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Indeck North American Power Fund v. Norweb

June 30, 2000

INDECK NORTH AMERICAN POWER FUND, L.P., INDECK AUBURNDALE, L.L.C., AND INDECK, GORDONSVILLE, L.L.C., PLAINTIFFS-APPELLANTS,
v.
NORWEB PLC, NORWEB POWER SERVICES (NO 1) LIMITED, NORTHERN HYDRO LIMITED, CALPINE AUBURNDALE, INC., AND CALPINE GORDONSVILLE, INC., DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Justice Hartman

Appeal from the Circuit Court of Cook County. Honorable Sheldon Gardner, Judge Presiding.

This case involves two purchase and sale agreements and pre-existing partnership agreements through which various partnerships, which owned and operated electric generating power plants, intended to convey their interests to other partnerships wishing to purchase them. Pre-existing partnership rights (i.e., first refusal, denial of permission to sell, and designated other purchaser), owned by another entity not involved in the purchase and sale were exercised by that entity prior to the closing of the purchases, thereby preventing the subject sale. Instead, the sales of the plants were made to a purchaser designated by the non-contracting partner.

The putative purchasers under the purchase and sale agreement, plaintiffs Indeck North American Power Fund, L.P., Indeck Auburndale, L.L.C., and Indeck Gordonsville, L.L.C. (collectively "Indeck(s)"), appeal from the order of the circuit court granting summary judgment in favor of the putative sellers, defendants Norweb plc (a public limited company registered in England and in Wales), Norweb Power Services (No 1) Limited, and Northern Hydro Limited (collectively "Norweb(s)"), on Indeck(s)' breach of contract and equitable estoppel claims, under section 2-1005 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1005 (West 1996) (section 2-1005)) and dismissing with prejudice Indeck(s)' tortious interference with contract and civil conspiracy claims asserted against third party and ultimate purchasers, defendants Calpine Auburndale, Inc. and Calpine Gordonsville, Inc. (collectively "Calpine(s)"), pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West 1996) (section 2-615)). The non-contracting partner, the Mission Entities (Mission(s)) *fn1 also sued by Indeck(s), settled their differences with Indeck(s) and are not parties to this appeal.

Under the two purchase agreements, Norweb(s) intended to convey to Indeck(s) their general partnership interests in two limited partnerships, Auburndale Power Partners (Auburndale), and Gordonsville Energy (Gordonsville), for an amount in excess of $40 million. Mission(s) were pre-agreement general partners with Norweb(s) in the Auburndale and Gordonsville limited partnerships. Mission(s) exercised their pre-existing partnership rights of first refusal and denial of permission to sell, and designated Calpine(s) as purchasers of the subject partnership interests instead. Norweb(s) thereafter sold their interests to Calpine(s). Indeck(s) instituted this action, with the results noted above.

Indeck(s) presents as issues on appeal whether the circuit court erred in granting (1) Norweb(s)' section 2-1005 motion for summary judgment on Indeck(s)' contract claims; (2) summary judgment in favor of Norweb(s) on Indeck(s)' equitable estoppel claims; (3) Calpine'(s) section 2-615 motion to dismiss and dismissing with prejudice Indeck(s)' tortious interference with contract claims; and (4) in dismissing with prejudice Indeck(s)' civil conspiracy claims.

On March 28, 1996, Norweb(s) announced their intention to sell their 50 percent general partnership interests in the Auburndale and Gordonsville limited partnerships, which own and operate power generation facilities in Florida and Virginia, respectively. Auburndale was a partnership consisting of Norweb Power (a 50% general partner), and Mission(s)' El Dorado (a 1% general partner), and Devereaux (a 49% limited partner). Gordonsville was a partnership consisting of Norweb(s)' Northern Hydro (a 50% general partner), and Mission(s)' Rapidan (a 1% general partner), and Madison (a 49% general partner).

In July 1996, Norweb(s), caused an information memorandum to be sent to potential qualified bidders, including Indeck(s), inviting bids in connection with Norweb(s)' intended sale of their partnership interests in Auburndale and Gordonsville. Prospective bidders were advised by Norweb(s) that the transfers of their partnership interests in both Auburndale and Gordonsville were subject to the rights of first refusal, denial of permission to sell, and designated purchaser, held by the existing general partners of each partnership.

It was at this procedural juncture, according to Indeck(s), that Mission(s) and Calpine(s) concocted a scheme to skew the entire procedure in favor of purchase by Calpine(s), in return for Mission(s)' refusal to consent to the sale and designation of Indeck(s) as purchaser, in return for a $7 million payment to Mission(s) by Calpine(s). As other potential bidders were evaluating Norweb(s)' offering materials, Calpine(s) and Mission(s) discussed "partnering" on acquiring Norweb(s)' sale assets and planned for Calpine(s) to acquire Norweb(s)' interests in the Auburndale and Gordonsville plants by agreeing not to bid on them in Norweb(s)' bidding process. Instead, Mission(s) would designate Calpine(s) as purchaser under its rights in the partnership agreements once Norweb(s) had entered into contracts to sell the partnership interests to the winning bidder. Meanwhile, unaware of the Mission(s)-Calpine(s)' arrangement, Indeck(s) submitted its bid for Norweb(s)' interests and was put on a short list, which Norweb(s) disclosed to Mission(s). Ultimately, Indeck(s) was selected by Norweb(s) as the preferred bidder and entered final negotiations to purchase Norweb(s)' interests.

