Blueearth Biofuels, LLC v. Hawaiian Electric Co. Inc.
| Decision Date | 25 May 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. HAWAIIAN ELECTRIC COMPANY, INC., AND MAUI ELECTRIC COMPANY, LTD., Counterclaim-Plaintiffs, v. BLUEEARTH BIOFUELS, LLC, AND LANDIS MAEZ, Individually, Counterclaim- Defendants. |
| Court | U.S. District Court — District of Hawaii |
LTD.'S MOTION FOR SUMMARY JUDGMENT AND; (5) DISMISSING
On April 25, 2011, the Court heard: (1) Plaintiff and Counterclaim-Defendant BlueEarth Biofuels, LLC and Counterclaim-Defendant Landis Maez's Motion to Dismiss First Amended Counterclaim of Hawaiian Electric Company, Inc. and Maui Electric Company, Ltd. ("BlueEarth's Motion"); (2) Defendants Hawaiian Electric Company, Inc., Maui Electric Company Ltd. and Karl E. Stahlkopfs Motion for Summary Judgment on the First, Second, Fourth, Sixth, Seventh, Ninth, Tenth, and Eleventh Causes of Action of the Third Amended Complaint ("HECO/MECO Defendants' Motion"); (3) Defendant Aloha Petroleum LTD.'s Motion for Summary Judgment on the Claim for Lost Profits and on theFifth through Tenth Causes of Action of the Third Amended Complaint ("Aloha's Motion"); and (4) Defendants Hawaiian Electric Company, Inc., Maui Electric Company, Ltd., and Karl E. Stahlkopfs Joinder in Defendant Aloha Petroleum, Ltd,'s Motion for Summary Judgment ("Joinder Motion"). John S. Edmunds, Esq., and Jamie Olin, Esq., appeared on behalf of Plaintiffs; Paul Alston, Esq., Clyde J. Wadsworth, Esq., C. Michael Hehre, Esq., and Calvert G. Chipchase, IV, Esq., appeared on behalf of Defendants. After reviewing the motion as well as the supporting and opposing memoranda, the Court: (1) GRANTS BlueEarth's Motion (Doc. # 425); (2) GRANTS IN PART and DENIES IN PART the HECO/MECO Defendants' Motion (Doc. # 437); (3) GRANTS IN PART and DENIES IN PART Aloha's Motion (Doc. # 433); (4) GRANTS the Joinder Motion (Doc. # 463) and; (5) DISMISSES Count Six of the Third Amended Complaint.
This case involves failed plans to create and construct a biodiesel production facility on Maui. (Third Amended Complaint ("TAC"), Doc. # 387; First Amended Counterclaim ("FACC"), Doc. # 411.)
In 2006, BlueEarth Biofuels, LLC's ("BlueEarth"), Hawaiian Electric Company, Inc. ("HECO") and Maui Electric Company, Ltd. ("MECO") begantalks jointly to 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.
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. (See "Operating Agreement," Doc. # 326, Ex. 102; "Investment Agreement," id., Ex. 103.)
Under the BEMB Agreements, BlueEarth and UBC were members of BEMB—the entity created to develop the project. (FACC ¶ 15; Operating Agreement at 40.) BlueEarth transferred to BEMB all of its development work while the HUS responsibilities were transferred to UBC. (FACC ¶ 15) The business affairs of BEMB, pursuant to the BEMB Agreements, were to be managed by and under the direction of a Board of Managers with three members selected by BlueEarth and two selected by UBC. (Operating Agreement at 28, 19).BlueEarth appointed Counterclaim Defendant Landis Maez ("Maez") as one of its three BEMB managers on February 4, 2008. (Id.)
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 thenegotiations 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.)
Simultaneously, the HECO/MECO Defendants allege that Maez negotiated a side-deal pursuant to which ECP paid him $50,000 to negotiate the Tolling Agreement on ECP's behalf. (FFAC ¶ 20.) The HECO/MECO Defendants allege that, notwithstanding the fiduciary duties Maez owed to BEMB and UBC, Maez accepted ECP's money without disclosing this deal to BEMB, UBC, HECO or MECO and that ECP's interest in the negotiations were adverse to those of BEMB, HECO and MECO. (Id. ¶ 21.) The HECO/MECO Defendants also allege that Maez falsified emails that he forwarded to HECO, MECO and others to make it appear that a deal was closer than it actually was. (Id. ¶ 23.)
Eventually, negotiations for the Project fell through and plans ceased. (TAC ¶ 39.) In early October 2008, BlueEarth filed the instant lawsuit in the Northern District of Texas, claiming that Defendants had violated the variousNDAs 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 September 13, 2010, UBC transferred and assigned to HECO all of UBC's claims against BlueEarth and Maez arising from or relating to (a) BlueEarth, (b) BEMB, (c)...
To continue reading
Request your trial