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Empire State Ethanol and Energy, LLC v. Bbi International; Jeff Kistner

January 25, 2011

EMPIRE STATE ETHANOL AND ENERGY, LLC, PLAINTIFF,
v.
BBI INTERNATIONAL; JEFF KISTNER, INDIVIDUALLY AND IN HIS CAPACITY AS MEMBER OF BIOPRO RESOURCES, LLC, AND/OR ALBANYRENEWABLE ENERGY, LLC; ED STAHL, INDIVIDUALLY AND IN HIS CAPACITY AS MEMBER OF BIO-PRO RESOURCES, LLC, AND/OR ALBANY RENEWABLE ENERGY, LLC;
ALBANY RENEWABLE ENERGY, LLC;
BIO-PRO RESOURCES, LLC; AND MIKE BRYAN, INDIVIDUALLY AND IN HIS CAPACITY AS CHIEF EXECUTIVE OFFICER, BBI INTERNATIONAL, DEFENDANTS.



The opinion of the court was delivered by: Gary L. Sharpe District Court Judge

MEMORANDUM-DECISION AND ORDER

I. Introduction

Plaintiff Empire State Ethanol and Energy, LLC commenced this action against defendants BBI International, Mike Bryan, BBI Chief Executive Officer, Albany Renewable Energy, LLC (ARE), Bio-Pro Resources, LLC, and Jeff Kistner and Ed Stahl, Members of Bio-Pro and/or ARE, alleging unfair competition and other unlawful conduct in violation of §§ 1 and 2 of the Sherman Act,*fn1 §§ 3 and 4 of the Clayton Act,*fn2 and the New York State Donnelly Act.*fn3 (See Am. Compl., Dkt. No. 17.) Empire additionally asserts claims for breach of contract, fraud, tortious interference with contract and prospective contractual relations, and breach of fiduciary duties. (See id.) Pending are BBI and Bryan's motion to confirm an arbitration award and be dismissed from the action, (Dkt. No. 90), and Kistner's motion for summary judgment, (Dkt. No. 91). For the reasons that follow, BBI and Bryan's motion is granted in part and denied in part, and Kistner's motion for summary judgment is denied.

II. Background

A. Factual History*fn4

In 2006, plaintiff Empire, a New York limited liability company, began searching for a site in New York State to locate a dry mill ethanol plant. (See Am. Compl. ¶ 19, Dkt. No. 17.) BBI, a Colorado-based corporation, provides bio-fuels facility services regarding project development, financing, construction, and operation. (See id. at ¶ 21.) Mike Bryan is BBI's Chief Executive Officer and President of Project Development. (See id. at ¶ 9.) In September 2006, Empire entered into an Ethanol Plant Feasibility Study Contract with BBI, according to which BBI agreed to identify suitable sites and develop a feasibility study for Empire. (See id. at ¶ 20.) To aid BBI's search, Empire provided BBI with access to confidential business information and trade secrets related to, among other things, Empire's strategic planning, financial condition, site evaluation criteria, and business and investment goals and objectives. (See id. at ¶ 22.) This exchange of information was made pursuant to the Contract's confidentiality provision, which was subject to a five-year period of effectiveness. (See id. at ¶ 23.)

On May 1, 2007, Empire and BBI entered into a Project Development Agreement (PDA), whereby BBI agreed to perform various services for and advise Empire regarding the development, financing, and construction of an ethanol plant. (See id. at ¶¶ 30-31.) Under the PDA, which included a three-year confidentiality provision, BBI allegedly assumed obligations of trust and responsibility to Empire. (See id. at ¶¶ 34-35.) Additionally, BBI's provision of services was made contingent on Empire's agreement to utilize the services of certain third-party contractors pre-selected by BBI. (See id. at ¶ 42.) The Agreement also contained an arbitration provision requiring arbitration of "any dispute or controversy arising between the Parties hereto under or relating to [the PDA] or [BBI's] performance or nonperformance of its obligations hereunder." (Marciano Decl., PDA ¶ 7, Dkt. No. 25:3.)

