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Capergy US, LLC v. SAG Realty, LLC

United States District Court, D. Maine

January 18, 2019

CAPERGY US, LLC, Plaintiff,
v.
SAG REALTY, LLC and SCOTT GARDNER, Defendants.

          ORDER ON DEFENDANTS' MOTION TO DISMISS

          JON D. LEVY CHIEF U.S. DISTRICT JUDGE.

         In 2016, Capergy US, LLC (“Capergy”), SAG Realty, LLC (“SAG”), and a third party formed EMEP, LLC (“EMEP”), a Maine limited liability company, for the purpose of purchasing the Great Northern Paper Company Mill in East Millinocket and restarting the mill's biomass power plant. In this action, Capergy asserts that SAG and its sole member, Scott Gardner (referred to collectively as “SAG”), breached various commitments they made to Capergy, including their promise to contribute to the start-up costs Capergy incurred to launch EMEP. This matter is before the Court on SAG's Motion to Dismiss, which seeks the dismissal of the complaint for lack of subject-matter jurisdiction, Fed.R.Civ.P. 12(b)(1), and for failing to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6). After careful consideration, I deny the motion.

         I. FACTUAL BACKGROUND

         The complaint alleges the following facts, many of which are disputed, but which I treat as true for purposes of the motion to dismiss.

         In March 2016, Scott Gardner, acting as the sole member of SAG, approached Capergy about partnering to purchase the Great Northern Paper Company Mill in East Millinocket (the “GNP Mill”) and restarting the existing biomass power plant on the site. In May 2016, Capergy, SAG, and a third party[1] formed EMEP, a Maine limited liability company (“LLC”), for the purpose of purchasing the GNP Mill. EMEP is subject to an Operating Agreement that was made effective on May 27, 2016. See ECF No. 7-1. Also, on May 27, 2016, Capergy and SAG reached an oral agreement that each party would bear 50% of the costs incurred by EMEP in connection with the purchase and development of the GNP Mill. On June 30, 2016, EMEP entered into a binding letter of intent agreeing to buy the GNP Mill for $1, 750, 000. The letter of intent required a $100, 000 deposit, to which Capergy and SAG each contributed $50, 000 pursuant to their oral agreement.

         On December 7, 2016, Capergy and SAG agreed that Capergy would advance the costs associated with the development of the GNP Mill-which included implementing a biorefinery and a greenhouse, and restarting the power plant-and, consistent with the May 27, 2016 oral agreement, SAG would reimburse Capergy for 50% of those costs. That same day, based on their partnership in EMEP, the parties signed several agreements which stated that SAG would supply materials and services at above-market prices to other power plants owned by Capergy's affiliates.

         Relying on the oral agreement to evenly split development costs, Capergy incurred $430, 287.15 in legal, development, regulatory, and technical costs associated with the effort to purchase the GNP Mill between the end of 2016 and August 2017. SAG never paid its share of those costs. On March 23, 2017, SAG informed Capergy that it would not contribute any funds toward the GNP Mill project, including the 50% share of the purchase price that Capergy understood SAG to have committed to. In response, Capergy demanded that SAG either pay half the purchase price or sell its share of EMEP to Capergy for $50, 000. The complaint alleges that SAG responded that it would remain partners with Capergy and contribute to the purchase, but that SAG did so only to leverage the partnership to procure above-market service contracts with Capergy. SAG never contributed its half of the purchase price and as a result, EMEP failed to close on the mill, halting development of the planned biorefinery.

         Capergy's complaint invokes the Court's diversity jurisdiction under 28 U.S.C.A. § 1332 (West 2019) because (1) Capergy is a Delaware limited liability company and its sole members are citizens of the State of Indiana and France; (2) SAG is a Maine limited liability company; and (3) Scott Gardner, SAG's sole member, is a resident of Lincoln, Maine.

         II. LEGAL ANALYSIS

         SAG moves to dismiss the Complaint on the two following grounds: (1) for lack of subject-matter jurisdiction under Rule 12(b)(1) because, they contend, EMEP is a necessary party in interest, is properly aligned as a plaintiff, and its joinder destroys diversity; and (2) for failure to state a claim under Rule 12(b)(6).

         A. Subject-Matter Jurisdiction

         SAG asserts that even though it is not styled as such, Capergy's suit is a derivative action brought on behalf of EMEP and that EMEP is therefore a necessary party in interest. SAG further argues that EMEP would be properly aligned as a plaintiff, which destroys diversity jurisdiction. See ECF No. 6 at 4 (citing Gabriel v. Preble, 396 F.3d 10, 14 (1st Cir. 2005) (noting that where a derivative suit is prosecuted on behalf of the corporation, the general rule is that the corporation should be deemed a plaintiff)).[2] Capergy counters that its suit is a direct action between LLC members brought pursuant to Maine law under either 31 M.R.S.A. § 1631 or § 1637 (West 2019).

         Section 1631 authorizes a member of an LLC to maintain a direct action ...


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