This is Rossi v. Darden document 43.0.
Darden is going for the jugular. This is narrow and focused. (My first impression is that it s a bit too narrow, but just maybe Jones Day knows exactly what they are doing.)
This is a repeat of an argument that was in their Motion to Dismiss, as they acknowledge. The Second Amendment (DE:1.4 ) allowed the postponement of the Guaranteed Performance Test until a date to be determined in writing by agreement of the parties, and to be of, not the original Plant, but a "six cylinder Hot Cat unit," referred to repeatedly, the Test was to be of the "Six Cylinder Unit," instead of the original 1 MW plant delivered to IH in August, 2013.
However, the primary argument advanced in the Motion to Dismiss was the lack of signatures on the Second Amendment. If the Second Amendment was invalid, then there had been no test within the required period and therefore no payment due. That would not have been the end, because Rossi could have equitable arguments requiring consent to a later test, under proper conditions. At the time, there was much derision at the IH argument, since they had, after all, signed the Second Amendment. However, a reason for that now appears. They wanted Rossi to clearly argue that the Second Amendment was valid. Until that point, Rossi could have denied the Second Amendment, but still argued estoppel on the matter of time. Now, the pleadings show that the Second Amendment was accepted fully by Rossi and Leonardo, even though Leonardo never signed it, as far as we know.
So now they are nailed to the terms of the Second Amendment. And this was very clearly about a Six Cylinder Unit. In order to make their dismissal argument, they needed fact on record showing that the Six Cylinder unit was never delivered to Florida.
There is possible technical error here. Darden argues that the Florida installation was the original Plant as delivered in 2013. The actual installation was of two 1 MW plants. This came out recently in discussions on E-catworld, there are photographs. The main plant used consisted of four "slabs," or "Tigers," 250 kW each, and this is obvious from the JM Products "invoices" -- actually invoice requests. However, the original plant was also installed and ready if needed. So there were two plants in Florida, but it was not the Six Cylinder Unit, which was left in Raleigh.
Unless estoppel can be shown -- and it has not even been alleged at this point -- this is a fatal flaw, and it is not simply some technical argument. The $89 million payment was conditioned on a Guaranteed Performance Test of, originally, that specific Power Plant delivered, which might have been modified or repaired during Test, but .... substituting something completely different without explicit consent would void the test. This was not a test where "Something Rossi" could satisfy it. Rossi had represented that he had a 1 MW plant ready to go. IH called his bluff. It was not ready, that became fairly obvious in the Validation Test. It is reasonably clear that the delay was from Rossi, not IH. He knew that an immediate test would fail, so he put it off. However, this is not established for the Court.
In rejecting the Motion to Dismiss Count I, the judge wrote:
QuoteRegarding Defendants’ “six-cylinder” argument, there is insufficient information in the record to determine whether the six-cylinder unit is simply another name for the E-Cat Unit. Accordingly, the Court will allow discovery to proceed on this matter before ruling. Thus, the Court declines to dismiss Count I.
The MTD specifically raised the issue, obviously. In their response to the motion, Rossi had stated
QuoteLastly, Defendants argue that Plaintiffs' claim for Breach of Contract should be dismissed because "Plaintiffs have not pled, and cannot pled [sic], that they performed their "test" ...using such a Six Cylinder Unit." Such argument is clearly improper as it goes beyond the four corners of the Complaint and therefore cannot be considered by the Court when considering the Motion to Dismiss. Caravellov. Am. Airlines, únc.,315 F. Supp.2d1346,1348 (S.D. F\a.2004). Moreover, such argument would likewise be subject to limitation under the doctrines of equitable estoppel and waiver, matters of fact, not an insufficiency of pleading.
The judge did not accept this argument directly. Rather, the Judge hinted that if it were known that the Unit tested was not the "Six Cylinder Unit" described in the Second Amendment, she would have dismissed. Yes, estoppel might be shown, but conditions for estoppel have not actually been alleged. Only if the defendants explicitly accepted the installation in Florida as a GPT -- rather than as merely a sale of power as all the correspondence indicates -- would estoppel apply. In the MTD, Annesser declined to reply to the claim, terming it moot. This, by itself, is not fatal, because it is a factual argument. However, what does the pleading record now show?
