Opinion
No. 218-2017-CV-00545
04-25-2019
North American Dismantling Corporation v. Cate Street Capital, Inc., CSC Group Holdings, LLC, NewCo Energy, LLC, Berlin Station, LLC, and Burgess BioPower, LLC
ORDER
The Plaintiff, North American Dismantling Corporation ("NADC"), moves to amend its Complaint — which the Court earlier characterized as a Petition for Discovery — in order to make substantive claims. The First Amended Complaint asserts a breach of contract claim against Berlin Station, LLC ("Berlin Station"). (First Amend. Compl. ¶ 1.) It asserts a claim for declaratory judgment against Cate Street Capital, Inc. ("Cate Street"), CSC Group Holdings, LLC ("CSC"), NewCo Energy, LLC ("NewCo"), and Burgess BioPower, LLC ("Burgess"). (Id. ¶ 2.) It asserts a claim of equitable estoppel against Cate Street, CSC, NewCo, Berlin Station and Burgess. (Id. ¶ 3.) Finally, it asserts a cause of action against Cate Street, CSC, NewCo and Burgess for tortious interference with contractual relations and civil conspiracy to tortiously interfere with contractual relations. (Id. ¶ 4.)
The Defendants object and also move for summary judgment, alleging in substance that any amendment would be futile. On summary judgment the parties have briefed only one issue-whether a so-called Earn-Out obligation in an agreement between NADC and Laidlaw was transferred to any of the Defendants.
For the following reasons, NADC's Motion to Amend is GRANTED and the Defendants' Joint Motion for Summary Judgment is DENIED as genuine issues of material fact exist on the issue of whether Berlin Station is obligated to NADC under a so-called Earn-Out obligation.
I
These claims arise from the construction of a biomass power plant in Berlin, New Hampshire. This case's procedural history is unusual. In 2017, NADC brought a declaratory judgment action against Cate Street, CSC, NewCo, Berlin Station and Burgess seeking an order permitting NADC to review documents identified in Exhibit B to its Complaint to determine whether the Defendants were complying with the terms of a certain Asset Purchase Agreement entered into by NADC and Laidlaw Berlin PioPower, LLC ("Laidlaw") in May 2008 (the "NADC/Laidlaw APA"). NADC alleged that the NADC/Laidlaw APA entitled NADC to five percent (5%) of the cash flow of a "Biomass Project" from companies that Cate Street manages. The Defendants moved to dismiss because NADC could not identify any entity actually obligated to NADC under the NADC/Laidlaw APA.
As defined in the NADC/Laidlaw APA. (See Compl., Ex. A at 3.)
On October 17, 2017, the Court denied the Defendant's Motion to Dismiss, construing NADC's claim as a Petition for Equitable Discovery in accordance with RSA 498:1. Discovery has since proceeded and NADC has determined that it has been provided with sufficient information to seek leave to amend and bring the claims set forth in the First Amended Complaint. (Pl.'s Mot. for Leave to File First Amend. Compl. at 4.) The Defendants have filed an Objection on the ground of futility. They purport to demonstrate futility in their Motion for Summary Judgment.
II
NADC first argues that the Motion for Summary Judgment is procedurally improper and must be denied because it seeks to dispose of the First Amended Complaint on a summary judgment standard before the case has reached the pleading stage. (Pl.'s Obj. to Joint Mot. for Summ. J. [hereinafter "Pl.'s Obj."] at 1.) Nonetheless, it has responded to the merits of the Defendants' motion.
Superior Court Rule 12 (g) provides in relevant part that "[m]otions for summary judgment shall be filed, defended and disposed of in accordance with the provisions of RSA 491:8-a." The statute specifically states that "[a] party against whom a claim, counterclaim, or crossclaim is asserted or a declaratory judgment is sought, may, at any time, move for a summary judgment in his favor as to all or any part thereof." RSA 491-A: 8-a, I (emphasis added). Although NADC only recently filed the First Amended Complaint, this case has been pending since 2017 solely for the purpose of allowing NADC to pursue discovery. The parties have indeed engaged in significant discovery. During the pendency of the action, the Court has conducted a number of discovery conferences, in accordance with Standing Order 10 of the Business and Commercial Dispute Docket. NADC even concedes it has in fact obtained the information it sought in its original complaint against the Defendants.
Moreover, responding to a Complaint by a Motion to Dismiss instead of an answer is specifically authorized by Superior Court Rule 9(b). On a Motion to Dismiss, the trial court may consider any documents whose authenticity is not disputed or documents sufficiently referred to in the Complaint. Beane v. Beane, 160 N.H. 708, 711 (2010).In this case, the issue that must be decided is essentially whether a so-called "Earn-Out" provision in the NADC/Laidlaw APA was transferred to any of the Defendants via transactions memorialized in various writings. NADC has responded to the Motion for Summary Judgment on the merits and, while both parties have filed affidavits in support of their memoranda, the ultimate determination of the rights and liabilities of the parties must be made based upon the language of documents to which both parties have access. Under these circumstances, the Court GRANTS the Motion to Amend and will address the merits of the summary judgment motion.
