Green Plains Renewable Energy Inc. v. Ethanol Holding Company, LLC

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
GREEN PLAINS RENEWABLE
ENERGY INC., GREEN PLAINS
WOOD RIVER LLC, and GREEN
PLAINS FAIRMONT LLC,
Plaintiffs, C.A. N0. N14C-01-233 MMJ CCLD
V.
ETHANOL HOLDING COMPANY,
LLC,
Defendant.
Submitted: July 21, 2016
Decided: August 19, 2016
Corrected: January 25, 2017
Upon Plaintiffs’ Motion for Summary Judgment
GRANTED IN PART
DENIED IN PART
OPINION
John A. Sensing, Esquire, J esse L. Noa, Esquire, Potter Anderson & Corroon LLP,
Omri E. Praiss, Esquire (Argued), Joseph P. Conran, Esquire, Tanya M. Maerz,
Esquire, Husch Blackwell LLP, Attorneys for Plaintiffs
Michael D. DeBaecke, Esquire, Blank Rome LLP, John P. Passarelli, Esquire
(Argued), James M. Sulentic, Esquire, Carol A. Svolos, Esquire, Kutak Rock LLP,
Attorneys for Defendant
JOHNSTON, J.
PROCEDURAL CONTEXT
Plaintiffs Green Plains Renevvable Energy, Inc., Green Plains Wood River,
LLC, and Green Plains Fairmont, LLC (collectively “Green Plains”) brought this
action for declaratory judgment against Dcfcndant Ethanol Holding Company,
LLC (“EHC”). Green Plains Renewable Energy, Inc. is an lowa corporation with
its principal place of business in Omaha, Nebraska. Green Plains Wood River,
LLC, Green Plains Fairmont, LLC, and EHC are all Delaware limited liability
companies.
On January 27, 2014, Green Plains filed its Complaint, seeking the Court’s
interpretation and construction of certain provisions of the Asset Purchase
Agreement (“APA”), Which Was entered into between Green Plains and EHC.
Green Plains alleged that EHC assumed certain liabilities under the APA, Which
trigger two post-closing purchase price adjustments
On March 24, 2014, EHC filed its Motion to Dismiss. EHC argued that the
terms of the APA are unambiguous and that EHC did not assume the alleged
liabilities. Oral argument Was heard on December 4, 2014.
By Opinion dated February 9, 2015, the Court denied EHC’s Motion to
Dismiss. The Court held:
Viewing the pleadings in the light most favorable to Green Plains, the
Court finds that it is reasonably conceivable that Green Plains could
succeed on the merits of its declaratory judgment action. The Court
finds that the APA is ambiguous as to Whether EHC assumed
2
liabilities because the APA is reasonably susceptible of two different
interpretations
Extrinsic evidence of the parties’ intent must be
fleshed out during discovery.l
On May 13, 2016, Green Plains filed its Motion for Summary Judgment.
Oral argument was heard on July 21 , 2016.
UNDISPUTED FACTS
This case involves two different contracts between several different parties.
Accordingly, many attorneys and company executives are involved. For ease of
reference, a chart of the relevant individuals is included below.
Michelle Mapes
Executive Vice President, General Counsel, and Corporate
Secretary of Green Plains, who was the co-lead negotiator of
the APA on behalf of Green Plains
Christopher Wu
“Team Leader” from Carl Marks Advisory Group, which
was retained by EHC’S counsel, Kutak Rock LLP, as
financial advisor to First National Bank Omaha (“FNB
Omaha”), primarily in connection with the negotiation of the
Deed in Lieu of Foreclosure Agreement (“DILFA”)
Andrew Wong
Works for FNB Omaha and is the President of EHC, who
was involved in the negotiation of the DILFA and APA
Joel Wiegert
Attorney from Kutak Rock LLP, who was the lead attorney
negotiating the DILFA on behalf of FNB Omaha
1 Green Plal``ns Renewable Energy lnc. v. Ethanol Hola'ing C0., LLC, 2015 WL 590493, at *6
(Del. Super.).
