Blueearth Biofuels Llc v. Hawaiian Electric Co. Inc.

• Decision Date: 08 February 2011
• Docket Number: Civ. No. 09–00181 DAE–KSC
• Parties: BLUEEARTH BIOFUELS, LLC, Plaintiff,v.HAWAIIAN ELECTRIC COMPANY, Inc.; Maui Electric Company, Ltd.; Aloha Petroleum, Ltd.; and Karl E. Stahlkopf, Individually, Defendants.
• Court: U.S. District Court — District of Hawaii

780 F.Supp.2d 1061

BLUEEARTH BIOFUELS, LLC, Plaintiff,

v.HAWAIIAN ELECTRIC COMPANY, Inc.; Maui Electric Company, Ltd.; Aloha Petroleum, Ltd.; and Karl E. Stahlkopf, Individually, Defendants.

Civ. No. 09–00181 DAE–KSC

United States District Court, D. Hawai‘i.

Feb. 8, 2011.

Jaime Olin, Michael K. Hurst, Tonya Parker, Gruber Hurst Johansen & Hail LLP, Dallas, TX, John S. Edmunds, Joy S. Omonaka, Ronald J. Verga, Edmunds & Verga, Honolulu, HI, Jonathan R. Childers, Gruber Hurst Johansen & Hail, Dallas, TX, for Plaintiff.C. Michael Moore, Gene R. Besen, Sonnenschein Nath & Rosenthal LLP, Dallas, TX, Clyde J. Wadsworth, Alston Hunt Floyd & Ing Honolulu, Honolulu, HI, Paul Alston, Alston Hunt Floyd & Ing, Honolulu, HI, for Defendants.

ORDER: (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS HAWAIIAN ELECTRIC COMPANY, INC., MAUI ELECTRIC COMPANY, LTD. AND KARL E. STAHLKOPF'S AMENDED MOTION TO DISMISS THE FOURTH, SIXTH, SEVENTH, NINTH, TENTH AND ELEVENTH CAUSES OF ACTION OF PLAINTIFF BLUEEARTH BIOFUELS, LLC'S THIRD AMENDED COMPLAINT AND; (2) GRANTING IN PART AND DENYING IN PART ALOHA PETROLEUM, LTD.'S MOTION FOR JUDGMENT ON THE PLEADINGS ON COUNTS SIX THROUGH TEN OF THE THIRD AMENDED COMPLAINT

DAVID ALAN EZRA, District Judge.

On February 7, 2011, the Court heard Defendants Hawaiian Electric Company, Inc. and Maui Electric Company, Ltd.'s (the “HECO/MECO Defendants”) Amended Motion to Dismiss the Fourth, Sixth, Seventh, Ninth, Tenth and Eleventh Causes of Action of Plaintiff BlueEarth Biofuels, LLC's Third Amended Complaint and Defendant Aloha Petroleum, Ltd.'s (“Aloha”) Motion for Judgment on the Pleadings on Counts Six through Ten of the Third Amended Complaint. John S. Edmunds, Esq., Michael K. Hurst, Esq., Jaime Olin, Esq., and Steven W. Hopkins, Esq., appeared on behalf of Plaintiff; Teri–Ann E.S. Nagata, Esq., and C. Michael Heihre, Esq., appeared at the hearing on behalf of Defendant Aloha Petroleum, Ltd. (“Aloha”); and Clyde J. Wadsworth, Esq., appeared at the hearing on behalf of the HECO/MECO Defendants. After reviewing the motions and the supporting and opposing memoranda, the Court: GRANTS IN PART and DENIES IN PART the HECO/MECO Defendants' Motion to Dismiss (Doc. # 392) and GRANTS IN PART and DENIES IN PART Aloha's Motion for Judgment (Doc. # 406). Specifically, the Court DENIES Aloha's Motion for Judgment and the HECO/MECO Defendants' Motion to Dismiss with respect to Count Nine and DENIES the HECO/MECO Defendants' Motion to Dismiss with respect to Count Eleven. Counts Four, Seven, Eight, and Ten of the Complaint are DISMISSED. Count Six is DISMISSED WITHOUT PREJUDICE.

