IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
SOLARRESERVE CSP HOLDINGS, )
LLC, a Delaware limited liability )
company, )
)
Plaintiff, )
)
v. ) C.A. No. 2019-0791-JRS
)
TONOPAH SOLAR ENERGY, LLC, )
a Delaware limited liability company, )
)
Defendant. )
MEMORANDUM OPINION
Date Submitted: February 24, 2020
Date Decided: March 18, 2020
Francis G.X. Pileggi, Esquire of Eckert Seamans Cherin & Mellott, LLC,
Wilmington, Delaware and Michael G. Platner, Esquire, John S. Poulos, Esquire and
Vincent F. Alexander, Esquire of Lewis Brisbois Bisgaard & Smith LLP,
Ft. Lauderdale, Florida, Attorneys for Plaintiff.
Andrew D. Cordo, Esquire, Shannon E. German, Esquire and Nora M. Crawford,
Esquire of Wilson Sonsini Goodrich & Rosati, P.C., Wilmington, Delaware and
Matthew A. Feldman, Esquire, Todd G. Cosenza, Esquire and Charles D. Cording,
Esquire of Willkie Farr & Gallagher LLP, New York, New York, Attorneys for
Defendant.
SLIGHTS, Vice Chancellor
Tonopah Solar Energy, LLC (“Tonopah”) was created to build and operate a
solar power plant in Nevada. At Tonopah’s formation, Plaintiff, SolarReserve CSP
Holdings, LLC (“SolarReserve”), was its sole owner. As the project moved forward,
and expenses mounted, SolarReserve determined that it needed to seek out other
funding sources to help cover expenses. After exploring its options, Tonopah took
out loans from the United States Department of Energy (“the DOE”) and entered
into a co-venture relationship with a construction firm, Cobra Thermosolar Plants,
Inc. (“Cobra”).
The funding infusion did not solve Tonopah’s challenges. According to
SolarReserve, Cobra botched the construction of the power plant, which caused the
DOE to declare events of default under the governing loan documents. The
declarations, in turn, triggered the DOE’s rights to alter Tonopah’s governance
structure, thereby removing SolarReserve from its position of control over Tonopah.
SolarReserve now petitions the Court to dissolve Tonopah, not as a matter of
law under Delaware’s Limited Liability Company Act (the “Act”),1 but as a matter
of equity. According to SolarReserve, it is no longer reasonably practicable to carry
on Tonopah’s business.
1
6 Del. C. § 18-101 et seq.
1
Statutory dissolution of a Delaware limited liability company (“LLC”) is only
available to the entity’s members and managers. SolarReserve is neither a member
nor manager of Tonopah. Acknowledging it has no statutory standing to seek
dissolution, SolarReserve urges the Court to invoke its equitable powers to order
Tonopah’s dissolution. In response, Tonopah has filed a Motion to Dismiss
SolarReserve’s Amended Complaint for failure to state a viable basis for
dissolution.2
After giving SolarReserve the benefit of all reasonable inferences, I conclude
it has not pled facts that would justify, much less allow, dissolution as a matter of
equity. SolarReserve may have other rights and remedies stemming from the facts
it alleges, but a Court order dissolving Tonopah is not one of them.
I. FACTUAL BACKGROUND
I draw the facts from the allegations in the Complaint, documents
incorporated by reference or integral to that pleading and judicially noticeable facts.3
2
Am. Compl. (D.I. 38) (“Complaint”).
3
See Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 320 (Del. 2004) (quoting
In re Santa Fe Pac. Corp. S’holder Litig., 669 A.2d 59, 69 (Del. 1995)) (noting that on a
motion to dismiss, the court may consider documents that are “incorporated by reference”
or “integral” to the complaint); D.R.E. 201–02 (codifying Delaware’s judicial notice
doctrine).
2
For purposes of this Motion to Dismiss, I accept as true the Complaint’s well-pled
factual allegations and draw all reasonable inferences in Plaintiff’s favor.4
A. Parties and Relevant Non-Parties
Defendant, Tonopah, is a Delaware LLC.5 Plaintiff, SolarReserve, holds an
“indirect equity interest” in Tonopah “through several intermediary entities.” 6
Specifically, SolarReserve holds a 50% interest in Tonopah Solar Investments, LLC
(“TSI”), which has an interest in Tonopah Solar Energy Holdings I, LLC, which, in
turn, has an interest in Tonopah Solar Energy Holdings II, LLC (“Holdings”).
