JILL N. PARRISH, District Judge.
This matter comes before the court on the Motion for Summary Judgment filed on November 3, 2017 by Defendants Alan E. Hall, Tempus Global Data, Inc., and Island Park Group of Companies, LLC (the "Hall Defendants"). (ECF No. 524).
The court held a hearing on this motion on July 27, 2018. On the basis of that hearing, the parties' memoranda and associated exhibits, a review of relevant law, and for the reasons below, the Hall Defendants' Motion for Summary Judgment is granted in part and denied in part.
In the early 2000s, the Utah State University Research Foundation ("USURF") developed a new weather system sensor. The development of the sensor—the Geosynchronous Imaging Fourier Transform Spectrometer, or the GIFTS sensor for short—was funded by the National Aeronautics and Space Administration ("NASA") and the National Oceanic and Atmospheric Administration ("NOAA"). The GIFTS sensor was designed to provide high-resolution atmospheric data that would significantly improve weather forecasting.
David Crane and Gene Pache founded GeoMet in 2008. They envisioned that GeoMet would employ sensors, like the GIFTS sensor, that would provide unique and proprietary weather data. To this end, GeoMet obtained a verbal commitment from NASA that GeoMet could have the GIFTS sensor.
In September 2010, GeoMet received a remote sensing license from the Department of Commerce and NOAA (the "NOAA license"). GeoMet was the first company to obtain this type of license. The NOAA license allows GeoMet to operate up to six satellite sensors, like the GIFTS sensor, in geosynchronous orbit, take detailed weather observations, and commercialize the data.
Beginning in late 2009 and early 2010, before GeoMet obtained the NOAA License, GeoMet had discussions with USURF. GeoMet and USURF discussed whether USURF could build a commercial version of the GIFTS sensor. The commercial version of the GIFTS sensor is called the Sounding and Tracking Observatory for Regional Meteorology or the STORM sensor for short. USURF eventually agreed to build the STORM sensor.
GeoMet and USURF entered into a number of agreements concerning the STORM sensor. One of those agreements was the Preferred Service Provider Agreement. In April 2013, GeoMet and USURF terminated the Preferred Service Provider Agreement so that Utah State University Advanced Weather System Foundation ("AWSF"), a subsidiary of USURF, could take responsibility for building the STORM sensor.
Throughout 2011 and afterwards, GeoMet worked to identify potential customers that were willing to execute letters of intent and memoranda of understanding. This was an expensive and time-consuming process. GeoMet, in 2011, entered into a nonbinding License and Services Agreement with a Chinese data company. This agreement reflects that the company was willing to buy $8.9 million of weather data per month (i.e., $108 million per year). Ultimately, however, the company entered into a contract with GeoMet under which it committed to purchase only $300,000 of weather data per month (i.e., $3.6 million per year). GeoMet obtained multiple other letters of intent, but none led to the execution of firm commitments.
AsiaSat, a foreign entity based in Hong Kong, operates satellites and sells space on its satellites to broadcasting and telecommunication companies. In early 2012, GeoMet and AsiaSat began to discuss whether AsiaSat could host the STORM sensor on one of its satellites. Specifically, GeoMet and AsiaSat discussed whether AsiaSat could host the STORM sensor on a satellite referred to as AsiaSat 9.
GeoMet and AsiaSat also discussed whether AsiaSat could use its balance sheet to secure a loan of about $170 million from the Export-Import Bank of the United States (the "EXIM Bank").
Because of the high cost associated with constructing, launching, and hosting the STORM sensor, AsiaSat was concerned about its "exposure" in doing a deal with GeoMet. Specifically, AsiaSat was worried that it would take out a loan with the EXIM Bank, GeoMet's business would fail, and AsiaSat "would be on the hook to pay off the debt."
Because of these concerns, GeoMet and AsiaSat came to an understanding that, before AsiaSat would agree to take out a loan from the EXIM Bank, GeoMet would be required to provide a guarantee or "backstop" that would secure AsiaSat in the event that GeoMet was unable to pay back the loan. According to AsiaSat's CEO, "[t]he key element was always [that GeoMet] provide a guarantee that eliminated [AsiaSat's] risk . . . ."
In early 2013, AsiaSat commenced the initial application steps for securing a loan from the EXIM Bank (the "Proposed EXIM Loan").
In 2012 and early 2013, GeoMet expressed a desire to enter into a formal agreement with AsiaSat. GeoMet believed that a formal agreement would legitimize the cooperation between the two companies, making it easier for GeoMet to obtain guarantees for the Proposed EXIM Loan.