Beginning in June 2007, defendants Kistner, then BBI's Vice President of Project Finance, and Stahl, then BBI's Senior Manager, were assigned to oversee Empire's project. (See Am. Compl. ¶¶ 15-16, 36-37, Dkt. No. 17.) However, according to Empire, in April 2007, Kistner and Stahl formed Bio-Pro for the purpose of developing a competing ethanol facility in New York. (See id. at ¶ 29.) Empire alleges that Kistner and Stahl never disclosed their activities regarding Bio-Pro. (See id. at ¶ 40.)

In Fall 2007, Empire began researching the Port of Albany as a potential site, and notified BBI regarding its interest in a Port of Albany site. (See id. at ¶ 50.) Based on these new findings, Empire approached officials at BBI, including Kistner, about the possibility of preparing a new feasibility study for Empire regarding the Port of Albany site. (See id. at ¶ 53.) Shortly thereafter, on November 7, 2007, Empire met with BBI officials, including Kistner and Stahl, to discuss its proposal and to address what Empire perceived as BBI's "foot dragging." (See id. at ¶ 54.) At this meeting, Mark Yancey, BBI's Vice President of Project Development, informed Empire that BBI could not perform a feasibility study for the Port of Albany site because BBI had developed a new confidential technology that had become BBI's principal focus. (See id. at ¶ 55.) Empire alleges that this statement was knowingly false and was made as a pretext to induce Empire to abandon its efforts regarding the Port of Albany site. (See id. at ¶ 56.) In reliance on this representation, Empire terminated the PDA, which was made retroactively effective November 1, 2007. (See id. at ¶¶ 57-59.) According to Empire, BBI's intent was to cause Empire to terminate the PDA so that BBI could assume a more prominent role in BioPro's acquisition of a Port of Albany site. (See id. at ¶ 56.)

Two days later, on November 9, Kistner formed a Delaware-based company named "New York Renewable Energy, LLC," which he subsequently renamed "Albany Renewable Energy, LLC" on November 16. (See id. at ¶¶ 60-61.) Empire alleges that Kistner and Stahl had been using the name "Albany Renewable Energy, LLC" in October 2007 or earlier. (See id. at ¶ 62.) Empire further alleges that while the PDA was in effect and while Kistner and Stahl were overseeing the Empire project, Kistner and Stahl used BBI's resources and relationships to promote BioPro and ARE's Port of Albany project. (See id. at ¶¶ 72-77.) In addition, according to Empire, after terminating the PDA, the third-party contractors selected by BBI refused to furnish any further services in relation to Empire's Port of Albany project. (See id. at ¶ 64.)

On February 24, 2008, Empire received an email from Kistner, in which Kistner revealed his role in forming and operating ARE: "I feel I have an ethical obligation to inform you that I am the CFO and one of the founding members of another entity that has also submitted a proposal to the Port [of Albany]. I suspect this email comes as a bit of a surprise." (Id. at ¶ 81.)

B. Procedural History

On June 13, 2008, Empire filed suit against BBI, Bryan, Yancey,*fn5 Kistner, Stahl, Bio-Pro, and ARE, asserting nine causes of action arising under federal and state law, including unfair competition, unlawful restraint of trade and monopolization, exclusive dealings, breach of contract, fraud, tortious interference with contract and with prospective contractual relations, and breach of fiduciary duties. (See id. at ¶¶ 97-162.) Empire also sought to pierce ARE's corporate veil. (See id. at ¶¶ 163-70.)

On October 3, 2008, defendants moved to dismiss the action and compel arbitration under the PDA. (See Dkt. Nos. 26-28.) On March 20, 2009, the court granted BBI and Bryan's motion to compel arbitration and stayed the action against BBI and Bryan. (See Mar. 20, 2009 Order at 9-27, Dkt. No. 48.) However, as to the nonsignatory defendants, Kistner, Stahl, Bio-Pro, and ARE, the court denied their motions to compel arbitration. (See id. at 27-28.) The court ...


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