2019 06:38 pm

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK --------------------------------------------------------------------X INDECK ENERGY SERVICES, INC., : Index No. 652171/2014 Plaintiff, : Justice Jennifer Schecter

- against - : MERCED CAPITAL, L.P., MERCED PARTNERS III, L.P., : MERCED HALYARD VENTURES, LLC, and CARSON BAY ENERGY HOLDINGS IV, LLC, : Defendants. : --------------------------------------------------------------------X

DEFENDANTS’ POST-TRIAL BRIEF (August 29, 2019)

Of Counsel: Terrence J. Fleming, Esq. (pro hac vice) Sandra Smalley-Fleming, Esq. (pro hac vice) Jonathan P. Baker, Esq. (pro hac vice) George Brunelle, Esq. Anna Hadjikow, Esq. BRUNELLE & HADJIKOW, P.C. FREDRIKSON & BYRON, P.A. 39 Broadway, 33rd Floor 200 South Sixth Street New York, NY 10006 Suite 4000 (212) 809-9100 Minneapolis, MN 55402 (612) 492-7000

FILED: NEW YORK COUNTY CLERK 08/29/2019 06:38 PM INDEX NO. 652171/2014

NYSCEF DOC. NO. 670 RECEIVED NYSCEF: 08/29/2019

1 of 48

- i -

TABLE OF CONTENTS

PAGE NO.

I. INDECK FAILED TO PROVE REASONABLY CERTAIN EVIDENCE TO SUPPORT AN AWARD OF FUTURE LOST PROFITS. ................................................ 3 A. Indeck offered no evidence of harm to Indeck. ...................................................... 3 B. Indeck offered no evidence that it took steps to mitigate its damages. ................... 3 C. Defendants invested significant resources into developing their own

projects. ................................................................................................................... 3 D. Indeck based its “lost profits” theory on a foundation of unfounded

assumptions regarding future events. ...................................................................... 4 1. Indeck’s expert limited his analysis to the Halyard Wharton

project. ........................................................................................................ 4 2. Kubow’s analysis relied upon the occurrence of a number of future

events. ......................................................................................................... 4 3. Kubow’s analysis contains arbitrary adjustments to the data on

which his analysis is based. ........................................................................ 5 E. Defendants’ experts demonstrated the flawed nature of Kubow’s analysis. ......... 5

1. Lynn Lednicky highlighted many issues with Kubow’s reliance on Defendants’ pro forma for his calculations. ............................................... 5

2. Arthur Cobb highlighted additional problems with Kubow’s analysis. ....................................................................................................... 6

F. Defendants’ experts demonstrated that Defendants’ projects have no value. ....................................................................................................................... 7 1. Lednicky showed that the value of a power project is directly tied

to developmental milestones. ...................................................................... 7 2. Cobb demonstrated that it is speculative to attribute tens of

millions of dollars in value to what amounted to Defendants’ business plan. .............................................................................................. 7

II. THE ILLINOIS COURT RULED THAT INDECK IS NOT ENTITLED TO THE “LOST PROFITS” DAMAGES IT SEEKS IN THIS CASE. ............................................ 8

III. INDECK’S OWN WITNESSES UNDERCUT ITS DAMAGES CLAIM. ....................... 9 A. There is little benefit to being the so-called “first-mover.” .................................... 9 B. Lagowski testified to the necessity of securing a revenue stream and the

speculative nature of the ERCOT market. ............................................................ 10 C. Indeck’s history with power projects confirms that it is difficult to turn a

concept into a revenue-generating operation. ....................................................... 10

IV. INDECK’S WITNESSES OFFERED LITTLE EVIDENCE OF OTHER DAMAGES. ...................................................................................................................... 11 A. Confidential studies. ............................................................................................. 11 B. Retention bonuses. ................................................................................................ 11 C. Replacement costs and salary differences. ............................................................ 11 D. Management fees. ................................................................................................. 12



2 of 48

- ii -

V. DEFENDANTS’ MARKETING EFFORTS UNDERSCORED THE LACK OF VALUE ATTRIBUTABLE TO DEFENDANTS’ PROJECT. ........................................ 12 A. Defendants retained Scotiabank to market the project. ........................................ 12 B. Defendants’ marketing efforts yielded little interest. ........................................... 13 C. Feedback from potential investors confirmed that Defendants could not

attract investors to develop a power plant............................................................. 14 1. Beowulf. .................................................................................................... 14 2. Castleman. ................................................................................................. 14 3. Hull Street. ................................................................................................ 15 4. Rockland Capital. ...................................................................................... 15

VI. DEFENDANTS DID NOT OBSCURE THEIR MARKETING EFFORTS AND ENDEAVORED TO MAXIMIZE THE VALUE OF THEIR PROJECT. ...................... 15 A. Defendants apprised Indeck and the Court of their marketing efforts. ................. 15

I. INDECK FAILED TO PROVE ITS ENTITLEMENT TO FUTURE LOST PROFITS........................................................................................................................... 17 A. Indeck failed to prove the existence or value of a “first-mover advantage.” ........ 17 B. Indeck failed to establish that the purported value of Defendants’ project

serves as a proxy for its alleged damages. ............................................................ 18 C. Measuring damages from the date of the breach does not discharge Indeck

from its obligation to prove damages with reasonable certainty. ......................... 20 D. The manner in which Indeck measured its purported lost profits is

speculative............................................................................................................. 21 1. Kubow’s date-of-the-breach analysis relied upon numerous

hypothetical assumptions. ......................................................................... 21 2. Events since the date of the breach further underscore the

speculative nature of Kubow’s analysis. ................................................... 25 3. Kubow’s use of DCF methodology to value a nonexistent project

was unreliable. .......................................................................................... 25 4. Indeck provided the Court no evidence to support its contention

that it is entitled to lost profits based upon the alleged value of the Halyard Henderson project. ...................................................................... 26

5. Using Defendants’ pro forma does not establish the reliability of Indeck’s damages theory. .......................................................................... 27

6. Kubow’s self-serving adjustments to the numbers in Defendants’ pro forma undercut the reliability of his analysis. .................................... 27

7. Indeck’s invocation of the “wrongdoer rule” is unavailing. ..................... 28 8. Indeck’s own history with failed power projects undermines the

reliability of Kubow’s projections. ........................................................... 29 E. Defendants’ experts demonstrated that Indeck’s lost profits analysis is

speculative and unreliable. .................................................................................... 29 1. Kubow failed to account for the fact that the value of power

projects increases in proportion to the progress of the project. ................ 29 2. The vast differences in Kubow’s damages analyses underscore the

speculative nature of his analysis. ............................................................. 30 3. Defendants’ experts were credible. ........................................................... 30



3 of 48

- iii -

F. Defendants’ marketing efforts buttress the conclusion that Indeck’s damages claim is speculative. ............................................................................... 32

G. The Illinois Court’s ruling that Indeck’s damages claim is speculative precludes a different finding by this Court. .......................................................... 32

II. INDECK FAILED TO MITIGATE ITS DAMAGES. ..................................................... 33

III. INDECK FAILED TO PROVE ITS OUT-OF-POCKET LOSSES and entitlement to management fees. .......................................................................................................... 34 A. Indeck’s purported out-of-pocket losses and management fee claims

pertain to Indeck’s dismissed aiding-and-abetting claim. ..................................... 34 B. Indeck failed to introduce a sufficient evidentiary basis for its purported

out-of-pocket losses. ............................................................................................. 35 C. Indeck failed to prove that Defendants caused its out-of-pocket losses. .............. 35 D. Indeck is not entitled to recover management fees ............................................... 36

IV. INDECK IS NOT ENTITLED TO ATTORNEYS’ FEES. .............................................. 37 A. Indeck should be precluded from recovering attorneys’ fees and costs if

Indeck recovers only nominal damages. ............................................................... 37 B. New York law precludes Indeck from recovering attorneys’ fees in excess

of the amount actually recovered. ......................................................................... 38

V. INDECK’S RIGHT TO PREJUDGMENT INTEREST IS LIMITED............................. 39

VI. AT MOST, THE COURT SHOULD AWARD INDECK DEFENDANTS’ HALYARD WHARTON PROJECT. ............................................................................... 39



4 of 48

- iv -

TABLE OF AUTHORITIES

Page(s) Cases

Aldaloro v. PFPC Worldwide, Inc., No. Civ. A. 20289, 2005 WL 2045640 (Del. Ch. Aug. 19, 2005) ...........................................26

Bank of Am., N.A. v. Bear Stearns Asset Mgmt., 969 F. Supp. 2d 339 (S.D.N.Y. 2013) ......................................................................................28

Baskin-Robbins, Inc. v. S & N Prinka, Inc., 78 F. Supp. 2d 226 (S.D.N.Y. 1999) ........................................................................................35

Britestarr Homes, Inc. v. Piper Rudnick LLP, 256 Fed. Appx. 413 (2d Cir. 2007) ..............................................................................22, 23, 24

Chainani v. Lucchino, 942 N.Y.S.2d 735.....................................................................................................................37

Delulio v. 320-57 Corp., 99 A.D.2d 253 (1st Dep’t 1984) ..............................................................................................39

E.J. Brooks Co. v. Cambridge Security Seals, 80 N.Y.S.3d 162 (2018) .....................................................................................................18, 19

Excelsior 57th Corp. v. Winters, 227 A.D.2d 146 (1st Dep’t 1996) ............................................................................................37

F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250 (2d Cir. 1987)...................................................................................................38

Finkelstein v. Liberty Digital, Inc., No. Civ. A. 19598, 2005 WL 1074364 (Del. Ch. Apr. 25, 2006) ...........................................26

Holy Props. Ltd., L.P. v. Kenneth Cole Prods., Inc., 661 N.E.2d 694 (N.Y. 1995) ....................................................................................................33

Homkow v. Musika Records, Inc., No. 04 Civ. 3587, 2009 WL 721732 (S.D.N.Y. Mar. 18, 2009) .......................................22, 23

Indeck Energy Servs., Inc. v. Merced Capital, L.P., No. 652171/2014, 2018 WL 801541 (Sup. Ct. N.Y. Co. Feb. 9, 2018) .......................... passim

Kachkovskiy v. Khlebopros, 164 A.D.3d 568 (2d Dep’t 2018) .............................................................................................38

Matter of Kemp & Beatley, Inc., 473 N.E.2d 1173 (N.Y. 1984) ..................................................................................................39



5 of 48

- v -

Kenford Co. v. County of Erie, 67 N.Y.2d 257 (1986) ..................................................................................................22, 23, 24

Kidder, Peabody & Co., Inc. v. IAG Intern. Acceptance Grp. N.V., 28 F. Supp. 2d 126 (S.D.N.Y. 1998) ..................................................................................22, 24

Mack Cali Realty, L.P. v. Everfoam Insulation Sys., Inc., 110 A.D. 3d 680 (2d Dep’t 2013) ............................................................................................34

Pesa v. Yoma Dev. Grp., 18 N.Y.3d 527 (2012) ..............................................................................................................35

Richard C. Mugler Co. v. A.C. Mgmt. Corp., 29 A.D. 548 (2d Dep’t 1967) ...................................................................................................33

Sanni, Inc. v. Fiocchi, 443 N.E.2d 1108 (Ill Ct. App. 1982) .......................................................................................33

Schonfeld v. Hillard, 218 F.3d 164 (2d Cir. 2000).........................................................................................21, 22, 28

Sudit v. Labin, 148 A.D.3d 1073 (2d Dep’t 2017) ...........................................................................................40

Superior Vending Servs., Inc. v. Workmen’s Circle Home and Infirmary Foundation for Aged, 148 A.3d 960 (2d Dep’t 2017) .................................................................................................21

Wooten v State of New York, 302 A.D.2d 70 (4th Dept 2002) ...............................................................................................34

Zink v. Mark Goodson Prods., 261 A.D.2d 105 (1st Dep’t 1999) ............................................................................................27

Other Authorities

CPLR 5001(a) ................................................................................................................................39

CPLR 5001(b) ................................................................................................................................39



6 of 48

- 1 -

PRELIMINARY STATEMENT

This Post-Trial Brief is submitted on behalf of Merced Capital, L.P., Merced Partners III,

L.P., Merced Halyard Ventures, LLC, and Carson Bay Energy Holdings IV, LLC

(“Defendants”).

