Trireme Energy Dev. v. RWE Renewables Am's., LLC

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TRIREME ENERGY DEVELOPMENT, LLC, et al., Plaintiffs, v. RWE RENEWABLES AMERICAS, LLC, et al., Defendants.

No. 22-cv-07439 (JLR)

United States District Court, S.D. New York

August 24, 2023

OPINION AND ORDER

JENNIFER L. ROCHON, UNITED STATES DISTRICT JUDGE:

Plaintiffs Trireme Energy Holdings, Inc. and Trireme Energy Development LLC (collectively, “Trireme” or “Plaintiffs”) bring this action against Defendants RWE Renewables Americas, LLC and RWE Renewables Services, LLC (collectively, “RWE” or “Defendants”) for breach of contract. See ECF No. 36 (“SAC” or “Second Amended Complaint”). The alleged breach occurred when Defendants internally restructured company assets without either seeking Plaintiffs' consent or paying Plaintiffs a pre-designated payment. See id. Defendants move to dismiss under Federal Rule of Civil Procedure (“Rule”) 12(b)(6) on the grounds of claim splitting and failure to state a claim. See ECF No 31 (“Mot.”). For the reasons stated below Defendants' motion to dismiss is DENIED.

BACKGROUND

I. The Parties

Plaintiff Trireme Energy Holdings, Inc. (“Trireme Holdings”) is a Delaware corporation that maintains a principal place of business in Pittsburgh, Pennsylvania. SAC ¶ 9. Plaintiff Trireme Energy Development, LLC (“Trireme LLC”) is a limited liability company with two members: Trireme Holdings and James Spencer (“Spencer”). Id. ¶ 10. Through its members, Trireme LLC is a citizen of Delaware and Pennsylvania. Id. ¶¶ 10-11. In connection with another company, EverPower, Trireme “developed, owned, and operated large-scale wind farms” in the United States. Id. ¶ 19. Trireme used separate special-purpose entities to manage each of its energy projects. Id. ¶ 20. In 2017, Trireme sold all of its business assets. Id. ¶¶ 21-22.

Prior to December 31, 2020, Innogy Renewables U.S. LLC (“IRUS”) was a limited liability company wholly owned by Innogy SE, a German utility. Id. ¶¶ 11, 25. On December 31, 2020, IRUS merged into Defendant RWE Renewables Services, LLC (“RWE Services”). Id. ¶ 11. Through the merger, RWE Services inherited IRUS's duties, obligations, and liabilities. Id. ¶ 12. RWE Services is a limited liability company with one member: Defendant RWE Renewables Americas, LLC (“Renewables Americas”). Id. ¶ 13. Renewables Americas is a limited liability company that Plaintiffs allege, on information and belief, is “owned by a chain” of limited liability companies whose sole member is RWE Renewables International Participations BV, a citizen of the Netherlands. Id. ¶¶ 14, 15.

II. The Merger Agreement

On December 21, 2017, Trireme sold its energy projects still in development to IRUS. Id. ¶¶ 1, 23. The terms of the sale were set out in a merger agreement. Id. ¶ 23; see ECF No. 33-3 (“Merger Agreement”). Under the Merger Agreement, Trireme sold Trireme Energy Development II, LLC, an entity holding the special-purpose entities for Trireme's ongoing energy development projects, to IRUS. SAC ¶ 24. IRUS, in turn, merged Trireme Energy Development II, LLC (and its subsidiaries and assets) into IRUS. Id. At the time the Merger Agreement was signed, IRUS was wholly owned by Innogy SE. Id. ¶ 25.

Pursuant to the Merger Agreement, IRUS agreed to pay Trireme $50 million upfront, plus up to $112 million in milestone payments if IRUS met certain performance benchmarks. Id. ¶¶ 1, 26.

Those milestone payments are connected to each renewable-energy project that IRUS acquired. Id. ¶ 27. Additionally, under Section 7.6(c) of the Merger Agreement, IRUS agreed that it would:

not sell[,] assign, transfer or otherwise dispose of any of the assets, rights and other properties of a Target Project or the equity interests of a Development Company prior to December 31, 2020 without the consent of the Member Representative, unless prior to or contemporaneously with such sale, assignment, transfer or other disposition Purchaser pays the Payment Milestone Amount that would have been payable with respect to such Target Project if the Target Project had achieved the Payment Milestone as of the date of such sale, assignment, transfer or other disposition.

Merger Agreement § 7.6(c); see SAC ¶ 28.

As a result of the Merger Agreement, IRUS owned 100 percent of the equity interests in the renewable energy development companies that Trireme previously owned. SAC ¶ 29. Specifically, IRUS owned IRUS Wind Holdings LLC, which itself owned IRUS Wind Development LLC, which in turn owned 100 percent of the energy development companies. Id. ¶ 30. Similarly, through a series of limited liability companies, IRUS owned 100 percent of Trireme's solar development projects. Id. ¶ 31. Plaintiffs portray the ownership interests of the development companies as follows:

(Image Omitted)

Id. ¶ 32.

