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Adler v. Solar Power, Inc.

United States District Court, S.D. New York

March 30, 2018

ADLER, Plaintiff,
v.
SOLAR POWER, INC., STEVEN KIRCHER, AMY LIU, JOHN DOE 1-3, SPI SOLAR, INC., and SPI ENERGY CO., LTD., [1] Defendants.

          MEMORANDUM OPINION AND ORDER

          LAURA TAYLOR SWAIN UNITED STATES DISTRICT JUDGE

         Kevin Adler (“Plaintiff”) brings this action against SPI Solar, Inc. and its predecessor Solar Power, Inc. (collectively “Solar Power”), Steven Kircher, Amy Liu, and three unnamed defendants (collectively, “Defendants”). Plaintiff asserts five causes of action arising from the negotiation and termination of an employment relationship, including breach of contract (Count 1), breach of the implied covenant of good faith and fair dealing (Count 2), defamation (Count 3), fraud (Count 4), and violation of New York Labor Law § 191 et seq. (“NYLL”) (Count 5). (Compl., Docket Entry No. 1.) The parties have filed cross-motions for summary judgment, with Defendants seeking summary judgment dismissing all counts and Plaintiff seeking partial summary judgment on Counts 1, 3, 5 and damages for the breach of contract alleged in Count 1 for failure to grant stock. (Docket Entry Nos. 40, 44.) Plaintiff also moves to amend the complaint to add SPI Energy Co., Ltd., a successor party defendant to Solar Power, Inc. (Docket Entry No. 55.)

         The Court has subject matter jurisdiction of the action under 28 U.S.C. § 1332(a)(3).

         The Court has carefully considered the submissions of both parties. For the following reasons, Plaintiff's motion for partial summary judgment is granted in part and denied in part and Defendants' motion for summary judgment is granted in part and denied in part. Plaintiff's unopposed motion to add SPI Energy Co., Ltd. as a successor party defendant is also granted.

         Background[2]

         Solar Power was, at all relevant times, headquartered in China and engineered, constructed, and acquired solar energy projects in several countries. (Def. 56.1 St. ¶¶ 2-3.)

         Plaintiff founded and worked at Sol-Wind, a business entity that aggregated renewable energy assets. (Id. ¶¶ 4-5.) After an unsuccessful initial public offering, Plaintiff, then employed as a consultant with Sol-Wind, was terminated. (Id. ¶ 12.) On or about February 26, 2015, Plaintiff met with Henry Ka, Solar Power's Senior Vice President of Corporate Development, and Kirchner, [3] Solar Power's North America Chief Strategy Officer, founder, and former Chief Executive Officer, in San Francisco. (Id. ¶ 15; Pl. 56.1 St. ¶¶ 16-17.) Kircher and Ka discussed with Plaintiff the possibility of him joining Solar Power and expressed their desire that Plaintiff would bring an experienced team of his colleagues from Sol-Wind. (Def. 56.1 St. ¶ 16; Adler Tr., Docket Entry No. 45-3, at 40:6-25.)

         On about March 16, 2015, Plaintiff and some of his former colleges attended another meeting in New York City also attended by Solar Power leadership, including Xiaofeng Peng, Chairman of Solar Power, Hoon Khoeng Cheong, Solar Power's Chief Operating Officer, and Ka. (Def. 56.1 St. ¶¶ 18-19.) Kircher did not attend this March 2015 meeting. (Id. ¶ 20.) Peng discussed Solar Power's desire to hire an experienced team to create either a Master Limited Partnership (“MLP”) or a YieldCo that “would aggregate operating solar and wind renewable energy projects and sell its shares on the New York Stock Exchange or the NASDAQ.” (Def. 56.1 St. ¶ 16.) Although the parties disagree on the specific features and definitions of MLPs and YieldCos, such entities generally aggregate solar energy projects with the intention that interests in the entity will eventually be publicly traded or traded in a manner resembling public trading.[4] (See Def. 56.1 St. ¶ 8; see also Pl. 56.1 Resp. ¶ 8.)

         At the March meeting, Peng discussed Solar Power's $1.5 billion open line of credit, which would be needed to fund an MLP or YieldCo, and noted various projects that Solar Power could contribute to the MLP or YieldCo. Other Solar Power officers present may also have contributed to those discussions. (Def. 56.1 St. ¶¶ 23-25; Pl. 56.1 Resp. ¶ 23; Pl. 56.1 St. ¶ 29; Adler Tr. 66:14-68:10.) At his deposition, Ka testified that, to his knowledge, Kircher did not make any representations about Solar Power's finances, lines of credit, or its current and prospective projects during the discussions between Adler and Solar Power. (Def. 56. St. ¶¶ 26-27.)