3
Buffalo Lake Energy, LLC (“Buffalo Lake”) and Pioneer Trail Energy, LLC
(“Pioneer Trail”) were owners and operators of two ethanol production plants. On
September 25, 2006, pursuant to a Credit Agreement, certain lenders, including
FNB Omaha (collectively, “Lenders”), made loans to Buffalo Lake, Pioneer Trail,
and BFE Operating Company, LLC, a wholly-owned subsidiary of BioFuel Energy
(collectively, “Borrowers”). These loans financed the acquisition, construction,
and operation of two Ethanol Plants.
Borrowers subsequently defaulted on their loans. Rather than having
Lenders foreclose on the assets, Borrowers and Lenders negotiated an arrangement
under which the Search for a qualified buyer for the Ethanol Plants could be
conducted and, ultimately, Borrowers’ assets could be transferred in a controlled
manner. This conveyance was set forth in the DILFA. Over the course of several
months, Lenders and Borrowers negotiated the DILFA. The DILFA Was executed
on April 11, 2013, and was placed in escrow pending closing. EHC became the
acquiring entity under the DILFA. Upon conveyance of the assets to EHC,
Borrowers were released nom personal liability under the Credit Agreement.
The DILFA included two Assignments of Contracts_one for Buffalo Lake
and one for Pioneer Trail.2 Section 1 of the Assignments of Contracts provides:
“Assignor hereby assigns, conveys, and transfers to Assignee all of Assignor’s
2 The relevant terms of the Assignments of Contracts are the same.
4
right, title, and interest” in certain defined contracts. Section 2 provides:
“Assignee hereby accepts such assignment of Assignor’s right, title, estate and
interest in, to and under solely those contracts that are Set forth in Schedule l
attached hereto.”
When Borrowers executed the Assignments of Contracts, a few items were
intentionally left blank and were to be filled in by Lenders’ Administrative Agent
at a later date. Among the items left blank was the list of contracts to be included
in Schedule I. The parties anticipated that the Administrative Agent would identify
and provide a list of the assumed contracts some time on or before closing.
In August 2013, Christopher Wu, on behalf of Lenders, contacted Michelle
Mapes, general counsel to Green Plains, to inquire about a possible purchase of the
Ethanol Plants. On November 4, 2013, EHC and Green Plains entered into the
Asset Purchase Agreement (“APA”), wherein Green Plains agreed to purchase
assets from EHC, specifically, the ethanol production assets transferred from
Borrowers to EHC under the DILFA. In Section 4.11 of the APA, EHC
represented that the DILFA “is in full force and effect and is the valid and binding
obligation of the Seller enforceable according to its terms.” Under the Bill of Sale
associated with the APA, Green Plains agreed to pay all obligations and liabilities
of Seller with respect to the purchased assets arising and relating to periods after
the effective date.
The APA also included a “true-up” provision. Section 2.03 provided that
Green Plains would pay 3101 million (the purchase price) plus the value of the
Inventory and raw materials as of the Closing Date, less a Shortfall Amount
(amount by which accounts payable3 exceeded accounts receivable), or plus an
Excess Amount (amount by which accounts receivable exceeded accounts
payable).
On November 20, 2013, Joel Wiegert, the lead attorney who negotiated the
DILFA on behalf of FNB Omaha, emailed Mapes and attached various draft
conveyance documents: (1) from the Borrowers to the Lenders; and (2) from the
Lenders to Green Plains. The Assignments of Contracts were included among
these documents. For the first time, the Assignments of Contracts included a
Disclaimer Provision. The Disclaimer Provision was inserted into Schedule I.
Schedule l had been left blank for the purpose of listing assumed contracts.
