United States District Court, D. Colorado
ORDER ON PENDING MOTIONS
Brooke Jackson United States District Judge.
move for summary judgment on plaintiff's First, Third,
Fifth, Sixth, and Seventh Claims for Relief. ECF No. 246. The
motion is granted in part and denied in part. This order also
addresses several other pending motions.
December 21, 2011 Wellons, Inc. 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”), and Wellons
began work on the facility.
October 20, 2014, after a payment dispute arose, Wellons
recorded a mechanic's lien on the facility's property
for $14, 441, 874.31 plus interest. ECF No. 246-8 at 1.
Wellons recorded an amended lien on December 16, 2014. ECF
No. 246-9 at 1.
12, 2015 Wellons brought this suit against EVCE and several
affiliated entities and employees, including Evergreen Clean
Energy Corporation (“Evergreen”), Clearwater
Ventures, LLC (“Clearwater”), Western Resources,
LLC (“Western”), Colorado Forestry Funding, LLC
(“CFF”), West Range Forest Products, LLC
(“WRFP”), Dean Rostrom, and Kendric Wait. ECF No.
1. Wellons filed its third amended complaint a year later on
June 21, 2016. ECF No. 139. This complaint raises seven
claims for relief: (1) breach of contract against EVCE; (2)
default of a promissory note against Evergreen; (3)
foreclosure of a mechanic's lien against EVCE and
Clearwater; (4) unjust enrichment against EVCE, Evergreen,
and Clearwater; (5) fraudulent transfers against all
defendants; (6) civil conspiracy against all defendants; and
(7) breach of directors' duties against Mr. Rostrom and
Mr. Wait. Defendants now move for summary judgment on
Wellons' First, Third, Fifth, Sixth, and Seventh Claims.
ECF No. 246. The motion has been fully briefed. See
ECF Nos. 281, 287.
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).
DEFENDANTS' MOTION FOR PARTIAL SUMMARY
move for summary judgment on Wellons' claims for breach
of contract, mechanic's lien foreclosure, fraudulent
transfers, civil conspiracy, and breach of directors'
duties. I will address each issue in turn.
Breach of Contract.
validity of Wellons' breach of contract claim depends on
the meaning of the EPC contract. The EPC contract specifies
that it is governed by Utah law. ECF No. 246-1 at 73. Under
Utah law, the primary goal of contract interpretation is to
ascertain the intent of the parties at the time of
contracting. Equine Assisted Growth & Learning
Ass'n v. Carolina Cas. Ins. Co., 266 P.3d 733, 736
(Utah 2011). When contractual language is unambiguous, the
parties' intentions are determined from the
contract's plain meaning as a matter of law. Reighard
v. Yates, 285 P.3d 1168, 1177 (Utah 2012). A contractual
term is ambiguous if it is capable of more than one
reasonable interpretation. Daines v. Vincent, 190
P.3d 1269, 1275 (Utah 2008). Extrinsic evidence may be
admitted to support a plausible claim of textual ambiguity.
Id. at 1278. When a contract is ambiguous, summary
judgment is appropriate only if the evidence, viewed in the
light most favorable to the nonmoving party, leaves no issue
of material fact to be resolved. Peterson v. Sunrider
Corp., 48 P.3d 918, 927 (Utah 2002).
argue that the undisputed evidence shows Wellons did not
perform its own contractual duties and thus cannot maintain
an action for breach of contract. A prima facie case for
breach of contract requires: “(1) a contract, (2)
performance by the party seeking recovery, (3) breach of the
contract by the other party, and (4) damages.” Bair
v. Axiom Design, L.L.C., 20 P.3d 388, 392 (Utah 2001).
Regarding performance by the party seeking recovery, only a
material breach will excuse further performance by the other
party. McArthur v. State Farm Mut. Auto. Ins. Co.,
274 P.3d 981, 987 (Utah 2012). Therefore, “[n]ot every
minor failure justifies nonperformance and rescission of the
contract.” Saunders v. Sharp, 840 P.2d 796,
806 (Utah Ct. App. 1992). Such a breach “must be
something so substantial that it could be reasonably deemed
to vindicate the other's refusal to perform; and this is
a matter of affirmative excuse or justification, which the
party so claiming has the burden of demonstrating.”
Zion's Properties, Inc. v. Holt, 538 P.2d 1319,
1321 (Utah 1975). Utah courts have evaluated whether a breach
is material by applying the Restatement of Contract's
(a) the extent to which the injured party will be deprived of
the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately
compensated for the part of that benefit of which he will be
(c) the extent to which the party failing to perform or to
offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to
offer to perform will cure his failure, taking account of all
the circumstances including any reasonable assurances; [and]
(e) the extent to which the behavior of the party failing to
perform or to offer to perform comports with standards of
good faith and fair dealing.
Cross v. Olsen, 303 P.3d 1030, 1036 (Utah Ct. App.
