BOSTON, MA – According to a press release on their Web site, International law firm McDermott Will & Emery LLP has secured a $230 million arbitration award for Firm client Bionol Clearfield LLC (Bionol), the Quincy, Massachusetts-founded developer of an ethanol plant located in Clearfield County, Pennsylvania, from Getty Petroleum Marketing Inc. (Getty). The award includes $47 million in damages incurred to date, and over $180 million in future damages.
In 2007, Bionol and Getty, a wholly owned subsidiary of Lukoil Americas at the time, entered into a five-year “Off-take Agreement” requiring Getty to purchase essentially all of the output from the Clearfield County ethanol plant under a commodity based pricing formula. When the plant came online in early 2010, and after a precipitous drop in the commodities market, Getty challenged the pricing mechanisms of the contract. Getty then commenced the subject arbitration, seeking damages of $10 million for breach of contract, fraudulent inducement, mistake and related claims.
The McDermott team responded with counterclaims on behalf of Bionol. A panel of AAA Arbitrators then heard evidence over four weeks, including expert testimony on the ethanol, corn, and related commodities markets. Ultimately, the Panel adopted all of McDermott’s legal theories on liability and damages under the Uniform Commercial Code. The Panel also adopted the damage model developed by McDermott and their expert witness.
“We are delighted by this ruling in favor of our client Bionol, and also in our ability to secure for Bionol the full benefit of its bargain and thus all the monetary damages we sought on their behalf,” said McDermott lead partner Anthony Bongiorno. “While the ethanol markets have fluctuated greatly over the past few years, Bionol and Getty had a deal on this commodity based pricing formula. McDermott never wavered on the principal that ‘a deal is a deal’ and that this contract was legally binding regardless of subsequent market fluctuations.”
Adding another dimension of difficulty to this case, after the first six days of testimony from fact and expert witnesses, Lukoil announced the sale of Getty to an unrelated party. This forced Bionol to file a motion for interim relief, which the Panel allowed, ordering an attachment on all of the assets of Getty in the amount of $47 million.
“This was an important benchmark for our trial team, providing us with momentum to keep this complex case moving forward toward the final award providing for all damages sought.”
In addition to Bongiorno, the McDermott trial team included partner Matthew Martel and associates Victoria Thavaseelan and Malinda Morain.
According to a prior Gant story, Bionol along with its affiliates, Bioenergy Holdings LLC and Bionol Holdings LLC, each filed a voluntary petition for chapter 7 relief in the United States Bankruptcy Court in Delaware. Bionol anticipates that its assets will be sold through the bankruptcy process as a functioning ethanol plan, for the benefit of its employees, creditors, and other stakeholders.
