IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
THE DATA CENTERS, LLC,
a Delaware Limited Liability Company,
Plaintiff,
v.
1743 HOLDINGS LLC, a Delaware
Limited Liability Company, and
THE UNIVERSITY OF DELAWARE,
Defendants.

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C.A. No. _______________
Trial By Jury Demanded

COMPLAINT
The Data Centers, LLC (“TDC”), by and through counsel, files this Verified
Complaint pursuant to Super. Ct. Civ. R. 8 demanding trial by jury and monetary
damages, and alleges in support thereof:
SUMMARY OF THE ACTION
1.

A commercial landlord flatly breached a 75-year Ground Lease

Agreement (Ex. A hereto, hereinafter “the Lease”) with an industrial tenant,
expelling the tenant from the leasehold. The tenant now sues for the relief to
which it is entitled under the plain terms of the Lease and at common law.
Relatedly, the landlord breached two contracts requiring it to negotiate in good
faith to reach a final agreement to purchase steam from the tenant. In addition, the
landlord and its corporate parent defamed the tenant to publicize a false excuse for
the landlord’s own unlawful conduct and incompetence, and tortiously interfered

ME1 19774246v.1

 with the tenant’s economic relations with non-parties. The landlord is liable for
general, specific, exemplary, and punitive damages for those torts.
2.

This Complaint presents a sorry tale of the University of Delaware’s

(hereinafter “the University”) bureaucratic leadership disgracing the institution and
our State before the national business community.

The University led a

competitive bidding process to induce a private company to select Delaware to
host a $1.3 billion business project. Then, the University publicly reneged on the
bid it won. As a direct result of that breach, Plaintiff has suffered damages it
estimates in good faith of at least $200 million.
3.

Additionally, the University’s misconduct inflicted crushing public

losses upon all Delaware citizens: 8,400 jobs that would have paid $479 million in
wages lost, $25.6 million in State and local one-time taxes and fees foregone, and
$4.2 million in annual taxes to Christiana School District, just to name a few.
4.

Worse, the sole reason for the University’s unlawful conduct was that

its leadership decided it was more important to please unrelated professional
activists than to meet its contract obligations, or to honor its commitments to the
State that contributes more than $100 million annually to its budget.
5.

The Data Center would have been a powerful economic engine for the

State, which substantially supports the University’s budget and operations, and
also would have generated environmentally friendly, inexpensive electricity for
2
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 both the University and the ordinary working people of Newark. In an egregious
error in judgment, with no regard for the common good and to the detriment of all,
the University allowed itself to be led astray by a tiny minority of all-or-nothing
extremists who reject all new electricity generation in their backyards, no matter
how clean or scientifically sound. While reasonable people can differ, the
University committed the unpardonable sin of trying to appease the extremists,
whose sole reason for being was selling unscientific fear to misguide the public, by
openly defying a contract it not only agreed to, but actively sought.
THE PARTIES
6.

Plaintiff TDC is a Delaware LLC which may be served through

counsel of record. The principal of TDC is E. Eugene Kern. Mr. Kern and his
TDC colleagues have decades of experience in project management of building
and managing data centers. They are well known leaders in the relevant industry.
7.

Defendant 1743 Holdings LLC (hereinafter “Holdings”) is a Delaware

LLC wholly-owned by the University of Delaware. Holdings may be served
pursuant to 6 Del. C. §18-105 via its registered agent Scott R. Douglass, University
of Delaware, 122 Hullihen Hall, Newark, DE 19716.
8.

Holdings is a single-purpose entity charged with owning and

developing a parcel of land in Newark, Delaware, at the direction and for the
benefit of its sole interest-holder, the University of Delaware. Holdings has no
3
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 employees and conducts business only by utilizing employees and agents of its
owner.

The University speaks for itself and Holdings with one voice, often

describing the University rather than Holdings as the landlord on the Lease.
9.

The University of Delaware is a public land grant college located

primarily in Newark, Delaware. The University holds domestic corporation status
pursuant to 14 Del. C. §5101, and may be served pursuant to 10 Del. C. §3111 via
service upon any officer, director, or manager having a business office within the
State, including inter alia via its President Dr. Patrick Harker, 122 Hullihen Hall,
Newark, DE 19716.
10.

The University owns 100% of Holdings. Agents of the University

manage all aspects and conduct all business of Holdings.

In all conduct

complained of herein, the University behaved as if Holdings had no separate
corporate existence.
11.

The University and Holdings are alter egos in Delaware law.

12.

In addition and in the alternative, the University and Holdings formed

a common law partnership for the purpose of conducting a $1.3 billion business
venture contemplated by the Lease and now under dispute in this action
(hereinafter “the Project”), as described more fully herein. Each is responsible to
the other as a general partner, and the partnership is liable to TDC. Hereinafter
unless designated otherwise, “the University” encompasses itself, Holdings as its
4
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 alter ego, and the common law partnership of Holdings and the University.
13.

Non-party City of Newark (hereinafter, “Newark” or “the City”) is a

Delaware municipality with home rule powers pursuant to 22 Del. C. Ch. 1, et seq.
14.

Non-party Delaware Municipal Electric Corporation Inc. (“DEMEC”)

is a public corporation designated as a Joint Action Agency pursuant to 22 Del. C.
§1301, et seq.

The members of DEMEC are the Delaware municipalities of

Clayton, Dover, Lewes, Middletown, Milford, Newark, New Castle, Seaford, and
Smyrna, in its own words, “all major towns except Wilmington.”

DEMEC

provides 100% of the electric power to all of its members except for Dover.
DEMEC provides that electric power to its members via a combination of its own
power plant assets plus contracts to purchase electricity from third parties. One
purpose of DEMEC is to aggregate the buying power of its members to command
better pricing for power purchases from third parties.
15.

DEMEC is governed by a nine-member board. Two DEMEC board

members are appointed by Newark: one voting director and one alternate director.
During the events described in the Complaint, Newark’s board members were City
Director Carol Houck and City Treasurer Louis Vitola (alternate).
JURISDICTION AND VENUE
16.

The Superior Court holds original subject matter jurisdiction over

contract and tort actions arising at law. The amount in controversy vastly exceeds
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 $50,000.00.
17.

Both Defendants are Delaware entities subject to personal jurisdiction

in Delaware. Virtually all of the conduct complained of occurred in Delaware, and
the damages were both caused and accrued in Delaware. The Lease expressly
contemplates jurisdiction in the Courts of Delaware.
FACTS
I.

The STAR Campus
18.

The University indirectly owns an approximately 272-acre parcel of

land in Newark, Delaware, that it calls “the STAR Campus.” “STAR” abbreviates
“Science, Technology & Advanced Research.”
19.

The STAR Campus was formerly an automobile manufacturing plant

(including ancillary uses such as rail yards) owned by the Chrysler Corporation.
20.

The land currently called the STAR Campus was zoned for industrial

use throughout the latter half of the 20th century, and was so used by Chrysler for
decades up to 2007.
21.

In 2009, the University purchased the STAR Campus property from

the bankrupt Chrysler Corporation. Subsequently, most buildings associated with
the former Chrysler plant were demolished so the land could be redeveloped.
22.

From 2009 to present, the University has sought to induce high-tech

science and research businesses to become tenants at the STAR Campus.
6
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 23.

Current tenants of the STAR Campus include, inter alia, a fuel cell

manufacturer (Bloom Energy), a joint venture researching applications for electric
cars (eV2G), and the University’s College of Health Sciences.
24.

As described more fully post, the Lease expressly acknowledges the

University’s active role in inducing TDC to sign the Lease to become a tenant at
the STAR Campus, stating in its third “Whereas” clause on Ex. A., p. 1:
“Landlord [Holdings] and the University have partnered in order to attract Tenant
[TDC] to the [STAR] Campus, thus creating the opportunity for collaboration
between Tenant and the University.”
II.

The Data Center
25.

The Project that is the subject of this dispute was the design,

construction and operation of a data center, including all of its ancillary uses.
26.

One possible generic definition of “data center” is that proffered by

the United States Environmental Protection Agency in its July 12, 2012
presentation: Best Practices for Data Centers – Using Your FEC Experience to
Take the Next Step:
A facility housing electronic equipment used for data processing, data
storage, and communications networking; Houses server, network,
and computer equipment; May have environmental controls; May
contain or link to an uninterruptible, redundant and/or backup power
supply; May be protected by physical security and protection devices
or systems (e.g. closed circuit monitoring, fire suppression); May be
built for redundancy[.]
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 27.

Circa 2006, Mr. Kern identified a market need for independent data

centers to house electronic information for commercial clients on a contract basis.
Mr. Kern therefore spent the next four years establishing a project plan to build and
operate such a data center including all ancillary uses, in particular the generation
of electricity and steam to power same, and to secure investors for same.
28.

Mr. Kern established TDC to be the business entity that would

manage the construction of the Project, and ultimately own and operate it. TDC’s
purpose is fully disclosed by the Lease (Ex. A., p. 1, in the second “Whereas”
clause), and was known to Defendants at all relevant times.
29.

