In the United States Court of Federal Claims
                                       No. 19-612T

                                  (Filed: October 6, 2020)

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                                    *
PACIFIC WIND, LLC,                  *
                                    *             Subject-Matter     Jurisdiction;   The
                    Plaintiff,      *             American Recovery and Reinvestment
                                    *             Act of 2009 Section 1603; Article III
v.                                  *             Standing; Motion to Dismiss; RCFC
                                    *             12(b)(1);     Redressability;    Direct
THE UNITED STATES,                  *             Economic Interest; Injury in Fact;
                                    *             Indemnification Agreement.
                    Defendant.      *
                                    *
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Keith Martin, Norton Rose Fulbright US LLP, Washington, D.C., with whom were Seth
M. Kruglak and Robert Kirby, New York, New York, and Amanda L. Rosenberg, Los
Angeles, California, for Plaintiff Pacific Wind, LLC.

Bart D. Jeffress, Attorney of Record, with whom were Richard E. Zuckerman, Principal
Deputy Assistant Attorney General, David I. Pincus, Chief, G. Robson Stewart, Assistant
Chief, and Katherine Powers, Trial Attorney, Justice Department Tax Division, Court of
Federal Claims Section, Washington, D.C., for Defendant.

                                 OPINION AND ORDER

WHEELER, Judge.

       This case centers on the Government’s obligation to pay a cash grant due to Plaintiff
for investing in a wind farm in California. Under Section 1603 of the American Recovery
and Reinvestment Act of 2009 (the “Recovery Act”), Pub. L. No. 111-5, 123 Stat. 115,
Plaintiff Pacific Wind, LLC (“Pacific Wind”) is entitled to a 30 percent credit of the dollar
amounts invested in grant-eligible assets. Congress enacted § 1603 to encourage the
construction of alternative energy production facilities.
       Pacific Wind is the owner of a wind farm in Kern County, California (“the Project”)
and leased it to a subsidiary of EDF Renewable Energy, Inc. (“EDF”). In 2012, Pacific
Wind and the Project were sold to PacWind Holdings Lessor Trust (“PacWind”) in a sale-
leaseback transaction. In this transaction, PacWind purchased Pacific Wind and the Project
and then leased the Project back to an EDF subsidiary for a term of approximately 20 years.

       After placing the wind farm in service, Pacific Wind applied for over $100 million
in § 1603 grants. In its application, Pacific Wind used an independent appraiser Marshall
& Stevens and included an opinion from an independent auditor Ernst & Young, validating
the claimed grant-eligible costs. Ultimately, the Treasury disallowed $1,904,760 in
extended warranties costs and $372,109 in “soft costs and part of the purchase price paid
by the Lessor Parent that Treasury allocated to the extended warranty.”1 Compl. ¶ 44.

        Pacific Wind commenced this action on April 24, 2019, alleging that the
Government underpaid them by over $8.4 million when it made a grant to Pacific Wind
pursuant to § 1603. The Government has moved to dismiss the complaint for lack of
subject-matter jurisdiction. According to the Government, Pacific Wind lacks standing
because when Pacific Wind was sold, the non-party seller agreed to indemnify Pacific
Wind for any § 1603 grant shortfall. Essentially, the Government argues that an
indemnification agreement prohibits a plaintiff from making a claim against the party who
inflicted the injury.

        In response, Pacific Wind asserts that it has standing because the “Treasury injured
Plaintiff by refusing to pay the amounts to which Plaintiff is entitled” under § 1603. Dkt.
No. 17 at 21. Pacific Wind further argues that its “agreement to use such funds to repay
its indemnitor is irrelevant to its standing to sue for wrongdoing under binding Supreme
Court precedent.”

to Pacific Wind is not affected by the fact that Pacific
Wind had an indemnification agreement with EDF. Accordingly, the Government’s
motion to dismiss under Rule 12(b)(1) for lack of subject-matter jurisdiction is DENIED.

                                          Background

       Section 1603 of the Recovery Act allows the Treasury to provide “Grants for
Specified Energy Property In Lieu of Tax Credits.” 26 U.S.C. § 48. Effectively, it
reimburses individuals or entities for a percentage of the cost of placing specified energy
property such as wind farms, into service.

 Pacific Wind “does not dispute the remaining cash grant shortfall for which it applied that
Treasury has attributed to extended warranties.” Compl. ¶ 59.

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        Pacific Wind, LLC, is a special-purpose Delaware limited liability company and
owns the windfarm project at issue. Compl. ¶¶ 8, 25. Pacific Wind spent $319,597,539
developing the 140-megawatt wind farm in Kern County, California. Compl. ¶¶ 4, 30.
Pacific Wind is owned by PacWind Holdings Lessor Trust, a Delaware statutory trust that
is not a party to this suit.

