ETOWAH ENVIRONMENTAL GROUP, LLC v. WALSH Et Al.

774 S.E.2d 220, 333 Ga. App. 464
CourtCourt of Appeals of Georgia
DecidedJuly 23, 2015
DocketA15A0116
StatusPublished
Cited by5 cases

This text of 774 S.E.2d 220 (ETOWAH ENVIRONMENTAL GROUP, LLC v. WALSH Et Al.) is published on Counsel Stack Legal Research, covering Court of Appeals of Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
ETOWAH ENVIRONMENTAL GROUP, LLC v. WALSH Et Al., 774 S.E.2d 220, 333 Ga. App. 464 (Ga. Ct. App. 2015).

Opinion

Branch, Judge.

In August 2006, defendant Highstar Capital Fund II, LP (“High-star”) acquired Advanced Disposal Services, Inc. (“ADS”) for $470 million. In a lawsuit later filed against ADS, plaintiff Etowah Environmental Group, LLC (“Etowah”) claimed that ADS had presented Etowah with an artificially low price for Federal Road, a Forsyth County waste management facility owned by ADS and Etowah, and that ADS had thus induced Etowah to forego its right to “tag along” in Highstar’s acquisition of ADS. An arbitration panel later found that ADS had breached its fiduciary duty to Etowah in the context of the ADS acquisition and awarded Etowah approximately $19 million for the value of Federal Road.

In February 2012, after collecting the arbitration award, Etowah brought this action for fraud and other claims, and seeking punitive damages and attorney fees, against Highstar and its principals Michael Walsh and Christopher Beall, as well as Highstar’s subsidiary Adstar Waste Holdings Corporation (“the Highstar defendants”). The Highstar defendants moved for summary judgment on the ground that the issue of the value of Federal Road had already been determined by the arbitration panel such that Etowah was collaterally estopped from raising that issue in its action against the High-star defendants. On appeal from the trial court’s grant of the High-star defendants’ motion, Etowah argues that the issue of the value of its share of Federal Road is not precluded. Etowah also argues that the trial court erred when it granted summary judgment as to Etowah’s claims for other compensatory and punitive damages against Highstar and when it excluded documents produced by Highstar’s consultants as privileged. We conclude that although the trial court did not err when it barred Etowah from relitigating that portion of its fraud claim that would have involved the issue of Federal Road’s value and when it excluded the documents, genuine issues of fact remain as to Etowah’s claim for attorney fees and costs incurred before the arbitration panel in discovering the extent of Highstar’s fraud, and thus as to punitive damages arising from that claim. We therefore affirm in part and reverse in part.

To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. OCGA § 9-11-56 (c). A defen *465 dant may do this by showing the court that the documents, affidavits, depositions and other evidence in the record reveal that there is no evidence sufficient to create a jury issue on at least one essential element of plaintiff’s case.

Lau’s Corp. v. Haskins, 261 Ga. 491 (405 SE2d 474) (1991).

Thus viewed in favor of Etowah, the record shows that in 2001, Etowah and Advanced Disposal Services, Inc. (“ADS”) agreed to form Federal Road, LLC, which would acquire and operate the Eagle Point landfill in Forsyth County. 1 ****&ADS held a 75% interest in Federal Road, with Etowah owning the remaining 25%. Section 10.6 of Federal Road’s operating agreement provided for Etowah’s “tag-along right” as follows:

(a) In the event a Member elects to transfer ... all or a portion of its [Federal Road] Interest (the “Selling Member”) to an unaffiliated third party ... , all remaining Members (“Non-Selling Members”) shall have the right to cause the Selling Member to effect the transfer of such Non-Selling Members’ respective [Federal Road] Interest to such Third Party at an incremental price and on the same terms and conditions (“the Offer”) as the Selling Members proposes to transfer its [Federal Road] Interest to such Third Party (the “Tag-Along Right”).

Section 10.10 of the operating agreement, entitled “Consent to Merger,” provided in relevant part:

[E]ach Member hereby irrevocably consents to the merger or consolidation by any legal means of [Federal Road] with *466 [ADS] (or its successor) upon (i) the election of [ADS] (or its successor); and (ii) the adoption of a plan of merger or other consolidation by Majority Vote which provides Units of relatively equal value in [ADS] or successor entity in exchange for the [Federal Road] Interest held by each Member.

Section 10.10 also provided that the “unit value” to be used in calculating each Federal Road member’s interest “shall be made in accordance with paragraph 10.9 (b),” which provided in relevant part:

The Unit Value of Units issued by [Federal Road] and the Unit Value of Units issued by [ADS] shall be determined to arrive at the ratio of units in [ADS] exchanged for Units in [Federal Road] pursuant to a Unit Exchange. The Unit Value . . . shall be determined: (i) by agreement by and between each Member of [Federal Road] and [ADS], or (ii)... by an appraiser[, who] shall determine that total fair market value of [Federal Road] and divide that amount by the total Units outstanding and after considering voting rights and applicable discounts and premiums, arrive at the Unit Value of the Units issued by [Federal Road] to such Member to be exchanged for Units in [ADS].

On May 5,2006, Highstar sent ADS’s principal, Charles Appleby, a written offer to buy ADS for $425 million “less the balance of [ADS’s] existing debt,” with Federal Road accounting for at least $62 million of ADS’s value. On May 10, Highstar increased its offer for ADS by $25 million, to $450 million, but decreased the value of Federal Road to between $45.5 million and $47 million. On May 19, Highstar increased its written offer for ADS by another $20 million, to $470 million, but also created a second offer letter, addressed to ADS, that purported to be an offer for Federal Road alone at a price of $45.5 million. According to Etowah, Highstar created the second May 19 letter for the purpose of deceiving Etowah as to the terms of High-star’s offer for ADS, including the value of Federal Road.

On June 12, 2006, Highstar and ADS met in New York to discuss Highstar’s offer. On the following day, ADS met with Etowah and showed its representatives Highstar’s second offer letter (but not its first) as well as an analysis showing how much Etowah would receive were it to “tag along” to the $45.5 million offer for Federal Road. As a result of being shown this letter, and because it felt that the $45.5 million offer for Federal Road was too low, Etowah declined to exercise its tag-along right. A merger plan dated June 30, 2006, *467 provided that Etowah would merge into ADS, with Etowah’s 25% interest in Federal Road to be exchanged for ADS shares.

In August 2006, Highstar acquired ADS for $470 million. On September 21, 2006, Etowah was merged into ADS in accordance with Delaware law. On May 19, 2007, ADS merged Etowah out of its minority ownership of ADS shares. On June 1, 2007, Etowah sued ADS and others, but apparently not the Highstar defendants, 2

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Bluebook (online)
774 S.E.2d 220, 333 Ga. App. 464, Counsel Stack Legal Research, https://law.counselstack.com/opinion/etowah-environmental-group-llc-v-walsh-et-al-gactapp-2015.