GREEN EARTH ENERGY PHOTOVOLTAIC CORP v. KEYCORP (2024)

MEMORANDUM AND ORDER ON MOTION FOR SUMMARY JUDGMENT BY KEYBANK NATIONAL ASSOCIATION

(Dkt. No. 250)

I. Introduction

Green Earth Energy Photovoltaic Corp. (“GEE”), Christopher Scyocurka, and Paige Scyocurka (collectively “GEE Parties”), filed this action against KeyBank National Association (“KeyBank”),¹ in August 2019, asserting numerous claims related to an alleged promise by KeyBank to provide GEE with between $40 and $80 million in loans to finance solar projects to be built by GEE. (Dkt. No. 1.) After initially granting the GEE Parties’ motion for temporary restraining order, the court denied their request for preliminary injunction, finding they had not demonstrated a likelihood of establishing that an enforceable agreement required KeyBank to provide tens of millions of dollars of additional loans to GEE beyond the scope of the parties’ written agreements. (Dkt. No. 66.) Soon after, the GEE Parties sought leave to amend their complaint to add a breach of contract claim related to KeyBank's failure to make a final payment on a solar project GEE had built for the Springfield Boys & Girls Club (“SBGC Project”). (Dkt. No. 70.) The court granted the GEE Parties’ request to file an amended complaint in the same order in which it granted KeyBank's motion to dismiss the claims originally asserted by the GEE Parties. (Dkt. No. 78.) Thereafter, KeyBank filed a separate action alleging the GEE Parties had breached their obligations under several written agreements between the GEE Parties and KeyBank. (20-cv-11984, Dkt. No. 1.) The court denied the GEE Parties’ motion to dismiss KeyBank's claims and, a short time later, granted the parties’ joint motion to consolidate the two cases. (20-cv-11984, Dkt. Nos. 34 and 46.) Following discovery, KeyBank moved for summary judgment as to the GEE Parties’ surviving claims related to the SBGC Project and KeyBank's claims against the GEE Parties. For the reasons set forth below, the court will grant KeyBank's motion.

II. Summary Judgment Standard

“Summary judgment is appropriate ‘if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ ” Bellone v. Southwick-Tolland Reg'l Sch. Dist., 748 F.3d 418, 422 (1st Cir. 2014) (quoting Fed. R. Civ. P. 56(a)). “[I]f there is a genuine dispute of a material fact, that dispute would ‘need[ ] to be resolved by a trier of fact.’ ” Doe v. Trs. of Bos. Coll., 892 F.3d 67, 79 (1st Cir. 2018) (quoting Kelley v. LaForce, 288 F.3d 1, 9 (1st Cir. 2002)) (second alteration in original). “Facts are material when they have the ‘potential to affect the outcome of the suit under the applicable law,’ ” and disputes are genuine when a reasonable jury considering the evidence “ ‘could resolve the point in the favor of the non-moving party.’ ” Cherkaoui v. City of Quincy, 877 F.3d 14, 23-24 (1st Cir. 2017) (quoting Sánchez v. Alvarado, 101 F.3d 223, 227 (1st Cir. 1996)). When ruling on a motion for summary judgment, the court must construe “the record evidence in the light most favorable to the nonmoving party.” Benoit v. Tech. Mfg. Corp., 331 F.3d 166, 173 (1st Cir. 2003). The court draws all reasonable inferences in favor of the non-moving party, but does not “draw unreasonable inferences or credit bald assertions, empty conclusions, rank conjecture, or vitriolic invective.” Cherkaoui, 877 F.3d at 23 (internal quotations omitted) (emphasis in original).

A “nonmovant can forestall summary judgment by ‘present[ing] definite, competent evidence’ demonstrating the existence of a genuine dispute about a material fact.” Murray v. Kindred Nursing Ctrs. W. LLC, 789 F.3d 20, 25 (1st Cir. 2015) (quoting Mesnick v. Gen. Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991)). However, “in the face of the defendant's properly supported motion for summary judgment, the plaintiff [can]not rest on his allegations,” but must present “significant probative evidence.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) (internal quotations omitted). “[I]n deciding summary judgment motions courts may consider any material that would be admissible or usable at trial.” Asociación de Periodistas de Puerto Rico v. Mueller, 680 F.3d 70, 78 (1st Cir. 2012) (internal quotations omitted).

III. Summary of Material Facts

A. Facts Relevant to KeyBank's Claims

Between 2017 and 2019, KeyBank loaned GEE approximately $15 million. The terms of the loans and the GEE Parties’ repayment obligations were set forth in a series of agreements executed by the parties. The GEE Parties have not made any payments required under these agreements since 2019, and KeyBank claims the cessation of payments entitles it to summary judgment on its claims that the GEE Parties are in breach of several loan agreements between KeyBank and the GEE Parties. In May 2017, GEE and KeyBank executed a Business Loan Agreement (“BLA”) and promissory notes tied to a Working Capital Line of Credit (“WCLOC”) and a Master Security Agreement (“MSA”), also referred to as the Equipment Line. By its terms, the BLA applied to all loans KeyBank made to GEE.