The Disclaimer Provision provided: “[EHC’s] acceptance of the Assignor’s4
assignment of the foregoing contracts shall not constitute an assumption by [EHC]
of the obligations thereunder.” Mapes was not specifically informed about the
addition of the Disclaimer Provision. Additionally, no one from EHC sent Mapes
3 Accounts Payable was broadly defined under the APA as “the value of all liabilities assumed
by the Seller that survive the Closing, whether current or noncurrent, as determined under
GAAP.” Motion for Summary Judgment (“Mot. Summ. J.”) (Trans. ID. 59002590), Ex. 3: Asset
Purchase Agreement, § 1.01.
4 The Assignors Were Buffalo Lake and Pioneer Trail. Each executed Schedule l to their
respective Assignment of Contracts With an identical Disclaimer Provision.
6
a copy of the Assignments of Contracts with the completed Schedule I containing
the Disclaimer Provision.
On November 22, 2013, Andrew Wong, President of EHC, executed the
Assignments of Contracts, which included the Disclaimer Provision, on behalf of
EHC. On the same date, Lenders and Borrowers closed on the DILFA, and EHC
and Green Plains then closed on the APA.
On December 23, 2013, pursuant to Section 2.06 of the APA, Green Plains
sent its calculation of the Shortfall Amount to EHC. Green Plains calculated the
Shortfall Amount to be $11,835,475.18, thereby resulting in $5,517,284.75 owed
by EHC to Green Plains.
EHC contends that there is no provision in the APA, DILFA, or
Assignments that required EHC to assume a liability that would survive the
closing. Accordingly, EHC argues that the Accounts Payable Amount does not
exceed the Accounts Receivable Amount, and thus the Shortfall Amount is zero.
STANDARD OF REVIEW
Summary judgment is granted only if the moving party establishes that there
are no genuine issues of material fact in dispute and judgment may be granted as a
matter of law.5 All facts are viewed in a light most favorable to the non-moving
party.6 Summary judgment may not be granted if the record indicates that a
material fact is in dispute, or if there is a need to clarify the application of law to
specific circumstances7 When the facts permit a reasonable person to draw only
one inference, the question becomes one for decision as a matter of law.8 If the
non-moving party bears the burden of proof at trial, yet “fails to make a showing
sufficient to establish the existence of an element essential to that party’s case,”
then summary judgment may be granted against that party.9
ANALYSIS
Disclaim er Provision
Parties’ Contentions
Green Plains
Green Plains contends that the Disclaimer Provision is invalid and
unenforceable because FNB Omaha, as Administrative Agent, did not have
authority to unilaterally amend Schedule I to the Assignments of Contracts. Green
5 Super. Ct. Civ. R. 56(0).
6 Hammond v. Coft Indus. Operating Corp., 656 A.2d 558, 560 (Del. Super. 1989).
7 super. ct. civ. R. 56(¢).
8 Woonen v. Kig@r, 226 A.2d 238, 239 (Dei 1967).
9 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
8
Plains asserts that the Disclaimer Provision is a substantive term that materially
alters the DILFA. Green Plains argues that in order to comply with the DILFA’s
Anti-Amendment provision, the amendment must have been in writing and signed
by both parties-FNB Omaha and Borrowers. Green Plains contends that
permitting FNB Omaha to unilaterally amend the DILFA would render the anti-
amendment clause a “mere surplusage” in violation of Delaware law.
Green Plains claims that FNB Omaha only had the right to fill in the blanks
of the Assignments of Contracts_adding the date, the name of the assignee, and
the list of assigned contracts. Green Plains contends that by inserting the
Disclaimer Provision, FNB Omaha exceeded its scope of authority as
Administrative Agent. Green Plains points to the depositions of both Wu and
Wong. Both testified that FNB Omaha “would simply provide a list of those
assumed contracts and identify them under Schedule l . . . .”10
EHC
EHC argues that the Court, in its February 9, 2015 Opinion, already has
found that the APA is ambiguous EHC contends that the resolution of the
ambiguity is a trial issue for the jury and, therefore, summary judgment is
inappropriate and the case must proceed to trial.
