SL EC, LLC v. Ashley Energy, LLC

• Decision Date: 21 September 2021
• Docket Number: Case No. 4:18-CV-01377-JAR
• Citation: 561 F.Supp.3d 802
• Parties: SL EC, LLC, et al., Plaintiffs, v. ASHLEY ENERGY, LLC, et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

561 F.Supp.3d 802

SL EC, LLC, et al., Plaintiffs,

v.ASHLEY ENERGY, LLC, et al., Defendants.

Case No. 4:18-CV-01377-JAR

United States District Court, E.D. Missouri, Eastern Division.

Signed September 21, 2021

Elkin Leland Kistner, Kistner Hamilton, Paige A. Tungate, Michael P. Downey, Downey Law Group LLC, St. Louis, MO, William H. Mooney, Dylan R. Maschmeyer, Robert L. Brown, Lynch, Cox, Gilman & Goodman P.S.C., Louisville, KY, for Plaintiffs SL EC, LLC, Michael Becker.

Christopher LaRose, Jared M. Walsh, William Ray Price, Jr., Armstrong Teasdale LLP, St. Louis, MO, Christopher Blake Rambicure, Pro Hac Vice, Miller Edwards PLLC, Louisville, KY, for Defendant Ashley Energy LLC.

Andrew Robinson Smith, Steptoe & Johnson, PLLC, Carl D. Edwards, Jr., Miller Edwards Rambicure PLLC, Lexington, KY, Christopher LaRose, Jared M. Walsh, William Ray Price, Jr., Armstrong Teasdale LLP, St. Louis, MO, Christopher Blake Rambicure, Pro Hac Vice, Miller Edwards PLLC, Louisville, KY, for Defendant Power Investments, LLC.

MEMORANDUM AND ORDER

JOHN A. ROSS, UNITED STATES DISTRICT JUDGE

This matter is before the Court on Defendants’ Motion for Summary Judgment. (Doc. 201). The motion is fully briefed and ready for disposition.¹ For the reasons discussed below, the motion will be granted in part and denied in part.

I. BACKGROUND²

This case concerns the purchase of a historic steam power plant in downtown St. Louis (the "Plant"). The City of St. Louis assigned its right to purchase the Plant to Plaintiff SL EC, LLC ("SLEC"), a company solely owned and controlled by Plaintiff Michael Becker ("Becker"). SLEC created a wholly-owned subsidiary in Defendant Ashley Energy, LLC ("Ashley Energy") to purchase the Plant. Pursuant to a client agreement (the "Client Agreement"), SLEC retained Jim Davis ("Davis") of Plaintiff Davis & Garvin, LLC ("D&G") to represent them in the Plant transaction.

SLEC could not afford to purchase the Plant by itself but intended to participate in the acquisition. Accordingly, in May 2016, Becker approached Defendant Mason Miller ("Miller"), the managing member of Defendant Power Investments, LLC ("Power Investments") and a partner at Defendant Miller Wells, PLLC, a law firm ("Miller Wells"). Initially, the parties expected that Power Investments and others would fund Ashley Energy's purchase of the Plant in exchange for some portion of the equity in Ashley Energy.

These plans deteriorated when SLEC and Becker encountered substantial financial difficulty and even contemplated bankruptcy. On August 3, 2017, Davis informed Miller that SLEC could not afford to retain any ownership in Ashley Energy. (Doc. 203-1). Instead, the parties agreed that Power Investments would purchase Ashley Energy outright. The parties had already coordinated financing of approximately $8,500,000 from Arena Investors, L.P. (the "Arena Financing"), who is not a party to this litigation, to fund the acquisition. Over the following few days, the parties hastily drafted and executed a Membership Interest Purchase Agreement ("MIPA") and Assignment and Assumption of Membership Interests Agreement ("Assignment Agreement"). The undisputed portions of the MIPA provide that Power Investments would purchase 100% of the equity in Ashley Energy in exchange for (i) $600,000 up front³ and (ii) a contingent $1,100,000 payment (the "Contingent Payment"). The status of the Contingent Payment is the key issue in this litigation.

Plaintiffs’ sprawling Second Amended Complaint ("SAC") (Doc. 90) includes the following counts:

Counts I and II – D&G's Breach of Contract and Promissory Estoppel Claims Against Ashley Energy: D&G alleges that Defendants have failed to pay legal fees incurred in the Plant transaction.⁴

Count III(a)⁵– Becker and SLEC's Breach of Contract Claim Against Power Investments: Becker and SLEC allege that Power Investments has breached various provisions in the MIPA.

Count III(b) – Plaintiffs’ Fraudulent Conveyance Claim Against Defendants: Plaintiffs allege that Defendants fraudulently conveyed approximately $479,970 from Ashley Energy to Miller and Miller Wells after closing.

Counts IV and V – Plaintiffs’ Claims for Discovery of Assets, Establishment and Imposition of Constructive Trust, and to Pierce Corporate Veil: These counts seek remedies in connection with Plaintiffs’ fraudulent conveyance claim in Count III(b). Because the Court will grant summary judgment in favor of Defendants on Count III(b), it will also dismiss these claims for associated remedies.