         Adler's Hiring

         Ka took the lead in negotiating the terms of Solar Power employment with Plaintiff and his former Sol-Wind co-workers. (Id. ¶ 29.) On or about April 1, 2015, Amy Liu, then Solar Power's Chief Financial Officer, authorized Solar Power to hire Plaintiff and several of his former colleagues. (Id. ¶ 28.) Liu, by email to Ka, approved Plaintiff's position and compensation, though there was no explicit approval to transfer stock to Plaintiff as compensation. (Pl. 56.1 St. ¶ 7; Def. 56.1 Resp. ¶ 7.) The parties disagree on whether Peng, Liu, Kircher, or Cheong were involved in negotiating Plaintiff's employment contract, internally deliberating on changes and terms to the contract, or approving the final draft of the contract. (Pl. 56.1 St. ¶¶ 8, 10-12; Def. 56.1 Resp. ¶¶ 8, 10-12; Pl. 56.1 Resp. ¶ 67; Def. 56.1 Reply ¶ 67.) Defendants also assert that personal communications between the Solar Power executives, as testified to by Ka, did not include any discussions about compensating Plaintiff with stock in addition to his salary. (See Def. Mem. of Law in Opp'n to Pl.'s Mot. for Partial Summ. J. (“Def.'s Opp'n”), Docket Entry No. 51, at 4-5; Ka Tr., Docket Entry No. 45-6, 45:16-46:23.)

         It is nonetheless undisputed that Liu authorized Kircher to execute the final contract, hiring Plaintiff as Vice President, Head of Structure Finance - North America, which was in the form of an offer letter and acceptance statement (collectively, the “Employment Agreement”). (Pl. 56.1 St. ¶¶ 19-20; Pl. 56.1 Resp. ¶ 87.) Ka then emailed the executed contract document to Plaintiff's attorney and a Solar Power payroll and accounting representative, [5] writing “[c]ongratulations! It's official now. Please date it for April 8th.” (Pl. 56.1 St. ¶¶ 22; PX N, Docket Entry No. 56-14.)

         Terms of Plaintiff's Employment

         The Employment Agreement provided that Solar Power agreed to compensate Plaintiff through an annual salary of $220, 000, a twenty-five percent bonus, and restricted stock that would vest at certain milestones. (DX F, Docket Entry No. 45-8.) Solar Power also agreed to create an MLP or YieldCo, to be known as Management LLC, which Plaintiff would help to operate for Solar Power. (Pl. 56.1 St. ¶ 28.) Although the Employment Agreement stated that Plaintiff would be based in both San Francisco, California and New York City, he predominantly worked in New York. (Pl. 56.1 St. ¶ 41.)

         The Employment Agreement, whose effective date was April 8, 2015, provided that Plaintiff would be “entitled to a bonus of at least 25% . . . upon the achievement of certain goals as mutually agreed to by [Plaintiff] and the Company in January of each calendar year.” (DX F at 1.)

         The Employment Agreement obligated Solar Power to grant Plaintiff 490, 000 shares of restricted Solar Power stock within 30 days of the execution of the Employment Agreement. (Id. at 1-2; Pl 56.1 St. ¶¶ 33-37.) 30, 000 of the shares, referred to as the “Sign-On Restricted Stock, ” were to vest on the 60th day following the execution of the contract provided Plaintiff was still employed by Solar Power on that date. (Pl. 56.1 St. ¶ 33.) 280, 000 of the shares were “Time-Based Restricted Stock, ” 70, 000 of which were to vest one year from the effective date of the Employment Agreement, and 17, 500 of which were to vest at the end of each calendar quarter thereafter. (DX F at 2.) The remaining 180, 000 shares were denominated “Performance-Based Restricted Stock” and were to vest upon the achievement of certain milestones related to the MLP/YieldCo plan, the first of which was creation of an Acquisition Credit Facility of at least $200 million. (Id.) The shares associated with a particular milestone would vest immediately if the company terminated or ceased to pursue that milestone. (Id. at 2-3.) The Employment Agreement further provided that, in the event of a termination without good cause, the Sign-on Restricted Stock and Time-Based Restricted Stock would vest 100% automatically. (Id. at 3.) All of the stock was subject to restriction pursuant to 17 C.F.R. § 230.144(d) and therefore could not be sold for 180 days.[6] (Def. 56.1 Resp. ¶ 38.) Plaintiff never received any of the restricted stock from Solar Power. (Pl. 56.1 St. ¶ 52.)

         Solar Power entered into similar employment contracts, providing for salary and restricted stock, with William Heck, dated March 25, 2015, Tamir Jamil, dated April 16, 2015, and Sharon Mauer, also dated April 16, 2015. (DX H, I, and J, Docket Entry Nos. 45-10, 45-11, 45-12.)

         Notwithstanding the inclusion of stock-based compensation provisions in each of the cited Employment Agreements Defendants contend, citing testimony by Peng, that only Solar Power's board of directors had authority to approve the issuance of stock to Adler and that the board never approved such an issue. (Def. 56.1 St. ¶¶ 44, 46.)

         Melodious International Investments Group, Ltd. purchased stock in Solar Power on November 19, 2015, for $2.70 per share, although it was not specified if such stock was restricted. (Adler Aff., Docket Entry No. 56, ¶ 25.) The daily average of the public price of Solar Power stock was $1.95 on June 8 and $1.91 on June 15, 2015, as calculated from the opening and closing prices on the day in question.[7] (Plaintiff's Reply Mem. of Law in Further Supp. of Plaintiff's Mot. for Summ. J., Docket Entry No. 65, at 7-8.)