As is more fully detailed post, the comparative advantage of TDC’s

data center Project was incorporation of a power plant into the design of the
facility at the outset. Designing in a power plant to provide the data center with
electric and steam power created many beneficial effects, including inter alia
ability to promise customers higher levels of reliability than facilities dependent
only upon the public electricity grid, lower prices for electricity to the facility’s
customers, more efficient use of electricity and steam due to short distances from
point of generation to point of use, and additional revenue from selling excess
electricity and steam to the public grid and/or nearby buildings.
30.

During 2010-2012, TDC investigated several competing locations to

host the Project. In addition to the University’s STAR Campus in New Castle
8
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 County, other locations that marketed themselves as potential hosts included
commercial sites in neighboring Kent and Cecil counties, as well as sites in
Southeastern Pennsylvania, Southern New Jersey, Maryland and Kansas.
31.

The reason that many locations including the University aggressively

marketed themselves to host the Project is simple: the Project would provide a
massive economic windfall to its host location.
32.

TDC commissioned an Economic Study (Ex. B hereto, hereinafter

“Economic Study”) to forecast the public economic benefits the Project would
provide its host jurisdiction, including:

33.

(a)

3,954 temporary construction jobs to build the Project
over a two-year period;

(b)

290 permanent jobs to operate the completed Project
facilities;

(c)

$7.69 million annual business income taxes (calculated at
Delaware rates);

(d)

$5.56 million in one-time permit and development fees
(calculated at Delaware rates); and,

(e)

$7.9 million in annual property tax sharing (calculated at
New Castle County rates), which as a practical matter
constitute funds to support the local school district
(Christiana School District).

As the Project moved through the planning and approval stage,

several of the potential job and economic benefits were revised upward.
34.

Additionally, the Project anticipated providing many private sector
9

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 benefits to its landlord, including:

35.

(a)

Provision of electricity at extremely competitive cost;

(b)

Provision of steam – commonly employed to heat and
cool buildings – at extremely competitive cost;

(c)

Provision of data center space for both the landlord’s
normal business operations and those of anticipated cotenants in the science and technology fields;

(d)

Development of a vacant parcel including accessory uses
and structures such as access roads and parking lots;

(e)

A long-term lease at set rent; and

(f)

Assistance in meeting carbon-reduction and globalwarming goals (as described more fully post).

In what was Delaware’s former business custom, the State, New

Castle County, City of Newark, the Delaware Chamber of Commerce, and the
University all cooperated to induce TDC to select the STAR Campus to host the
Project, with the University taking the lead. Among the many inducements jointly
and severally made were:
(a)

Newark sponsored
development grants;

the

(b)

Newark caused DEMEC to agree to buy excess
electricity generated by the Project, as memorialized by a
Letter of Intent (“Electricity LOI,” Ex. C hereto);

(c)

The University agreed to buy steam generated by the
Project, memorialized by a Letter of Interest (the “Steam
LOI,” Ex. D hereto); and,

(d)

The City and the University agreed to support TDC in
securing zoning approval for the Project.
10

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Project

for

State-issued

 III.

The Project’s Power Needs And Governing Engineering Principles
36.

A data center should never lose electric power even for one second.

The loss of power to a data center can be worse than a temporary inconvenience
for that facility’s customers. Instead, a power outage can cause data losses that are
impossible to rectify, and destroy the facility’s computing equipment which costs
hundreds of millions of dollars. Additionally, data center outages can cost ecommerce websites millions of dollars per minute in lost profits. Those lost
customer profits are difficult or impossible to forecast in advance, and therefore are
prohibitively expensive and/or impossible to insure.
37.

Because data centers ipso facto should never lose electric power,

modern data centers are generally built to accommodate multiple sources of
electricity. Colloquially, data centers that rely entirely upon the public electricity
grid, and thus suffer black-outs upon a power outage just like ordinary retail
electricity purchasers, are “last generation” obsolete technology.
38.

Modern data centers require enormous amounts of electricity. Thus,

modern data centers often incorporate a power generation asset capable of
generating electricity adequate to ensure a self-reliant continuous provision of
power in lieu of or in addition to connections to the public electricity grid.
39.

This Project design incorporated a substantial power generating asset
11

ME1 19774246v.1

 in the form of a Combined Heat and Power plant, described in detail post.
40.

A data center’s power needs vary seasonally based upon the weather

and many other factors. For example, more electricity is required to run air
conditioners to cool a data center’s equipment in summer than in winter.
41.

Because a data center should never lose power, modern data centers

typically have more electricity generating capacity than they require to operate
even at peak demand. This excess capacity protects the data center from partial
equipment failure. The engineering term of art for this principle is “redundancy.”
One classic example of redundancy is a reserve diesel generator.
42.

The engineering term of art “spinning reserve” means redundancy that

is “online” at all times (say, an extra turbine on an always-operating power plant).
A “non-spinning reserve,” also called “offline reserve,” is redundancy that is not
always “on,” but could be brought online quickly (say, an extra generator).
Because data centers should never lose power, they must maintain a significant
portion of their redundancy as spinning (on-line) reserve rather than non-spinning
(off-line) reserve.
43.

Classically, data centers connected to the public electricity grid would

maintain on-line reserves in the form of lead acid batteries in an Uniterruptible
Power Supply (“UPS”) system. Lead acid batteries are disfavored in modern
designs because: (a) they are failure-prone and typically represent the “weakest
12
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 link” in a data center redundancy scheme; and (b) they are toxic and cause
substantial pollution upon disposal.
44.

Of course, modern data centers also maintain non-spinning reserve in

addition to spinning reserve. In the event of partial equipment failure, the spinning
reserve covers the lost electricity immediately so that the data center never loses
power. Simultaneously, the non-spinning reserve is brought online and becomes
spinning reserve while repairs are effectuated.
45.

The engineering term of art for the aforementioned design principle is

“N+2+1,” where N is the number of power generating components required by
ordinary operations, 2 is spinning reserve redundancy, and 1 is non-spinning
reserve redundancy that serves as the final line of defense against a power failure.
“N+2+1” is an industry-recognized design standard for power plants supporting
data centers.
46.

When not needed for ordinary operations, spinning reserve electricity

can be sold to the public electricity grid, or to neighboring buildings and uses. The
alternative would be to waste the excess electricity at no value to anyone.
47.

When data centers use steam for power generation and cooling, the

same principles of spinning reserve described ante for electricity apply. Thus, data
centers often generate more steam than they need even on the highest-demand day
of the year to protect themselves from catastrophic outages, and can sell their
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 excess steam for other uses.
48.

In sum, a modern design for a data center can support: (a) a power

source independent from the public grid, (b) capable of generating substantially
more electricity (and steam) than required by the data center at its peak load of
operations, i.e. redundancy, (c) that operates all the time as spinning reserve, (d)
with any excess power being sold instead of wasted.
49.

TDC’s Project included many new innovations (some subject to

pending patents) to “design in” its attached CHP Plant from the start, rendering the
data center portion of the Project exceptionally energy efficient and thus more
profitable than classic last generation data center designs. Importantly, TDC’s
Project included its CHP Plant as an essential feature, and cannot work without it.
IV.

The CHP Power Plant
50.

At all relevant times, the Project design incorporated a Combined

Heat and Power co-generation plant, a/k/a the “CHP Plant.”1
51.

The CHP Plant was designed to burn natural gas supplied via a tie-in

to existing local gas lines to generate both electricity and heat (hence, “combined
heat and power”). The heat generated was to be employed to make steam, which
was to be used to both create electricity and to run certain cooling equipment for

1

“Combined Heat and Power,” and “CHP,” and “co-generation” are industry terms not specific
to this Project.

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 the data center. The electricity generated was to be used to power the data center’s
ordinary operations, i.e. to run computers.
52.

According to an August 2012 Joint Report of USEPA and USDOE

titled: “CHP: A Clean Energy Solution” (Ex. E hereto), CHP is the current state
of the art for power generation.2 Historic power plants typically captured only
around 40% of the potential energy from burning fossil fuels to produce electricity,
with the other 60% being wasted as uncaptured heat.3 CHP incorporates advances
in engineering design to capture that historically-wasted heat to generate power.4
Modern CHP plants can run at efficiencies exceeding 65%.5
53.

The CHP Report states the benefits of CHP plants over conventional

electricity generation thus:6
Cost-effective, clean CHP can provide a suite of benefits to both the
user and to the nation:
Benefits of CHP for U.S. businesses:
Reduces energy costs for the user
Reduces risk of electric grid disruptions and enhances
energy reliability
2

Id. at p. 3.

3

Id.

4

Id.

5

Id.

6

Id. at p. 5. “GHG” as used in the quote means “greenhouse gasses.”

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 Provides stability in the face of uncertain electricity
prices
Benefits of CHP for the Nation
Improves U.S. manufacturing competitiveness
Offers a low-cost approach to new electricity
generation capacity
Provides an immediate path to lower GHG emissions
through increased energy efficiency
Lessens the need for new transmission and
distribution (T&D) infrastructure and enhances power
grid security
Uses abundant clean domestic energy sources
Uses highly skilled American labor and American
technology
54.

