Breach of contract suit filed over Woodville bio fuel project

Kelly Holleran Jun. 11, 2012, 3:56pm

A renewable energy company has filed suit against a German company, claiming it has lost significant amounts of money after the German business failed to fulfill its promises to form a partnership.

Forestech Energy wanted to start a company in which it would sell wood pellets to Europe as a source of renewable bio fuel.

"After a significant investment of time and money, Plaintiff determined that a Woodville-Beaumont area facility would be selected for such a project," the suit states.

In order for the business to succeed, however, Forestech needed to find a partner in Europe that would be able to transport the goods to Europe at a low price, according to the complaint filed May 24 in Jefferson County District Court.

Forestech thought it had found that partner in defendant German Pellets, "one of Europe's leaders in wood pellet manufacturing," the suit states.

After planning a wood pellet project with a mill in Woodville and obtaining a shipping site in Beaumont, Forestech began meeting with German Pellets, which represented a desire to become partners with Forestech, the complaint says.

German Pellets told Forestech that because of its equity, it could help finance the project. The suit states it issued a letter of intent to Forestech representing that the two could form a U.S. limited liability company called Texas German Pellets, Forestech alleges. For its part in the company, Forestech would have an equity interest and receive a management fee, according to the complaint.

German Pellets and Forestech proceeded to attend meetings together to secure different necessities for the project. At these meetings, German Pellets treated Forestech as a partner, the suit states.

While trying to get the project off the ground, Forestech spent significant money when it developed a financial model, obtained rights to a plant site and required permits, reviewed the wood resources available to it, procured a source of wood, negotiated different state and federal incentives, negotiated a natural gas contract and obtained rights for shipping at the Port Arthur Port Facility, the complaint says.

German Pellets, meanwhile, engineered a wood pellet facility, selected a contractor, purchased the site and paid for engineering, equipment and demolition, Forestech claims.

Despite all of Forestech's work in helping to get the facility running, German Pellets has failed to issue a record of Forestech's interest in the newly formed U.S. company. In addition, it has failed to pay Forestech a management fee, according to the complaint.

In fact, German Pellets has not yet completed construction of the project or to begin operations, the suit states. Therefore, Forestech has not been able to proceed with the project as it had planned, the complaint says.

In its complaint, Forestech alleges breach of contract, unjust enrichment, misappropriation of trade secrets, common law fraud, constructive fraud and disgorgement.

It is seeking unspecified damages, plus attorneys' fees and other relief the court deems just.

Gary Neale Reger and David J. Fisher of Orgain, Bell and Tucker in Beaumont are representing Forestech.

The case has been assigned to Judge Gary Sanderson, 60th District Court.

Case No. B192-498

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