         The Employment Agreement also provided that Solar Power would create Management LLC within 60 days of the execution of the Employment Agreement and that Plaintiff and his team would be granted “a significant ownership interest in Management LLC.” (Pl. 56.1 St. ¶ 39; DX F at 3.) By August 12, 2015, Solar Power had officially ceased its YieldCo strategy without creating Management LLC. (Pl. 56.1 St. ¶¶ 39, 45, 48; Def. 56.1 Resp. ¶¶ 39, 45, 48.) Solar Power terminated Adler's employment on September 30, 2015. (Def. 56.1 St. ¶ 55.)

         Defamation Plaintiff alleges that, on June 20, 2015, Liu summoned Heck, who was then a vice-president at Solar Power, to meet her at a hotel in California on June 23. (Heck Aff., Docket Entry No. 47, ¶¶ 2-4.) At the meeting Liu, who was primarily based in China, allegedly told Heck that she wanted “control over the North American platform and [that] she would be replacing Adler, ” Kircher, and Ka. (Id. ¶¶ 2, 7.) According to Heck, Liu characterized Adler as “a thief, trying to steal from Solar Power” and accused him of working with Ka and Kircher to steal the company. (Id. ¶ 6 (internal quotation marks omitted).) She also allegedly referred to Plaintiff as “incompetent, ” “a terrible business man, ” “stupid, ” “a bad man, ” and “a man without morals, ” and stated that Plaintiff “thinks all Chinese are stupid people.” (Id. ¶ 6.) Liu then asked Heck to “prepare a business plan for North America . . ., but to exclude Adler, Kircher, and Ka.”[8] (Id. ¶ 8.) On July 14, 2015, [9] Liu told Plaintiff that she did not want to honor his contract and asked him to tear up his contract. (Adler Tr. 205:1-25.) As previously stated, Solar Power then terminated Adler on September 30, 2015. (Def. 56.1 St. ¶ 55.)

         Solar Power, Inc.'s Subsequent Merger

         Plaintiff has proffered uncontroverted evidence that Solar Power, Inc., has merged with another entity to become a wholly owned subsidiary of SPI Energy Co., Ltd. (SPI Energy Co., Ltd., United States Securities and Exchange Commission Form 6-K, dated January 4, 2016, Docket Entry No. 56, Ex. 25; Peng Tr., Docket Entry No. 45-13, 17:6-8.) SPI Energy Co., Ltd., conducts business in “substantially the same manner as it was conducted by [SPI Solar, Inc.]” and continues to be “managed by substantially the same board of directors and executive officers that managed” Solar Power, Inc. (Id. at 2.)

         Discussion

         The pending motions are brought pursuant to Rule 56(a) of the Federal Rules of Civil Procedure. Under Rule 56(a), summary judgment is appropriate when the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” The moving party bears the burden of demonstrating the absence of a material issues of fact, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986), and the court must be able to find that, “after drawing all reasonable inferences in favor of a non-movant, no reasonable trier of fact could find in favor of that party.” Marvel Entertainment, Inc. v. Kellytoy (USA), Inc., 769 F.Supp.2d 520, 523 (S.D.N.Y. 2011) (quoting Heublein v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993)) (internal quotation marks omitted). A fact is considered material “if it might affect the outcome of the suit under the governing law, ” and an issue of fact is “genuine” where “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Holtz v. Rockefeller & Co. Inc., 258 F.3d 62, 69 (2d Cir. 2001) (internal quotation marks and citations omitted). “[M]ere conclusory allegations or denials . . . cannot by themselves create a genuine issue of material fact where none would otherwise exist.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (quoting Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995)) (internal quotation marks and citations omitted). When considering cross-motions for summary judgment, “the court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.” Schwabenbauer v. Board of Educ. of City School Dist. of City of Olean, 667 F.2d 305, 314 (2d Cir. 1981).

         Choice of Law

         A federal court sitting in diversity will adopt the choice of law analysis of the forum state in which it sits. Softel, Inc. v. Dragon Med & Sci. Commc'ns, 118 F.3d 955, 967 (2d Cir. 1997). Plaintiff resided, worked, and negotiated his contract in New York, and the parties agree that New York law applies to both Plaintiff's contract and defamation claims. (Mem. of Law in Supp. of Pl.'s Mot. for Partial Summ. J., Docket Entry No. 49, at 3; See Mem. of Law in Supp. of Def.'s Mot. for Summ. J, Docket Entry No. 41, at 4, 7.) The Court will apply New York law because, by relying on New York law in their briefs, the parties implicitly consented to its application. Celle v. Filipino Reporter Enters., Inc., 209 F.3d 163, 175-76 (2d Cir. 2000) (parties are deemed to have consented to a choice of law if they do not object); Joyce v. Thompson Wigdor & Gilly LLP, No. 06-CV-15315-RLC, 2008 WL 2329227, at *3 (S.D.N.Y. June 3, 2008) (court applied New York law when parties assumed the application of New York law in their submissions).

         Breach ...


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