Ge Mobile Water, Inc. v. Red Desert Reclamation, LLC

6 F.Supp.3d 195

GE MOBILE WATER, INC.

v.RED DESERT RECLAMATION, LLC, et al.

Case No. 13–cv–357–PB.

United States District Court, D. New Hampshire.

Signed March 17, 2014.

Danielle Andrews Long, Robinson & Cole LLP, Boston, MA, for GE Mobile Water, Inc.

Scott H. Harris, McLane Graf Raulerson & Middleton PA, Manchester, NH, for Red Desert Reclamation, LLC, et al.

MEMORANDUM AND ORDER

PAUL BARBADORO, District Judge.

In February 2012, GE Mobile Water, Inc. entered into a contract with Red DesertReclamation, LLC to lease water treatment equipment for use at its Wyoming facility. After Red Desert failed to make payments required under the contract, GE Mobile sued it and two affiliated entities, Clean Runner, LLC and Cate Street Capital, Inc. In an earlier order, I denied Red Desert's motion to dismiss for lack of personal jurisdiction. GE Mobile Water, Inc. v. Red Desert Reclamation, LLC, 2014 DNH 049, 14, 2014 WL 900715. I now consider Clean Runner and Cate Street's motion to dismiss for failure to state a claim.

I. BACKGROUND¹

In 2012, Red Desert operated a facility in Rawlins, Wyoming for recycling water used in the hydraulic fracturing of natural gas reserves. Red Desert used water treatment technology at its Wyoming facility that was developed by Clean Runner. Red Desert and Clean Runner are managed by Cate Street Capital, Inc., a Delaware corporation with an office in Portsmouth, New Hampshire. Cate Street planned to use the Wyoming facility as a platform to showcase Clean Runner's technology, with the goal of operating similar hydraulic fracturing water treatment facilities throughout the country. Doc. Nos. 18–2, 18–4, 18–5, 18–6.

Beginning in September 2011, Steven Fischer, a GE Mobile employee, began working with Judson J. Cleveland on a proposed contract under which GE Mobile would lease water processing and treatment equipment for use at the Red Desert facility. At the time, Cleveland was a Managing Director of Cate Street, Chief Operating Officer of Red Desert, and President of Clean Runner. Barry Glichenhaus and Samuel Olson of Cate Street were also involved in negotiating the contract. During negotiations, Cate Street's representative told Fischer that Cate Street was paying for the project and was the ultimate decision maker. Cleveland also represented “that Cate Street, being funded with $40 million for the Project, would be able ‘to make good’ on the invoices issued by [GE Mobile] for the Project.”

Negotiations culminated in a Proposal from GE Mobile and a $3.264 million Purchase Order from Red Desert (collectively the “Contract”). Cleveland signed the Purchase Order on behalf of Red Desert on February 28, 2012. Under his signature, Cleveland wrote, “President, Clean Runner.” Cleveland similarly signed the Proposal, writing “For: Red Desert Reclamation” by “Judson Cleveland, President, Clean Runner.” Doc. No. 1–1. A representative of GE Mobile accepted the Purchase Order by signing it and the Proposal the next day.

The Contract includes an integration clause, a no oral modification clause, and a choice of law clause. The integration clause states: “The parties intend this Agreement, with any attached Exhibits and Addenda, as a final expression of their agreement and a complete and exclusive statement of its terms.” It provides that “no representations ... have been made” other than those “expressly set forth,” and notes that the parties' course of previous dealings, usage, or trade shall be inadmissible in any judicial proceeding. The no oral modification clause provides that any modifications to the Contract must be reduced to writing and signed by the parties. The choice of law clause specifies that the Contract is governed by Virginia law. Doc. No. 1–1.

Pursuant to the Contract, GE Mobile delivered equipment to Red Desert's Wyoming facility in April 2012. GE Mobile subsequently sent several invoices to Red Desert at Cate Street's Portsmouth, New Hampshire address, the address specified in the Purchase Order. In August 2012, Cleveland emailed Fischer a proposal to address Red Desert's failure to make payments required under the Contract. Cleveland asked Fischer in the email: “[i]f I can get CSC to cut you a check for $100K on Monday to be applied to RO Invoices will that help you?” Doc. No. 1–4. Cleveland's email identifies him as “Judson J Cleveland/President/CEO/Clean Runner, Inc., One Cate Street, Portsmouth, NH 03801–7108.” Approximately one week later, GE Mobile received a check from Red Desert for $20,000. The check was drawn on an account that listed the account holder as “Red Desert Reclamation, LLC/ 1 Cate Street, Suite 100, Portsmouth, NH 03801.” Doc. No. 18–10.

