Kinetic Energy Development Corp. v. Trigen Energy Corp.

• Decision Date: 07 September 1999
• Citation: 22 S.W.3d 691
• Parties: (Mo.App. W.D. 1999) Kinetic Energy Development Corporation, Appellant, v. Trigen Energy Corporation, Respondent. WD54751 0
• Court: Missouri Court of Appeals

22 S.W.3d 691 (Mo.App. W.D. 1999)

Kinetic Energy Development Corporation, Appellant, v. Trigen Energy Corporation, Respondent.

WD54751

Missouri Court of Appeals Western District

09/07/99

Appeal From: Circuit Court of Jackson County, Hon. William E. Turnage

Counsel for Appellant: Phillip Sanford Smith

Counsel for Respondent: Byron J. Beck

Opinion Summary: Kinetic Energy Development Corp. brought an action in quantum meruit against Trigen Energy Corporation for work performed by Kinetic leading to Trigen's acquisition of the Kansas City District Steam System. Kinetic obtained a jury verdict in the amount of $4,271,000.00. The circuit court granted Trigen's motion for judgment notwithstanding the verdict or, in the alternative, for new trial. Kinetic appeals.

Court holds:

(1) Although Kinetic presented evidence that it did provide certain services to Trigen, which Trigen accepted, it did not present evidence providing a way for a jury to reasonably value those services. The methodology of valuation provided by Kinetic's expert did not involve valuing specific services provided by Kinetic, but erroneously assumed Kinetic owned an exclusive and valuable right to purchase the Kansas City District Steam System, which was transferred to Trigen. Because Kinetic did not own exclusive purchase rights, this methodology was flawed. Such evidence was not proper evidence to prove certain reasonable value in a quantum meruit action. Thus, the trial court did not err in finding that Kinetic failed as a matter of law to prove the reasonable value of its services.

(2) Kinetic made a submissible case for nominal damages at least. However, a new trial should be allowed in cases where there is reason to believe that a plaintiff can prove reasonable value. Accordingly, this court, in an exercise of its discretion, remands the cause for a new trial in order for Kinetic to attempt to prove a claim in quantum meruit for specific consulting services, including research and investigation services provided Trigen and which Trigen either requested or accepted.

Ellis and Howard, JJ., concur.

James M. Smart, Jr., Judge

Kinetic Energy Development Corp. ("Kinetic") brought an action in quantum meruit against Trigen Energy Corporation ("Trigen") and obtained a jury verdict in the amount of $4,271,000.00. After trial, the circuit court granted Trigen's motion for judgment notwithstanding the verdict ("JNOV") or, in the alternative, for new trial. Kinetic appealed, claiming that the trial court erred in granting Trigen's motion for JNOV and in granting a new trial to Trigen. This court issued a decision affirming the award of new trial and reversing the judgment notwithstanding the verdict. Trigen moved for rehearing, contending, inter alia, that our analysis of the issue of reasonable value was erroneous. We granted rehearing because we believed that our previous opinion failed to adequately address the issues related to proof of valuation of Kinetic's services. Although we still, in this opinion, vacate the JNOV, we attempt to give much more specific guidance to the parties and to the court as to a retrial.

Factual Background

The Kansas City steam distribution system consists of distribution pipes and a steam- generating power plant serving a substantial part of downtown Kansas City. The system was built at the turn of the century, and served office buildings and manufacturing plants over the years. The steam system's pipes are underground pipes designed to deliver the steam to the various customers on the steam system. The system included a power plant known as the Grand Avenue Station, which generates the steam from boilers. Kansas City Power and Light Company (KCPL) owned the system since its inception.

In the latter part of this century, real estate developers began to construct buildings designed to use electricity rather than steam. The gradual changeover to electricity caused the customer base of the steam system to decline.

In 1987, due to the age and market circumstances of the steam system, KCPL decided that it wished to abandon its ownership of the system and to convert the steam customers to electricity. In order to abandon the steam system, however, KCPL was required to petition the Missouri Public Service Commission (MPSC) for permission to abandon the system, to discontinue steam service, and to convert those customers to electricity. Accordingly, KCPL did apply to the MPSC for such permission. The MPSC determined it was not in the best interest of the public or of KCPL's customers to allow abandonment of the system without seeing if the system could be sold to someone who would attempt to serve the need of those customers still using steam.

