C. A. 19-10119-MLW
MEMORANDUM AND ORDER
At a January 24, 2023 conference, Red Wolf Energy Trading, LLC ("Red Wolf") and Bia Capital Management, LLC, Gregory V. Moeller, and Growthworks, LLC ("Bia Defendants") reached an agreement to settle this case. See Dkt. No. 371, attached hereto as Exhibit 1. The court memorialized that agreement in a draft order. Dkt. No. 366-1. The parties have confirmed that the draft order accurately reflects the agreement that they reached. See Dkt. Nos. 368, 369.
The court ordered the parties to provide, by January 27, 2023, language for the release which they had agreed would be incorporated in the final order. Dkt. No. 366. Red Wolf submitted its proposed release provisions. The Bia Defendants submitted two sets of release provisions they would accept, one of which is a modified version of Red Wolf's release provisions. The parties do not agree on the release language. The Bia Defendants have requested a conference to resolve this disagreement.
Two aspects of the proposed release provisions appear to cause the disagreement.
First, in both of their proposed release options, the Bia Defendants include language releasing claims Red Wolf may have against their attorneys, Todd & Weld LLP. Red Wolf's proposed language does not release claims against the Bia Defendants' "representatives," "attorneys," or "agents." However, at the January 24, 2023 conference both Red Wolf and its attorney represented that they have no intention of suing Todd & Weld LLP. The court notes that it has not found Todd & Weld LLP liable for the sanctions imposed on the Bia Defendants. Dkt. No. 322 at 45 n.lO, 70. However, at the January 24, 2023 hearing the court directed the parties to draft a release of only the defendants. Dkt. No. 371 at 37:7-13. As Todd & Weld LLP is not a defendant, the court does not intend to adopt its preferred language.
Second, Red Wolf seeks to include a provision stating that the agreed judgment against the Bia Defendants - $1,400,000 - is not dischargeable in bankruptcy. Specifically, Red Wolf seeks to have the Bia Defendants agree that the judgment is non-dischargeable: (a) pursuant to 11 U.S.C. §523(a)(6), which prevents discharge of willful and malicious injuries; and (b) pursuant to 11 U.S.C. §523(a) (19) (B), which concerns the violation of securities laws or fraud and deceit regarding the purchase or sale of a security. A non-dischargeability provision was not discussed or agreed to at the January 24, 2023 conference. The Bia Defendants oppose it.
It is not this court's intention to adjudicate whether a judgment in this case would be dischargeable in hypothetical bankruptcy proceedings. However, the court has previously addressed whether the Bia Defendants' conduct was willful or malicious. In its October 25, 2022 Memorandum and Order, the court noted that the First Amended Complaint (Dkt. No. 129) does not allege that the defendants acted willfully and maliciously or willfully and knowingly. See Dkt. No. 331 at 2 n.l. Therefore, the court stated that it did not believe that the defaults entered against the Bia Defendants established that they acted maliciously or willfully. Id. Therefore, there is now no basis for the court to find that any debt resulting from the judgment in this case would not be dischargeable in bankruptcy pursuant to 11 U.S.C. §523(a)(6). Section 523(19) is irrelevant as this is not a case involving securities laws. In essence, Red Wolf is seeking to add a material term to an agreement that the court believes is enforceable. See, e.g., Rand-Whitney Packaging Corp, v. Robertson Grp., Inc., 651 F.Supp. 520, 535-36 (D. Mass. 1986). If any of the Bia Defendants seek relief from the judgment in this case in bankruptcy, the Bankruptcy Court will have to decide whether the judgment is non-dischargeable.
In view of the forgoing, unless by February 3, 2023 a party provides a written, persuasive reason for the court to reconsider the language concerning the release to be included in the final judgment, the court intends to enter the order attached hereto as Exhibit 2.
On Behalf of the Plaintiff: JOHN A. STEN, ESQ. and ALISON R. MCFARLAND, ESQ., Armstrong Teasdale, LLP, .
On Behalf of the Defendant BIA Capital Management, LLC, Gregory V. Moeller, and Growthworks, LLC: CHRISTOPHER R. O'HARA, ESQ. and MEGAN DELUHERY, ESQ., Todd & Weld LLP, On Behalf of the Defendant Michael Harradon: SUSANNE M. ELOVECKY, ESQ., Partridge Snow & Hahn
BEFORE THE HONORABLE MARK L. WOLF UNITED STATES SENIOR DISTRICT JUDGE
HEARING VIA VIDEOCONFERENCE
THE COURT: Good afternoon. Would the Clerk please call the case.
THE CLERK: I will, your Honor. Your Honor, this is Civil Matter 19-10119, Red Wolf Energy Trading v. BIA Capital Management, et al.
THE COURT: Would counsel please identify themselves for the Court and for the record, and identify which of your clients are on the Zoom, please.
MR. STEN: Good afternoon, your Honor. John Sten. With me is Alison McFarland, and our client, Wesley Allen, is here for Red Wolf Energy.
THE COURT: Okay.
MR. O'HARA: Good afternoon, your Honor. Christopher O'Hara, and with me is Megan Deluhery and our client, Greg Moeller, who is representing himself, and BIA Capital Management LLC and GrowthWorks LLC.
THE COURT: Okay, and
MS. ELOVECKY: Good afternoon, your Honor. Suzanne Elovecky on behalf of Michael Harradon, who is also here on the call.
THE COURT: Okay, and for some reason I don't see - there's Mr. Harradon.
Okay, we're here pursuant to my December 20, '23 order. I have received a series of reports from you. I understand that the plaintiff has settled with Jon Moeller, and there's been a stipulation of dismissal concerning him. Is that correct?
MR. STEN: That is correct, your Honor.
