Bordeaux Capital Inc. v. U.S. Methanol Corp., CIVIL ACTION NO. 2:18-cv-01262
| Decision Date | 28 May 2020 |
| Docket Number | CIVIL ACTION NO. 2:18-cv-01262 |
| Parties | BORDEAUX CAPITAL INC., Plaintiff, v. UNITED STATES METHANOL CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Southern District of West Virginia |
Before the Court is Defendant United States Methanol, LLC's ("USM LLC") Motion for Summary Judgment. (ECF No. 78.) For the reasons discussed more fully herein, the Motion, (ECF No. 78), is DENIED.
This action arises from a letter agreement between Plaintiff Bordeaux Capital, Inc. ("BCI") and Defendant United States Methanol Corporation ("USM Corp."). USM Corp. was incorporated on December 18, 2014, (ECF No. 79 at 11; ECF No. 89 at 2), with the "basic business plan [] to acquire out-of-use methanol plants in other parts of the world, relocate them to West Virginia, and produce and market methanol to customers in the United States." (ECF No. 79 at 11-12; ECF No. 89 at 2.) At all relevant times, USM Corp.'s principals and majority shareholders were Bradley Gunn and Richard Wolfli. (ECF No. 79 at 12; ECF No. 89 at 2.)
On September 28, 2015, USM Corp. obtained financing from KKCG Structured Finance Limited ("KKCG") to purchase shares in Slovenian companies that collectively owned a methanol manufacturing plant. (ECF No. 78-3.) Pursuant to a term sheet dated January 3, 2016 ("the Term Sheet"), USM Corp. and KKCG also negotiated the formation of a special-purpose entity, NewCo, to "finance, construct, own and operate the development and construction of two methanol processing facilities located in West Virginia (the 'Project'"). (ECF No. 78-5 at 2.) Under the Term Sheet, KKCG would make an equity investment of approximately $85,000,000 to finance the initial phase of constructing the two methanol plants. (Id.) In addition, USM Corp. was entitled to receive a development fee and reimbursement for its expenses incurred in developing the business plan. (Id. at 6.)
Meanwhile, in November 2015, USM Corp. retained BCI to perform financial advisory services. (ECF No. 79 at 13; ECF No. 89 at 2.) USM Corp. and BCI executed a letter agreement on January 13, 2016 (the "Engagement Letter"), wherein BCI agreed to raise financing for the Project in exchange for a percentage of financing received by USM Corp. (ECF No. 78-2.)
Thereafter, on January 29, 2016, KKCG and USM Corp. amended their original loan agreement by, among other things, increasing the loan amount by €5,371,943. (ECF No. 78-4.) KKCG and USM Corp. then executed the Term Sheet on February 5, 2016. (ECF No. 89-2 at 21-28.) As a result, USM LLC was formed on March 7, 2016, as the "NewCo" entity referenced in the Term Sheet.
On March 10, 2016, USM LLC and KKCG entered into a Limited Liability Agreement governing USM LLC (the "USM LLC Agreement"). (ECF No. 78-7.) The USM LLC Agreement created three classes of membership or ownership units in the company: Class A Units;Class B Units; and Incentive Units. (Id. at 13.) On the same day, KKCG made an initial capital contribution to USM LLC in the amount of $750,000 and a $85,000,000 capital commitment to USM LLC. In exchange, KKCG received 7,500 Class A Membership Units in USM LLC, which represented 100% of the Class A Membership Units. Mr. Gunn and Mr. Woifli each received Incentive Units in USM LLC. Class B Membership Units in USM LLC were not and never have been issued. (Id. at 51.)
Pursuant to the USM LLC Agreement, USM LLC is managed by a Board of Managers (the "Board"). (Id. at 27.) The Board is composed of five individuals, three of whom are designated by the Class A Members, and two of whom are designated by the Class B Members. (Id. at 29.) If there are no Class B Members, as was the case here, the final two managers are designated by the Incentive Members. (Id.) On March 10, 2016, KKCG, as the sole Class A Member of USM LLC, designated Karel Komarek, Katarina Kohlmayer, and Natalie Miller1 to the Board of USM LLC. In addition, Mr. Gunn and Mr. Wolfli, as Incentive members, designated themselves to the Board. (Id. at 52.)
