McCoy v. Gamesa Technology Corp. et al
Filing
275
MEMORANDUM OPINION signed by the Honorable Charles P. Kocoras on 9/26/2012.Mailed notice(sct, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
AARON MCCOY,
)
)
Plaintiff,
)
)
vs.
)
)
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
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GAMESA TECHNOLOGY CORPORATION, INC.,
)
)
Third-Party Plaintiffs,
)
)
vs.
)
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OUTLAND RENEWABLE ENERGY, LLC,
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OUTLAND RENEWABLE ENERGY FIELD
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SERVICES, LLC and OUTLAND ENERGY
)
SERVICES, LLC,
)
)
Third-Party Defendants.
)
11 C 592
MEMORANDUM OPINION
CHARLES P. KOCORAS, District Judge:
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 1
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 CounterPlaintiffs 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
Corporación Tecnológica, S.A. (“Gamesa Spain”),2 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
1
For the purposes of a motion to dismiss, the Court accepts all well-pleaded allegations in
the complaint as true. Justice v. Town of Cicero, 577 F.3d 768, 771 (7th Cir. 2009).
2
Gamesa Spain is not a party to this lawsuit; Outland alleges that Gamesa is owned and
controlled by Gamesa Spain.
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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 sitespecific 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.
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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
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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”).
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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
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completed. On August 31, 2011, Gamesa’s attorneys sent letters to Outland which
allegedly disclosed that Gamesa had contacted various third parties in an attempt to
interfere with Outland’s ability to receive subcontracts with these third parties (“August
31st letters”).
Procedural Posture
Outland filed a 22-count counter-claim against Gamesa and Iberdrola for
violations of federal and state antitrust law and common law claims for indemnification,
tortious interference with a contract and with prospective economic advantage,
defamation and various defamation-related torts, accounting, breach of contract, and
breach of the duty of good faith and fair dealing. On January 26, 2012, the Court
dismissed Outland’s claims against Iberdrola. McCoy v. Gamesa Tech. Corp., Inc., 11
C 592, 2012 WL 245166 (N.D. Ill. Jan. 26, 2012). Now before the Court is Gamesa’s
motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) on
all of Outland’s claims less its indemnification claim.
LEGAL STANDARD
A party may request judgment on the pleadings once the pleading period has
closed. Fed. R. Civ. P. 12(c); Forseth v. Vill. of Sussex, 199 F.3d 363, 367 n.5 (7th Cir.
2000). A Rule 12(c) motion is analyzed under the same standard as a Rule 12(b)(6)
motion to dismiss. Guise v. BMW Mortg., LLC, 377 F.3d 795, 798 (7th Cir. 2004). A
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Rule 12(b)(6) motion tests the legal sufficiency of a complaint. Szabo v. Bridgeport
Machs., Inc., 249 F.3d 672, 675 (7th Cir. 2001). To state a claim, the allegations in a
complaint must set forth a “short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007). A claim must provide sufficient factual matter “to state a claim
to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
“Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements,” are not sufficient to withstand a motion to dismiss under Rule 12(b)(6).
Id.
DISCUSSION
I.
Defamation, Disparagement, and Injurious Falsehood
Outland alleges that Gamesa is liable for defamation, injurious falsehood, and
commercial and property disparagement. To establish a claim for defamation, a
plaintiff must make allegations that demonstrate that the defendant (1) made a false
statement about the plaintiff, (2) made an unprivileged publication of the statement to
a third party, and (3) the publication caused damage to the plaintiff. Green v. Rogers,
917 N.E.2d 450, 459 (Ill. 2009).
Outland highlights three allegations in support of its defamation claim, none are
sufficient to support a defamation claim. First, Outland alleges that Gamesa Spain made
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defamatory statements. Gamesa Spain is not a defendant to this action, and Outland
makes no allegation that Gamesa Spain was speaking on behalf of Gamesa. Outland
therefore cannot rely on these statements in stating a claim against Gamesa.
