Punta Lima, LLC v. Punta Lima Dev. Co.

• Decision Date: 11 February 2020
• Docket Number: Civil No. 19-1800 (FAB),Civil No. 19-1673 (FAB)
• Citation: 440 F.Supp.3d 130
• Parties: PUNTA LIMA, LLC, Plaintiff, v. PUNTA LIMA DEVELOPMENT COMPANY, LLC, Defendant. Punta Lima Wind Farm, LLC, Plaintiff, v. Punta Lima Development Company, LLC, Defendant.
• Court: U.S. District Court — District of Puerto Rico

440 F.Supp.3d 130

PUNTA LIMA, LLC, Plaintiff,

v.PUNTA LIMA DEVELOPMENT COMPANY, LLC, Defendant.

Punta Lima Wind Farm, LLC, Plaintiff,

v.Punta Lima Development Company, LLC, Defendant.

Civil No. 19-1673 (FAB)

Civil No. 19-1800 (FAB)

United States District Court, D. Puerto Rico.

Signed February 11, 2020

Alberto Jose Bayouth-Montes, Antonio L. Roig-Lorenzo, Salvador J. Antonetti-Stutts, Gabriel A. Miranda-Rivera, Paul A. Cortes-Ruiz, Ricardo J. Casellas-Santana, Daniel Perez-Refojos, Hermann D. Bauer-Alvarez, O'Neill & Borges LLC, San Juan, PR, for Plaintiffs.

Crystal N. Acevedo-Jimenez, Rivera Tulla & Ferrer, Hato Rey, PR, Rafael Escalera-Rodriguez, Sylvia M. Arizmendi-Lopez-de-V, Gustavo Adolfo Pabon-Rico, Reichard & Escalera, Carlos R. Rivera-Ortiz, San Juan, PR, for Defendants.

OPINION AND ORDER

BESOSA, District Judge.

Forasmuch as these cases originate with Hurricane María, the cases themselves have become like tempests. The Court's November opinion, Punta Lima, LLC v. Punta Lima Dev. Co., LLC, ––– F.Supp.3d ––––, 2019 WL 6358215 (D.P.R. Nov. 27, 2019) (Besosa, J.), was followed by seven amended counterclaims against each plaintiff, see Docket Nos. 130, 131, 177, 178, a motion to dismiss some of those amended counterclaims, see Docket No. 180, a discovery dispute, see Docket No. 139, and a raft of scheduling squabbles, see Docket Nos. 136, 151, 168.

"[W]hat's past is prologue," it seems, in this turbulent litigation. William Shakespeare, The Tempest act 2, sc. 1.

As discussed below, the motion to dismiss filed by Punta Lima, LLC ("Punta Lima") and Punta Lima Wind Farm, LLC ("Wind Farm," and together with Punta Lima, "plaintiffs"), see Docket No. 180 is GRANTED IN PART AND DENIED IN PART. That part of the motion pertaining to the amended fifth counterclaim remains pending. Plaintiffs' first motion to dismiss, see Docket No. 148, is VACATED AS MOOT . Punta Lima Development Company, LLC ("defendant")'s amended first counterclaims against each plaintiff, see Docket No. 177 at pp. 14–17; Docket No. 178 at pp. 16–19, are DISMISSED WITH PREJUDICE . Defendant's amended fifth counterclaims, see Docket No. 177 at pp. 22–24; Docket No. 178 at pp. 24–26, are bifurcated from the trial on the other claims and counterclaims in these cases. Defendant's amended sixth counterclaims, see Docket No. 177 at pp. 24–25; Docket No. 178 at pp. 26–27, are DISMISSED WITH PREJUDICE IN PART . Defendant's amended seventh counterclaim against Wind Farm, see Docket No. 177 at pp. 25–31, is not dismissed, while the amended seventh counterclaim against Punta Lima; see Docket No. 178 at pp. 27–33, is DISMISSED WITH PREJUDICE .

Other pending motions are also resolved below. Plaintiffs' motion regarding claims to be heard at trial, see Docket No. 136, is GRANTED IN PART AND DENIED IN PART . Plaintiffs' motion to continue the hearing and trial, see Docket No. 151, is DENIED .

I. Background

A. Factual Background

The Court's November opinion in these cases detailed the factual allegations in plaintiffs' complaints. See Punta Lima, ––– F.Supp.3d at –––– – ––––, 2019 WL 6358215, at *1–6. Defendant has since answered those allegations. See Docket No. 130 at pp. 1–23; Docket No. 131 at pp. 1–9. Many of the facts alleged by plaintiffs are admitted and adopted by defendant. See Docket Nos. 130, 131.

In this opinion, the Court relies on the factual allegations in defendant's amended counterclaims and the materials attached to them or incorporated in them. Docket Nos. 177, 178; see also Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009) (explaining that, except for a certain narrow class of documents, Federal Rule of Civil Procedure 12(b)(6) permits a court to consider only facts and documents that are part of or incorporated into a complaint). This opinion does not present defendant's complete counternarrative. Rather, the Court generally focuses on defendant's factual allegations relevant to resolution of plaintiffs' pending motion to dismiss. The Court "take[s] as true the allegations of the [amended counterclaims], as well as any inferences [the Court] can draw from [them] in the [counterclaimant's] favor." Zenón v. Guzmán, 924 F.3d 611, 615 (1st Cir. 2019) ; see Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 174–75, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965).