Holdings is the sole member of Tonopah.7
Non-party, Cobra, is an engineering, procurement and construction firm. 8
As explained in more detail below, Cobra and SolarReserve agreed to become
“50/50 co-venturers” in the construction of the Tonopah solar power plant in
4
Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002).
5
Compl. at 1.
6
Compl. ¶ 1.
7
Compl. ¶¶ 1, 14.
8
Compl. ¶ 10.
3
Nevada.9 Non-party, the DOE, is a federal agency that agreed to fund “the majority”
of the power plant project.10
The following organizational chart depicts the relationships between the
relevant parties and non-parties:11
9
Compl. ¶¶ 17–18.
10
Compl. ¶ 15.
11
The chart is compiled from Compl. ¶¶ 11–14; Compl. Ex. C.
4
B. Tonopah’s Origins and Finances
In March 2008, a SolarReserve affiliate formed Tonopah for the stated
purpose of developing, owning and operating a solar power plant in Nevada. 12
At first, SolarReserve effectively owned 100% of Tonopah’s membership
interests.13 To get its power plant up and running, Tonopah planned to proceed in
three steps.
First, in response to higher costs than anticipated related to construction of
the power plant, Tonopah went in search of capital.14 In the fall of 2011, Tonopah
entered into agreements with the DOE by which the DOE guaranteed a $700 million
loan to Tonopah (the “DOE Loan”).15 The DOE Loan is governed by a Loan
Guarantee Agreement (the “LGA”).16
Second, with capital in hand, Tonopah hired Cobra to design and build the
power plant.17 Cobra agreed to build the power plant not only as a contractor but
12
Compl. ¶ 9.
13
Id.
14
Compl. ¶ 15.
15
Compl. ¶ 9.
16
Compl. ¶ 27.
17
Compl. ¶ 10.
5
also as a co-venturer with SolarReserve.18 SolarReserve surrendered its sole
ownership of Tonopah to allow Cobra to become a 50% investor in TSI, which, in
turn, held an indirect interest in Tonopah.19
Third, as a condition of the DOE’s willingness to “fund the majority” of
Tonopah’s power plant project, the DOE required Tonopah to find a buyer for the
power plant’s energy before Tonopah could start building.20 To fulfill this
requirement, Tonopah contracted with Nevada Power Company d/b/a/ NV Energy
(“NVE”).21 NVE agreed to purchase Tonopah’s energy, subject to certain
conditions.22 To memorialize their agreement, Tonopah and NVE signed a Power
Purchase Agreement (the “PPA”), which obligated NVE to purchase energy over a
span of 25 years.23 The PPA required Tonopah’s plant to be up and running by
“late 2014.”24
18
Compl. ¶¶ 17–18.
19
Id.
20
Compl. ¶¶ 15–16.
21
Id.
22
Compl. ¶ 20.
23
Id.
24
Id.
6
As a result of these three steps, SolarReserve surrendered its sole ownership
of Tonopah, took on a 50% co-venturer in Cobra, and assumed $700 million in debt
guaranteed by the DOE with significant strings attached (as discussed below). These
results were fine from SolarReserve’s perspective so long as the project moved
forward as planned. Unfortunately, it didn’t.
C. Tonopah’s LLC Agreement
Tonopah’s constitutive document is its Third Amended and Restated Limited
Liability Company Agreement (the “LLC Agreement”).25 The LLC Agreement
makes clear that SolarReserve was Tonopah’s “Original Member,” but that changed
over time. As of the time SolarReserve brought its Complaint, Tonopah had one
“sole member”—Holdings—not SolarReserve.26 Section 3.5 of the LLC Agreement
states, “[n]ew members shall be admitted only upon the approval of the Board of
Managers.”27 And Section 8.1 provides that Holdings may not “sell, assign or
transfer . . . all or any part of its Membership Interests . . . without the prior written
25
Compl. at 1; Compl. Ex. A (D.I. 38) (the LLC Agreement).
