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Geometwatch Corp. v. Hall

United States District Court, D. Utah

November 27, 2018

GEOMETWATCH CORP., a Nevada corporation, Plaintiff,
ALAN E. HALL, et al., Defendants.


          Jill N. Parrish, United States District Court Judge.

         District Judge Jill N. Parrish This matter comes before the court on the Motion for Summary Judgment filed on November 3, 2017 by Defendants Alan E. Hall, Tempus Global Data, Inc., and Island Park Group of Companies, LLC (the “Hall Defendants”). (ECF No. 524).[2] Plaintiff, GeoMetWatch Corp. (“GeoMet”) filed an opposition to the motion on January 22, 2018, (ECF No. 553), to which the Hall Defendants replied on March 23, 2018, (ECF No. 571). GeoMet also filed a Motion for Consideration of Supplemental Material, which the court hereby grants, and has considered as part of this motion. (ECF No. 691).

         The court held a hearing on this motion on July 27, 2018. On the basis of that hearing, the parties' memoranda and associated exhibits, a review of relevant law, and for the reasons below, the Hall Defendants' Motion for Summary Judgment is granted in part and denied in part.


         A. Development of the GIFTS Sensor

         In the early 2000s, the Utah State University Research Foundation (“USURF”) developed a new weather system sensor. The development of the sensor-the Geosynchronous Imaging Fourier Transform Spectrometer, or the GIFTS sensor for short-was funded by the National Aeronautics and Space Administration (“NASA”) and the National Oceanic and Atmospheric Administration (“NOAA”). The GIFTS sensor was designed to provide high-resolution atmospheric data that would significantly improve weather forecasting.

         B. GeoMet's Vision

         David Crane and Gene Pache founded GeoMet in 2008. They envisioned that GeoMet would employ sensors, like the GIFTS sensor, that would provide unique and proprietary weather data. To this end, GeoMet obtained a verbal commitment from NASA that GeoMet could have the GIFTS sensor.

         In September 2010, GeoMet received a remote sensing license from the Department of Commerce and NOAA (the “NOAA license”). GeoMet was the first company to obtain this type of license. The NOAA license allows GeoMet to operate up to six satellite sensors, like the GIFTS sensor, in geosynchronous orbit, take detailed weather observations, and commercialize the data.

         C. USURF Agrees to Build the STORM Sensor

         Beginning in late 2009 and early 2010, before GeoMet obtained the NOAA License, GeoMet had discussions with USURF. GeoMet and USURF discussed whether USURF could build a commercial version of the GIFTS sensor. The commercial version of the GIFTS sensor is called the Sounding and Tracking Observatory for Regional Meteorology or the STORM sensor for short. USURF eventually agreed to build the STORM sensor.

         GeoMet and USURF entered into a number of agreements concerning the STORM sensor. One of those agreements was the Preferred Service Provider Agreement. In April 2013, GeoMet and USURF terminated the Preferred Service Provider Agreement so that Utah State University Advanced Weather System Foundation (“AWSF”), a subsidiary of USURF, could take responsibility for building the STORM sensor.

         D. GeoMet Obtains Letters of Intent and Memoranda of Understanding

         Throughout 2011 and afterwards, GeoMet worked to identify potential customers that were willing to execute letters of intent and memoranda of understanding. This was an expensive and time-consuming process. GeoMet, in 2011, entered into a nonbinding License and Services Agreement with a Chinese data company. This agreement reflects that the company was willing to buy $8.9 million of weather data per month (i.e., $108 million per year). Ultimately, however, the company entered into a contract with GeoMet under which it committed to purchase only $300, 000 of weather data per month (i.e., $3.6 million per year). GeoMet obtained multiple other letters of intent, but none led to the execution of firm commitments.

         E. AsiaSat and the Proposed EXIM Loan

         AsiaSat, a foreign entity based in Hong Kong, operates satellites and sells space on its satellites to broadcasting and telecommunication companies. In early 2012, GeoMet and AsiaSat began to discuss whether AsiaSat could host the STORM sensor on one of its satellites. Specifically, GeoMet and AsiaSat discussed whether AsiaSat could host the STORM sensor on a satellite referred to as AsiaSat 9.

         GeoMet and AsiaSat also discussed whether AsiaSat could use its balance sheet to secure a loan of about $170 million from the Export-Import Bank of the United States (the “EXIM Bank”).[3] GeoMet planned to use the loan proceeds to pay for the STORM sensor.

         Because of the high cost associated with constructing, launching, and hosting the STORM sensor, AsiaSat was concerned about its “exposure” in doing a deal with GeoMet. Specifically, AsiaSat was worried that it would take out a loan with the EXIM Bank, GeoMet's business would fail, and AsiaSat “would be on the hook to pay off the debt.”

         Because of these concerns, GeoMet and AsiaSat came to an understanding that, before AsiaSat would agree to take out a loan from the EXIM Bank, GeoMet would be required to provide a guarantee or “backstop” that would secure AsiaSat in the event that GeoMet was unable to pay back the loan. According to AsiaSat's CEO, “[t]he key element was always [that GeoMet] provide a guarantee that eliminated [AsiaSat's] risk . . . .”