Because CHP power generation is so efficient, environmentally

friendly, and superior to conventional electricity generation in terms of global
warming impact, the President of the United States issued Executive Order #13624
on August 30, 2012 (Ex. F, hereinafter “the CHP Executive Order”) formally
directing USDOE (and other federal agencies) to increase America’s total CHPgenerated electricity by 50% to 40 gigawatts by 2020.7 The CHP Executive Order
highlights this massive increase in CHP-generated electricity as a vital step to

7

See also Ex. E. at p. 3 describing the 50% commitment.

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 reduce the country’s global warming contribution thus:8
Instead of burning fuel in an on-site boiler to produce thermal energy
and also purchasing electricity from the grid, a manufacturing facility
can use a CHP system to provide both types of energy in one energyefficient step. Accelerating these investments in our Nation’s
factories can improve the competitiveness of United States
manufacturing, lower energy costs, free up future capital for
businesses to invest, reduce air pollution, and create jobs.
55.

The United States government – consistent with the CHP Executive

Order – specifically supported inclusion of the CHP Plant in this Project. The
USEPA issued a formal opinion letter dated February 7, 2014 (Ex. G, hereinafter
“EPA Opinion Letter”) supporting the Project and recognizing its positive
environmental impact, including its contribution to carbon emissions reduction:
TDC’s decision to utilize CHP technology demonstrates exceptional
leadership in energy use, energy management and environmental
stewardship. The CHP system will not only support the reliable
operation of TDC’s data center, but also provide useful heat to the
University of Delaware. We estimate that the CHP system will avoid
significant emissions of nitrogen oxide (NOx), sulfur dioxide (SO2)
and carbon dioxide equivalent (CO2e). In addition, the CHP system is
expected to enhance Delaware’s energy infrastructure and enable
TDC to provide essential energy and data services in the event of
severe weather occurrences or other significant grid disruptions.
56.

The Lease expressly recognizes TDC’s right to build the CHP Plant as

part of the Project. Lease p. 1, at the Fourth “Whereas” Clause states (emphasis
added):
WHEREAS, the hereinafter described Premises lie within the
8

Id.

17
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 Campus. Landlord and Tenant believe that the Premises will provide
an ideal site for the development by Tenant of a facility to be operated
by Tenant as a data center, power plant facility, operational office
and maintenance facilities, electronic equipment warehousing,
communications hotel and other related or attendant uses deemed
necessary by Tenant consistent with Tenant’s business operations as a
data center provider and with a science and technology campus (the
“Permitted Uses”);
57.

Importantly in context, the Lease phrase “[as] deemed necessary by

Tenant consistent with Tenant’s business operations” vests sole and exclusive
discretion on the design of the CHP Plant with TDC. The University held no right
under the Lease to meddle in TDC’s engineering designs for the CHP Plant.
Specifically, the Lease affords the University no right to direct TDC not to employ
a “N+2+1” redundancy scheme in favor of some different redundancy scheme.
Further, the Lease affords the University no right to demand that TDC eschew the
CHP Plant to instead draw power from the public electric grid, i.e. to employ an
obsolete “last generation” design.
58.

The data center portion of the Project required approximately 248

MW of electricity to conduct its normal operations at peak load.
59.

The total capacity – including both spinning and non-spinning reserve

– of the CHP Plant as designed for the Project was 279 MW in winter conditions,
with reduced operating efficiency in summer.
60.

Of the 279 MW in total capacity, the CHP Plant would have produced

253 MW operating normally, with the excess electricity sold back to the grid.
18
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 Operating at peak load of 248 MW (e.g. on the hottest day of August), the CHP
Plant would have had approximately 5 MW to spare for grid sales. On other days
the CHP Plant may have had more electricity to sell, depending on the weather and
other factors. The remaining capacity of approximately 24 MW (Total 279 MW
minus 253 MW normal operations) was non-spinning reserve.
61.

As explained more fully post, circa late 2013 and early 2014 the

University falsely claimed that at the time it signed the Lease in December 2012, it
did not understand that the Project incorporated a 248 MW capacity CHP Plant.
All such statements were false and known to be false at the time they were made.
62.

To provide one specific example, TDC’s principals met with

University employees Scott Douglass and Andy Lubin on September 25, 2012,
during the University’s efforts to lure TDC to sign the Lease. At that meeting,
TDC provided Messrs. Douglass and Lubin with a document “The DataCenters
LLC, Star Campus Facility, Newark, Delaware Executive Summary”, attached
hereto at Ex. H. The Executive Summary expressly states that the CHP Plant
would be 248 MW in size. The document also fully explains the scope of the
Project thus:
This trend creates a unique opportunity for the development,
construction and management of self-powered data centers utilizing a
highly optimized and efficient power generation plant to provide all
necessary energy for the data center. TDC developed this concept and
has applied for Provisional Patent protection while the non-Provision
Patent is being developed. This is the first data center project of its
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 kind to be completely “off-grid” meaning the facility will not rely on
being connected to the grid to supply uninterrupted power to its
tenants. This innovative approach pairs an energy efficient, highly
secure, concurrently maintainable, high density data center with a
thermodynamically optimized combined heat and power (CHP) plant
resulting in a high reliability, reduced operating costs and a cleaner
emissions profile facility. When completed, the project will consist of
a 192,000ft2 data center facility, featuring a captive combined cycle
power plant with total installed capacity of 248MW. This facility will
support four (4) times the electrical density of today’s aging data
centers.
***
The initial facility will be constructed on the Science, Technology &
Advanced Research (STAR) Campus of the University of Delaware at
Newark.
The design consists of an administration building,
cogeneration facility and two (2) data center modules each containing
eight (8) 12,000ft2 data halls. Each data hall, or Pod, will hold over
400 computer racks and provide power and cooling for up to 7 MW of
IT load (583W/ft2). Overall the facility will occupy over 900,000ft2 on
60 secure acres. The site is located at the intersection of high-speed
fiber and 138kV electrical transmission lines.
63.

Many, many other documents exist by which TDC fully disclosed the

Project, including the size and uses of the CHP Plant, to University officials and
agents including, without limitation, Scott Douglass, Andy Lubin, Harold
Brangman, Jeremy Firestone, Kathlene Matt, Charlie Riordin, Domenico Grasso,
Christina Hudson, Laure Ergin, and Larry White.

All of the University’s

subsequent statements to the press and public that it did not understand the design
of the Project prior to signing the Lease were knowingly false.
64.

The University’s feigned lack of understanding of the Project design

is particularly egregious given that its President is Patrick Harker, Ph.D., MBA.
20
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 Dr. Harker is a Civil Engineer by training whose last job was an appointed
professor position in the University of Pennsylvania’s Department of Electrical and
Systems Engineering, and who inter alia serves on the Board of Directors of
electric utility company Pepco (a/k/a Delmarva Power) and Huntsman Chemical.
Thus, the University’s highest-ranking officer was well-qualified to review and
fully understand TDC’s business plan for the Project when it was proffered to the
University in 2012, had he chosen to do so.
65.

The Executive Summary is consistent with documents TDC showed

other parties interested in understanding the details of the Project. For example,
TDC constructed a 110-page document entitled “The DataCenters LLC – SelfPowered Data Centers Business Plan” dated August 31, 2012, shared with the
University, the Office of the Governor and the Delaware Economic Development
Office, among others.

Page 42 of the Business Plan expressly describes the

capacity of the CHP Plant for the Project as “approximately 250 MW”.9
V.

LEED Certification
66.

In engineering and construction, the acronym “LEED” stands for

“Leadership in Energy & Environmental Design.” LEED is a certification regime
operated by the US Green Building Council. LEED Certification is the worldwide

9

The Business Plan contains TDC’s confidential commercial information and trade secrets, and
therefore is not attached as an exhibit hereto.

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 industry standard for measuring energy and environmental efficiency in
construction projects. There is a specific LEED certification process applicable to
data centers. LEED certification ratings run bronze, silver, gold, and platinum
based on points awarded for various state of the art design aspects.
67.

Consistent with industry norms for major construction projects, TDC

submitted its project design plans for LEED Certification. In November 2013, the
Project was determined to have reached LEED Gold, with the option to advance
certification to LEED Platinum upon a construction inspection.
68.

Employing the objective industry standard of LEED Certification, the

Project had the highest possible rating it could get for energy and environmental
design, pre-construction. Based on the objective view of the relevant third-party
certification body, the Project was as good or better than any data center operating
in the United States in terms of energy and environmental impact.
69.

The University is a signatory to the American College & University

Presidents’ Climate Change Commitment10 (“ACUP Commitment,” attached
hereto at Ex. I). The ACUP Commitment is a public agreement by dozens of
college presidents to take specific concrete steps to reduce global warming
contribution by signatory universities.
70.

One of the University’s pledges via the ACUP Commitment is:

10

Available at http://www.presidentsclimatecommitment.org/about/commitment, last referenced
on December 22, 2014.

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 Establish a policy that all new campus construction will be built to at
least the U.S. Green Building Council’s LEED Silver standard or
equivalent.
71.

Thus, the University formally recognized LEED Silver as the

appropriate measure of state of the art construction design for on-campus facilities
to reduce global warming. This Project was better: LEED Gold increasing to
LEED Platinum after construction.
72.

In another unrelated demonstration of the Project’s “state of the art”

quality, TDC’s design won second place in the Data Center Dynamics 2013 North
America Awards in the “Future Thinking and Design Concepts” Division. The
Project narrowly missed winning first place to a design presented by Facebook.
VI.