THE COURT: And then I have a report that says Mr. Harradon made an offer that was to expire on January 16. What's the status of matters with regard to Mr. Harradon?
MR. STEN: If I could go first, your Honor, Mr. Harradon's counsel graciously extended that deadline. The parties have reached the principal agreement of settling. There's drafts out, and it's just a matter of execution and maybe a - and I'll turn it over to my sister. Maybe she might have some slight changes, but we're basically settled, as far as I can tell.
MS. ELOVECKY: Your Honor, that is accurate. We received the draft settlement agreement. My client has not had a chance to review it yet. I have given it an initial review and had a discussion with Attorney McFarland about a couple of small changes. It looks like we're just dealing with smaller items and not material terms. I believe that this will be resolved within the next few days.
THE COURT: Well, I had ordered on December 20 that you tell me what the material terms of the settlement were, if there was a settlement that wasn't finalized. And here's the situation. It sounds like you're settled, but I told you I was going to set a schedule to litigate the case if the matter is not settled by then. It's got to get resolved. And I'm pleased and I expect your representations are reliable. Is there any problem with telling me what the terms of the settlement are? Because if you've got an agreement in principle, subject to memorializing it, if for some reason this falls apart, it's possible that the agreement you have now is enforceable, if it's an agreement on all material terms, subject to it being written up and having some immaterial terms refined. You could look at ¶ 1986 decision in Rand-Whitney v. Robertson Box Company that discusses that principle, although it was a long time ago.
So is there any problem with doing what I ordered on December 20; if you've got an agreement in principle, tell me what the agreement is?
MS. ELOVECKY: I don't object to that, your Honor. I will just say, we didn't have this agreement as to material terms until the last few business days.
THE COURT: Oh, no, that's okay. No, that's okay, and I commend you for continuing to work on it. What I'm saying is - what I'm saying is what I said.
Mr. Sten, do you have any problem?
MR. STEN: I haven't consulted my client. We can give you the terms. There's a payment amount of money over a period -
THE COURT: Excuse me. I want to know the precise terms, and I'm going to ask Mr. Harradon and Mr. Allen if that's what have agreed to, but it hasn't been formally written up yet.
MR. STEN: Mr. Allen, do you have a problem with talking about the terms here?
MR. ALLEN: I do not.
THE COURT: Okay, why don't you, Mr. Sten, state what you understand the material terms are.
MR. STEN: Let me pull it up, your Honor, so I get it right.
MR. STEN: Sorry, your Honor. A total of $400,000 in monetary payments over time.
What was the duration you agreed upon?
(Discussion between Mr. Sten and Mr. Allen.)
MR. STEN: So it's an upfront payment of $50,000 with the remaining $350,000 to be paid over the next ten years in annual payments. And if I get anything wrong, Suzanne, please correct me.
MS. ELOVECKY: I will.
MR. STEN: The execution
THE COURT: But annual $35,000 payments?
MR. STEN: Yes.
THE COURT: No interest?
MR. STEN: No interest.
THE COURT: Go ahead.
MR. STEN: Simultaneous with the execution of the settlement agreement, Mr. Harradon will deliver an agreement of judgment which will be attached and integrated into the settlement agreement.
THE COURT: Okay.
MR. STEN: That will be held in the event of a breach or default to be filed with this court.
THE COURT: If there's a breach or default?
MR. STEN: Yes. And then that would be for the amount of $400,000 less the amount of any settlement payments made prior to the breach or default.
THE COURT: Okay.
MR. STEN: And it also incorporates that Mr. Harradon would be responsible for attorneys' fees and expenses incurred by Red Wolf in enforcing the settlement agreement or the filing of a confession of judgment.
THE COURT: And what about the injunction?
MR. STEN: Well, there's also - the injunction I'll skip down to
THE COURT: Are there other financial terms?
MR. STEN: No, but there is, he agrees to sit for a deposition. Mr. Harradon agrees to sit for a deposition and appear at any future trial in this matter in person.
THE COURT: Including a trial on damages?
MR. STEN: Correct. The deposition has a 21-day written notice, if required.
THE COURT: Okay.
MR. STEN: He agrees to participate in an informal Zoom interview on various categories within 14 days' written notice with Mr. Allen and Mr. Christian. He agrees that the information shared during this interview is not confidential and may be used in further proceedings in this litigation. Specifically carved out from that is anything that would be covered by a joint defense agreement, but no other carveouts of material
THE COURT: A joint defense agreement between whom?
MR. STEN: If there's a joint defense agreement between Mr. Moeller, BIA, Mr. Harradon, you know, we wouldn't want to do anything to cause him to violate that.
THE COURT: And what about, is there an injunction that's part of the agreement?
MR. STEN: Yes. Agree to the 7, 2020 terms of injunction as set forth in the transcript of that hearing, which include no use or disclosure of any material or information obtained from Red Wolf? By agreement - THE COURT: Forever or for three years?
MR. STEN: An agreement to stay out of CAISO - THE COURT: No, wait, wait, wait. I asked for clarification.
MR. STEN: Forever, forever as to Red Wolf. Excuse me.
THE COURT: Okay, go ahead.
MR. STEN: Agreement to stay out of CAISO for a period of three years.
THE COURT: Okay.
MR. STEN: And an agreement to stay out of any electricity trading market for one year.
THE COURT: Ms. Elovecky, does that accurately state all the material terms of the agreement?
MS. ELOVECKY: Yes.
THE COURT: All right. And, Mr. Allen, are those the fundamental features of what you've agreed to to settle with Mr. Harradon?
MR. ALLEN: Yes, your Honor.
THE COURT: All right. And, Mr. Harradon - he seems to have disappeared from my screen. Oh, there he is. Mr. Harradon, if you want to talk to your lawyer about this privately, I'll put you in another room. Before you answer, you can talk to her if you want, but are those terms that you've agreed to to settle this case?