III
Although the Court's decision must be based upon the precise language of the documents , the gist of the transactions can be set forth in summary form. NADC is attempting to recover from the Defendants the benefit of a contract that NADC entered into with Laidlaw. In May 2008, NADC entered into the NADC/Laidlaw APA with Laidlaw by which NADC agreed to sell land and other assets it owned in Berlin, New Hampshire, to Laidlaw with the expectation that Laidlaw would use the land and other assets to develop and operate a biomass power plant. Laidlaw did not have the capital to build such a plant itself and so the parties contemplated at the time that Laidlaw would later enter into a sale and leaseback with an entity which could provide the capital for the power plant whereby Laidlaw would transfer the land to the entity, which would then lease the site back to Laidlaw to build and operate the power plant.
Laidlaw was required to pay NADC $5 million for the assets. It also agreed to a so-called "Earn-Out," which is the central issue in this lawsuit. Under the Earn Out, Laidlaw agreed that it would provide NADC part of the profit it made from operating the biomass plant it intended to build and operate after the plant was constructed.
In December 2008, Laidlaw, NADC, and an entity called PJPD entered into a so-called Development Closing (the "PJPD Assignment and Amendment") pursuant to which Laidlaw assigned all of its right and title in the NADC/Laidlaw APA to PJPD. NADC then conveyed its real estate to PJPD at this time. The PJPD Assignment and Amendment specifically referenced an October 2008 "Letter Agreement" that Laidlaw and NewCo had entered into, which provided in substance that PJPD would capitalize and Laidlaw would build and operate a power plant pursuant to a sale and leaseback.
NewCo essentially created PJPD to provide the capital to build the plant.
Laidlaw, however, was not ultimately able to complete the agreement it entered into and essentially withdrew from the project. NewCo, or its wholly-owned subsidiaries, eventually entered into an agreement with a different entity, Berlin Station, to build a new power plant, which was larger and much more expensive than the power plant referenced in the Letter Agreement, the NADC/Laidlaw APA, and the PJPD Assignment and Amendment.
As is often the case, the Court must determine from the documents what the parties intended when a transaction does not go as planned. The critical dispute between the parties is whether the Earn-Out obligation Laidlaw assumed in the NADC/Laidlaw APA survived Laidlaw's withdrawal from the project and transferred to another entity.
The intent of the parties can be determined by analysis of the language of 5 transactions referenced in the pleadings.
A. The May 9, 2008 NADC/Laidlaw APA between NADC and Laidlaw
On May 9, 2008, NADC and Laidlaw entered into the NADC/Laidlaw APA that gave Laidlaw the right to purchase a portion of the former Frazier Mill Site in Berlin (the "Project Site") from NADC for the development of a power plant. (Aff. Of Robert J. Desrosiers in Supp. of Defs.' Joint Mot. for Summ. J. [hereinafter "Desrosiers Aff."] ¶ 4.) The documents establish that NADC and Laidlaw contemplated that Laidlaw would enter into a sale and leaseback arrangement with a third party which had sufficient capital to finance a biomass power plant (the "Biomass Project"). (See, e.g., Compl., Ex. A [hereinafter "NADC/Laidlaw APA"] § 1.7(a).) The "Biomass Project" was defined as "an approximately 65 megawatt biomass project." (NADC/Laidlaw APA § 1.2.)
A sale and leaseback is a common method for financing large capital projects such as power plants and involves both a developer and owner. Generally, a developer manages construction of the project on behalf of the owner. Then, when the project is completed the owner leases the completed facility back to the developer who operates the facility pursuant to a long-term lease with the owner. (Desrosiers Aff. ¶ 7.)
Although Laidlaw acquired the right to buy the Project Site in May, 2008, Laidlaw did not acquire title to it at that time. Under the terms of the NADC/Laidlaw APA, title would be transferred later after Laidlaw arranged a sale-leaseback with an investor to finance the construction of the power plant. At the time the NADC/Laidlaw APA was signed, no investor had been identified. (Desrosiers Aff. ¶ 7.)
As part of the NADC/Laidlaw APA, Laidlaw agreed to an "Earn-Out" provision. (NADC/Laidlaw APA § 1.7.) If the project were built, and if Laidlaw became the tenant/operator, then Laidlaw agreed that a specific formula would determine whether NADC would be entitled to further compensation, which would be based on Laidlaw's net cash flow. (Id.; Desrosiers Aff. ¶ 8.) Thus, in substance, the Earn-Out provision was additional compensation to NADC for its sale of the Project Site.