On April 3, 2013, GeoMet and AsiaSat executed a Cooperation Agreement. Under the Cooperation Agreement, AsiaSat agreed to use "reasonable efforts" to cause the EXIM Bank to close the Proposed EXIM Loan. But before AsiaSat was required to do so, GeoMet was required to meet certain conditions, two of which are relevant here. Section 2.2.1 of the Cooperation Agreement provides:
One of the purposes of the Convertible Note described in Section 2.2.1(b) was to provide AsiaSat a mechanism to obtain equity in GeoMet. But GeoMet's attorneys were "against" GeoMet issuing a convertible note to AsiaSat because it would make the STORM collateral for the Proposed EXIM Loan. And GeoMet knew that "NOAA would not accept that." AsiaSat nevertheless refused to "back off" on the convertible-note requirement. Eventually, GeoMet's attorney refused to approve the convertible note because it was "too onerous."
The CEO of AsiaSat described GeoMet's obligation to provide a guarantee or backstop for the Proposed EXIM Loan as "the basis for the agreement" and a "key element" of the Cooperation Agreement. GeoMet also understood that obtaining a guarantee or backstop for the Proposed EXIM Loan was "critical" to AsiaSat.
Under the Cooperation Agreement, AsiaSat could terminate the agreement "at any time after the Cut-off Time, by written notice to [GeoMet], if the conditions set forth in Article 2.2.1. . . [were] not fulfilled on or prior to the Cut-off Time." The Cut-off Time was July 31, 2013. GeoMet and AsiaSat agreed that the Cut-off Time could only be modified by a written agreement.
In April 2013, after GeoMet and USURF terminated the Preferred Service Provider Agreement, GeoMet and AWSF entered into a Preferred Provider Agreement. The Preferred Provider Agreement provides that GeoMet "shall enter into, maintain, and fulfill . . . the October 1, 2013 [Storm 001 Contract]" and that "[m]aintenance of the . . . contract specifically includes complying with the payment schedule set forth [in the contract]."
Under the Preferred Provider Agreement, AWSF could terminate the agreement by giving written notice of default to GeoMet if, among other things, GeoMet failed to comply with the payment schedule set forth in the Storm 001 Contract. The termination would be effective thirty days after AWSF provided written notice unless GeoMet cured the default.
On October 1, 2013, GeoMet and AWSF executed the STORM 001 Contract referenced in the Preferred Provider Agreement. The STORM 001 Contract contains a payment schedule under which GeoMet was required to "ensure adequate funding to comply with the Milestone Payment Schedule."
Under the Milestone Payment Schedule, GeoMet was required to pay to AWSF a total of $124,933,872. GeoMet was required to make its first payment of $5,384,022 on January 6, 2014. GeoMet knew that AWSF could not build the STORM sensor unless GeoMet provided the funding.
The Storm 001 Contract defined an "Event of Default" as, among other things, when "GeoMetWatch fails to pay when due any amount payable under th[e] contract." "During the continuance of any Event of Default, AWSF may, by notice to [GeoMet], (i) discontinue performing its obligations under th[e] contract, and (ii) terminate th[e] contract."
In July 2013, it became apparent that GeoMet would not be able to provide a guarantee or backstop for the Proposed EXIM Loan before the July 31, 2013, Cut-off Time. Accordingly, AsiaSat and GeoMet extended the Cut-off Time to September 30, 2013.
On July 29, 2013, AsiaSat informed GeoMet that it was not filing the Federal Register notice for the Proposed EXIM Loan and that it was not going to submit the Proposed EXIM Loan to the EXIM Bank for board approval.
AsiaSat informed GeoMet that "[t]he only outstanding thing [was] the guarantee, which is also the most sensitive one. [AsiaSat] would proceed with the filing to the Federal Register as soon as [it] ha[d] more clarity on the guarantee." AsiaSat's CEO informed GeoMet in an email:
AsiaSat told the EXIM Bank to stop entirely the process related to the Proposed EXIM Loan. GeoMet discussed with AsiaSat alternatives whereby GeoMet would not be required to meet its obligations set forth in the Cooperation Agreement. But AsiaSat did not agree to any of the proposed alternatives.
In September 2013, AsiaSat and GeoMet again extended the Cut-off Time, to November 30, 2013. On November 24, 2013, a week before the Cut-off Time, GeoMet asked AsiaSat if there were "another way to structure the deal" and if "AsiaSat would support [AWSF] for a month or two." AsiaSat informed GeoMet that it was "unable to engage any funds nor . . . willing to trigger the Ex-Im loan until a guarantee is in place . . . ."