The MCA1 (PX1, DX44) between Indeck and Defendants is dated March 5, 2013. Indeck

Energy Servs., Inc. v. Merced Capital, L.P., No. 652171/2014, 2018 WL 801541, at *1 (Sup. Ct.

N.Y. Co. Feb. 9, 2018). The parties entered into the MCA for the purpose of allowing Indeck

and Defendants to explore whether Indeck wanted to develop a power project utilizing turbines

owned by Carson Bay. Id. at *2. Ultimately, the parties decided not to move forward with this

arrangement. Id.

On summary judgment, the Court determined that Defendants breached sections 2 and 5

of the MCA, which prohibited Defendants from hiring Dahlstrom and DePodesta for a period of

two years and from using Indeck’s Confidential Information (as defined in the MCA). Id. at *4-

5. The Court determined that a fact issue remained regarding Indeck’s entitlement to damages

beyond nominal damages. Id. at *5.

Prior to this trial, a 54-day trial was conducted in Illinois in which Indeck sued Dahlstrom

and DePodesta for breach of confidentiality agreements, conspiracy, misappropriation of trade

secrets, and disgorgement. (SSF Decl. Ex. 4.) Indeck requested disgorgement of all

compensation, bonuses, and other benefits received from Indeck while Dahlstrom and DePodesta

were in breach of their fiduciary duties to Indeck, as well as all benefits they would receive after

leaving Indeck’s employ (which, Indeck claimed, included profits Dahlstrom and DePodesta

would realize upon the sale of a future power project). (Id.)

1 Unless otherwise noted, Defendants adopt the abbreviations used in Indeck’s post-trial brief.



7 of 48

- 2 -

Prior to and after trial, the Illinois court made determinations that limited the damages

Indeck recovered in that case. First, the Illinois court determined (1) that Indeck had failed to

demonstrate “usurpation of any corporate opportunity involving the turbines,” and (2) that any

funding opportunity Indeck might have had in 2013 is still available today. (DX49, at 15:13-15,

16:10-12.) Indeck’s damages claim took further blows following 54 days of trial when the

Illinois court determined that (1) Dahlstrom and DePodesta’s breaches ended with their

employment at Indeck, (2) Dahlstrom and DePodesta did not have to return management fees

earned from Defendants, and (3) Indeck’s claim for disgorgement of lost profits was too

speculative. (DX47, at 92:1-94:2.) Ultimately, the Court awarded Indeck only $204,992 – the

compensation paid to Dahlstrom and DePodesta during the time they were in breach of their

fiduciary duties while employed at Indeck. (DX48, at ¶ 8.)2

The only issues remaining for trial in this case were whether Indeck was damaged and, if

so, the amount of any damages, whether any damages were the result of Defendants’ actions, and

whether Indeck made reasonable efforts to mitigate its damages. See Indeck, 2018 WL 801541.3

The trial record, informed by the Illinois court’s determinations, leads to the conclusion that

Indeck has not met its burden.

2 This Court has taken judicial notice of the record from the Illinois action, and that record is part of the trial record here. 3 Consequently, damages-related evidence is the only evidence relevant to this Court’s post-trial decision.



8 of 48

- 3 -

FACTS PROVED AT TRIAL

I. INDECK FAILED TO PROVE REASONABLY CERTAIN EVIDENCE TO SUPPORT AN AWARD OF FUTURE LOST PROFITS.

A. Indeck offered no evidence of harm to Indeck.

With respect to Indeck’s “lost profits” theory of damages, Indeck offered no evidence of

any harm to Indeck itself. Mark Kubow, the expert Indeck retained to opine on the amount of its

lost profits, offered no analysis of any harm done to Indeck. (Tr.120:22-121:2.) Kubow “did not

look at the condition of the Indeck project, per se, as relevant.” (Tr.121:1-2.) Kubow (and

Indeck) did not provide any nexus between the purported value of Defendants’ projects and the

damages Indeck allegedly incurred. (Tr.578:7-11, 20-25-579:1-7.)

B. Indeck offered no evidence that it took steps to mitigate its damages.

At trial, Indeck presented no evidence that it attempted to market its project or of any

attempts to secure revenue contracts or financing, or that Indeck had entered into cost contracts

with construction companies. Nor did Indeck produce, or introduce at trial, any offers,

proposals, or term sheets from potential investors, even though Indeck claims to possess “‘the

market and technical expertise to successfully develop a natural gas generation project.”’

(DX41, at 10 (quoting Indeck’s Verified Complaint).) This is because Indeck simply “decided to

close down [its] development activities.” (Tr.585:13-14.)

C. Defendants invested significant resources into developing their own projects.

The steps involved in developing a power project are “well known to anyone that is

operating in the power space.” (Tr.577:20-22.) The difficulty in the process is bringing all of

the steps together in a finished project. (Tr.577:24-25.) Defendants “started from scratch.”

(Tr.517:7.) Defendants retained a site location consultant, who identified approximately 300

potential site locations. (Tr.517:7-16.) Ultimately, Defendants narrowed those 300 potential



9 of 48

- 4 -

sites to five locations for which they acquired site control. (Tr.517:16-19.) Defendants retained

an engineering consultant to render conceptual designs for the projects, an environmental

consultant to assist with air permitting, two financial consultants to assist with financial

modeling, and invested approximately $10.6 million in their projects, excluding attorneys’ fees.

(Tr.522:3-12, 514: 7-14.)

D. Indeck based its “lost profits” theory on a foundation of unfounded assumptions regarding future events.

1. Indeck’s expert limited his analysis to the Halyard Wharton project.

As proof of its contention that Defendants’ projects are worth many millions of dollars,

Indeck offered testimony and reports from Mark Kubow. Kubow was retained for the purpose of

providing an opinion on the “value of the Merced Halyard project in the ERCOT market

specifically, Wharton County in Texas[.]” (Tr.62:24-63:2.) Kubow’s first report provided a

valuation only for the Halyard Wharton project. (Tr.133:11-14; PX2.) Kubow’s first report

contained no analysis regarding any alleged value of the Halyard Henderson project. (PX2.) In

his subsequent reports, without proving any analysis, Kubow included the Halyard Henderson

project in his damages estimate based on his bald assumption that the projects are comparable

and would, therefore, be worth the same. (Tr.97:21-98:3; 673:13-674:2; PX4, at 4.)

2. Kubow’s analysis relied upon the occurrence of a number of future events.

Kubow assigned value to Defendants’ project based upon a DCF analysis. That analysis

assumed the occurrence of many future events, including:

The project would deploy GE 7FA.03 turbines;

Turbine and equity commitments would be completed and the project would receive notice to proceed before December 31, 2015;

The project would be completed and in operation by January 1, 2017;



10 of 48

- 5 -

Defendants would secure a 15-year PPA at $4.75 per Kw-mo and reimbursement for variable costs at a rate of $2.25/MWh;

The project would be 80% financed with senior debt with an interest rate of Libor plus 450 basis points; and

The project would be sold at the end of 2018, after two years of operations, with the price based on an eight-times EBIDTA multiple.

(PX2, at 9-10.) Kubow acknowledged at trial that none of these events have come to pass.

(Tr.132:8-136:14.) Kubow further acknowledged, as he did in the Illinois trial, that the ERCOT

market is volatile and that the volatility affects the valuation of power generation projects.

(Tr.78:9-11, 21-79:1.)

3. Kubow’s analysis contains arbitrary adjustments to the data on which his analysis is based.

Kubow based his analysis on Defendants’ pro forma, which itself is simply a collection

of assumptions. (Tr.87:3-5, 86:5-87:5; PX2, at 4-5.) In his analysis, however, Kubow made a

number of adjustments to the data on which he relied. For example, while Defendants’ pro

forma assumed that the GE 7FA.03 turbines were worth $25 million per turbine, Kubow reduced

that figure to $14 million per turbine, based solely on conversations Kubow had with

unidentified individuals. (PX2 at 8.) In addition, while Defendants’ pro forma assumed $7.5

million for development costs, Kubow adjusted those costs downwards to $3 million because, in

his opinion, that figure was “more in line with industry assumptions.” (Id.)

E. Defendants’ experts demonstrated the flawed nature of Kubow’s analysis.

1. Lynn Lednicky highlighted many issues with Kubow’s reliance on Defendants’ pro forma for his calculations.

First, Lednicky highlighted the problems associated with Kubow’s reliance on

Defendants’ pro forma in his calculations. A pro forma is not a definitive statement of value;

rather, it is a “tool to help assess [a project’s] viability.” (Tr.581:21-22.) As Lednicky further



11 of 48

- 6 -

explained, “So you are using [a pro forma] as a tool to help guide your decisions with respect to

continued development, not as a proof of value that you could realize at this point in time.”

(Tr.582:3-5 (emphasis added); Defs.’ Ex. 38, at 8.)

Second, Lednicky shed light on the arbitrary adjustments Kubow made to Defendants’

pro forma numbers on which he relied. Kubow “began his calculations from information that he

obtained from Halyard, and then he began to make adjustments to that.” (Tr.587:12-13.) Those

adjustments included lowering the cost of the Carson Bay turbines and reducing Defendants’

development costs based on Kubow’s bare opinion that they should be so adjusted. (Tr:587:14-

23; Defs.’ Ex. 38, at 9-11.) The result of Kubow’s adjustments “increase[d] the value” Indeck

ascribed to Defendants’ project. (Tr.587:24-25.) Had Kubow “taken the pro forma as it was

presented through [Defendants], he would have seen a negative return, which would have

indicated that [Defendants] would not have gone forward with the project[.]” (Tr.591:3-6.)

