Dillon v. Novel Energy Sols.
| Decision Date | 08 May 2023 |
| Docket Number | 23-cv-162 (ECT/LIB) |
| Parties | Daniel Dillon, Plaintiff and Counter Defendant, v. Novel Energy Solutions L.L.C., a Minnesota Limited Liability Company, and Clifton D. Kaehler, an individual, Defendants and Counterclaimants. |
| Court | U.S. District Court — District of Minnesota |
Charlie R. Alden, Gilbert Alden Barbosa PLLC, Burnsville, MN for Plaintiff Daniel Dillon.
Patrick R. Martin and Colin H. Hargreaves, Ogletree Deakins Minneapolis, MN; and Rachel B. Cowen and Jean Morrow Edmonds, McDermott Will & Emery LLP, Chicago, IL, for Defendants Novel Energy Solutions LLC and Clifton D. Kaehler.
Plaintiff Daniel Dillon is a former employee and part-owner of Defendant Novel Energy Solutions, LLC. When Dillon's employment with the company ended in September 2022, Novel purchased Dillon's ownership interest. In this case Dillon claims that this buyout violated Novel's Operating Agreement and that, as a result, his ownership interest was significantly undervalued.
Dillon and Defendants have filed competing summary-judgment motions concerning the ownership-valuation issue. Defendants' motion will be granted, and Dillon's motion will be denied. The quantity of Dillon's ownership interest is no longer disputed, and, as a matter of law, Novel's buyout complied with the Operating Agreement.[1]
I[2]
Novel is headquartered in St. Paul; it develops land for solar infrastructure projects and constructs solar gardens and facilities. Compl. [ECF No. 1-1] ¶ 5. Novel hired Dillon as its general counsel on September 23, 2019, and he would serve in that role until his resignation on September 23, 2022. Id. ¶¶ 7, 69; ECF Nos. 39-2, 39-7, 35-2. During the hiring process, Kaehler told Dillon that equity in the company could be granted to him in connection with the position, but that details would be worked out at a later date. ECF No. 39 ¶ 2.
By May 2020, Kaehler had granted Dillon a 0.5% equity stake in Novel. ECF No. 39-1 at 1. In connection with Dillon's review in January 2021, Kaehler granted Dillon another 0.1% in vested equity due to his job performance. ECF No. 39-2. Kaehler then notified Dillon on June 17, 2022, that he would be granted 1% equity-not including the 0.1% he received at his January 2021 performance review-for a total of 1.1% equity in Novel. Id. At that time, 0.6% of his equity had vested, with 0.25% vesting upon the conclusion of his third full year of employment with Novel, and a final 0.25% vesting on the conclusion of his fourth year with Novel. Id.
Kaehler notified Dillon that he was being removed from his position as General Counsel on September 16, 2022-one week before his next round of equity was scheduled to vest. ECF No. 39-4. Kaehler told Dillon that due to “performance issues,” he would be “transitioned” to a position as Director of Business Affairs, and that his responsibilities would shift to “‘manag[ing] clients' and other general business matters.” Id.; ECF No. 39 ¶ 6. Kaehler also told Dillon that his equity vesting would pause until Kaehler saw how Dillon performed in the new position. ECF No. 39 ¶ 6. Dillon submitted his letter of resignation from Novel on September 23, 2022. ECF No. 35-2.
Novel's Operating Agreement gives Novel the option to purchase the ownership (or “Membership”) interest of an equity holder (or “Member”) on the occurrence of a “Triggering Event.” ECF No. 35-1 (“Operating Agreement”) § 7.5. As relevant here, Section 7.5 of the Operating Agreement provides:
Id. There is no dispute that Dillon's equity consists of Common Units he was granted, not provided in exchange for invested capital. ECF No. 35 ¶ 3. The Operating Agreement provides different equity-valuation methods depending on the Triggering Event. Operating Agreement § 7.5. If the triggering event is a Supermajority Vote to force the sale of a member's units, the value of the membership interest is based on the company's “Book Value.” Id. If the Triggering Event is a member's separation of employment, then the valuation method used is a stipulated value set by supermajority vote, which may then be challenged by the departing member with his own valuation performed by a licensed appraiser. Id. §§ 8.2, 8.4.
On December 30, 2022, Novel's board of governors adopted a resolution concerning Dillon's ownership interest. Relevant here, the resolution approved and adopted Dillon's admission as a member of Novel and, “in exchange for his employment services to [Novel],” issued “up to 50,450 Voting Common Units . . . to Dillon, which represent[ed] approximately 1.1% of the outstanding Membership Interests of [Novel.]” ECF No. 35-3. The resolution also memorialized the occurrence of a “Supermajority Vote” cast to force Dillon's sale-and Novel's redemption-of Dillon's entire 1.1% membership interest. Id. Novel provided Dillon with a notice of redemption, ECF No. 35-4, and tendered a check for $34,531.55, which represented Novel's calculated book value for Dillon's 1.1% equity interest. ECF No. 35-5. Dillon rejected the payment, ECF No. 34-2, and brought this case.
Dillon asserts claims across ten counts. The claims fall in three categories: (1) In his FMLA (Count VII) and MHRA (Count VIII) claims, Dillon alleges that Defendants interfered with his leave rights and discriminated against him for exercising his rights and on account of his disabilities. As noted, the Parties' motions do not implicate these claims. (2) Dillon asserts several claims challenging Defendants' ostensible failure to credit Dillon's 1.1% ownership interest in Novel. To this end, Dillon asserts claims for breach of contract (Count I), breach of the duty of good faith and fair dealing (Count II), declaratory judgment (Count III), and breach of fiduciary duty (Count VI). (3) Finally, Dillon asserts claims challenging the validity of the Supermajority Vote and the calculation of the value of his ownership interest. To this end, Dillon asserts claims for a “buyout” under the Operating Agreement (Count IV) or, alternatively, a buyout under Minn. Stat. § 322C.0701 (Count V), specific performance under the Operating Agreement (Count IX), and a declaratory judgment (Count X). For relief, Dillon seeks various forms of damages, a declaration that he “is the owner of 1.1% equity in Novel,” a buyout of his interest in compliance with the Operating Agreement, and attorneys' fees and costs. See Compl. at 23, ¶¶ 1-8.
II
Summary judgment is warranted “if the movant 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” only if its resolution might affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute over a fact is “genuine” only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. “The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [their] favor.” Id. at 255. Courts take a “slightly modified” approach when, as here, multiple parties have moved for summary judgment. Fjelstad v. State Farm Ins. Co., 845 F.Supp.2d 981, 984 (D. Minn. 2012). In resolving Dillon's motion, the record is viewed in the light most favorable to Novel and Kaehler, and in resolving Novel and Kaehler's motion, the record is viewed in the light most favorable to Dillon. See id. “[T]he filing of cross motions for summary judgment does not necessarily indicate that there is no dispute as to a material fact, or have the effect of submitting the cause to a plenary determination on the merits.” Young Am.'s Found. v. Kaler, 482 F.Supp.3d 829, 851 (D. Minn. 2020) (citations omitted), vacated and remanded on other grounds 14 F.4th 879 (8th Cir. 2021) (citation and internal quotations omitted).
The Parties narrowed the disputed issues through their briefing. The 1.1% quantity of Dillon's membership interest is no longer in dispute. In their opening brief, Defendants argued that the December 30, 2022, resolution issuing “approximately 1.1% of the outstanding Membership Interests of [...
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