         In early 2013, AsiaSat commenced the initial application steps for securing a loan from the EXIM Bank (the “Proposed EXIM Loan”).[4] The loan application listed a special purpose vehicle that was 100 percent owned by AsiaSat as the “borrower.” The loan application listed GeoMet as the domestic “exporter.” AsiaSat represented that the total cost of venture was $168 million, though AsiaSat applied for a loan of only $125 million because the EXIM Bank was unwilling to finance more than 85 percent of the venture's cost.

         F. AsiaSat and The Cooperation Agreement

         In 2012 and early 2013, GeoMet expressed a desire to enter into a formal agreement with AsiaSat. GeoMet believed that a formal agreement would legitimize the cooperation between the two companies, making it easier for GeoMet to obtain guarantees for the Proposed EXIM Loan.

         On April 3, 2013, GeoMet and AsiaSat executed a Cooperation Agreement. Under the Cooperation Agreement, AsiaSat agreed to use “reasonable efforts” to cause the EXIM Bank to close the Proposed EXIM Loan. But before AsiaSat was required to do so, GeoMet was required to meet certain conditions, two of which are relevant here. Section 2.2.1 of the Cooperation Agreement provides:

“[t]he obligation of AsiaSat . . . to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or AsiaSat's . . . waiver of each of the following conditions: . . .
(b) AsiaSat . . . shall have received from [GeoMet] the Convertible Note duly executed by an authorized officer of [GeoMet], which Convertible Note shall be in full force and effect on the Effective Date; [and]
(c) AsiaSat . . . shall have received legally valid and binding guarantees and/or other credit support (including letters of credit) in favor of AsiaSat . . . given by a guarantor (or bank, in the case of letters of credit) acceptable to AsiaSat . . . in [its] sole and absolute discretion and, in each case, in form and substance satisfactory to AsiaSat . . . in [its] sole and absolute discretion, which shall guarantee the full performance and payment of the obligations of [GeoMet] . . . hereunder (i) in respect of the Right to Use Fee[5] (which credit support shall be referred to as the ‘Right to Use Credit Support'), and (ii) under the Convertible Note (which credit support shall be referred to as the ‘Convertible Note Credit Support' and collectively with the Right to Use Fee Credit, the ‘Credit Supports'), which Credit Supports shall be in full force and effect on the Effective Date . . . .”

         One of the purposes of the Convertible Note described in Section 2.2.1(b) was to provide AsiaSat a mechanism to obtain equity in GeoMet. But GeoMet's attorneys were “against” GeoMet issuing a convertible note to AsiaSat because it would make the STORM collateral for the Proposed EXIM Loan. And GeoMet knew that “NOAA would not accept that.” AsiaSat nevertheless refused to “back off” on the convertible-note requirement. Eventually, GeoMet's attorney refused to approve the convertible note because it was “too onerous.”

         The CEO of AsiaSat described GeoMet's obligation to provide a guarantee or backstop for the Proposed EXIM Loan as “the basis for the agreement” and a “key element” of the Cooperation Agreement. GeoMet also understood that obtaining a guarantee or backstop for the Proposed EXIM Loan was “critical” to AsiaSat.

         Under the Cooperation Agreement, AsiaSat could terminate the agreement “at any time after the Cut-off Time, by written notice to [GeoMet], if the conditions set forth in Article 2.2.1 . . . [were] not fulfilled on or prior to the Cut-off Time.” The Cut-off Time was July 31, 2013. GeoMet and AsiaSat agreed that the Cut-off Time could only be modified by a written agreement.

         G. GeoMet's Dealings with AWSF

         In April 2013, after GeoMet and USURF terminated the Preferred Service Provider Agreement, GeoMet and AWSF entered into a Preferred Provider Agreement. The Preferred Provider Agreement provides that GeoMet “shall enter into, maintain, and fulfill . . . the October 1, 2013 [Storm 001 Contract]” and that “[m]aintenance of the . . . contract specifically includes complying with the payment schedule set forth [in the contract].”

         Under the Preferred Provider Agreement, AWSF could terminate the agreement by giving written notice of default to GeoMet if, among other things, GeoMet failed to comply with the payment schedule set forth in the Storm 001 Contract. The termination would be effective thirty days after AWSF provided written notice unless GeoMet cured the default.

         On October 1, 2013, GeoMet and AWSF executed the STORM 001 Contract referenced in the Preferred Provider Agreement. The STORM 001 Contract contains a payment schedule under which GeoMet was required to “ensure adequate funding to comply with the Milestone Payment Schedule.”

         Under the Milestone Payment Schedule, GeoMet was required to pay to AWSF a total of $124, 933, 872. GeoMet was required to make its first payment of $5, 384, 022 on January 6, 2014. GeoMet knew that AWSF could not build the STORM sensor unless GeoMet provided the funding.