2013) (quoting Restatement (Second) of Contracts § 241
(1981)); see also, e.g., Grassy Meadows Sky
Ranch Landowners Ass'n v. Grassy Meadows Airport,
Inc., 283 P.3d 511, 518 (Utah Ct. App. 2012) (same);
GeoNan Properties, LLC v. Park-Ro-She, Inc., 263
P.3d 1169, 1175 n.6 (Utah Ct. App. 2011) (same).
Formal Notice of Final Completion.
defendants assert that Wellons committed a material breach by
failing to comply with the EPC contract's process for
determining if Wellons has achieved “Final
Completion” of the project. Section XI.E.5 of the EPC
contract provides that Wellons “shall . . .
notify” EVCE in writing when it believes it has
achieved Final Completion. ECF No. 246-1 at 57. EVCE must
then determine whether Final Completion has been achieved,
and it must notify Wellons of its determination. Id.
If EVCE informs Wellons that Final Completion has not been
achieved, then Wellons must remedy the deficiencies and
resubmit notice of Final Completion. Id. The parties
may repeat this process until EVCE determines that Final
Completion has been achieved, or either party may instead
invoke the EPC contract's dispute resolution process.
concedes that it did not provide written notice of Final
Completion, but it contends that defendants were not
prejudiced by its nonperformance of this contractual duty.
ECF No. 281 at 4. I agree. Section XI.E.5's written
notice requirement was not a material provision of the EPC
contract. If Wellons adequately completed the project, then
informal notice of this result would not deprive EVCE of the
benefit the company expected to receive; informal notice
would forfeit Wellons' claim to millions of dollars if it
constituted a material breach; and such notice would still
comport with the standards of good faith and fair dealing.
See Restatement (Second) of Contracts § 241
(1981). It is therefore a “minor failure” rather
than a material breach.
defendants' view, Wellons' failure to adhere to
Section XI.E.5 “deprives [EVCE] of its right to a
completed, operational plant before it must pay any final
amounts to Wellons.” ECF No. 246 at 7-8. Not so. If
Wellons did not substantially perform under the contract,
then it is not entitled to final payment. Conversely, if
Wellons did substantially perform, then it is entitled to
payment less “any cost or other loss that [it] has
avoided by not having to perform.” Ford v. Am. Exp.
Fin. Advisors, Inc., 98 P.3d 15, 26 (Utah 2004)
(emphasis omitted) (quoting Restatement (Second) of Contracts
§ 347 (1981)). Wellons' compliance with this notice
provision might have helped avoid a lawsuit, but, standing
alone, it would not have changed the fact that Wellons did or
did not achieve Final Completion.
also argue that they were disadvantaged because Wellons'
repair warranty extends “for a period of one (1) year
from the date of Final Completion, ” and its liability
insurance “shall be maintained without interruption
from the date of commencement of the Work until Final
Completion of the Work.” ECF No. 246 at 8 n.8 (quoting
ECF No. 246-1 at 54, 61). Yet defendants do not contest that
EVCE knew Wellons believed it had achieved Final Completion
in the spring of 2014. See ECF No. 287; see
also ECF No. 281 at 4; ECF No. 281-10 at 2 (alerting Mr.
Rostrom and Mr. Wait on February 27, 2014 that Wellons is
“in a safe position to declare final completion . . .
once we get through the 30 day test”); ECF No. 283 at 5
(informing Mr. Rostrom and Mr. Wait on March 27, 2014 that
the facility successfully completed this 30-day test, and
noting that “[t]he facility has been accepted for
operation under all project documents”). If EVCE had
actual knowledge of Final Completion, then Wellons'
failure to provide formal notice had no effect on EVCE's
enjoyment of Wellons' repair warranty and liability
insurance. And even if defendants claimed that they did not
have actual knowledge, then we would have a fact dispute that
could not be resolved on summary judgment. Summary judgment
is therefore denied on this question.
Achievement of Final Completion.
defendants contend that Wellons did not achieve Final
Completion. The EPC contract states that Wellons cannot
achieve Final Completion until the remaining items on a
defined “Punch List, ” “taken as a whole
and in [EVCE's] commercially reasonable discretion,
” are “not estimated to require a cost to
complete in excess of $400, 000.” ECF No. 246-1 at 56.
Defendants cite three pieces of evidence for its view that
this limit was exceeded.
EVCE's engineer concluded at an unspecified time,
presumably in October 2014, that the Punch List items would
cost more than $400, 000 to complete. ECF No. 246-2 at ¶
8. But this opinion is disputed. On February 27, 2014 Wellons
told Mr. Rostrom and Mr. Wait that it projected to have some
Punch List items remaining, but that the cost of these items
would not exceed $400, 000. ECF No. 281-10 at 2. On October
27, 2014 Wellons wrote Mr. Rostrom that some of the items
EVCE alleged were incomplete “have either been
completed or are not within Wellons' scope of
work.” ECF No. 281-14 at 3. And on November 4, 2014