The BLA defined an “Event of Default” as resulting if GEE failed to comply with or perform any obligation under the BLA or any other agreement between the parties. Other provisions in the BLA included an “Acceleration Provision,” a “No Waiver Provision,” an “Integration Provision,” and a “Fee Provision.” The Acceleration Provision permitted KeyBank to accelerate the balance due upon the occurrence of an “Event of Default.” Pursuant to the “No Waiver Provision,” KeyBank could not be deemed to have waived any of its rights under the BLA, even if it delayed or omitted to exercise a right, unless the waiver was set out in a writing signed by KeyBank. The “Integration Provision” provided that the BLA could only be amended through a signed writing. In the event KeyBank had to take steps to enforce the BLA, the “Fee Provision” required GEE to pay the costs and reasonable attorneys’ fees incurred by KeyBank.

After executing the BLA, GEE and KeyBank executed a separate promissory note for the WCLOC, and GEE immediately borrowed $2.5 million. The initial note was later superseded by other promissory notes with similar terms. GEE borrowed additional funds under the WCLOC until late 2018 or early 2019, but never made any payments that substantially reduced the outstanding balance. The parties also executed the MSA, which supplied additional terms and conditions to separate loan agreements between the parties that were secured by personal property associated with specific solar projects. GEE ultimately financed fourteen completed solar projects under the MSA. Though the parties may not have followed an identical process each time, typically GEE would begin the financing process by submitting a cost analysis for a new solar project. KeyBank would then provide GEE with a document describing the terms and conditions under which KeyBank would loan money for the project. Once GEE executed that document and a Progress Payment Loan and Security Agreement (“Progress Agreement”), GEE could begin requesting progress payments to be used to pay for construction of the solar project. Each Progress Agreement included an “Outside Term Closing Date,” which set a deadline for GEE to complete the project and either repay amounts borrowed for construction or execute a separate promissory note secured by the completed project. By July 2018, KeyBank had paid out over $11 million to finance solar projects under the MSA.

In September 2018, KeyBank and GEE agreed to use a new structure to finance a solar project in Wamogo, Connecticut. GEE built the project, but it was owned and financed by KeyBank. Pursuant to a lease agreement (“Wamogo Lease”), a new limited liability company created by GEE operated the project and agreed to make monthly payments to KeyBank. The Wamogo project was the only time the parties used the new structure. Around October 2018, the business relationship between GEE and KeyBank began to sour and KeyBank stopped financing new GEE projects.

On January 29, 2019, the GEE Parties signed the final promissory note associated with the WCLOC; at that point, the outstanding balance was almost $5 million. Christopher and Paige Scyocurka signed repayment guarantees on behalf of themselves and GEE. The note provided that GEE would repay the loan balance on or before August 1, 2019 and make monthly interest payments until the balance was fully paid. For several months GEE continued to make all payments required under the parties’ various agreements, but GEE did not pay off the outstanding balance by August 1, 2019 and it has not made any payments on any KeyBank loans since September 2019. KeyBank has calculated that, as of February 1, 2023, the GEE Parties owed it over $21 million in unpaid principal, accrued interest, and late charges under the BLA, the WCLOC note, the MSA, the Wamogo Lease, and Progress Agreements related to the Bible Way Project and the SBGC Project, described below.

B. Additional Facts Relevant to GEE Parties’ Claims

KeyBank agreed to finance the development of the Bible Way Project and on August 31, 2017, GEE executed a Progress Agreement for the project (“Bible Way Agreement”). The Outside Term Closing Date set in the Bible Way Agreement was January 17, 2018. After the Bible Way Progress Payment Agreement was executed, KeyBank made one progress payment to GEE in the amount of $184,513 and GEE began making interest payments on that amount. Despite terms in the Bible Way Agreement requiring completion of the project and repayment or a new secured note by the Outside Term Closing Date, the project was not complete by that date. GEE continued to make, and KeyBank continued to accept, interest payments on the outstanding balance. KeyBank also loaned additional funds to GEE while the Bible Way Project remained incomplete. As late as November 2018, GEE told KeyBank that it expected to complete the Bible Way Project by the end of 2018.

On June 1, 2018, GEE executed a Progress Payment Agreement for the SBGC Project (“SBGC Agreement”). The SBGC Progress Payment Agreement set September 18, 2018 as the Outside Term Closing Date. On September 20, 2018, KeyBank requested additional financial information from GEE in relation to a different project. Although the Outside Term Closing Date had passed for the SBGC Project, KeyBank disbursed two more project progress payments in October 2018, as the business relationship between KeyBank and GEE began to unravel.

