A Wrongful Termination – Power Plant Contract Cut Short is Made Right

After three years of litigation, global energy leader and Hinckley Allen client Iberdrola Energy Projects, Inc. (“IEP”) won an international arbitration against Footprint Power Salem Harbor Development, LP (“Footprint”) with an award of $237 million, including recovery of all of IEP’s attorney’s fees and costs. The dispute arose out of the construction of a 674 MW combined cycle power plant known as the Salem Harbor Energy Center project located in Salem, Massachusetts. IEP was responsible for the engineering, procurement and construction of the project, while Footprint was the owner and developer of the project.

Known for making environmental, social and governance factors intrinsic to their projects, IEP won the contract to build Footprint’s power plant in Massachusetts. However, when the project was more than 98% complete, Footprint wrongfully terminated the contract after alleging unjustified delays and contractual breaches and immediately sought to draw on IEP’s performance letter of credit.

Hinckley Allen’s Construction & Public Contracts team, one of the most experienced in the nation, championed IEP’s case, arguing that Footprint’s decision to terminate the contract was wrongful and driven by its improper goal of drawing on IEP’s performance letter of credit to fund completion of the project, notwithstanding that the power plant was almost fully operational at the time of termination.

Arbitration hearings took place in Q1 of 2021 (over the course of 2+ months), with witnesses across the globe appearing and being cross-examined via Zoom.

On October 15, 2021, a Tribunal of three very experienced construction arbitrators issued a 77-page award in IEP’s favor on its affirmative claims for wrongful termination and Breach of Contract, and granted IEP a 319-day extension of time to the Guaranteed Substantial Completion Date.  The Tribunal rejected Footprint’s counterclaims for excess cost to complete, liquidated damages, Mass Gen. Law c. 93A violations and breach of the duty of good faith and fair dealing.  The Tribunal further awarded IEP all of its legal fees and costs expended in connection with pursuing the arbitration and defending against Footprint’s counterclaims, finding Hinckley Allen’s legal fees to be abundantly “reasonable”.  The net award in IEP’s favor was $236,404,377, plus post-award interest accruing at a rate of 9% per annum if the Award was not paid in full within thirty (30) days.

The Award was confirmed by the New York State Court (Schecter, J.) on December 23, 2021.  (See Iberdrola Energy Projects, Inc. v. Footprint Power Salem Harbor Development, Index No. 656017/2021, NYSCEF Doc. Nos. 71-73).

The arbitration was administered by the American Arbitration Association International Centre for Dispute Resolution (“ICDR”), under the ICDR International Arbitration Rules.

Hinckley Allen congratulates IEP on this ground-breaking win!

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