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Aaron Mccoy v. Gamesa Technology Corporation

September 26, 2012

AARON MCCOY, PLAINTIFF,
v.
GAMESA TECHNOLOGY CORPORATION, INC., A DELAWARE CORPORATION, GAMESA WIND US, LLC, A DELAWARE LIMITED LIABILITY CORPORATION, IBERDROLA RENEWABLES, INCORPORATED, AN OREGON CORPORATION, AND STREATOR-CAYUGA RIDGE WIND POWER, LLC, A DELAWARE CORPORATION, DEFENDANTS.
IBERDROLA RENEWABLES, INC., AND GAMESA TECHNOLOGY CORPORATION, INC., THIRD-PARTY PLAINTIFFS,
v.
OUTLAND RENEWABLE ENERGY, LLC, OUTLAND RENEWABLE ENERGY FIELD SERVICES, LLC AND OUTLAND ENERGY SERVICES, LLC, THIRD-PARTY DEFENDANTS.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge:

MEMORANDUM OPINION

This matter comes before the Court on a motion for judgment on the pleadings by Counter-Defendants Gamesa Technology Corporation ("Gamesa Corp.") and Gamesa Wind US, LLC ("Gamesa Wind") (together "Gamesa") under Federal Rule of Civil Procedure 12(c). For the following reasons, Gamesa's motion is granted.

BACKGROUND*fn1

While this litigation began as a lawsuit by Outland's employee for personal injuries, that event is only tangentially related to the counter-claims that Counter-Plaintiffs Outland Renewable Energy, LLC; Outland Renewable Energy Field Services, LLC; and Outland Energy Services, LLC (together "Outland") now assert against Gamesa. Gamesa, a wholly-owned subsidiary of Spanish company Gamesa Corporacion Tecnologica, S.A. ("Gamesa Spain"),*fn2 manufactures and sells wind turbines to wind farms. Wind turbine sales agreements provided for Gamesa to be the purchaser's exclusive source for the turbines' operation, maintenance, and repair services ("O&M services") for a period of time. Gamesa did not self-perform O&M services, but instead subcontracted the work to other companies. Outland was one such company.

The Gamesa-Outland Relationship Outland's relationship with Gamesa lasted from August 2006 until October 2010. Gamesa subcontracted its O&M services to Outland via "Purchase Orders," contracts relating to O&M services projects limited to "a specific task, or set of tasks." In 2010, Outland generated approximately $6.1 million in revenue from performing O&M services under Purchase Orders. In October 2008, Gamesa and Outland entered into the first of two agreements which set forth long-term commitments for the provision of O&M services. Under the Framework Services Agreement ("FSA"), Gamesa agreed to subcontract O&M services to Outland at certain wind farms operated by Iberdrola Renewables, Inc. ("Iberdrola"), a purchaser of Gamesa turbines. In November of 2009, Gamesa and Outland entered into the Maintenance Services Agreement ("MSA"), which placed additional Iberdrola wind farms, including Cayuga Ridge Wind Farm ("Cayuga Ridge"), under the purview of the FSA. The MSA also required Outland to train its employees on health and safety standards, and to comply with Iberdrola's site-specific rules and safety procedures. Notwithstanding the FSA and MSA, Gamesa continued to tender Purchase Orders to Outland related to other projects until their relationship ended.

Since 2006, Outland has made substantial investments in personnel and equipment in order to service the Gamesa account. Outland made these investments based on Gamesa's assurances that it did not intend to compete with Outland for O&M services, and that Gamesa would continue to provide a minimum level of work to Outland.

Safety Protocols and Aaron McCoy's Injury Outland technicians required its wind turbine technicians to employ a safety procedure known as the "lock-out tag-out" ("LOTO") procedure. The LOTO procedure complies with industry standards and federal regulations. In September 2010, without Outland's off-site management's knowledge, Gamesa and Iberdrola instructed Outland's on-site personnel to follow a modified procedure ("modified LOTO procedure"), which was put in place to increase maintenance efficiency. On October 20, 2010, while working under the modified LOTO procedure, Aaron McCoy ("McCoy") and several other Outland technicians were performing repair and maintenance work on wind turbines at Cayuga Ridge. At one point, an Outland technician radioed an Iberdrola technician to power up a particular wind turbine. The Iberdrola technician mistakenly powered up the wind turbine that McCoy was then scaling. An electrical explosion occurred, and McCoy sustained injuries as a result.

The United States Occupational Health and Safety Administration ("OSHA") conducted an investigation of Cayuga Ridge in response to the accident. On April 8, 2011, OSHA issued six citations against Outland.

Gamesa's Attempt to Eliminate Outland Outland alleges that the demand for wind turbines exceeded supply, resulting in a shortage of wind turbines. This, according to Outland, created sufficient market power in wind turbine manufacturers with "significantly less than a major share of the overall wind turbine sale market," and that a wind turbine manufacturer possessed sufficient market power -- the power to raise price without significantly lowering volume -- to harm its customers. Outland alleges that Gamesa exercised its market power by unlawfully tying O&M services to wind turbines.

In the summer of 2010, due to shrinking market share and declining turbine demand, Gamesa decided to develop an internal O&M services division. According to Outland, this decision spelled the end of the Gamesa-Outland relationship. Gamesa assured Outland that it did not intend to compete with Outland, but nevertheless openly attempted to recruit technicians away from Outland. These efforts were largely unsuccessful. In January 2011, Gamesa's head of service expressed his interest in acquiring Outland, but Outland's president responded that Outland wished to remain independent.

Outland states that Gamesa then secretly attempted to put Outland out of business so that Gamesa could absorb Outland's employees at reduced wages while simultaneously eliminating Outland as a competitor. During this time, Gamesa assured Outland that Gamesa would continue to subcontract O&M services work.

On February 18, 2011, Outland and Duke Energy ("Duke") signed a letter of intent declaring that Duke would purchase a 25% share of Outland (the "acquisition").

Duke was a competitor of Iberdrola's. According to Outland, Gamesa saw the acquisition as a threat to its scheme to eliminate Outland. Gamesa called Outland eight days later and stated that Iberdrola may refuse to allow Outland to perform O&M services work on its wind farms if the acquisition were consummated. A month later, Outland contacted Iberdrola directly and learned that contrary to Gamesa's statements, Iberdrola had no reservations about the acquisition.

On April 14, 2011, Gamesa called Duke directly to tell Duke that it opposed the acquisition. Gamesa then allegedly attempted to induce Duke to breach the letter of intent by discussing wind turbine sales agreements and an offer for a five-year extension of Gamesa's O&M services warranty. Gamesa did not persuade Duke, which remained committed to proceeding with the acquisition.

On May 11, 2011, Duke and Outland agreed that Duke would acquire 100% of Outland. The following day, Gamesa sent a letter to Outland declaring that Outland violated the MSA by failing to comply with certain health and safety standards. Gamesa specifically referred to the events leading to McCoy's injury and the resulting OSHA citations. The letter also stated that Iberdrola demanded that Gamesa remove Outland from all of its wind farms. Gamesa then ceased subcontracting any new business to Outland via Purchase Orders, the FSA or the MSA. Outland alleges that this caused Duke to drop the acquisition price by $15 million. The acquisition was never completed. On August 31, 2011, Gamesa's attorneys sent letters to Outland which ...


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