On September 4, 2012, representatives of GE Mobile and Cate Street met at Cate Street's offices to discuss the status of outstanding payments on the Contract. In attendance were Cate Street's president/CEO, its compliance director, and GE Mobile's North American sales director. GE Mobile warned Red Desert that its failure to make additional required payments risked a shutdown of operations. Cate Street's president acknowledged that Red Desert could not currently pay its invoices, but he assured GE Mobile that Cate Street was finishing work on a $1 million contract and would be able to pay once the contract was satisfied. He further explained that Cate Street would have to recapitalize Red Desert and that it planned on doing so by going “to its investors to obtain more money to pay off Red Desert's debts, including the amount owed to GE.” Doc. Nos. 18, 18–9.

Discussions between GE Mobile and Cate Street continued in the ensuing weeks over telephone and email. GE Mobile agreed to adjust the balance due under the Contract, giving Red Desert a credit of $172,050 to account for technologies that were not utilized at the facility. On September 20, 2012, Cate Street confirmed by phone its “continued interest in keeping the Project operational.” Doc. No. 18. The next day, Cate Street's president emailed GE Mobile, stating “I want[ ] to reiterate our position and confirm Red Desert Reclamation, LLC's commitment to its vendors.” Doc. No. 1–5. He acknowledged that Cate Street would have to make a serious decision regarding whether to close the facility, but “[w]hether we close the facility or keep it open Red Desert will pay its bills to GE.” On October 1, 2012, GE Mobile emailed Cate Street's president, saying “[a]s I understand, it is your intent to shut down the facility and move forward with resolving all outstanding commitments.” Doc. No. 1–5.

GE Mobile received no further payments, and the parties agreed to shut down the project. After giving notice, GE Mobile removed its equipment and technicians in early October 2012. The removal coincided with the closing of operations for the winter, so GE Mobile's actions did not compromise production at the site. Up to that point, GE Mobile had provided everything contractually required of it and was owed $996,000.

On October 16, 2012, GE Mobile emailed Cate Street's president to again request his assistance in expediting payments. The email outlined the September conversations between the two companies and noted that Red Desert planned to close its books by October 15 and pay GE Mobile by November 15. It proposed a payment schedule and expressed “concern[ ] about the continued delay in payment, and diminution of clear communication between us.” On October 26, 2012, Cleveland stated in a telephone call with a GE Mobile official that he was “confident” that Cate Street would come through for GE Mobile and explained that Cate Street was raising equity to pay its outstanding invoices. Doc. No. 18–8.

On February 27, 2013, GE Mobile received a letter from Clean Runner on Red Desert letterhead. The letter stated that Red Desert's recycling site was closed and that both Clean Runner and Red Desert were beginning the process of winding down their operations. Doc. No. 18–11. The letter offered Clean Runner and Red Desert's creditors a global settlement of $300,000 on an acknowledged debt of $1.147 million. A proposed settlement agreement attached to the letter identified both companies as the “debtor” to the project.

II. STANDARD OF REVIEW

To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must make factual allegations sufficient to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A claim is facially plausible when it pleads “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citations omitted).

In deciding a motion to dismiss, I employ a two-step approach. See Ocasio–Hernández v. Fortuño–Burset, 640 F.3d 1, 12 (1st Cir.2011). First, I screen the complaint for statements that “merely offer legal conclusions couched as fact or threadbare recitals of the elements of a cause of action.” Id. (citations, internal quotation marks, and alterations omitted). A claim consisting of little more than “allegations that merely parrot the elements of the cause of action” may be dismissed. Id. Second, I credit as true all non-conclusory factual allegations and the reasonable inferences drawn from those allegations, and then determine if the claim is plausible. Id. The plausibility requirement “simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence” of illegal conduct. Twombly, 550 U.S. at 556, 127 S.Ct. 1955. The “make-or-break standard” is that those allegations and inferences, taken as true, “must state a plausible, not a merely conceivable, case for relief.” Sepúlveda–Villarini v. Dep't of Educ., 628 F.3d 25, 29 (1st Cir.2010); see Two...