The Contracts
73.

In November 2012, TDC completed its examination of all the

competing offers to host the Project, selected the University’s offer (made with
aligned State and local governments) to host the Project, informed all the various
interested parties of that selection, and publicly announced the selection.
74.

At the highest summary level, the Project contemplated that TDC

would sign three (3) major contracts, (hereinafter, the “Major Contracts”): (a) a
Lease with the University to provide land on which to build and operate the Project
facilities; (b) a Power Purchase Agreement (Ex. J hereto, hereinafter, the “PPA”)
with DEMEC to sell excess electricity generated by the Project to DEMEC, who
23
ME1 19774246v.1

 would ultimately sell it to customers in Newark; and (c) a Steam Sale Agreement
with the University to sell excess steam generated by the Project to the University
and its affiliates.
75.

All three of the Major Contracts were expressly contemplated by the

bid for the STAR Campus to host the Project. The University and Newark together
guaranteed that TDC would receive the three Major Contracts if it selected the
STAR Campus to host the Project, and in fact signed binding letters of intent to
deliver the Major Contracts.
A.

The Ground Lease Agreement

76.

Holdings and TDC signed the Ground Lease Agreement (Ex. A) on

December 14, 2012. It is a fully-executed, binding contract.
77.

Lease §1.1 provides TDC a tenancy over a defined 43-acre portion of

the STAR Campus.
78.

Lease §2.1 states the term of the Lease as 75 years, renewable

pursuant to Lease §2.2 for an additional 20 years for a total Lease of ninety-five
(95) years.
79.

Several provisions of the Lease expressly acknowledge TDC’s plan to

build the CHP Plant. For example, Lease p. 1 defines TDC “in the business of …
operating data centers and related power plants.” Lease p. 1 further describes a
“power plant facility” as a “Permitted Use,” a defined term employed throughout
24
ME1 19774246v.1

 the rest of the Lease. Lease §1.5(b) required TDC to do an ambient noise survey
“each time a new generator is added” to the CHP Plant. Lease §9.1 describes
TDC’s ownership of the defined term “Improvements” on the property, and
incorporates by reference Lease Ex. D which includes a picture of the design of the
CHP Plant. Lease §9.12 describes TDC’s right to access the University’s tie-ins to
Newark’s electric power grid for the purpose of selling its excess electricity to
DEMEC, and requires Holdings and the University to grant TDC easements to
achieve that Permitted Use. Lease §9.14 describes the agreement between TDC
and the University to reach a Steam Sale Agreement to purchase excess steam from
the CHP Plant. Thus, allowing TDC to build its CHP Plant was always a clear
condition of the Lease.
80.

Lease §9.14 cross-references the University’s obligation to negotiate

in good faith to buy excess steam from the CHP Plant, as was memorialized by the
Steam LOI signed contemporaneously with the Lease.
B.

The Power Purchase Agreement

81.

Newark was a significant contributor to the University’s effort to lure

TDC to select the STAR Campus to host the Project, and helped the University
extensively in the bidding process.
82.

On information and belief based on extensive meetings and

correspondence with City officials, Newark wanted the Project at the STAR
25
ME1 19774246v.1

 Campus for three (3) principal reasons: (a) the construction of the facility would
generate nearly $5.6 million in one-time fees to State and local governments, and
also $8 million in annual property tax revenue indefinitely; (b) the Project was
forecasted to create 8,400 direct and indirect jobs (including five years’ worth of
construction jobs), several thousand of which would have been for Newark
residents; and (c) the Project was forecasted to provide Newark with electricity at
prices lower than it had historically been able to procure from third-party suppliers
through DEMEC, and thus would have lowered the electric bills of City residents.
83.

Consistent with Newark’s public support of the Project, Newark City

Director Carol Houck advocated for DEMEC to agree to purchase electricity from
TDC as a condition of the overall bid for the Project. Director Houck had lawful
authority to operate within DEMEC to pursue that agreement because she was (and
still is) a DEMEC board member.
84.

Newark also formally sponsored TDC’s applications for State-issued

redevelopment grants, with the full support of the University.
85.

On December 17, 2012 (contemporaneous to execution of the Lease),

DEMEC issued a formal Letter of Intent (the “Electricity LOI”) to negotiate a PPA
“to purchase up to 100% of the excess electricity the Project generates.” The
Electricity LOI is signed by DEMEC President Pat McCuller, who holds authority
to enter into such contracts.
26
ME1 19774246v.1

 86.

TDC would not have signed the Lease without the Electricity LOI.

The sale of the CHP Plant’s excess electricity to DEMEC was always an important
part of the Project.
87.

The execution date of the Electricity LOI is indicative of the level of

cooperation between multiple Delaware actors (the University, the State, the City,
and DEMEC) to arrange all the contracts that formed the basis of the Project.
88.

Consistent with the Electricity LOI, TDC and DEMEC met several

times in early 2013 to formalize their agreement into a long-term PPA.
89.

On April 18, 2013 after significant negotiation and exchanges of

proposals, DEMEC and TDC agreed to a “final” formal Term Sheet (Ex. K hereto,
hereinafter the “PPA Term Sheet”) that stated all the essential terms of agreement
by DEMEC to buy electricity from TDC. The PPA Term Sheet includes all
essential terms of a PPA such as the formula for calculating price (which varies
based on market energy prices), length of the agreement, and ranges of acceptable
quantities of electricity to be delivered.
90.

The PPA Term Sheet contains all the financial terms governing the

sale of electricity by TDC to DEMEC. While such agreements are typically
reduced to a formal PPA, the PPA Term Sheet represents “the deal” between the
parties. Thus, negotiations between TDC and DEMEC were largely complete by
April 2013, months before the emergence of activist opposition to the Project.
27
ME1 19774246v.1

 91.

Consistent with the Electricity LOI and the PPA Term Sheet, TDC

and DEMEC worked cooperatively together to draft a final PPA incorporating their
agreed terms as stated in the PPA Term Sheet.
92.

TDC submitted to DEMEC a final version of the PPA in April 2014.

The April 2014 submission incorporated all of DEMEC’s requested edits, matched
the PPA Term Sheet, and was ready for DEMEC’s signature.
93.

Because Defendants breached the Lease and thereby terminated the

Project, DEMEC never signed the PPA.
C.

The Steam Sale Agreement

94.

Part of the University’s bid to host the Project was an agreement by

the University to purchase steam from the CHP Plant.
95.

In industrial applications, steam can only be transported short

distances before cooling off and thus losing its capacity to generate heat or power.
One of the requirements of CHP Plants is for nearby buildings to use steam that in
historic power plants was just wasted. See e.g. Ex. E at p. 3.
96.

The Leasehold is practically surrounded by the University and its

affiliates. Thus as a practical matter, the University and its affiliates were the only
possible purchasers of steam from the CHP Plant.
97.

The University owns and operates a steam plant on its Central

Campus approximately two miles from the Leasehold, as well as steam assets at
28
ME1 19774246v.1

 the Bob Carpenter Center and other nearby buildings on its South Campus. The
University’s promise to buy steam from TDC anticipated that the CHP Plant would
tie into the University’s existing steam infrastructure.
98.

Circa 2012, the University greatly desired TDC to supply steam both

to the University and to co-tenants at the STAR Campus, because the University
was undergoing difficulties managing its steam assets. By way of non-exclusive
example, the University had published an infrastructure analysis titled “University
of

Delaware

Campus

Capacity

and

Assessment

Review”

(“University

Infrastructure Assessment,” Ex. L hereto)11 in which it criticized its own existing
steam and power assets thus (emphasis added):
Strength: Many buildings are served from central heating and cooling
plants.
Issues: Boilers and chillers are operating near capacity with
inadequate redundancy [;] Portions of the underground distribution
systems need replacement [;] Quality and reliability of electrical
power is poor.
99.

Thus at the time of bidding in 2012, the University viewed TDC’s

production of steam via the CHP Plant as a way of fixing deficiencies and capacity
issues in the University’s existing steam infrastructure. This anticipated benefit
was especially important because the University’s plan for the STAR Campus
included other industrial tenants who would have steam needs that the University’s
11

Available at http://www.udel.edu/capacity/analysis_infrastructure.html, last accessed on
December 22, 2014.

29
ME1 19774246v.1

 existing steam infrastructure could not meet.
100. Consistent with the University’s representations during its bid to host
the Project, the University issued a December 14, 2012 Letter of Interest (Ex. D).
The Steam LOI is signed by the University’s Director of Real Estate, Andrew
Lubin. Mr. Lubin is authorized to enter such contracts via his officer position
within the University.
101. The Steam LOI was acknowledged by all parties with an interest in
the Project. For example, the EPA Opinion Letter acknowledges the Steam LOI by
stating: “The CHP system will not only support the reliable operation of TDC’s
data center, but also provide useful heat to the University of Delaware.” (Ex. G).
102. TDC would not have signed the Lease without the Steam LOI. As
stated throughout this Complaint, the University’s promise to purchase steam from
the Project was an important factor in the University’s winning bid.
103. The Steam LOI contains an express promise to negotiate in good faith
to reach a final Steam Sale Agreement, stating in relevant part:
This Letter of Interest is being provided to reiterate our support for the
TDC Project located on the STAR Campus of the University of
Delaware in Newark and express our interest in seeing it developed to
provide an option to purchase steam.
We have been working with your team since October 2011 regarding
this [P]roject, with the primary focus on steam distribution to the main
campus core, and recently began to explore the potential sale of steam
to the STAR Campus. The procurement of low priced steam could be
an incentive to attract other strategic partners and developers to the
30
ME1 19774246v.1

 site.
As you know, we are a major buyer of energy in the region and our
operations could use steam as an energy source. As a result, your
Project is an opportunity for us to consider purchasing steam the
Project generates once completed. We would require details on the
following terms:
1.
2.
3.

