Zornoza v. TerraForm Glob.
| Decision Date | 07 April 2023 |
| Docket Number | 16-md-2742 (PKC),18-cv-11617 (PKC) |
| Parties | CARLOS DOMENECH ZORNOZA, Plaintiff, v. TERRAFORM GLOBAL, INC., TERRAFORM POWER, INC., AHMAD CHATILA and BRIAN WUEBBELS, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiff Carlos Domenech Zornoza asserts that he was terminated in retaliation for raising concerns that material misrepresentations had been made to investors about the liquidity and cashflow of non-party SunEdison, Inc. (“SunEdison”). Domenech alleges that about a month after alerting directors of SunEdison to these concerns, he was terminated as CEO and president of Terraform Global, Inc. (“Global”) and Terraform Power, Inc. (“TERP”), both of which were controlled by SunEdison.
Domenech brings a claim of retaliation under the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (“Sarbanes-Oxley”). Discovery in this action has concluded. Defendants TERP Global, Ahmad Chatila and Brian Wuebbels jointly move for summary judgment in their favor under Rule 56, Fed.R.Civ.P. (ECF 115.) Defendant Wuebbels separately moves for summary judgment in his favor. (ECF 119.) Domenech also seeks summary judgment in his favor against TERP and Global. (ECF 118.)
Because the summary judgment record would permit a reasonable jury to find that retaliatory motivation was a contributing factor to Domenech's termination, defendants' joint summary judgment motion will be denied as to the claim against TERP and Global. But Domenech has not pointed to evidence that would permit a reasonable jury to find that individual defendants Chatila or Wuebbels have liability under Sarbanes-Oxley for his termination. Summary judgment will therefore be granted dismissing the claims against Chatila and Wuebbels. Domenech's motion for summary judgment in his favor will be denied because a reasonable inference could be drawn by a reasonable fact finder either in his favor or against him on evidence material to his claim. The end result of the Court's rulings on the various motions is that only Domenech's claims against TERP and Global survive.
BACKGROUND.
The relationship between non-party SunEdison and defendants TERP and Global is important to understanding much of defendants' motions. Before it declared bankruptcy on April 21, 2016, SunEdison was a publicly traded renewable-energy company. (Wuebbels 56.1 ¶ 1; Pl. 56.1 Resp. ¶ 1; Def. 56.1 ¶ 17; Pl. 56.1 Resp. ¶ 17.)[1]SunEdison was the majority shareholder of TERP and Global and sponsored their initial public offerings in 2014 and 2015. (Wuebbels 56.1 ¶ 2; Pl. 56.1 Resp. ¶ 2; Def. 56.1 ¶¶ 3, 5, 8; Pl. 56.1 Resp. ¶¶ 3, 5, 8.)[2] TERP and Global are commonly described as “Yieldcos” (Id.) As Yieldcos, TERP and Global were conceived by SunEdison to acquire renewable-energy facilities developed by SunEdison or third parties and to manage those facilities' long-term operations. (Wuebbels 56.1 ¶ 3; Pl. 56.1 ¶ 3.) The Yieldcos were to receive cash earnings from the facilities and pay dividends to their shareholders, including SunEdison. & .) TERP developed projects in the United States, Canada, the United Kingdom and Chile, while Global's business focused on developing markets. (Pl. 56.1 ¶¶ 2, 5; Def. 56.1 Resp. ¶¶ 2, 5.) Before their initial public offerings in 2014 and 2015, TERP and Global were wholly owned subsidiaries of SunEdison. (Def. 56.1 ¶¶ 2-3, 5-6; Pl. 56.1 Resp. ¶¶ 2-3, 5-6.)
After the Yieldcos became publicly traded companies, SunEdison held majority voting power on the boards of both TERP and Global. (Wuebbels 56.1 ¶ 4; Pl. 56.1 Resp. ¶ 4.) Defendant Chatila was a director of the two Yieldcos' boards and also their chairman. (Def. 56.1 ¶ 10; Pl. 56.1 Resp. ¶ 10.) Chatila was also the CEO of SunEdison. (Def. 56.1 ¶ 11; Pl. 56.1 Resp. ¶ 11.) Defendant Wuebbels was the CFO of SunEdison and also a director of the two Yieldcos. (Def. 56.1 ¶¶ 13-14; Pl. 56.1 Resp. ¶¶ 13-14.) Because of the close relationship between the Yieldcos and SunEdison, the Yieldcos' transactions with SunEdison required approval from a conflicts committee consisting of independent directors who had no relationship to SunEdison. (Pl. 56.1 ¶ 4; Def. 56.1 Resp. ¶ 4.)
