Green Earth Energy Photovoltaic Corp. v. Keybank Nat'l Ass'n

51 F.4th 383

GREEN EARTH ENERGY PHOTOVOLTAIC CORPORATION ; Christopher Scyocurka; Paige Scyocurka, Plaintiffs/Counter-Defendants, Appellants,

Green Earth Wamogo, LLC, Counter-Defendant, Appellant,

v.KEYBANK NATIONAL ASSOCIATION, Defendant/Counter-Plaintiff, Appellee,KeyCorp; Doug Beebe, Defendants.

No. 21-1580

United States Court of Appeals, First Circuit.

October 18, 2022

Benjamin H. Duggan, with whom Kathy Jo Cook, Timothy J. Wilton, and KJC Law Firm, LLC were on brief, for appellants.

Curtis L. Tuggle, with whom Jessica E. Salisbury-Copper, Thompson Hine LLP, Donald R. Frederico, Melanie A. Conroy, and Pierce Atwood LLP were on brief, for appellee.

Before Lynch, Thompson, and Gelpí, Circuit Judges.

THOMPSON, Circuit Judge.

This interlocutory appeal introduces us to the rise and fall of the business relationship between solar energy companies and the bank which funded the companies' development and expansion in residential and commercial markets. After the relationship went south, both sides sued one another; these cases are ongoing. Today we consider the solar energy companies' appeal from the district court's order appointing a receiver.¹ To cut to the chase, we affirm.

THE BACKSTORY

Please bear with us as we set out the backstory to this appeal. For reasons that will become clear once we reach our discussion of the arguments on appeal, we need to paint a comprehensive backdrop even though much of the information ultimately has no bearing on the issue before us. The narrative below draws the information about the events which culminated in this litigation from the companies' allegations in their respective complaints and about the travel of this case from the docket entries in the district court. The details provided do not signal that we are accepting the parties' factual allegations as true at this stage of the litigation.

Building the Relationship

Green Earth Energy Photovoltaic Corporation ("GEE") is a Massachusetts-based business founded in 2007 by Christopher and Paige Scyocurka. Since 2011, GEE has focused on the solar energy industry in Massachusetts and Connecticut. GEE's solar business model runs the gamut for its commercial and residential property-owning clients, starting with the design of a solar energy system for the client's use and continuing through to the maintenance of the system once it's up and going.

In 2016, GEE started a business relationship with KeyBank National Association -- a national bank we'll refer to as "KeyBank" from now on. At first, KeyBank provided commercial loans and a line of credit to GEE so GEE could contract with property owners to lease space on which GEE built and operated the solar energy systems. Under this business model, GEE owned the solar energy systems and received the tax benefits as well as the income generated from selling the electricity produced by the solar units back to the property owner. GEE and KeyBank entered into several written contracts in May 2017 establishing a "Working Capital Line of Credit" to govern their general business relationship, including contracts with titles such as Master Security Agreement, Master Equipment Lease Agreement, Business Loan Agreement, Commercial Security Agreement, Commercial Guaranty, and Promissory Note.² At KeyBank's behest, the Scyocurkas also signed personal guarantees for the line of credit. The Commercial Security Agreement included a provision allowing that in the "event of default" (with several types spelled out) the appointment of a receiver to "take possession of all or any part of the Collateral, with the power to protect and preserve the Collateral, [and] to operate the Collateral preceding foreclosure or sale" would be one of the available remedies to KeyBank.³ In 2017 and 2018, GEE and KeyBank developed at least sixteen projects in Massachusetts and Connecticut under the parameters of these various contracts, each project with its own loan documents (including a promissory note and a collateral schedule).

The business model began to shift in 2017. Some of the GEE-KeyBank projects developed under an alternative business model -- one that GEE says KeyBank initiated via an oral conversation in January 2017 in which KeyBank proposed it would continue to act as the lender for the construction of solar energy systems but KeyBank would then purchase each system upon completion and lease it back to GEE, which would operate the system on KeyBank's behalf.⁴ GEE refers to this alternative model as the "sale-leaseback plan." According to GEE, KeyBank stated it could provide $40 million for these projects and could obtain syndicated financing for an additional $30-40 million. The companies, however, did not put the sale-leaseback plan, business model, or any terms of the oral agreement in writing.