10 Mot. Summ. J., EX. A: Deposition of Christopher Wu at 112:15-21; Ex. B: Deposition of
Andrew Wong at 219:12-17.
9
In the alternative, EHC argues that if the Court determines that the APA is
unambiguous, it should find that the Disclaimer Provision in the DILFA is valid
and enforceable. EHC contends that the Administrative Agent was authorized to
populate any incomplete schedules to the DILFA before closing. EHC states that
when the Borrowers signed the DILFA, the circumstances related to the
assumption of liabilities under the contracts that would be listed in Schedule l were
unknown by the parties. Section 2 of each Assignment of Contracts provides:
“Assignee hereby accepts such assignment of Assignor’s right, title, estate and
interest in, to and under solely those contracts that are Set forth in Schedule l
attached hereto.” EHC argues that Section 2 purposely omitted language that
would address whether EHC would or would not assume any of the liabilities
under the contracts to be added to Schedule l upon the closing of the DILFA. EHC
claims that this language was omitted so that the desired outcome could be
addressed at the eventual closing.
EHC next contends that Green Plains reviewed and approved Schedule l
prior to closing. EHC states that on November 20, 2013, prior to closing, Wiegert
emailed Mapes and expressly directed her to review and comment on Schedule l to
each Assignment of Contracts. EHC argues that Green Plains had every
opportunity to review the Disclaimer Provision prior to closing and could have
10
objected to it and refused to close the APA. lnstead, Green Plains chose not to do
so.
EHC admits that Green Plains was not a party to the DILFA. However,
EIIC states that Green Plains was a party to thc APA, which stated that Grccn
Plains would acquire Deed in Lieu assets and would assume liabilities “acquired,
assumed or incurred by the Seller in connection with the Deed in Lieu Closing
.”H Therefore, EHC argues, to
pursuant to the Deed in Lieu Documents . .
understand the assets that Green Plains acquired and the liabilities it assumed,
someone at Green Plains would have been obliged to read the Deed in Lieu
Documents, including Schedule I. EHC contends that the Disclosure Provision
cannot be considered invalid and unenforceable because of Green Plains’ failure to
read it and assert a timely objection prior to closing.
Discussion
Contract terms are interpreted according to their plain, ordinary meaning,
unless there is an ambiguity.12 “Contract language is not ambiguous merely
39l3
because the parties dispute what it means. Rather, contract language is
ambiguous only if it is reasonably susceptible of two or more interpretations, or
11 Mot. Summ. J., Ex. 3: Asset Purchase Agreement, § 2.02(c).
12 Alm Berkeley VI C. V. v. Omneon, lnc., 41 A.3d 381, 385 (Dei_ 2012).
13
1a
ll
can have two or more different meanings.14 “When there is uncertainty in the
meaning and application of the terms of the contract [the Court] will consider
testimony pertaining to antecedent agreements, communications and other factors
which bear on thc proper interpretation of the contract.”15
The Court, in its February 9, 2015 Opinion, held that the timing of the
addition of the Disclaimer Provision to the end of Schedule l to the Assignments of
Contracts presented a genuine issue of material fact at that stage of the
proceedings16 Having reviewed the testimony of the parties, the Court now finds
that the timing of the Disclaimer Provision is no longer a genuine issue of material
fact. The testimony of the parties demonstrates that the DILFA was executed on
April 11, 2013, and was placed in escrow pending closing. EHC admits that the
Disclaimer Provision was added to the end of Schedule l to the Assignments of
Contracts a few days before closing. On November 22, 2013, Wong executed the
Assignments of Contracts, which included the Disclaimer Provision, on behalf of
EHC. On the same date, Lenders and Borrowers closed on the DILFA, and EHC
and Green Plains then closed on the APA.
