Dillon v. Novel Energy Solutions L.L.C., 0:23-cv-00162

Background

Novel Energy Solutions (Novel) granted Daniel Dillon 1.1% in common units (0.5% + 0.1% + 1% grant less vesting), with a partial vesting schedule tied to years of service.
Dillon resigned as general counsel on September 23, 2022, one week before additional vesting; dispute arose whether that resignation functioned as a timely Transfer Notice under Novel’s Operating Agreement.
The Operating Agreement (§ 7.5) gives the company options to redeem a member’s interest on certain “Triggering Events,” with different valuation rules: a Supermajority Vote redemption uses Book Value; a separation-of-employment redemption uses Article VIII’s Stipulated Value (subject to member-challenged appraisal).
Novel waited past the Company’s 45-day option window (and the remaining-members’ 30-day window) and then, on December 30, 2022, effectuated a Supermajority Vote to redeem Dillon’s 1.1% interest and tendered payment based on Book Value (check for $34,531.55); Dillon rejected payment and sued.
Dillon pleaded multiple counts (breach of contract, breach of good faith, declaratory relief, buyout under the Agreement or Minn. Stat., specific performance, FMLA and MHRA claims). He abandoned several contract-based counts and the statutory buyout claim in briefing.
The court held that (1) the quantity of Dillon’s interest (1.1%) was no longer disputed, (2) Novel’s December 30 supermajority-triggered buyout used the Book Value formula in § 7.5(a), and (3) Dillon’s remaining contract/remedy claims seeking Article VIII valuation or specific performance failed; defendants’ partial summary judgment granted and plaintiff’s denied.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Novel’s buyout complied with the Operating Agreement valuation scheme	Dillon: separation-of-employment (§7.5(d)) governs, so Article VIII Stipulated Value (with appraisal right) applies	Novel: a later Supermajority Vote (§7.5(a)) occurred, so Book Value controls	Court: §7.5(a) applied after the Company’s option window lapsed; Book Value governs; buyout complied with Agreement
Whether Dillon’s resignation served as a timely Transfer Notice activating the Company’s 45-day Article VIII option	Dillon: his resignation letter functioned as the Transfer Notice	Novel: resignation did not effectively trigger the Article VIII purchase window (and, even if it did, Novel let the window expire)	Court: resignation likely did not qualify as a Transfer Notice; in any event, Company and members’ option periods expired before the December supermajority vote
Whether the December 30 resolution made ownership-quantity claims moot	Dillon: disputed whether the resolution was unconditional/irrevocable	Novel: the resolution established the 1.1% quantity and mooted those challenges	Court: quantity is no longer disputed; Dillon abandoned those counts; summary judgment for defendants on Counts I, II, III, V, VI
Whether equitable relief (specific performance / declaratory relief) can force Article VIII valuation	Dillon: seeks court order requiring buyout under Article VIII valuation	Novel: Article VIII valuation is displaced when §7.5(a) supermajority redemption occurs	Court: Article VIII does not apply after §7.5(a) supermajority-triggered redemption; Counts IX and X fail

Key Cases Cited

Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard governs whether a reasonable jury could find for nonmovant)
Already, LLC v. Nike, Inc., 568 U.S. 85 (voluntary cessation and mootness principles)
Bus. Bank v. Hanson, 769 N.W.2d 285 (Minn.) (contract-construction: plain meaning controls absent ambiguity)
Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339 (Minn.) (unambiguous contracts are enforced even if result is harsh)
Satcher v. Univ. of Arkansas at Pine Bluff Bd. of Trustees, 558 F.3d 731 (8th Cir.) (failure to oppose a basis for summary judgment constitutes waiver) }