On March 11, 2016, BCI invoiced USM Corp. for $677,521.66 for its services performed under the Engagement Letter. (ECF No. 79 at 21; ECF No. 89 at 3.) USM Corp. made partial payments on the invoice in the amount of $77,521.66 on May 24, 2016, and $50,000 on July 8, 2016. (ECF No. 79 at 22; ECF No. 89 at 7.) A total balance of $550,000 currently remains outstanding. BCI alleges that USM LLC promised to pay the remaining balance and, thus, BCI continued to perform services for USM LLC until the Engagement Letter was terminated onSeptember 6, 2017. (ECF No. 1 at ¶ 41 (Compl.).) When BCI inquired into the outstanding balance, USM LLC instructed BCI "that [its] only recourse was against USM Corp. (Id. at ¶ 9.)
On August 28, 2018, BSI brought this action against USM Corp., USM LLC, and Petrochemical Holdings Corporation ("PHC")2 (collectively, "Defendants"). BCI contends that "USM Corp. and USM LLC secretly and intentionally conspired to, and did, arrange their affairs so that all or substantially all of USM Corp.'s assets, including its intellectual property, business plan, bids, rights, employees, prospects and opportunities, including the Project, were transferred from USM Corp. (or PHC) to USM LLC (the 'Secret Agreement') for less than fair value, with the intention of leaving USM Corp. (now PHC) a shell company." (Id. at ¶ 24.) Based on these allegations, BCI asserts five causes of action against the Defendants for breach of contract, unjust enrichment, quantum meruit, intentional tort/fraud, and violations of the West Virginia Uniform Voidable Transactions Act, W. Va. Code § 40-1A-1, et. seq. ("WVUVTA"), (id at ¶¶ 43-62), for which it seeks compensatory and punitive damages, pre- and post-judgment interest, attorney fees and costs, and any other relief justified, (id. at 15).
USM LLC filed the present motion for summary judgment on December 20, 2019. (ECF No. 78.) BCI timely responded on January 13, 2020, (ECF No. 89), and USM LLC filed a timely reply on January 20, 2020,3 (ECF No. 91). BCI also filed a motion to file a sur-reply on February 7, 2020 and attached its proposed sur-reply as an exhibit thereto.4 (ECF No. 96.) As such, the motion is ripe for adjudication.
Summary judgment is appropriate when the moving party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A fact is material when it 'might affect the outcome of the suit under the governing law.'" Strothers v. City of Laurel, 895 F.3d 317, 326 (4th Cir. 2018) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "A genuine dispute arises when 'the evidence is such that a reasonable jury could return a verdict for the non-moving party.'" Id. (quoting Anderson, 477 U.S. at 248). "Thus, at the summary judgment phase, the pertinent inquiry is whether there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Variety Stores, Inc. v. Wal-Mart Stores, Inc., 888 F.3d 651, 659 (4th Cir. 2018) (alteration and internal quotation marks omitted).
"The burden is on the nonmoving party to show that there is a genuine issue of material fact for trial . . . by offering 'sufficient proof in the form of admissible evidence' . . . ." Guessous v. Fairview Prop. Invs., LLC, 828 F.3d 208, 216 (4th Cir. 2016). In ruling on a motion for summary judgment, this Court "view[s] the facts and all justifiable inferences arising therefrom in the light most favorable to the nonmoving party." Jones v. Chandrasuwan, 820 F.3d 685, 691 (4th Cir. 2016) (quoting Libertarian Party of Va. v. Judd, 718 F.3d 308, 312 (4th Cir. 2013)).
In Count One of the Complaint, BCI alleges that Defendants breached the Engagement Letter by failing to pay all fees owed to BCI for its services performed under the agreement. (ECFNo. 1 at ¶ 46.) Pursuant to the Engagement Letter, BCI is entitled to "Work Fees," "US Methanol-Sourced Funding Fees," and "BCI-Sourced Funding Fees" under the following conditions:
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