14 Rhone-Poulenc Basic Chems. C0. v. Am. Motorists Ins. C0., 616 A.2d 1192, 1196 (Del. 1992).
15 Pella¢on v. Bank ofNew York, 592 A.2d 473, 478 (Del. 1991).
16 Green Plains Renewable Energy Inc., 2015 WL 590493, at *5.
12
Having found that the timing of the addition of the Disclaimer Provision no
longer presents a genuine issue of material fact, the Court must determine whether
the provision was validly added to Schedule l to the Assignments of Contracts.
Section 27 of the DILFA provides: “This Agreement may not be amended
except by an amendment in writing signed by all parties hereto.” The validity of
the Disclaimer Provision turns on whether it is a substantive amendment or merely
an item that was contemplated by the parties to be filled in by the Administrative
Agent.
In his deposition, Wu admits that the Disclaimer Provision is substantive:
Q: The last provision does not identify a contract that’s being
assigned from the borrowers to EHC; correct?
Right.
But, rather, it’s a substantive provision; correct?
Yes.
And you testified that this provision is a material term; correct?
?.>@?.>Q?.>
Yes.17
Additionally, Wiegert admitted that in the event that EHC had to operate the
Ethanol Plants, and thus would have to assume obligations under the contracts,
EHC would have had to eliminate the Disclaimer Provision.18 Such a concession
17 Mot. Summ. J., Ex. A: Deposition of Christopher Wu at 261.
18 Mot. Summ. J., Ex. C: Deposition of Joel Wiegert at 164-65.
13
demonstrates that the provision had a substantive effect on the DILFA and the
obligations of the parties thereto.
Before Schedule l to the Assignments of Contracts was populated by FNB
Omaha, it read:
SCHEDULE I_-ASSUMED CONTRACTS
[t0 be provided by Administrative Agent on or before Closing]
The plain language leads to only one reasonable interpretation-that the
blank space in Schedule l would be filled in with a list of contracts. There is
nothing to indicate that the parties contemplated that Schedule I would contain
anything more than a list.
EHC’s argument that the Administrative Agent was granted broad authority
and flexibility to amend Schedule l by adding the Disclaimer Provision is without
merit. EHC admits that there is no provision in the DILFA that distinguishes or
alters the rights and obligations of the Lenders depending on whether or not a
buyer is found.19 Rather, FNB Omaha’s flexibility pertained to the determination
of whether and when to close.20 Further, as was conceded by both Wu and Wong,
FNB Omaha had the limited authority to complete the Assignments of Contracts
19 Mot. Summ. J., Ex. B: Deposition of Andrew Wong at 75.
20 Mot. summ. J., EX. 2, § 3(b).
14
by providing a list of the contracts to be assumed.21 FNB Omaha was not
permitted to substantively amend the Assignments of Contracts by adding a
provision that was not reviewed by and consented to by both partieS_Lenders and
2 Green Plains was not a signatory to the DILFA, Assignments of
Bor‘rowers.2
Contracts, or Schedule I.
The Court finds that the Disclaimer Provision is a substantive amendment.
Therefore, the Disclaimer Provision is invalid and unenforceable because FNB
Omaha, as Administrative Agent, did not have the authority to unilaterally amend
Schedule l to the Assignments of Contracts with a substantive provision.
Assumption of Liabilities
Parties’ Contentions
Green Plains
Green Plains contends that under the Assignments of Contracts, EHC agreed
to assume all liabilities pertaining to such contracts that accrued prior to the closing
of the DILFA. Green Plains argues that the circumstances surrounding the
negotiation and drafting of the Assignments of Contracts demonstrate that the
21 Mot. Summ. J., Ex. A: Deposition of Christopher Wu at 112:15-21; Ex. B: Deposition of
Andrew Wong at 219:12-17.
