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. The agreement followed Borealis’s introduction to Miller Buckfire & Co., LLC, an investment bank. Under the agreement, Borealis promised ETG a 7.5% interest in Borealis’s carried interest from investments made with qualifying “Financing,” as that term was defined in a separate capital-raising agreement between Borealis and Miller Buckfire.

Borealis and KKR-related entities later formed three Embarcadero Maritime funds. KKR-affiliated entities invested a total of $400 million across those funds. They later formed two Stanley Maritime funds, including a direct-lending fund. ETG claimed that Borealis breached the revenue-sharing agreement by failing to pay ETG its share of carried interest from these investments.

Summary judgment concerning the Embarcadero funds

The court granted ETG’s motion for partial summary judgment concerning the first Embarcadero fund, EM I. The court held that ETG’s claim was timely because Borealis’s payment obligation depended on the generation of carried interest, not merely on closing the financing. The court also rejected Borealis’s argument that ETG had to demand an assignment of carried interest before suing. The agreement did not require such a demand.

The court stated that the parties did not dispute that EM I was a qualifying Financing and that Class D distributions from EM I were carried interest under the agreement. Borealis acknowledged that, if ETG’s claim was timely and procedurally proper, ETG was entitled to summary judgment concerning those distributions. The court therefore granted ETG’s motion, while leaving open the possibility of additional damages beyond the Class D distributions.

The court denied Borealis’s motion for summary judgment concerning EM II and EM III. It had previously found that the agreement’s language could reasonably support ETG’s interpretation that qualifying financing was not limited to investments specifically arranged by Miller Buckfire. The evidence was not so one-sided that a jury could not accept ETG’s interpretation. The court found evidence that the later funds could have been additional parts of a broader joint venture that Miller Buckfire helped establish between Borealis and KKR. Whether EM II and EM III qualified under the agreement therefore remained for a factfinder to decide.

The court also agreed with Borealis, and ETG did not dispute, that any separate claim for breach of the implied promise of good faith and fair dealing duplicated the breach-of-contract claim. The court dismissed that claim, if any.

Summary judgment and discovery concerning the Stanley Maritime funds

The court denied Borealis’s motion for summary judgment concerning SM I and SM II, without prejudice to renewal within fourteen days after the close of reopened fact discovery. The court had previously prohibited discovery concerning those funds. It now ruled that the agreement could potentially cover investments that resulted directly from Miller Buckfire’s introduction of KKR and Borealis.

The limited available evidence indicated that Borealis and KKR discussed a debt fund shortly after their introduction and continued discussing the idea during the Embarcadero joint-venture period. Because ETG could potentially establish a connection between Miller Buckfire’s introduction and the Stanley funds, the court permitted discovery on that issue. The court vacated the stay of discovery concerning the additional funds, including the Stanley funds.

Discovery objections

ETG had objected under Federal Rule of Civil Procedure 72(a) to discovery rulings by Magistrate Judge Jennifer E. Willis. Because the court reopened discovery concerning the additional funds, including the Stanley funds, it overruled ETG’s objections as moot. “Moot” meant that the objections no longer required a ruling because the underlying discovery restriction had been lifted.

Motions to seal

The court held that materials submitted with the summary-judgment motions were judicial documents subject to a presumption of public access. It denied Borealis’s requests to seal communications from before October 7, 2018, because those communications concerned proposed business changes and did not show an actual or anticipated legal dispute. Those materials had to be filed publicly, subject to any separate protection the court’s order allowed.

The court allowed communications from October 7, 2018, onward to remain sealed because they concerned settlement discussions after the parties developed a concrete dispute about ETG’s entitlement to carried interest from funds beyond EM I. The court granted Miller Buckfire’s sealing request for its investor contact log and an email concerning a potential investor.

The court denied without prejudice Borealis’s remaining sealing requests, including requests concerning an agreement with a third party and other broadly described commercial or confidential information. Borealis had not shown specifically why the materials required sealing or that its proposed redactions were narrowly tailored. Borealis was permitted to submit revised sealing requests consistent with the order.

Disposition

Judge Torres 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 Rule 72(a) objections as moot; granted in part and denied in part Borealis’s sealing motions; and granted Miller Buckfire’s sealing motion.