As of November 30, 2013, GeoMet had neither provided to AsiaSat the Convertible Note (as was required by Section 2.2.1(b) of the Cooperation Agreement), nor a guarantee or backstop for the Proposed EXIM Loan (as was required by Section 2.2.1(c) of the Cooperation Agreement). Because of GeoMet's inability to meet these requirements, AsiaSat did not proceed with the approval process for the EXIM Loan.
On September 20, 2013, shortly after GeoMet and AsiaSat extended the Cut-Off Time a second time, GeoMet's attorney introduced GeoMet's then-CEO to Alan Hall. AWSF and USURF encouraged GeoMet to meet with Mr. Hall because they believed that he could provide the backstop funding for the Proposed EXIM Loan or locate someone who could. AWSF and USURF assured GeoMet that Mr. Hall was required to treat information related to the STORM sensor as confidential. Accordingly, GeoMet made confidential business and technical information available to Mr. Hall and his team.
On November 3, 2013, Mr. Hall sent an email to AsiaSat's CEO. Mr. Hall explained that GeoMet was "in trouble" and that it was contractually obligated to pay AWSF $6 million on January 6, 2014, and another $8 million in February. Mr. Hall further explained that he was prepared to obtain a NOAA license, similar to GeoMet's, if GeoMet failed to pay AWSF. Mr. Hall proposed that he and AsiaSat become equal partners in a business of which Mr. Hall would own 42 percent and AsiaSat would own 42 percent. Utah State University ("USU") would own 1 percent, and employees would own 15 percent (in the form of stock options). Finally, Mr. Hall wrote: "USU and [AWSF] love this plan and will happily discuss it with you. I have not broached this matter with [GeoMet] and ask you to not speak with me in the near term."
Three days later, on November 6, 2013, GeoMet and Mr. Hall, on behalf of Island Park, executed a Mutual Non-Disclosure Agreement (the "Mutual NDA"). Under the Mutual NDA, Island Park agreed that it would use GeoMet's confidential information only to facilitate "technical and commercial discussions relating to the development and distribution of environmental observation systems and/or services of GeoMetWatch." Island Park further agreed that it would "not disclose to any other person or entity any Confidential Information, or that discussions are taking place between the parties concerning the Confidential Information . . . ."
On January 6, 2014, GeoMet failed to make the first milestone payment of $5,384,022 to AWSF. The next day, AWSF notified GeoMet that its failure to make the $5,384,022 payment constituted (1) an Event of Default under the Storm 001 Contract and (2) a material breach of the Preferred Provider Agreement. Consequently, AWSF notified GeoMet that it was (1) terminating the Storm 001 Contract and discontinuing performance under the contract and (2) terminating the Preferred Provider Agreement on the condition that GeoMet did not cure the breach within thirty days. GeoMet failed to cure the breach, and AWSF terminated the Preferred Provider Agreement.
In January 2014, AsiaSat and GeoMet discussed the status of AsiaSat 9 and deployment of the STORM sensor. At this time, AsiaSat notified GeoMet that the terms of the Cooperation Agreement still applied to any potential deal between the two entities. AsiaSat and GeoMet did not agree to extend the Cut-off Time.
Sometime in early 2012, GeoMet had discussions with a non-USU-related engineering and manufacturing entity (the "American Manufacturer") to determine whether that company could act as either the primary or secondary source for construction of the STORM sensor. In February of 2014, following its termination by AWSF, GeoMet approached AsiaSat with a proposal involving the American Manufacturer constructing the sensor. But AsiaSat indicated that it would need something concrete from that entity before it considered whether to re-engage GeoMet before the AsiaSat 9 launch.
The American Manufacturer was concerned about GeoMet's "financial backing to pay [the American Manufacturer] to go forward with [building] an instrument." The American Manufacturer believed that GeoMet was "running out of money and desperate using [it] to get money from Asia to survive." The American Manufacturer never agreed to act as a guarantor for the Proposed EXIM Loan.
In February 2014, GeoMet entered into a Time and Materials Purchase Agreement with the American Manufacturer. That company agreed to "figure out integration of its existing [sensor] model with what [GeoMet] needed." In exchange, GeoMet agreed to pay the manufacturer $500,000. The Time and Materials Purchase Agreement was not an agreement to construct a STORM sensor, or any other type of sensor.
In March 2014, GeoMet, together with the American Manufacturer's management, met with AsiaSat. GeoMet presented the idea that the American Manufacturer would construct the STORM sensor. AsiaSat rejected the proposal and made no commitment to GeoMet. AsiaSat believed that switching sensor providers was risky and "that it was problematic the guarantee was still not in place." AsiaSat never agreed to launch a sensor built by the American Manufacturer. In April 2014, the American Manufacturer recognized that a hurdle to GeoMet creating a viable venture included "[h]aving the sufficient investment and funding to go forward with the project."