2. Arthur Cobb highlighted additional problems with Kubow’s analysis.

Cobb highlighted several issues with Kubow’s analysis. First, Cobb revealed several

basic mathematical errors in Kubow’s calculations. (DX41.) As a result, Kubow reduced his

damages figure by nearly $2 million. (PX4, at 13-14.)

Second, Cobb shed light on the extreme variations in the values Kubow attributed to

Defendants’ projects. (Tr.671:5-672:9.) Kubow’s October 16, 2015 report provided a value of

$17,054,000 for the Halyard Wharton project; Kubow’s September 7, 2018 report provided

values of $30,731,000 for each of Halyard Wharton and Halyard Henderson; Kubow’s April 10,

2019 report provided several values—a “reliable and accurate value” of $11,592,000 for each

project, and a total “reliable, accurate, and achievable” value of $6,000,000. (Id.; DX43, at 4

(citing Kubow’s reports.) This variation underscored the “randomness and a speculative nature

of the Kubow reports.” (Tr.672:8-9.)



12 of 48

- 7 -

Third, Cobb highlighted that Kubow provided no analysis as to why the Halyard

Henderson project and Halyard Wharton project should share the same purported value.

(Tr.673:7-674:2.) “There simply were statements of belief, estimation that Henderson had a

similar value, but there was no detail, no separate projections, no separate consideration, no

respect for the difference in timing of the projects.” (Tr.673:15-19.) As a result, the purported

value attributed to the Halyard Henderson project was “even more speculative in that there was

no separate analysis, no separate assumptions, [and] no separate fact base[.]” (Tr.673:24-674:1.)

F. Defendants’ experts demonstrated that Defendants’ projects have no value.

1. Lednicky showed that the value of a power project is directly tied to developmental milestones.

Lednicky demonstrated that the value of a power plant is tied to its developmental stage.

Developing a power plant involves many steps—“there are a number of elements that need to

come together.” (Tr.572:19-20; DX38.) As a developer progresses through those steps, the

value of a project generally increases. (Tr.574:12-15; DX38, at 7.) If the value of Defendants’

project is the proper measure of the damages, it is “the value of that particular development

project as the facts sit at the point in time that’s relevant.” (Tr.580:23-25.) Because Defendants’

project was still in the predevelopment stage at the date of the breach, which Indeck contends is

the date at which damages must be measured, the value of the project was “essentially zero.”

(Tr.591:15-17; DX38, at 13.) Relatedly, Lednicky demonstrated the speculative nature of

Kubow’s valuation, which assumes the construction, operation, and sale of Defendants’ project.

In Lednicky’s experience, “most projects are not successful.” (Tr.582:6-9.) This is especially

true for projects, like Defendants’ projects, that have not progressed to the point of securing a

revenue stream such as a PPA, let alone financing. (Tr.582:13-585:6.)

2. Cobb demonstrated that it is speculative to attribute tens of millions of dollars in value to what amounted to Defendants’ business plan.



13 of 48

- 8 -

Cobb’s analysis underscored that it is speculative to attribute tens of millions of dollars in

value to Defendants’ projects (DX41-43.) According to Cobb, it is “one thing to have a business

plan, it is another to execute on that business plan.” (Tr.674:24-675:1.) Cobb observed that,

although Kubow assumed Defendants would obtain a PPA, the Brattle Group’s September 2012

ERCOT analysis noted that market forces and increased competition had “reduced the number of

buyers willing to sign long-term PPAs.” (DX41, at 16.) Cobb highlighted the fact that the value

Kubow attributed to Defendants’ project depended on achieving the significant, hypothetical

sales price assumed by Kubow. (Tr.680:10-681:20; DX41, at 18; DX43.) Kubow’s April 10,

2019 report showed negative cash flows of $43 million in the first year and $109 million in the

second year. (Tr.680:16-681:20; DX41, DX43, at 6.) Accordingly, the sales price, which would

occur in “the most speculative of the years” is the “most important number” in Kubow’s

analysis. (Tr.677:12-678:10.) As Cobb summarized, estimating lost profits based on a “power

generation project that (1) does not have a power purchase agreement, (2) has not been

constructed, (3) does not have a construction start date, (4) has not been operated, (5) does not

have an operations start date, and (6) does not have an identified purchaser is speculative.”

(DX41, at 21; see also Tr.678:20-679:20.)

II. THE ILLINOIS COURT RULED THAT INDECK IS NOT ENTITLED TO THE “LOST PROFITS” DAMAGES IT SEEKS IN THIS CASE.

At the Illinois trial, Indeck asserted the exact same damages theory as it did in this case—

that it is entitled to damages based on the purported value of Defendants’ project. Indeck

supported this damages theory with the same expert presented here—Kubow. After 54 days of

trial, the Illinois court rejected as too speculative Indeck’s theory that it is entitled to some

measure of damages based on the alleged value of a hypothetical future project:

Here, the Court agrees with Defendants that a Court cannot order disgorgement of a hypothetical future benefit.



14 of 48

- 9 -

ERCOT is a volatile and speculative market and no one knows whether Defendants will obtain any future benefits.

. . . .

But, here, the damages are purely speculative.

The fact of damages is uncertain.

. . . .

Indeck did not prove its belief, which the Court recognizes is a heartfelt belief, that Defendants will profit handsomely as soon as trial is over.

It’s [sic] simply has not been proven and it’s a speculative argument.

(DX47, at Tr.93:4-94:2 (emphasis added).) III. INDECK’S OWN WITNESSES UNDERCUT ITS DAMAGES CLAIM.

A. There is little benefit to being the so-called “first-mover.”

Indeck has only provided general of definitions of “first-mover’s advantage.” Larry

Lagowski, Indeck’s President, defined it as “you get done whatever you’re going to do before the

other people do it.” (1/23/2018 PM IL Tr.32:23-33:1.)4 When asked if the first-mover’s

advantage gives a company an edge over others who may soon after try to enter the market,

Lagowski stated that the first-mover’s advantage only applies if a power developer can secure

financing for its project. (1/23/2018 PM IL Tr.34:17-23.) He explained that “if you move early

and you spend a lot of money to do that, and then you find out you can’t finance [the project],

you may not have an early mover advantage.” (1/23/2018 PM IL Tr.34:20-23.) Lagowski

explained that the risks of moving early can sometimes lead to a disadvantage, because “if you

don’t know if you can finance something” and “get ahead of yourself,” you can end up in

4 The Lagowski transcripts designations are set forth and filed in conjunction with the parties’ Stipulation.



15 of 48

- 10 -

bankruptcy. (1/23/2018 PM IL Tr.35:1-8.) This is consistent with Defendants’ view: “I think at

this point it has actually become a disadvantage, and the reason for that is that particularly air

permits have a finite life, so what originally appeared to be an advantage I think, at this point,

has probably turned into a disadvantage.” (Tr.505:5-10.)

B. Lagowski testified to the necessity of securing a revenue stream and the speculative nature of the ERCOT market.

Lagowski explained that before investing more in a project, power plant developers

should ensure that there is a path to financial closing. (02/24/2015 Lagowski IL Dep. at 97:4-6.)

However, before lenders or equity investors will commit to providing financing, they must also

see a clear path to the project making money. (02/24/2015 Lagowski IL Dep. at 97:21-98:1.)

Since ERCOT does not make a capacity payment, a power plant only makes money on

operation. (1/23/2018 PM IL Tr.24:2-6.) A developer can enter into hedges to help with

financing. (1/23/2018 PM IL Tr.24:7-9.) With respect to financing, Lagowski explained

“[t]here is nothing for certain.” (1/23/2018 PM IL Tr.38:14.) He acknowledged that energy

development can be “speculative in nature” and even when “you start a project, you can’t know

if it will be seen to completion.” (1/23/2018 PM IL Tr.39: 13-20.)

C. Indeck’s history with power projects confirms that it is difficult to turn a concept into a revenue-generating operation.

From 2010 through 2015, Indeck abandoned multiple projects because “they were not

going to happen.” (02/24/2015 Lagowski IL Dep. at 17:3-18.) In fact, from 2001 to 2016,

Indeck did not develop a single successful electric generating project. (04/04/2016 IL Tr.45:18-

24; 50:2-5.) Indeck spent in excess of $20 million on an unsuccessful power project in

Wisconsin, which Dahlstrom and DePodesta worked to develop. (04/04/2016 IL Tr.51:11-16.)

Aside from its Wharton project, Indeck has been involved in developing one other natural gas



16 of 48

- 11 -

power project. (02/24/2015 Lagowski IL Dep. at 18:22-19:10.) Indeck is no longer developing

that project. (02/24/2015 Lagowski IL Dep. at 19:9-10.)

IV. INDECK’S WITNESSES OFFERED LITTLE EVIDENCE OF OTHER DAMAGES.

A. Confidential studies.

Indeck seeks $71,000 for confidential studies, but did not enter an exhibit into evidence

demonstrating this expense. Indeck waited until the eve of trial to provide the invoices that

supposedly support its out-of-pocket losses. (Tr.14:5-6.) As such, the Court did not admit the

evidence. (Tr.14:12-17.)

William Garth, Indeck’s Vice-President, submitted an affidavit stating the confidential

studies, performed by Tetra Tech and Navigant, cost $71,000. (Garth Aff. ¶ 17.) Garth

confirmed that Indeck is only claiming damages for the studies related to the Houston area.

(Tr.36:12-15.) However, when asked to lay out a summary of the expenses, Garth stated “it’s

pretty self-explanatory in the invoices.” (Tr.36:21-23.) When asked to identify the number of

sites identified, Garth again directed the Court to the inadmissible purchase order. (Tr.35:5-10.)

B. Retention bonuses.

Indeck also seeks $100,000 for retention bonuses given to Kelly Inns and Mike Ferguson.

(PX153.) Garth admitted that neither Inns nor Ferguson gave any indication that they were

seeking other work. Rather, Indeck preemptively chose to give them retention bonuses.

(Tr.48:4-7.) Indeck failed to prove a causal link between this payment and Defendants’ actions.

C. Replacement costs and salary differences.

Indeck seeks $246,000 in damages for recruiting and salary differences allegedly caused

by the departure of Dahlstrom and DePodesta. Garth acknowledged that both Dahlstrom and

DePodesta were disgruntled employees. (Tr.44:23-45:2.) Garth also acknowledged that Indeck



17 of 48

- 12 -

routinely uses headhunters and that it is Indeck’s choice whether to pay relocation costs for new

employees. (Tr.45:22-46:6.) Dahlstrom and DePodesta were at-will employees who could have

left Indeck’s employ at any time for any reason, or no reason at all. (Tr.562:16-17.) Indeck

would have incurred all of the costs it is seeking if Dahlstrom and DePodesta had left for other

jobs other than with Defendants. (Tr.45:17-20.) Again, Indeck failed to prove a causal link

between these payments and Defendants’ actions.