The NADC/Laidlaw APA identified NADC and a Delaware limited liability company called White Mountain Energy, LLC as the "Seller." (NADC/Laidlaw APA at 2.) Laidlaw was identified as the "Purchaser." (Id.) The Earn-Out provision provides, in relevant part:
The parties do not discuss White Mountain Energy, LLC in their papers, and the Court assumes that its existence, vel non, is irrelevant to the issues before the Court.
1.7 Earn-Out. In addition to the Purchase Price, the Seller [NADC] shall have the opportunity to earn additional consideration based on the net cash flow generated from the operation of the Business by the Purchaser [Laidlaw] in accordance with, and subject to, the following terms:(NADC/Laidlaw APA §1.7(a) (parties' names added for clarity).) Therefore, under the Earn-Out formula, Laidlaw would owe a periodic payment to NADC if net revenues received by Laidlaw as the tenant/operator exceeded all of Laidlaw's defined operating expenses including the "fixed rents payments" to the owner/landlord. The NADC/Laidlaw APA also contained detailed financial projections. (See NADC/Laidlaw APA, Ex. F.) However, it also provided:
(a) For a period of ten (10) years from the commencement of commercial operations of the Biomass Project that the Purchaser [Laidlaw] intends to develop (the "Earn-Out Period"), the Seller [NADC] shall be entitled to five percent (5%) of the net cash flow earned by the Purchaser [Laidlaw] from the operation of the business (the "Earn-Out"). For purposes hereof, net cash flow shall be defined as after tax income, calculated on an annual basis, determined in accordance with generally accepted accounting principles, after debt service to unrelated parties, fixed rent payments in accordance with the contemplated sale-leaseback financing transaction (excluding any participation in net profits by landlord, i.e., percentage rent), and a management fee of $750,000 per annum (subject to an annual 3% increase) . . . .
The Seller [NADC] acknowledges that such projections are merely the Purchaser's [Laidlaw's] good faith estimate as of the date of their creation of the potential financial performance of the Biomass Project and are not a representation or warranty by the Purchaser [Laidlaw] of the actual financial performance of the Biomass Project in the future. The Seller [NADC] acknowledges that no assurance can be provided as to the successful development of the Biomass Project and if the Biomass Project is successfully developed the actual financial performance of the Biomass
Project may differ materially from the projections provided to the Seller [NADC]. No assurance can be provided that the Biomass Project or any other project on the Premises can be successfully developed, and if developed that it will perform as projected.(NADC/Laidlaw APA, § 1.7(a) (parties' names added for clarity and emphasis added).)
B. The October 2008 Laidlaw/NewCo Letter Agreement
NewCo was formed by a group of investors in late 2008. (Desrosiers Aff.¶ 10.) In October 2008, Laidlaw and NewCo entered into a sale-leaseback agreement confirmed by a "Letter Agreement." (Id. ¶ 11; Desrosiers Aff., Ex. 3 [hereinafter the "Letter Agreement"].) Under the sale-leaseback agreement, an entity to be formed by NewCo would be the owner and Laidlaw would be the developer/tenant. (Letter Agreement at 1.) The Letter Agreement specifically called for Laidlaw to purchase the Project Site and then convey it to an entity to be formed by NewCo. (Id. at 3.) The Letter Agreement also provided that the "total purchase price to be paid by the Buyer [NewCo] to the Seller [Laidlaw] for the Land pursuant to the Development Closing shall be the cost associated with the acquisition of the Land as set forth in the Asset Purchase Agreement between the Seller [Laidlaw] and NADC and the funds allocated in the Development Closing Budget." (Id.)
The Letter Agreement specifically provided that the Buyer, i.e. NewCo, could freely assign the agreement including, without limitation, to one or more special purpose entities formed solely in connection with the proposed "Facility." (Letter Agreement at 1 n. 1). The "Facility" was defined by the Letter Agreement in a similar way that the "Biomass Project" was defined in the NADA/Laidlaw APA:
The Facility will consist of both new and/or converted upgraded existing buildings and equipment to operate as a biomass-fueled power plant capable of producing electricity at a gross rate of approximately 65 megawatts
(MW), not inclusive of the parasitic load and any transformer losses (the Facility).(Letter Agreement at 2.)
C. The December 23, 2008, PJPD Assignment and Amendment
On December 23, 2008, a "Development Closing" was held between Laidlaw, NADC, and a special purpose entity that NewCo formed called PJPD Holdings, LLC ("PJPD"), at which NADC ultimately conveyed title to the Project Site to PJPD via a quitclaim deed. (Desrosier Aff. ¶ 11; Desrosier Aff., Ex 4 [hereinafter the "PJPD Assignment and Amendment"]; Desrosier Aff., Ex. 5.)
Under the PJPD Assignment and Amendment, Laidlaw was the "Assignor" and PJPD was the "Assignee." Laidlaw assigned "all of the Assignor's right, title and interest in and to the [NADC/Laidlaw] APA, heretofore held by Assignor, subject to the terms and conditions set forth therein and herein." (PJPD Assignment and Amendment § 1.) The Assignment and Amendment also provided in relevant part that:
The [NADC/Laidlaw] APA is hereby amended, and the undersigned hereby agree, as follows:(PJPD Assignment and Amendment § 3 (parties' names added for clarity and emphasis added).)