         The Storm 001 Contract defined an “Event of Default” as, among other things, when “GeoMetWatch fails to pay when due any amount payable under th[e] contract.” “During the continuance of any Event of Default, AWSF may, by notice to [GeoMet], (i) discontinue performing its obligations under th[e] contract, and (ii) terminate th[e] contract.”

         H. AsiaSat Halts the EXIM Loan Process

         In July 2013, it became apparent that GeoMet would not be able to provide a guarantee or backstop for the Proposed EXIM Loan before the July 31, 2013, Cut-off Time. Accordingly, AsiaSat and GeoMet extended the Cut-off Time to September 30, 2013.

         On July 29, 2013, AsiaSat informed GeoMet that it was not filing the Federal Register notice for the Proposed EXIM Loan and that it was not going to submit the Proposed EXIM Loan to the EXIM Bank for board approval.[6] AsiaSat chose not to submit the Proposed EXIM Loan for board approval because it “did not have the guarantees as required [by the Cooperation Agreement].” As AsiaSat's CEO explained, “[T]o submit [the Proposed EXIM Loan] to EXIM for approval, the guarantees had to be in place.”

         AsiaSat informed GeoMet that “[t]he only outstanding thing [was] the guarantee, which is also the most sensitive one. [AsiaSat] would proceed with the filing to the Federal Register as soon as [it] ha[d] more clarity on the guarantee.” AsiaSat's CEO informed GeoMet in an email:

We have delayed the submission of the register filing with EXIM until we have the guarantee sorted out. The deal is still on and the process is still intact. . . . As soon as we notify EXIM to proceed, they will submit the filing to the registry and our deal will be on the agenda for the next Board meeting 10 days later. Nothing has changed, the key driver is still the guarantee. . . .

         In August 2013, GeoMet had still not been able to obtain the required guarantee and AsiaSat told the EXIM Bank to stop entirely the process related to the Proposed EXIM Loan. GeoMet discussed with AsiaSat alternatives whereby GeoMet would not be required to meet its obligations set forth in the Cooperation Agreement. But AsiaSat did not agree to any of the proposed alternatives.

         In September 2013, AsiaSat and GeoMet again extended the Cut-off Time, to November 30, 2013. On November 24, 2013, a week before the Cut-off Time, GeoMet asked AsiaSat if there were “another way to structure the deal” and if “AsiaSat would support [AWSF] for a month or two.” AsiaSat informed GeoMet that it was “unable to engage any funds nor . . . willing to trigger the Ex-Im loan until a guarantee is in place . . . .”

         As of November 30, 2013, GeoMet had neither provided to AsiaSat the Convertible Note (as was required by Section 2.2.1(b) of the Cooperation Agreement), nor a guarantee or backstop for the Proposed EXIM Loan (as was required by Section 2.2.1(c) of the Cooperation Agreement). Because of GeoMet's inability to meet these requirements, AsiaSat did not proceed with the approval process for the EXIM Loan.

         I. The Hall Defendants

         On September 20, 2013, shortly after GeoMet and AsiaSat extended the Cut-Off Time a second time, GeoMet's attorney introduced GeoMet's then-CEO to Alan Hall. AWSF and USURF encouraged GeoMet to meet with Mr. Hall because they believed that he could provide the backstop funding for the Proposed EXIM Loan or locate someone who could. AWSF and USURF assured GeoMet that Mr. Hall was required to treat information related to the STORM sensor as confidential. Accordingly, GeoMet made confidential business and technical information available to Mr. Hall and his team.[7]

         On November 3, 2013, Mr. Hall sent an email to AsiaSat's CEO. Mr. Hall explained that GeoMet was “in trouble” and that it was contractually obligated to pay AWSF $6 million on January 6, 2014, and another $8 million in February. Mr. Hall further explained that he was prepared to obtain a NOAA license, similar to GeoMet's, if GeoMet failed to pay AWSF. Mr. Hall proposed that he and AsiaSat become equal partners in a business of which Mr. Hall would own 42 percent and AsiaSat would own 42 percent. Utah State University (“USU”) would own 1 percent, and employees would own 15 percent (in the form of stock options). Finally, Mr. Hall wrote: “USU and [AWSF] love this plan and will happily discuss it with you. I have not broached this matter with [GeoMet] and ask you to not speak with me in the near term.”[8]

         Three days later, on November 6, 2013, GeoMet and Mr. Hall, on behalf of Island Park, executed a Mutual Non-Disclosure Agreement (the “Mutual NDA”). Under the Mutual NDA, Island Park agreed that it would use GeoMet's confidential information only to facilitate “technical and commercial discussions relating to the development and distribution of environmental observation systems and/or services of GeoMetWatch.” Island Park further agreed that it would “not disclose to any other person or entity any Confidential Information, or that discussions are taking place between the parties concerning the Confidential Information . . . .”

         J. AWSF Terminates the Storm 001 Contract and the ...

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