Secondly, Outland refers to Gamesa’s attempts to induce Duke to refrain from
acquiring Outland. In addition, Outland alleges that the August 31st letters “made it
clear that Gamesa had engaged in new interference with Outland’s outgoing prospective
economic relations by referencing specific third parties . . .,” and that the letters
confirmed that Gamesa was continuing its attempts to put Outland in a false light with
Outland’s potential customers. To maintain a defamation claim, a plaintiff must clearly
identify the allegedly defamatory statement. Heying v. Simonaitis, 466 N.E.2d 1137,
1141 (Ill. App. Ct. 1st Dist. 1984). These allegations respectively describe Gamesa’s
attempts to induce Duke and Outland’s subjective understanding of a letter. The glaring
absence of a statement attributable to Gamesa is fatal to Outland’s defamation claim.
Its defamation claim therefore must be dismissed.
Outland’s claims for commercial disparagement, disparagement of property, and
injurious falsehood also fail, since each of those claims require a plaintiff to sufficiently
allege a defamatory statement. See Imperial Apparel, LTD v. Cosmo’s Designer Direct,
Inc., 853 N.E.2d 770, 781-82 (Ill. App. Ct. 1st Dist. 2006); Montgomery Ward & Co.
v. United Retail, Wholesale & Dep’t Store Employees C.I.O., 79 N.E.2d 46, 52 (Ill.
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1948); Kolegas v. Heftel Broad. Corp., 578 N.E.2d 299, 303-04 (Ill. App. Ct. 2d Dist.
1991) (recognizing that no Illinois court has recognized the existence of a cause of
action for injurious falsehood before dismissing on other grounds), rev’d in part on
other grounds, 607 N.E.2d 201 (Ill. 1992).
II.
Tortious Interference
Outland advances claims for tortious interference with contractual relations and
with prospective economic advantage. To state a claim for tortious interference of a
contract, a plaintiff must allege (1) the existence of a valid and enforceable contract
between it and a third party; (2) defendant’s knowledge of that contract; (3) defendant’s
intentional and unjustified inducement of the third party to breach the contract; (4) the
third party’s breach; and (5) damages. Strosberg v. Brauvin Realty Svcs., Inc., 691
N.E.2d 834, 845 (Ill. App. Ct. 1st Dist. 1998). To state a claim for tortious interference
of prospective economic advantage, a party must allege (1) the plaintiff’s reasonable
expectancy of entering into a valid business relationship; (2) the defendant’s knowledge
of the plaintiff’s expectancy; (3) the defendant’s intentional interference that defeat that
expectancy; and (4) damages. Heying, 466 N.E.2d at 1140-41. Further, the defendant’s
interference must have induced a breach or termination of the relationship or
expectancy. Id. at 1141.
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Outland alleges that Gamesa tortiously interfered with the Purchase Orders, the
FSA, and the MSA. Outland and Gamesa were the only parties to those contracts. It
is well-settled that “a party cannot tortiously interfere with his own contract; the tortfeasor must be a third party to the contractual relationship.” Douglas Theater Corp. v.
Chi. Title & Trust Co., 681 N.E.2d 564, 576 (Ill. App. Ct. 1st Dist. 1997). Outland thus
cannot state a claim for tortious interference with contractual relations based on
agreements with Gamesa.
Outland also alleges that Gamesa tortiously interfered with Outland’s prospective
economic advantage by intentionally deterring potential Outland customers from doing
business with Outland. However, the complaint fails to allege with any specificity how
Gamesa interfered with Outland’s reasonable expectancy. Outland’s naked allegations
that its prospective contractual relations were interfered with are not enough to state a
claim. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.”).3
3
Outland’s brief nevertheless directs the Court’s attention to an August 31, 2011 letter sent
by Gamesa’s attorneys that was not incorporated into the complaint. To the extent that Outland
seeks to amend his complaint via his reply brief, the Court declines to do so and instructs Outland
to follow the amendment procedures outlined in Federal Rule of Civil Procedure 15. In any case,
nothing in the letter gives rise to a claim for tortious interference with prospective economic
advantage. The letter states that Outland had solicited Gamesa’s customers in violation of a noncompete clause within the FSA, and that Gamesa intended to enforce the agreement. Where a
defendant acts to enhance its own interests, it is insulated from liability for harming the plaintiff’s
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Thirdly, the complaint alleges that Gamesa interfered with Duke’s attempted
acquisition of Outland. While a fair reading of the complaint would indicate that
Outland’s claim is for tortious interference with a contract, Outland’s brief clarifies that
the claim is one for tortious interference with prospective business advantage. The
claim fails under both theories.