(a) The undersigned acknowledge that Assignee [PJPD] will be leasing all of the assets conveyed pursuant to the [NADC/Laidlaw] APA to Assignor [Laidlaw] or another entity [NADC] and WME agree Section 3.6 of the [NADC/Laidlaw] APA shall not apply or be binding upon Assignee [PJPD], its principals and affiliates. (Sic).
(b) The Earn-Out described in Section 1.7 of the [NADC/Laidlaw] APA shall be subordinate to the Fixed Rent payable to Assignee [PJPD] pursuant to the Lease. With respect to [NADC] and WME the term Fixed Rent shall be interpreted consistent with the [NADC/Laidlaw] APA in that the subordination granted herein shall not apply to and shall exclude any participation in net profits.
There is an obvious grammatical error in § 3 (a); there should be a period after the word "entity" so that the first part of § 3(a) should read "the undersigned acknowledge that Assignee [PJPD] will be leasing all of the assets conveyed pursuant to the [NADC/Laidlaw] APA to Laidlaw or another entity[.]" This provision establishes that Laidlaw, PJPD and NADC all understood that the leaseback could be made to Laidlaw or another entity, which is in fact what occurred.
The PJPD Assignment and Amendment specifically provided that Laidlaw was conveying all of its "right title and interest in and to the [NADC/Laidlaw] APA, hereto for held by[Laidlaw], subject to the terms and conditions set forth therein and herein." (PJPD Assignment and Amendment § 1.) Critically, the PJPD Assignment and Amendment specifically provided that § 3.6 of the NADC/Laidlaw would not be binding on PJPD but would remain binding on Laidlaw. It contained no such provision with respect to the Earn-Out. In fact, immediately following the provision providing that PJPD Assignment and Amendment, the PJPD Assignment and Amendment provided that the Earn-Out specified in § 1.7 of the NADC/Laidlaw APA "shall be subordinate to the Fixed Rent payable to [PJPD]." If the parties intended the Earn-Out obligation to remain with Laidlaw, they could have drafted language identical to that relating to § 3.6 of the NADC/Laidlaw APA.
D. The September 2, 2011, Assignment and Assumption agreement between Laidlaw and Berlin Station, LLC (The "Laidlaw/Berlin Station Assignment")
Following the December 2008 Development Closing, Laidlaw failed to meet a number of deadlines and eventually withdrew from the Project in 2010. (Desrosiers Aff. ¶ 14.) NewCo (which controlled PJPD) subsequently acquired all of Laidlaw's stock and Laidlaw ceased all operations. (Id.) When Laidlaw withdrew from the project, NewCo set about finding a solvent developer/tenant to develop/operate the power station. (Id.¶ 15.) Berlin Station became that entity. In September 2011, the new developers obtained approximately $275 million in financing to construct a 75 megawatt facility and acquired the necessary permits and approvals for the project without Laidlaw's help. (Id.) Notably, Laidlaw had committed to build a 65 megawatt facility costing approximately $108 million under the Laidlaw/NewCo Letter Agreement.
On September 2, 2011, Laidlaw entered into an "Assignment and Assumption Agreement" with Berlin Station through which Laidlaw "irrevocably assign[ed], transfer[ed], deliver[ed] . . . to [Berlin Station] all right, title, and interest in and to the Assets, subject to all liabilities, obligations, and all encumbrances upon such Assets." (Desrosiers Aff., Ex. 6 [hereinafter "Berlin Station Assignment and Assumption"] § 1.) These "Assets" were defined as:
All assets, tangible and intangible personal property, contracts, and permits owned by [Laidlaw] of every kind and nature, wherever located, including the following:
(Berlin Station Assignment and Assumption, Ex. A.)• Biomass Fuel Supply Agreement dated March 1, 2011, by and between [Laidlaw] and Richard Carrier Trucking, Inc.
IV
NADC claims the Earn-Out obligation in the NADC/Laidlaw APA that ran from Laidlaw to NADC was transferred in the PJPD Assignment and Amendment and subsequently to the developer/tenant that succeeded Laidlaw, i.e. Berlin Station.
A
NADC argues that the language of § 1 of the PJPD Assignment and Amendment supports its position because it provides that Laidlaw "unconditionally and irrevocably grants, bargains, transfers, sells, assigns and conveys to Assignee [PJPD] all of Assignor's [Laidlaw] right, title and interest in and to the [NADC/Laidlaw] APA, heretofore held by Assignor, subject to the terms and conditions set forth therein and herein." NADC contends that:
The Assignment and Amendment transferred the entire [NADC/Laidlaw APA] for the sale of the Frazier Pulp Mill . . . from Laidlaw to PJPD. It also amended the [NADC/Laidlaw] APA in five ways to account for the transfer; none of which "expressly agreed" that the Earn-Out provision remained with Laidlaw.(Pl.'s Obj. at 2 (emphasis in original).)
