All Energy, “solicit, contact, negotiate, or form any agreements with” All Energy's “acquisition target,” the Rosholt Plant. Id. ¶ 6. The parties also agreed to “maintain complete confidentiality regarding [All Energy's] business contacts, and w[ould] disclose such Business Sources only to named parties pursuant to the express written permission of [All Energy].” Id.

The NDA defines confidential information as “any and all information and documents provided by the Disclosing Party to the Receiving Party, either directly or indirectly ... unless such information has been explicitly designated by the Disclosing Party as not Confidential Information.” Id. ¶ 1. The provision further enumerates the inclusion of “technical data, trade secrets, plans for products or services, company or supplier lists, customer lists, customer information[,] marketing plans, ... [and] financial documents or data” as confidential information. Id. An exception in the provision allows the disclosure of confidential information “to explore a potential financing between the parties” and to a party's own personnel for the purpose of evaluating potential business relationships and otherwise carrying out the agreement, but binds said personnel to the terms of the agreement or similar confidentiality measures. Id.

On February 8, 2012, Miller and Holdings filed a Motion to Dismiss for failure to state a claim with...