Energy Transportation Group, Inc. v. Borealis Maritime Limited

Background

Energy Transportation Group, Inc. (ETG) sued Borealis Maritime Limited for breach of a revenue-sharing agreement (RSA). The RSA followed agreements between Borealis and Miller Buckfire & Co., LLC, under which Miller Buckfire was to help Borealis raise capital and identify investors. The RSA provided that, if Borealis obtained a financing as defined in the Miller Buckfire agreement, Borealis would give ETG a 7.5% interest in carried interest generated from investments made with that financing. Carried interest refers here to performance-based economic benefits received by Borealis and related entities, excluding management fees for operating costs.

Borealis and KKR-related entities later formed three Embarcadero Maritime funds: EM I, EM II, and EM III. They also later formed Stanley Maritime funds SM I and SM II. ETG alleged that Borealis owed it a share of carried interest from those funds. The court previously held that the RSA was ambiguous about whether ETG’s entitlement extended beyond transactions specifically arranged by Miller Buckfire.

Summary judgment rulings

Summary judgment is a ruling entered when the evidence shows no genuine dispute over a fact that could affect the result and the law entitles one side to judgment. ETG sought partial summary judgment on its entitlement to compensation from EM I. Borealis sought summary judgment concerning EM II, EM III, SM I, and SM II.

For EM I, the court granted ETG’s motion for partial summary judgment. Borealis did not dispute that EM I was a financing under the RSA or that Class D distributions from EM I qualified as carried interest. The court rejected Borealis’s argument that ETG’s claim was untimely because the six-year limitations period began when EM I closed in 2013. The court held that Borealis’s payment obligation depended on carried interest being generated and that the claim accrued when the alleged breach occurred, not merely when the financing was obtained. The court also rejected Borealis’s argument that ETG lacked standing because it had not demanded an assignment of carried interest; the RSA did not require such a demand.

For EM II and EM III, the court denied Borealis’s motion for summary judgment. The court held that the RSA could reasonably be read to cover investments that resulted and flowed directly from Miller Buckfire’s introduction of KKR and Borealis, even if Miller Buckfire did not specifically arrange each later investment. Extrinsic evidence—evidence outside the contract’s text that may help determine the parties’ intent—supported both sides’ interpretations. Evidence also could allow a factfinder to view EM II and EM III as later portions of a broader venture contemplated when Miller Buckfire introduced KKR to Borealis. Because genuine factual disputes remained, the issue could not be resolved on summary judgment.

For SM I and SM II, the court denied Borealis’s motion for summary judgment without prejudice to renewal within fourteen days after reopened fact discovery. The court held that the RSA could conceivably cover those funds if ETG established a sufficiently direct connection between Miller Buckfire’s introduction and the funds’ development. The court therefore permitted discovery concerning the Stanley Maritime funds and vacated the earlier stay of that discovery.

The court also agreed that any separate claim for breach of the implied duty of good faith and fair dealing was duplicative of ETG’s breach-of-contract claim and dismissed that claim, if asserted.

Other rulings and disposition

The court overruled ETG’s objections under Federal Rule of Civil Procedure 72(a) as moot because the reopening of discovery eliminated the effect of the earlier discovery restrictions.

The court granted in part and denied in part Borealis’s sealing requests. Communications before October 7, 2018, that had been treated as settlement communications generally had to be filed publicly, while communications on or after October 7, 2018, could remain sealed as settlement material. Borealis’s requests to seal broad categories of commercially sensitive or proprietary material were denied without prejudice to renewal with narrower, document-specific redactions. The court granted Miller Buckfire’s sealing request for a contact log and an email containing private business contacts and information.

The order therefore granted ETG’s motion for partial summary judgment; denied Borealis’s motion for summary judgment, without prejudice to renewal as to SM I and SM II after reopened discovery; overruled ETG’s objections as moot; granted in part and denied in part Borealis’s sealing motions; and granted Miller Buckfire’s sealing motion.