Peaker Energy Group, LLC et al v. Cargill, Incorporated et al

Filing 405

ORDER AND REASONS: ORDERED that the 265 Motion for Summary Judgment on Lost-Profits Damages is GRANTED to the extent stated herein relative to any damages award for "lost profits" or "lost business value" sought by Plaintiffs Peaker Energy Group., LLC and Energy Coast Logistics Terminal,LLC in this matter. Signed by Chief Judge Kurt D. Engelhardt. (cml) (NEF:MAG KNOWLES)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
PEAKER ENERGY GROUP, LLC &
ENERGY COAST LOGISTICS TERMINAL, LLC

CIVIL ACTION

VERSUS

NO. 14-2106

CARGILL, INCORPORATED &
LOUISIANA SUGAR REFINING, LLC

SECTION "N" (3)

ORDER AND REASONS
Presently before the Court is "Defendants' Joint Motion for Summary Judgment on
Lost-Profits Damages" (Rec. Doc. 265). Having carefully considered the parties' submissions, the
record in this matter, and applicable law, IT IS ORDERED that Defendants’ motion is GRANTED
to the extent stated herein relative to any damages award for "lost profits" or "lost business value"
sought by Plaintiffs Peaker Energy Group., LLC (“Peaker”) and Energy Coast Logistics Terminal,
LLC (“ECLT”) in this matter.
With their motion, Defendants Cargill, Inc. and Sugar Growers and Refiners, Inc.
("SUGAR") argue that Plaintiffs are precluded from recovering damages for "lost profits" in this
matter for three different reasons. First, Defendants argue that Plaintiffs cannot recover “lost
profits” in this case because such damages cannot be proven with reasonable certainty.1 Second,
Defendants contend that Plaintiffs cannot show the requisite causation – that Defendants’ actions

1

See Rec. Doc. 265-1, p. 15.
1

– "as opposed to external forces" – caused Plaintiffs' alleged damages.2 Third, Defendants maintain
that the proper measure of damages is the difference between the cost of obtaining a lease at the LSR
site compared to an alternate site, and that Plaintiffs have failed to produce evidence of "what it
would have cost them to develop the Project a suitable, alternative location."3
In ruling in Defendants' favor relative to the instant motion, the Court does not find
it necessary to address Defendants' second and third grounds for their motion. Instead, the Court
focuses solely on Defendants' first contention: that Plaintiffs have failed to put forth evidence
sufficient to prove with reasonable certainty that Plaintiffs' venture, but for Defendants' allegedly
wrongful conduct, would have been successful and generated profits. As urged by Defendants,
damages are not recoverable for a claim of lost expected profits that is overly speculative or
uncertain. See, e.g. Texas Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276 (Tex.
1994); George W. Garig Transfer v. Harris, 226 La. 117, 75 So. 2d 28, 33 (1954); see also
Transverse, L.L.C. v. Iowa Wireless Servs., L.L.C., 617 F. App'x 272, 278 (5th Cir. 2015) (“Lost
profit damages may not be based on evidence that is speculative, uncertain, contingent, or
hypothetical.”)
Rather, "[f]or both their tort and their contract claims, to recover damages for lost
profits, Plaintiffs must prove with reasonable certainty that [they] would have actually earned
[future] profits but for Defendants' conduct."4 Thus, to survive summary judgment, Plaintiffs must
put forth evidence sufficient to "establish [to a reasonable certainty] that they would have been

2

Id. at pp. 15 and 22.

3

Id. at p. 23.

4

Id.
2

successful if only LSR had not [] declined" to lease its site to them.5 As stated above, the Court
finds that Plaintiffs have not met this burden.
In reaching this decision, the Court focuses primarily on Defendants' contentions
regarding: (1) Plaintiffs' status as brand-new business entities, without well-established track
records;6 (2) ECLT's questionable ability to finance the Project, which Matthew Goitia estimated
to require $140 million for the first phase and an additional $65 million for the second phase;7 (3)
the undisputed uncertainty of the market spread between the prices of crude oil in Canada and the
United States Gulf Coast, and associated costs, both long-term and during the approximately
eighteen to twenty months construction would require;8 (4) the narrowing of the spread by 2016

5

Id.