26
LLC Agreement at 1 (recitals) (“WHEREAS, [SolarReserve] assigned and transferred
all of its membership interests in [Tonopah] to [Holdings].”). Holdings is now Tonopah’s
sole member. Compl. ¶ 14.
27
LLC Agreement § 3.5.
7
consent of the Board of Managers.”28 These provisions, often called “choose your
partner” provisions, further remove SolarReserve from Tonopah’s governance.
D. Tonopah’s Troubles
SolarReserve alleges everything went south after Cobra encountered
“construction delays” and performed “grossly deficient work.”29 Indeed, the power
plant is still not fully operational today.30 These delays caused Tonopah to miss key
deadlines under the PPA, releasing NVE from its obligations to purchase Tonopah’s
energy.31
When NVE walked away from the project, the DOE declared an event of
default under the LGA.32 This, in turn, allowed the DOE to exercise certain remedies
under the LGA and other related agreements, including (i) a right to replace
SolarReserve’s nominees to Tonopah’s Board of Managers (the “Board”) with its
own nominees and (ii) placing Holdings’ Tonopah units with a collateral agent for
28
LLC Agreement § 8.1
29
Compl. ¶ 30.
30
Compl. ¶ 34.
31
Compl. ¶¶ 35–36.
32
Compl. ¶ 37; Compl. Ex. B at 1–2 (the DOE’s Default Letter, instructing Holdings to
“cease and desist from taking any action purporting to exercise the voting, consensus, and
other powers of ownership pertaining to the Pledged Collateral” under the LGA and the
Equity Pledge Agreement between Holdings and the DOE).
8
the DOE’s benefit until the event of default was cured.33 Until the default is cured,
Holdings is prohibited from exercising the “powers of ownership” pertaining to its
Tonopah units.34 Currently, SolarReserve alleges Tonopah is insolvent and without
any realistic possibility of fulfilling its stated purpose (building a solar power
plant).35
The Complaint contains a torrent of accusations against Cobra and the DOE
related to Tonopah’s post-loan troubles. The DOE allegedly “manufactured” its
events of default while Cobra used its 50% investment in TSI to “veto” Tonopah’s
efforts to sue Cobra for its negligent construction services.36 The Complaint also
insinuates the DOE and Cobra are working together to “freeze SolarReserve out” of
its investment in Tonopah.37 I do not tarry long on these allegations as none of the
alleged wrongdoers are parties to this action.
33
Compl. ¶¶ 37, 42–43, 50; Compl. Ex. B at 2 (“Pursuant to . . . the Equity Pledge
Agreement, upon the occurrence and during the continuation of an Event of Default . . .
under the [LGA] all rights of [Holdings] to exercise the voting, consensus and other powers
of ownership pertaining to the Pledged Collateral . . . ceased and such rights vested in the
Collateral Agent.”); Opening Br. in Supp. of Def.’s Mot. to Dismiss the Am. Compl.
(D.I. 17) Ex. 3 (the “Equity Pledge Agreement”) §§ 2 (defining “Pledged Collateral” to
include “all limited liability company interests . . . of [Tonopah]”), 6(b).
34
Equity Pledge Agreement §§ 2, 6(b).
35
Compl. ¶ 45.
36
Compl. ¶¶ 37, 40.
37
Compl. ¶ 43.
9
E. Procedural History
On October 2, 2019, SolarReserve filed its original Verified Complaint
pursuant to Section 18-110 of the Act seeking an order declaring that SolarReserve
had the right to appoint a manager to the Board and naming Tonopah and the DOE
as defendants.38 Soon after, the DOE removed the case to the United States District
Court for the District of Delaware (“Delaware District Court”).39
While the case was proceeding in the Delaware District Court, SolarReserve
amended its pleading by filing the now-operative Complaint—dropping the DOE as
a defendant and seeking Tonopah’s equitable dissolution rather than a declaration of
rights.40 This amendment prompted the Delaware District Court to remand the case
back to this court for further proceedings on November 18, 2019.41 On that same
day, Tonopah filed a Motion to Dismiss under Court of Chancery Rule 12(b)(6).42
II. ANALYSIS
In considering a motion to dismiss under Court of Chancery Rule 12(b)(6),
the Court applies a well-settled standard:
38
D.I. 1.
39
D.I. 8.
