In re SunEdison, Inc.

In re: SUNEDISON, INC., et al., Debtor.

DRIVETRAIN, LLC, Plaintiff, v. EVERSTREAM SOLAR INFRASTRUCTURE FUND I LP, and EVERSTREAM SOLAR INFRASTRUCTURE FUND I GP, LP, Defendants.

No. 16-10992 DSJ

Adv. Proc. No. 19-01120 (DSJ)

United States Bankruptcy Court, S.D. New York

July 27, 2021

KAGEN CASPERSEN & BOGART PLLC COUNSEL FOR DRIVETRAIN, LLC BY JOEL M. TAYLOR, ESQ. TERRI JANE FREEDMAN, ESQ.

DAY PITNEY LLP COUNSEL FOR DEFENDANTS BY: JOSHUA W. COHEN, ESQ.

MEMORANDUM OF DECISION AND ORDER

DAVID S. JONES, UNITED STATES BANKRUPTCY JUDGE.

Drivetrain LLC ("Drivetrain" or "Plaintiff"), in its capacity as Trustee of the SunEdison Litigation Trust, on behalf of debtor, EverStream HoldCo Fund I, LLC (the "Everstream Debtor"), has moved for leave to file an amended complaint to add a claim for breach of contract (the "Motion") [ECF No. 30]. Drivetrain asserts that the proposed amended complaint (the "Amended Complaint," at times referenced as the "PAC") states a claim for breach of contract under Delaware law, and that this contract claim relates back to claims asserted in the original complaint and is thus timely. [See Motion at 3, 5-6.] Defendants, EverStream Solar Infrastructure Fund I LP (the "Everstream Partnership") and EverStream Solar Infrastructure Fund I GP LP (the "Everstream General Partner" and, together with the Partnership, the "Defendants") oppose Drivetrain's request. [See Defendants' Memorandum of Law in Opposition to Plaintiffs' Motion for Leave to Amend Complaint, ECF No 31 ("Opposition")]. They contend that the proposed amendment is futile given the express language of applicable agreements, and they object that the proposed amendment comes after undue delay and that its allowance would unduly prejudice the Defendants. [Id. at 8, 11]. For the following reasons, the Court grants Plaintiff's Motion.

BACKGROUND

A. The Everstream Partnership and the Everstream Debtor's Default on Its Investment in the Everstream Partnership

The Everstream Partnership is a Delaware limited liability partnership that was formed to invest in and operate renewable energy assets. [PAC ¶ 16; Motion at 1]. The Everstream General Partner served as the general partner of the Everstream Partnership, and the Everstream Debtor invested as a limited partner. [PAC ¶ 16; Motion at 1]. Pursuant to a Subscription Agreement, dated February 7, 2013 (the "Subscription Agreement"), the Everstream Debtor, which was formed for the purpose of investing in the Everstream Partnership, committed to provide up to $30 million in capital funding to the Everstream Partnership upon a capital call or calls, as provided for in the Limited Partnership Agreement of the EverStream Partnership dated February 7, 2013 (as amended and restated in accordance with its terms, the "Partnership Agreement"). [PAC ¶ 18].

The Partnership Agreement provided in relevant part as follows regarding limited partners' obligations to make payments in response to capital calls, and regarding the consequences of a failure to meet those obligations. Each limited partner (including the Everstream Debtor) agreed to fund partnership investments by paying up to the amount of the limited partner's "Capital Commitment," defined as "with respect to any Limited Partner, the aggregate contribution such Limited Partner has agreed to make to the [Everstream] Partnership, whether or not contributed, as may be modified by the express terms of this [Partnership] Agreement." [ECF No. 20-1 ("Partnership Agreement") § 1]. These payments were not required immediately upon the effectiveness of the Partnership Agreement but were required to be made in response to "Capital Calls," when such calls were made by the Everstream Partnership. [See Partnership Agreement §§ 1, 5.1]. If a limited partner failed to make a required payment in response to a capital call and failed or refused to cure the missed payment following notice, the Everstream General Partner had the authority to designate it as a "Defaulting Partner." [See id. § 6.1]. If a Defaulting Partner failed to cure its default by paying its required contribution and any interest accrued because of the delay within ten days after receipt of a "Default Notice," then the Everstream General Partner had the authority to deem that defaulting partner in "Material Default" under the Partnership Agreement. [See id.].

Upon such a Material Default, the Everstream General Partner was authorized to pursue various remedies "available to the [Everstream] Partnership under this Agreement or at law or in equity[.]" [Id. § 6.2]. Section 6.6 of the Partnership Agreement is particularly relevant, providing in part:

The General Partner may make the changes in the interest of a Defaulting Partner that is in Material Default provided for in . . . Section 6.6.