D. Management fees.

Finally, Indeck seeks recovery of the project management fees paid to Dahlstrom and

DePodesta over the course of five years. (Tr.18:22-19:1.) Project management is not Indeck’s

business—Garth admitted that Indeck had not managed an energy project for a third party for 25

years, and Indeck has not received any such revenue during that time period. (Tr.30:10-14.)

Moreover, the MCA’s prohibition against hiring Indeck’s employees is limited to two years.

(PX1.) In addition, Garth acknowledged that, to obtain the benefit of management fees, Indeck

would have had to pay Dahlstrom and DePodesta (or some other Indeck employees), resulting in

a dollar-for-dollar diminution of any such management fees. (Tr.31:12-22.)

V. DEFENDANTS’ MARKETING EFFORTS UNDERSCORED THE LACK OF VALUE ATTRIBUTABLE TO DEFENDANTS’ PROJECT.

A. Defendants retained Scotiabank to market the project.

Defendants retained Scotiabank to locate investors for their project. (Tr.363:14-363:17.)

Seth Keller, co-head of the Power and Utilities Investment Banking Group for Scotiabank, led

that effort. (Tr.361:22-24, 363:14-17.) Keller has been leading execution and origination of

M&A transactions within the power and utilities space at Scotiabank for more than nine years.

(Tr.362:3-7.) Scotiabank created a CIM that described the project and summarized financial

projections. (PX124-A; Tr.363:22-363:25.) Like Defendants’ earlier pro forma, the CIM



18 of 48

- 13 -

estimated the costs to build the project and projected the potential returns on investment.

(Tr.364:5-10.)

Once the materials were prepared, Scotiabank emailed a teaser out to approximately 170

potential investors in early 2018. (Tr.365:18-365:19; 368:21-368:25; 385:5-8; 397:14-16;

526:20-23). After sending the teaser, Scotiabank executed NDAs with approximately 30

investors who expressed interest in the projects. (Tr.365:14-20; 526:24-527:1.) Once a potential

investor executed an NDA, Scotiabank provided the CIM to that party. (Tr.527:2-8.)

Towards the end of February 2018, Scotiabank delayed the bidding process out of fear

that any bids would become public as a result of a discovery order from the Illinois proceeding.

(Tr.386:16-386:20; 388:24-389:1.) After about a month pause, the bidding process resumed.

(Tr.389:25-390:9.)

The Scotiabank process yielded little interest in Defendants’ Halyard Wharton project.

(Tr.390:14-15.) The only company that sent a proposal was Metropolis. (PX137, Tr.393:22-

394:2.) Hendrik Vroege and Jim Kueser, the owner of Metropolis, discussed a possible deal

during a sit-down meeting at an industry convention in Las Vegas in April 2018. (Tr.527:25-

528:9,). That same day, Vroege and Kueser “concluded [the] deal would never happen.”

(Tr.528:5-9.) According to Keller, Metropolis Energy would never have been able to fund the

building of the project. (Tr.391:20-392:5.)

B. Defendants’ marketing efforts yielded little interest.

In fall 2018, Defendants relaunched the marketing process and began contacting potential

investors. (Tr.315:22-24.) In the new CIM, the parties assumed the power plant would use new

Siemens turbines, rather than the older models already owned by Defendants. (Tr.211:14-17.)

Potential buyers found the newer models more attractive than the GE 7FA.03 units owned by



19 of 48

- 14 -

Merced. (DX7). Ultimately, although several parties expressed interest in purchasing

Defendants’ project as-is, Defendants’ marketing process did not lead to a successful transaction.

C. Feedback from potential investors confirmed that Defendants could not attract investors to develop a power plant.

1. Beowulf.

In October 2018, Defendants started negotiations with Beowulf Energy. (Tr.315:25-316:

5.) In November 2018, Beowulf made an indicative proposal to purchase 100% of the equity

interests in Merced Halyard Ventures, LLC. (DX1.) The proposal did not include financing;

rather, Beowulf proposed to purchase the projects’ assets (which, at that time, included permitted

bare ground and site control). (DX1; Tr.510:18-20.) Later, on January 8, 2019, Beowulf sent an

updated proposal that included upfront consideration of $2.5 million and a closing of $2.5

million for Halyard Wharton, $1 million for Halyard Henderson, and $150,000 for the Bernard

project. (DX3.) After engaging in due diligence, Beowulf changed its proposal. (Tr.333:6-15.)

Beowulf’s new proposal was $500,000 upfront and $2.5 million at financial close. Id. In April

2019, after further due diligence, Beowulf pulled its proposal. (Tr.334:1-3.)

2. Castleman.

Castleman first contacted Merced regarding the power plant projects in February 2018.

(DX11.) Castleman had other projects competing with Halyard Wharton and Henderson and no

access to capital to fund the project. (Tr.398:9-22.) Castleman proposed to pay Defendants

$500,000 at closing and $1 million for each project after financial closing or commencement of

construction. (PX155-A; Tr.535:23-536:2.) Castleman declined to proceed with this proposal

and has not continued discussions with Defendants. (Tr.536:10-12.)



20 of 48

- 15 -

3. Hull Street.

Defendants also had preliminary discussions with Hull Street. (PX13.) Hull Street

received some of Defendants’ due diligence materials but neither made a proposal nor sent a

written term sheet. (Tr.258:23-259:5.) Hull Street declined to proceed with the investment

opportunity because of the risk in the market. (Tr.258:18-21.)

4. Rockland Capital.

Most recently, in May 2018, Defendants communicated with Rockland Capital.

Rockland proposed to invest $109,000 into the project, which would give Rockland the option to

purchase the Halyard Wharton and Halyard Henderson projects for a total of $1 million.

(Tr.537:11-22.)

VI. DEFENDANTS DID NOT OBSCURE THEIR MARKETING EFFORTS AND ENDEAVORED TO MAXIMIZE THE VALUE OF THEIR PROJECT.

A. Defendants apprised Indeck and the Court of their marketing efforts.

Indeck’s discovery-related arguments about Defendants’ marketing efforts are

quintessential red-herrings. (Indeck Br. at 13-14; Ellis Decl.) First, Defendants did not deceive

the Court about their marketing efforts. In October 2018, Vroege submitted an affidavit that

summarized the Scotiabank marketing efforts. In that affidavit, Vroege described the Scotiabank

process that produced no viable interest. (PX10.) Vroege did not omit mention of Defendants

cutting the Scotiabank process short, because Scotiabank, not Defendants, made the decision to

postpone the bidding process (and, regardless, as set out above, the Scotiabank process

proceeded after a short delay). (Tr.389:11-13, 419:19-420:3.) Vroege did not falsely claim that

Scotiabank had reengaged in October 2018—he stated that he had attempted to reengage with

Scotiabank. (PX10.) Keller confirmed that, while Scotiabank did not actively work on the

project after April 2018, he continued to have discussions with Vroege following April 2018.



21 of 48

- 16 -

(Tr.426:20-427:2.) In addition, Vroege confirmed that, because there was no interest in

financing Defendants’ project from any party, there was no reason for him to update his

affidavit. (Tr.506:7-15.)

Second, Indeck was kept apprised of each and every proposal Defendants received.

Defendants continued to produce emails up to May 6, 2019, which was the date Indeck requested

Defendants make their final production. (SSF Aff. ¶ 3.) And in the spring of 2019, Indeck

deposed, for the second time, both Vroege and Keller regarding marketing Defendants’ projects.

(Id. ¶ 4.) While Dahlstrom and DePodesta emailed with potential investors independently, the

vast majority of those emails were forwarded to Defendants and produced to Indeck. (Id. ¶ 5.)

The “hidden” emails Indeck cites were sent on May 10, and May 28, 2019—days beyond the

May 6, 2019 discovery cutoff Indeck requested. (Id. ¶ 6; Ellis Decl. Exs. A-B.) In addition,

Indeck deposed Dahlstrom and DePodesta after trial (and after receiving supplemental

productions of their emails) and does not now claim that it learned of any new proposals through

those depositions. (Id. ¶ 7.)5 To be sure, Indeck submitted transcripts from the Illinois

proceeding where Dahlstrom and DePodesta were found to have violated their discovery

obligations. (Ells Decl. Exs. D-E.). Dahlstrom and DePodesta’s conduct in Illinois has nothing

to do with Defendants, and, as set forth above, the Illinois court limited Indeck’s recovery to the

salaries paid to Dahlstrom and Depodesta near the end of their employment. (DX48, at ¶ 8.)

Defendants have invested approximately $10.6 million in their project, excluding

attorneys’ fees. (Tr.514:7-14.) In addition, from 2013 through 2017, Defendants undertook

efforts to make their projects shovel ready, including obtaining site control, hiring an engineering

5 Indeck complains about Defendants’ discovery productions up to the eve of trial, yet simultaneously contends that such information is irrelevant to the issue of damages. Indeck cannot have it both ways.



22 of 48

- 17 -

consultant to create conceptual designs, obtaining interconnection and air permits, and

attempting to obtain revenue agreements with utility companies. (Tr.517:3-525:25.) In addition,

Defendants retained Scotiabank, who was motivated to generate interest in the projects because

Scotiabank’s payment was contingent upon a transaction. (Tr.446:17-18, 507:1-4.) Despite that

incentive, Scotiabank ceased its work around April 2018 because “the market did not have much

interest in the project at that time.” (Tr.447:6-9.) When the Scotiabank process yielded no

results, Defendants continued searching for interested parties, and ultimately decided to monetize

the projects and attempt to sell them as-is (as opposed to constructing the plants). (Tr.491:10-17,

533:21-534:9.)

Defendants have to answer to their investors, the majority of which are pension plans,

university endowments, and charitable foundations. (Tr.512:12-514:2.) Defendants’ investment,

including the projects at issue here, have time horizons which end in a “harvest period” during

which Defendants must use their best efforts to realize the best outcome for their investors.

(Tr.512:14-22.) Defendants did not renew the interconnection agreement because they “decided

that we did not want to throw good money after bad anymore.” (Tr.533:8-9.) Simple market

realities caused Defendants’ projects to fail.

ARGUMENT

I. INDECK FAILED TO PROVE ITS ENTITLEMENT TO FUTURE LOST PROFITS.

A. Indeck failed to prove the existence or value of a “first-mover advantage.”

Although Indeck contends that Defendants obtained a valuable first-mover advantage, the

record belies this assertion. (Indeck Br. at 17.)

Indeck’s witnesses failed to establish the existence and value of the first-mover

advantage. Garth had “not quantified” the supposed first-mover advantage and generically



23 of 48

- 18 -

described it as “the difference between getting a project done and not getting a project done.”

