Exelon Generation Acquisitions, LLC v. Deere & Company
176 A.3d 1262
| Del. | 2017Background
- Exelon acquired Deere’s wind-energy business, including Blissfield Wind Energy LLC, which was developing the Blissfield Wind Project defined in the Purchase Agreement as “the wind project under development in Lenawee County, Michigan” (81 MW).
- Deere had secured a Consumers Energy Power Purchase Agreement (PPA) tied to the Lenawee County site before the sale; the Purchase Agreement made earn-out payments conditional on certain development milestones for three Michigan projects, including Blissfield.
- Riga Township enacted restrictive zoning less than a year after the sale, making development in Lenawee County commercially infeasible; Exelon declared force majeure under the PPA and notified Deere it abandoned the Blissfield project per the Agreement’s abandonment clause.
- Exelon negotiated an amendment to the PPA allowing the contract to apply to a new site, then purchased the Beebe Wind Farm in Gratiot County and completed development there under the amended PPA.
- Deere sued, claiming the Blissfield project had been “relocated” to Gratiot and that achievement of a Commercial Operation Date under the amended PPA triggered the $14 million earn-out. The Superior Court granted summary judgment for Deere; the Delaware Supreme Court reversed.
Issues
| Issue | Plaintiff's Argument (Deere) | Defendant's Argument (Exelon) | Held |
|---|---|---|---|
| Whether earn-out was triggered by Commercial Operation under the amended PPA at Beebe | The earn-out condition ties to milestones in the PPA; once the PPA (amended) reached Commercial Operation Date, earn-out is due regardless of site | The Purchase Agreement defines Blissfield as the wind project under development in Lenawee County; earn-out requires that Lenawee County project to reach milestones, which it did not | Reversed: earn-out not triggered because the Lenawee County project never achieved the milestones; the amended-PPA milestones for Beebe do not satisfy the Blissfield definition |
| Whether the term “Blissfield Wind Project” is moveable or site-specific | The geographic phrase was merely an identifier at time of sale; the project can be moved and remain the same project | The project was tied to Lenawee County with real property, permits, leases, and Deere’s representations; it was not merely an idea or a PPA that could be transplanted | Held for Exelon: context and representations show the project had a geographic anchor; parties did not intend the earn-out to be satisfied by developing a different site |
| Whether post-closing conduct (amendment, force majeure, communications) may be used to interpret the Agreement | Post-closing events show parties treated the PPA and project as moveable, justifying award | Post-closing conduct may show factual performance but cannot be used to interpret an unambiguous contract term | Held: Courts may consider post-closing conduct to determine if milestones were met, but not to rewrite or interpret unambiguous contract language; here contract unambiguous about Lenawee County anchor |
| Whether incorporating PPA milestones into the Purchase Agreement means the entire PPA (and its later amendments) is incorporated for all purposes | Incorporation of the PPA milestones implies the PPA (and its amended site) supplies the operative milestones for the earn-out | Only the defined term (Commercial Operation Date) and its referenced milestones are incorporated for the narrow purpose stated; incorporation of discrete terms does not absorb the whole PPA or change the geographic definition of the Blissfield Project | Held: The Purchase Agreement incorporated only relevant defined terms (e.g., Commercial Operation Date) for their specific purposes; amendment of the PPA to reference a different Plant Site did not convert a distinct, Lenawee-tethered project into the Blissfield Project for earn-out purposes |
Key Cases Cited
- Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228 (Del. 1997) (contract interpretation is a question of law; extrinsic evidence cannot be used to vary unambiguous terms)
- Twin City Fire Ins. Co. v. Del. Racing Ass'n, 840 A.2d 624 (Del. 2003) (objective theory of contracts; focus on parties’ shared expectations as reflected in the contract)
- Salamone v. Gordon, 106 A.3d 354 (Del. 2014) (contract construction judged by a reasonable third-party understanding)
- Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192 (Del. 1992) (questions of contract construction are for the court to decide)
- Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del. 2010) (courts use objective meaning of contract language to ascertain intent)