As Norweb(s) and Indeck(s) were finalizing the terms of the Auburndale and Gordonsville purchase agreements, Mission(s) and Calpine(s) allegedly furthered their plan to pre-empt Indeck(s)' acquisition of these interests. By February 1997, Mission(s) had agreed to allow Calpine(s) to acquire the Auburndale and Gordonsville interests, as demonstrated by an internal Calpine(s)' memorandum dated February 7, 1997, which noted that "Mission expects to receive formal notice of [an] offer to Norweb to buy 50 percent of the Auburndale and Gordonsville projects by February 7, 1997. Mission will give Calpine the opportunity to match this offer." *fn2

By late March 1997, Indeck(s) alleged agreement on the terms of definitive purchase and sale agreements had been reached for the sale of Norweb(s)' 50 percent partnership interest in Auburndale to Indeck Auburndale, L.L.C., and for the sale of Norweb(s)' Northern Hydro's 50 percent partnership interest in Gordonsville to Indeck Gordonsville, L.L.C.

Both purchase and sale agreements contained representations and warranties to be exchanged between Indeck(s) and Norweb(s). One provision specified Norweb(s)' "seller's knowledge" obligations, section 5.1 of each agreement, requiring Norweb(s) to make "all inquiries *** that are reasonably necessary to permit Seller to make such representation or warranty on a fully informed basis." *fn3 Both agreements also contained the representations in section 5.2(n) that Norweb(s) sent to Mission(s) to review, under which Norweb(s) and its affiliates represented and warranted to Indeck(s) that, other than the seller and the Mission(s) partners in the respective partnerships, "no Person has any right to or interest in the Partnership, and there is not outstanding any option, warrant, right of first refusal, or other right to acquire the Partnership [or the Mission partners] or any direct or indirect interest therein, nor does the Partnership [or the Mission partners] have any agreement to issue any such option, warrant, right of first refusal, or other right." *fn4

Both agreements also imposed obligations on Norweb(s) to seek Mission(s)' consent and on Norweb(s) themselves to guarantee the performance of their subsidiaries' obligations. Section 5.5 of both agreements required Norweb(s) as the seller to use their best efforts "to obtain the satisfaction of the Conditions *** in Section [] 4.1 [the 'CONDITIONS TO CLOSING,' purchaser's obligations] *** as soon as possible." *fn5

One week after the purchase agreements were signed, however, on April 11, 1997, Mission(s) informed Indeck(s) orally that it would exercise its rights of first refusal under the partnership agreements. On May 16, 1997, Mission(s), through its subsidiary El Dorado, served notice that it exercised its right of first refusal under the Auburndale Partnership Agreement and designated defendant Calpine Auburndale, Inc., one of Calpine(s)' subsidiaries, to purchase this interest. On the same date, Rapidan, Mission(s)' general partner for Gordonsville, served notice that it designated Calpine Gordonsville, Inc., another of Calpine(s) subsidiaries, to purchase the general partnership interest of Norweb(s)' Northern Hydro in the Gordonsville partnership.

At the same time, it is alleged, Mission(s) and Calpine(s) entered into an agreement under which Mission(s) granted Calpine(s) rights of first refusal in all of Mission(s)' east coast cogeneration facilities, including Mission(s)' interests in Auburndale and Gordonsville, for which Calpine(s) agreed to pay Mission(s) the $7 million fee upon the closing of the transactions with the Calpine(s) affiliates. Calpine(s) allegedly derived this $7 million figure from the value of Norweb(s)' Auburndale and Gordonsville interests.

After Indeck(s) objected to the designation of Calpine(s) to purchase Norweb(s)' partnership interests, Norweb(s) asserted that the purchase agreements with Indeck(s) remained in force. On June 4, 1997, however, Calpine(s) directed Norweb(s) by letter to terminate its dealings with Indeck(s). Following these and other directions from Calpine(s), Norweb(s) ceased all actions to effect the transfer of the Auburndale and Gordonsville interests to Indeck(s).

On June 11, 1997, Indeck(s) filed their initial complaint in this case in the circuit court of Cook County. The case was removed to the United States District Court for the Northern District of Illinois on June 27, 1997, where the district court granted Indeck(s)' request for expedited discovery in connection with their motion for a preliminary injunction to enjoin the sales of the partnership interests by Norweb(s) to Calpine(s). Documents were exchanged, and a dozen individuals were deposed both in the United States and in England. After Calpine(s) intervened, but before the preliminary injunction motion was decided, the case was remanded to the circuit court of Cook County on September 2, 1997, where Indeck(s)' motion for a temporary restraining order was denied on September 5, 1997. *fn6

Norweb(s) joined in Mission(s)' motion to dismiss the amended complaint on August 22, 1997; however, before the circuit court ruled, Indeck(s) was granted leave to file a second amended complaint at law seeking compensatory and punitive damages on September 30, 1997. The second amended complaint alleged three causes of action against Norweb(s): breach of contract, fraud, and ...


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