On October 7, 1987, the MPSC ordered KCPL to make a good faith effort to sell the Kansas City steam system, and rejected the proposal to convert its steam customers to electric heating equipment. However, the MPSC informed KCPL that it would be allowed to close down the system December 31, 1990, if the system were not sold by that date. On January 25, 1988, in response to the MPSC's order, KCPL published a Request for Proposals (RFP), asking any interested parties to submit proposals for the purchase of the Kansas City steam system by March 25, 1988. The RFP required an earnest deposit in the amount of $100,000.00 for the purpose of demonstrating good faith intent to complete negotiations.

At the time of the publication of the RFP, Kinetic Energy Development Corp. was a small company which had been formed a year earlier by William "Tab" Schmidt and Jerry Corbier. The intention of Kinetic's organizers was to develop opportunities to acquire energy systems, and then to bring into each project a financial partner which would provide the resources for the acquisition and operation of the energy system. Kinetic looked at opportunities to acquire different systems, and had already involved itself in an effort to acquire steam systems in Tulsa and Oklahoma City. Kinetic responded to KCPL's RFP with a proposal indicating that it wished to attempt to work toward the purchase of the distribution system (the pipes) for $4 million, or, alternatively, the purchase of the entire system, including the power plant, for $6 million. Kinetic offered a corporate guarantee of $100,000.00 in lieu of the cash deposit. The $100,000.00 corporate guarantee specified that it would expire at the execution of an actual agreement for the purchase and sale of the distribution system, or upon the rejection by KCPL of Kinetic's negotiations, or upon the failure to achieve an agreement by December 31, 1988. Three other proposals were also received by KCPL. Only one other proposal, that of an organization called Catalyst Thermal, offered to pay any money for the system. Catalyst Thermal offered to pay $2.8 million for the system, and also demanded the right to be able to co-generate electricity at the power plant, and not just steam.

On May 24, 1988, KCPL conditionally accepted Kinetic's proposal to purchase the steam distribution system (without the power plant) for $4 million. KCPL made clear that its acceptance was conditioned upon the definitive negotiation of all necessary terms and conditions of an agreement for purchase and sale, and on the acquisition of all necessary regulatory approvals, and the satisfaction of all the terms and conditions of the Request for Proposals. The only provision of the RFP to which Kinetic took exception in its response was the provision requiring the cash deposit of the sum of $100,000.00, as already mentioned. Kinetic represented in its response that it already had the financing capability to acquire and improve the steam system, and further represented that it already had made provision for the construction of its own power plant, although Kinetic had neither the financing nor any provision for its own power plant.

Throughout the remainder of 1988, Kinetic attempted to obtain a financing commitment, but was unsuccessful in efforts to engage a financial partner. Earlier, Kinetic had also begun development efforts with regard to the district steam systems in Tulsa, Oklahoma, and in Oklahoma City. As to the Kansas City project, Kinetic and KCPL attempted to negotiate sales documents while Kinetic sought a financial partner and gathered information concerning the technical, operational, financial, environment, regulatory and marketing aspects of the steam system.

By December 1988, KCPL informed Kinetic that it was growing impatient over the lack of progress in the negotiations because of Kinetic's inability to arrange financing. KCPL advised Kinetic that it was necessary that the parties enter into a signed sales agreement by December 30, 1988. On December 30, 1988, KCPL informed Kinetic that because there was no signed sale agreement, KCPL was withdrawing its conditional acceptance of Kinetic's response to the RFP. KCPL added that it considered the negotiations to be concluded.

At this time, Kinetic was attempting to persuade Trigen Energy Co., a national energy company owned by large domestic and foreign entities, to get involved as a financial partner in both the Oklahoma systems and the Kansas City system. Trigen had earlier been aware of KCPL's attempt to sell the Kansas City steam system, but Trigen had elected not to pursue the acquisition of the system at the time the RFP was published. On January 13, 1989, Trigen and Kinetic and the principals of Kinetic (Schmidt and Corbier) entered into an agreement to work together on the acquisition and development of the Kansas City system and the Oklahoma systems. The agreement contemplated, inter alia, that Kinetic would be reimbursed certain expenses, Kinetic would transfer any "actual or implied right to purchase the system" to Trigen. The agreement contemplated that a Trigen subsidiary would be formed to take title and to operate the system, and that Schmidt and Corbier would become employees of the Trigen...