Developer and Investor entered into a business venture through which Developer would construct a wind power project and Investor would find the necessary capital to fund the project.  The parties executed various agreements before construction and soon after construction began.  The parties originally planned for Investor to purchase Developer’s interest in the venture at an agreed-upon price formula.  Soon after construction began, they executed a redemption agreement through which they agreed upon a fixed-dollar purchase price and payment terms. 

Developer filed a lawsuit alleging that Investor made various misrepresentations to induce it to accept the much lower fixed-price redemption amount.  The alleged misrepresentations concerned the amount of:

• turbine costs
• O&M building costs
• internal charges
• operating expenses
• expected energy sales
• line losses
• construction costs

In addition, through a quantum meruit claim, Developer sought to recover the value of services performed “at the special insistence and request” of Investor.

In response to the lawsuit, Investor raised a number of substantive counterarguments, but the court focused on the deficiencies contained in Developer’s complaint.  In short, Investor argued that the complaint failed to assert sufficient facts to satisfy minimum pleading requirements.

Misrepresentation Claims

In response to Developer’s claims of misrepresentation, Investor argued that any statements were merely predictions about the future and expressions of opinion, neither of which can support a misrepresentation claim.

Unfortunately for the Developer, the court could not assess whether the alleged misrepresentations were true statements of fact, as opposed to mere
predictions, because Developer’s complaint failed to identify the specific facts.  Instead, Developer’s complaint contained conclusory legal statements indicating that Investor misrepresented facts, but it failed to identify the specific facts that were misrepresented.

Quantum Meruit Claims

Occasionally, project participants will seek remedies outside of written contacts.  One such claim is for quantum meruit.  In such claims, one party provides a benefit to another and seeks recovery of the value of the benefit.

Many states limit recovery under quantum meruit when the parties have an express and binding written contract that address the benefits provided. Investor raised this argument as a substantive defense to Developer’s quantum meruit claim.

As with the misrepresentation claim, the court was unable to address the substantive meruits of the claim and defense because the complaint was devoid of necessary facts to support the claim.  As before, it contained solely legal conclusions without specific supporting facts.

Second Chance for Developer

The court dismissed the deficient claims in Developer’s compliant.  Luckily for Developer, however, the court dismissed them without prejudice to amend, which means the Developer had a limited period of time to amend the complaint to include adequate supporting facts.

Implications

Though the court simply addressed pleading deficiencies, the case is helpful for other renewable energy project participants.  The parties’ dispute arose over alleged misrepresentations that induced one party to agree to a lower buy-out price.  Possible solutions for this problem include:

• If the parties do not want to permit reliance on predictions and estimates, the contract could specifically indicate that any statement regarding costs, sales, or other facts subject to prediction and estimation are merely expressions of anticipation.  They are not statements of fact and cannot form the basis of any claim for misrepresentation.
• If the parties want to permit reliance on such facts, the contract could include specific representations and warranties thereof.  A breach of these provisions would normally give grounds for a breach-of-contract action.
• In any event, some contracts that contain buy-out provisions allow for an independent third party to determine the amount.

In addition, claims for quantum meruit are common in construction or EPC projects on which the contract does not adequately address the scope of work to be performed.  For instance, if a contract does not mention a particular type of work required on a project, the contractor may assert a quantum meruit claim to recover the value of such work.  In many instances, the quantum meruit claim and breach-of-contract claim are alternative claims.  This means that the contractor may recover on either claim for which the court finds sufficient grounds.

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