CoBON ENERGY, LLC v. AGTC, INC.

2011 UT App 330, 264 P.3d 219, 692 Utah Adv. Rep. 9, 2011 Utah App. LEXIS 328, 2011 WL 4485968
CourtCourt of Appeals of Utah
DecidedSeptember 29, 2011
Docket20100236-CA
StatusPublished
Cited by4 cases

This text of 2011 UT App 330 (CoBON ENERGY, LLC v. AGTC, INC.) is published on Counsel Stack Legal Research, covering Court of Appeals of Utah primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CoBON ENERGY, LLC v. AGTC, INC., 2011 UT App 330, 264 P.3d 219, 692 Utah Adv. Rep. 9, 2011 Utah App. LEXIS 328, 2011 WL 4485968 (Utah Ct. App. 2011).

Opinion

OPINION

VOROS, Judge:

1 This appeal asks whether, by releasing its claims against Robena LLC in consideration for payment of $60,000 in unpaid consulting fees, Appellants Alpine Coal Co., Inc. and AGTC, Inc. (collectively, Alpine) also released a claimed $22 million in unacerued claims against CoBon Energy, LLC (CoBon), Robena LLC's general partner and .01% owner. We hold that Alpine did not and, therefore, reverse.

BACKGROUND

12 The Crude Oil Windfall Profit Tax of 1980, see 26 U.S.C. § 29 (1988) (current version at 26 U.S.C. § 45K (2006)), enacted a tax credit for producers of qualifying alternative energy sources (the Section 29 program). See id. One such alternative energy source was synthetic fuel from coal (synfuel). Co-Bon had acquired the right to use technology needed for converting coal to synfuel; Alpine was knowledgeable in the coal industry and had experience developing and marketing coal products. In December 1996, Alpine and CoBon entered into a consulting agreement (the 1996 Consulting Agreement) for the purpose of developing facilities for the production and sale of synfuel, thus generating significant tax credits under the Section 29 program.

T3 Pursuant to the 1996 Consulting Agreement, Alpine agreed to provide consulting services and project development assistance. In exchange, CoBon agreed to pay Alpine 30% of the proceeds received from tax ered-its generated by the facilities. The facilities had to be completely developed by July 1, 1998, to qualify for the tax eredit. Any facility developed before that date could generate tax credits until the end of 2007, at which time the Section 29 program expired.

*221 T4 The parties worked on nine separate projects for the development of synfuel facilities. Three of those projects resulted in the timely development of six synfuel facilities. These generated over $66 million for CoBon under the Section 29 program. About $5 million of those proceeds were generated by the Robena facility. The Robena facility was managed by Robena LLC, which originally was wholly owned by CoBon.

15 On March 27, 1998, Alpine, doing business as Viron Energy (Viron), sent CoBon a letter offering to identify, evaluate, and obtain raw materials for the operation of the Robena facility in exchange for a monthly fee. CoBon responded that Alpine was already required to provide this service under the 1996 Consulting Agreement. CoBon also expressed confusion over who Viron was, indicating that the March 27 letter was the first CoBon had heard of Viron.

(6 After further negotiation, on May 8, 1998, CoBon sent Alpine a letter of understanding (the 5/8/98 LOU) agreeing to pay Viron $15,000 per month for identifying, evaluating, and obtaining suitable raw materials for the Robena project. However, in the 5/8/98 LOU CoBon reserved the right to offset payments made to Viron against its obligations to Alpine under the 1996 Consulting Agreement. On May 18, 1998, CoBon sent Alpine a second letter of understanding (the 5/18/98 LOU) stating that Robena "will hereafter enter into a consulting agreement for Viron's reasonable and necessary assistance and consultation in identifying, evaluating, and obtaining raw material resources suitable for the [Robena) project." Like the 5/8/98 LOU, this letter contained a reservation of rights. Representatives of both Co-Bon and Alpine signed this letter.

T 7 The following month, CoBon sold Robe-na LLC to an entity owned 99.99% by Provi-dian Services LLC (Providian) and .01% by CoBon. CoBon retained its position as general partner and manager. On July 1, 1998, Robena LLC, then under control of Providi-an, sent Viron a letter, stating that "Robena hereby retains Viron's reasonable and necessary assistance and consultation in identifying, evaluating, and obtaining raw material resources suitable for the [Robena) Project," in exchange for a $15,000 monthly fee to Viron (the 1998 Retainer Agreement). The 1998 Retainer Agreement superseded the 5/18/98 LOU according to CoBon's President, who signed both. It also contained a reservation of rights.

18 Viron performed services pursuant to the 1998 Retainer Agreement and was paid for those services through April 1, 1999. After that date, Robena LLC stopped paying Viron. Two months later, Providian replaced CoBon with Palmer Management Corporation as the general manager of Robena LLC; CoBon remained a general partner. Viron continued to perform services under the 1998 Retainer Agreement through August 1999. On September 1, 1999, owed $60,000 in back payments for four months of services, Viron stopped work.

Viron sued Robena LLC in the Commonwealth of Pennsylvania for breach of contract, seeking damages of $60,000 in back payments (the Pennsylvania Action). Viron's complaint was signed and verified by Mark J. Rodak, an engineer and Viron's president. 1 The complaint relied on the 5/8/98 LOU with CoBon as the basis for the breach of contract claim and attached a copy. Robena LLC sought dismissal, noting that Viron had attached a letter of understanding with CoBon, not Robena LLC, and alleged that Viron had thus failed to establish a contract between Viron and Robena LLC.

110 Robena LLC and Viron settled in June 2000. Robena LLC paid Viron the $60,000 Viron sued for, and Viron signed the release that is the subject of this appeal (the Release). The Release released all "Released Parties" from "any and all claims ... and causes of action which relate to or arise out of any consulting services which have been performed by Viron regarding the Robena Synthetic Fuel Plant including, without limitation, claims asserted in, or that *222 could have been asserted in, the [Pennsylvania] Action."

4 11 The settlement of Viron's suit against Robena LLC had no apparent effect on Co-Bon's payments to Alpine under the 1996 Consulting Agreement. CoBon made payments to Alpine both before and after execution of the Release. In May 2000, before the execution of the Release, CoBon paid Alpine $10,000 based on anticipated distributions under the Section 29 program. In November and December 2001, after the execution of the Release, CoBon paid Alpine $408,000 in consulting fees under the 1996 Consulting Agreement based on tax credits received.

12 In the fall of 2002, Alpine demanded payment of additional distributable proceeds under the 1996 Consulting Agreement; Co-Bon responded by filing suit in Utah. CoBon sought a declaration that the 1996 Consulting Agreement had been rendered unenforceable by "tax laws and other circumstances," and that therefore Alpine was not entitled to further payments. Alpine counterclaimed for payments due-approximately $22 million by Alpine's tally-under the 1996 Consulting Agreement. The parties settled that dispute, agreeing to dismiss the claims and start anew.

€13 In October 2006, CoBon again filed suit in Utah against Alpine seeking declaratory relief, However, CoBon abandoned its claim based on a change in tax law and instead alleged breach of contract for Alpine's refusal to perform services under the 1996 Consulting Agreement.

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Bluebook (online)
2011 UT App 330, 264 P.3d 219, 692 Utah Adv. Rep. 9, 2011 Utah App. LEXIS 328, 2011 WL 4485968, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cobon-energy-llc-v-agtc-inc-utahctapp-2011.