GHI Energy, LLC v. Entrypoint RNG Partners, LLC

CourtDistrict Court, S.D. Texas
DecidedJune 17, 2025
Docket4:24-cv-01592
StatusUnknown

This text of GHI Energy, LLC v. Entrypoint RNG Partners, LLC (GHI Energy, LLC v. Entrypoint RNG Partners, LLC) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
GHI Energy, LLC v. Entrypoint RNG Partners, LLC, (S.D. Tex. 2025).

Opinion

UNITED STATES DISTRICT COURT June 17, 2025 SOUTHERN DISTRICT OF TEXAS Nathan Ochsner, Clerk HOUSTON DIVISION § GHI Energy, LLC, § § Plaintiff, § § Civil Action No. 4:24-cv-01592 v. § § Entrypoint RNG Partners, LLC, § § Defendant. § §

MEMORANDUM, RECOMMENDATION, AND ORDER Multiple motions are pending in this contract dispute between Plaintiff/Counter-Defendant GHI Energy, LLC (“GHI”) and Defendant/Counter-Plaintiff Entrypoint RNG Partners, LLC (“Entrypoint”). Entrypoint filed a motion to compel discovery against GHI and UGI Energy Services LLC, a third-party defendant in this case. Dkt. 23. GHI moved for partial summary judgment to construe key terms in its contract with Entrypoint, Dkt. 25, which motion Entrypoint requests that the Court deny or defer pending discovery, Dkt. 33. GHI also moved to strike parts of Entrypoint’s reply in support of its motion to deny or defer. Dkt. 45. After carefully considering the motions, Dkt. 23, 25, 33, 45, the responses, Dkt. 27, 35, 41, 48, the record, and the applicable law, it is recommended that GHI’s motion for partial summary judgment (Dkt. 25) be granted, and that Entrypoint’s interrelated motion to deny or defer (Dkt. 33) be denied. It is further ordered that Entrypoint’s motions to compel (Dkt. 23)

and GHI’s motion to strike (Dkt. 45) are both denied. Background The facts are largely undisputed. GHI Energy was founded in 2011 by John Greene, who served as its president. Dkt. 35-2 at 2. Clarke Anderson

joined as vice president in 2012. Id. GHI was one of the first companies to work in the natural gas arena of California’s Low Carbon Fuel Standard (“LCFS”) and the federal Renewable Fuel Standard (“RFS”). Id. at 2-3. It buys renewable natural gas (“RNG”) from production facilities and sells it as fuel to

vehicle fleets. Dkt. 25-1 at 2. Those sales generate credits that GHI then sells either to brokers or directly to refineries that need them to comply with regulatory requirements. Id. UGI Energy Services LLC (“UGIES”) acquired GHI in July 2020. Id. at

1. Greene and Anderson formed Entrypoint to receive compensation for managing GHI during the transition to new management. Id. at 2. A. The Management Services Agreement As part of GHI’s sale to UGIES, Greene and Anderson executed a

Management Services Agreement (“MSA”) on Entrypoint’s behalf, on July 8, 2020. See Dkt. 26 at 1, 29-31; Dkt. 25-1 at 1; Dkt. 35-2 at 5. The MSA had a three-year term. See Dkt. 26 at 16. Under the MSA, Entrypoint would perform certain “Business Services” for GHI, including marketing and monetizing credits for GHI’s benefit, “cultivating relationships with prospective

Customers throughout California,” and advising UGIES on RNG investment opportunities and RFS and LCFS revenue maximization. See Dkt. 26 at 33-34 (Exhibit B to MSA). In exchange, GHI promised to pay Entrypoint an annual $325,000 management fee and, in Section 5.2, an annual Long-Term

Management Incentive (“LTMI”) Payment. Dkt. 26 at 13-14, 36-38; see also Dkt. 25-1 at 2-3; Dkt. 35-2 at 5. The MSA specified how LTMI Payments would be calculated. Dkt. 26 at 36-38 (Exhibit D, Long-Term Management Incentive Payment); see also id. at

14 (MSA § 5.2, “Long-Term Management Incentive Payment calculated as set forth in Exhibit D”). As stated in the attached Exhibit D, the LTMI Payment for each fiscal year from October 1, 2020 to September 30, 2025 is based on GHI’s and any other UGIES Entity’s EBITDA1 performance. Id. at 36.