The Defendants argue that the Earn-Out stayed with Laidlaw and was not conveyed for reasons that they claim are obvious from the documents and the circumstances under which they were executed. Essentially, they argue that the Earn-Out could not be conveyed to the owner in a proposed sale and leaseback because the owner, i.e. PJPD, could not pay itself rent in the contemplated transaction. The Defendants point to the language of page one of the PJPD Assignment and Amendment stipulating that PJPD "intends to lease some or all of the assets conveyed pursuant to the [NADC/Laidlaw] APA to [Laidlaw]" and to the language in § 3(b) explaining that "[t]he Earn-Out described in Section 1.7 of the [NADC/Laidlaw] APA shall be subordinate to the Fixed Rent payable to [PJPD]" to show that, although Laidlaw as indeed conveying the assets and real estate it had acquired from NADC to PJPD pursuant to the PJPD Assignment and Amendment so that PJPD could finance the project, the Earn-Out obligation remained with Laidlaw because the owner under the contemplated sale and leaseback, i.e. PJPD, could not pay itself rent. The Defendants therefore take the position that when Laidlaw — which they alleged retained the Earn-Out obligation — withdrew from the Project in 2010 any possibility of an Earn- Out payment to NADC ended. (See Defs.' Mem. of Law in Supp. of Joint Mot. for Summ. J. [hereinafter "Mot. Summ. J."] at 10.)
B
The fundamental principle regarding interpretation of a contract is to determine the intent of the parties. Behrens v. S. P. Const. Co., 153 N.H. 498, 500 (2006). Intent of the parties is determined by considering the plain meaning of the language of the contract. Ryan James Realty v. Villages at Chester Condo. Association, 153 N.H. 194, 197 (2006). In interpreting a contract, a court will give the language used by the parties its reasonable meaning, considering the circumstances and the context in which the agreement was negotiated and reading the document as a whole. Birch Broadcasting, Inc. v. Capitol Broadcasting Co., Inc., 161 N.H. 192, 196 (2010). The New Hampshire Supreme Court has recently stated:
It is axiomatic that we give an agreement the meaning intended by the parties when they wrote it. When interpreting a written agreement, we give the language used by the parties its reasonable meaning, considering the circumstances and context in which the agreement was negotiated, when reading the document as a whole. Absent ambiguity, the parties' intent will be determined from the plain meaning of the language used. Only when the parties reasonably disagree as to its meaning will the agreement's language be deemed ambiguous.Signal Aviation Services v. City of Lebanon, 169 N.H. 162, 166 (2016) (quotation omitted).
Neither party claims that there is an ambiguity in the contract terms. NADC simply claims that the language in the PJPD Assignment and Amendment means that the Earn-Out was transferred to PJPD and subsequently to Laidlaw's replacement, Berlin Station, when Laidlaw abandoned the project and PJPD or its related successors leased the property to a new tenant.
If the transaction occurred as planned, Laidlaw, as operator of the plant pursuant to the sale and leaseback and not the owner, PJPD, would have been responsible to pay the Earn-Out. But the PJPD Assignment and Amendment, to which Laidlaw, PJPD, and NADC were all parties, specifically contemplated that PJPD would be leasing the facility to Laidlaw "or another entity." (PJPD Assignment and Amendment at 1.) There is nothing in the agreement to suggest that the Earn-Out obligation would be void if the power plant were leased to another entity. Although NADC agreed in the NADC/Laidlaw APA that the projections for the Earn-Out from a 65 megawatt biomass power plant were illustrative, and that the plant might not be built at all, it was also a party to the later executed PJPD Assignment and Amendment, which contemplated that the power plant could be operated by an entity other than Laidlaw. It is not reasonable to believe that the parties contemplated that NADC would lose all rights to an Earn-Out if the entity that was to operate the power plant was substituted with another.
On the other hand, the Earn-Out was tied to the specific 65 megawatt proposal that the parties were negotiating in the NADC/Laidlaw APA and the Letter Agreement. Specifically, Exhibit F to the NADC/Laidlaw APA contained detailed financial projections of the "additional consideration based on the net cash flow generated from the operation of the Business by the Purchaser." (NADC/Laidlaw APA § 1.7 (emphasis supplied).)