Before his termination on November 20, 2015, Domenech was the president and CEO of TERP and Global. (Pl. 56.1 ¶ 1; Def. 56.1 Resp. ¶ 1.) Domenech also was an executive vice president of SunEdison. (Def. 56.1 ¶ 81; Pl. 56.1 Resp. ¶ 81.) As will be discussed in greater detail, Domenech's salary was paid by a SunEdison subsidiary named NVT, LLC (“NVT”), but certain agreements expressly provided that Domenech's performance at the Yieldcos would be supervised by independent committees of the two companies' directors, and that the Yieldcos' boards had authority to terminate officers. (Def. 56.1 ¶¶ 16, 32; ECF 122-36 at 11, 122-38 at 10.) Defendants TERP and Global urge that summary judgment should be granted in their favor because Domenech was technically an employee of SunEdison and not the Yieldcos, but there is no dispute that he acted as president and CEO of TERP and Global and was terminated (or removed) from those positions.
Domenech was terminated as president and CEO of TERP and Global on November 20, 2015, after a series of steps were taken to alter the composition of the two Yieldcos' boards. Domenech asserts that his termination was an act of retaliation for alerting SunEdison's directors that Chatila and Wuebbels were publicly misrepresenting the value of SunEdison's liquidity and cashflow. Defendants assert that there was no retaliatory motivation behind the termination, and that Domenech's professional rivalry with Chatila had become so destructive that the best interests of SunEdison and the Yieldcos were under threat.
In defendants' telling, over the course of 2015, Domenech took a series of actions with the intention of undermining Chatila. In July 2015, SunEdison and TERP agreed to purchase Vivint, Inc. (Def. 56.1 ¶ 80.) According to defendants, when the TERP conflicts committee raised concerns about the Vivint acquisition, Domenech did not adequately advance the transaction, which caused the deal to stall and ultimately fail. (Def. 56.1 ¶¶ 85-86; Def. Mem. at 20.) In a separate incident, defendants assert that in late October or November 2015, Domenech and the Yieldcos' CFO Alex Hernandez met with Bank of America Merrill Lynch (“Bof A”). (Def. 56.1 ¶ 88.) The SunEdison board later learned that Domenech and Hernandez “leaked” negative, confidential information about SunEdison's finances to Bof A, causing Bof A to cancel financing for SunEdison projects in Hawaii. (Def. 56.1 ¶ 89.) In a deposition, SunEdison director Steven Tesoriere testified that the “leak” was a “significant issue” behind Domenech's termination. (Def. 56.1 ¶ 90.) According to defendants, several directors and executives at SunEdison believed that Domenech aspired to succeed Chatila as CEO of SunEdison, and that in the fall of 2015, SunEdison's directors began to observe that Domenech was not working cooperatively with SunEdison leadership, “prioritizing himself over the team's needs.” (Def. 56.1 ¶ 72-75.)
Domenech points to a very different set of circumstances surrounding his termination. Domenech asserts that in August 2015, internal SunEdison records showed that the company was suffering a “liquidity crisis as it burned through cash.” (Pl. 56.1 ¶ 38.) He identifies a series of alleged misstatements that Chatila and Wuebbels made to SunEdison's board and to members of the public that dramatically overstated SunEdison's available cash and the strength of the company's liquidity. (Pl. 56.1 ¶¶ 38-40, 44-48.) Domenech asserts that the statements were knowingly false, pointing to a text message from Chatila instructing senior SunEdison executive not to admit that “we have cash flow issues.” (Pl. 56.1 ¶ 42; Def. 56.1 Resp. ¶ 42.) As recounted by Domenech, Chatila and Wuebbels were publicly claiming that SunEdison had approximately $1.4 billion in unrestricted cash when the actual number was closer to $342 million. (Pl. 56.1 ¶¶ 43-48.)
In October 2015, Domenech and non-party Francisco Perez, who was then COO of TERP and Global, contacted Steve Tesoriere, a board member of TERP, Global and SunEdison, and stated that Wuebbels and Chatila had misrepresented the value of SunEdison's liquidity. (Pl. 56.1 ¶¶ 50-51; Def. 56.1 Resp. ¶¶ 50-51.) Tesoriere suggested that Domenech relay his concerns to Emanuel Hernandez, the chairman of SunEdison's board. (Pl. 56.1 ¶ 52; Def. 56.1 Resp. ¶ 52.) As will be discussed in greater detail, following his communications with Domenech, Hernandez quickly instructed an internal review of SunEdison's liquidity and learned that the company's available cash was far lower than previously represented by Chatila and Wuebbels. Hernandez then authored a script for his use in an October 23, 2015 meeting of SunEdison's independent directors. (ECF 122-45.) The script included a detailed description of Hernandez's discussions with Domenech and others who raised similar concerns, described his follow-up conversations with Chatila and Wuebbels, and described the dire status of SunEdison's liquidity. (Id.) The script concluded with four action items, including the following: “What do to [sic] with the ‘civil war' we have on our hands which essentially challenges the leadership of the CEO and CFO - with Carlos [Domenech], Pancho [e.g., Francisco Perez], PaulG [e.g., Paul Gaynor] reaching out to the Board for assistance/action.” (Id. at 6.)
On November 20, 2015, Domenech was terminated as president and CEO of TERP and Global. (Pl. 56.1 ¶ 74;...
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