The complaint highlights two instances in which Gamesa allegedly attempted to
disrupt Duke’s acquisition. First, on April 14, 2011, Gamesa attempted to induce Duke
into scuttling its plans to acquire a stake in Outland. But as the complaint itself
acknowledges, Duke rejected Gamesa’s attempts. Outland cannot plausibly claim that
it was harmed by Gamesa’s efforts to stifle the acquisition where Gamesa’s attempts
were rebuffed. See Buchanan-Moore v. Cnty. of Milwaukee, 570 F.3d 824, 827 (7th
Cir. 2009) (“[The Court] need not ignore facts set forth in the complaint that undermine
the plaintiff’s claim or give weight to unsupported conclusions of law.”).
The complaint also seems to suggest that Gamesa’s May 12, 2011 letter
informing Outland that it was in default of the MSA and its ceasing to tender Purchase
Orders to Outland disturbed the acquisition.
However, the complaint lacks any
allegation that Gamesa had knowledge of the May 11, 2011 acquisition agreement
expectancy. Fid. Nat’l Title Ins. Co. v. Westhaven Props. P’ship, 898 N.E.2d 1051, 1067-68 (Ill.
App. Ct. 1st Dist. 2007).
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between Duke and Outland. That the letter was sent one day after the acquisition
agreement was signed is not enough to infer Gamesa’s knowledge of the agreement.
See Twombly, 550 U.S. at 555 (“The pleading must contain something more than a
statement of facts that merely creates a suspicion of a legally cognizable right of
action.”) (citation and quotation omitted). The claim is therefore dismissed.
III.
Antitrust Claims
Outland alleges that Gamesa violated federal and state antitrust laws by
unlawfully tying its O&M services to the sale of wind turbines.4 However, the Court
does not reach Outland’s allegations of a tying arrangement because Outland has failed
to make a threshold showing that Gamesa participated in an unlawful conspiracy, or that
it possessed monopoly power.
Section 1 of the Sherman Act prohibits contracts, combinations, or conspiracies
that result in unreasonable restraints of trade. 15 U.S.C. § 1; Denny’s Marina v. Renfro
Prods., 8 F.3d 1217, 1220 (7th Cir. 1993). To state a § 1 claim, a plaintiff must allege
(1) an agreement; (2) resulting in an unreasonable restraint of trade; (3) that injured the
plaintiff. Omnicare, Inc. v. Unitedhealth Group, Inc., 629 F.3d 697, 705 (7th Cir.
2011).
4
Outland brings claims under the antitrust laws of Minnesota, Texas, and Illinois.
Interpretation of these statutes rely on the application of federal antitrust law.
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Outland alleges that Gamesa conspired with Gamesa Spain, its parent company.
In Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), the Supreme
Court held that a parent corporation is incapable of conspiring with its wholly-owned
subsidiary under §1 of the Sherman Act. Fishman v. Estate of Wirtz, 807 F.2d 520, 541
n.19 (7th Cir. 1986). The complaint alleges that “Gamesa Spain owns . . . 100% of the
shares of” Gamesa Corp. Gamesa Corp. is therefore incapable of conspiring with
Gamesa Spain under § 1. Furthermore, the complaint fails to highlight any disparate
purpose between Gamesa Spain and Gamesa Wind, or between Gamesa Technology
and Gamesa Wind. Because the complaint fails to allege a conspiracy by two or more
distinct actors, its claims under § 1 and related state law cannot prevail.