(Tr.41:17-18.) Lagowski testified that “if you move early and you spend a lot of money to do

that, and then you find out you can’t finance [the project], you may not have an early mover

advantage.” (1/23/2018 PM IL Tr.34:20-23.) Lagowski explained that the risks of moving early

can sometimes lead to a disadvantage, because “if you don’t know if you can finance something”

and get ahead of yourself, “you can end up in bankruptcy.” (1/23/2018 PM IL Tr.35:1-8.) This is

consistent with Defendants’ reality: “I think at this point it has actually become a disadvantage,

and the reason for that is that particularly air permits have a finite life, so what originally

appeared to be an advantage I think, at this point, has probably turned into a disadvantage.”

(Tr.505:5-10.)

In addition, the steps Defendants had to undertake to develop their project undercut any

assertion of a first-mover advantage. Defendants had to “start from scratch.” (Tr.517:7-8.)

Defendants also had to hire a GIS consultant to identify potential locations, distill those locations

down to a management list, conduct site visits, and secure site control. (Tr.517:7-19.)

Defendants also retained an engineering consultant for permitting assistance and two separate

financial modelling consultants for financial projections. (Tr.522:4-7.) Under Indeck’s own

definition of first-mover advantage, Defendants, who have spent more than $10 million on

unsuccessful projects, are actually at a disadvantage. Plainly, Defendants did not obtain any

first-mover advantage.

B. Indeck failed to establish that the purported value of Defendants’ project serves as a proxy for its alleged damages.

Under New York law where, as here, a defendant is alleged to have exploited “the skill,

expenditures and labors” of the plaintiff, “[d]amages must correspond to the amount which the

plaintiff would have made except for the defendant’s wrong . . . not the profits or revenues



24 of 48

- 19 -

actually received or earned by the defendants.” E.J. Brooks Co. v. Cambridge Security Seals, 80

N.Y.S.3d 162, 168-69 (2018). There is “no presumption of law or fact” that a defendant’s

purported gains whether measured “by the defendant’s profits, revenues, cost savings, or any

other measure of unjust gain” will “approximate the losses incurred by the plaintiff.” Id. at 171.

Rather, a plaintiff must always show that “there is some approximate relation of correspondence

... between the gains of the aggressor and those diverted from his [or her] victim,” without which

damages “would cease to serve the compensatory goals” of recovery. Id.

Indeck failed to prove that the supposed value of Defendants’ project bears any relation

to the damages it allegedly suffered. In the first instance, Kubow acknowledged at trial that he

did not undertake any analysis of harm to Indeck. (Tr.120:22-121:2.) Kubow’s reports confirm

that Indeck’s damages theory is not based upon any harm it actually suffered: “Indeck Energy

suffered harm . . . . In valuing this harm, I looked to quantify the reasonable value of the Merced

Halyard Project.” (DX31, at 4.) After analyzing Kubow’s reports, Cobb concluded that

Kubow’s did not identify any harm to Indeck: “No they don’t. They, in effect, are attempting to

look at benefit to Merced. He did not use Indeck information, Indeck estimates, at all. He is

looking at Merced information.” (Tr.690:16-19.) Lednicky pointed out the same flaw in

Kubow’s analysis: “In my view there ought to be a clear nexus between the measure of damages

and the damages that were incurred, and I did not see any nexus that was presented by Kubow.

In fact, Indeck continued to move forward[.]” (Tr.578:7-11.) The Illinois court’s determinations

that Indeck failed to show “usurpation of any corporate opportunity involving the turbines,” and

(2) that any funding opportunity Indeck might have had in 2013 is still available today further

undermines any connection between Defendants’ projects and the damages Indeck seeks here.

(DX49, at 15:13-15, 16:6-9.)



25 of 48

- 20 -

Because Indeck has not established a connection between the losses that it asserts it

sustained and the value Indeck attributes to Defendants’ project, the Court should reject Kubow’s

analysis in its entirety.

C. Measuring damages from the date of the breach does not discharge Indeck from its obligation to prove damages with reasonable certainty.

In arguing that measuring breach of contract damages as of the date of the breach

essentially discharges Indeck from its obligation to prove its lost profits theory with reasonable

certainty, Indeck takes this straightforward proposition too far.

Unsurprisingly, the cases Indeck cites do not support its extreme position. Kaminsky v.

Herrick, Feinstein LLP was not a lost profits case. In Kaminsky, the dispute centered around the

proper measure of damages “for breach of a contract to deliver shares in an IPO.” 59 A.D.3d 1,

11 (1st Dep’t 2008). Applying the date-of breach rule, the court determined that “the arbitrators

properly rejected evidence of value of [the] shares after trading began.” Id. at 11-12. Another

case Indeck cites, Credit Suisse First Boston v. Utrecht-America Finance Co., actually undercuts

its position. 84 A.D.3d 579, 580 (1st Dep’t 2011). Credit Suisse was not a lost profits case,

and, in affirming the Supreme Court, the First Department made clear that the factfinder “should

be able to make its valuation determination on all relevant elements of the case.” Id. at 581.

Sharma v. Skaarup Ship Management Corp. stands for nothing more than the proposition that

where a breach of contract involves deprivation of an item with a discernable market value,

damages are determined by measuring the market value at the time of the breach. 916 F.2d 820,

825 (2d Cir. 1990). Finally, in Simon v. Electrospace Corp., the Court confirmed that damages

should be based on the value of stock at the date of the breach, which value was “precisely

determinable on the public market.” 269 N.E.2d 21, 26 (N.Y. 1971).



26 of 48

- 21 -

In the first instance, it is questionable whether these cases are applicable in light of the

fact that Kubow conceded—both in his reports and in his testimony—that he did not conduct a

fair market value analysis of Defendants’ projects. (DX31, at 4; Tr.115:6-7.) In addition,

conspicuously absent from these cases is a statement that measuring damages at the date of the

breach discharges the duty of a plaintiff to prove future lost profits with reasonable certainty, or

that a court cannot consider the totality of the circumstances, whether before or after the breach,

to assess whether a plaintiff has met that burden.

That is because it is black-letter law in New York that a plaintiff seeking lost profits must

prove that such damages are capable of measurement with reasonable certainty. Superior

Vending Servs., Inc. v. Workmen’s Circle Home and Infirmary Foundation for Aged, 148 A.3d

960, 961 (2d Dep’t 2017). Future lost profits must be “capable of measurement based upon

known reliable factors without undue speculation.” Id. Where, as here, lost profits are based on

hypothetical profits of a new business venture, such evidence “receives greater scrutiny because

there is no track record on which to base an estimate. Projections of future profits based upon a

multitude of assumptions that require speculation and conjecture and few known factors do not

provide the requisite certainty.” Schonfeld v. Hillard, 218 F.3d 164, 172 (2d Cir. 2000) (citations

omitted) (applying New York law). Thus, Indeck, like any other plaintiff in New York, must

establish future lost profits with reasonable certainty, and all circumstances are relevant for

determining whether a plaintiff, like Indeck, has met that burden.

D. The manner in which Indeck measured its purported lost profits is speculative.

1. Kubow’s date-of-the-breach analysis relied upon numerous hypothetical assumptions.

Courts applying New York law routinely deny claims for future lost profits when such

claims are supported by numerous, unfounded assumptions about what might happen in the



27 of 48

- 22 -

future. See, e.g., Kenford Co. v. County of Erie, 67 N.Y.2d 257, 261 (1986); Schonfeld, 218

F.3d at 174 (concluding that “the district court properly held that Curtis’s projections based on

INN’s Business Plan are legally insufficient”); Britestarr Homes, Inc. v. Piper Rudnick LLP, 256

Fed. Appx. 413, 414 (2d Cir. 2007) (“As to the amount of lost profits from a power plant that

was to have been built on Britestarr’s property: The expert report . . . measured lost profits

on . . . improperly speculative assumptions[.]”); Kidder, Peabody & Co., Inc. v. IAG Intern.

Acceptance Grp. N.V., 28 F. Supp. 2d 126, 137 (S.D.N.Y. 1998) (“Despite the extensive

calculations made by IAG’s expert, undoubtedly applying the latest accounting and economic

principles, the assumptions it rests upon prove too unsupportable and far-reaching to be

reasonably certain.”); Homkow v. Musika Records, Inc., No. 04 Civ. 3587, 2009 WL 721732, at

*11 (S.D.N.Y. Mar. 18, 2009) (“[T]he Court concludes that Plaintiff’s lost profits request is

based upon highly speculative, if not erroneous, assumptions.” . . . As a new business venture,

with no track-record of sales, the Court concludes that there is no ‘reasonable certainty’ that

Plaintiff would sell 7,000 CDs in a four-year period.”).

Here, even setting aside future events (which establish the speculative nature of Kubow’s

analysis) Kubow’s date-of-the-breach damages analysis, which is Indeck’s sole evidence of its

purported lost profits, fails to establish lost profits with reasonable certainty. Kubow built the

value he ascribes to Defendants’ projects upon numerous unfounded assumptions about what

might happen in the future. (Supra at 4-5; PX2, at 9-10.)

At the date of the breach, these assumptions were speculative. Among other things,

Carson Bay, who owned the GE 7FA.03 turbines, was free to sell them at any time to any other

party. (Tr.593:18-21; DX39, at 3-4.) The 15-year PPA Kubow assumed that Defendants would

secure was simultaneously the “fundamental piece” Defendants would need “to move forward”



28 of 48

- 23 -

and “very rare” because of the “buyer dynamics in the ERCOT market.” (Tr.589:8-21.) Indeed,

the value Kubow attributed to Defendants’ project was entirely dependent upon the sale price of

a project that had yet to be financed, constructed, or operated. (Tr.677:14-17; DX41, at 18-23.)

Given that so many future events needed to come to fruition for Defendants to realize the value

Kubow attributed to their project, Indeck failed to establish that it incurred millions in damages

on the date of the breach. This is especially true in light of the fact that Defendants’ project was

not (and is not) a going concern with a history of revenue on which to base assumptions about

future revenues. See Homkow, 2009 WL 721732, at *11 (“As a new business venture . . . there is

no ‘reasonable certainty’ that Plaintiff would sell 7,000 CDs in a four-year period.”). Thus, even

measured at the date of the breach, Indeck failed to demonstrate future lost profits with

reasonable certainty.

Britestarr, which also involved a claim for lost profits based on a nonexistent power

plant, is instructive. In that case, Britestarr Homes attempted to establish its entitlement to lost

profits based on a power plant that was supposed to have been built on its property. 256 Fed.

Appx. at 414. As the basis for its lost profits claim, Britestarr Homes’s expert assumed that “a

hypothetical power plant developer would have secured $1 billion in debt and equity financing in

time to start construction in December 2003; that the debt financing would have included a loan

of $740 million at 7.25% interest; and that the developer would have entered into a construction

contract for the plant.” Id. at 415. The Britestarr Court rejected reliance on such “improperly

speculative assumptions.” Id. at 414.