On April 16, 2014, AsiaSat formally terminated the Cooperation Agreement. According to AsiaSat's CEO, the Hall Defendants did not pressure AsiaSat to terminate the Cooperation Agreement. AsiaSat's decision was unrelated to the Hall Defendants. The American Manufacturer learned that AsiaSat terminated the Cooperation Agreement and understood that AsiaSat did so based on GeoMet's inability to raise capital.
Tempus was formally created on December 20, 2013. The Hall Defendants used GeoMet's confidential information to create for Tempus the same types of documents that were in existence for GeoMet: the Tempus Executive Summary, the Tempus Business Plan, the Tempus Revenue Model, a NOAA License Application, and the Commercial Weather Market Data Report.
One of the members of Mr. Hall's team explained that she "happened to download a [GeoMet] business plan before [GeoMet] took it down." She went on to explain that she would "pull information from [GeoMet's business plan]," knowing that Tempus would need to "reword and personalize it to Tempus." Tempus used GeoMet's revenue models to create financial models for Tempus. And Tempus, like GeoMet, obtained a license from NOAA, pursued a business relationship with AsiaSat, and sought to obtain a loan from the EXIM Bank.
On April 1, 2014, Tempus announced that it had opened operations in Utah to deliver a hyperspectral weather sensor and that it was in the final stages of securing a NOAA license. On April 25, 2014, Mr. Hall, Tempus, AWSF, and others filed suit against GeoMet, claiming to own the intellectual property at issue in this case.
In May 2014, GeoMet ran out of money. No further investments were made in GeoMet. In June 2014, the American Manufacturer ordered its employees to stop work related to the Time and Materials Purchase Agreement because GeoMet had not made the payments required under the agreement.
In September 2014, the American Manufacturer would have been willing to proceed with GeoMet had there been a credible source of funding. GeoMet resumed discussions with the American Manufacturer in 2015, but nothing resulted from the discussions.
Around June 2016, Tempus ceased all operations. Since then, Tempus has not pursued any business opportunities and has no employees and no operating capital. Tempus never generated revenue. Tempus never paid a salary, dividend, distribution, or compensation of any kind.
Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The movant bears the initial burden of demonstrating the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has met this burden, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (citation omitted). To do so, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
When the nonmoving party bears the burden of proof at trial on a dispositive issue, that party must "go beyond the pleadings" and designate specific facts so as to "make a showing sufficient to establish the existence of an essential element to that party's case." Celotex, 477 U.S. at 322. "[T]he plain language of Rule 56(c) mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Liberty Lobby, Inc., 477 U.S. at 249. And, "[t]o defeat a motion for summary judgment, evidence, including testimony, must be based on more than mere speculation, conjecture, or surmise." Pioneer Ctrs. Holding Co. Emp. Stock Ownership Plan & Tr. v. Alerus Fin., N.A., 858 F.3d 1324, 1334 (10th Cir. 2017) (quoting Bones v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th Cir. 2004)).
Finally, summary judgment is not a "disfavored procedural shortcut" but rather "an integral part of the Federal Rules as a whole" that is designed "to secure the just, speedy and inexpensive determination of every action." Celotex, 477 U.S. at 322. (quoting Fed. R. Civ. P. 1).
The Hall Defendants argue that there is insufficient evidence of causation to sustain a damages award for lost profits. Specifically, the Hall Defendants seek a ruling that, as a matter of law, GeoMet cannot recover lost profits damages under any of its claims for relief.
GeoMet's Second Supplemental Damages Disclosure articulates the three damages theories under which it seeks lost profits damages. While the Hall Defendants identify specific defects in each theory, their general argument is that GeoMet cannot adduce evidence from which a reasonable jury could conclude that the Hall Defendants were the cause of GeoMet's alleged lost profits.
During oral argument on this motion, the court questioned whether a ruling on the admissibility of plaintiff's expert testimony might facilitate resolution of the motion. But after reviewing plaintiff's experts' reports, the court has concluded that plaintiff's expert testimony is not material to the resolution of this motion because the evidence in this case is simply insufficient to support a conclusion that the defendants caused GeoMet any damage. Stated differently, even assuming that a Daubert hearing on GeoMet's experts resulted in a ruling that their opinions were admissible, those opinions are insufficient to establish a causal nexus between defendants' conduct and GeoMet's claim for lost profits. Consequently, in pursuit of the "just, speedy, and inexpensive determination" of this action, the court declines to hold Daubert hearings, finding that they could not alter the court's conclusion that the Hall Defendants are entitled to summary judgment on the issue of damages. See Fed. R. Civ. P. 1. The Daubert motions are therefore denied as moot. (ECF Nos. 626, 628, 632, 636, 641, 643, 648, and 652).