MR. HARRADON: Yes, your Honor.
THE COURT: Okay, all right. Does anybody perceive - well, all right, you said it's going to take you a few days, I think, to get this signed. I want to establish a deadline for filing a stipulation of dismissal. So how long - and I'd like it done by early next week, if that's reasonably possible. Is that feasible?
MS. ELOVECKY: That's feasible, your Honor.
THE COURT: Mr. Sten?
MR. STEN: Yes, that is feasible, your Honor.
THE COURT: Why don't we say then, please, next - you can file your stipulation of dismissal by January 30, which is next Monday? Okay?
MS. ELOVECKY: Yes, your Honor.
MR. STEN: Yes, your Honor.
THE COURT: All right. And is there a perceived need for Mr. Harradon and Ms. Elovecky to stay on this Zoom if they prefer not to? It's a public proceeding as of now. They could stay on if they want to, but they can also be excused.
MR. STEN: The plaintiff has no objection, your Honor.
THE COURT: Ms. Elovecky, what's your preference?
MS. ELOVECKY: I would be fine to go on with my day. THE COURT: Do other things.
MS. ELOVECKY: Yes.
THE COURT: Then do you want to
MR. HARRADON: I'm fine to go on with my day as well.
THE COURT: That means go off this conference. Okay, the two of you may leave. And, Mr. Harradon, I hope you've learned some lessons from this experience. My memory is, you still are planning to be in business with Mr. Moeller; but if you ever have the misfortune to have to appear before a judge again, I hope you understand that you have to be honest, accurate, and complete when you sign something under oath. Otherwise, you're not just risking losing money; you're risking losing your liberty. Okay?
MR. HARRADON: I understand, your Honor.
THE COURT: All right, so the two of you can leave the Zoom.
MS. ELOVECKY: Thank you, your Honor.
THE COURT: Thank you.
MR. HARRADON: Thank you.
(Ms. Elovecky and Mr. Harradon leave the hearing.)
THE COURT: All right, so I'd like to get updated on where things stand on the possible settlement with BIA, Growthworks, and Jon Moeller. I have the impression from reading the report that Red Wolf got all the required documents that it requested and I ordered. As I understand it, there was previously an agreement in principle concerning the injunction that would issue: no CAISO trading by those defendants for three years, no electricity trading for one year, no use or disclosure of Red Wolf's trade secrets, although that might have been limited to three years, if you look at the transcript, in our conversation, your conversations that I mediated. And I think, if I remember correctly, Mr. Allen wanted the hardware back out of Mr. Moeller's house. But are those the features of the - do you basically still have an agreement on the scope of an injunction? Other matters are resolved?
MR. O'HARA: I think, your Honor, that the specificity of what we're talking about has been further clarified in communications by and between. I think there still is some not entire alignment but very close. I think it's convergence bidding or electricity - excuse me - convergence bidding - bear with me - or virtual bidding on CAISO, which is basically what they do, and on the regulatory markets that Red Wolf has been involved in as of the time that BIA ceased operations. So we know what they are, again, convergence bidding, and the other term is "virtual bidding," and that's what has been going on in those markets.
THE COURT: Which markets are those, the markets that Red Wolf is in as of the date of settlement?
MR. O'HARA: Correct, as of the date that BIA ceased operations in 2022. In other words, when it went under, Judge, and was terminated by CAISO.
THE COURT: Let me see if I understand those two things. No virtual or convergence bidding on CAISO for three years?
MR. O'HARA: Correct, that's correct.
THE COURT: No virtual bidding or convergence bidding in markets in which Red Wolf was operating or worked bidding itself on the day that BIA ceased operation, and that's for one year?
MR. O'HARA: Correct. As I understand it, it's on their website, your Honor.
THE COURT: I see. Okay, and that's for one year.
MR. O'HARA: And a no use/no disclosure is consistent with what you said in the injunction.
THE COURT: Okay, so that's three years or
MR. O'HARA: I believe that's what it was, your Honor. I honestly don't know. I don't remember because I don't have the transcript in front of me. I know we did order, it and I didn't look at that specifically.
THE COURT: You know, but that's - I think Mr. Allen said three years was - I've got the transcript. I can look.
And what about, are you giving - is there an agreement - well, I guess giving an agreement back is not part of the injunction. But, Mr. Sten, are those the fundamental features of the injunction on which you've agreed?
MR. STEN: No. No, we've received an offer of that at 12:42. You know, I've heard pieces of that before, but
THE COURT: Wait a minute. What 42?
MR. STEN: We received a settlement proposal at 12:42 today that has these as features. They may have been -
THE COURT: Excuse me. Did you obey my order to get the - we did this on December 20. I started off and I was told, these are the fundamental features of the injunction, the injunction on what would be litigated. So I'm asking you about the injunction. I'm not asking you about money or anything else.
MR. STEN: Your Honor, we are still on the terms of what was discussed at that hearing. What we're hearing back now is fundamentally different, in our opinion.
THE COURT: The injunction?
MR. STEN: What Mr. O'Hara just told you, yes.
THE COURT: And how is it different?
MR. STEN: Our position is that the injunction that was agreed on in the hearing we had, and that we just had with Mr. Harradon, is the injunction that we're willing to agree to.
THE COURT: Well, but how is this different? Maybe I don't understand what virtual or convergence bidding is, but that's the only thing that sounds different to me. What's different?
MR. STEN: Can I have Mr. Allen explain? They're trying to narrow the markets, narrow the pieces through this - that's our opinion - and we're still willing to settle on the original injunctive relief that was discussed.