       On September 7, 2012, when the windfarm was nearly completed, the developer,
EDF Renewable Energy, Inc., sold Pacific Wind to one of its subsidiaries, EDF Renewable
Asset Holdings, Inc., as part of a sale-leaseback transaction.

At the time of
the sale-leaseback transaction, Pacific Wind had not yet applied for its anticipated § 1603
cash grant. Dkt. No. 11 at 11. EDF Renewable Asset Holdings, Inc. then resold Pacific
Wind to PacWind Holdings Lessor Trust, whose equity holders are tax equity investors.

price was $351,557,293, an amount appraiser Marshall & Stevens
determined to be the fair market value using a replacement cost and income analysis.

Pacific Wind then leased the Project to another subsidiary of developer EDF,
Pacific Wind Lessee, LLC.

As part of the transaction, the lessee agreed to
indemnify Pacific Wind for any § 1603 shortfall. Dkt. No. 16, Ex. 1 at A0087. Pacific
Wind then promised to reimburse any recovery to EDF should there be a shortfall. Dkt.
No. 17 at 6.

        On September 14, 2012, Pacific Wind applied for a § 1603 cash grant of
$101,135,896 before sequestration, which is equal to thirty percent of $337,119,654, the
purchase-price basis of its eligible property. Compl. ¶¶ 38, 40. To establish its eligibility
for the Recovery Act’s cash grant, Pacific Wind submitted applications and an independent
appraisal conducted by Marshall & Stevens and a “Report of Independent Accountants”
from Ernst & Young LLP. Compl. ¶¶ 39, 41. The Department of Treasury, however,
reduced the award to $91,252,173,2 corresponding with an eligible basis of $304,173,910.3
Compl. ¶ 42. According to Pacific Wind, the Treasury’s reduced eligible basis equals the
“bare cost to build the eligible portion of the Project with zero profit allowed on the sale of
the project at the end of construction to the Lessor Parent.” Compl. ¶¶ 41–42. Notably,
the Government does not dispute that the Treasury underpaid Pacific Wind’s § 1603 grant.




2
  Section 1603 grants during this time were subject to an 8.7 percent reduction for sequestration,
bringing the final award to $83,313,235.
3
  Originally, on April 26, 2013, the Treasury awarded Pacific Wind $83,061,583. A month later
the Treasury supplemented the award with $251,652, citing an error in its original calculations.
Compl. ¶¶ 41, 43.


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                                           Analysis

   I.        Standard of Review

        In reviewing a motion to dismiss for lack of subject-matter jurisdiction under Rule
12(b)(1) of the Rules of the Court of Federal Claims (“RCFC”), the Court “accepts as true
all uncontroverted factual allegations in the complaint, and construes them in the light most
favorable to the plaintiff.” Essex Exp. Lines v. United States, 

, 692 (Fed. Cir.
2014). The Court's task in considering a jurisdictional challenge is a limited one, and
considers not whether the plaintiff will ultimately prevail, but “whether the claimant is
entitled to offer evidence to support the claims.” Forest Prods. Nw., Inc. v. United States,

, 120 (2004). Where subject-matter jurisdiction is challenged, the plaintiff
must establish the Court's jurisdiction by a preponderance of the evidence. See Reynolds
v. Army & Air Force Exch. Serv., 

, 748 (Fed. Cir. 1988).

        A.    Tucker Act

       Under the Tucker Act, the Court can hear any claim that is “founded either upon the
Constitution, or any Act of Congress or any regulation of an executive department, or upon
any express or implied contract with the United States, or for liquidated or unliquidated
damages in cases not sounding in tort.” 28 U.S.C. § 1491. The Tucker Act “does not create
a substantive cause of action; in order to come within the jurisdictional reach and the waiver
of the Tucker Act, a plaintiff must identify a separate source of substantive law that creates
the right to money damages.” Fisher v. United States, 

, 1172 (Fed. Cir.
2005). “In the parlance of Tucker Act cases, that source must be ‘money-mandating.’”

has held that § 1603 is “money mandating,” and that it has
jurisdiction over § 1603 disputes. See W.E. Partners II, LLC v. United States, 

, 690 (2015), aff’d, 636 F. App’x 796 (Fed. Cir. 2016); LCM Energy Sols. v. United
States,107 Fed. Cl. 770, 772 (2012).