6

Although various individual members of Plaintiffs' teams had several years of prior
business experience in crude oil trading, transportation, logistics, and financing, they had never
worked together on project like this one. See Rec. Doc. 265-1, p. 2.
7

See Rec. Doc. 265-1, p. 4 (citing Rec. Doc. 265-1, Exh. Q at LSR0000165). The
report prepared by one Plaintiffs' expert, Craig McCann, reflects that "ECLT projected it would need
between $109 million and $123 million to initially fund the project [and] anticipated that it would
need an additional $56.2 million for later capital expenditures." See Rec. Doc. 321, Exh. B, pp. 1011. The report prepared for Plaintiffs by Legacy Capital LLC discusses various models reflecting
the necessary capital expenditure for phase 1 to be between $111.5 million and $120.25 million with
additional $65.11 million needed for phases 2 and 3. See Rec. Doc. 321, Exh. 61, pp. 11-12. It is
undisputed that Plaintiffs would have had to acquire these sums from outside sources. Indeed,
Defendants report ECLT's bank balance at the end of 2013 to be less than $34,000. See Rec. Doc.
265-1, p.4.
8

Plaintiffs' Matthew Goitia identified this uncertainty ("price
spreads,
technology/yield claims, possible market shocks" and "[s]ignificant and a prolonged price
compression") in the "Investment Evaluation Document" that he transmitted by email to Scott
MacKenzie, Larry Faucheux, and Erdin Guma on January 6, 2014. See Rec. Doc. 265-1, Exh. Q at
LSR0000165. According to Goitia, the implications of these risks included "default, re-evaluation
of contract, etc." Id. He identified the "main risk management strategy [to be] secur[ing] firm longterm service contracts for a significant portion of terminal capacity." Id.
3

(when Plaintiffs would have been able to complete the Project);9 (5) Plaintiffs' roles as the first
entities to develop a "true third-party terminal" of the type they envisioned; (6) the uncertainty of
the approval by LSR's Board of Directors of a long-term lease agreement between LSR and
Plaintiffs; and (7) the uncertainty of securing sufficient "take or pay" customer agreements with fiveto-seven year terms.10 Although any one of these factors, if considered alone, arguably would be
of little significance, the combination pushes the speculative and uncertain nature of the success,

9

See Rec. Doc. 265-1, p. 19. According to Defendants, the report prepared by
Plaintiffs' expert , Eric Smith, reflect that the spread would have dropped to $6.33 in January 2016.
Id. Further, taking into account estimated transportation, Defendants estimate that Plaintiffs'
hypothetical customers would have lost $11.15 per barrel as of that date. Id.
10

See Rec. Doc. 265-1 at pp. 15-22. Defendants discuss additional conditions in their
memorandum: (1) securing rights to additional necessary neighboring land; (2) obtaining
necessary permits and licenses from federal, state, and local regulatory agencies; (3) securing
sufficient oil production (five unit trains of oil per week) from Canadian facilities; and (4) securing
agreements with necessary railroads for use of tracks. Id.
4

profitability, and value of Plaintiffs' venture far beyond a level upon which an award of damages for
lost profits or lost business value11 may rest.
New Orleans, Louisiana, this 30th day of December 2016.

_________________________________
KURT D. ENGELHARDT
United States District Judge

Clerk to Copy:
U.S. Magistrate Judge Daniel E. Knowles, III

11

In opposing Defendants' motion, Plaintiffs argue that it must be denied for the
additional reason that Plaintiffs are seeking a damages award for the lost business value, as of the
time of loss (June 2014), as calculated by their proffered experts, rather than a damage award for lost
profits. See Rec. Doc. 321, pp. 14-19. On the showing made, the Court disagrees. Specifically,
Plaintiffs' reliance on a lost business value measure presents a distinction without a difference, in
this particular instance, given that Plaintiffs' experts' lost asset value calculations are premised upon
the same or similar assumptions that preclude a lost profits damage award, e.g., the capabilities of
Plaintiffs' management team; the securing of more than $100 million in financing for the project's
first phase, between January 2014 and June 2014, and more than $50 million thereafter; the LSR
Board's ultimate approval of a lease and dock agreement; commencement of construction in June
2014 followed by commencement of actual operations in 2016; the existence of sufficient market
conditions to render Plaintiffs' operations successful for a number of years following an assumed
commencement of operations in 2016; and the securing of sufficient take-or-pay agreements ("five
unit trains per with at an average length of five years") with creditworthy customers. See Rec. Doc.
321, Exh. B, at pp. 3-4, 8 and 20; see also Rec. Doc. 321, Exh. 61 passim.
5