22 In the February 9, 2015 Opinion, the Motion to Dismiss was decided on the basis of ambiguity
and the question was left open as to whether the DILFA was incorporated by reference into the
APA through Section l3.09’s integration clause. Because the Court finds that the Disclaimer
Provision was not validly added, the Court again need not address the integration issue.
15
parties contemplated EHC taking on both the pre-closing benefits (accounts
receivable) and burdens (accounts payable).
First, Green Plains argues, Wiegert and Wu both admitted that at closing
EHC was going to assume certain Acknowledged Liabilities that were noted on the
term sheets exchanged between the parties.23 Among the listed Acknowledged
Liabilities was the Federated Contract, which also appeared on Schedule I to the
Assignment of Contracts. Accordingly, Green Plains contends that EHC’s
argument_that it never intended to assume any liabilities_directly conflicts with
the plain terms of the executed documents.
Second, Green Plains argues that the negotiations between Green Plains and
EHC demonstrate that the parties anticipated EHC assuming pre-closing liabilities.
The “Illustrative Gross Purchase Price to Net Lender Proceeds” prepared by EHC
shows that EHC expected to pay certain “Outflows,” including accounts payable.24
Green Plains claims that EHC has admitted that the approach laid out in these
charts, which was shared with both Green Plains and EHC’s Board of Managers,
was consistent with the terms of the APA.25
Third, Green Plains contends that EHC’s position that it did not assume any
pre-closing liabilities contradicts well-established contract interpretation rules,
23 Mot. Summ. J., Ex. A: Deposition of Christopher Wu at 71-72; Ex. C: Deposition of Joel
Wiegert at 31_32.
24 Mot. summ. J., Ex. 23.
25 Mot. Summ. J., Ex. D: Deposition of Joseph Kavan at 84_85.
16
negates the terms mutually agreed to by Borrowers and Lenders, and leaves
numerous portions of the DILFA without purpose or meaning. Green Plains
argues that the DILFA makes clear that Lenders agreed to be responsible for
obligations as “expressly provided herein or in the Payment Schedule (as to
amounts to be paid at Closing, in the ordinary course or assumed).”26 Green Plains
contends that pursuant to the Payment Schedule, Lenders agreed to assume and pay
at closing accounts payable “relating to goods and services delivered prior to
closing, subject to review and approval by Administrative Agent of final A/P
”27 Green Plains argues that under EHC’s
schedule as of the closing date.
interpretation_that it assumed no pre-closing liabilities_several terms of the
DILFA would be superfluous and of no effect.
Green Plains further argues that EHC’s position would render several
provisions of the APA meaningless The definition of “Accounts Payable
Amount” carves out an exception for “any Asset Retirement Obligations” owed to
Cargill by Borrowers or EHC.28 Green Plains claims that this exclusion would be
unnecessary if EHC never assumed any liabilities and the Accounts Payable
Amount was always $0.00.
26 Mot. Summ. J., Ex. 2: Deed in Lieu Of Foreclosure Agreement and Joint Escrow Instructions,
§ 8.
27 Mot. Summ. J., Ex. 2: Deed in Lieu Of Foreclosure Agreement and Joint Escrow Instructions,
Schedule XI: Schedule of Closing Payments.
28 Mot. Summ. J., Ex. 3: Asset Purchase Agreement, § 1.01.
l7
Similarly, Section 2.03 was amended to include a purchase price adjustment
that took into account a “Shortfall Amount” and an “Excess Amount.” The
Shortfall Amount was defined as the amount by which accounts payable exceeded
accounts receivable The Excess Amount was defined as thc amount by which
accounts receivable exceeded accounts payable. Green Plains contends that if the
Accounts Payable Amount was always $0.00, there was no need to amend the APA
to include a calculation of these amounts.