40
D.I. 38.
41
D.I. 9.
42
D.I. 10.
10
(i) all well-pleaded factual allegations are accepted as true; (ii) even
vague allegations are ‘well-pleaded’ if they give the opposing party
notice of the claim; (iii) the Court must draw all reasonable inferences
in favor of the non-moving party; and (iv) dismissal is inappropriate
unless the plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances susceptible of proof.43
Given that SolarReserve’s arguments in favor of dissolution rely heavily on
this Court’s equitable powers, I begin my analysis by considering the proper role of
equity in the context of Delaware LLCs. Next, I briefly address the statutory
standards for dissolution before turning to SolarReserve’s efforts to plead a case for
equitable dissolution. As I explain below, Tonopah’s Motion to Dismiss must be
granted because SolarReserve fails to state a reasonably conceivable claim for
equitable dissolution.
A. Equity and the Enforcement of LLC Agreements
At its essence, a Delaware LLC is a “creature of contract, designed to afford
the maximum amount of freedom of contract, private ordering and flexibility to the
parties involved.”44 Indeed, “[i]t is this flexibility that gives ‘uncorporate’ entities
like limited liability companies their allure.”45 With this in mind, Delaware courts
take care to uphold “the public policy of Delaware” to honor the expressed intent of
43
Savor, 812 A.2d at 896–97 (citations omitted).
44
6 Del. C. § 18-1101(b); R&R Capital, LLC v. Buck & Doe Run Valley Farms, LLC,
2008 WL 3846318, at *4 (Del. Ch. Aug. 19, 2008) (internal quotations omitted).
45
R&R Capital, 2008 WL 3846318, at *4.
11
the parties to an LLC agreement as determined from the language of the agreement.46
Except in the most extreme circumstances, this court will not “invoke equitable
principles to override the plain language of an [LLC agreement].”47
B. Judicial Dissolution
Delaware’s LLC Act identifies certain circumstances under which a Delaware
“a limited liability company [can be] dissolved and its affairs [] wound up.”48
Among them is “[t]he entry of a decree of judicial dissolution under § 18-802.”49
Section 18-802, in turn, allows a Delaware LLC’s “member or manager” to seek a
judicial decree of dissolution.50 To the extent a member or manager of a Delaware
LLC seeks court-ordered dissolution, Sections 18-801 and 18-802 lay out the path
he must traverse to achieve that result.
46
Id., at *6; Absalom Absalom Trust v. Saint Gervais LLC, 2019 WL 2655787, at *5–6
(Del. Ch. June 27, 2019).
47
Absalom, 2019 WL 2655787, at *6. See also id. (noting that equity “always attempts to
ascertain, uphold, and enforce rights and duties which spring from the real relations of the
parties.”); R&R Capital, 2008 WL 3846318, at *7 (observing that Chancery will not lightly
disregard clear contractual language under the guise of equity “lest the courts erode the
primary attraction of limited liability companies.”).
48
6 Del. C. § 18-801(a).
49
6 Del. C. § 18-801(a)(5). The Act lists other scenarios that trigger dissolution, including
that the lifespan of the entity as stated in the LLC agreement has expired, that members by
two-thirds vote agree to dissolution, and that the LLC no longer has members. See 6 Del.
C. § 18-801(a)(1)–(5).
50
6 Del. C. § 18-802.
12
As noted, SolarReserve does not seek Tonopah’s statutory dissolution because
it is neither member nor manager of Tonopah.51 Instead, SolarReserve asks the
Court to dissolve Tonopah as a matter of equity.52 This is a far less-traveled path to
achieve the dissolution of a Delaware LLC. To be sure, this court views any form
of judicial dissolution as a “limited remedy that [should be] grant[ed] sparingly.”53
Where, as here, a petitioner seeks equitable dissolution outside of the grounds
enumerated in the Act, such as where a non-member/non-manager seeks dissolution,
that petitioner must “explain” in a “convincing manner” why this court should
“invoke equitable principles to override the plain language” of the Act and the
relevant LLC agreement.54
Apparently recognizing that its “lack of formal status as a member or
manager” is likely fatal to its bid for dissolution, SolarReserve understandably
51
Pls.’ Answering Br. in Opp’n to Defs.’ Mot. to Dismiss (“PAB”) (D.I. 29) at 10–11;
Trusa v. Nepo, 2017 WL 1379594, at *6 (Del. Ch. Apr. 13, 2017); In re Carlisle Etcetera
LLC, 114 A.3d 592, 597 (Del. Ch. 2015) (Section 18-802 “[b]y its terms . . . limits the right
to seek statutory dissolution . . . to members and managers of an LLC.”) (emphasis
supplied).