III. The Reorganization

In March 2018, two German utilities, E.ON SE (“E.ON”) and RWE AG (“RWE”), restructured the German utilities industry through a series of transactions. Id. ¶ 33. As part of this reorganization, IRUS's parent, Innogy SE, was acquired by E.ON and RWE. Id. ¶¶ 3, 33. RWE acquired Innogy SE's renewable energy assets, such as IRUS and its subsidiaries. Id. ¶¶ 4, 33. Plaintiffs allege that after RWE acquired IRUS, IRUS transferred and disposed of its interests in the energy development companies in violation of the parties' Merger Agreement. Id. ¶ 34.

Plaintiffs allege that, on May 29, 2020, IRUS “effected the assignment, conveyance, and transfer of all the right, title, and interest” in a development company named Cassadaga Wind LLC from IRUS Wind Development LLC to a new subsidiary called Cassadaga Wind Holdings LLC. Id. ¶ 35. Similarly, Plaintiffs allege that, on July 1, 2020, IRUS transferred all of its interests in the other energy development companies to other RWE subsidiaries. Id. ¶ 36. The transferred energy development companies include: IRUS Wind Operations LLC, IRUS Wind Development LLC, and IRUS Solar Development LLC. Id. As a result of the transfers, IRUS no longer possessed direct or indirect ownership of the energy development companies. Id. ¶ 37. Although Innogy maintained a 100 percent equity interest in IRUS Wind Holdings LLC and IRUS Solar Holdings, LLC through the reorganization, those limited liability companies no longer owned any of the energy development companies, as pictured by Plaintiffs below. Id. ¶ 38.

(Image Omitted)

Id.

Plaintiffs allege that they “reasonably believed” that the E.ON-RWE asset swaps did not implicate Section 7.6(c) of the Merger Agreement “[b]ased on Innogy's representations about the transaction.” Id. ¶ 39. IRUS did not ask for Plaintiffs' consent, nor did IRUS pay Plaintiffs any milestone payments “[p]rior to transferring and disposing” of its equity interests in the energy development companies pursuant to Section 7.6(c) of the Merger Agreement. Id. ¶¶ 40-41.

IV. Alleged Concealment of the Transfers

Plaintiffs allege that IRUS “concealed the transfers” of the energy development companies and that Plaintiffs were “not on notice” of those alleged transfers “until late 2021, when the relevant facts were disclosed in another litigation.” Id. ¶ 42. In support of these assertions, Plaintiffs allege that “public records do not contain any information” about the alleged transfers, and the alleged transfers are instead “only recorded in RWE's internal records,” which Defendants did not “voluntarily disclose[]” to Plaintiffs. Id. ¶¶ 43, 55.

Plaintiffs further allege that IRUS and RWE provided “materially misleading” information about the “transfers” to Plaintiffs on several occasions. Id. ¶ 44. First, in June or July of 2018, Trireme's chief executive officer (“CEO”), James Spencer (“Spencer”), learned that RWE planned to potentially acquire Innogy's renewable energy business. Id. ¶ 45. IRUS's CEO, Andrew Young (“Young”), told Spencer that IRUS would request Trireme's consent to transfer Innogy's obligations “under a certain parent guarantee to RWE.” Id. In connection with that request, on September 20, 2018, Young and Spencer met in person and discussed the transfer, and Spencer asked Young if IRUS planned to transfer the energy development companies in connection with the RWE transaction. Id. ¶¶ 46-47. Young reported that IRUS would maintain ownership of the energy development companies and the E.ON-RWE reorganization would not require IRUS to make a milestone payment under the Merger Agreement. Id.

Second, in August 2019, Innogy sent Plaintiffs a memorandum (the “2019 Memo”) about the E.ON-RWE reorganization that Plaintiffs allege was misleading. Id. ¶¶ 48, 54. The 2019 Memo explained that RWE would acquire Innogy's renewable assets through the asset swap. Id. ¶ 48. It described RWE's desire to become a market leader in electricity production in Europe, which RWE hoped to achieve by diversifying its portfolio of energy assets. Id. ¶ 49. Describing the specifics of the asset swap, RWE reported in the 2019 Memo that it:

intends to (indirectly) transfer to E.ON all its shares in innogy SE (“innogy”), which currently amount to a stake of approximately 76.8% in the share capital of innogy (“Share Transfer”). In a second step, in line with the Overall Transaction Objectives, the renewables business of E.ON (“E.ON RES Business”) will be carved-out from E.ON and be operated by a subsidiary of RWE in the future. In addition, the renewables business of Innogy (“innogy RES Business”) shall be carved out from innogy and also be operated by such subsidiary of RWE.

Id. The 2019 Memo also reported that when RWE acquired Innogy, Innogy staff with industry experience would transfer with the business to maintain continuity. Id. ¶ 50. The 2019 Memo did not state that IRUS planned to transfer or dispose of the energy development companies. Id. ¶ 51.

Third on April 22, 2020, IRUS shared allegedly...