Clean Coal Techs., Inc. v. Leidos, Inc.

377 F.Supp.3d 303

CLEAN COAL TECHNOLOGIES, INC., Plaintiff,

v.LEIDOS, INC., formerly known as Science Applications International Corp, and Dilo Paul, Defendants.

17 Civ. 9678 (KPF)

United States District Court, S.D. New York.

Signed March 28, 2019

Barry Mark Kazan, Catherine Rebecca Hartman, Thompson Hine LLP, New York, NY, for Plaintiff.

Thomas Richard Fallati, Tabner, Ryan and Keniry, LLP, Albany, NY, for Defendant Leidos, Inc.

Brian David Mogck, Walden Macht & Haran LLP, New York, NY, Thomas Richard Fallati, Tabner, Ryan and Keniry, LLP, Albany, NY, for Defendant Dilo Paul.

OPINION AND ORDER

KATHERINE POLK FAILLA, United States District Judge

Several lawsuits in several courts have risen from the ashes of the failed business relationship between Clean Coal Technologies, Inc. ("CCTI" or "Plaintiff") and Leidos, Inc. ("Leidos"). In this most recent action, CCTI brings claims for breach of contract, tortious interference with contract, and tortious interference with prospective economic advantage against Leidos, and brings the latter two claims against a Leidos employee, Dr. Anton Dilo Paul (together with Leidos, "Defendants"), in his personal capacity. Both Defendants have moved to dismiss the claims against them in CCTI's Amended Complaint. For the reasons that follow, Dr. Paul's motion is granted in part, and Leidos's motion is granted in full.

BACKGROUND¹

A. Factual Background

1. The Parties

For purposes of the instant motions, the Court accepts as true the well-pleaded allegations of the Amended Complaint. CCTI is a coal technology company incorporated in Nevada with a principal place of business in New York. (Am. Compl. ¶¶ 1, 12). Leidos is a Delaware corporation with a principal place of business in Virginia. (Id. at ¶ 2). Leidos is an engineering advisory firm. (Paul Br. 1). Dr. Paul is an employee of Leidos and a resident of Pennsylvania; he also holds restricted shares of CCTI stock. (Am. Compl. ¶ 3).

2. The Pilot Plant Contracts

The business dealings underlying the instant dispute relate to the development of a pilot plant for CCTI's coal dehydration technologies in Shady Point, Oklahoma (the "Pilot Plant"). (Am. Compl. ¶¶ 12-104). In May 2015, CCTI entered into an Amended and Restated Engineering, Procurement and Construction Management Contract (the "Construction Contract") with Benham Constructors, LLC ("Benham"), which was previously known as Leidos Constructors, LLC. (Id. at ¶¶ 13-15). Benham was a Leidos subsidiary at that time. (Id. ). On December 14, 2015, Leidos and CCTI entered into a Professional Services Agreement (the "Services Agreement") by which Leidos would assist CCTI with the development of the Pilot Plant. (Id. at ¶¶ 17, 18).

On March 16, 2016, Leidos announced that it had completed the sale of Benham to The Haskell Company ("Haskell"). (Am. Compl. ¶ 19). Around the same time, Benham informed CCTI that it had completed testing at the Pilot Plant. (Id. at ¶ 20). On April 15, 2016, Leidos informed CCTI that it was closing out the Construction Contract, as Leidos did not wish to have the contract assigned to Haskell. (Id. at ¶ 22). Leidos stated at the time that the payment to close out the construction contract was $ 96,893.64. (Id. ). The sale of Benham to Haskell closed in July 2016. (Id. at ¶ 33). CCTI, however, consistently disputed the final invoice that Benham provided to it to close out the Construction Contract. (Id. ).

3. The Paul Email

On April 28, 2016, Dr. Paul sent an email to CCTI regarding progress on the Pilot Plant (the "Paul Email"). (Am. Compl. ¶ 23). The Paul Email was described as a "draft response to potential investors [in CCTI] that were following CCTI's progress on the pilot plant." (Id. ). Generally speaking, it provided an optimistic report regarding the CCTI's technology. (Id. at ¶¶ 27-31). CCTI states that the email led it to believe "that it had a ‘fully validated technology’ and available data that could be used to encourage investors and other business partners to support CCTI's efforts." (Id. at ¶ 31).

4. The Construction Contract Dispute

An orderly dissolution of the Construction Contract proved elusive. CCTI claims that Leidos or Benham removed a password for the computer system at the Pilot Plant, along with materials identified as "Carrier CDs" and a Secure Digital (or "SD") card containing data for the Plant's control system (the "SD Card") — all despite the Construction Contract's provision of title in these items to CCTI. (Am. Compl. ¶¶ 34-37). In June 2017, CCTI requested that Leidos provide the password and the SD Card to it. (Id. at ¶¶ 37-38). CCTI states that, instead, between June 7, 2017, and July 14, 2017, Leidos maintained the SD Card and then improperly provided it to Benham rather than CCTI. (Id. at ¶¶ 39-40).