BACKGROUND

This case involves failed plans to create and construct a biodiesel production facility on Maui. (Third Amended Complaint (“TAC”), Doc. # 65.)

In 2006, BlueEarth Biofuels, LLC's (“BlueEarth”), Hawaiian Electric Company, Inc. (“HECO”) and Maui Electric Company, Ltd. (“MECO”) began talks to jointly and exclusively develop a local biodiesel production facility to replace their use of petroleum diesel for power production. ( Id. ¶ 12; Doc. # 325, Ex. 166.) The new facility would produce biodiesel, which is derived from vegetable feedstock. ( Id.)

On September 27, 2006, BlueEarth executed Mutual Non–Circumvention and Non–Disclosure Agreements (“NDAs”) with both HECO and MECO. (TAC ¶¶ 14, 15.) These NDAs established, among other things, that: (1) confidential information given by one party to another would remain property of the originating party; (2) such confidential information would not be disclosed or used for any purpose by the receiving party, other than for evaluation of the Project; (3) any contacts would be exclusive and valuable contacts of the disclosing party; (4) the party receiving contacts would not enter into direct negotiations or transactions with contacts; and (5) neither party would solicit or accept any business from sources made available by one party to the other without the express written permission of the disclosing party. (Doc. # 269, Ex. A; id., Ex. B.)

After several months of negotiations, BlueEarth, HECO, and MECO signed a confidential Memorandum of Understanding (the “MOU”) detailing the plan for the “evaluation, funding and development” of the large-scale biodiesel production facility to be developed by a newly formed limited liability company, originally termed “Newco,” owned by the parties and located on MECO-owned land on Maui (the “Project”). (TAC ¶ 19; Doc. # 269, Ex. C.) Although the MOU was entered into between BlueEarth, HECO, and MECO, HECO's responsibilities in the MOU were expressly contemplated to be superceded by an unregulated subsidiary identified as “HUS” and were so designated by the MOU's terms. (Doc. # 269, Ex. C.) HUS was defined as “[b]oth HECO and the Unregulated Subsidiary[.]” ( Id.)

The MOU specified how the parties would proceed with the Project's planning, developing, permitting, funding, construction, and operation. ( Id.) The MOU also contained a provision in which the parties agreed to “work exclusively and in good faith with each other to develop” the Project. (Doc. # 269, Ex. C at 4.) The MOU explicitly contemplated future formal agreements in furtherance of the parties' business relationship, including a “Tolling Agreement” for the long-term sale of biodiesel produced by the Project. (TAC ¶ 21, n. 1; Doc. # 269, Ex. C at 2.) The Project was anticipated to be owned 51% by BlueEarth and 49% by HUS. (Doc. # 269, Ex. C at 1–3.) Specific formalities were left to an “Investment Agreement” to be entered into the parties at a later date. (Doc. # 269, Ex. C at 1–5.)

Subsequent to the signing of the MOU, two companies were formed: (1) the parties created the entity identified in the MOU as “Newco” and named the company BlueEarth Maui Biodiesel LLC (“BEMB”) (Doc. # 316, Ex. 111 at H091481); and (2) HECO created the unregulated subsidiary contemplated in the MOU as HUS and named it Uluwehiokama Biofuels Corp. (“UBC”). (Doc. # 316, Ex. 117). The parties negotiated, and on February 4, 2008 signed, an Operating Agreement and an Investment Agreement (collectively, the “BEMB Agreements”) to govern the operation and ownership of BEMB as contemplated in the MOU. The BEMB agreements were entered into between BlueEarth, UBC and BEMB and were signed on February 4, 2008. (Doc. # 326, Exs. 102, 103.)