THE COURT: Okay, he can in just a minute, I want him to, but I think - I actually didn't anticipate this was going to be an issue. My understanding was, the fundamental features were no CAISO trading, three years by the BIA defendants, including Jon Moeller, no electricity trading at all for one year, and no use or disclosure of Red Wolf's information or trade secrets. And I think in the colloquy it said for three years, Mr. Allen, so that's fine; it doesn't have to be forever.
So how is what Mr. O'Hara described, Mr. Allen, different - well, first, let me take a step back. Did I accurately describe what you said was agreeable in an injunction at the hearing on December 19 or the conference: no CAISO trading for three years, no electricity trading for one year, no use or disclosure of Red Wolf's trade secrets or confidential information, I think for three years? Is that what you think the injunction should provide?
MR. ALLEN: Yes, sir. The only slight change would be use of Red Wolf's information in perpetuity.
THE COURT: Okay, so not for three years.
MR. ALLEN: I was under the impression what we agreed upon was CAISO for three years - CAISO for one year, electricity trading for three years, and use of Red Wolf's information.
THE COURT: No. That's backwards.
MR. ALLEN: Okay, one in three or three in one?
THE COURT: Yes, it was no CAISO trading for three years, no electricity trading for one year, and no use or disclosure of Red Wolf's trade secrets or confidential information. I think you'll see that the - okay, so that's correct?
MR. ALLEN: Yes.
THE COURT: And then I thought you had agreed to a three-year limitation, but we'll put that aside for the moment.
MR. ALLEN: Okay.
THE COURT: So how does what Mr. O'Hara described differ from what you just confirmed both parties agreed to in principle for the injunction on December 19?
MR. ALLEN: In two ways your Honor. First, it limits the type of electricity trading to one type of electricity trading.
THE COURT: What's the one type?
MR. ALLEN: Virtual trading versus electricity trading. There are several different types of electricity trading. And, secondly, it limits it to the markets that Red Wolf participates in instead of, you know, we were thinking all electricity markets for the broader constraint.
THE COURT: It could be materially different because the representations that were made in December, none of this is done until it's done, but we're going to litigate it, and then I'm going to decide what's fair in the circumstances.
MR. ALLEN: Yes, your Honor.
THE COURT: And, you know, I guess reread pertinent parts of my September decision that I spent several full days of Labor Day weekend writing, and an injunction is an equitable remedy. If I have to draft an injunction in the case that's helpful to you, I'm going to try and make sure it has no loopholes.
MR. ALLEN: Yes, sir, and
THE COURT: I'm actually talking primarily to Mr. O'Hara and Mr. Moeller.
MR. ALLEN: There's another way that I thought about.
THE COURT: I don't want to think up new ways because
MR. ALLEN: - the default, which was months ago.
THE COURT: I actually thought this was - I was doing this out of an abundance of caution. But, Mr. O'Hara, you say you don't have the transcript at your fingerprints. I do, and I have my Clerk's notes and my notes. Your client doesn't have to agree to anything, but if we litigate it, I'll tell you, I'll draft the injunction. And, as I just said, A, I don't issue orders that I don't understand and I have to get educated on the markets, but I'm going to try to draft something that's simple, clear, so if there's an issue someday when I'm no longer the judge, some other person who hasn't spent years immersed in this can understand.
MR. O'HARA: Right. So your Honor will recall, in that hearing, Mr. Moeller himself described how there are other roles that he could play consulting.
THE COURT: Right.
MR. O'HARA: Not bidding, not convergence bidding, which is what he did in CAISO, and not doing any kind of virtual trading in those markets, and he talked about the scope of that in the hearing that led to this discussion. So the parameters we've put on it are simply where Red Wolf is trading. And, frankly, look, if it makes a difference to Mr. Allen, we're totally fine to give him as of where they are today. We just need to know what markets are off-limits, and there are many markets that they're not involved in in any way.
THE COURT: That sounds to me materially different than we discussed before because you could write an agreement that makes it clear, if this is what the parties agree to, that Mr. Moeller can consult with others, give them advice if they want it.
MR. MOELLER: Judge, can I say something?
THE COURT: Go ahead.
MR. MOELLER: Red Wolf, to my knowledge, doesn't do anything other than convergence or virtual bidding. If it were all electricity trading, I would be restricted from working for power companies, companies that might manage, maintain, operate physical generators. I would be restricted from convergence or revenue right trading, which is something that, as far as I know, Mr. Allen has never done in his company. So he's restricting me from - he's trying to restrict me from doing things that his own company doesn't even do.
THE COURT: Well, I don't know that we're going to get much further on this. It sounds like we're going backwards, but if you don't have agreement on the financial terms, then we're going to litigate this, including the sanctions, which I thought was the major impediment to proceed.
MR. O'HARA: I think it is the major impediment, your Honor. I really do.
THE COURT: Okay, so let me - I got a report on January 5 from the defendants that said, "Red Wolf accepted the amount of money offered by the defendants but not the payment terms." And then there is the question of sanctions. And then I received a separate report on January 5. Let me just make sure I'm characterizing these correct. So No. 358...
357 was the defendant's report, and it told me that the parties had agreed on - that the defendant agreed to pay what the plaintiff was demanding, but there's a dispute as to the payment terms. And then in 358, Red Wolf told me that Red Wolf in principle accepted the amount of the monetary offer made by the BIA defendants but not their proposed terms. "Red Wolf, however, would not agree to waive the pending sanctions before this Court."
So what did it mean that you agreed on the amount of money the defendants would pay but not on the terms? And let me know if that's no longer - you know, the issue has evolved since January 5.
MR. STEN: Your Honor, as best I can recall, the dollar amount was acceptable for the underlying conduct of Moeller, BIA, and Growthworks, and the payment schedule was not.
THE COURT: So what's the dollar amount?
