DK LIPA LLC v. Sybac Solar LLC

Background

DK LIPA LLC sued SB Energy Holdings, LLC, formerly known as Sybac Solar LLC, and MISF, LLC. The claims alleged breach of contract and tortious interference with contract. Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient and plausible claim.

In 2013, DK LIPA and SB Energy entered into a Right of First Offer Agreement governed by New York law. The agreement concerned a planned 9.9-megawatt solar project on Long Island. After the agreement ended, Paragraph 8 required SB Energy, for 36 months, to notify DK LIPA within three business days of a written offer from another party. DK LIPA then had a one-time, 30-day right to enter into an engineering, procurement, and construction contract or purchase agreement on terms matching the other party’s terms, subject to a stated modification of the total consideration.

In 2016, SB Energy entered into a nonbinding letter of intent with MISF concerning partial co-development of a solar project known as Middle Island Solar Farm. The letter of intent referred to the same three power purchase agreements identified in SB Energy’s agreement with DK LIPA. It contemplated a jointly owned entity that would own, finance, and operate the project, lease the project site from MISF, and give MISF an option to purchase the project. SB Energy did not provide DK LIPA with the letter of intent or an opportunity to exercise a right of first refusal concerning the letter or related contracts.

Court’s Analysis

The court applied New York law. To state a breach-of-contract claim, DK LIPA had to plausibly allege an agreement, its own adequate performance, a breach by SB Energy, and resulting damages. The court focused on whether the complaint plausibly alleged a breach of Paragraph 8.

The court concluded that “written offer” could reasonably be understood to include the letter of intent. The agreement did not clearly limit that term to an offer to purchase the project or to a particular property. The project described in the letter of intent was also consistent with the agreement’s description because both concerned a solar project on Long Island, the same power purchase agreements, and the same intended power rating. The fact that the project was contemplated at a different location did not, based on the agreement’s text, establish that Paragraph 8 could not apply.

The court also rejected Defendants’ argument that the letter of intent involved a joint-venture structure fundamentally different from the purchase-and-construction arrangement contemplated by the agreement. The agreement could reasonably be read to support DK LIPA’s position that the project was the same project, moved to a different location, and that the arrangements were sufficiently similar for the letter of intent to trigger Paragraph 8. Because the contract was at least ambiguous on these points, the court was required at the motion-to-dismiss stage to resolve the ambiguity in DK LIPA’s favor.

The court separately held that the tortious-interference claim was sufficiently pleaded. That claim required, among other things, an actual breach of contract. Defendants disputed only that element and relied on their arguments against the breach-of-contract claim. Because the court found those arguments unpersuasive, it did not dismiss the tortious-interference claim.

Disposition

Judge Lorna G. Schofield denied Defendants’ motion to dismiss. The Clerk of Court was directed to close the motion at Docket Number 29. The opinion addressed only whether the complaint plausibly stated claims at the pleading stage; it did not determine the ultimate merits of those claims.