Sometime in 2007, BlueEarth began searching for potential fuel subcontractors who would manage and run logistics for a fuel terminal. (TAC ¶ 27.) The fuel terminal would be used to store and transfer the raw materials, such as palm oil, and fuel in connection with the Project. ( Id. 27–28.) One of the subcontractors approached by BlueEarth was Aloha.¹ ( Id.) BlueEarth also subsequently considered Aloha as a candidate for providing an equity investment in the Project. ( See Doc. # 300 Exs. 14 at BE022996, 93.) According to BlueEarth, over the course of the next two years BlueEarth spent over $1.2 million working to develop the Project. (TAC ¶ 25.)

As the Project progressed, BlueEarth and HECO worked jointly to develop the Tolling Agreement and originally engaged in negotiations with Energy Capital Partners (“ECP”) for this purpose.² (Doc. # 316, Ex. 104.) After the negotiations with ECP fell through, BlueEarth alleges that HECO, MECO, Karl Stahlkopf—HECO's then-Vice President of Energy Solutions and Chief Technology Officer—and Aloha began engaging in private negotiations concerning the development, investment, and ownership of the Project. (TAC ¶¶ 32–36.) BlueEarth further contends that HECO, MECO, and Aloha worked to circumvent the MOU and their respective NDAs in order to cut BlueEarth out of the Project altogether. ( Id.)

Eventually, negotiations for the Project fell through and plans ceased. ( Id. ¶ 39.) In early October 2008, BlueEarth filed the instant lawsuit in the Northern District of Texas, claiming that Defendants had violated the various NDAs and the Confidentiality Agreement and engaged in a scheme to circumvent BlueEarth's role in the Project. ( Id. ¶ 10.) On April 21, 2009, the case was transferred to this District. ( Id.)

On November 1, 2010, BlueEarth filed its Third Amended Complaint (“Complaint”). (Doc. # 387.) The Complaint alleges the following eleven causes of action:

• First: breach of contract (HECO NDA) against HECO (TAC ¶¶ 44–48);

• Second: breach of contract (MECO NDA) against MECO ( Id. ¶¶ 49–53);

• Third: breach of contract (MOU) against HECO and MECO ( Id. ¶¶ 54–59);

• Fourth: quantum meruit/unjust enrichment against HECO and MECO ( Id. ¶¶ 60–63);

• Fifth: breach of contract (Aloha NDA and Confidentiality Agreement) against Aloha ( Id. ¶¶ 64–68);

• Sixth: unfair competition under Haw.Rev.Stat. § 480–2 against HECO, MECO, Stahlkopf, and Aloha ( Id. ¶¶ 69–76);

• Seventh: tortious interference with existing contracts (all NDAs and the Confidentiality Agreement) as to all Defendants ( Id. ¶¶ 77–84);

• Eighth: tortious interference with existing contract (MOU) against Aloha ( Id. ¶¶ 85–89);

• Ninth: misappropriation of trade secrets against all Defendants in violation of Haw.Rev.Stat. § 482B–2 ( Id. ¶¶ 90–93);

• Tenth: conversion against all Defendants ( Id. ¶¶ 94–95);

• Eleventh: breach of fiduciary duty against HECO and MECO ( Id. ¶¶ 96–101).

On June 29, 2009, Defendant Aloha filed a Motion to Dismiss (Doc. # 74) and HECO/MECO Defendants and Karl Stahlkopf filed a joint Motion to Dismiss Plaintiff's Second Amended Complaint (Doc. # 75). On October 7, 2009, this Court issued an order denying without prejudice Defendant Aloha's Motion to Dismiss and HECO/MECO Defendants and Karl Stahlkopf's joint Motion to Dismiss and directed the parties to submit proposed questions to be certified to the Supreme Court of Hawai'i. (Doc. # 168.)

On September 14, 2009, BlueEarth filed a motion for a Temporary Restraining Order. (Doc. # 143.) On October 26, 2009, after significant briefing from both sides, this Court issued an order denying BlueEarth's motion. (Doc....