52
Compl. ¶¶ 65–71. For its part, Tonopah does not challenge whether “this Court has the
jurisdiction to find equitable standing here.” Reply Br. in Further Supp. of Def.’s Mot. to
Dismiss the Am. Compl. (D.I. 35) (“DRB”) at 5 n.10 (emphasis supplied). Instead, it
contends SolarReserve has not “pled facts that would compel the Court to exercise its
power under the circumstances.” Id.
53
In re Arrow Inv. Advisors, LLC, 2009 WL 1101682, at *2 (Del. Ch. Apr. 23, 2009).
54
Absalom, 2019 WL 2655787, at *6.
13
cleaves to Carlisle, “the only extant LLC precedent where the Chancery Court has
explicitly relied on its constitutionally vested equitable powers” to dissolve a
Delaware LLC where the petitioner lacks standing to seek dissolution under the
Act.55 Carlisle, however, was a very different case.
Carlisle, a Delaware LLC, had two original members, Tom James Company
(“James”) and Well Union Capital Limited (“Wu Parent”).56 When the original
members formed Carlisle, they “executed a simple form of operating agreement . . .
in which they committed to work promptly on a more detailed operating
agreement.”57 Shortly after Carlisle’s formation, and when business was going well,
Wu Parent decided to assign its membership interests to a wholly owned subsidiary
for tax purposes.58 After the assignment, James treated the subsidiary as Carlisle’s
member.59 For example, all of Carlisle’s tax filings and all subsequent agreements
55
PAB at 11 n.13 (citing Carlisle, 114 A.3d 592). SolarReserve makes other arguments in
support of dissolution, all of which assume it has overcome its lack of member or manager
status as a predicate to seek this extreme remedy. See, e.g., PAB at 13–23 (arguing why it
is no longer practicable to achieve Tonopah’s stated purpose). While these arguments may
have merited consideration if made by a member or manager, they have no bearing on the
question of whether the Court should invoke equity on behalf of an outsider to dissolve an
entity when neither the member nor manager of the entity seek that relief.
56
Carlisle, 114 A.3d at 594.
57
Id. at 594, 596.
58
Id. at 594.
59
Id.
14
between James, Wu Parent and Carlisle identified the subsidiary as the member, not
Wu Parent.60
The parties drafted an amended LLC agreement which referred to the
subsidiary as Carlisle’s member, but “because their relationship seemed amicable,
and business matters took precedence,” they never got around to executing the
amended LLC agreement.61 Unfortunately, James and Wu Parent’s relationship did
not remain amicable. Disagreements over management issues eventually led to
deadlock.62
Despite the managerial disagreements, James was satisfied with the status
quo. Four members comprised Carlisle’s board of managers (two nominated by each
party), yet James had appointed Carlisle’s CEO.63 Since the board of managers was
in deadlock, neither party could remove the CEO, leaving James effectively in
control of Carlisle because its hand-picked CEO ruled the roost “free of any
oversight.”64
60
Id. at 595.
61
Id. at 596.
62
Id.
63
Id.
64
Id. at 594.
15
Alarmed by these developments, Wu Parent and its subsidiary both petitioned
for Carlisle’s dissolution.65 In response, James moved to dismiss, arguing neither
Wu Parent nor its subsidiary had standing to seek dissolution since the former had
assigned its interest and the latter had never been formally admitted to Carlisle as a
member.66 James pressed these arguments even though it had drafted an agreement
referring to the subsidiary as Carlisle’s member just months before the case began.67
The court agreed with James that Wu Parent and the subsidiary had not stated
a claim for statutory dissolution.68 Yet, under the extreme facts alleged, following a
thorough and thoughtful explication of the origin and scope of this court’s equitable
powers, Vice Chancellor Laster held the subsidiary had stated a claim for equitable
dissolution based on the court’s “retain[ed] . . . residual authority” that prevents a
Delaware LLC from being “wholly exempt” from judicial oversight.69 As the court
explained, contrary to James’ argument, Chancery cannot be divested (by statute or
agreement) of its authority to order dissolution “where it appears manifest that equity
65
Id. at 597.