On October 31, 2018, GEE informed KeyBank that it would need a cash infusion of about $1 million to get through the next few weeks. KeyBank expressed concerns about GEE's cash position in the context of the WCLOC and informed GEE that KeyBank would not fund any new projects unless GEE's cash situation improved. Around this same time, KeyBank also informed GEE that it would not issue the final payment on the SBGC Project until GEE provided a Qualification Statement for the project from the Massachusetts SMART Program, a new state solar incentive program. The SMART Program did not begin accepting applications until November 26, 2018, so this requirement necessarily delayed the final progress payment.

At the end of 2018, both the Bible Way Project and the SBGC Project remained incomplete. On January 25, 2019, GEE informed KeyBank that it would not be moving forward with the Bible Way Project and asked whether the amount it owed on the Bible Way Project could be transferred to another project. KeyBank responded that it would not loan GEE money for new projects and was focused solely on closing the outstanding loans for the Bible Way and SBGC Projects. In a February 1, 2019 email, KeyBank informed GEE that it would extend the Outside Term Closing Date for the SBGC Project for two additional months. Three days later, KeyBank provided GEE with a payoff quote for the Bible Way Progress Payment Agreement and confirmed that the only option for closing out that loan was for GEE to pay off the outstanding balance.

GEE finally received the qualification statement for the SBGC Project from Massachusetts on April 8, 2019. That same day, GEE sent KeyBank the qualification statement and its invoice for the final progress payment under the SBGC Agreement. On April 12, 2019, KeyBank informed GEE that it would not issue the final progress payment for the SBGC Project until GEE repaid the outstanding balance owed under the Bible Way Agreement. When GEE did not receive the final progress payment for the SBGC Project, it ceased work, leaving the project incomplete and not connected to the grid. KeyBank served GEE with a Notice of Default concerning the Bible Way Project on May 15, 2020. Although GEE did not repay any principal, it continued to pay, and KeyBank continued to accept, interest payments on the outstanding balances for the two projects until September 2019.

IV. Discussion

Relying heavily on the written terms of the parties’ agreements and the timing of certain undisputed events, KeyBank has argued that it is entitled to summary judgment on both the GEE Parties’ claims and its own counterclaims. The GEE Parties have opposed the motion and argued that there are genuine disputes of material facts that must be resolved before a determination can be made as to which of the parties was the first to be in material breach of their agreements. Both parties’ claims are governed by state contract law. Though the BLA and WCLOC contain choice of law provisions identifying Connecticut law and the Progress Payment Agreements contain choice of law provisions identifying New York law, KeyBank exclusively cited Massachusetts law in the supporting memorandum filed with its motion and the GEE Parties followed suit in their opposition. In a lengthy Reply, filed a few days before the hearing, KeyBank included citations to Connecticut and New York law and advised that it would not oppose a request by the GEE Parties to file a surreply to address any relevant differences between the states’ laws. The GEE Parties did not request leave to file a surreply and at the hearing expressed the view that for purposes of the claims at issue here, the relevant law is effectively the same in all three states. The court agrees. Since this case does not require a separate delineation of the law of each of the states, the court will cite Massachusetts law, consistent with both parties’ initial focus. Katz v. Pershing, LLC, 672 F.3d 64, 72, (1st Cir. 2012) (“[T]he parties concede, at least tacitly that Massachusetts law controls ․ [and the court] is free to honor that reasonable understanding of the parties.”)

The contours of the relevant law are well established. “To prevail on a claim for breach of contract, a plaintiff must demonstrate that there was an agreement between the parties; the agreement was supported by consideration; the plaintiff was ready, willing, and able to perform his or her part of the contract; the defendant committed a breach of the contract; and the plaintiff suffered harm as a result.” Bulwer v. Mt. Auburn Hosp., 46 N.E.3d 24, 39 (Mass. 2016). After an immaterial breach, the injured party must continue to perform its obligations under the contract, but the injured party is excused from further performance by the other party's material breach. Teragram Corp. v. Marketwatch.com, Inc., 444 F.3d 1, 11 (1st Cir. 2006). “[A] material breach of a contract occurs when the breach concerns an ‘essential and inducing feature of the contract.’ ” G4S Tech. LLC v. Mass. Tech. Park Corp., 99 N.E.3d 728, 733-34 (Mass. 2018). Whether a breach is material “is generally a question for the trier of fact to decide,” but the matter may be decided by the court where “the evidence on the point is either undisputed or sufficiently lopsided.” Teragram, 444 F.3d at 11 (internal quotations omitted). Conversely, interpreting the terms of a contract “is ordinarily a question of law for the court,” though “the meaning of an ambiguous contract term is a question of fact.” Farmers Ins. Exch. v. RNK, Inc., 632 F.3d 777, 783 (1st Cir. 2011) (internal quotations omitted).