MR. STEN: Mr. O'Hara, do you have any objection to stating it?
MR. O'HARA: Not at all. It's $1.4 million.
MR. STEN: I think this issue has been cleared up to some degree because at least the current offer is a judgment in the amount of $1.4 million, and as far as I can tell from this, unless it's clarified, so our payment terms
THE COURT: And what's the - look, that's significant. It started at 50, and as I recall, because I looked at it, Mr. Allen wanted a million; and there was $400,000 at issue in sanctions, is that reasonable, would be paid? What are the payment terms that the defendant proposes, the $1.4 million?
MR. O'HARA: Well, if I can go back, Judge, to go through this, I think it will clarify?
THE COURT: Sure. Go ahead.
MR. O'HARA: So the initial proposed terms were given to us by Red Wolf on December 15: $1.4 million settlement payment joint and several among our clients; two junctions during the November 7 hearing; and three hardware and assets from BIA and Growthworks. That was their proposal.
On January 4 we gave them a proposal of $1.4 million with payment terms of $100,000 up front and money to be paid, as circumstances permit, over time. And those terms were rejected by BIA on January 5 where they changed their December 15 proposal to entry of judgment on the number as opposed to a settlement; and two, no contingencies or schedules.
And then we came back to them just before the hearing with a proposal judgment in the amount of $1.4 million against the three entities. So we've met their term. Whether it's the settlement proposal that they gave on December 15 or on January 4, we've met that monetary proposal, and indeed even agreed to a proposed judgment in that amount.
THE COURT: Well, previously I think the offer was $50,000 and what, 10 percent of Mr. Moeller's income over the years?
MR. O'HARA: Fifteen percent over four years, I think? But 15 percent I think is the garnishment amount, Judge, that they're legally permitted to get from Mr. Moeller's income, as I understand it. So, we - look, that's really - we had previously proposed that. Again, there's been a series of proposals. Our number went substantially north, and the issue on the change is really not the dollar number on the $1.4 million because I think we have agreement on that part of it.
THE COURT: Yes, just the last positions of the parties on December 19 were, Mr. Moeller was offering $50,000 now and 15 percent of his income over ten years. But here's part of my interest that I think should be your interest: I mean, someday maybe after we go back to court and I decide these matters, and any appeal is exhausted, the parties should be done with each other. And you won't know how good you feel to be done with each other. It will be like you had a migraine headache for seven years, and now you don't. But that may require a lot more work and a lot more expense.
You know, I assume that the plaintiffs would tell me Mr. Moeller will pay, you know, the other $1.3 million as circumstances permit. You're going to be embroiled in continuous surveillance and litigation to determine what his capacity to pay is. And it's opaque. If that was to be in an order, I doubt I would enter it because it's just an invitation to more litigation, if that's a helpful observation. But I continue to encourage you to do something that's clear and as clean as possible and get you all disengaged as soon as possible.
MR. O'HARA: So, your Honor, the differences between us now are that in the December proposal, they had no sanctions term.
THE COURT: Right.
MR. O'HARA: Now they do as part of their January 4 proposal, which was the thing that we told them, because of circumstances, we can't negotiate that. We don't have the ability to do it. We did
THE COURT: I'm sorry. Explicate that a bit. Make it more clear to me.
MR. O'HARA: Your Honor, we previously filed papers that articulate, perhaps not to your Honor's specifics, but we've articulated the idea of the issue of concern, which is that we need to withdraw because of the conflict.
THE COURT: And I said at that time it was hypothetical. But here's where we're going if you don't resolve this: I ordered the BIA defendants to pay reasonable attorneys' fees and expenses and sanctions for my granting of the second motion for sanctions. I left open whether Todd & Weld would be required to make up any deficiency - and you can find this in Footnote 10 and at the end of the decision - and that I would give Todd & Weld an opportunity essentially to litigate that issue. It would turn, as I think the Todd & Weld lawyers recognize, on whether they made reasonable inquiry before filing some of the documents that I found were false and misleading, Mr. Moeller's documents or memoranda relying on that information in those declarations.
So I do think that if we have to litigate that issue, I would have to let Todd & Weld withdraw. And they have told me they have their own counsel, so (Inaudible) pay your lawyers. And, you know, I mean, if somehow you agree on everything, so, you know, that's going to be part of any continued litigation. And Mr. Allen is going to be running up bills with Mr. Sten. He's not going to get the even $100,000 soon. He's going to be distracted. And when there's continued litigation, you're going to have to come here. It was snowing here yesterday. Good thing you weren't flying here. But you'll have to make other arrangements for your children. I mean, it's not a threat. It's just a description. It's a preview of coming attractions. So
MR. O'HARA: Well, your Honor, we tried to get to $1.4 million for that reason, because we understood there was $1 million and then $400,000. The $1.4 million number, as I understood it, and perhaps I'm mistaken, but my understanding was that that encompassed that number in a form of a judgment.
THE COURT: Well, I hadn't heard the $1.4 million number before, and I assume that's the logic of it. Mr. Allen wanted $1 million; then they also wanted another roughly $400,000 in sanctions, so we agreed on the number. But my friend and colleague Judge Woodlock is fond of quoting Supreme Court Justice Robert Jackson who characterized something once 28 as "a munificent bequest in a pauper's will." In other words, Mr. Allen is going to tell me, "Mr. Moeller's promise to pay me another $1,300,000, if circumstances permit, is worthless," and I would understand why he would say that. I think you've got - if you're going to settle this
Well, why don't we take a step back because since we seem to be going backwards anyway. There have been questions about Mr. Moeller's capacity to pay, and there were certain documents on December 19 that the plaintiff wanted, and Mr. Moeller said he would produce them. I understand from the reports they were in (Inaudible), but, I mean, that should be the other thing, Mr. Sten, Mr. Allen. I mean, I can enter an order. Even at the end of litigation, I can enter an order. I can say he needs to pay you $1.4 million, and then it will be up to you to go out and collect it, or it could be much less. I don't know what the damages are. I have to start from scratch on that.
