Drivetrain, LLC v. EverStream Solar Infrastructure Fund I LP (In re SunEdison, Inc.)
| Decision Date | 26 April 2022 |
| Docket Number | Case No. 16-10992 (DSJ),Adv. Proc. No. 19-01120 (DSJ) |
| Citation | 639 B.R. 824 |
| Parties | IN RE: SUNEDISON, INC., et al., Debtor. Drivetrain, LLC, Plaintiff, v. EverStream Solar Infrastructure Fund I LP, and EverStream Solar Infrastructure Fund I GP, LP, Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
KAGEN CASPERSEN & BOGART PLLC, Counsel for Drivetrain, LLC, 757 3rd Avenue, 20th Floor, New York, NY 10017, By: Joel M. Taylor, Esq.
DAY PITNEY LLP, Counsel for Defendants, 195 Church Street, New Haven, CT, By: Joshua W. Cohen, Esq., Daniel J. Carragher, Esq., Jennifer M. Palmer, Esq.
Plaintiff Drivetrain, LLC ("Drivetrain " or "Plaintiff "), in its capacity as Trustee of the SunEdison Litigation Trust, and in turn on behalf of debtor EverStream HoldCo Fund I, LLC ("Everstream Debtor "), has moved for leave to file a second amended complaint (the "Second Amended Complaint ") to add an entirely new claim for breach of fiduciary duty and to name two new, individual defendants, P.J. Lee ("Lee ") and Bruce Pflaum ("Pflaum ") [ECF No. 50 (the "Motion ")]. Last year, the Court granted Plaintiff's earlier motion for leave to add a breach of contract claim against the original entity defendants by filing an initial amended complaint (the "First Amended Complaint "). Defendants EverStream Solar Infrastructure Fund I LP (the "Everstream Partnership ") and EverStream Solar Infrastructure Fund I GP LP ("Everstream General Partner " and, together with the Everstream Partnership, "Defendants "), oppose Drivetrain's request. [See Defendants’ Memorandum of Law in Opposition to Plaintiffs’ Motion for Leave to Amend Complaint, ECF No. 51 ("Opposition ")]. They challenge the Second Amended Complaint on grounds of futility—contending that the governing partnership agreement eliminated fiduciary duties and imposed in their place solely contractual obligations, that Everstream General Partner's complained-of conduct was authorized by the governing partnership agreement, that the Plaintiff does not sufficiently allege unfairness, that the newly proposed claim does not relate back to the original complaint, and that the claim is time-barred and was raised only after undue delay. [Id. at 10–24].
For the reasons that follow, the Court concludes that the governing agreement explicitly overrode fiduciary duties to the extent any such duties were not imposed by the terms of the partnership agreement itself. The Court therefore concludes that the new proposed amendments, all of which seek to add a breach-of-fiduciary-duty claim against the existing Defendants and two new individual defendants, are futile, and therefore should not be allowed. In light of this conclusion, the Court does not reach Defendants’ other arguments, including defenses of undue delay and statute of limitations.
Unless otherwise noted, the following background information is taken from the Court's July 2021 decision that authorized Plaintiff to file the First Amended Complaint. Drivetrain, LLC v. EverStream Solar Infrastructure Fund I LP (In re SunEdison, Inc.) , No. 16-10992, Adv. No. 19-01220, 2021 WL 3176070 (Bankr. S.D.N.Y. July 27, 2021) (" Drivetrain I "). The Everstream Partnership is a Delaware limited liability partnership that was formed to invest in and operate renewable energy assets. Everstream General Partner served as the general partner of the Everstream Partnership, and Everstream Debtor invested in that partnership as a limited partner. Pursuant to a subscription agreement dated February 7, 2013 (the "Subscription Agreement "), Everstream Debtor—itself formed for the purpose of investing in the Everstream Partnership—committed to provide up to $30 million in capital funding to the Everstream Partnership upon a capital call or calls, as provided for in the Limited Partnership Agreement of the Everstream Partnership dated February 7, 2013 (as amended and restated in accordance with its terms, the "Partnership Agreement ").