(a) The General Partner may reduce or eliminate the Defaulting Partner's Capital Commitment, Capital Contributions and Uncontributed Capital Commitment to zero or by such proportion as the General Partner may elect in its discretion, and no Defaulting Partner shall be entitled to any consideration in connection with any such reduction or elimination. If the Capital Commitment of a Defaulting Partner is reduced, then the Sharing Percentages of the Partners shall be adjusted accordingly with the result that future distributions to the Defaulting Partner pursuant to Section 8.2 will be reduced or eliminated.

(Emphasis added.) To the extent a defaulting partner's "Sharing Percentage is reduced to zero, then the [Everstream] General Partner may cause the Defaulting Partner's interest in the Partnership to be extinguished." [Id. § 6.6(c)].

Between March 2013 and May 2014, the EverStream Debtor made capital call payments to the Everstream Partnership totaling $21, 073, 368.00, which were directly paid by either SunEdison or debtor NVT LLC ("NVT"). [PAC ¶ 20]. In November 2015, the Everstream Partnership issued a capital call notice in the amount of $212, 014.00 (the "November 2015 Capital Call") which the Everstream Debtor failed to pay. [Id. ¶ 21]. In a letter dated February 23, 2016 (the "February 2016 Letter"), the Defendants informed the Everstream Debtor that, as a result of its failure to satisfy the November 2015 Capital Call, it was in "Material Default" under the Partnership Agreement and that, accordingly, the Everstream Debtor's partnership interest had been "extinguished for no consideration pursuant to Section 6.6 of the Partnership Agreement." [Id. ¶ 22; ECF No. 11 Ex. C]. Plaintiff does not dispute that it was a "Defaulting Partner," nor that its default was "Material," as those terms are used in the Partnership Agreement.

In March 2016, the Defendants informed the Everstream Debtor that its partnership interest could be reinstated, notwithstanding its default, if the Everstream Debtor paid the Everstream Partnership $3, 758, 523.26 (the "March 2016 Capital Call"), the sum of (1) the November 2015 Capital Call, plus accrued default interest and (2) the pro rata amount that the Everstream Debtor would have needed to fund in response to an additional capital call to all of the Everstream Partnership's limited partners in the total amount of $8, 337, 962.00 if the Everstream Debtor's partnership interest had not been terminated. [PAC ¶ 23]. The Defendants stated that the Everstream Debtor's partnership interest would remain "extinguished for no consideration" unless and until the Everstream Partnership received the full amount of the March 2016 Capital Call. [Id. (quoting the March 2016 Capital Call)].

The Everstream Debtor did not make the payment required by the March 2016 Capital Call. The Defendants, in a letter dated April 22, 2016 (the "April 2016 Letter"), notified the Everstream Debtor that it would not be reinstated as a limited partner and that its partnership interest, to the extent not extinguished as of February 2016, was being extinguished in exchange for "no consideration." [Id. ¶¶ 23-24].

B. Procedural History

On April 21, 2016, SunEdison and certain of its affiliates, including NVT, commenced voluntary cases under Chapter 11 of the Bankruptcy Code. [Id. ¶ 35]. The Everstream Debtor filed its Chapter 11 case on July 20, 2016. [See Bankr. P. No. 16-12058, ECF No. 1].

On April 19, 2019 Plaintiff, on behalf of the Everstream Debtor, filed an adversary proceeding complaint against the Defendants in this Court. [ECF No. 1 (the "Initial Complaint")]. Plaintiff's Initial Complaint included two causes of action: a claim for fraudulent transfer pursuant to §§ 548 and 550 of the Bankruptcy Code, and a claim for disallowance of claims pursuant to § 502(d) of the Bankruptcy Code; it did not include a claim for breach of contract. [Id. ¶¶ 35-43]. The Initial Complaint is subject to a motion to dismiss [ECF No. 9] on which, pursuant to a stipulation between the parties dated November 19, 2020 [see Motion at 2], briefing has been suspended or delayed pending the Court's ruling on Plaintiff's motion for leave to amend. Plaintiff now moves for leave to amend its Initial Complaint as reflected in the proposed Amended Complaint that is the subject of this motion. The proposed Amended Complaint would add a claim for breach of contract, essentially asserting that the Everstream Partnership breached the Partnership Agreement by deeming the Everstream Debtor's prior capital-call payments in excess of $21 million to have been forfeited as a consequence of its failure to honor subsequent capital calls. [PAC ¶¶ 37-40].

DISCUSSION

A. Applicable Standards and Whether Plaintiff's Breach of Contract Claim Is Futile

Rule 15(a) of the Federal Rules of Civil Procedure, made applicable to this adversary proceeding pursuant to Rule 7015 of the Federal Rules of Bankruptcy Procedure, governs motions for leave to...