GeoMet and its experts concede that the expert testimony they seek to present at trial is based on certain assumptions. For example, the expert opinions simply "assume" that GeoMet would have been able to secure funding for its venture despite its inability to do so before the Hall Defendants arrived on the scene.
Setting aside the speculation inherent in GeoMet's damages theories, there remains a lack of evidence suggesting that the cause of the venture's failure was the conduct of the defendants. With one exception, GeoMet's experts do not opine that the defendants' conduct was the cause of the lost profits GeoMet seeks,
In short, the testimony GeoMet's experts seek to offer (as well as the testimony of the experts offered by defendants in response) is material only if the defendants' conduct caused GeoMet's lost profits. But the evidence supporting this conclusion is deficient and requires resort to speculation and conjecture that is inconsistent with observed events and the uncontroverted testimony of third parties. Thus, the expert testimony GeoMet proffers cannot defeat summary judgment.
Under Utah law, "[l]ost profits must be established with reasonable certainty." Cook Assocs., Inc. v. Warnick, 664 P.2d 1161, 1165 (Utah 1983). This requires "proof of `sufficient certainty that reasonable minds might believe from a preponderance of the evidence that the damages were actually suffered.'" Id. (quoting First Sec. Bank of Utah v. J.B.J. Freeyards, Inc., 653 P.2d 591, 596 (Utah 1982)). This requirement applies to proof of (1) the fact of lost profits, (2) causation of lost profits, and (3) the amount of lost profits. Id.
"The basic and general rule is that loss of anticipated profits of a business venture involve so many factors of uncertainty that ordinarily profits to be realized in the future are too speculative to base an award of damages thereon." First Sec. Bank, 653 P.2d at 596. While this is the general rule, the "pivotal question is not whether the plaintiff has proven an established earning record but whether he has proven the damages for lost profits with reasonable certainty, although the former is often relevant to the latter." Cook Assocs., 664 P.2d at 1166.
"A record of past earnings obviously increases the certainty with which one could predict future profits." Id. "But that fact should not automatically preclude new businesses from recovering lost profits . . . ." Id. Instead, "new businesses should be allowed to try to prove lost profits up to a reasonable level of certainty by other means, just as established businesses are permitted to do." Id. These means include "expert testimony of profit potential, evidence of the actual profits of similar businesses, and evidence of subsequent earnings of the business claiming lost profits." Id. at 1166 n.4.
Whether a defendant caused lost profits "is generally determined by an examination of the facts, and questions of fact are to be decided by the jury." Mahmood v. Ross, 990 P.2d 933, 938 (Utah 1999). "However, this does not mean that a jury is free to find a causal connection between a breach and some subsequent injury by relying on unsupported speculation." Id. And "[w]hen an injury may have come from either one of two causes, either of which may have been the sole proximate cause, it devolves on the plaintiff to prove by a preponderance of the evidence that the cause for which the defendant was liable was culpable and the proximate cause." Tremelling v. S. Pac. Co., 170 P. 80, 84 (Utah 1917) (quoting Edd v. Union Pac. Coal Co., 71 P. 215 (Utah 1903)).
Put another way, while a jury may make "deductions based on reasonable probabilities, `the evidence must do more than merely raise a conjecture or show a probability [as to proximate cause].'" Mahmood, 990 P.2d at 939 (quoting Sumsion v. Streator-Smith, Inc., 132 P.2d 680, 683 (Utah 1943)). "Where there are probabilities the other way equally or more potent[,] the deductions are mere guesses and the jury should not be permitted to speculate." Id. (citation omitted). Thus, "where `the proximate cause of the injury is left to conjecture, the plaintiff must fail as a matter of law.'" Id. (citation omitted). And though Utah law tolerates some uncertainty in fixing the amount of lost profits in favor of a start-up venture, this relaxed standard is triggered only once causation has been established. See Kilpatrick v. Wiley, Rein & Fielding, 37 P.3d 1130, 1146 (Utah 2001).
By its own admission, GeoMet's success in this venture required the cooperation of at least three other distinct entities: The EXIM bank, a commercial satellite partner (necessary both to host the instrument and to serve as the primary borrower for an EXIM loan), and an entity to construct the instrument.
