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Solar Utilities Network, L.L.C. v. Navopache Electric Cooperative, Inc.

United States District Court, D. Arizona

September 29, 2015

Solar Utilities Network, L.L.C., Plaintiff,
Navopache Electric Cooperative, Inc., Defendant.


PAUL G. ROSENBLATT, District Judge.

Pending before the Court is defendant Navopache Electric Cooperative, Inc.'s Motion for Summary Judgment Pursuant to Rule 56 (Doc. 72), which the Court finds should be denied. Also pending are three related procedural motions: Navopache Electric Cooperative, Inc.'s Motion to Exclude James Dudley Howard, Jr. as a Witness (Doc. 71), which the Court finds should be denied; plaintiff Solar Utilities Network. LLC's Motion to Strike Defendant Navopache Electric Cooperative, Inc.'s Improper Controverting Statement to Sun's Supplemental Statement of Facts (Doc. 85), which the Court finds should be granted; and Navopache Electric Cooperative, Inc.'s Alternative Motion for Leave to File Amended Reply (Doc. 86), which the Court finds should be denied.[1]


According to the Second Amended Complaint ("SAC") (Doc. 35), this diversity-based action arises out defendant Navopache Electric Cooperative, Inc. ("NEC")'s alleged wrongful repudiation and termination of the parties' Solar Energy Power Purchase Agreement ("PPA") dated October 15, 2010. The purpose of the PPA was to assist NEC in complying with requirements of the Arizona Corporation Commission that it obtain certain amounts of its electricity from renewable energy sources. Pursuant to the PPA, NEC agreed to purchase for twenty years all of the electric energy and related environmental benefits produced at or attributable to a one megawatt solar power plant that plaintiff Solar Utilities Networks, LLC ("SUN") was to construct and operate in Hunt Valley, Arizona. In a letter to SUN dated August 4, 2011, NEC terminated the PPA and repudiated its contractual obligations "due to SUN's failure to commence construction of the Generation Facility and to secure Construction Financing by July 31, 2011." The SAC alleges state law claims for Breach of Contract (First Claim for Relief) and for Breach of the Implied Covenant of Good Faith and Fair Dealing (Second Claim for Relief), both arising from the termination of the PPA. The PPA provides that it is to be governed and construed in accordance with Arizona law.

NEC's Motion to Exclude Testimony of James Howard

NEC has moved to preclude James Howard from being either an expert or fact witness and to exclude SUN from offering Howard's opinions, reports or testimony in this action.

The Court considers the following facts to be undisputed for the purposes of this motion. In January 2011, after the execution of the PPA, SUN partnered with Dudley Ventures ("DV"), an investment and advisory services firm that specializes in utilizing congressionally-sanctioned tax credits and other complex federal and state subsidy programs. DV is involved in numerous investments regarding power generation facilities, including solar plants. SUN turned the solar power plant project over to DV to obtain financing and to manage the construction and operation of the solar plant. DV ultimately became a joint venture partner with SUN and the manager of the project. Under the joint venture agreement between SUN and DV, DV is contributing 50% of the attorney fees and legal costs of this action and is to receive 50% of any damages recovered in this action. James Howard is the founder and CEO of DV and is a 75% owner of the company. SUN views Howard as likely its most important witness in this action as he was intimately involved with almost all of the operative issues involved in this action, including DV's efforts to obtain construction financing, to commence construction of the power plant, to obtain tax benefits and subsidies, the efforts to obtain NEC's audited financial statements, the time line for completion of the project, and the events occurring after NEC terminated the PPA. Howard's involvement in this action also included choosing the litigation counsel for SUN.

