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Leaf Invenergy Co. v. Invenergy Renewables LLC

Supreme Court of Delaware

February 13, 2019, Submitted; May 2, 2019, Decided

No. 308, 2018


 [*690]  TRAYNOR, Justice:

In 2008, Invenergy Wind LLC ("Invenergy"), a wind energy developer, was raising money for a Series B investment round, and Leaf Clean Energy Company ("Leaf Parent"), an investment fund, expressed interest. After extensive negotiations, Leaf Parent invested $30 million in Invenergy Series B notes through a vehicle called Leaf Invenergy Company ("Leaf"). The agreement [**2]  governing the Series B notes ("Series B Note Agreement") gave noteholders such as Leaf the right to convert to equity and incorporated an LLC agreement ("Series B LLCA") that the noteholders and Invenergy would execute upon conversion.

The Series B Note Agreement and the Series B LLCA also included provisions that prohibited Invenergy from conducting a "Material Partial Sale"—a defined term—without Leaf's consent unless Invenergy paid Leaf a premium called a "Target Multiple"—another defined term. Although the parties renegotiated several aspects of their agreements with one another over the next few years, the consent provisions persisted in substantially similar form into the Third Amended and Restated LLC Agreement (the "LLC Agreement"), which is the operative agreement in this dispute. Those consent provisions form the crux of this litigation.

Leaf filed suit after Invenergy closed a $1.8 billion asset sale—a transaction that Invenergy concedes was a Material Partial Sale—without first obtaining Leaf's consent or redeeming Leaf's interest for the Target Multiple. After a trial, the Court of Chancery concluded that, although Invenergy had breached the Material Partial Sale consent [**3]  provisions, Leaf was not entitled to the Target Multiple. The court then awarded only nominal damages because, according to the court, Invenergy had engaged in an "efficient breach."1 The Court of Chancery directed the parties to complete a buyout of Leaf's interests pursuant to another LLC Agreement provision that Invenergy had invoked after Leaf had filed suit.

We disagree with the Court of Chancery's interpretation of the consent provision and its award of nominal damages and therefore REVERSE. The consent provisions unambiguously require Invenergy to pay Leaf the Target Multiple if it conducts a Material Partial Sale without Leaf's consent, and the concept of efficient breach does not permit Invenergy to circumvent that requirement. Because Invenergy conducted a Material Partial Sale without Leaf's consent and without paying Leaf the Target Multiple, Leaf is entitled to the Target Multiple as contractual damages. We thus award Leaf the Target Multiple  [*691]  in damages on condition that it surrenders its membership interests in Invenergy.

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210 A.3d 688 *; 2019 Del. LEXIS 226 **; 2019 WL 1965888

LEAF INVENERGY COMPANY, a Cayman Islands exempt limited liability company, Plaintiff Below-Appellant/Cross-Appellee, v. INVENERGY RENEWABLES LLC, a Delaware limited liability company, Defendant Below-Appellee/Cross-Appellant.

Subsequent History: Motion for Reargument filed 5/17/19; Denied 5/20/19. Case Closed May 21, 2019.

Prior History:  [**1] Court Below-Court of Chancery of the State of Delaware. C.A. No. 11830-VCL.

Leaf Invenergy Co. v. Invenergy Wind, LLC, 2018 Del. Ch. LEXIS 126 (Del. Ch., Apr. 19, 2018)

Disposition: REVERSED and REMANDED.


Partial, damages, shareholders, noteholders, contractually, liquidation, convert, parties, merger, paths, negotiation, breached, investors, rights, conducts, redeem, calculation, conversion, Contracts, Wind, nominal damages, appraisal, paying, unambiguously, expectations, hypothetical, provisions, affirmative vote, cash proceeds, injured party

Civil Procedure, Appeals, Standards of Review, De Novo Review, Contracts Law, Contract Interpretation, Business & Corporate Compliance, Breach, Contracts Law, Breach, Remedies, Damages, Damages, Types of Damages, Liquidated Damages, Contract Conditions & Provisions, Contract Conditions & Provisions, Efficient Breach