GeoMet describes its first damages theory as follows:
In short, under its first theory, GeoMet contends it lost profits because the Hall Defendants prevented it from launching an AWSF-built STORM sensor on an AsiaSat satellite.
To have realized this opportunity, GeoMet needed AsiaSat to obtain a loan in excess of $100 million from the EXIM Bank. GeoMet would have used the proceeds from the loan to pay AWSF to build the STORM sensor. AsiaSat and GeoMet entered into the Cooperation Agreement under which AsiaSat agreed to use reasonable best efforts to obtain the Proposed EXIM Loan. But before AsiaSat was required to do so, GeoMet had to satisfy certain requirements, two of which are relevant here.
First, GeoMet was required to provide a backstop or guarantee for the Proposed EXIM Loan. This was a "key element" of the Cooperation Agreement because AsiaSat was unwilling to take out a loan in excess of $100 million unless GeoMet guaranteed repayment of the loan.
GeoMet appears to concede that it could not have obtained the required backstop. That is, GeoMet does not argue that it would have been able to obtain the backstop but for the Hall Defendants' actions. And there is no evidence that GeoMet was even partially successful in obtaining the backstop. Instead, GeoMet argues that the requirement was "flexible" and that AsiaSat, before the Hall Defendants interfered, was willing to remove it altogether. But the evidence on which GeoMet relies does not support its position.
First, GeoMet relies on a declaration from its president, David Crain, in which he states that "[p]rior to the Hall Defendants' introduction to [GeoMet], [AsiaSat officers] discussed . . . AsiaSat requiring less than the full backstop, or possibly waiving that condition entirely." Notably, this says nothing about whether AsiaSat was actually willing to require less than the full backstop or guarantee—it simply says that the matter was discussed. Put simply, Mr. Crain's declaration does not support the assertion that AsiaSat was willing to waive or reduce the backstop requirement. See Fed. R. Civ. P. 56(c)(1).
More importantly, the notion that AsiaSat was willing to waive or reduce the backstop requirement is contradicted by the deposition testimony of AsiaSat's then-CEO, Bill Wade, which is corroborated by contemporaneous email communications between Mr. Wade and GeoMet. Mr. Wade testified that the backstop requirement was "the key factor" of the Cooperation Agreement and that AsiaSat's board was not willing to "assum[e] the risk of a default on the EXIM loan." From the start, AsiaSat required a "watertight commitment that [it] [would] receive the necessary funds to make the EXIM repayments." In short, Mr. Wade made clear that AsiaSat was not willing to waive or reduce the backstop requirement.
Second, GeoMet relies on an email chain between Mr. Wade and Mr. Hall in its attempt to show that the backstop requirement was flexible. Mr. Hall asked whether it would be possible for him to "work directly with the Ex Im Bank" and noted that he "would assume the obligations." Mr. Wade responded, "As a US entity, you would not be able to work with EXIM. They only work with foreign companies for the export of US produced products." He went on, "If you are willing to explore the loan obligation[,] we can certainly work with you to come up with a workable solution that will kick start the project. I think once we confirm a number of commitments, the guarantee could be reduced and ultimately removed before any risk attaches."
In short, Mr. Wade suggests that AsiaSat was willing to reduce or remove the backstop requirement if (1) Mr. Hall was "willing to explore the loan obligation" and (2) AsiaSat "confirm[ed] a number of commitments." At best, the email suggests that AsiaSat was "flexible" with the backstop requirement if certain events transpired. But GeoMet has no evidence that it provided "a number of commitments" to AsiaSat, and everything Mr. Wade said was in response to Mr. Hall's suggestion that he would "assume the obligations."
The email does not support GeoMet's assumption that AsiaSat was willing to reduce or waive the backstop requirement without receiving anything in exchange. GeoMet simply reads eight words from the email—"the guarantee could be reduced and ultimately removed"—out of context. And most notably, the entire exchange took place after Mr. Hall had been introduced to GeoMet and AsiaSat. Consequently, the email does not support the assertion that "prior to the Hall Defendants' introduction to [GeoMet], AsiaSat discussed with [GeoMet] requiring less than the full backstop, or possibly waiving it altogether." See Fed. R. Civ. P. 56(c)(1). Indeed, the email suggests that AsiaSat was willing to require less than the full backstop after Mr. Hall was introduced to GeoMet.
In short, GeoMet has been unable to identify any admissible evidence that AsiaSat was willing to reduce or remove the backstop requirement. And GeoMet has no evidence that it would have been able to satisfy this requirement. Therefore, the undisputed facts establish that GeoMet was unable to launch an AWSF-built satellite on an AsiaSat satellite not because of anything the Hall Defendants did but rather because GeoMet was unable to obtain a sufficient backstop for the Proposed EXIM Loan.
