Gainesville, FL Biomass Settlement Offer Would Alter Contract with City

Gainesville, FL Bio­mass Set­tle­ment Offer Would Alter Con­tract with City

- by Christo­pher Cur­ry, August 15, 2013. Source: The Gainesville Sun 

The bio­mass plant com­pa­ny has sent Gainesville its terms for drop­ping a $50 mil­lion arbi­tra­tion coun­ter­claim and some city offi­cials say the terms are unacceptable.

The Gainesville Renew­able Ener­gy Cen­ter seeks no mon­ey to set­tle. Instead, GREC, which filed its coun­ter­claim on the grounds that the city’s arbi­tra­tion claim was an oppor­tunis­tic attempt to force con­tract rene­go­ti­a­tions, wants a series of mod­i­fi­ca­tions to the city’s con­tract to pur­chase pow­er from the plant.

Some of the request­ed changes would make it eas­i­er for the com­pa­ny to sell the plant. Anoth­er request­ed change would require that the city noti­fy GREC of any poten­tial legal claim for breach of con­tract with­in 45 days of dis­cov­er­ing the facts that would serve as the foun­da­tion of that claim. Oth­er­wise, the city would lose its right to bring the legal claim.

City Attor­ney Nicolle Shal­ley said con­sent­ing to that request would sig­nif­i­cant­ly reduce the city’s legal rights when the statute of lim­i­ta­tions to bring a claim in Flori­da is five years.

The City Com­mis­sion will again dis­cuss GREC’s pro­posed terms — and how to move for­ward — at the end of Monday’s Com­mu­ni­ty Rede­vel­op­ment Agency meeting.

Asked by Com­mis­sion­er Todd Chase if she would rec­om­mend a set­tle­ment based on the terms pro­posed, Shal­ley said she would not.

GRU Gen­er­al Man­ag­er Bob Hun­zinger, on the oth­er hand, said in more gen­er­al terms that he would “lean toward” the city accept­ing a set­tle­ment. He said GREC was under a tight time­line for a finan­cial trans­ac­tion it is attempt­ing to com­plete involv­ing the plant. Against that back­drop, Hun­zinger said that, while com­mis­sion­ers saw the pro­posed terms for the first time Thurs­day, if the City Com­mis­sion does not make a deci­sion, then GREC could poten­tial­ly say by Mon­day that the offer is off the table and “see you at arbitration.”

Chase said that, if GREC is sin­cere in its effort to rebuild good rela­tions with the city, the com­pa­ny would drop the coun­ter­claim with­out any demands. In response to a ques­tion from Chase, Shal­ley said GREC had ini­tial­ly com­mu­ni­cat­ed to the arbi­tra­tor it planned to drop its coun­ter­claim if the arbi­tra­tor had dis­missed the city’s claim. Now the firm is seek­ing con­di­tions, Chase noted.

Com­mis­sion­er Thomas Hawkins said he want­ed to set­tle because the city could face sig­nif­i­cant lia­bil­i­ty if it los­es at arbi­tra­tion. But Hawkins said he opposed con­di­tions “not in the city’s best inter­est” and he opposed decid­ing too quick­ly. He voiced oppo­si­tion to GREC’s request­ed con­di­tion plac­ing the 45-day time lim­it for noti­fi­ca­tion of poten­tial legal claims.

Among the request­ed changes allow­ing GREC to sell the plant more eas­i­ly, the city would, for 5 1/2 years, waive the con­trac­tu­al right that ini­tial­ly led to its arbi­tra­tion claim — Gainesville’s right to make a first offer to pur­chase the plant before GREC may sell a con­trol­ling inter­est in it.

Anoth­er would have the city waiv­ing for 5 1/2 years its right of approval before GREC may trans­fer its con­trac­tu­al duties and oblig­a­tions to anoth­er company.

Such a com­pa­ny would have to have at least five years’ expe­ri­ence with pow­er gen­er­a­tion and meet spe­cif­ic finan­cial cri­te­ria — or it would have to be the sub­sidiary of a com­pa­ny meet­ing those criteria.

The city’s arbi­tra­tion claim alleged that two sales com­bin­ing to a 57 per­cent stake in the plant con­sti­tut­ed a change of con­trol­ling inter­est that should have trig­gered the city’s con­trac­tu­al right of first offer to buy the plant.

At arbi­tra­tion, Gainesville was seek­ing to require GREC to sell the plant to the city.

On Aug. 1, the for­mer fed­er­al judge serv­ing as arbi­tra­tor grant­ed GREC’s motion to dis­miss, rul­ing the trans­ac­tions were unre­lat­ed sales of minor­i­ty own­er­ship inter­ests. The arbi­tra­tor told the two sides to attempt to work out an agree­ment to resolve the GREC counterclaim.

That coun­ter­claim alleges that poten­tial tax equi­ty investors, who would put mon­ey toward a project in exchange for receiv­ing some of its tax incen­tive ben­e­fits, did not move for­ward because the city’s arbi­tra­tion claim was a “cloud” hang­ing over the plant. That caused GREC some $50 mil­lion in dam­ages, accord­ing to the counterclaim.

Shal­ley said GREC’s attor­neys would have to prove that alle­ga­tion if the arbi­tra­tion fight over the coun­ter­claim continues.

“They are actu­al­ly going to have to show that these are real and actu­al los­es,” she said.

Chase said he “can’t find any rea­son to believe there is any valid­i­ty” to the counterclaim.

As it stands, the city has paid the New York City-based law firm of Orrick, Her­ring­ton & Sut­cliffe some $1.1 mil­lion for legal fees relat­ed to arbi­tra­tion and mediation.

If there is no set­tle­ment and arbi­tra­tion goes to a one-day hear­ing, the com­pa­ny would cap addi­tion­al fees at no more than $107,000, Shal­ley said. Fees for any addi­tion­al days of hear­ings would be capped at no more than $12,000, she said.