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Wellons, Inc. v. Eagle Valley Clean Energy, LLC

United States District Court, D. Colorado

March 7, 2017

WELLONS, INC. an Oregon corporation, Plaintiff,
v.
EAGLE VALLEY CLEAN ENERGY, LLC, a Utah limited liability company, EVERGREEN CLEAN ENERGY CORPORATION, a Colorado corporation, CLEARWATER VENTURES, LLC, a Utah limited liability company, DEAN L. ROSTROM, individually, KENDRIC B. WAIT, individually, GEORGE SORENSON, individually, WILCOX REVOCABLE TRUST U/A 0627/03 WILLIAM WILCOX AND LYN WILCOX TRUSTEES FOR THE BENEFIT OF WILLIAM WILCOX AND LYN WILCOX, SEA SOUTH, LLC, a Delaware limited liability company, WESTERN RESOURCES, LLC, a Utah limited liability company, COLORADO FORESTRY FUNDING, LLC, a Delaware limited liability company, and WEST RANGE FOREST PRODUCTS, LLC, a Colorado limited liability company, Defendants. EAGLE VALLEY CLEAN ENERGY, LLC, EVERGREEN CLEAN ENERGY CORPORATION, and CLEARWATER VENTURES, LLC, Counterclaimants,
v.
WELLONS, INC., Counterclaim defendant. EAGLE VALLEY CLEAN ENERGY, LLC, EVERGREEN CLEAN ENERGY CORPORATION, and CLEARWATER VENTURES, LLC, Third-party plaintiffs,
v.
WELLONS GROUP, INC., and MARTIN NYE, Third-party defendants. GCUBE INSURANCE SERVICES, INC., a California corporation, Plaintiff,
v.
WELLONS, INC., an Oregon corporation, Defendant.

          ORDER

          R. Brooke Jackson, Judge

         Counterclaim defendant Wellons, Inc. moves for summary judgment on counterclaimants' second cause of action for liquidated damages under the “Consent and Agreement.” ECF No. 216. The motion is granted.

         BACKGROUND

         On December 21, 2011 Wellons, Inc. (“Wellons”) and Eagle Valley Clean Energy, LLC (“EVCE”) entered into an contract for Wellons to design and build a biomass power plant in Gypsum, Colorado. The parties memorialized their agreement in the “Amended and Restated Engineer, Procure, and Construct Contract” (“the EPC contract”).

         To obtain a construction loan for the project, EVCE executed a “Credit Agreement” with Deutsche Bank Trust Company Americas and lenders affiliated with the bank on August 8, 2013. ECF No. 226-1 ¶ 4; ECF No. 228-1. Deutsche Bank “was not a lender, ” but instead was “an agent acting at the direction of the lenders.” ECF No. 226-2 ¶ 5. In the Credit Agreement's jargon, Deutsche Bank was the “Administrative Agent” and “Collateral Agent” for “the Lenders that [were] from time to time parties” to that agreement. See ECF No. 228-1.

         Deutsche Bank considered EVCE's loan risky and required additional safeguards from the parties. ECF No. 216 at 3; ECF No. 226-1 ¶ 8. To that end, Deutsche Bank required EVCE and Wellons to sign a “Consent and Agreement” (“the Consent”) before it would finance the Credit Agreement. See ECF No. 216-1 at 1; ECF No. 226 at 5-6, ¶¶ 3-4. The Consent amended the EPC contract to EVCE's benefit, making it more likely that EVCE would be able to repay the Deutsche Bank loan if Wellons failed to adequately construct the power plant. See ECF No. 216 at 3; ECF No. 226 at 5, ¶ 3 (summarizing the Consent's amendments as including “requiring Wellons to secure its performance under the EPC Contract with a letter of credit, ” “imposing additional Repair Warranty obligations on Wellons, ” “adding liquidated damages for Wellons' failure to timely achieve Substantial Completion and/or Final Completion, ” and “eliminating a provision that purports to limit Wellons' financial liability for defects in its work”). The Consent provided that these amended terms would remain in effect “until the time that this Consent is terminated.” ECF No. 216-1 art. 1.11; accord ECF No. 226 at 8, ¶ 14.

         EVCE had also sought less expensive financing from the U.S. Department of Agriculture's Rural Utilities Service (“RUS”), but was unable to obtain such a loan until May 2014. ECF No. 216 at 3; ECF No. 226 at 6, ¶ 9. Some of this money was used to pay off the Deutsche Bank loan. ECF No. 216 at 5; ECF No. 226 at 6, ¶ 9.

         The project did not go as planned. Wellons and EVCE each claim that the other party breached the EPC contract. See Compl., ECF No. 1 ¶¶ 22-25; Am. Countercl., ECF No. 141 ¶¶ 49-62. Wellons now moves for summary judgment on EVCE and other counterclaimants' claims for liquidated damages under the Consent, arguing that the Consent terminated when RUS repaid the Deutsche Bank loan in full. ECF No. 216 at 2.

         STANDARD OF REVIEW

         The Court may grant summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden to show that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving party must “designate specific facts showing that there is a genuine issue for trial.” Id. at 324. A fact is material “if under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998). A material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court will examine the factual record and make reasonable inferences in the light most favorable to the party opposing summary judgment. Concrete Works of Colo., Inc. v. City & Cnty. of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994).

         ANALYSIS

         EVCE's liquidated damages claim depends on the meaning of Sections 1.2, 4.6, and 4.7 of the Consent. Wellons contends that only Section 4.7 applies in this case, and that its plain terms dictate that the Consent terminated when RUS repaid the Deutsche Bank loan. ECF No. 216 at 2. EVCE disagrees, arguing that the Consent continues to apply in favor of RUS under Section 1.2, and that Sections 4.6 and 4.7 must be read together to require a signed agreement to terminate the Consent. ECF No. 226 at 10.[1]

         Interpretation of the Consent-a contract-is a question of law for the Court. See USAA Cas. Ins. Co. v. Anglum, 119 P.3d 1058, 1059 (Colo. 2005). When interpreting a contract, the primary goal is to determine and give effect to the intent of the parties. Ad Two, Inc. v. City & Cnty. of Denver, 9 P.3d 373, 376 (Colo. 2000). The parties' intent is to be ascertained primarily from the language of the agreement itself. Id. The Court gives words their plain and ordinary meaning unless it is clear that the parties intended an alternative interpretation. Chacon v. Am. Family Mut. Ins. Co., 788 P.2d 748, 750 (Colo. 1990). Unless the terms in a contract are susceptible to more than one reasonable interpretation, the Court will not look beyond the four corners of an agreement in determining its meaning. Ad Two, Inc., 9 P.3d at 376-77. And any ambiguity in the Consent will be construed against the party that drafted it-Deutsche Bank. See Moland v. Indus. Claim Appeals Office of State, 111 P.3d 507, 510 (Colo.App. 2004). The Court will consider each disputed provision in turn.

         A. Section 1.2.

         Section 1.2 of the Consent is titled “Consent to Assignment” and provides, in relevant part:

The Collateral Agent [Deutsche Bank] and the Project Company [EVCE] agree that the Secured Obligations may be refinanced, extended, renewed or replaced from time to time, and Contract Party [Wellons] agrees that this Consent will remain in full force and effect and continue to apply in favor of the Collateral Agent [Deutsche Bank] or any replacement ...

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