So why don't you find out - I mean, I asked you before. Since we're going backwards, I'll ask you an even more basic question. The first one I think I asked you when this process started, what are your interests?
May I ask Mr. Allen, Mr. Sten, what his interests are today?
MR. STEN: Of course, your Honor.
THE COURT: Go ahead.
MR. ALLEN: Your Honor, my interests remain the same as they have been. Keeping Mr. Moeller - I don't want my employees to have to compete against our own IP, so the injunctive relief is a portion of it, and be made whole from the expenses that we've incurred in this process.
THE COURT: And from your examination of Mr. Moeller's finances, I mean, usually when a case is settled, it ends the parties' relationship except for the injunction. How much money do you believe he and the BIA defendants, the BIA entity that sued Growthworks, could pay you?
MR. ALLEN: I'm not sure, your Honor. And the reason why is, yeah, we've gotten plenty of confirmation on BIA, and I think this was memorialized in our update. There are questions we have about wires that are transfers out of BIA. We don't know who the wires were transferred to.
THE COURT: Well, when were these transferred?
MR. ALLEN: During the course of the litigation. 2019, I want to say. I would have to look at my notes. I think it was in March or May. But, yeah, and we've asked questions about that. The information we got back was (Inaudible). One of them in particular I'm thinking of was 370, maybe 9 thousand dollars. And the response back was, it was a short-term blue loan to/from Greg Moeller to sustain operations. It was a wire out of BIA, so it was a wire to sustain Greg Moeller's operations? That doesn't make a whole lot of sense to me. That's one thing.
Another thing is, the condo that was sold in August of this past year, I think we discussed Mr. Moeller netted somewhere around $400,000 from that. What happened to the money? He said he spent it. So, yes, I have some questions about his capacity to pay.
MR. MOELLER: Is that taken on face value as true, or do I get
THE COURT: Well, I know. What are your interests in?
MR. MOELLER: I want this just to be done, and, you know, I produced everything I've been asked to produce. The transactions Mr. Allen is talking about, we sent them an explanation. I made a direct wire into BIA from a home equity line of credit for $301,000 for the infamous loss in April that Mr. Allen knew about, you know, instantly; and then I had to pay myself back because it was money off of a home equity line of credit.
The other amount that he was talking about, the $400,000, half of that is my wife's; half of it was mine. So he continually inflates the number to poke the bear, and it's - you being the bear. If you look at my tax returns, I've made $10,000 per year for the last six years while I've been working on this company. That's all I've made. So you can do the math. I don't have any money. I've got a daughter who's got problems and has cost us a significant amount of money. You know, you're trying to get blood from a stone.
THE COURT: When you were talking in December, December 19, you were willing to give as part of the settlement, contribute to the settlement 15 percent of your income. And I don't know how income gets defined in this process, but I think it was basically taxable income because I think they would want to see your tax returns to see what you're telling the IRS your income is. Is that something - and that was to be for ten years, as I recall. But is that something you would still be willing to do as part of the settlement?
I'm sorry. You're on mute.
MR. MOELLER: If that's the definition that would clear up what do I pay on the balance of the $1.4 million, then, yeah. I mean, that's what we would get - that's where we would end up if we went through bankruptcy. So I'm happy to, you know, save us all the legal fees. The only one making money here is Mr. Sten.
THE COURT: Yes, and everybody else is losing money.
Mr. Allen, what's your... We've done this before, and you were agreeable. Can I talk to you each alone for a moment, a few moments? Is that agreeable? Mr. O'Hara is shaking his head "yes." Mr. Sten, is that okay?
MR. O'HARA: Yes, your Honor it's okay with us.
THE COURT: Why don't we put Mr. O'Hara and Ms. Deluhery and Mr. Moeller in another room, and the rest of us will stay here.
Does that work, Mr. Fleming, or should we do it the other way around?
THE CLERK: That's fine, Judge. So Attorney O'Hara, Deluhery, and Moeller in a separate room?
THE COURT: Please.
THE CLERK: Okay, I'll do that right now.
THE COURT: And I think we'll go off the record. So while Ms. Marzilli can stay, the parties agree it's off the record, under the same ground rules we've had: Nobody is going to move for my disqualification and put me out of my misery.
MR. STEN: Unfortunately not, your Honor.
MR. O'HARA: It's fine by us, your Honor.
THE COURT: Okay, let's excuse Mr. O'Hara, Ms. Deluhery, and Mr. Moeller.
(Discussion off the record.)
THE COURT: Okay, here's what they propose and will accept, and it actually, from my perspective, would be a very sensible resolution. This I could sign an order to do.
First, an injunction, which I think you in our last conversation agreed to, no trading of any kind in CAISO for three years, no electric trading in any market for one year, no use of Red Wolf's trade secrets or confidential information forever. Mr. Moeller could work for a power company as long as he was not involved in trading electricity. So that would be the injunction.
If the monetary piece falls in place, is that all right, Mr. Moeller?
MR. MOELLER: When you say no trading in ISO, does that include natural gas, or is that just electricity?
THE COURT: I don't know.
MR. MOELLER: These (Inaudible) matter.
MR. O'HARA: They had always said electricity trading, Judge.
THE COURT: All right, so no CAISO. Let's assume we can get that taken care of, all right? I mean, Mr. Allen may say there's certain valuables or something else, but, you're right, we're talking about electricity. That was my understanding.