        B.     Standing Requirements

         Standing is a threshold jurisdictional issue that must be met before a case may
proceed on the merits. See Myers Investigative & Sec. Servs., Inc. v. United States, 

, 1369 (Fed. Cir. 2002). “The Court of Federal Claims, though an Article I court
. . . applies the same standing requirements enforced by other federal courts created under
Article III.” Anderson v. United States, 

, 1350 n.1 (Fed. Cir. 2003). To
establish standing, a plaintiff must show: (1) that it has suffered an “injury in fact,” an
invasion of a legally protected interest that is “(a) concrete and particularized, and (b) actual
or imminent, not conjectural or hypothetical,” (2) that there is a “causal connection between
the injury and the conduct complained of,” and (3) that the injury is likely to be redressed
by a favorable decision. Lujan v. Defs. of Wildlife, 

, 560–66 (1992).


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   II.        Pacific Wind Has Standing to Bring Its Claim in This Court

        In its motion to dismiss, the government asserts that Pacific Wind lacks standing to
pursue its claim because a non-party, EDF, indemnified Pacific Wind for the § 1603 cash
grant shortfall. Dkt. No. 16 at 19. The Government posits that where a third party “already
had paid plaintiff for the § 1603 cash grant shortfall . . . plaintiff was not suffering any
actual harm.” Dkt. No. 16 at 19. Notably, the Government does not dispute that it
underpaid Pacific Wind and concedes that had the seller of Pacific Wind not included an
indemnification clause in its sale, “the analysis would be different.”

n.7. The
Government emphasizes that Pacific Wind’s injury has already been redressed and “the
fact that the $8,400,203 injury was paid by EDF Renewable Energy and not Treasury does
not change the fact that plaintiff is no longer suffering a harm.”

The Government,
therefore, contends that a favorable judicial decision would not “redress” any injury that
Pacific Wind might have suffered because any monetary award would go to EDF. As a
result, the Government concludes that Pacific Wind has “no stake” in the litigation and
lacks standing.

that it suffered a particularized injury when it applied for a cash
grant and the Government refused to pay the full amount it was entitled to under § 1603.
Pacific Wind further argues that the litigation will redress its injury as the Government is
required to “pay what [it] owe[s].” Dkt. No. 17 at 16 (quoting Sprint Commc’ns Co., L.P.
v. APCC Servs., Inc., 

, 274 (2008)). Further, Pacific Wind argues that the
fact a third-party has indemnified it for the shortfall is immaterial. In support, Pacific Wind
cites several cases supporting its claim that “federal courts routinely entertain suits which
will result in relief for parties that are not themselves directly bringing suit.” Dkt. No. 17
at 18 (quoting 

). Accordingly, Pacific Wind argues that its
indemnity agreement does not affect its standing.

         A.    Injury in Fact

       The Government argues that Pacific Wind’s § 1603 application did not create a
binding contract with the Government, therefore depriving Pacific Wind of standing. Dkt.
No. 18 at 20. The Government maintains that because § 1603 does not create a contract,
Pacific Wind is not entitled to any “rights” or “benefits.”

Government
cites ARRA Energy Co. I v. United States, 

(2011), which found that a § 1603
grant application does not create an “express contract.”

Notably, in ARRA
Energy Company, the Court dismissed plaintiff’s breach of contract claim (a claim Pacific
Wind does not bring in this case) and permitted plaintiff to proceed with its claim that the
Government violated § 1603.

that the Government violated its mandatory obligation to
award reimbursement grants to it under § 1603. According to Pacific Wind, it was entitled
to receive $100,452,835.50, which is 30 percent of $334,842,785, its eligible basis in the

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Project. Ultimately, the Treasury only paid $91,252,173, creating a shortfall of
approximately $8,400,203 after sequestration. Compl. ¶ 59. Pacific Wind notes that the
Government does not dispute that the amount paid to Pacific Wind was $8.4 million less
than the amount requested; rather, it merely tries to shift the burden of recouping that
money to non-party EDF. Dkt. No. 17 at 14–15.

       Pacific Wind clearly satisfies the standing requirements. The Government “may
indeed be obliged to follow a statute or regulation regardless of whether it has a contractual
duty to perform.” ARRA Energy Co. 

(quoting Hanlin v. United States,

, 1331 (Fed. Cir. 2003)). Pacific Wind bases its suit upon a concrete and
particularized “injury in fact,” namely, the Treasury’s failure to pay the full cash grant
amount Pacific Wind was allegedly entitled to under § 1603.

       B.   Identity of Indemnifier

       The Government next argues that the cases cited by Pacific Wind involve insurance
subrogation, which it asserts is inapplicable to this case as EDF is not an insurer. Dkt. No.
18 at 6. The problem with this argument is that the Government is trying to arbitrarily
narrow prior holdings to the insurance context. There is no reason the principle that
indemnification is immaterial to standing cannot be applied in the sale-leaseback context.
Cf. Am. Mar. 