Similarly, although it did not involve a power plant project, the Court of Appeals of New

York’s opinion in Kenford provides additional guidance here. In that case, the County of Erie

entered into a contract with a construction company and an operating company for the



29 of 48

- 24 -

construction and operation of a domed sports facility near the city of Buffalo. 67 N.Y.2d 257 at

260. After negotiations, the county and operating company were unable to come to terms on

either a lease or an operating agreement, nor was the stadium ultimately constructed. Id. The

operating company sued the county, seeking, among other things, lost profits for the 20-year

period of the proposed management contract. Id. at 261-62. On appeal, the operating company’s

lost profits damages were set aside on the grounds that they were unduly speculative, even

though the “quantity of proof [was] massive and, unquestionably, represent[ed] business and

industry’s most advanced and sophisticated method for predicting the probable results of

contemplated projects.” Id. at 236. The Kenford Court explained further its reasons for setting

aside the lost profits award:

[D]espite the massive quantity of expert proof submitted by DSI, the ultimate conclusions are still projections, and as employed in the present day commercial world, subject to adjustment and modification. . . . DSI assumed the facility was completed, available for use and successfully operated by it for 20 years[.] . . . Quite simply, the multitude of assumptions required to establish projections of profitability over the life of this contract require speculation and conjecture, making it beyond the capability of even the most sophisticated procedures to satisfy the legal requirements of proof with reasonable certainty.

Id. at 262. The facts here are strikingly analogous. As in Britestarr and Kenford, the Court should

reject Indeck’s attempt to establish its alleged lost profits via an analysis that depends upon

numerous, hypothetical occurrences, including the financing, construction, operation, and sale of

a project that, at the time of the breach, was nothing more than permitted bare ground. Indeck

has not established its entitlement to any amount of lost profits with reasonable certainty. See

Kidder, 28 F. Supp. 2d at 134 (“[A] claimant cannot establish lost profits with the law’s requisite



30 of 48

- 25 -

certainty where its calculation is dependent upon a host of assumptions concerning uncertain

contingencies, and applies numerous variables about which an expert can only surmise.”).

2. Events since the date of the breach further underscore the speculative nature of Kubow’s analysis.

The passage of time has shown that Kubow’s assumptions about the milestones

Defendants would achieve with their projects were simply wrong:

Kubow 2015 Assumptions

Kubow 2018 Assumptions Reality

“15 year average price would be $4.75 per kW-mo with reimbursement for variable costs at a rate of $2.25/MWh” (PX2, at 9).

“[I]t is appropriate to increase the related price assumption from $4.75/KW-month to $6.98/KW-month” (PX6, at 4).

Defendants never secured a PPA.

“First full year of operation, 2017, is projected to be $17,500,000 growing to $17,912,000 in 2018” (PX2, at 11).

“It is assumed that construction begins in Q4 2018 and that the project goes into operation on January 1, 2020” (PX6, at 8)

Construction never began; no plants are in operation..

“Sale of project is assumed to occur on January 1, 2019 at a sale price of $161,207,000 based on a 2018 EBITDA of 17,912,00 and a nine times multiple” (PX2, at 11).

“Updating the prior opinion for known changes creates an updated valuation range of $9,997,000 to $61,458,000 depending on the value used for the PPA price.” (PX6, at 9.)

The proposals Defendants received do not cover development expenses.

Not only was Kubow’s analysis speculative and unreliable as of the date of the breach,

his shifting projections and the fact that none of them came true further underscore the

undeniable conclusion that Indeck cannot establish an entitlement to future lost profits.

3. Kubow’s use of DCF methodology to value a nonexistent project was unreliable.

Indeck touts Kubow’s analytical methodology as the “proper method” to value

Defendants’ nonexistent project and cites case law in support of this assertion. (Indeck Br. at

23.) One of the cases Indeck cites stresses that DCF methodology must be “used responsibly.”



31 of 48

- 26 -

Aldaloro v. PFPC Worldwide, Inc., No. Civ. A. 20289, 2005 WL 2045640, at *9 n. 34 (Del. Ch.

Aug. 19, 2005) (“I stress ‘used responsibly’ for there are situations when the available data will

not support the use of the DCF model.”). A DCF analysis is not used responsibly where, as here,

the expert’s “assumptions bear no relationship to reality.” Finkelstein v. Liberty Digital, Inc.,

No. Civ. A. 19598, 2005 WL 1074364, at *14, 17 (Del. Ch. Apr. 25, 2006) (“[R]ather than

addressing the operative reality of Liberty Digital, as required by law, Feinstein imagines an

ideal world for Liberty Digital and values the Access Agreement on that basis[.]”). Kubow’s

unrealistic assumptions about the “ideal world” for Defendants’ project underscore the

conclusion that Kubow’s methodology, as well as the numbers he derived from that method, are

speculative and unreliable.

4. Indeck provided the Court no evidence to support its contention that it is entitled to lost profits based upon the alleged value of the Halyard Henderson project.

Kubow performed no analysis with respect to the Halyard Henderson project. Kubow

testified that he was retained to provide an opinion on the “value of the Merced Halyard project

in the ERCOT market specifically, Wharton County in Texas[.]” (Tr.62:23-63:2.) Indeed,

Kubow’s first report provided a valuation only for the Halyard Wharton project and is devoid of

any analysis regarding the alleged value of the Halyard Henderson project. (Tr.133:11-14; PX2.)

In his subsequent reports, Kubow included the Halyard Henderson project in his damages

estimate based on his bald assumption that the projects are comparable and would, therefore, be

worth the same. (Tr.97:21-98:3; 673:13-674:2; PX2, at 4.) While Kubow testified that the

ERCOT market is “relatively homogenous,” that testimony is directly contradicted by Kubow’s

acknowledgement that the ERCOT market is volatile and that the volatility affects the valuation

of power generation projects. (Tr.78:9-11, 21-79:1.) Kubow’s analysis of the purported value of

the Halyard Henderson project is not just speculative, it is nonexistent. Because Indeck offered



32 of 48

- 27 -

effectively no evidence of the value of this project, the Court should deny Indeck’s damages

based on the alleged value of the Halyard Henderson project.

5. Using Defendants’ pro forma does not establish the reliability of Indeck’s damages theory.

Indeck attempts to buttress its damages theory by touting Kubow’s reliance on

Defendants’ pro forma. A pro forma is not a definitive statement of value; rather, it is a “tool to

help assess [a project’s] viability.” (Tr.581:21-22.) As Lednicky explained, “So you are using [a

pro forma] as a tool to help guide your decisions with respect to continued development, not as a

proof of value that you could realize at this point in time.” (Tr.582:3-5 (emphasis added); DX38,

at 8.) In other words, Defendants’ hopes about what might happen in the future created for the

purpose of assessing whether to continue investing money into the project do not establish the

reliability of Kubow’s speculative analysis. See Zink v. Mark Goodson Prods., 261 A.D.2d 105,

105 (1st Dep’t 1999) (“[P]laintiffs’ claim for lost profits was properly dismissed since it was

predicated not upon the requisite reasonably certain assessment but upon nothing more than

assumptions, speculation and conjecture respecting the performance of the game show.”).

6. Kubow’s self-serving adjustments to the numbers in Defendants’ pro forma undercut the reliability of his analysis.

Kubow’s arbitrary modifications of the numbers in Defendants’ pro forma further

undercut the reliability of his analysis. When Defendants’ figures served the purpose of

increasing Indeck’s alleged damages, Kubow adopted them wholesale. (PX2, at 7-10.) When,

however, they would work to Indeck’s disadvantage, Kubow arbitrarily adjusted those numbers.

For example, while Defendants’ pro forma assumed that the GE 7FA.03 turbines were worth $25

million per turbine, Kubow reduced that figure to $14 million per turbine, based solely on

conversations Kubow had with unidentified individuals. (PX2 at 8.) In addition, while

Defendants’ pro forma assumed $7.5 million for development costs, Kubow adjusted those costs



33 of 48

- 28 -

downwards to $3 million because, in his opinion, that figure was “more in line with industry

assumptions.” (PX2 at 8.) As Lednicky explained, the result of Kubow’s adjustments

“increase[d] the value” Indeck ascribed to Defendants’ project. (Tr.587:24-25.) Had Kubow

“taken the pro forma as it was presented through [Defendants], he would have seen a negative

return, which would have indicated that [Defendants] would not have gone forward with the

project[.]” (Tr.591:2-7.) In other words, when Kubow saw fit to modify Defendants’ pro forma,

he only did so in ways that would drive up Indeck’s damages estimate. This is yet another

reason why Kubow’s analysis is speculative and unreliable.

7. Indeck’s invocation of the “wrongdoer rule” is unavailing.

Indeck cites cases in hopes of establishing the proposition that, because the Court has

determined liability, Indeck is essentially relieved of establishing damages with reasonable

certainty. (Indeck Br. at18.) But, the “wrongdoer rule” does not apply where “the existence of

lost profits damages cannot be established with the requisite reasonable certainty.” Schonfeld,

218 F.3d at 175. Indeck has not established either the existence or the amount of its purported

lost profits. The wrongdoer rule, therefore, has no application here. See Bank of Am., N.A. v.

Bear Stearns Asset Mgmt., 969 F. Supp. 2d 339, 360 (S.D.N.Y. 2013) (“But under the wrongdoer

rule, a plaintiff who prevails in a breach of contract action must still demonstrate a stable

foundation for a reasonable estimate as to damages.” (citation omitted)). Indeed, the Court’s

summary judgment order confirms that Indeck bears the burden of proving its damages. Indeck,

2018 WL 801541, at n. 9 (“[N]othing herein should be construed as the court relieving Indeck of

its obligation to prove that its alleged damages flowed from these breaches.”).



34 of 48

- 29 -

8. Indeck’s own history with failed power projects undermines the reliability of Kubow’s projections.

While Kubow’s reports assumed that the financing, construction, operation, and sale of

Defendants’ project was a sure thing, Indeck’s own history with failed power projects contradicts

that assumption. Indeck has a long list of failed development plants. From 2001 to 2016, Indeck

did not develop a single successful electric generating project. (04/04/2016 IL Tr.45:18-24; 50:2-

5.) Aside from its Wharton project, Indeck has been involved in developing one other natural

gas power project. (02/24/2015 Lagowski Dep. at 19:1-10.) Indeck is no longer developing that

project. (02/24/2015 Lagowski Dep. at 19:9-10.) Thus, while Kubow assumed that Defendants’

project would be a guaranteed success, Indeck’s experience with multiple failed power projects

undermines the reliability of that assumption.

E. Defendants’ experts demonstrated that Indeck’s lost profits analysis is speculative and unreliable.

1. Kubow failed to account for the fact that the value of power projects increases in proportion to the progress of the project.

Lednicky’s analysis and testimony further underscored that it is speculative to attribute

millions of dollars in value to an unfinished power project. Rather, a power project accrues

value as it progresses through development. (DX38, at 7-8; Tr.572:15-577:8.) To realize the full

value Kubow attributed to Defendants’ project, a power developer needs to “develop all of [the

steps] in a way that allows the project to be built, and then you can achieve a full valuation.”

