Confidential
Settlement – $4,061,100Judge
Court
L.A. Superior Central
Attorneys
Plaintiff
Defendant
Experts
Plaintiff
David Branchcomb
(technical)
James T. Brodie
(technical)
Ellen Banaghan
(technical)
Robert E. Sims
(Latham & Watkins LLP)
(technical)
Defendant
Joseph Tuso
(technical)
Phillip McLeod
(technical)
William Ahern
(technical)
Jeffrey Bodington
(technical)
Darrell Bone
(technical)
Phillip L. Wheeler
(technical)
Facts
Pursuant to two long term Interim Standard Offer 4 power purchase contracts (ISO4 contracts), plaintiffs Energy Development and Construction Co. (EDCC) and SGF, Ltd. (SGF) sold to Edison electric power produced by wind turbine generators (WTGs). The ISO4 contracts provide for two pricing periods, a ten-year first period followed by a second period for the remainder of the contract term. First period prices were substantially greater than second period prices. The ISO4 contracts would terminate unless operation began within five years of contract execution. SGF developed its wind energy project (the 6064 project) in phases with WTGs becoming operational over a period of years beginning in early 1985. EDCC installed as single phase in late 1984 but proposed to install additional phases. SGF also sold energy to Edision from another wind energy project (the 6009 project) pursuant to a different type of power purchase contract which provided for payment of lower prices than the ISO4 contracts. A dispute arose between the parties concerning the proper interpretation of the ISO4 contracts. Edison interpreted the contracts to provide for a single first period beginning when the first WTG became operational and ending then years later. EDCC and SGF contended that each WTG had its own ten-year first period. EDCC and SGF also contended that they suffered damages as a result of Edison's refusal to give them requested assurances concerning the operation of the termination provision of the ISO4 contracts. In addition, SGF contended that it suffered economic damages and physical damage to WTGs in the 6009 project because of Edison's alleged failure to maintain properly electrical transmission facilities within its control. From 1986 through 1994, SGF and related sellers transferred electric power produced by the 6009 project to the 6064 project and sold the transferred power to Edison at ISO4 prices. They ceased this practice after Edison discovered it in 1994 and demanded that they stop. These transfers were the subject of Edison's cross-complaint.
Settlement Discussions
The damage phase of the trial on Edison's cross-complaint in the EDCC lawsuit was set for Feb. 8, 1999. Cross-defendants contended that Edison was not entitled to damages because it had been permitted by the Public Utilities Commission to recover all of energy payments through the rates it charged to its customers for electric service. Edison contended that it was entitled to sue to recover payments on behalf of its customers. Seven court days before the trial was scheduled to begin, the parties reached a settlement whereby the settling cross-defendants agreed to pay Edison the full amount of its claim, including prejudgment interest, in the amount of $4,061,099. As of Feb. 3, 1999, Edison had received settlement payments totaling $3.7 million. The balance is payable over time, with interest, and is secured by real and personal property, a personal guaranty, an assignment of contract proceeds, and a confession of judgment.
Other Information
EDCC and SGF commenced this lawsuit (EDCC lawsuit) in February 1994. In February 1995, the court granted plaintiff's motion for summary adjudication on the first period issue on the grounds that the parties' ISO4 contracts were only susceptible to plaintiffs' interpretation. In August 1995, the Court of Appeal granted Edison's petition for a writ of mandate and directed the trial court to set aside its order granting plaintiffs' summary adjudication. The Court of Appeal held that the contracts were reasonably susceptible to Edison's interpretation. The court further concluded that the interpretation issue was a very close question. Southern California Edison v. Superior Court (1995) 37 Cal.App4th 839. Pursuant to the California Judicial Council's coordination procedures, the EDCC lawsuit was later coordinated with eight other lawsuits against Edison in which the plaintiffs' alleged similar claims based on their contentions that their 15 ISO4 contracts provided for a separate first period for each of their WTGs. All plaintiffs were represented by the same law firm, Hillyer & Irwin. The plaintiffs in the EDCC lawsuit sought to recover compensatory damages in excess of $60 million based on their contention that the parties' contracts should be interpreted as providing for multiple first periods. The plaintiffs in the remaining coordinated cases collectively sought to recover in excess of $130 million. The EDCC lawsuit was designated as the lead case. The liability and damages phases were bifurcated. The liaibility phase of the bench trial in the EDCC lawsuit began on March 11, 1997 and was submitted for decision on May 20, 1997. The case went to trial on plaintiffs' causes of action for damages for breach of contract based on allegations that Edison breached the parties' contracts by interpreting the ISO4 contracts to provide for a single first period, failing to provide assurances concerning the operation of the termination provision in the ISO4 contracts and failing to maintain properly the transmission facilities serving the 6009 project. The plaintiffs also sought declaratory relief and specific performance. In its cross-complaint, Edison sought, among other things, declaratory relief to establish that its interpretation of the parties' ISO4 contracts was correct and that SGF and related sellers had breached their contracts and had committed fraud and deceit by secretly transfering electric power from the 6009 project to the 6064 project in order to realize the higher price available under the SGF ISO4 contract. The court issued a tentative decision on the liability phase of the trial on Aug. 7, 1997, and a statement of decision on Feb. 6, 1998. The court found for Edison on all of the issues raised by plaintiffs in their complaint. On Edison's cross-complaint, the court found for Edison on its breach of contract, fraud, and deceit of action based on the transfer of electric power between the two projects. Beginning shortly after the court's tentative decision and continuing through May 1998, Edison settled the first period issue with the plaintiffs in the remaining eight coordinated cases for a waiver of costs. In each case, the plaintiffs expressly accepted Edison's interpretation that their ISO4 contracts provide for a single first period and dismissed their lawsuits with prejudice.
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