Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 1 of 11 PageID #: 1 IN THE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA TERRE HAUTE DIVISION HIGHLAND TH, LLC and OVERSEAS LEASE GROUP, INC., v. Plaintiffs, THE CITY OF TERRE HAUTE, THE CITY OF TERRE HAUTE WASTEWATER UTILITITES, BOARD OF PUBLIC WORKS AND SAFETY, DUKE BENNETT, and MARK THOMPSON, Defendants. Case No. 1:15-cv-905 COMPLAINT Plaintiffs Highland TH, LLC and Overseas Lease Group, Inc., for their Complaint against Defendants state: THE PARTIES, JURISDICTION, AND VENUE 1. Plaintiff Highland TH, LLC ( Highland is a Delaware limited liability company. Highland s sole member is Plaintiff Overseas Lease Group, Inc. ( OLG, which is a Delaware corporation with its principal place of business in Florida. Therefore, both Highland and OLG are citizens of Delaware and Florida. 2. Defendant The City of Terre Haute (the City is an Indiana municipal corporation located in Indiana. Therefore, it is a citizen of Indiana. 3. Defendant The City of Terre Haute Wastewater Utilities (the Utilities is a subdivision of the City and a citizen of Indiana. 4. Defendant Board of Public Works and Safety (the Board is an independent board created under Indiana law and a citizen of Indiana.
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 2 of 11 PageID #: 2 5. Defendant Duke Bennett ( Bennett is the Mayor of Terre Haute and a citizen of Indiana. 6. Defendant Mark Thompson ( Thompson is the Director of the TWHU and a citizen of Indiana. 7. This Court may exercise subject-matter jurisdiction over this lawsuit because it is between citizens of different states, and the amount in controversy exceeds $75,000, exclusive of interest and costs. 28 U.S.C. 1332. 8. This Court may exercise personal jurisdiction over all Defendants because all of them are citizens of Indiana. 9. Venue is proper in this judicial district because all Defendants reside in this judicial district, a substantial part of the events and omissions giving rise to Plaintiffs claims occurred in this judicial district, and a substantial part of the property that is the subject of this lawsuit is situated in this judicial district. FACTS COMMON TO ALL COUNTS 10. Plaintiffs incorporate the preceding paragraphs as though fully restated here. 11. The City, the Utilities, the Board, and Powerdyne Terre Haute Holdings LLC ( Powerdyne entered into a Purchase and Sale Agreement dated July 15, 2014 (the Agreement. 12. An authentic copy of the Agreement is attached to this Complaint as Exhibit 1. 13. Under the Agreement, the City, the Utilities, and the Board promised to buy renewable diesel fuel from Powerdyne and promised to deliver waste activated sludge and other biological material to Powerdyne to produce the diesel fuel. (Agreement 4.1 & 4.4. 2
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 3 of 11 PageID #: 3 14. A necessary step in producing renewable diesel fuel is removing the water from the waste activated sludge through centrifugation, a process known as de-watering. (Agreement 4.4 & Addendum I. 15. The City, the Utilities, and the Board agreed to pay 240 consecutive monthly payments of $719,326.58 for de-watering services. (Addendum I. 16. Thus, the total revenue for de-watering services during the term of the Agreement would exceed $172 million. 17. The parties to the Agreement later agreed to assign the rights and to delegate the obligations concerning de-watering to Highland. 18. That agreement is set forth in the Partial Assignment and Delegation of Purchase and Sale Agreement dated November 20, 2014 (the Assignment. 19. An authentic copy of the Assignment is attached to this Complaint as Exhibit 2. 20. Highland and the Utilities entered into a Lease Agreement dated May 15, 2014, under which Highland agreed to lease from the Utilities the facility where the de-watering operation would occur (the Lease. 21. An authentic copy of the Lease is attached to this Complaint as Exhibit 3. 22. When Highland entered into the Agreement, Assignment, and Lease, Highland was wholly owned by Powerdyne. 23. In late November 2014, OLG acquired Highland. 24. On November 14, 2014, Thompson spoke in person with a representative of OLG concerning the Agreement, and the commitment by the City, the Utilities, and the Board to purchase renewable diesel fuel. 3
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 4 of 11 PageID #: 4 25. Thompson stated that other cities had entered into a waste water supply agreement with the Utilities and that the commitment from other cities provided a sufficient revenue stream to ensure the City, the Utilities, and the Board could perform the Agreement. Thompson provided spreadsheets to representatives of OLG concerning the projected revenue. 26. Thompson repeated those representations later in 2014 and 2015. 27. Based on Thompson s representations, Highland drafted a proforma to present to the Terre Haute City Council. 28. In reliance on Thompson s representations, OLG acquired Highland. 29. After acquiring Highland, OLG made substantial investments to ensure that Highland could perform its obligations under the Assignment. 30. In December 2014, OLG accepted Highland s obligations under a construction contract with Plocher Construction Company to purchase, install, and test the de-watering plant. 31. OLG has insured the equipment in the de-watering plant from November 2014 through the present. 32. Highland also engaged CH2M Hill Engineers, Inc. to provide operations and maintenance services for the de-watering facility. 33. After making substantial investments in the de-watering facility, Highland was prepared to begin operating the facility on or around December 20, 2014. 34. The City, the Utilities, and the Board, however, never delivered waste activated sludge to the de-watering facility. 35. The City, the Utilities, and the Board have also never made a payment to Highland. 4