Over the next several months, GEE and KeyBank executives were in touch, giving one another updates. In April 2018, a new KeyBank executive (Doug Beebe) entered the GEE-KeyBank relationship and the companies continued to work together to further develop and structure the sale-leaseback plan as well as further the first project under the plan -- a facility on Wamogo Road in Litchfield, Connecticut. Meanwhile, Massachusetts was in the midst of piloting a new solar energy program known as SMART (Solar Massachusetts Renewable Target), and the companies developed plans to take advantage of it.

Breaking the Relationship

KeyBank threw the first wrench into the business relationship gears in August 2018 when Beebe told the Scyocurkas that he had cold feet about moving forward with the sale-leaseback plan for residential projects under Massachusetts' SMART program. GEE was floored -- believing it had KeyBank's backing, it had invested millions in preparing to engage in residential SMART programs. So it reached out to the KeyBank exec (Scott Frazer) with whom it had worked from the beginning. Frazer told GEE he had some ideas on how to resolve his colleague's concerns.

In September 2018, when GEE finished the Wamogo project in Connecticut, the parties got together to celebrate. The celebration included a discussion of three commercial projects ready to begin which would utilize Massachusetts' SMART program benefits. The next month, Massachusetts delayed the rollout of the SMART program and, to GEE's dismay, KeyBank officially reneged on all the planned SMART projects -- residential, commercial, and industrial -- with Beebe announcing to GEE that KeyBank was "not interested" in funding these projects.

GEE did not give up; in response to KeyBank's request for an "additional equity infusion" (presumably into the parties' business relationship), the Scyocurkas mortgaged their home to KeyBank for $1.2 million and continued to reach out to other KeyBank executives, especially after the SMART program eventually rolled out at the end of November. In March 2019, the Scyocurkas met with KeyBank executives, but KeyBank would not reverse its position. As a result, GEE has been unable to finish the projects it had started in reliance on the sale-leaseback plan, KeyBank's promises for substantial financing, and the written financing agreements with KeyBank. According to KeyBank, GEE hasn't made a payment on any of the projects' individual promissory notes since September 1, 2019 and, as of June 2020, GEE and the Scyocurkas allegedly owed KeyBank over $9 million.

HOW THE PARTIES LANDED HERE, NOW

Claims and Counterclaims

In 2019, GEE and the Scyocurkas (collectively "GEE") filed a complaint against KeyBank, alleging several claims stemming from the alleged oral agreement about the sale-leaseback plan including breach of contract, breach of the covenant of good faith and fair dealing, promissory estoppel, misrepresentation (intentional and negligent), RICO (based on wire fraud), civil conspiracy, and violation of Mass. Gen. Laws ch. 93A ("Chapter 93A").⁵ GEE asked the district court to enter a preliminary injunction ordering KeyBank not to terminate or call in any of the loans or lines of credit extended to GEE or to the Scyocurkas individually throughout the pendency of the litigation. The district court temporarily granted the relief requested but then, after a hearing in which it determined GEE was unlikely to succeed on the merits, denied GEE's motion.⁶

KeyBank filed a Rule 12(b)(6) motion to dismiss GEE's entire complaint, to which part of GEE's responses was to twice move to amend its complaint; first to add factual allegations and second to add a breach of contract claim and a breach of the covenant of good faith and fair dealing claim specifically for the project at the Boys & Girls Club in Springfield, Massachusetts. The district court allowed GEE to add the claims related to the Springfield Boys & Girls Club project, granted KeyBank's motion to dismiss the claims based on the sale-leaseback plan allegations, and denied as futile GEE's first motion to amend to add factual allegations about the sale-leaseback plan. The district court also ordered GEE to file an amended complaint, which removed the dismissed claims and fact allegations related thereto and which did not support the remaining claims.

GEE filed an amended complaint, detailing the set of loan contracts for the Springfield Boys & Girls Club project (which had been agreed to under the original loan business model and not the sale-leaseback plan), and claiming KeyBank breached these contracts by refusing to pay the final loan "progress payment." This amended complaint also continued to include all the original factual allegations from the original complaint related to the sale-leaseback plan. KeyBank cried foul, asking the district court to strike the allegations not pertaining to the Springfield project. The district court granted KeyBank's motion.⁷ KeyBank then answered GEE's amended complaint and alleged several counterclaims for breach of contract and foreclosure.

For its part, KeyBank then initiated a new federal action against GEE, Green Earth Wamogo, LLC, and the Scyocurkas,...