; Quarles Petroleum Co. v. United States, 

, 1207 (Ct. Cl. 1977). A breaching party cannot deny a plaintiff’s rights on the grounds
that plaintiff entered into an indemnification agreement with a third party. See Philip
Morris & Co. to Use of Aetna Ins. Co. v. United States, 

, 168 (Ct. Cl.
1957); see also Kawa v. United States, 

, 300 (2007).

       The Government concedes that in some instances, a plaintiff may still have standing
despite a third-party’s reimbursement. Dkt. No. 18 at 19–20. In its reply brief, the
Government admits that this Court allowed a plaintiff who had been reimbursed by an
insurance provider to proceed with its case because it was “the government’s own breach
of contract that had caused the loss.” Dkt. No. 18 at 19–20 (citing N. Slope Tech., Ltd. v.
United States, 

(1992)). The only rationale offered by the Government for
distinguishing that case is the third party here was not an insurer but rather a non-party
lessee of the wind farm. The Court, however, is not convinced. None of the decisions
addressing third-party reimbursement purport to limit their holdings to the insurance
context. Moreover, not every case cited by Pacific Wind is limited to the insurance context.
See Philip 

(plaintiff reimbursed by a trucking company).

        Accordingly, the Government is not absolved from its liability merely because EDF
indemnified Pacific Wind. The Government caused Pacific Wind’s harm. Pacific Wind’s
injury is directly related to the Treasury’s refusal to make the full payment under § 1603.
It is irrelevant that Pacific Wind was reimbursed under an indemnification agreement.


                                              6
Notably, the Government loses nothing should it be required to pay Pacific Wind the
shortfall—money which it has no equitable right to retain.

       C.   Redressability

        The Government’s argument that Pacific Wind cannot satisfy the redressability
requirement because it will provide any recovery to EDF misconstrues the redressability
inquiry. The redressability inquiry “focuses on whether the injury that a plaintiff alleges
is likely to be redressed through the litigation—not on what the plaintiff ultimately intends
to do with the money recovered.” 

(emphasis in original); see also
Am. Mar. Transp., Inc. v. United States, 18 Cl. 283, 292 (1989).

        The Government cannot “step into the shoes” of Pacific Wind and reap the benefits
of Pacific Wind’s indemnification agreement with EDF. N. Slope Tech., 

. The fact that Pacific Wind recovered money under an indemnification agreement
with a third party in no way lessens the degree of harm caused by the Treasury’s actions.
Cf. In re Upstream Addicks & Barker (Texas) Flood-Control Reservoirs, 

,
253 (2019) (holding that insurance money in a takings claim “has little bearing on whether
the government effected a taking initially”); N. Slope 

(“[A]cceptance of a given amount from the insurance company…did not affect the right of
the plaintiff to recover . . . .”); Am. Mar. 

(noting plaintiff’s
business relationship with third party—the ultimate recipient of any damages—might also
be injured should it not recover damages from the Government).

        The Government also argues that Pacific Wind is not “exercising legal rights
originating from an insurance or subrogation contract.” Dkt. No. 16 at 16. The
Government, however, offers no convincing reason why the type of contractual
relationship should impact a plaintiff’s ability to satisfy Article III’s standing requirements.
There is no rule that prevents Pacific Wind from suing for the benefit of EDF, who
absorbed the loss. See, e.g., United States v. Am. Tobacco Co., 

(1987)
(allowing plaintiff to recover from the Government the value of its stamps destroyed by a
fire for the benefit of its insurance carriers); S.W. Aircraft Inc. v. United States, 

, 1210 (Ct. Cl. 1977) (holding aircraft owner’s receipt of insurance proceeds did not
bar suit against Government). What Pacific Wind does with the proceeds after the suit
should not concern the Government. See Hughes Commc’ns Galaxy, Inc. v. United States,

, 581 (1997), aff'd, 

(Fed. Cir. 2001). In short, the
Government gains no immunity for its actions by relying on an agreement to which it was
not a party. Pacific Wind’s indemnification agreement with EDF is immaterial to the
Government’s liability and does not impact Pacific Wind’s right to recover the loss for
which the Government was responsible. See Chicago, St. Louis and New Orleans R.R. v.
Pullman S. Car Co., 

, 87 (1891).

                                             ***

                                               7
        None of the reasons offered by the Government for denying Pacific Wind’s standing
are convincing. The Government caused Pacific Wind injury and this litigation will redress
that injury should Pacific Wind be successful. Pacific Wind therefore has standing to sue.

                                    CONCLUSION

      For the reasons set forth above, the Court DENIES the Government’s motion to
dismiss.

IT IS SO ORDERED.
                                                s/Thomas C. Wheeler
                                                THOMAS C. WHEELER
                                                Judge




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