All contracts also include an implied covenant of good faith and fair dealing which “provides that ‘neither party shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.’ ” Gottlieb v. Amica Mut. Ins. Co., 57 F.4th 1, 8 (1st Cir. 2022) (quoting Latson v. Plaza Home Mortg., Inc., 708 F.3d 324, 326 (1st Cir. 2013)). “The covenant may not, however, be invoked to create rights and duties not otherwise provided for in the existing contractual relationship, as the purpose of the covenant is to guarantee that the parties remain faithful to the intended and agreed expectations of the parties in their performance.” Uno Rest's, Inc. v. Boston Kenmore Realty Corp., 805 N.E. 2d 957, 964 (Mass. 2004). “The covenant is preserved so long as neither party injures the rights of another to reap the benefits prescribed by the terms of the contract.” Id.

In this case, the GEE Parties have not argued that any of the terms in the parties’ agreements are ambiguous, nor has it disputed the occurrence of any of the facts set forth above. Instead, GEE has argued that there are additional facts in dispute regarding the parties’ broader business relationship that must be resolved by a factfinder before the court can determine which of the parties was the first to be in material breach of the agreements. Specifically, the GEE Parties contend that a factfinder hearing the full details of the parties’ course of dealing could conclude that KeyBank's decision not to make the final progress payment on the SBGC Project was a material breach of SBGC Agreement that preceded any material breach on the part of GEE.

These other facts the GEE Parties seek to present to a factfinder are essentially the same ones the court has previously found insufficient to support claims that the parties’ oral and informal written communications obligated KeyBank to loan GEE tens of millions of dollars more than the amounts reflected in the parties’ written agreements. (Order on Mot. for Prelim. Inj., Dkt. No. 66; Order on Mots. to Dismiss and Mots. for Leave to File Am. Compls., Dkt. No. 78; Electronic Order, Dkt. No. 95). They are extrinsic to the terms of the parties’ written agreements and do not contradict the facts related to the history of GEE's payments to KeyBank. As a result, it is not necessary to resolve any disagreements regarding the additional facts before determining which party was first to be in material breach of one or more of the parties’ written agreements.

The written agreements make clear that GEE had two central obligations under the Bible Way Agreement: to pay interest on the outstanding balance and to either repay the principal amount or execute a new loan secured by the completed project. Although GEE continued to fulfill its obligation to pay interest until September 2019, it was clearly in material breach of the second obligation by April 2019. At that time, well over a year after the Outside Term Closing Date set out in the SBGC Agreement and two months after GEE had informed KeyBank that it would not complete the project, GEE had made no attempt to repay the loan balance. See Teragram Corp., 444 F.3d at 12 (finding “district court correctly concluded that as a matter of law” a party's failure to make the payments required under contract was a material breach of its obligation under that contract).

Pursuant to the clearly stated terms of the BLA, following a breach of the Bible Way Agreement, KeyBank was permitted to accelerate the balances under all of the parties’ agreements, including the SBGC Agreement. The fact that KeyBank did not immediately elect to do so did not waive the right or amend the terms of the BLA. Against the background of the parties’ written agreements, KeyBank's refusal to advance the final progress payment for the SBGC Project until GEE repaid the balance owed on the abandoned Bible Way Project was not the material breach alleged by GEE but an act of forbearance. At that time, KeyBank would have been justified in accelerating the balance due under all of the parties’ loan agreements, including the SBGC Agreement. KeyBank's decision to simply take the less severe step of delaying the final payment until GEE met its obligations under the Bible Way Agreement was not a breach of the SBGC Agreement. Nor did it violate the implied covenant of good faith and fair dealing, the scope of which was defined by the parties’ obligations under their written agreements. KeyBank is, therefore, entitled to summary judgment on GEE's claims against it. Additionally, for these reasons and the GEE Parties’ failure to make any payments of interest (or principal) after September 2019, KeyBank is entitled to summary judgment on its counterclaims for breach and foreclosure related to the PLA, MSA, Bible Way Agreement, the SBGC Agreement, and the personal guarantees provided by the Scyocurkas.

V. Conclusion

For the reasons discussed above, KeyBank's Motion for Summary Judgment (Dkt. No. 250) is ALLOWED.²

It is so Ordered.

FOOTNOTES

1.   The initial complaint also included claims against Doug Beebe and KeyCorp which were later dismissed.

2.   The calculation of damages and resolution of the receivership will be addressed in a separate order.

MASTROIANNI, United States District Judge