Although the plain language of the PJPD Assignment and Agreement suggests PJPD assumed "all" of Laidlaw's "interest in and to the [NADC/Laidlaw] APA . . . subject to the terms and conditions set forth therein" except for § 3.6 of the NADC/Laidlaw APA, a court must consider all the circumstances of the transaction and need not rely solely on the agreement, even if that agreement is an integrated agreement. "The interpretation of an integrated agreement is directed to the meaning of the terms of the writing or writings in the light of the circumstances, in accordance with the rules stated in this Chapter." Restatement (Second) Contracts § 212(1) (1981). Comment (b) to this chapter elaborates:
Plain meaning and extrinsic evidence. It is sometimes said that extrinsic evidence cannot change the plain meaning of a writing, but meaning can almost never be plain except in a context. Accordingly, the rule stated in Subsection (1) is not limited to cases where it is determined that the language used is ambiguous. Any determination of meaning or ambiguity should only be made in the light of the relevant evidence of the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made therein, usages of trade, and the course of dealing between the parties. See §§ 202, 219-23. But after the transaction has been shown in all its length and breath, the words of an integrated agreement remain the most important evidence of intention.Moreover, "[a]greements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish . . . that the integrated agreement, if any, is completely or partially integrated [or] the meaning of the writing, whether or not integrated." Id. § 214(b) & (c).
An examination of the circumstances surrounding the PJPD Assignment and Amendment do not, however, undermine the Court's conclusion that the agreement acted to transfer the Earn-Out obligation to PJPD. It is doubtless true that the PJPD Assignment and Amendment did not explicitly provide that the Earn-Out was transferred to PJPD; but it conversely did not provide that it was to remain with Laidlaw. Nonetheless, the construction urged by the Defendants would be inconsistent with the obvious intent of the parties at the time of the PJPD Assignment and Amendment.
All of the parties expected that the transaction would occur as they had planned; NACD would convey the real estate to PJPD and PJPD would lease the property to Laidlaw so that Laidlaw could operate the power station, and presumably make a profit. The profit that Laidlaw would earn as the operator of the power plant was what NADC and Laidlaw both contemplated the Earn-Out would be paid from if the sale and leaseback proposal came to fruition. The argument that the Earn-Out could not be conveyed to PJPD because it could not pay itself rent is irrelevant because the parties did not contemplate that rent would begin until the plant was constructed and a lease was entered into in which Laidlaw would be the tenant subject to whatever obligations the parties agreed upon, which conceivably would have included the Earn-Out obligation.
Moreover, the PJPD Assignment and Amendment demonstrates that the parties anticipated the possibility that "another entity" other than Laidlaw may become the tenant that operated the power plant. It would be consistent with this possibility for PJPD to temporarily assume the Earn-Out obligation, considering PJPD — neither NADC nor Laidlaw — would ultimately be in position to effectuate the contemplated leaseback portion of the parties' plan and thereby convey the Earn-Out to whatever entity became the tenant.
C
In the alternative, NADC claims that even if the Earn-Out obligation was not transferred as part of the PJPD Assignment and Amendment it was transferred by the September 2011 Laidlaw/Berlin Station Assignment. This document was executed after Laidlaw fell behind on its obligations and withdrew from the Project in 2010, NewCo acquired the stock of Laidlaw, and Laidlaw ceased all operations. (Desrosiers Aff.¶ 10.) As indicated previously, the Court believes that the Earn-Out was transferred to PJPD as a result of December 23, 2008, PJPD Assignment and Amendment. Thus, in 2011, Laidlaw had no Earn-Out obligation to transfer. But assuming that it was not transferred by the PJPD Assignment and Amendment, and remained with Laidlaw, it was plainly transferred by the plain language of the Laidlaw/Berlin Station Assignment.
The Laidlaw/Berlin Station Assignment is a very brief document that begins by reciting the ownership of the corporate entities. The document states in relevant part that:
1. Assignment. Effective as of the date of this Agreement (the "Effective Date"), Assignor [Laidlaw], to the extent that it may do so pursuant to the terms of the Assets, hereby irrevocably assigns, transfers, and deliver (collectively, the "Assignment") to Assignee[Berlin Station] all right, title, and interest in and to the Assets, subject to all liabilities, obligations, and all encumbrances upon such Assets(Laidlaw/Berlin Station Assignment ¶¶ 1-2 (parties' names added for clarity and emphasis added).)
2. Assumption. Effective as of the Effective Date, Assignee[Berlin Station] hereby accepts the Assignment and assumes and agrees to observe and perform all of the duties, obligations, terms, and covenants of the Assets.
NADC argues that the language of the agreement is broad and clear and, by its terms, means that Berlin Station specifically agreed to accept Laidlaw's "liabilities, obligations, and all encumbrances," which includes the Earn-Out obligation. NADC argues that the term "Assets" is defined in the Laidlaw/Berlin Assignment as "[a]ll assets, tangible and intangible personal property, contracts, and permits owned by [Laidlaw] of every kind and nature, wherever located." (Laidlaw/Berlin Station Assignment, Ex. A.)
The Defendants argue that the stated purpose of the Laidlaw/Berlin Assignment is inconsistent with NADC's interpretation. The Laidlaw/Berlin Assignment is a part of a series of documents. It provides in relevant part:
WHEREAS, the Assignment (as defined below) shall be deemed to have been made through a series of transfers as follows: Assignor [Laidlaw] contributes the Assets to NewCo Energy; NewCo Energy contributes the assets the PJPD; PJPD contributes the assets to NewCo Holdings; NewCo Holdings contributes the assets to BBP #1; and BBP#1 contributes the assets to Berlin Station.