Second, GeoMet was required to provide AsiaSat with a convertible note. The purpose of this was to provide AsiaSat a mechanism through which it could obtain equity in GeoMet. AsiaSat would provide a loan to GeoMet and the debt from the loan could be converted, at some later point, into GeoMet stock.
But GeoMet's attorneys were "against" GeoMet issuing a convertible note to AsiaSat because it would pledge the STORM sensor as collateral for the Proposed EXIM Loan. And GeoMet knew that "NOAA would not accept that." AsiaSat nevertheless refused to "back off" on the convertible-note requirement. Eventually, GeoMet's attorney indicated that he would not approve the convertible note because it was "too onerous."
In its opposition memorandum, GeoMet does not even address whether it would have been able to provide a convertible note to AsiaSat.
In sum, independent of anything the Hall Defendants did, GeoMet was unable to perform under the Cooperation Agreement. GeoMet was not able to obtain a sufficient backstop, and GeoMet was unable to provide AsiaSat with a convertible note. As a result, AsiaSat refused to undertake the loan process and GeoMet was unable to obtain the funds it needed. Consequently, GeoMet was unable to pay AWSF to build the STORM sensor.
GeoMet's first causation theory is rendered even more speculative by the timeline in this case. GeoMet's inability to perform the "key element" of the deal—on which AsiaSat's submission of the loan application for EXIM board approval was conditioned—led AsiaSat to take affirmative steps to delay and ultimately halt the loan approval process in July 2013,
Of course, there is a slim possibility that AsiaSat would have been willing to waive both requirements.
GeoMet's first damages theory is the most closely connected to the observable events that form the core of this dispute. In light of the court's finding that this theory fails because it involves multiple speculative contingencies, the remaining theories—each of which involve entities and occurrences that are even more attenuated from the actual course of events—face a decidedly uphill battle.
GeoMet describes its second damages theory as follows:
This theory comprises two distinct theories. First, GeoMet lost profits because the Hall Defendants frustrated the EXIM Bank loan process, thereby preventing GeoMet from using the proceeds to pay the American Manufacturer to build the STORM sensor. Second, GeoMet could have used project financing to obtain a loan (presumably from the EXIM Bank), used to the proceeds to pay the American Manufacturer to build the STORM sensor, and used a commercial satellite operator, "such as JSAT," to launch the satellite. But there is no admissible evidence to support the plausibility, let alone the probability, of such a theory.
The first theory fails for the same reasons discussed above. GeoMet was unable to provide a sufficient backstop for the Proposed EXIM Loan, and GeoMet was unwilling to provide AsiaSat with a convertible note. Accordingly, AsiaSat was unwilling to undertake the loan process because it was concerned that it would "be on the hook to pay off the debt." In light of these undisputed facts, no reasonable jury could conclude that the Hall Defendants frustrated the EXIM Bank loan process, thereby preventing GeoMet from using the proceeds to pay the American Manufacturer. In short, GeoMet, independent of anything the Hall Defendants did, was unable to satisfy the requirements of the Cooperation Agreement.
The second theory fails because it is entirely speculative that GeoMet would have been able to obtain project financing from the EXIM Bank, or any other bank for that matter. GeoMet asserts that "[the EXIM Bank] confirmed its ability to finance [GeoMet's] project through either balance-sheet or project financing, which confirmation was not limited to just having AsiaSat as the operator to fly the sensor." In support of this, GeoMet cites an expert report from Jozsef Szamosfalvi, the former CFO of GeoMet. Mr. Szamosfalvi opines that the EXIM Bank "would likely have agreed to project financing." Mr. Szamosfalvi bases this opinion on his interactions with the EXIM Bank when he was the CFO of GeoMet and his experience financing other transactions with the EXIM Bank. But Mr. Szamosfalvi is unable to explain the terms on which the EXIM Bank would have offered project financing.
And Mr. Szamosfalvi's guess as to what the EXIM Bank might have done is unreliable because it is contradicted by the testimony of Christine Fogt, a representative of the EXIM Bank. When asked if GeoMet could "have applied for a loan under the project finance structure," her response was unequivocal: "No, because when we met, . . . the discussion was always focused to have [GeoMet] in partnership for this business proposal or the weather sensor to be a payload onto a satellite with AsiaSat. . . . This was not a special project set up with the understanding that repayment or evaluation repayment would only be strictly based on future revenues of [GeoMet's project] under a project finance deal. The repayment would be from an existing company with an established history and it was a corporate direct loan." Consequently, no reasonable juror could conclude that GeoMet could have obtained project financing from the EXIM Bank because GeoMet's sole basis for this argument is an expert report submitted by its former CFO that is based upon assumptions and opinions that are directly contrary to the undisputed facts.
