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AGTC Inc. v. CoBon Energy LLC

Court of Appeals of Utah

July 18, 2019

AGTC Inc. and Alpine Coal Co. Inc., Appellants,
v.
CoBon Energy LLC, Appellee.

          Fourth District Court, Provo Department The Honorable James R. Taylor No. 060402937

          E. Scott Savage and Stephen R. Waldron, Attorneys for Appellants

          Wm. Kelly Nash, Douglas B. Thayer, Kimberly N. Baum, and Troy L. Booher, Attorneys for Appellee

          Judge Michele M. Christiansen Forster authored this Opinion, in which Judges Gregory K. Orme and Ryan M. Harris concurred.

          CHRISTIANSEN FORSTER, JUDGE

         ¶1 AGTC Inc. and Alpine Coal Co. Inc. (collectively, A&A) appeal the district court's grant of summary judgment to CoBon Energy LLC (CoBon) on their contract and unjust enrichment claims. We reverse and remand for further proceedings.

         BACKGROUND[1]

         ¶2 To pursue certain tax credits related to the manufacture of synthetic fuels from coal (synfuel), Covol Technologies Inc. (Covol) and Intermountain Consumer Professional Engineers (ICPE) partnered to form CoBon. ICPE's principals included Steven Nash, Robert Nash, and Anton Tonc, each licensed professional engineers. Using technology developed by Covol, with assistance from ICPE, CoBon planned to develop facilities that would take small and unmarketable pieces of coal known as coal fines-a waste product of coal manufacturing-and bind them together to form marketable coal briquettes.[2]

         ¶3 After establishing a synfuel production facility, CoBon envisioned selling that facility to a buyer who would make and sell synfuel briquettes. This production would entitle the buyer to claim the associated tax credits. As part of the facility transaction, CoBon would receive a share of the tax credits from the buyer in addition to certain royalty and proprietary technology fees. Before any of this could happen, however, CoBon needed to identify sources of coal fines, find suitable locations for facilities, and negotiate the purchase of coal fines and sale of coal briquettes. But neither Covol nor ICPE had coal industry experience or contacts.

         ¶4 In November 1995, CoBon contacted A&A and requested its assistance in presenting projects to coal companies and getting facility projects under contract. Mark Rodak, a consultant and the principal of Alpine Coal, had significant mining engineering education and training as well as experience in various roles in the mining industry. Richard Visovsky, a consultant and the principal of AGTC, also had significant mining engineering training and education and had experience in synfuel development. Neither of these individuals was a licensed professional engineer.

         ¶5 In March 1996, A&A entered into a consulting agreement with Covol-the company licensing the coal fines bonding technology. Four months later, Covol terminated the consulting agreement with A&A and renegotiated its relationship with CoBon. Under the new arrangement, Covol agreed to license its coal fines bonding technology to CoBon who, using that license, could pursue development of its own synfuel facilities. Additionally, ICPE was removed as a principal of CoBon and replaced by Steven Nash and Robert Nash. In anticipation of receiving its license from Covol, CoBon entered into its own agreement with A&A, first orally and then in a formal written agreement (the Consulting Agreement).

         ¶6 Over several years, A&A provided consulting and assistance to CoBon in its endeavor to establish synfuel facilities. A&A communicated with coal companies and vendors on CoBon's behalf. A&A brought in several potential project hosts and worked toward the goal of securing synfuel development projects. Ultimately, A&A devoted approximately 6, 000 hours consulting for CoBon, which resulted in the completion of several synfuel projects generating approximately $69 million in tax credit payments and other revenue to CoBon.

         ¶7 CoBon began paying A&A for its assistance under the Consulting Agreement in 2001 but stopped making payments the following year. In response to A&A's demand to continue payments, CoBon filed a lawsuit in a Utah district court, alleging, among other things, that A&A breached the Consulting Agreement. In response, A&A asserted several counterclaims, including claims for breach of contract and unjust enrichment against CoBon. In 2009, CoBon amended its reply to A&A's counterclaims to argue that A&A was barred from asserting its contract claims by Utah's "non-recovery rule," which bars unlicensed professionals from seeking enforcement of contracts for professional services where the licensing requirements have been enacted with the purpose of protecting the public. See George v. Oren Ltd. & Assocs., 672 P.2d 732, 735 (Utah 1983).

         ¶8 In 2016, CoBon moved for partial summary judgment on A&A's unjust enrichment claim. CoBon asserted that because both parties had previously admitted that the Consulting Agreement was a binding and enforceable contract, A&A could not pursue its unjust enrichment claim. See Ashby v. Ashby, 2010 UT 7, ¶ 14, 227 P.3d 246 ("[A] prerequisite for recovery on an unjust enrichment theory is the absence of an enforceable contract governing the rights and obligations of the parties relating to the conduct at issue."). A&A opposed the motion on the ground that several of CoBon's "contentions and defenses," including its contention that A&A was barred from recovering under the Consulting Agreement by the non-recovery rule, [3] "go to the validity, enforceability and scope of the Consulting Agreement." Because CoBon's defenses had not been abandoned or rejected, A&A argued that dismissing its equitable claims "would be ...


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