Here's the financial terms: You agree to pay $1.4 million, $100,000 now, $50,000 a year for 26 years, no interest. It's clean. They don't have to look at your tax returns. They don't have to see what your wife is making. They don't have to figure out, when you file jointly, what's your taxable income or hers, and it's like a mortgage, they analogize it. You've got a debt; you can pay it off, not in a huge - they wanted more, like $100,000 a year. Then they said, well, he's not going to be able to pay it perhaps. They want it to be something manageable so Mr. Allen gets paid eventually.
What's your reaction to that?
MR. MOELLER: That seems okay.
THE COURT: Yes. And, look, I think - okay. And Mr. O'Hara, do you have any concerns about resolving the case on that basis?
MR. O'HARA: No. I think the only issue really is the scope of the electricity trading. So, for example, Europe, no one's in Europe. No one's in
THE COURT: Look, why complicate this?
MR. O'HARA: I'm not trying to.
THE COURT: Everything up until what you just said is no electricity trading for a year.
MR. O'HARA: We're fine with that.
THE COURT: That's the point.
MR. O'HARA: We're fine with that, Judge.
MR. MOELLER: Can I ask a question?
THE COURT: Yes.
MR. MOELLER: I'm not trying to stir the pot, but my kids are going to school in the next - I've got a college-age kid now. What if I can't pay? Like, what if
THE COURT: Then if you can't pay and they're not satisfied you can't pay - this is going to be part of a court order - then you'd have to come to court and show you can't pay.
MR. MOELLER: Okay.
THE COURT: But, look, you know, this has been a miserable experience for you. As I said, though, you're suffering from a self-inflicted wound. To get it behind you, you're well educated, you're hardworking, you're sitting in your house in Weston, I assume - it looks nice - you can give it your undivided attention to making enough money to send your kids to school and to pay them and to continue to live comfortably. And, believe me, you'll feel a lot better if this is over because otherwise, if this doesn't get resolved now, we're going back into battle mode.
MR. MOELLER: I understand. I'm just trying to ask a practical question.
THE COURT: But that's the answer to the question.
MR. MOELLER: Okay.
THE COURT: You know, if you tell me you can't pay and they think you can pay, they can come back to court and say, "He's violating the injunction," because it's court-ordered. It's not just an agreement. It's going to be part of my order. And, you know, if I'm here, I'll decide if you can pay. Many years from now, hopefully, when I'm not here, somebody else will decide whether you can pay. And, you know, we deal with this in other contexts. We impose fines in criminal cases. Sometimes people don't pay them, and we litigate whether they can pay them. Okay?
MR. MOELLER: Okay.
THE COURT: All right, let's get them back. (Pause.)
THE COURT: All right, so with one question, I think you've agreed on all the fundamentals of the settlement. Mr. Moeller asked me, if there's no trading in CAISO for three years, is that, as has been I think assumed by him and perhaps me, limited to electricity? Could he trade gas? As long as he doesn't use your confidential information and trade secrets, which is an independent prohibition.
MR. ALLEN: Yes, I have no problem with Mr. Moeller trying his hand in natural gas.
THE COURT: All right. Then this is what you've each told me is acceptable in principle: That I issue an injunction that bars the BIA defendants, we'll call them, from trading in the CAISO market for three years in electricity. The BIA defendants will not trade electricity in any market for one year. The BIA defendants will not use Red Wolf's trade secrets or confidential information at any time in the future. And this does not prohibit Mr. Moeller from working for a power company as long as he doesn't trade electricity in that one-year period or three-year period concerning CAISO.
Is that agreeable, Mr. Allen?
MR. ALLEN: Yes, your Honor.
THE COURT: And in fact we'll go back and I'll put this on the record, if we've got an agreement.
And, Mr. Moeller, is that agreeable as far as we went?
MR. MOELLER: Yes.
THE COURT: And then Mr. Moeller will give you a judgment for $1.4 million. He will pay $100,000 essentially now - you know, within 30 days, I would say - and he will pay you $50,000 a year for 26 years. Are those also the other fundamental features of the agreement, Mr. Allen?
MR. ALLEN: Yes, your Honor.
THE COURT: Mr. Moeller?
MR. MOELLER: Yes.
THE COURT: And then Mr. Moeller asked me, I'll tell you, what happens - he's got kids to go to college - if he can't pay? And I said, if a year comes and he doesn't pay and you're not satisfied he can't pay, you can come to court and say he's violating the court order to pay. And a judge, me or somebody else, will decide whether he lacks the capacity to pay. That's the way it works. That's what I told him.
Do you understand that, Mr. Allen, too?
MR. ALLEN: Yes, your Honor.
THE COURT: All right. And I hesitate to let you out of my sight to write this up. I think I might in the next day or so draft a court order. And the other feature is, there would be a release. You would want that, Mr. O'Hara, that the defendants and Todd & Weld are released from all claims, I assume?
MR. O'HARA: Yes, your Honor.
THE COURT: Yes.
(Discussion off the record.)
THE COURT: What I'm going to do, I'm ordering that the lawyers confer and by noon tomorrow send me the language that you want concerning the release. I'm going to draft - I don't have a lot of time for this, but it's going to be more efficient - I'm going to draft an order memorializing what you've just agreed to. I'm going to send you the order and give you no more than two days to tell me if you think it doesn't accurately memorialize what you've agreed to.
I'm also now ordering you to order the transcript of this proceeding because it will accurately reflect everything you've agreed to. Does anybody have a question or concern about proceeding in that way?
MR. STEN: Your Honor, I apologize to be the fly in the ointment, but releasing Todd & Weld wasn't part of any discussions we ever had.
THE COURT: The case is over. The case has been dismissed.
MR. STEN: I understand as to Mr. Moeller
THE COURT: No. Excuse me, Mr. Sten.