WHEREAS, Assignor [Laidlaw] desires to assign to Assignee [Berlin], and Assignee [Berlin] desires to accept from Assignor [Laidlaw], all of the assets identified on Exhibit A (the "Assets").(Laidlaw/Berlin Station Assignment at 1 (parties' names added for clarity).) The Assets, are defined in Exhibit A as:
All assets, tangible and intangible personal property, contracts, and permits owned by Assignor[Laidlaw] of every kind and nature, wherever located, including the following:
(Laidlaw/Berlin Station Assignment, Ex. A.)• Biomass Fuel Supply Agreement dated March 1, 2011, by and between Laidlaw Berlin Biopower, LLC and Richard Carrier Trucking, Inc.
The Defendants argue that this document "reflects a housekeeping transaction which merely cleans up a loose end related to Laidlaw's withdrawal from the project." (Mot. Summ. J. at 12; Desrosiers Aff. ¶ 19.) They argue that, "[s]pecifically, at the time Laidlaw withdrew in 2010, it had acquired a few contracts in its own name in anticipation of later operating a power plant, including the Fuel Supply Agreement referenced in the Assignment. The only effect of the Assignment is to transfer of the Fuel Supply Agreement to Berlin Station, LLC so that Berlin Station would not need to start over and negotiate that agreement from scratch." (Mot. Summ. J. at 12; Desrosiers Aff. ¶ 19.)
In support of their argument that the Laidlaw/Berlin Station Assignment is merely "a housekeeping transaction," the Defendants point out that a virtually identical document was executed on the same day, September 2, 2011, whereby PJPD Holdings, LLC, assigned all of its assets to Berlin Station (the "PJPD/Berlin Station Assignment"). Both assignments contained broad and expansive language. Like the Laidlaw/Berlin Station Assignment, the PJPD/Berlin Station Assignment described the "Assets" as:
All assets, tangible and intangible personal property, contracts, and permits owned PJPD (sic) of every kind and nature, wherever located, including the following:(Desrosiers Aff., Ex. 7 [hereinafter the "PJBD/Berlin Station Assignment"], Ex. A.)
Independent Engineering Services Agreement by and between PJPD and Black & Veatch Corporation, dated effective August 6, 2010[.]
The Court must consider the "circumstance and context in which the agreement was negotiated, when reading the document as a whole." Atronix v. Morris, 171 N.H. 429, 431 (2018) (quotation omitted). Where language is clear and unambiguous, as it is here, a court must give it effect. Signal Aviation Services, 169 N.H. at 166. Thus, whatever assets Laidlaw had after the December 2008 PJPD Assignment and Amendment were assigned to Berlin station.
V
This analysis does not, however, end the Court's inquiry. The PJPD Assignment and Amendment did not specifically define the power plant the parties intended to erect on NACD's real estate nor did the document reference the prior Letter Agreement between Laidlaw and PJPD. That agreement did specifically define the "Facility" to be built:
The Facility will consist of both new and/or converted upgraded existing buildings and equipment to operate as a biomass-fueled power plant capable of producing electricity at a gross rate of approximately 65 megawatts (MW), not inclusive of the parasitic load and any transformer losses . . . .(Letter Agreement at 2.) The PJPD Assignment and Amendment did, however, specifically reference the NADC/Laidlaw APA, which in turn referred to the project to be built in decidedly nonspecific terms:
The Seller acknowledges that no assurance can be provided as to the successful development of the Biomass Project and if the Biomass Project is successfully
developed the actual financial performance of the Biomass Project may differ materially from the projections provided to the Seller. No assurance can be provided that the Biomass Project or any other project on the Premises can be successfully developed, and if developed that it will perform as projected.(NADC/Laidlaw APA § 1.7 (a) (emphasis added).) Moreover, the term "Biomass Project" is defined in the agreement as "the operation of an approximately 65 megawatt biomass project."
Again, neither party claims that there is an ambiguity in any of the agreements between the parties. But the Defendants argue that the project that was actually built was different from that contemplated by the parties, so that the Earn-Out is not applicable:
In September 2011, the new developers obtained approximately $275 million in funding for the construction project (the "Construction Financing Closing"), and construction began shortly thereafter. The power plant that was built was different than what Laidlaw had committed to build under the Letter Agreement: the Letter Agreement contemplated a 65 megawatt facility at a cost of approximately $108 million, while the power plant that was built is a 75 megawatt facility at a cost of approximately $275 million.(Mot. Summ. J. at 5 (citing Letter Agreement at 2, 6; Desrosiers Aff. ¶ 15).)