1. Basic Description of the Parties' Relationship

Wind Farm and defendant used to be affiliates. See Docket No. 177 at p. 3; Docket No. 178 at p. 3. That relationship changed hours before the first complaint in this judicial proceeding was filed on July 15, 2019. See Docket No. 177 at p. 3; Docket No. 178 at p. 3. Since July 15, Punta Lima has owned the membership interest in Wind Farm. See Docket No. 177 at p. 3; Docket No. 178 at p. 3.

2. Land Leases and Related Agreements

Around late 2012, defendant and Wind Farm entered a suite of agreements by which defendant leased or subleased land to Wind Farm. See Docket No. 177 at p. 7; Docket No. 178 at p. 7. The agreements are collectively referred to in this opinion as the "land leases." The land is described in this opinion as the "project site" because a wind-powered electric generation project is located on the land. See Docket No. 17 at pp. 2, 7; Docket No. 178 at pp. 2, 7. The electric generation project is described in this opinion as the "project."

Some agreements give rights to Punta Lima. For instance, if Wind Farm defaults in its land leases rental obligations, Punta Lima has the right, but not the obligation, to cure the default. See Docket No. 177 at p. 7; Docket No. 178 at pp. 7–8.

Wind Farm and defendant also entered an operation and management service agreement to perform routine administrative services associated with the project. See Docket No. 177 at p. 13; Docket No. 178 at p. 15. That agreement is referred to in this opinion as the "O&M agreement." The O&M agreement is designed to last as long as an agreement between Wind Farm and another entity. See Docket No. 177 at p. 13; Docket No. 178 at p. 15.

3. Facility Lease

Also in 2012, Wind Farm leased from Punta Lima wind-powered electric generation equipment and related material. See Docket No. 177 at p. 8; Docket No. 178 at p. 8. That agreement is referred to in this opinion as the "facility lease."

The facility lease addresses destruction of the project. See Docket No. 177 at p. 8; Docket No. 178 at pp. 8–9. If the project is destroyed, Wind Farm can choose either to rebuild the project or to terminate the facility lease. See Docket No. 177 at p. 8; Docket No. 178 at pp. 8–9. The facility lease requires Wind Farm to choose to rebuild or terminate within four months of the destructive incident, or be deemed to have elected to terminate the agreement. See Docket No. 177 at p. 8; Docket No. 178 at pp. 8–9. In the event of termination, Wind Farm owes Punta Lima a sum referred to here as the "termination payment." See Docket No. 120, Ex. 8 at p. 24 (cited at Docket No. 178 at p. 9); see also Docket No. 177 at pp. 3–4, 29–30 (discussing termination payment); Docket No. 178 at pp. 3–4, 31–32 (same).

Another agreement granted Punta Lima the right to foreclose on the membership interest in Wind Farm should the latter default in its facility lease obligations. See Docket No. 177 at p. 8; Docket No. 178 at pp. 9. Pursuant to this agreement, defendant states, "the delivery of the Collateral ‘secures the payment and performance when due of all Obligations.’ " See Docket No. 188 at p. 8 (quoting agreement); Docket No. 178 at p. 9 (same).

4. Subordination Agreement

Defendant and Wind Farm also executed a subordination agreement. See Docket No. 177 at pp. 2–3; Docket No. 178 at pp. 2–3. This agreement is denominated the "subordination agreement" in this opinion. Pursuant to the subordination agreement, defendant agreed to subordinate most of Wind Farm's payment obligations to defendant in favor of Wind Farm's obligations to Punta Lima. See Docket No. 177 at pp. 2–3; Docket No. 178 at p. 2–3.

5. Project Operation and Destruction

Hurricane María destroyed the project on September 20, 2017. See Docket No. 177 at p. 8; Docket No. 178 at p. 10. Before then, the project was successfully operated. See Docket No. 177 at p. 8; Docket No. 178 at p. 10.

6. Negotiations After Destruction of the Project

After the hurricane passed, the parties and their parent companies began negotiations to rebuild the project. See Docket No. 177 at p. 9; Docket No. 178 at p. 11.

In 2018 and 2019, Punta Lima agreed to extend the time in which Wind Farm was required to decide whether to rebuild the project or terminate the facility lease. See Docket No. 177 at p. 9; Docket No. 178 at p. 11. These agreements are referred to in this opinion as the "extension agreements." The extension agreements provided that Wind Farm would continue payments due pursuant to the facility lease but would not spend insurance proceeds on, for instance, land leases rent. See Docket No. 177 at pp. 9–10, 27; Docket No. 178 at pp. 11–12, 29; see, e.g., Docket No. 119, Ex. 19 at pp. 2–3 (cited or referenced in Docket Nos. 177, 178) (stating terms of extension agreement).

The negotiations were eventually halted. See Docket No. 177 at p. 10; Docket No. 178 at pp. 11–12. Punta Lima was opposed to sharing the costs of revenue reductions proposed by the Puerto Rico Electric Power Authority ("PREPA"). See Docket No. 177 at p. 10; Docket No. 178 at pp. 11–12. PREPA is the entity purchasing electric power from the project. See Docket No. 177 at p. 8; Docket No. 178 at p. 9. The negotiations were also halted because of Punta Lima's approach to a proposed joint venture interest distribution. See Docket No. 177 at p. 10; Docket No. 178 at p. 11–12. As a result, defendant was unable to begin reconstruction efforts. See Docket No. 177 at p. 10; Docket No. 178 at p. 12.

7. Wind Farm Defaults on Land Leases

On May 9 and 31, 2019, defendant informed Wind Farm of defaults pursuant to the land leases. See Docket No. 177 at p. 10; Docket No. 178 at p. 12. At...