In the Amended Answer, Additional Defenses, Counterclaims and Third Party Claims (AACT, document 30.0 and exhibits),
QuoteThe AACT
Defendants filed the AACT on August 11, 2016. [D.E. 30]. The AACT makes clear that “[t]he Six Cylinder Unit in the Proposed Second Amendment is separate and distinct from the E-Cat Unit or Plant as referenced in the License Agreement, the First Amendment, and the Complaint.” AACT ¶ 62 (page 11). To eliminate any doubt, Defendants explained that the “Six Cylinder Unit remains in North Carolina” (and hence could not have been tested by Plaintiffs in Florida) and attached photographs to the AACT that accurately depict the Six Cylinder Unit. Id. ¶ 62, Ex. 3. In addressing paragraph 71 of the Complaint, Defendants further explained:
“Defendants admit that the E-Cat Unit was operated in Florida during a period in 2015 and 2016.
As reflected in Rossi’s internet blog postings at the time, that Unit was the Plant – i.e., the 1 MW
E-Cat – which is described in Exhibit C to the License Agreement. AACT ¶ 71 (page 13).
That is basically it. Now, Rossi had the right to respond to the AACT. Did he?
He responded to the "Additional Defenses," the Affirmative Defenses, claiming they were vague, and to the Counterclaims etc., with a motion to Dismiss them, but he did not respond to the Answer, which contains the above claims. Response to the Answer itself was due 9/2. By not responding to the Answer, Rossi set up conditions for this Motion, which was filed at 6:23 PM on 9/2, when they were reasonably confident that there was going to be no Answer in time.
He could still Answer and then refer to the Answer in a response to the new motion for Judgment. But what is he going to say?
We know very well this: the Second Amendment was written at a point where Rossi had decided he did not want to test the original E-Cat Unit, but an improved version, then being designed or built, called the "Six Cylinder Unit." So the Second Amendment reflected that. By the time of getting ready for the Doral installation, the Six Cylinder Unit may have been abandoned, and now the Hot Stuff was the Tigers, or "slabs." So what was shipped to Doral was the original E-Cat unit, plus the unit actually used was the four Tigers.
Rossi never asked IH to consent to Doral as a Guaranteed Performance Test. Rather, he set it up to appear as one. This is very clear: the Doral test was not of the "Six Cylinder Unit." Nor has any evidence been alleged that would be adequate to show estoppel.
In addition, the Judge will very likely decide this upon a hearing. If the plaintiff has not responded, pointed questions will be asked. Essentially, "Is it or isn't it?"
And we know it isn't. So Annesser or the new attorneys may claim that it doesn't matter, it was "accepted." And then IH will point to what they included in their Motion:
QuoteAs the Proposed
Second Amendment makes crystal clear, that payment was:
Id. (emphasis added).
There is an error here. They intended to add emphasis. Did they intend to emphasize the "six cylinder Hot Cat unit" or "agreed to in writing." Both were absent and have not been alleged by Rossi. If either was missing, the GPT was invalid, unless the Agreement was further amended.
My imagination of the hearing: J = the judge, R = Rossi counse, IH = Industrial Heat counsel.
J: Was the unit tested a "Six Cylinder E-Cat Unit"?
R: It doesn't matter because the tested unit was accepted for the test.
J: I take that as a "No." How are we to know that the tested unit was accepted?
R: They did not object to it.
J: On what occasion? When did their lack of objection signify acceptance of this as a Guaranteed Performance Test?
R: My client worked for a year, every day, and they let him.
J. My condolences to your client. Next time, perhaps he should make sure there is a written agreement, as required, before he works for a year to earn a payment of $89 million. Hearing adjourned.
IH: Thank you, your honor. Turning to Annesser or the other counsel: I'm so sorry for your client.