(Tr.574:12-15.) While the process to develop a power plant is conceptually simple, the

“execution to achieve all of those things is a very difficult thing to do.” (Tr.582:10-12.) Most

projects similar to Defendants’ project “are not successful.” (Tr.582:8-9.) Had Kubow actually

valued Defendants’ project based on its status on the date of the breach in 2013, he would have

concluded that it had a value that “was essentially zero.” (Tr.591:13-17.) Even in 2015, when



35 of 48

- 30 -

site control and air permits had been obtained, Kubow’s analysis “[skipped] to the end which

doesn’t recognize the current value that one ought to consider.” (Tr.586:25-587:2.) Kubow’s

failure to account for the reality of power project developments further buttresses the conclusion

that Indeck’s lost-profits claim is speculative.

2. The vast differences in Kubow’s damages analyses underscore the speculative nature of his analysis.

Second, Cobb shed light on the extreme variations in the values Kubow attributed to

Defendants’ projects. (Tr.671:5-672:9.) Kubow’s October 16, 2015 report provided a value of

$17,054,000 for the Halyard Wharton project; Kubow’s September 7, 2018 report provided

values of $30,731,000 for Halyard Wharton and Halyard Henderson individually; Kubow’s

April 10, 2019 report provided several values—a “reliable and accurate value” of $11,592,000

for each project, and a total “reliable, accurate, and achievable” value of $6,000,000. (Id.;

DX43, at 4.) According to Cobb, this variation underscored the “randomness and a speculative

nature of the Kubow reports.” (Tr.672:8-9.)

3. Defendants’ experts were credible.

Indeck cannot seriously question Defendants’ experts’ experience. Lednicky has been

working in the power industry since 1991. (Tr.567:19-20; DX38A.) From 1991 through 2011,

while working for Destec and Dynegy, Inc., Lednicky was responsible for developing and

financing dozens of power plant facilities around the country. (Tr.568:18-569:9.) Lednicky is

familiar with concepts of DCF analysis and business valuation and “had quite a bit of experience

at both Destec and Dynegy in power plant evaluations.” (Tr.569:17-22.) Lednicky has prepared

and maintained financial pro formas and internal valuations for power projects. (Tr.570:3-12.)

And, Lednicky has experience in the ERCOT market via several power projects he helped

develop while at Destec and Dynegy. (Tr.570:23-571:13.)



36 of 48

- 31 -

Cobb is the president of Cobb & Associates, Ltd. Prior to that, Cobb was a partner at

KPMG and also was a professional staff member at Touche Ross (now Deloitte & Touche LLP),

as well as PricewaterhouseCoopers LLP. (Tr.665:1-24.) Cobb has been performing damages

calculations since 1975. (Tr.666:22-23.) Cobb has testified in state and federal courts more than

225 times. (Tr.666:24-25.) The majority of Cobb’s practice is devoted to lost profits analysis

and business valuations. (Tr.667:1-11.) Cobb has been involved in hundreds of cases where

DCF is an issue and has “taught seminars regarding [DCF] in lost profits and in valuation.”

(Tr.667:20-25.) And, while Indeck made a spectacle of the few occasions in which Mr. Cobb

has been disqualified or limited as an expert, the Court observed that it is bound to happen to an

expert who testifies with such regularity. (Tr.701:6-15.)

Indeck insinuates that Lednicky and Cobb blindly relied upon information from

Defendants in forming their opinions. Their reports confirm, however, that Lednicky and Cobb

both reviewed Kubow’s reports and supporting exhibits, deposition transcripts, and other sources

of information, in addition to information supplied by Defendants. (DX38-43.) Notably, Indeck

only finds it problematic when Defendants’ experts rely on Defendants’ information. Indeck

touts the reliability of Kubow’s analysis because it is purportedly based upon Defendants’ pro

forma. Indeck’s attempts to discredit Defendants’ experts fail.



37 of 48

- 32 -

F. Defendants’ marketing efforts buttress the conclusion that Indeck’s damages claim is speculative.

Indeck protests the Court’s consideration of post-breach events. But, as set forth above,

Indeck has not cited a single case that precludes a Court from considering post-breach evidence

to assess whether a plaintiff has proved future lost profits with reasonable certainty.6

The results of Defendants’ marketing efforts buttress the conclusion that Indeck’s lost

profits claim is speculative. Defendants engaged Scotiabank to market their project and, when

those efforts did not yield results, carried the effort forward on their own. (See supra at 12-15.)

Despite these efforts, the only serious proposal Defendants received was from Beowulf, who

ultimately proposed paying a maximum of $3 million, but pulled that proposal after engaging in

due diligence. Thus, while Kubow projected that Defendants would be able to sell their project

for tens of millions of dollars, the open market demonstrates that the value Kubow ascribes to

Defendants’ project is speculative and unreliable.

G. The Illinois Court’s ruling that Indeck’s damages claim is speculative precludes a different finding by this Court.

Yet another reason to deny Indeck’s lost profits claim here is the fact that the Illinois

court rejected Indeck’s nearly identical damages claim in that case. After 54 days of trial, which

included reports and testimony from Kubow, the Illinois court rejected Indeck’s claim that it

was entitled to damages based upon the hypothetical value of Defendants’ project: “Indeck did

not prove its belief, which the Court recognizes is a heartfelt belief, that Defendants will profit

handsomely as soon as trial is over. It’s [sic] simply has not been proven and it’s a

speculative argument.” (DX47, at 93:4-94:2 (emphasis added).)

6 Indeck’s persistent demands for discovery regarding Defendants’ project up to the date of trial discredits Indeck’s assertion that evidence regarding the current status of Defendants’ project is irrelevant.



38 of 48

- 33 -

In this case, Indeck asserted a nearly identical theory of damages as it did in Illinois: that

it is entitled to a measure of damages based upon the hypothetical future construction, operation,

and sale of Defendants’ project. (Indeck Br. at 18-20.) Indeck’s sole evidence of this theory is

Kubow’s testimony and reports. At trial, Kubow acknowledged that he undertook the same

analysis in this case as he did in the Illinois case. (Tr.124:15-17, 128:24-129:2.) Kubow’s

reports from the Illinois case confirm that his analysis was based, as it was in this case, on the

funding, construction, and sale of a hypothetical future project. (See, .e.g., DX34A, at 11-12.)

The Illinois court’s ruling, which was made in response to Kubow’s testimony and reports, is

instructive for the proposition that Indeck’s lost profits damages claim is here, as it was in

Illinois, incapable of proof to a degree of reasonable certainty.

Indeck has repeatedly asserted that this ruling has no bearing here because the Illinois

ruling will not have preclusive effect until the appeals process is exhausted. But, in appealing

the Illinois trial court’s decision, Indeck faces a nearly insurmountable task. Illinois Appellate

courts cannot consider facts which are not in the record. Sanni, Inc. v. Fiocchi, 443 N.E.2d

1108, 1111 (Ill Ct. App. 1982). As such, all Indeck can do on appeal is argue that the Illinois

trial court’s legal conclusion that Indeck’s future lost profits are too speculative, which was

based upon many of the proposed findings Indeck submitted, was somehow wrong. But, Indeck

will have to make this argument against the weight of a substantial, 54-day trial record and the

findings Indeck itself proposed. (DX46.) Indeck is unlikely to succeed in this endeavor.

II. INDECK FAILED TO MITIGATE ITS DAMAGES.

Under New York law, the non-breaching party to a contract has a duty of making

reasonable exertions to minimize its injury. Holy Props. Ltd., L.P. v. Kenneth Cole Prods., Inc.,

661 N.E.2d 694, 696 (N.Y. 1995); see also Richard C. Mugler Co. v. A.C. Mgmt. Corp., 29 A.D.

548 (2d Dep’t 1967) (“[R]espondent was under a duty to make a reasonable effort to minimize



39 of 48

- 34 -

the damages resulting from the breach.”). The duty to mitigate arises from common law,

meaning that it need not expressly be stated in a contract to be enforceable against the party

claiming breach. Mack Cali Realty, L.P. v. Everfoam Insulation Sys., Inc., 110 A.D. 3d 680, 682

(2d Dep’t 2013). Defendants must only offer some proof of Indeck’s failure to mitigate. . See

Wooten v State of New York, 302 A.D.2d 70, 74 (4th Dept 2002).

Indeck failed to mitigate its damages. At trial, Indeck presented no evidence that it

attempted to market its project (such as through an investment bank like Defendants did with

Scotiabank). Despite its self-professed expertise in the industry, Indeck presented no evidence of

any attempts to secure revenue contracts or financing, or that Indeck had entered into cost

contracts with construction companies. Nor did Indeck produce, or introduce at trial, any offers,

proposals, or term sheets from potential investors. Indeed, Kubow’s reports were “silent on the

topic of mitigation”; there was a “dearth of information, even discussion, of mitigation.”

(Tr.689:19; 690:7-8.) Indeck failed to mitigate its damages because it “decided to close down

[its] development activities.” (Tr.585:13-14.) New York law does not permit Indeck to collect

damages from Defendants in the absence of any reasonable efforts to mitigate its alleged

damages.

III. INDECK FAILED TO PROVE ITS OUT-OF-POCKET LOSSES AND ENTITLEMENT TO MANAGEMENT FEES.

A. Indeck’s purported out-of-pocket losses and management fee claims pertain to Indeck’s dismissed aiding-and-abetting claim.

On summary judgment, Indeck contended that it was entitled to the following categories

of damages on its aiding-and-abetting claim: (1) the full equity stake of DePodesta and

Dahlstrom in the joint venture, (2) the management fees that Halyard Energy Ventures has

received each year since 2013, and (3) the compensation, bonuses, and benefits DePodesta and

Dahlstrom received at Indeck while being disloyal. That claim was dismissed on summary



40 of 48

- 35 -

judgment, and the Court did not grant Indeck’s motion to renew that claim for trial.

Accordingly, Indeck should be precluded from recovering damages that pertain to a dismissed

claim. In addition, ordering Defendants to pay back the compensation the Illinois court already

ordered Dahlstrom and DePodesta to pay would amount to a double-recovery.

B. Indeck failed to introduce a sufficient evidentiary basis for its purported out-of-pocket losses.

Under New York law, “[a] plaintiff in a breach of contract action must produce facts and

figures from which the trier of fact may make an estimate, and the mere statement that he

estimates his expenses at a specified figure, without more, is incompetent.” Baskin-Robbins, Inc.

v. S & N Prinka, Inc., 78 F. Supp. 2d 226, 232 (S.D.N.Y. 1999).

Here, Kubow admitted that he was not retained to opine on Indeck’s out-of-pocket losses

and provided no testimony to that effect. (Tr.138:16-19.) Garth admitted that he did not know

the exact amounts of Indeck’s out-of-pocket losses and repeatedly referred to invoices the Court

determined were inadmissible. (Tr.14:12-17; 36:22-23; 44:13-18.) Thus, Indeck failed to

provide a sufficient basis for an award of out-pocket losses.

