[co-author: Stefan Suazo]
On July 13, 2023, a New York intermediate appellate court held that Iberdrola could continue pursuing all but one of its claims against a bevy of lenders in connection with a construction contract for a power plant in Massachusetts between an Iberdrola unit and the now-defunct owner and developer of the plant, Footprint Power Salem Harbor Development LP. The court affirmed the lower court’s ruling denying defendant-lenders’ motion to dismiss the claims for aiding and abetting tortious interference with contract, conspiracy to commit tortious interference with contract, and conversion. The appellate court, however, reversed the lower court’s decision on the unjust enrichment claim against the lenders, finding that such claim must be dismissed because the existence of a valid and enforceable contract bars such quasi-contract claims irrespective of whether the defendant-lenders were party to such contract.
The lawsuit, originally filed in 2021, alleges that the lenders conspired with Footprint’s owner to terminate the construction contract, misappropriate hundreds of millions of dollars from Iberdrola, and impede Iberdrola’s efforts to collect a significant portion of an arbitral award it won against Footprint in connection with the construction contract. Iberdrola entered into the contract with Footprint in 2014 to construct certain parts of a power plant. As security for its performance under the construction contract, Iberdrola provided Footprint with a $140 million letter of credit. In early 2018, when Iberdola claims Footprint knew the project’s value was nosediving, Iberdrola alleges that Footprint’s owners and lenders concocted and implemented a “Plan B” to deceive Iberdrola into continuing to work on the project without payment until it was near completion. Footprint then terminated the contract based pretextual claims that Iberdrola had defaulted. Using those allegedly pretextual claims, Footprint then drew on the $140 million letter of credit and deposited the proceeds in a segregated account controlled by the lenders. During the arbitration that Iberdola subsequently initiated against Footprint, however, Iberdrola alleged the lenders amended the credit agreement to make any award or judgment against Footprint an immediate event of default. Such amendment allegedly enabled the lenders to declare a default against Footprint and sweep Footprint’s bank accounts (including the segregated account holding the letter of credit proceeds) immediately after the arbitral award in favor of Iberdrola. Such actions thereby rendered Footprint judgment proof.
The appellate court held that Iberdola’s allegation that Footprint and the lenders obtained the letter of credit proceeds using improper means when they had suffered no harm was sufficient to survive a motion to dismiss on the conversion claim. Furthermore, the appellate court allowed the aiding and abetting and conspiracy claims to proceed, finding that Iberdola was “not required to affirmatively plead around an anticipated economic interest defense, since the economic interest defense is not an element of an aiding and abetting or conspiracy claim, but rather a defense to the underlying tort”—the alleged tortious interference by Footprint’s owner.
The case is Iberdrola Energy v. MUFG Union Bank, N.A., Nos. 2022-01963, 2022-01964, and 2022-02112 (N.Y. App. Div. July 13, 2023). Iberdrola Energy Projects is represented by Steptoe & Johnson LLP. The defendants are represented by Mayer Brown LLP and Eversheds Sutherland (US) LLP. The opinion is available here.