66
Id.
67
Id. at 596–97.
68
Id. at 601.
69
Id. at 606 (quoting In re Revlon, Inc. S’holders Litig., 990 A.2d 940, 960 n.8
(Del. Ch. 2010)).
16
so requires.”70 With this principle, I heartily agree. And I fully endorse Carlisle’s
application of the principle to the unique facts presented there.
But, again, the facts here bear no resemblance to Carlisle. Before drawing
the dispositive distinctions, it is useful to bring the question into focus—has
SolarReserve pled a set of reasonably conceivable facts “where it appears manifest”
that equity must intervene?71 In this regard, equity has no indurated rules, but it does
have many apothegms. “Equity always attempts to ascertain, uphold, and enforce
rights and duties which spring from the real relations of parties.”72 “Equity regards
substance rather than form.”73 Equity also “regards that as done which in good
conscience ought to be done.”74 In Carlisle, these formulations prompted the court
to give effect to the parties’ “real relationship” as a “joint venture in which they are
equal participants” with neither member intending to be a “passive investor.”75
Critical to the court’s analysis were the well-pled facts revealing that James treated
70
Id. (citing Huatuco v. Satellite Healthcare and Satellite Dialysis of Tracy, LLC, 2013
WL 6460898 (Del. Ch. Dec. 9, 2013), aff’d, 93 A.3d 654 (Del. 2014)).
71
Id.
72
Id. at 607 (citing 4 John Norton Pomeroy, Equity Jurisprudence § 1333(1) (Spencer W.
Symons ed., 5th ed. 1941) (emphasis in original)).
73
Id. (citing Monroe Park v. Metro. Life Ins. Co., 457 A.2d 734, 737 (Del. 1983)).
74
Id. (citing Monroe Park, 457 A.2d at 737).
75
Id. (citation omitted).
17
the subsidiary as a member throughout its course of dealing with Wu Parent, right
up to the point where it sought a decree of equitable dissolution.76
In contrast, SolarReserve pleads that it made calculated choices to reshape
Tonopah’s complicated ownership structure in order to secure additional funding.77
As a result, unlike Wu Parent in Carlisle, by virtue of its own choices, and as
recognized by all of the entity’s constituents, SolarReserve’s “real relationship” to
Tonopah is that of a remote, indirect investor, not a member.78 The LLC Agreement
unambiguously states, “[Holdings is] the sole member of [Tonopah].”79 If I were to
allow SolarReserve to seek Tonopah’s dissolution, I would not be “upholding”
rights, I would be creating new ones SolarReserve did not bargain for or reasonably
expect.80
This inescapable reality is further revealed in the fact that SolarReserve’s
claim to ownership runs through Holdings, which has pledged all of its “right, title
and interest in . . . [Tonopah’s] limited liability company interests” to a collateral
76
Id. at 606.
77
See, e.g., Compl. ¶¶ 17–18 (describing SolarReserve’s decision to give up its sole
ownership of Tonopah).
78
Compl. ¶¶ 17–19.
79
LLC Agreement at 1 (recitals).
80
Carlisle, 114 A.3d at 607.
18
agent to secure the DOE Loan.81 Now that the DOE has foreclosed under the LGA,
SolarReserve cannot rely on equity to recoup rights it knowingly bargained away. 82
There is no “manifest” role for equity here; the parties’ contract must prevail.83
As a last ditch argument, SolarReserve points to provisions in the LLC
Agreement that grant SolarReserve rights like those commonly held by members
and maintains that this somehow reflects an intent to confer member status on
81
Equity Pledge Agreement § 2(a).
82
At oral argument on the Motion to Dismiss, SolarReserve’s counsel represented that
Tonopah was operating without “adult supervision” such that no one can hold Tonopah’s
fiduciaries responsible for hypothetical (but unalleged) breaches of their fiduciary duties.