C. Indeck failed to prove that Defendants caused its out-of-pocket losses.

New York law prohibits the recovery for breach of contract “where they were not

actually caused by the breach—i.e., where . . . the damage would have been suffered, even if no

breach occurred.” Pesa v. Yoma Dev. Grp., 18 N.Y.3d 527, 531 (2012).

Indeck failed to show that its out-of-pocket losses were actually caused by Defendants’

breach. First, there is no connection between Defendants’ breach and the retention bonuses—

Garth admitted that neither Kelly Inns, nor Mike Ferguson were looking for new work when

Indeck paid their “retention bonuses.” (Tr.48:4-7.) Second, there is no connection between

Defendants’ breach and Indeck’s supposed replacement costs—Garth acknowledged that



41 of 48

- 36 -

Dahlstrom and DePodesta were at-will employees who could have left at any time, and that

Indeck would have incurred the replacement costs regardless of Defendants’ breach. (Tr.45:17-

20.) In addition, Garth admitted that Indeck routinely uses headhunters to fill positions, and that

it is always Indeck’s choice whether to pay new employees’ relocation expenses. (Tr.Tr.45:22-

46:6.) Finally, with respect to the “confidential studies,” Garth testified that Indeck had already

selected its sites before they hired consultants and that the studies were site-specific (i.e., would

not have utility for a developer developing a different site). (Tr.34:6-17; 39:3-15.) Indeck failed

to establish a causal connection between its out-of-pocket expenses and Defendants’ breach.

D. Indeck is not entitled to recover management fees

For several reasons, Indeck failed to prove that it is entitled to management fees. (Indeck

Br. at 37.) First, Indeck’s claim for management fees fails to account for the simple fact that the

MCA’s prohibition on engaging Indeck’s employees was expressly limited to a two-year term.

(PX1.)7 Thus, any claim for fees based upon Dahlstrom and DePodesta managing Defendants’

project must be limited to two years in the first instance. Even more fatal to Indeck’s claim is

Garth’s admission that Indeck is not in the business of project management and has not managed

a power project for a third-party for 25 years, let alone realized revenues for any such

management. (Tr.30:10-14.) Further, Indeck failed to account for the fact that any management

fees it would have earned would have been reduced dollar-for-dollar by the amount Indeck

would have had to pay Dahlstrom and DePodesta, or other employees, to manage the projects.

The Court should reject Indeck’s attempt to recover fees for services it does not provide.8

7 It is unclear whether Indeck is attempting to recover $2.5 million in management fees or $1 million. (See Indeck Br. at 4, 37.) To the extent it is the former, the two-year time period in the MCA is applicable and limits Indeck’s ability to recover management fees. 8 Further, such damages are explicitly barred by the MCA, which provides, in relevant part:



42 of 48

- 37 -

IV. INDECK IS NOT ENTITLED TO ATTORNEYS’ FEES.

A. Indeck should be precluded from recovering attorneys’ fees and costs if Indeck recovers only nominal damages.

To be a prevailing party under New York law, the party must have “prevailed with

respect to the central relief sought.” Chainani v. Lucchino, 942 N.Y.S.2d 735, 736 (4th Dep’t).

“[S]uch a determination requires an initial consideration of the true scope of the dispute litigated,

followed by a comparison of what was achieved within that scope.” Excelsior 57th Corp. v.

Winters, 227 A.D.2d 146 (1st Dep’t 1996) (determining that landlord was the prevailing party in

an action by the landlord for 54 months’ rent in which tenants claimed constructive eviction and

breach of warranty of habitability for 24 months, but only established an entitlement to four and

a-half months’ worth of rent abatement).

Indeck initially brought six separate claims against Defendants and requested seven

forms of relief, including an injunction (enjoining Defendants from five separate activities),

compensatory and consequential damages, disgorgement of confidential information, and

disgorgement of profits, among other things. (See NYSCEF Doc. No. 1.) After the Court’s

Order on summary judgment, the scope of the dispute has been significantly narrowed: The

Court dismissed all of Indeck’s claims except for its breach of contract claim and indicated that

Indeck may be entitled to only nominal damages. See Indeck, 2018 WL 801541. Should Indeck

recover only nominal damages on its remaining claim, it can hardly be said that Indeck will have

“prevailed with respect to the central relief sought,” especially when Indeck initially requested

Neither Party will have any claims against the other Party or any of its Representatives arising out of or relating to any transaction other than as parties to such definitive agreement, and then only in accordance with the terms thereof, or as Parties to this Agreement, for the matters specifically agreed to herein.

The plain terms of the MCA bar Indeck from recovering management fees.



43 of 48

- 38 -

seven different remedies stemming from six separate claims and purports to have been damaged

in excess of $33 million. In short, a technical favorable ruling and an award of nominal damages

does not entitle Indeck to recover its fees and costs as a “prevailing party” under the MCA. See,

e.g., Kachkovskiy v. Khlebopros, 164 A.D.3d 568, 573 (2d Dep’t 2018) (affirming denial of

attorneys’ fees where “the court properly concluded that the plaintiff did not receive substantial

relief, so as to warrant the conclusion that he prevailed on a central claim”).

B. New York law precludes Indeck from recovering attorneys’ fees in excess of the amount actually recovered.

Under New York law, “when a contract provides that in the event of litigation the losing

party will pay the attorneys’ fees of the prevailing party, the court will order the losing party to

pay whatever amounts have been expended by the prevailing party, so long as those amounts are

not unreasonable.” F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250, 1263 (2d Cir.

1987) (emphasis added). As a guidepost to the standard of reasonableness, New York courts

“will rarely find reasonable an award to a plaintiff that exceeds the amount involved in the

litigation.” Id. at 1264.

For example, in Regan v. Conway, plaintiff’s counsel sought $203,617.40 in attorneys’

fees under the parties’ contractual fees provision following a verdict of $40,000. 768 F. Supp. 2d

412 (E.D.N.Y. 2011). The Court rejected plaintiff’s fee request on the grounds that “the fee

should not exceed the amount in this litigation. The plaintiff recovered the sum of

$40,000 . . . the Court finds that a total ‘reasonable’ attorneys’ fee is . . . the sum of $40,000.”

Id. at 419.

The Court should preclude Indeck from recovering attorneys’ fees and costs in excess of

the damages it actually recovers in this case. Under New York law, any award of fees and costs



44 of 48

- 39 -

in excess of the compensatory damages Indeck actually recovers would be unreasonable as a

matter of law.

V. INDECK’S RIGHT TO PREJUDGMENT INTEREST IS LIMITED.

Under CPLR 5001(a), the prevailing party in a breach of contract action is entitled to

prejudgment interest. When damages were incurred at various times, the interest can be

computed from “a single reasonable intermediate date.” CPLR 5001(b). Where, as here, there is

difficulty in fixing a single, reasonable intermediate date, the “appropriate date from which to

compute interest is the date of the commencement of the action.” Delulio v. 320-57 Corp., 99

A.D.2d 253, 255 (1st Dep’t 1984). Indeck’s right to prejudgment interest, if any, is limited in

several respects.

First, as set forth above, Indeck is not in fact a “prevailing party” because a recovery of

nominal or out-of-pocket losses (which is Indeck’s best-case scenario here) does not equate to

Indeck being the prevailing party in a case where it sought tens of millions of dollars in “lost

profits.” Second, to the extent the Court awards interest on any damages Indeck recovers, the

earliest date to impose interest is the date Indeck filed its complaint on July 15, 2014, nearly four

months later than the March 2014 date Indeck contends should apply.

VI. AT MOST, THE COURT SHOULD AWARD INDECK DEFENDANTS’ HALYARD WHARTON PROJECT.

At trial, the Court requested “briefing on . . . the potential for any other type of damage

award[.] For example, is there any authority in the law for transfer of the opportunity[.]”

(Tr.350:24-351:3.) Because Indeck has failed to establish its entitlement to a legal remedy, the

Court should, at most, award Indeck Defendants’ Halyard Wharton project.

In general, New York courts do not award equitable relief when there is an adequate

remedy at law. Matter of Kemp & Beatley, Inc., 473 N.E.2d 1173, 1177 (N.Y. 1984). Here,



45 of 48

- 40 -

because the future lost profits Indeck seeks are speculative, Indeck has failed to establish its

entitlement to a legal remedy (i.e., damages). A New York court fashioning an equitable remedy

“may, in its discretion, grant relief that is warranted by the facts plainly appearing on the papers

of both sides, if the relief granted is not too dramatically unlike the relief sought, the proof

offered supports it, and there is no prejudice to any party.” Sudit v. Labin, 148 A.D.3d 1073,

1075 (2d Dep’t 2017).

The gravamen of Indeck’s claim for breach of the MCA is that Defendants, by hiring

Dahlstrom and DePodesta and utilizing Indeck’s confidential information, were able to develop

the project that Indeck would have developed absent Defendants’ breach. Thus, if the Court is

inclined to award Indeck anything, the most it should award Indeck is the right to take over

Defendants’ project. Such relief is “not too dramatically unlike the relief sought.” See Id.9

CONCLUSION

Based on the foregoing and the trial record, Defendants respectfully request that the

Court deny Indeck’s request for any damages beyond nominal damages.

9 The Court should note that any such transition would not be seamless in light of the fact that Defendants’ site control agreements need to be redeemed, the interconnection studies will have to be redone, and some permits and agreements may not be assignable. In addition, any equitable remedy should take into account the fact that Indeck would benefit from the $10-plus million Defendants have invested in the projects.



46 of 48

DATED:

67740290 v5 {00110899}

New York, NY August 29, 2019

/ -· George Brun~ , Anna Hadjikow, Esq. BRUNELLE & HADJfKOW, P.C. 39 Broadway, 33rd Floor New York, New York 10006 (2 12) 809-9100 (Tel.) (212) 809-3219 (Fax) gbrunelle@brunellelaw .com ahadj ikow@brunellelaw .com

FREDRIKSON & BYRON, P.A. Terrence J. Fleming, Esq. Sandra Smalley-Fleming, Esq. Jonathan P. Baker, Esq. 200 South Sixth Street, Suite 4000 Minneapolis, MN 55402 (612) 492-7000 [email protected] ssmalleyflem ing@fredlaw .com j baker@fred law .com

ATTORNEYS FOR DEFENDANTS

-41 -



47 of 48

CERTIFICATE OF COMPLIANCE

Pursuant to Commercial Division Ru le 17, I hereby certify that this memorandum contains 11,998 words, not counting the caption, table of contents, table of authorities, signature block, and this certificate. Word counts were performed using Microsoft Word 2013.

DATED: August 29, 201 9 New York, NY

-42-

/ r ,

AnnaHadjiko~ Brunelle & Hadjikow, P.C. 39 Broadway, 33rd Floor New York, NY I 0006



48 of 48

2019 06:38 pm

Documents