On July 14, 2017, Benham stated that it would not return the Carrier CDs or the SD Card until CCTI made a $ 425,979.51 payment to Benham under the Construction Contract. (Am. Compl. ¶ 41). CCTI alleges that Benham's refusal to return this material left it unable to operate the Pilot Plant. (Id. at ¶¶ 50-51).

On July 28, 2017, CCTI and Benham reached a settlement agreement by which Benham would provide CCTI with the password, Carrier CDs, and the SD Card, and CCTI would release its claims against Benham. (Am. Compl. ¶¶ 53-55). CCTI hired a different firm, Kiewit Engineering Group, Inc. ("Kiewet"), to re-start the plant and run additional tests, and CCTI claims that these actions led to the discovery of additional breaches by Benham of the Construction Contract. (Id. at ¶¶ 56-57). CCTI further states that it discovered that a second Leidos employee, Tom Ezel, had billed time for services he did not perform under the Construction Contract. (Id. at ¶¶ 61-62). CCTI states that, ultimately, it was required to pay $ 2 million to bring the Pilot Plant to the proper operating condition. (Id. at ¶ 63).

5. The Services Agreement Dispute

CCTI further alleges that Leidos and Dr. Paul communicated false or misleading information to investors and potential investors in CCTI regarding CCTI technology. (Am. Compl. ¶ 84). CCTI states that Dr. Paul reached out to investors who relied on the Paul Email, and that he also traveled to New York on May 13, 2016, in order to make a presentation on behalf of CCTI to potential investors from Shenuan, China. (Id. at ¶¶ 85-86). However, CCTI was unable to obtain investments from potential investors in October 2016 and November 2016, due to Leidos's failure to provide testing data that was required under the Services Agreement. (Id. at ¶¶ 87-88). CCTI does not allege that either of these two potential investors was the Shenuan investor group. (See id. ).

CCTI claims that Dr. Paul, on behalf of Leidos, billed CCTI for numerous services that he did not perform, and that CCTI discovered this malfeasance when it regained the password to the Pilot Plant in August 2017. (Am. Compl. ¶¶ 64-69). CCTI also alleges that Dr. Paul refused to produce a comprehensive report on tests of CCTI's technology for the U.S. Department of Energy ("DOE"), as the Services Agreement required, until CCTI delivered an additional $ 70,000. (Id. at ¶¶ 74, 76-78). On August 31, 2017, in response to CCTI's assertions that Leidos's failure to produce Dr. Paul's report would be a breach of the Services Agreement, Dr. Paul produced a report. (Id. at ¶¶ 79-80). CCTI alleges that the report was not compliant with the Services Agreement and contained numerous inaccuracies, but, due to Dr. Paul's prior assurances to DOE that it would receive a report, CCTI was forced to submit the report to DOE. (Id. at ¶ 80). After DOE itself noticed inaccuracies in the report, CCTI was required to pay Kiewet to prepare a new report. (Id. at ¶¶ 81-83).

6. The DOE Dispute

More broadly, CCTI alleges that Leidos and Dr. Paul interfered with CCTI's relationship with DOE. CCTI alleges that while it was negotiating with a potential investor in October 2016, Dr. Paul requested that CCTI issue him stock before the deal closed. (Am. Compl. ¶¶ 92-94). And when CCTI declined to issue stock, Dr. Paul told DOE that CCTI was financially unstable, in order to poison that relationship. (Id. at ¶¶ 95-97). CCTI alleges that the relationship between it and Dr. Paul became even more strained when Dr. Paul requested a "reliance" letter to make the CCTI shares he owned unrestricted, and CCTI refused. (Id. at ¶¶ 98-100). CCTI alleges that this dispute led Dr. Paul to provide his inaccurate August 31 report, which report contradicted the earlier Paul Email and damaged the relationship between CCTI and DOE. (Id. at ¶¶ 101-04).

7. The New York State Action

On March 21, 2017, Leidos sued CCTI in New York State Supreme Court, in an action styled as Leidos Inc. v. Clean Coal Technologies, Inc. , Index No. 505651/17 (N.Y. Sup. Ct.) (the "New York State Action"). (Am. Compl. ¶ 105). On March 23, 2017, the parties to that action stipulated that the balance owed to Leidos under the Services Agreement was $ 131,539.06. (Id.at ¶ 106). Leidos filed the stipulation and obtained a judgment. (Id. at ¶ 109). CCTI now argues that this judgment was improperly obtained.

B. Procedural Background

Plaintiff filed a summons with notice in New York State Supreme Court on October 27, 2017. (Dkt. # 1). On December 8, 2017, Leidos, with the consent of Dr. Paul, removed the action to this court. (Id. ). On December 13, 2017, Defendants filed an Answer with Counterclaims (Dkt. # 4), and, on March 15, 2018, Plaintiff filed its Complaint (Dkt. # 18).

Following a conference on June 12, 2018, this Court issued a scheduling order for motion practice and discovery. (Dkt. # 42). Pursuant to this Order, CCTI filed its First Amended Complaint on July 9, 2018. (Dkt. # 43). The First Amended Complaint brings four causes of action: (i) breach of contract against Leidos for breach of the Services Agreement; (ii) tortious interference with the Construction Contract against Leidos; (iii) tortious interference with the Services Agreement against Dr....