Oral Arg. on Def.’s Mot. to Dismiss the Am. Compl. (“Tr.”) (D.I. 43) at 37. This argument
was not clearly articulated in SolarReserve’s Answering Brief, but the idea appears to be
that Cobra is using its rights at the TSI level to “veto” any efforts SolarReserve makes to
hold Cobra and the DOE responsible for alleged wrongdoing, such that dissolution is the
only available remedy left for SolarReserve. Compl. ¶¶ 40–42. The argument is
unpersuasive for several reasons. First, SolarReserve has not brought a claim for breach
of fiduciary duty and equity will not support an extraordinary order to dissolve an LLC on
the mere speculation that someone may be breaching fiduciary duties. See In re Shawe &
Elting LLC, 2015 WL 4874733, at *33 (Del. Ch. Aug. 13, 2015). Second, nothing in this
decision prevents SolarReserve from pursing relief at the TSI level to vindicate wrongs
TSI’s fiduciaries allegedly committed at the Tonopah or Holdings levels. See, e.g.,
Case Fin., Inc. v. Alden, 2009 WL 2581873, at *7 (Del. Ch. Aug. 21, 2009) (holding that
fiduciaries have “a duty not to intentionally . . . participate in conduct that would injure
[a parent entity] . . . regardless of how far down the causal chain the injury would occur”).
Finally, to the extent SolarReserve would seek equitable dissolution based on the
wrongdoing of either Cobra or the DOE, both Cobra and the DOE would be necessary
parties to this proceeding. Del. Ct. Ch. R. 19(b).
83
Carlisle, 114 A.3d at 606 (holding the court should invoke equity to overcome a contract
only “where it appears manifest that equity so requires”); Libeau v. Fox, 880 A.2d 1049,
1056 (Del. Ch. June 16, 2005) (“When parties have ordered their affairs voluntarily through
a binding contract, Delaware law is strongly inclined to respect their agreement.”).
19
SolarReserve in all matters.84 By way of example, Section 7.2 gives SolarReserve
rights to obtain certain Tonopah books and records.85 According to SolarReserve,
these provisions create ambiguity concerning its membership status such that it is
reasonably conceivable that it may seek dissolution just as a member could.
The fact SolarReserve knew how to retain rights, while giving up others, does
not engender a sense that equity is needed here to vest SolarReserve with rights for
which it did not bargain.86 Tonopah is a “creature[] of contract, [and] I must enforce
[its] LLC agreement as written.”87 The LLC Agreement unambiguously states
Tonopah had one “sole member”—which was not SolarReserve.88 Under these
circumstances, SolarReserve cannot swoop in on the wings of equity as if it were a
Tonopah member to impose its preferences for the Company’s future when it
bargained away that status.89
84
Tr. at 29.
85
LLC Agreement §§ 1.1 (definitions of “SolarReserve Sponsor” and “Sponsor Entity”),
7.2.
86
Norton v. K-Sea Transp. P’rs L.P., 67 A.3d 354, 364 (Del. 2013) (declining to infer that
an omission resulted from “sloppy drafting” when an LPA’s drafters “knew how to impose
an affirmative obligation when they so intended”).
87
Touch of Italy Salumeria & Pasticceria, LLC v. Basico, 2014 WL 108895, at *4 (Del. Ch.
Jan. 13, 2014).
88
LLC Agreement at 1 (recitals).
89
Norton, 67 A.3d at 364; In re Shorenstein Hays-Nederlander Theatres LLC Appeals, 213
A.3d 39, 56 (Del. 2019) (stating that courts “interpret contracts as a whole [by giving] each
provision and term effect, so as not to render any part of the contract mere surplusage”).
20
III. CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss must be
GRANTED.
IT IS SO ORDERED.
Delaware LLCs respect the principle that “one generally is entitled to select his own
business associates in a closely held enterprise.” Achaian, Inc. v. Leemon Family LLC,
25 A.3d 800, 804 n.14 (Del. Ch. 2011). That the LLC Agreement’s drafters opted to
include “choose your partner” provisions is yet another factor weighing against
SolarReserve’s right to seek dissolution. LLC Agreement §§ 3.5, 8.1.
21
SolarReserve CSP Holdings, LLC v. Tonopah Solar Energy, LLC
Combined Opinion