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 5 of 11 PageID #: 5 36. Representatives of Highland and OLG engaged in ongoing discussions with Bennett and Thompson beginning in November 2014 through March 2015 to determine whether the City, the Utilities, and the Board would honor their contractual commitments. 37. Bennett and Thompson repeatedly stated that the Agreement and Assignment were valid contractual obligations that the City, the Utilities, and the Board would honor. 38. Bennett also stated during a meeting of the Terre Haute City Council in February 2015 that the Agreement was valid and did not need any further approvals. 39. In reliance on the representations made by Bennett and Thompson, OLG and Highland continued to incur costs to prepare and maintain the de-watering facility. 40. In March 2015, however, the City entered into negotiations with Terre Haute Dewatering Company, LLC ( THDC for THDC to provide de-watering services to the City. 41. On or around March 30, 2015, the City and THDC entered into a preliminary agreement under which THDC agreed to pay the City a deposit of $750,000 as prepayment of anticipated lease payments for the City s wastewater treatment facility. 42. An authentic copy of the Agreement between City of Terre Haute and Terre Haute Dewatering Company, LLC (the THDC Agreement is attached to this Complaint as Exhibit 4. 43. Bennett and Robert J. Murray ( Murray, President of the Board, signed the THDC Agreement on behalf of the City. 44. Murray signed the THDC Agreement with the understanding that the Board would later vote to approve the THDC Agreement. 45. When Murray learned that the THDC Agreement would not be presented to the Board for approval, he resigned from the Board. 5
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 6 of 11 PageID #: 6 46. Murray stated that he signed the THDC Agreement because he was told the City needed the $750,000 payment from THDC to meet its payroll obligations. 47. In May 2015, the City, the Utilities, and the Board repudiated the Agreement and the Assignment, contending that neither was valid. 48. An attorney for the City has also represented that the City cannot make payments on its bonds and cannot pay for equipment it needs to operate certain facilities. 49. The City, the Utilities, and the Board have failed to deliver waste activated sludge or other materials to Highland in accordance with the Assignment, have failed to make any payments due to Highland under the Assignment, and have indicated that they do not regard the Assignment as a binding obligation upon them. 50. Plocher Construction Company, which provided equipment for the de-watering facility, has indicated to Highland that it intends to sell some of the equipment to the City for an amount less than the market value of the equipment. COUNT 1 DECLARATORY JUDGMENT 51. Plaintiffs incorporate the preceding paragraphs as though fully restated here. 52. An actual controversy exists between the City, the Utilities, and the Board, on the one hand, and Highland, on the other, concerning the enforceability of the Agreement and Assignment. 53. Under 28 U.S.C. 2201, this Court may declare the rights and other legal relations of the parties to this lawsuit with respect to the Agreement and Assignment. 54. The Agreement and Assignment are both valid contracts, executed by people having authority to bind the parties to them and complying with all requirements for contracts of their nature. 6
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 7 of 11 PageID #: 7 WHEREFORE, Highland requests that this Court enter a judgment in its favor and against the City, the Utilities, and the Board, declaring that the Agreement and Assignment are valid, legally binding contracts. COUNT 2 BREACH OF CONTRACT 55. Plaintiffs incorporate the preceding paragraphs as though fully restated here. 56. The Agreement and Assignment are valid contracts binding upon the City, the Utilities, and the Board and require those Defendants to perform specific obligations to Highland. 57. The City, the Utilities, and the Board have breached the Agreement and Assignment by failing to deliver waste activated sludge or other materials to Highland in accordance with the Assignment, by failing to make any payments due to Highland under the Assignment, by entering into agreements inconsistent with their performance of the Agreement and Assignment, and by attempting to purchase the equipment Highland needs to operate the dewatering facility. 58. Those breaches of contract by the City, the Utilities, and the Board have caused Highland to suffer damages. Those damages include the expenses Highland incurred to prepare performing its obligations and the profits it would have earned had the City, the Utilities, and the Board performed their obligations. WHEREFORE, Highland requests that this Court enter a judgment in its favor and against the City, the Utilities, and the Board in an amount that will fully and fairly compensate it for the losses it has suffered as a result of the breaches of contract and award Highland interest, attorneys fees, and costs. 7