GeoMet describes its third damages theory as follows:
This theory, like the first two, fails.
As discussed above, aside from Mr. Szamosfalvi's unsupported expert opinion, there is no evidence from which a reasonable juror could conclude that GeoMet could have obtained project financing from the EXIM Bank. The EXIM Bank did not consider this venture for project financing, and GeoMet has no evidence as to what the terms of such financing would have been. Consequently, no reasonable juror could conclude that GeoMet would have been able to obtain project financing.
Under its final damages theory, GeoMet seeks "unjust enrichment damages based on Defendants Hall's and Tempus's misappropriation of GeoMetWatch's trade secrets." GeoMet argues that it "is entitled to seek damages related to Tempus's increased value resulting from its possession and use of GeoMetWatch's information, even if Tempus is presently lying low." It is far from clear what this means, but a review of the report of GeoMet's damages expert seems to indicate that it seeks unjust enrichment damages as measured by "the value of the opportunity taken by the Defendants." GeoMet does not explain how "the value of the opportunity" differs from the remedy it seeks at law (i.e., lost profits damages), nor does it provide any legal authority for the proposition that unjust enrichment damages under the Utah Uniform Trade Secrets Act can be properly measured by anything but ill-gotten profits. And although there does not appear to be a Utah case on point, the general rule is that "[i]n cases of trade secret misappropriation, unjust enrichment is normally measured by the defendant's profits on sales attributable to the use of the trade secret." Litton Sys., Inc. v. Ssangyong Cement Indus. Co., Ltd., 107 F.3d 30 (Fed. Cir. 1997) (finding the district court's "theory of unjust enrichment as encompassing unrealized expected gain [to be] unsupported in the law of unfair competition").
The Hall Defendants argue that GeoMet cannot recover under a theory of unjust enrichment because they have not been enriched. They state that Tempus, having ceased operations in June of 2016, "has never generated any revenue and never paid Alan Hall or Island Park any salary, dividend, distribution or compensation of any kind." They further state that "Mr. Hall has never received a salary, dividend or a distribution based on his ownership in or affiliation with Tempus."
GeoMet's does not to dispute these facts. Rather, it states only that "GeoMetWatch disputes any statement or inference that Tempus's failure to generate revenue forecloses GeoMetWatch's recovery of damages." But this statement is, at best, a non-responsive legal argument. As a result, the court must accept as undisputed the Hall Defendants' statements of material fact regarding their revenue and distributions. These facts establish that the Hall Defendants were not enriched. Accordingly, they are entitled to summary judgment on any claim for recovery premised on a theory of unjust enrichment.
The Hall Defendants also seek summary judgment on GeoMet's claims for nominal or statutory damages (i.e., the Lanham Act claim, the Truth in Advertising Act claim, and the Unfair Practices Act claim), arguing that GeoMet did not provide the damages calculations required by Rules 26 and 37 of the Federal Rules of Civil Procedure.
Rule 26(a)(1)(A) provides that a party must, without awaiting a discovery request, provide to the other party "a computation of each category of damages claimed by the disclosing party—who must also make available for inspection and copying under Rule 34 the documents or other evidentiary material, unless privileged or otherwise protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of the injuries suffered." Rule 26(e) imposes an ongoing duty to supplement and correct disclosure made under Rule 26(a), and Rule 37(c)(1) provides for the exclusion of information not disclosed as required by Rules 26(a) and (e).
But the Hall Defendants do not cite, and the court has been unable to find, any authority suggesting that a party is precluded from seeking nominal or statutory damages for failing to include a "computation" of such damages in its initial disclosures.
For the reasons articulated, the Hall Defendants' Motion for Summary Judgment is
IT IS ORDERED THAT:
GeoMet further takes umbrage with defense counsel's assertion that GeoMet's aversion to the convertible note requirement stemmed from a fear of equity dilution. But the court can conceive of no reason why a dispute about GeoMet's reason for failing to execute the convertible note bears on this motion. It is undisputed that GeoMet's outside counsel viewed this requirement as "too onerous," and that Gene Pache suggested that GeoMet should move on from the AsiaSat deal, in part because of the difficulty of satisfying that term. Whether this view of the convertible note related to the repayment terms, the collateralization of STORM, or the terms on which the debt was convertible into equity would seem to matter not one bit.