Available quantity
Term of Agreement
Price/heat rate

We would be willing to enter into this agreement (subject to final
negotiation, approvals, and due diligence) upon you finalizing your
financing and ground breaking for construction. …
During the term of our discussions we [the University] have been
greatly impressed by your [TDC] vision, understanding of industry
dynamics, and ability to take the Project to the next level. We
sincerely hope for your success in this venture and are looking
forward to you becoming a supplier for our Facility [the STAR
Campus].
We will work with you to complete due diligence, pricing
mechanisms and documentation over the coming weeks and months.
104. The Steam LOI is consistent with the University Infrastructure
Analysis; to wit, the University understood that its existing steam infrastructure
had insufficient redundancy to supply even existing University facilities, let alone
new industrial tenants at the STAR Campus. The University therefore saw a
Steam Sale Agreement based on the CHP Plant as a major plus of the Project, at
the time of bidding in 2012.
105. Lease §9.14 states expressly that TDC and the University would
31
ME1 19774246v.1

 negotiate in good faith to reach an agreement for the University to purchase steam
from TDC. Thus, the Lease expressly acknowledges the University’s agreement to
purchase steam as a condition of the Lease.
106. Circa early 2013, the University and TDC negotiated a term sheet to
govern the purchase of steam (Ex. M hereto, hereinafter “Steam Term Sheet”).
107. Unlike DEMEC, the University generally had a poor understanding of
how its steam generation assets worked and how to price steam. In addition, as
correctly highlighted in the University Infrastructure Analysis, many of the
University’s steam assets were inadequate or overloaded.

It therefore took

substantial effort for TDC and the University to negotiate how to deliver steam per
the Steam LOI.
108. On August 7, 2013, TDC and the University (along with their
respective consultants) had a major meeting at the University’s business offices.
Minutes of the meeting were transcribed, (Ex. N hereto, hereinafter “August Steam
Meeting Minutes”). The purpose of this meeting was to work through the gaps in
the University’s knowledge of its steam systems, to enable a final Steam Sale
Agreement to be executed. As of that meeting, the University consistently stated
that it intended to purchase steam from the CHP Plant, as is reflected in the
minutes thereof.
109. In conjunction with the August 7, 2013 meeting, the University
32
ME1 19774246v.1

 proposed that TDC hire various University employees to work at the CHP Plant.
The University went so far as to propose specific pay scales and salaries for those
employees. The University indicated that it wanted TDC to hire the University
employees who would be displaced by the University’s decision to switch its steam
sourcing from the Central Campus steam plant to TDC, so that the University
could avoid internal objections that the Steam Sale Agreement would necessitate
laying off University employees.
110. On information and belief, in late 2013 the University decided to
terminate the Project in bad faith including, inter alia, by breaching the Lease and
the Steam LOI.
111. On information and belief, part of the University’s strategy to breach
the Lease in bad faith was to deny to the public that the University had ever agreed
to purchase steam from the Project. The University’s public relations strategy was
to absolve itself of responsibility for bringing the Project to Delaware by
pretending that the University had not offered TDC the inducements it had made in
writing during the bidding process.
112. On April 23, 2014, University Officer and President of Holdings Scott
Douglass wrote a letter (Ex. O hereto, hereinafter “the April 23rd Letter”) to Amy
Roe, whose role in opposing the Project is detailed post. Dr. Roe had written to
Mr. Douglass asking if the University had ever promised to buy steam from the
33
ME1 19774246v.1

 Project. Mr. Douglass replied (emphasis added):
The University does not intend to purchase power in any form from
The Data Centers, LLC. Proposals for the sale of power and steam to
the University were made by TDC early on, but the University chose
not to pursue them. … On page 2 of your letter, you express concern
that ‘the University of Delaware and 1743 Holdings LLC may intend
to lease more STAR Campus property to industrial customers that
could use steam.’ You may rest assured that provision of TDC steam
plays no role in our plans for development of the STAR Campus.
113. The April 23rd Letter is a flat breach of Lease §9.14 and the Steam
LOI, which both obligate the University to negotiate a Steam Sale Agreement in
good faith.
114. Moreover, the April 23rd Letter contains several knowingly false
statements by an authorized agent of the University to the public. The Steam LOI
expressly states that the University anticipated that it would use the availability of
steam for purchase to lure other industrial tenants to the STAR Campus; the
truthful answer to the exact question Dr. Roe had asked was “yes.” Mr. Douglass’s
contrary statement in the April 23rd Letter directly contradicts the Steam LOI.
Moreover, the Steam LOI and Steam Term Sheet were not empty proposals of
TDC that the University had unbridled authority to accept or reject. Instead, the
Steam LOI and Lease §9.14 obligated the University to negotiate in good faith to
reach agreement on the purchase of steam, which was a fundamental basis of its
bid to lure TDC to the STAR Campus.
115. The University unlawfully breached its duty to negotiate a Steam Sale
34
ME1 19774246v.1

 Agreement in good faith.
VII. Community Opposition To The Project
116. At the outset in early 2013, the Project was greeted with substantial
fanfare and optimism betwixt TDC, the University, and the many State and local
government actors who had succeeded in luring the Project to the STAR Campus.
117. For example, Newark City Director Carol Houck stated in a May 17,
2013 News Journal article:
“It’s really all about improving reliability for electric customers,”
“We definitely see it as a positive thing for Newark and the state to
attract a new employer.”
Wade Malcolm, Huge Data Center Eyes UD Site, The News Journal, May 17, 2013
at A7.
118. Delaware Economic Development Office (“DEDO,” a State agency)
director Alan Levin praised the Project in the same News Journal article thus:
“It's a big technological advance for the state,”
“It’s something that will not only aid the STAR campus, but the
Newark region. It will allow for greater growth.”
Wade Malcolm, Huge Data Center Eyes UD Site, The News Journal, May 17,
2013 at A7.
119. Ms. Houck stated the following at the DEDO April 25, 2013 public
meeting:
[T]he City of Newark is pleased to be the Public Sponsor for this
Project. She stated that she believes that the arrival of the Data Center
35
ME1 19774246v.1

 here will bring many benefits. Ms. Houck stated that without this
Project, the substation would not be built at this time and certainly not
to this magnitude as the City of Newark would not be in a position to
do it. She stated that she feels this will be a great motivator for other
firms looking for a location that will have this service. She added that
this Project will benefit more than the Applicant. She stated that the
area will get greater reliability from this service and it will help reduce
electrical shortages. Ms. Houck stated that the City of Newark will be
one of nine municipal members that will benefit across the State. She
further added that jobs will be produced and that she feels there will
be a boost in the lodging, retail and dining sectors.
Delaware Infrastructure Investment Committee. (2013, April 25) Public Meetings
9 Minutes (Ex. P hereto).
120. Chairman Levin and Ms. Houck stated the following at the same
DEDO April 25, 2013 Public meeting:
Chairman Levin questioned if there was current problem with
reliability. It was stated that the lines go from north to south and that
the longer the lines, the more exposure. He added, that however, with
this substation going on the southern end of the City, lines will be
shortened by half and therefore, the exposure will go down. He stated
that today it is not a big issue, but could be in the future. Chairman
Levin asked if the savings from this Project will be passed on. Ms.
Houck stated that the savings will go into DEMEC’s portfolio and
will be done at a favorable rate and that all will benefit equally.
Houck stated that each entity will benefit from each other’s projects.
Chairman Levin stated that he believes the Project has met the public
purpose as it offers opportunities for other businesses.
Delaware Infrastructure Investment Committee (2013, April 25) Public Meetings 9
Minutes.
121. In an April 4, 2013 letter (Ex. Q hereto) from Carol Houck to Alan
Levin and copying City electrical director, Rick Vitelli, Ms. Houck points out
benefits in her letter of support of the project:
36
ME1 19774246v.1

 (a)

The Data Center project is expected to produce jobs for
Delaware during construction and after. For instance, the
site construction would provide work for local
engineering and planning firms and local trade
organizations as well as provide an economic boost to
local lodging, retail and dining establishments.…In
addition, the substation infrastructure that would be
developed as a result of The Data Center’s arrival to the
site would provide more specific benefits including the
following:

(b)

The electric substation will be a great selling point for
additional prospective customers at the STAR campus
who require an abundant and reliable electric service.

(c)

The substation as currently anticipated will also provide
the Delaware Technology Park and entire southern end of
the City with more reliable power including industrial
customers on Bellevue Road such as DOW Chemical,
GE Composites and DuPont.