Counts VI, VII – Becker and SLEC's Breach of Contract Claim Against Power Investments: Becker and SLEC allege that Power Investments has breached the MIPA by failing to make the Contingent Payment.

Count VIII – Becker and SLEC's Constructive Trust Claim Against Ashley Energy: Becker and SLEC seek the remedy of imposition of a constructive trust in connection with their breach of contract claim. Because the Court will deny summary judgment as to certain of Becker and SLEC's breach of contract claims, it will also deny summary judgment as to this claim for an associated remedy.

Count IX – Becker and SLEC's Tortious Interference Claim Against Defendants: Becker and SLEC allege that Defendants tortiously interfered in relation to an application by Ashley Energy for Property Assessed Clean Energy ("PACE") financing.

Count X – Becker and SLEC's Breach of Mutual Release Claim Against Power Investments: Becker and SLEC allege that Power Investments breached the mutual release provision of the MIPA by pursuing litigation in Kentucky.

Defendants have filed counter-claims on related grounds (Doc. 115), and a jury trial is currently set for October 18, 2021. (Doc. 185).

II. LEGAL STANDARD

Under Fed. R. Civ. P. 56, a movant is entitled to summary judgment if they can "show[ ] that there is no genuine dispute as to any material fact" and they are "entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see Meier v. City of St. Louis , 934 F.3d 824, 827-828 (8th Cir. 2019). In determining whether summary judgment is appropriate, this Court views the evidence in the light most favorable to the nonmovant. Osborn v. E.F. Hutton & Co. , 853 F.2d 616, 619 (8th Cir. 1988). The nonmovant, however, "must do more than simply show that there is some metaphysical doubt as to the material facts, and must come forward with specific facts showing that there is a genuine issue for trial" Torgerson v. City of Rochester , 643 F.3d 1031, 1042 (8th Cir. 2011) (internal quotations omitted); see also Celotex Corp. v. Catrett , 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

III. ANALYSIS

A. MIPA Claims (Counts III(a), VI, VII, VIII, X)

In Counts III(a), VI, VII, and X, Plaintiffs allege that Defendants have breached various provisions of the MIPA, most importantly by failing to make the Contingent Payment. Unfortunately, despite multiple lawyers’ involvement in its negotiation, the parties disagree over which document constitutes the final version of the MIPA. The versions proposed by each side include material, potentially dispositive differences regarding the Contingent Payment and other matters. Thus, the Court must sift through a seemingly frantic summer weekend of e-mails and phone calls between the parties to determine, if possible, which document constitutes the official, executed version of the MIPA for purposes of this litigation.

Identifying the True MIPA

The negotiation of the MIPA included numerous e-mails and phone calls, sometimes just minutes apart and often lacking important details. A detailed timeline of these events is necessary to determine whether this Court can decide as a matter of law which document constitutes the agreed upon MIPA. Prior to August 5, 2017, the parties had exchanged term sheets and generally negotiated the Plant purchase.

• E-mail from Miller to Davis on August 5, 2017 at 8:09 A.M. (Doc. 207-2 at 5): On a Saturday morning, Miller e-mails Davis and attaches a draft MIPA "reflecting the terms of the general offer we've discussed." Miller explains that he "need[ed] to get this done today" and requests that Davis "please secure [Becker's] signature as quickly as possible." The attached MIPA includes the following language regarding the Contingent Payment in § 1.D:

• "Upon the earlier of a transaction resulting in: (a) the sale, merger or liquidation of [Power Investments]; (b) the sale, merger or liquidation of Ashley [Energy]; or (c) the repayment or refinancing of the Arena Financing (an "Exit Event"), [Power Investments] shall pay the sum of $1,100,000 to SLEC (the "Final Payment"); provided, however, that as a result of such Exit Event should [Power Investments] receive total consideration less than $1,100,000, then the Final Payment shall be equal to 50% of the total consideration received by [Power Investments] as a result of the Exit Event." (Id. at 7) (hereinafter "Version #1").

• Response from Davis to Miller on August 5, 2017 at 10:05 A.M. (Doc. 203-1 at 130): Davis responds with six comments, including the risk that "[r]efinancing may not result in a cash out." Davis proposes to address this "by adding that [Power Investments] will make every effort to obtain cash out or that, in the event there is cash available, that it will be used to pay the SLEC obligation."

• Response from Miller to Davis on August 5, 2017 at 10:18 A.M. (Id. at 131): Miller responds to each of the six comments with "[q]uick notes" and mentions he "will call in a minute." As to the refinancing, Miller states that he "[a]gree[s] with the ‘best efforts’ approach" and mentions that if Power Investments "gets any distributions, [he will] apply 50% against the SLEC debt."

• Revised Draft from Miller to Davis on August 5, 2017 at 10:38 A.M. (Doc. 207-2 at 11): Miller sends Davis a revised MIPA supposedly "consistent with [his] notes" from the 10:18 A.M. e-mail. He states this version is the "best [he] can do" and requests that Davis "ask [Becker] to sign it ... as soon as possible." The attached draft

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