The Partnership Agreement provided in relevant part as follows regarding limited partners’ obligations to make payments in response to capital calls, and regarding the consequences of a failure to meet those obligations. Each limited partner (including Everstream Debtor) agreed to fund partnership investments by paying up to the amount of the limited partner's "Capital Commitment," defined as "with respect to any Limited Partner, the aggregate contribution such Limited Partner has agreed to make to the [Everstream] Partnership, whether or not contributed, as may be modified by the express terms of this [Partnership] Agreement." [ECF No. 20-1 ("Partnership Agreement ") § 1]. These payments were not required immediately upon the effectiveness of the Partnership Agreement but were required to be made in response to "Capital Calls," when such calls were made by the Everstream Partnership. [See Partnership Agreement §§ 1, 5.1]. If a limited partner failed to make a required payment in response to a capital call and failed or refused to cure the missed payment following notice, Everstream General Partner had the authority to designate it as a "Defaulting Partner." [See id. § 6.1]. If a Defaulting Partner failed to cure its default by paying its required contribution and any interest accrued because of the delay within ten days after receipt of a "Default Notice," then Everstream General Partner had the authority to deem that Defaulting Partner in "Material Default" under the Partnership Agreement. [See id. ].
Upon such a Material Default, Everstream General Partner was authorized to pursue various remedies "available to the [Everstream] Partnership under this Agreement or at law or in equity[.]" [Id. § 6.2]. Section 6.6 of the Partnership Agreement is particularly relevant, providing in part:
(Emphasis added.) Further, to the extent a Defaulting Partner's "Sharing Percentage is reduced to zero, then the [Everstream] General Partner may cause the Defaulting Partner's interest in the Partnership to be extinguished." [Id. § 6.6(c)].
Between March 2013 and May 2014, EverStream Debtor made capital call payments to the Everstream Partnership totaling $21,073,368.00, which were directly paid by either SunEdison or debtor NVT LLC ("NVT "). In November 2015, the Everstream Partnership issued a capital call notice in the amount of $212,014.00 (the "November 2015 Capital Call ") that Everstream Debtor failed to pay. In a letter dated February 23, 2016 (the "February 2016 Letter "), Defendants informed Everstream Debtor that, as a result of its failure to satisfy the November 2015 Capital Call, it was in "Material Default" under the Partnership Agreement and that, accordingly, Everstream Debtor's partnership interest had been "extinguished for no consideration pursuant to Section 6.6 of the Partnership Agreement." [ECF No. 11 Ex. C]. Plaintiff does not dispute that Everstream Debtor was a "Defaulting Partner," nor that its default was "Material," as those terms are used in the Partnership Agreement.
In March 2016, Defendants informed Everstream Debtor that its partnership interest could be reinstated, notwithstanding its default, if Everstream Debtor paid the Everstream Partnership $3,758,523.26 (the "March 2016 Capital Call "), an amount that was the sum of (1) the November 2015 Capital Call plus accrued default interest and (2) the pro rata amount that Everstream Debtor would have needed to fund in response to an additional capital call to all of the Everstream Partnership's limited partners in the total amount of $8,337,962.00 if Everstream Debtor's partnership interest had not been terminated. Defendants stated that Everstream Debtor's partnership interest would remain "extinguished for no consideration" unless and until the Everstream Partnership received the full amount of the March 2016 Capital Call.
Everstream Debtor made no payment in response to the March 2016 Capital Call. Defendants, in a letter dated April 22, 2016 (the "April 2016 Letter "), notified Everstream Debtor that it would not be reinstated as a limited partner and that its partnership interest, to the extent not extinguished as of February 2016, was being extinguished in exchange for "no consideration."
On April 21, 2016, SunEdison and certain of its affiliates, including NVT, commenced voluntary cases under Chapter 11 of the Bankruptcy Code. Everstream Debtor filed its Chapter 11 case on July 20, 2016. [See Bankr. S.D.N.Y. 16-12058, ECF No. 1].
On April 19, 2019 Plaintiff, on behalf of Everstream Debtor, filed an adversary proceeding complaint against Defendants in this Court. [ECF No. 1 (the "Initial Complaint ")]. Plaintiff's Initial Complaint included two causes of action: a claim for fraudulent transfer pursuant to Sections 548 and 550 of the Bankruptcy Code, and a claim for disallowance of claims pursuant to Section 502(d) of the Bankruptcy Code. [Id. ¶¶ 35–43].
As noted, in 2021, Plaintiff moved for leave to amend its Initial Complaint. Plaintiff submitted a proposed amended complaint that added a claim for...
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