(d)

The addition of this improved substation will free up
capacity on the existing Newark sub transmission system
and allow the city to install intelligent auto restoration
equipment with will reduce outage times by switching
circuit feeds without the need for an operator.

(e)

The Data Centers’ excess generation will flow into the
City’s distribution system. This energy will be purchased
by DEMEC which could reduce its portfolio cost and in
turn reduce charges to all DEMECs municipal customers.

(f)

The Data Centers’ excess generation will reduce the need
to import energy onto the peninsula reducing congestion
charges which may result in lower rates

(g)

Securing a high profile company such as The Data
Centers for the STAR campus could draw national
attention to Newark and the State of Delaware and foster
consideration of our state by additional high-tech
companies. Newark pledges to work with the State to
37

ME1 19774246v.1

 distinguish itself as a place to do business in a
progressive manner….I would like nothing more than to
welcome The Data Centers to Newark and the State of
Delaware with you in the near future.
122. There are many other public expressions of support by the State, the
City, and the University for the Project in late 2012 and early 2013.
123. An early – and perhaps the original – source of community opposition
to the Project was Amy Roe, Ph.D. According to documents filed in support of her
campaign as the Green Party candidate for Mayor of Newark, Dr. Roe is a selfemployed technical writer and photographer with a long record of environmental
activism through many local and national organizations.
124. In early June 2013, Dr. Roe wrote to Mr. Kern in the name of the
Sierra Club to request a meeting explaining the forecasted environmental impact of
the Project. In response, TDC on June 6, 2013 hosted Dr. Roe and Stephanie
Herron from the Sierra Club at its Wilmington office to present the Project.
125. At the conclusion of the June 6, 2013 meeting, Dr. Roe presented
TDC Executive Vice President Mike Bednar with her business card, and inquired if
TDC would hire her as a “local environmental consultant” for the Project. Mr.
Bednar politely complimented her card but declined to offer a job.
126. Shortly after TDC ignored Dr. Roe’s request for a job as an
“environmental consultant,” Dr. Roe organized a new citizens’ group to protest the
Project. This citizens group was designated “Newark Residents Against the Power
38
ME1 19774246v.1

 Plant,” often abbreviated in the press as “NRAPP.”
127. Through a remarkably successful campaign of misinformation,
NIMBY-ism and scaremongering, NRAPP grew rapidly and eventually comprised
over a hundred supporters.
128. In NRAPP’s view, all newly installed power generation capacity in
the United States must be exclusively wind or solar powered, regardless of the
University’s contractual obligations to allow TDC to construct the CHP Plant.
129. NRAPP’s “no natural gas” argument was ultimately adopted by
University governance bodies and personnel. For example, in a May 6, 2014 News
Journal article in which the University prefaced its decision to breach the Lease,
University Faculty Senate member James Morrison stated:
I would really like to go more aggressive. I think it’s time to really
make a statement. We’ve heard so much about the environment and
climate change and health on campus. It seems we as a society as
well as the UD, that we really need to make a statement that we need
to get away from fossil fuel as a source of energy.
Melissa Nann Burke, UD Faculty Opposes Gas-Fired Power Plant, The News
Journal, May 6, 2014 at A1.
130. In addition to complete rejection of ANY use of fossil fuels to
generate power, NRAPP advanced a secondary “Not In My Backyard” agenda of
certain Newark residents who did not want the STAR Campus redeveloped due to
dislike

of

increased

traffic,

noise,

view

obstruction,

commercial/industrial uses to residential uses, and similar concerns.
39
ME1 19774246v.1

proximity

of

 131. Unfortunately for Defendants, NRAPP’s objections flatly contradicted
TDC’s right to build the Project as stated by the Lease, signed nearly a year earlier.
The Lease expressly permits TDC to build its CHP Plant “as deemed necessary by”
TDC. The University did not reserve any right within the Lease to tell TDC that
the CHP Plant could not run on natural gas, as NRAPP (and ultimately the
University’s Faculty Senate) demanded.

Additionally, the Lease expressly

describes the size of facility that TDC was permitted to build as up to 900,000
square feet. The Lease thus protected TDC from both sets of NRAPP demands:
unscientific hair-shirt objections to natural gas, and selfish objections by neighbors
wishing to unlawfully limit the use of someone else’s property. While NRAPP
bore no real-world accountability for the positions it advocated, it was impossible
for the University to appease NRAPP’s demands without breaching both the Lease
and the Steam LOI, and tortiously interfering with the Electricity LOI and PPA.
VIII. NRAPP Challenges The Project
132. As explained ante, the Project consists of three (3) economic elements
to be embodied by the Major Contracts, all of which were agreed to by the
University (and the City) at the time it solicited the Project:
(a)

TDC had to be permitted to build and operate its data
center via the Lease, which was the core purpose of the
Project;

(b)

TDC had to be able to sell electricity generated by its
spinning reserve to DEMEC via the PPA, as stated in the
40

ME1 19774246v.1

 Electricity LOI; and
(c)

Less importantly, TDC had to be able to sell steam
generated by its spinning reserve to nearby properties
through the University’s existing steam infrastructure, as
stated in Lease §9.14 and the Steam LOI.

133. On information and belief, NRAPP understood the necessity of the
Major Contracts to the Project, and attacked each one in an effort to block it.
A.

The Zoning Challenge

134. Opponents began their attack on the Project by attacking its zoning
(the “Zoning Challenge”) before the City of Newark Board of Adjustment.
135. The Zoning Challenge plaintiffs assert that the CHP Plant would
violate municipal zoning on the STAR Campus, because the relevant zoning does
not specifically permit power plants.
136. The Zoning Challenge argued a false premise: that the CHP Plant was
a free-standing power plant unrelated to a permitted primary use.
137. In reality, the CHP Plant is an accessory use to the primary use of the
Project: the data center. Because the data center is an appropriate facility for the
STAR Campus zoning, its accessory uses are also permitted, and hence the CHP
Plant meets all relevant municipal zoning requirements.
138. Newark far in advance had anticipated typical challenges to and
complaints about all redevelopment efforts on the STAR Campus property, and
particularly to the Project. It therefore took steps during the 2012 bidding process
41
ME1 19774246v.1

 to streamline away anticipated zoning objections to the Project.
139. On July 27, 2012 during the bidding process for the Project, City
solicitor Bruce Herron issued a legal memorandum to City Director Houck stating
that the Project, including its CHP Plant, was a permissible use for the STAR
Campus property, i.e. there were no zoning issues.
140. After opposition to the Project emerged circa August 2013, City
Solicitor Herron caused Newark to engage its usual outside special counsel Max
Walton, Esq. of the Delaware law firm Connelly Gallagher to provide a legal
opinion on whether the Project met Newark’s Municipal Zoning Code.
141. Mr. Walton issued a formal opinion letter to the City dated September
9, 2013 (Ex. R hereto, hereinafter the “Zoning Opinion”).
142. The Zoning Opinion states that the CHP Plant is an accessory use to
the Project’s data center, and therefore was zoned as a matter of right. The Zoning
Opinion further opines that the Delaware Superior Court would force zoning
approval if the Board of Adjustment declined to approve zoning.
143. On January 17, 2014, City Director of Planning and Development
Maureen Feeney Roser wrote a letter (Ex. S hereto, hereinafter “Newark Zoning
Approval”) to respond to a request by TDC’s agent Duffield Associates to verify
that the CHP Plant was an appropriately zoned accessory use, i.e. that there were
no further issues regarding zoning in Newark’s view. Consistent with the Zoning
42
ME1 19774246v.1

 Opinion, Ms. Feeney verified on behalf of the City that the CHP Plant was
appropriately zoned as an accessory use.

The City issued a press release

announcing the Newark Zoning Approval on the same day.
144. NRAPP challenged the Newark Zoning Approval via an appeal to the
City Board of Adjustment.
145. The City defended the appeal of the Newark Zoning Approval, and
again engaged Mr. Walton to make the City’s case.
146. After written submissions, the Board held oral argument on the appeal
on March 19, 2014, which was open to the public and well attended.
147. At the March 19, 2014 meeting, the City Board of Adjustment voted
two-to-two on whether to overturn the Newark Zoning Approval. Because the
initial opinion was under appeal, an affirmative majority vote was necessary for the
appeal to prevail. Thus, TDC maintained its zoning.
148. NRAPP appealed the Board of Adjustment decision to the Superior
Court, where it presently sits as Sherry Hoffman, et al. v. The Board of Adjustment
of the City of Newark, et al., C.A. No. N14A-05-015-ALR.
149. The parties to the Zoning Challenge stipulated to stay all proceedings
before the Superior Court because the University caused Holdings to breach the
Lease and thereby terminated the Project.

43
ME1 19774246v.1

 B.