EHC
EHC contends that the DILFA did not require the assumption of liabilities
by Lenders in the event of the Ethanol Plant sale to Green Plains. EHC claims that
the DILFA was drafted with the flexibility to accommodate alternative potential
structures at closing. EHC argues that this flexibility was crucial because at the
time the DILFA was signed, a buyer had not been identified and there was
uncertainty as to whether Lenders would have to operate the Ethanol Plants.
Accordingly, EHC states, Lenders were prepared for two scenarios: (l) No Buyer
Found; and (2) Buyer Found. If no buyer was found, Lenders would take
possession of and operate the Ethanol Plants for Some period of time. To the
extent Lenders required goods and services under the Borrowers’ contracts with
vendors and Suppliers in order to operate the Ethanol Plants, it likely would have
been necessary for Lenders to assume liabilities under such contracts in order to
18
continue performance. lf a buyer was found, Lenders would transfer the Ethanol
Plants directly to a qualified third-party buyer. EHC contends that under the
“Buyer Found” scenario, no prudent commercial lender would ever assume
liabilities under contracts for which it was simply acting as a conduit to the
ultimate owner-operator.
EHC states that, in fact, a buyer for the Ethanol Plants was found. The table
closing for the DILFA and APA was structured such that EHC would act merely as
a conduit through which the Ethanol Plants would be transferred from Borrowers
to Green Plains, and Green Plains would take possession directly from Borrowers.
According to this “Buyer Found” scenario, EHC argues that FNB Omaha, as
Administrative Agent, exercised the authority provided to it under the DILFA to
expressly disclaim any assumption of liabilities under each Schedule l. EHC
contends that although the contracts were briefly assigned to EHC, it never
assumed the obligations thereunder and, therefore, assumed no liabilities that
survived the closing.
Discussion
ln its February 9, 2015 Opinion, the Court held:
Green Plains’ interpretation_that EHC assumed liabilities under the
APA_is reasonable because several APA provisions expressly
provide for EHC’s assumption of liabilities. No APA provisions
specifically state that EHC was only acting as a “pass-through” to
facilitate the transaction
19
At the same time, EHC’s interpretation that EHC did not assume any
liabilities is reasonable, given the simultaneous closings of the APA
and DILFA. Further, EHC contends that it never operated the ethanol
production facilities.
Viewing the plain language, the Court finds that the APA is
ambiguous as to whether EHC assumed liabilities because thc APA is
reasonably susceptible of different interpretations29
Wiegert and Wu both testified that at closing, EHC was going to assume
certain Acknowledged Liabilities that were noted on the terms sheets exchanged
between the parties.30 Wu testified that it was the intent of the parties to have these
term sheets incorporated into the DILFA. One of the liabilities listed was the
Federated Contract. The Federated Contract also appears on Schedule I to the
Assignment of Contracts. Accordingly, the executed documents indicate that EHC
intended to assume certain liabilities under the Assignments of Contracts.
Additionally, the negotiations between Green Plains and EHC demonstrate
that EHC anticipated taking on pre-closing liabilities. EHC prepared a
spreadsheet, titled “Illustrative Gross Purchase Price to Net Lender Proceeds.”
EHC created the spreadsheet in preparation for a call with Green Plains so that the
parties could “walk through the remaining money issues that relate to [Green
3331
Plains] to make sure we’re on the same page. The spreadsheet notes certain
29 Green Plains Renewable Energy Inc., 2015 WL 590493, at *5.
30 Mot. Summ. J., Ex. A: Deposition of Christopher Wu at 71-72; Ex. C: Deposition of Joel
Wiegert at 31-32.
31 Mot. summ. J., Ex. 23.
20
“Inflows” that EHC anticipated receiving, including the purchase price and the
amount of outstanding accounts receivable. The spreadsheet also includes certain
“Outflows,” including accounts payable and other accrued expenses If EHC did
not believe that it would be responsible for any liabilities under the assigned
contracts that accrued prior to closing, accounting for “Outflows” would have been
unnecessary.