MR. STEN: Your Honor
THE COURT: I didn't find Todd & Weld violated anything. They're not a party to the case.
MR. STEN: I agree with you a hundred percent, your Honor, so why then all of a sudden did a release for Todd & Weld show up? They have nothing to do with anything here.
THE COURT: There's not going to be any case to go after them on. I don't understand the implications of the question.
MR. STEN: And that might be the case. It's just literally the first time I've ever heard that.
THE COURT: Well, they didn't ask for it. The only thing I said, in my view, based on my decision - it's exactly what I wrote - they'd be required to make up any deficiency in the amount of sanctions I impose. I'm not imposing any sanctions. It's just an agreement to settle everything.
But, all right, Mr. O'Hara is that okay? The release will be in the conventional form and will release the defendants.
MR. O'HARA: Yeah, I hear by the question their intention to try to sue Todd & Weld, Judge. That's what I hear from that question.
THE COURT: Well, they're going to have trouble doing that in front of me, I think.
Mr. Sten, is it your intention to sue Todd & Weld?
MR. STEN: It is not my intention to sue Todd & Weld. I typically don't sue law firms. I -
THE COURT: Well, and I think
MR. STEN: But I'm not going to speak for my client. I don't know. It just came up for the very first time ever.
THE COURT: Mr. Allen, is it your intention to sue Todd & Weld or to get this behind you?
MR. ALLEN: Get this behind me.
THE COURT: Okay. I think that's where we are. Write the release in the conventional form that releases the two defendants. And I'm going out of town about a week from now. It's my intention to enter this order before then, and the case will be over. I'll look forward to seeing the lawyers again in another case. I trust I'm not going to have to see Mr. Moeller or Mr. Allen again.
MR. O'HARA: Your Honor, it would be a pleasure to see you on another case.
THE COURT: All right. Let's excuse the lawyers, Mr. Moeller, Mr. Allen. Lee, stay on with me and my staff for just a few minutes, please.
MR. MOELLER: Are we done for the day, Judge? We can hang up?
THE COURT: Yes. It means you can hang up. You can hang up.
(Discussion off the record.)
(Adjourned, 4:20 p.m.)
As agreed by the parties at the January 24, 2023 hearing, it is hereby ORDERED that:
1. Judgment will enter against Bia Capital Management, LLC, Gregory V. Moeller ("Moeller"), and Growthworks, LLC for $1,400,000, which Moller shall pay to Red Wolf Energy Trading, LLC ("Red Wolf"). Moeller shall pay Red Wolf $100,000 by February 23, 2023. Moeller shall pay the remaining $1,300,000 to Red Wolf in installments of $50,000 a year for twenty-six years with no interest. Payments shall be due on January 20th of each year, starting on January 20, 2024 and ending on January 20, 2050.
2. Bia Capital Management, LLC, Moeller, and GrowthWorks, LLC; their officers, agents, servants, employees, and attorneys; and other persons who are in active concert or participation with any of the foregoing are enjoined from: (a) trading electricity in the California Independent System Operator ("CAISO") market for three years from the date of this Order; (b) trading electricity in any market for one year from the date of this Order; and (c) using or disclosing any Red Wolf trade secret or confidential information at any time in the future. This Order does not prohibit Moeller from working for a power company, provided that he does not trade electricity in any market during the one-year period or in CAISO during the three-year period.
a. Bia Defendants' Release of Claims:
In exchange for the entry of the final agreed judgment and order as set out herein, Greg Moeller, Bia Capital Management, LLC, and Growthworks, LLC (the "Bia Defendants"), individually and on behalf of their respective family members, heirs, executors, administrators, legal and/or personal representatives, and past, present, and future directors, managers, members, officers, employees, trustees, fiduciaries, attorneys, insurers, successors, assigns, and agents, hereby fully, forever, irrevocably, and unconditionally release, remise, and discharge Red Wolf and all of its predecessors, successors, direct and indirect subsidiaries and other affiliates, along with any and all of its or their past, present and future directors, managers, members, officers, agents, employees, trustees, fiduciaries, representatives, insurers, and assigns (whether acting as agents for Red Wolf or in their individual capacity) (individually and collectively referred to as "Red Wolf Releasees") from and with respect to any and all claims, demands, charges, liabilities, damages, actions, causes of action, and suits of every type whatsoever, in law or at equity, asserted or unasserted, known or unknown, suspected or unsuspected, including any claim related to or arising out of any act, event, neglect, or omission occurring from the beginning of the world to the date of issuance of the final judgment and order in this matter.
b. Red Wolf's Release of Claims:
In exchange for entry of the final agreed judgment and order as set out herein, Red Wolf, its direct subsidiaries and other affiliates, and any and all of its or its past, present, and future directors, managers, members, officers, agents, employees, trustees, fiduciaries, representatives, insurers, and assigns (whether acting as agents for Red Wolf or in their individual capacity) hereby fully, forever, irrevocably, and unconditionally release, remise, and discharge each of the Bia Defendants and all of their predecessors, successors, direct and indirect subsidiaries and other affiliates, their respective family members, heirs, executors, administrators, and all of their past, present, and future directors, managers, members, officers, employees, trustees, fiduciaries, insurers, and assigns (individually and collectively referred to as "Bia Defendants Releasees") from and with respect to any and all claims, demands, charges, liabilities, damages, actions, causes of action, and suits of every type whatsoever, in law or at equity, asserted or unasserted, known or unknown, suspected or unsuspected, including any claim related to or arising out of any act, event, neglect, or omission occurring from the beginning of the world to the date of issuance of the final judgment and order in this matter, including, but not limited to any claims arising under any state or federal statutes or regulations, and including without limitation, any and all claims which were or could have been asserted in this action.