Outland also claims that Gamesa unlawfully monopolized the wind turbine O&M
services market. To state a claim for monopolization, a plaintiff must allege (1) the
defendant’s possession of monopoly power in a relevant market, and (2) its willful
acquisition or maintenance of that power. 15 U.S.C. § 2; MCI Comm’ns Corp. v. Amer.
Tel. & Tel. Co., 708 F.2d 1081, 1106 (7th Cir. 1986). Monopoly power “has long been
defined as the power to exclude competition or to control price . . . .” Indiana Grocery,
Inc. v. Super Valu Stores, Inc., 864 F.2d 1409, 1414 (7th Cir. 1989).
Outland fails to adequately allege that Gamesa possessed monopoly power. The
complaint alleges that at its height, Gamesa controlled 10% of the wind turbine market
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in the United States, far below what is necessary for the Court to infer that it possessed
monopoly power. MCI Comm’ns Corp., 864 F.2d at 1106-07 (a market share of at least
70 percent allows courts to infer the existence of monopoly power) (citing cases).
Outland attempts to save its claim by alleging that demand for wind turbines so far
outpaced supply that even manufacturers with less than a major market share could
exercise market power. This theory is fundamentally at odds with Gamesa’s supposed
motivation for starting an internal O&M services division and its subsequent attempts
to eliminate Outland: the shrinking demand for wind turbines. If the market for wind
turbines favored turbine sellers, as Outland alleges, Gamesa presumably would never
have attempted to enter the O&M services market in the first place. Outland fails to
offer any explanation for this inherent inconsistency in its complaint. Because there is
no cognizable allegation of monopoly power, Outland’s claims under § 2 lack merit.
Because Outland failed to allege the necessary elements to establish an unlawful
conspiracy or monopoly power, its antitrust claims fall short of stating a claim.
IV.
Breach of Contract
Outland claims that Gamesa is liable for breach of contract because it ceased to
tender Purchase Orders to Outland for transactional work. To state a claim for breach
of contract in Illinois, a plaintiff must allege (1) the existence of a valid and enforceable
contract; (2) plaintiff’s performance under the contract; (3) defendant’s breach of the
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contract; and (4) resulting damages to plaintiff. Priebe v. Autobarn, Ltd., 240 F.3d 584,
587 (7th Cir. 2001).
Outland falls far short of stating a claim for breach of contract. Outland never
alleges that Gamesa’s assurances of future work were reduced to a valid and
enforceable contract. Furthermore, Outland failed to allege that Gamesa breached any
of the three contracts that were pled: the Purchase Orders, FSA, and MSA. As such,
Outland failed to sufficiently allege a breach of contract.
V.
Accounting, Intentional Interference with Directives, and Breach of Duty of
Good Faith and Fair Dealing
Outland failed to defend its claims under Counts IV, VII and XIV against
Gamesa’s motion. It therefore waives those claims. See Lopez v. Pactiv Corp.,
11 C 4599, 2012 WL 1463579, at *1 (N.D. Ill. Apr. 27, 2012) (collecting cases);
Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041 (7th Cir. 1999).
VI.
Declaratory Judgment and Injunctive Relief
Outland claims that it is entitled to declaratory judgment that the FSA and MSA
are invalid and unenforceable, and seeks an injunction preventing Gamesa from
interfering with Outland’s prospective economic relations. Gamesa fails to allege that
Gamesa breached the FSA or MSA. Furthermore, as the Court stated in the January
26th Opinion, “[a] request for an injunction is a remedy and not a cause of action.”
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McCoy, 2012 WL 245166, at *7. Its request for declaratory judgment and injunctive
relief is dismissed.
CONCLUSION
For the foregoing reasons, Gamesa’s motion for judgment on the pleadings is
granted.
Charles P. Kocoras
United States District Judge
Dated: September 26, 2012
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