The formula for LTMI Payment calculations depends on whether “the aggregate amount of [GHI’s] and any other UGIES Entity’s EBITDA generated from Customers located in California for an applicable UGIES fiscal year”

1 The MSA defines EBITDA as “earnings before interest, taxes, depreciation, and amortization determined in accordance with GAAP [generally accepted accounting principles] and the methodology set forth in Exhibit D.” See Dkt. 26 at 8. exceeds $6,500,000.2 See id. (emphasis added). If it does, then the LTMI Payment is 25% of the difference, plus 10% of the aggregate EBITDA from “Customers” outside California for that fiscal year. See id. at 36. If the aggregate is less than or equal to $6.5 million, however, the LTMI Payment is 10% of the amount, if any, “by which [GHI’s] and any other UGIES Entity’s ageregate EBITDA generated [from] all Customers exceeds” $6,500,000. See id. (emphasis added). In any event, the LTMI Payment is capped at $1,000,000 for FY 2021-22 and $4,500,000 for FY 2023-25. See id. In the MSA, the term “UGIES Entity” is defined as “UGIES and any subsidiary entity that is directly or indirectly wholly-owned by UGIES.” Seeid. at 10. And “Customer” is “any person that purchases Compressed Natural Gas or Liquefied Natural Gas directly from Owner [GHI] or any other UGIES Entity for use as fuel in a vehicle that results in the generation of Credits for which Owner or such other UGIES Entity receives

revenues from the sale of such credits.” See id. at 7. Exhibit D also specifies which revenues and expenses should be included in the EBITDA calculation. See id. at 37. As relevant here, the revenue line items include:

e Natural Gas Sales to Customers e Sale of Gas Supply Commodity (RNG sale in local markets) 2 For the fiscal year ending September 30, 2020, the relevant threshold is $1,725,000. See Dkt. 26 at 37-38 (MSA, Exhibit D).

e Sale of RINs e Sale of LCFS Credits See id. The MSA also grants Entrypoint the right to audit GHI’s and UGIES’s “books and records relating to the determination of the [LTMI] Payment” during the contract term and for three years after it expires. See id. at 14. B. GHI’s LTMI Payments After purchasing GHI in 2020, UGIES invested in RNG production facilities that work with landfills and dairy farms to produce natural

gas. See Dkt. 25-1 at 3-4. It made these investments as joint ventures with third parties (the “Joint Ventures”) through a subsidiary, UGI Biofuels, LLC, which invested in the Joint Ventures through its subsidiary holding companies. See id. at 3. As their moniker indicates, the Joint Ventures themselves, which are jointly owned by third-party producers, are only partially owned by UGI Biofuels, LLC’s subsidiaries. In the meantime, GHI made LTMI payments to Entrypoint of $1,250,000 in 2021 and $95,834 in 2022. See id. at 2-3. But for 2023, GHI calculated the ageregate EBITDA as_ $5,208,9839—less than the $6.5 million threshold. See id. at 4. Based on that calculation, GHI maintained that it did not owe an LTMI Payment. See id.

C. This suit GHI sued Entrypoint in April 2024, seeking restitution of an alleged

$95,834 overpayment and declaratory judgment on payments made during fiscal years 2022 and 2023. Dkt. 1 at 9-12. Entrypoint counterclaimed against GHI and Third-Party Defendant UGIES for breach of contract and declaratory judgment. Dkt. 8 at 44-47. Both counterclaims dispute GHI’s calculation of

LTMI Payments, asserting that GHI improperly excluded revenues from the Joint Ventures when determining the aggregate EBITDA. See id. at 37, 40. Entrypoint also sought declaratory judgment on its right to audit the financial records of all entities involved in the Joint Ventures, not just GHI and UGIES.

See id. at 46-47. On October 24, 2024, Entrypoint filed a motion to compel discovery. Dkt. 23. GHI responded, Dkt. 27, and Entrypoint replied, Dkt. 32. GHI then moved for partial summary judgment to address two interpretive

issues under the MSA: (1) whether revenue from the Joint Ventures through UGIES’s partially owned subsidiaries counts toward the LTMI Payments; and (2) whether natural gas sales to GHI by third-party producers in the Joint Ventures qualifies as “Natural Gas Sales to Customers” that affects LTMI

Payment calculations. See Dkt. 25 at 7, 15-22, 23-25. Entrypoint responded, Dkt. 35, and GHI replied, Dkt. 39.

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