The PPA Challenge

150. NRAPP next attacked TDC’s right to sell electricity to DEMEC (the
“PPA Challenge”).
151. As described ante, DEMEC and TDC had already agreed to all
essential terms of the PPA via the PPA Term Sheet, which was finalized in April
2013. TDC completed other relevant work through the remainder of 2013, and
then submitted the final version of the PPA to DEMEC for signature in April 2014.
Thus as a practical matter, NRAPP arrived too late to kill the PPA absent
extraordinary intervention by the University.
152. Circa late 2013 to early 2014, NRAPP pressured the University to
terminate the Project and breach the Lease. The University at some point in late
2013 decided to acquiesce to NRAPP’s demands. In early 2014, the University
took the extraordinary action of establishing a “working group” to reexamine the
Lease and recommend whether the University should breach.
153. NRAPP prevailed upon sympathetic members of Newark’s City
Council to pass a May 12, 2014 resolution (the “Council Resolution”) “urging”
DEMEC’s board to “delay” signing the April 2014 final PPA.
154. The ostensible reason for delay stated in the Council Resolution was
to grant the University more time to conduct assessments of the Project via its
“working group.” In reality, the purpose of the delay was to give NRAPP more
44
ME1 19774246v.1

 time to attack the Project via pressuring the University to breach the Lease. On
information and belief, NRAPP understood it could not block the PPA without
specific help from the University, and that its only chance to prevent DEMEC from
signing the PPA was for the University to intervene.
155. On further information and belief, by May 2014 the University had
already decided to breach the Lease and terminate the Project.

Thus, the

University supported NRAPP’s efforts to attack the PPA as a means of deflecting
some of the blame for the Project’s failure from the University to DEMEC.
156. The Council Resolution holds no force of governmental authority.
The City is represented within DEMEC by two board members, and not by its City
Council. Moreover, Newark’s voting board member City Director Houck was the
Project’s public sponsor. To the extent the Council Resolution appeared to be an
assertion of government right, it was false.
157. At the time of the Council Resolution, all interested parties fully
understood that the City Council was not entitled to meddle in DEMEC’s
operations, and had no say in whether DEMEC would sign the PPA. In a July 13,
2013 email to principals of TDC and officers of Newark (subsequently subject to a
FOIA request by NRAPP and then publicized on its website), DEMEC President
McCuller wrote:
No approval of the Power Purchase Agreement will be needed from
Newark City Council. The agreement will be between TDC and
45
ME1 19774246v.1

 DEMEC. The PPA will have to be approved by the DEMEC Board of
Directors.
158. There was no basis for DEMEC to decline to sign the PPA. CHP
Plants are expressly endorsed by the federal government as a net positive to the
environment as described inter alia by the EPA Opinion Letter. The Project
proffered electricity at a rate substantially competitive to or better than DEMEC
had previously been able to procure for the City. In addition, the City asked for a
commitment to gift a $12 million substation and $6 million dollars of transmission
lines to facilitate delivery of the electricity, and TDC agreed.
159. Because NRAPP succeeded in pressuring the University to breach the
Lease and thereby terminated the Project, DEMEC never signed the PPA.
C.

The Lease Challenge

160. Having failed to derail the Project via the Zoning Challenge, and
simultaneous to the PPA Challenge, NRAPP pressured the University to breach the
Lease.
161.

During late 2013 and early 2014, NRAPP conducted a series of

protest actions to discomfit and embarrass the University, for example stationing
vocal protestors outside classrooms and football games.
162. NRAPP’s protests argued that the University’s commitment to
reduction of its carbon footprint was inconsistent with the Lease’s express
permission for TDC to construct the CHP Plant, i.e. “natural gas is bad.” NRAPP
46
ME1 19774246v.1

 also argued that the University erred by failing to consult various activists before
signing the Lease. Both arguments are entirely irrelevant to the University’s
contractual commitments in Delaware law.
163. The University’s leadership quailed under NRAPP’s protests almost
immediately, and began a scheme to concoct legal defenses for its decision to
breach the Lease.
IX.

The University Sabotages The Project
164. The University began its bad faith effort to escape the Lease by

issuing false statements to the press and in public hearings to the effect that TDC
had not told the University that the Project contemplated a CHP Plant with a
spinning reserve selling excess electricity to the City via DEMEC.
165. The University permitted any employee who so desired to make
statements about the Project, many of which were factually false and contradicted
by different University employees who had direct knowledge of the University’s
promises relevant to the Project.
166. By failing to disclaim false public statements of its employees and
agents, the University adopted those false statements as its own.
167. The University’s statements to the effect that it didn’t know of or
understand the CHP Plant at the time of bidding for the Project in 2012 were false
and known to be false when made; the CHP Plant and PPA were always core
47
ME1 19774246v.1

 elements of the Project and always known to the University.
168. In fact, the University stated in 2012 while bidding to host the Project
that it wanted the CHP Plant on campus for several reasons, including: (a) to
reduce the University’s carbon footprint to meet the ACUP Commitment; and (b)
to procure a steam supply for other industrial tenants of the STAR Campus without
having to build its own steam plant.
169. For example, shortly after the University signed the ACUP
Commitment in 2008, the University commissioned a study to measure the
University’s carbon footprint as required by the ACUP Commitment. That study
was titled, “A Sustainable University of Delaware - Greenhouse Gas Emission
Inventory 2009” (hereinafter, “GHG Inventory” attached hereto at Ex. T).
170. The GHG Inventory highlights that the University imports huge
amounts of electricity from the City, but has no control over the sources from
which Newark (really DEMEC) buys power, and therefore cannot realistically
control its carbon footprint without increasing its own power generation assets.
Ex. T at 14, 21-23.
171. The GHG Inventory therefore recommends that the University build
its own CHP plant, thus (Ex. T at 22-23):
[A]n Action Plan that significantly lowers electricity use and obtains a
portion of electricity needs from University on-site “clean” generation
(such as geothermal heat pumps, combined heat and power facilities,
and solar electricity) will improve the institution’s ability to control
48
ME1 19774246v.1

 the evolution of its carbon footprint.
172. After

publishing

the

GHG

Inventory,

the

University

also

commissioned a Climate Action Plan, which was another requirement of the
ACUP Commitment.

That document is titled, “A Sustainable University of

Delaware – Climate Action Plan,” hereinafter “CAP” attached hereto at Ex. U.12
173. The CAP recommended that the University build its own CHP Plant
as a means of reducing the University’s carbon footprint, thus (Ex. U at 13, 24):
For the University to dramatically reduce carbon emissions, it will
have to also increase its use of clean forms of energy including
cogeneration plants, renewable energy, and other innovative solutions
such as fuel cells. The Plan sets a target of 10% of 2008 electricity
use provided by clean energy supply by 2013 and 20% by 2020
(including the University’s participation in the City of Newark’s
offshore wind purchase). Clean energy supply includes: a proposed
combined heat and power plant; use of geothermal heat pumps; a fuel
cell power facility; participation in offshore wind purchase by the City
of Newark; and a major effort to utilize solar electric power.

12

Available at http://www.udel.edu/sustainability/footprint/University%20of%20
Delaware%20Climate%20Action%20Plan.pdf, last accessed on December 23, 2014.

49
ME1 19774246v.1

 174. On information and belief based on the University’s public
statements, the University fully understood that having a CHP Plant on campus
would reduce the University’s contribution to global warming, and bid for the
Project on that basis. As stated in the CAP, it was functionally impossible for the
University to meet its carbon reduction goals without a CHP Plant.
175. The University further sought to absolve itself in the eyes of NRAPP
by falsely stating that it never promised to buy steam from the Project, as
exemplified by the April 23rd Letter. The intended implication of such statements
was that the University had been hoodwinked by TDC into agreeing to a CHP
Plant of a size capable of producing excess steam.
176. In fact, the University had signed two (2) binding contracts – (a) The
Lease; and (b) The Steam LOI – to negotiate in good faith to buy steam from TDC.
The University had further promised to buy excess steam from TDC in many other
communications. The University’s promise to buy steam from TDC was always
50
ME1 19774246v.1

 “part of the deal” that induced TDC to select the STAR Campus for the Project.
177. On information and belief, the University in fact wanted the CHP
Plant on the STAR Campus at the time of bidding in 2012, and lured TDC to
Delaware specifically to get the CHP Plant onto the STAR Campus.

The

production of electricity and steam by the CHP Plant fit perfectly into the
University’s climate goals without requiring that the University spend its own
money to build its own CHP Plant. The University told TDC that fact many, many
times. The University simply changed its mind when faced with NRAPP’s protests
after signing all the relevant contracts.
178. The University further schemed in bad faith to sabotage TDC’s effort
to meet the construction milestones described in the Lease.
179. For example in 2013 and early 2014, the University permitted Bloom
Energy to dump thousands of tons of construction debris onto TDC’s Leasehold in
the course of constructing Bloom’s facility on a neighboring tenancy.