The language of a contract is ambiguous if the parties to the contract could reasonably disagree as to the meaning of the language. Seacoast Health v. Hospital Corporation of America, et al., 165 N.H. 168, 172 (2013). Here, although NADC does not articulate the reasons for its disagreement, the parties plainly disagree on whether the $108 million 65 megawatt power plant defined as the "Biomass Project" and the "Facility" in the NADC/Laidlaw APA and Letter Agreement, respectively, is materially equivalent to the $275 million, 75 megawatt power plant Berlin Station eventually brought to fruition.
Based upon the record, the Court cannot find as a matter of law that a 75 megawatt biomass plant costing $275 million is the same as an "approximately 65 megawatt" biomass power plant estimated to cost $108 million. While it may be reasonable to interpret the phrase " an approximately 65 MW biomass plant" as encompassing a 75 MW biomass power plant, it is equally reasonable to interpret the phrase as not encompassing a 75 MW biomass power plant, particularly since the undisputed evidence discloses that the 75 MW biomass power plant which was built cost more than twice as much as the original power plant.
The contracting parties could reasonably disagree about the meaning of "approximately 65 MW biomass plant". The phrase is therefore ambiguous. Appeal of Town of Durham, 149 N.H. 46, 47 (2003). If an agreement's language is ambiguous, it must be determined, under an objective standard, what the parties as reasonable people mutually understood the ambiguous language to mean. Behrens v. S.P.. Construction Co., 153 N.H. at 503. Such a determination cannot be made on the record before the Court.
Since there is a genuine issue of material fact as to whether the power plant that was actually constructed is encompassed within the terms of the agreements entered into by the parties, the Defendants are not entitled to summary judgment based upon the language of the NADC/Laidlaw APA, the Letter Agreement, and that PJPD Assignment and Amendment.
VI
Finally, NADC argues that the Defendants have conceded their liability in a number of documents, which have been produced as Exhibits A through H to the Marecki Affidavit. Many of the documents are the subject of a pending Motion to Strike. The Defendants assert that they are privileged and/or were produced in other litigation and are subject to protective order. Even assuming that the parol evidence rule and protective orders do not bar the documents NACD relies upon, they have little probative value.
Exhibit C to the Marecki Affidavit contains a number of e-mails dated between June 27, 2011, and July 6, 2011, between Charles Grecco (Cate Street's executive vice president) and Attorney Chris Branson. Grecco apparently wrote to Attorney Chris Branson and stated, in relevant, "per our conversation this is the NADC Earn Out that was part of the original purchase of the property. When we purchased [Laidlaw] we acquired this responsibility." (Marcicki Aff., Ex. C at 2.) Attorney Branson responded "I think the obligation to NADC will be preserved even if we allow the Development Agreement to be terminated so long as the Letter Agreement and the underlying P& S between Laidlaw and NADC are preserved and assigned to Berlin Station." (Id.) The Defendants assert that this exchange is in admissible as a privileged attorney-client communication and is the subject of a Pending Motion to Strike. NADC has provided no reason why the Court should consider communications that are plainly privileged and the Court will not do so. In any event, the issue before the Court is what the documents mean, and not what an attorney for one of the parties may have told his clients about the documents. Birch Broadcasting, 161 N.H. at 196.
NADC also claims that in February 2014 the Defendant's counsel acknowledged to Attorney Jack Crisp, who was then representing NADC, that "my client acknowledges the earn-out set forth in Section 1.7 of the Asset Purchase Agreement. They will comply with the terms and provisions of the Agreement." (Pl.'s Obj. at 6 (citing Marcicki Aff. ¶ 9.) NADC also claims at three other occasions, in March, June, and December 2015, the Defendants, by their counsel, acknowledged NADC's right to financial information in order to determine the amount it was owed under the Earn-Out. (Pl.'s Obj. at 6-7.)
The Defendants vigorously object to the Court considering any of these alleged communications. They assert that these emails were produced in other litigation, pursuant to a confidentiality order and they are presently the subject of a claw back motion and were in furtherance of settlement negotiations and are the subject of a pending Motion to Strike. (Defs.' Reply Mem. in Supp. of Joint Mot. for Summ. J. at 6.) The Court has reviewed the Motion to Strike and believes it has merit. However, the Court need not decide the motion because the documents NADC seeks to have the Court consider are plainly inadmissible as offers in compromise pursuant to New Hampshire Rule of Evidence 408. The New Hampshire Supreme Court has broadly interpreted the rule and it plainly would bar consideration of the documents proper. See generally Axenics, Inc., v. Turner Construction Co., 164 N.H. 659, 674 (2013) (holding that even internal memoranda evincing an offer to compromise which has not been disclosed to the opposing party is protected under Rule 408).
For the reasons set forth in this order, NADC's Motion to Amend is GRANTED and Defendants' Joint Motion for Summary Judgment is DENIED.
SO ORDERED
4/25/19
DATE
s/Richard B . McNamara
Richard B. McNamara,
Presiding Justice RBM/