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 8 of 11 PageID #: 8 COUNT 3 QUANTUM MERUIT 59. Plaintiffs incorporate paragraphs 1 50 of this Complaint as though fully restated here. 60. In the alterative, if the Agreement and Assignment are not binding contracts, OLG and Highland are still entitled to recover the expenses they incurred preparing to perform dewatering. 61. OLG and Highland incurred significant expenses to install de-watering equipment and to hire an operations and maintenance manager for the de-watering facility. 62. By completing that work, OLG and Highland conferred benefits upon the City, the Utilities, and the Board at those Defendants requests. 63. OLG and Highland expected payment for undertaking that work, and the City, the Utilities, and the Board knew of that expectation. 64. Allowing the City, the Utilities, and the Board to retain those benefits without restitution would be unjust. WHEREFORE, OLG and Highland request that this Court enter a judgment in their favor and against the City, the Utilities, and the Board in an amount that will fully and fairly compensate them for the expenses they incurred to prepare for performing their de-watering obligations and award Plaintiffs interest, attorneys fees, and costs. Count 4 Fraud 65. Plaintiffs incorporate paragraphs 1 58 of this Complaint as though fully restated here. 66. Bennett and Thompson made a material misrepresentation of past or existing fact, including that other cities had entered into a waste water supply agreement with the Utilities and 8
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 9 of 11 PageID #: 9 that the commitment from other cities provided a sufficient revenue stream to ensure the City, the Utilities, and the Board could perform the Agreement. 67. Those representations were false. 68. Bennett and Thompson knew those representations were false or recklessly disregarded that those representations were false. 69. Bennett and Thompson also represented between November 2014 through March 2015 that the City, the Utilities, and the Board regarded the Agreement and Assignment as binding contracts, but Bennett and Thompson have now repudiated those representations. 70. Bennett and Thompson intended to deceive OLG and Highland when it made those representations. 71. OLG and Highland relied upon those representations to their detriment by expending substantial money to prepare to perform the de-watering operations. 72. The misrepresentations made by Bennett and Thompson have caused OLG and Highland to suffer damages. WHEREFORE, OLG and Highland request that this Court enter a judgment in their favor and against Bennett and Thompson in an amount that will fully and fairly compensate them for the expenses they incurred to prepare for performing their de-watering obligations and award Plaintiffs interest, attorneys fees, and costs. Count 5 Appointment of a Receiver 73. Plaintiffs incorporate paragraphs 1 58 of this Complaint as though fully restated here. 9
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 10 of 11 PageID #: 10 74. Attorneys and representatives of the City have indicated that the City has difficulty meeting its payroll obligations, cannot meet its bond payment obligations, and cannot pay for certain equipment needed to operate its facilities. 75. Therefore, the City is likely insolvent. 76. Further, the equipment at the de-watering facility, which is needed for Highland to perform its obligations under the Agreement and Assignment, may be acquired by the City for below-market value, and the City may remove that equipment to be used by a third party. WHEREFORE, OLG and Highland request that this Court appoint a receiver over the City to manage its affairs for the benefit of creditors or, in the alternative, to appoint a receiver over the de-watering facility to manage the facility in the best interest of all affected parties. Count 6 Injunction 77. Plaintiffs incorporate paragraphs 1 58 of this Complaint as though fully restated here. 78. The equipment at the de-watering facility, which is needed for Highland to perform its obligations under the Agreement and Assignment, may be acquired by the City for below-market value, and the City may remove that equipment to be used by a third party. 79. If that occurs, Highland will suffer irreparable harm because it will be unable to perform its obligations under the Agreement and Assignment and may have no recourse against the City, the Utilities, or the Board, all of which are likely insolvent. WHEREFORE, To preserve the status quo during the pendency of this lawsuit, the Court should enter an injunction prohibiting Defendants from removing equipment from the dewatering facility. 10
Case 1:15-cv-00905-TWP-MJD Document 1 Filed 06/09/15 Page 11 of 11 PageID #: 11 FROST BROWN TODD LLC By: s/darren A. Craig Darren A. Craig, #25534-49 Abigail T. Rom, #29459-49 201 North Illinois Street, Suite 1900 P.O. Box 44961 Indianapolis, IN 46244-0961 317-237-3800 Fax: 317-237-3900 dcraig@fbtlaw.com arom@fbtlaw.com Attorneys for Plaintiffs Highland TH, LLC and Overseas Lease Group, Inc. 0130659.0626273 4833-4620-1892v1 11