Since Arizona law supplies the rule of decision in this action, Arizona law governs Howard's competency as a witness. Fed.R.Evid. 601. NEC argues that Howard cannot be allowed to be a witness because Arizona law prohibits the presentation of evidence from a witness whose compensation is based on the outcome of the litigation. See Laos v. Soble, 503 P.2d 978, 979 (Ariz.App.1972) ("We are of the opinion, and so hold, that a contract providing for compensation of a witness contingent on the success of the litigation is subversive of public justice for the reason that his evidence may be improperly influenced. Public policy considerations brand such [a] contract illegal.")[2] NEC reasons that Howard's testimony as a witness is improper because he stands to receive contingent compensation inasmuch as his company, DV, stands to receive 50% of any damages awarded to SUN. SUN alleges in its SAC that its damages from NEC's allegedly wrongful termination of the PPA exceed $7, 000, 000.

While the Court agrees with NEC that Howard, as the majority owner of DV, has a financial interest in this action given that he may personally profit if SUN wins, the Court cannot agree that under the particular facts at issue that Arizona public policy absolutely forbids him from testifying. First, Arizona law does not deem a person with an interest in the litigation to be incompetent to testify. A.R.S. ยง 12-2201(B) ("A person shall not be incompetent to testify because he is a party to an action or proceeding or interested in the issue tried[.]" Second, this is not at all the usual situation underlying Arizona's policy in which a party has a contract with a witness to testify on its behalf and is directly paying that witness a contingent fee to testify. While the Court understands that Howard is not a party plaintiff, his company is so closely allied with SUN regarding the issues presented in this action and he is so personally involved in this action that his testimony is more realistically compared to that of a party representative than that of a compensated independent witness. While it may be a close question, the Court concludes Howard's evidence should not be stricken because the issue here is more one of Howard's credibility as a witness rather than his competency as a witness.

Motions Related to NEC's Controverting Statement of Facts

SUN filed a 91-paragraph supplemental statement of facts in conjunction with its opposition to NEC's summary judgment motion. NEC, in conjunction with its summary judgment reply, filed a 23-page controverting statement of facts for the purpose of disputing what it considers to be facts in SUN's statement of facts "that are irrelevant to the determination of the [summary judgment] motion, inaccurate characterizations of the record, or editorialization as to the application of facts in the record[;]" NEC appended some fifty pages of additional exhibits as support for its controverting statement of facts. SUN has moved to strike NEC's controverting statement of facts and its additional exhibits on the ground that they are not authorized by LR 7.2(m)(1) or 56.1. NEC's opposition to the motion to strike includes a motion for leave to file an amended, overlength summary judgment reply if the Court concludes that its controverting statement of facts should be stricken.

The Court will grant SUN's motion to strike NEC's Controverting Statement of Facts and its attached exhibits and will deny NEC's motion to file an amended, over-length reply, to which NEC has attached the same new exhibits it attached to its Controverting Statement of Facts. See Parker v. Arizona, 2013 WL 3286414, at *8 (D.Ariz. June 28, 2013) ("District courts in Arizona have uniformly held that the Local Rules of Civil Procedure do not permit a party moving for summary judgment to file a supplemental statement of facts or attach[] exhibits with its reply."); B2B CFO Partners, LLC v. Kaufman, 856 F.Supp.2d 1084, 1086 (D.Ariz.2012) (Court concluded that LRCiv 56.1 "does not provide for a reply statement of facts or a response to the non-moving party's separate statement of facts."). Any objections that NEC desired to make regarding SUN's controverting and additional statements of facts should have been set forth in its reply memorandum and it did not need an overlength memorandum to do so.[3] See Gressett v. Central Arizona Water Conservation District, 2014 WL 4053404, at *2 (D.Ariz. Aug. 14, 2014) (Court noted that while a summary judgment movant may neither attach new evidence to its reply or file separate objections to the non-movant's controverting and additional statements of facts, "the movant may use its reply memorandum to respond to the non-movant's objections to the movant's supporting statement of facts.") (emphasis in original).

NEC's Motion for Summary Judgment

(1) Breach of Contract Claim

NEC argues that it is entitled to summary judgment on the SAC's breach of contract claim because the undisputed evidence establishes that it properly terminated the PPA because SUN did not timely secure construction financing for the solar ...

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