EHC’s argument_that it would have been “completely illogical” for the
Lenders to assume liabilities under contracts for the Ethanol Plants that Lenders
would never own or operate_is without merit. This scenario is not only the
conventional mechanism for ethanol plants, but was recognized as such by EHC,
Pursuant to a true-up provision, the seller of an ethanol plant typically is
responsible for any accounts payable that accrue prior to closing, while the
purchaser is responsible for accounts payable that accrue after the closing. The
record demonstrates that EHC was aware of the true-up process and intended to
implement it in the closing.
In an email dated May 17, 2013, Christopher Wu stated:
60 days after closing there can be a true up since [the Pioneer Trail
plant] is operating and the inventory would need to be measured as a
point in time prior to closing and once again for the adjustment post
closing. As stated in a prior email, this is the conventional mechanism
for ethanol plants32
32 Mot. Summ. J., Ex. 18.
21
Wu’s email recognizes that a true-up will be necessary to determine pre- and
post-closing costs to be allocated to the appropriate parties Further, Section 2.03
of the APA includes a purchase price adjustment whereby Green Plains would pay
the purchase price plus the value of the lnventory and Matei'ials Amount, less a
Shortfall Amount (amount by which accounts payable exceed accounts receivab``le),
or plus an Excess Amount (amount by which accounts receivable exceed accounts
payable). If EHC never intended to assume any liabilities, the Accounts Payable
Amount always would have been zero, and this calculation would have been
unnecessary.
The undisputed facts, including the testimony of the parties and the executed
documents, demonstrate that interpreting the APA no longer involves genuine
issues of material fact. The Court finds, as a matter of law, that EHC is liable for
all accounts payable that accrued prior to closing, consistent with the APA’s
definition of Accounts Payable Amount.
Shortfall Amount
Parties’ Contentions
Green Plains argues that because EHC is liable for pre-closing liabilities
under the contracts, it must pay the Shortfall Amount to Green Plains Green
Plains has calculated the Shortfall Amount as $l 1,835,475.18, and therefore
contends that EHC owes Green Plains $5,517,284.75.
22
EHC contends that it assumed no liabilities that survived the closing.
Therefore, EHC argues, the Accounts Payable Amount is zero and the Shortfall
Amount is zero.
Discussion
The Court has found that EHC is liable for all accounts payable that accrued
prior to closing, consistent with the APA’s definition for Accounts Payable
Amount. Accordingly, the Court finds that EHC is liable for the Shortfall Amount.
Although Green Plains has proven that it is entitled to the Shortfall Amount, the
precise amount for which EHC is liable is disputed.
The parties shall confer as to how to resolve the Shortfall Amount. GPRE
has suggested that the parties submit the dispute over the amount to an independent
accounting firm for determination pursuant to the terms of the APA. The parties
may also choose to resolve the dispute through a bench trial or by submitting the
case to mediation or other ADR.
CONCLUSION
The Disclaimer Provision is a substantive amendment that materially alters
the DILFA. FNB Omaha did not have authority to unilaterally add the provision.
Therefore, the Court finds that the Disclaimer Provision is invalid and
unenforceable
23
The documents and undisputed testimony of the parties demonstrate that
interpreting the APA no longer involves a genuine issue of material fact.
Undisputed extrinsic evidence leads the Court to find that the APA can be
susceptible of only one reasonable interpretation The Court finds, as a matter of
law, that EHC is responsible for accounts payable that accrued prior to closing.
Therefore, EHC is liable for the Shortfall Amount.
The parties shall confer and agree upon a process to resolve the issue of
calculating the precise Shortfall Amount that is due to Green Plains
THEREFORE, Plaintiffs Green Plains Renewable Energy, lnc., Green
Plains Wood River, LLC, and Green Plains Fairmont, LLC’s Motion for Summary
Judgment is hereby GRANTED IN PART and DENIED IN PART.
IT IS SO ORDERED.
‘ "' ary M. Johnston
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