The

University then sent TDC a letter dated May 2, 2014 complaining that TDC was
behind on the construction milestones stated in the Lease, despite that the
University had permitted Bloom to bury TDC’s parcel.
180. In another example, the University in a July 10, 2014 letter asserted
the right to terminate the Project based on Lease §9.1 for failure to begin
construction by January 1, 2014. In fact, the University had expressly admitted by
51
ME1 19774246v.1

 letter dated January 31, 2014 that the University had failed to deliver the
environmental permits necessary for TDC to even submit a construction design
plan, and that the University could not meet its duty to do so until February 2014 at
the earliest. Thus, the University expressly admitted in writing that delay of the
January 1, 2014 construction milestone was the University’s fault.
181. Upon information and belief, the University eventually settled on a
legal strategy of arguing that the Project was not “consistent with a first-class
campus,” and therefore was inconsistent with the purpose of the STAR Campus as
identified by “Whereas” clauses in the Lease.
182. The University’s position that the Project was not “first class” was
based on a post hoc legal theory that the CHP Plant was too large for the data
center because it had a spinning reserve. In the University’s simplistic post hoc
rationalization, “first class” would be a synonym for “small.” Alternatively, the
University argued in correspondence to TDC and in public statements that the term
“first class” meant “reliant on the public electricity grid instead of a power plant.”
183. The University’s post hoc argument that the Project was not “first
class” was not based on any objective industry criteria, for example LEED
certification. Nor was the term “first class” as newly defined by the University
linked to any express term in the Lease, but instead contradicted several Lease
terms. For example, the CHP Plant was well within the Permitted Use footprint of
52
ME1 19774246v.1

 900,000 square feet guaranteed to TDC by Lease §9.1. Nor was the argument
consistent with the University’s public documents such as the GHG Inventory and
the CAP, which set LEED Silver as the definition of “first class,” and expressly
recommended building a new CHP Plant on the University’s campus. Nor was it
consistent with the pre-Lease descriptions of the Project that TDC gave the
University to inform its bidding (for example the Executive Summary), which
expressly described the CHP Plant as 248 MW.
184. The University (through Holdings) asserted a unilateral right to define
the term “first class” in an arbitrary and capricious manner that guaranteed the
Project could not be completed. The University in bad faith decided to define the
words “first class” as “whatever NRAPP wants,” without any reference to the
technical specifications of the Project, to the express terms of the Lease, or to
industry standards.
185. In furtherance of its bad faith scheme to escape the Lease and the
Steam LOI, in May 2014 the University established an internal “working group” to
determine whether the Project was “first class.” The implication was that if the
working group recommended the Project was not “first class,” then the University
would breach the Lease.
186. Unsurprisingly in June 2014, the “working group” delivered the report
(Ex. V hereto, hereinafter “Working Group Report”) that the University publicly
53
ME1 19774246v.1

 stated that it wanted and that it paid for, i.e. a report stating that the Project was not
“first class” because the CHP Plant was too big.
187. The “working group” was not a method contemplated by the Lease for
resolving disputes thereunder.
188. In June 2014, the University submitted the Working Group Report to
the Faculty Senate for a vote on whether or not the University should terminate the
Project, i.e. breach the Lease.
189. The Faculty Senate, having been spoon-fed the Working Group
Report and well-aware of the University’s many public statements expressing
desire to escape the Lease, voted to terminate the Project.
190. Holdings purported to terminate the Lease by letter dated July 10,
2014 (“Termination Letter,” Ex. W hereto).
191. The Termination Letter purports to terminate the Lease unequivocally.
It does not purport to be notice and opportunity to cure a default as described in
Lease §17.1(b).
192. The University did not follow the express Lease provisions that
govern the default process thereunder including, inter alia, Lease §17.
X.

Damages
193. TDC’s single purpose was to design, construct, and operate the

Project as was contracted, at the STAR Campus.
54
ME1 19774246v.1

 194. Holdings’ breach of the Lease and purported termination of the
Project destroyed TDC’s sole reason to exist.
195. TDC paid substantial money out-of-pocket from 2011 to 2014 to
conduct the Project. These out-of-pocket expenses include, but are not limited to,
engineering design costs, up-front costs to procure resources to construct the
Project facilities, and legal and expert contractor costs to procure permits to build
and operate the Project facilities.
196. TDC estimates that its out-of-pocket damages caused by the breach of
the Lease are approximately $5 million, with the exact amount to be proven at trial.
197. TDC suffered extensive expectancy damages in addition to its “hard”
out-of-pocket losses.
198. TDC only agreed to select the STAR Campus to host the Project on
the basis that the University and the City would deliver the three Major Contracts.
The Major Contracts were always “the deal.”
199. TDC suffered at least the following losses as expectancy damages,
among others to be proven at trial:

ME1 19774246v.1

(a)

A 75-year lease (renewable to 95 years) over a 43-acre
parcel in Downtown Newark;

(b)

The right to operate its data center on its Leasehold as
described in the Lease;

(c)

The right to sell power to DEMEC as contemplated by
the Lease and all other documents related to the Project
55

 on the 30-year term of the PPA; and,
(d)

The right to sell steam to the University as contemplated
by the Steam LOI and the Lease.

200. In sum, the Project was a $1.3 billion endeavor that the University
destroyed through its breaches of contract, torts, and bad faith.
201. The University bid for TDC to bring the Project to the STAR Campus
with full actual knowledge of these anticipated sources of revenue. Indeed, the
University signed the Lease and the Steam LOI to enable these revenue sources.
TDC’s rational expectancy to operate the Project was always “the deal” between
the University and TDC.
202. TDC’s expectancy was reasonable. The University only won the
Project by agreeing to TDC’s statement of expectancy about how the Project
would work.
203. In addition to contract damages, TDC also suffered tort damages.
204. The University made numerous false public statements about the
Project. The point of those false statements was to absolve the University from
blame in the eyes of NRAPP for luring TDC to Delaware.

Succinctly, the

University repeatedly lied to the public to save the skins of its internal bureaucrats
who had signed all the contracts to bring the Project to Delaware, but who had
failed to anticipate backlash from local objectors and extremist activists.
205. The University’s misrepresentations destroyed TDC’s ability to
56
ME1 19774246v.1

 complete the Project. Because of the University’s misrepresentations, the Project
is now stuck with a public stigma that it is “not first-class” and unsuitable for a
leasehold on a college campus.
206. Defendants are liable for the misrepresentations in both general and
specific damages, in an amount to be determined by the trier of fact.
207. In addition to contract damages and general and specific tort damages,
the University’s unlawful conduct was willful, malicious and either fraudulent or
conducted with reckless disregard for the truth.
208. The University is liable to TDC for exemplary and punitive damages
in an amount to be determined by the trier of fact.
209. Lease §35 states the prevailing party enforcing a Lease default shall
be entitled to recover all reasonable attorneys’ fees and costs incurred in pursuing
remedies under the Lease.
210. Holdings is therefore liable to TDC for all attorneys’ fees and legal
costs incurred in this action.
COUNT I – BREACH OF CONTRACT
Breach of the Lease: TDC vs. Holdings
211. The Lease is a valid and enforceable contract between TDC and
Holdings.
212. The Lease is governed by Delaware law.
57
ME1 19774246v.1

 213. Holdings breached the Lease in at least the following specific ways,
among others:
(a)

Purporting to terminate the Lease on July 10, 2014
without cause and without following the notice and cure
provisions stated expressly in Lease §17;

(b)

Refusing to cooperate in permitting applications for
TDC’s Permitted Uses of the premises, in breach of
Ground Lease §6.4;

(c)

Unreasonably withholding approvals for TDC to
construct the structures required to accomplish the
Permitted Uses, in breach of Lease §9.2;

(d)

Failing to approve or disapprove TDC’s submitted plans
within ten (10) days of submittal in breach of Lease §9.3
which, in addition to constituting breach, also constitutes
automatic approval of such plans per the express terms of
Lease §9.3;

(e)

Failing to reasonably cooperate with TDC regarding
TDC’s approved fiber optic lines, in breach of Lease
§9.13;

(f)

Failing to negotiate in good faith with TDC for a Steam
Purchase Agreement as stated in Lease §9.14, and
publicly disclaiming such obligation;

(g)

Failing to indemnify TDC for all costs incurred by
Holdings’ breach of the Lease, including, without
limitation, 100% of all lost project costs, 100% of all
TDC’s liabilities to all third-parties on its efforts to
develop the leasehold, and all of TDC’s attorneys’ fees,
in breach of Ground Lease §11.2. For the avoidance of
doubt, Ground Lease §11.2 not only renders Holdings
liable for 100% of all losses on Project, but also for all of
TDC’s legal fees and related expenses incurred in this
Action;
58

ME1 19774246v.1

 (h)

Failing to provide TDC with thirty (30) days’ notice and
opportunity to cure its supposed (non-existent) default, in
breach of Lease §17.1(b);

(i)

Failing to provide TDC with Quiet Enjoyment of the
leasehold in breach of Ground Lease §19.1; and

(j)

By making other such breaches as discovery shall reveal.

214. Holdings breached the Lease at the direction of the University, which
is its parent and alter ego.
215. TDC did not breach the Lease.
216. Holdings’ breach of the Lease has severely damaged or destroyed
TDC’s ability to perform the Lease, i.e. to complete the Project.
217. TDC was damaged by Holdings’ breaches of the Lease.
218. Ground Lease §35 states that this dispute is governed by the “English
Rule,” and that Holdings must compensate TDC for all attorneys’ fees and costs
incurred in pursuing this Action.
COUNT II – INDEMNIFICATION
Relief Required By Lease §11.2: TDC vs. Holdings
219. All prior paragraphs are incorporated by reference.
220. Holdings defaulted on the Lease as is alleged throughout this
Complaint, inter alia, by sending the Termination Letter in breach of Lease §17.
221. Lease §11.2 states expressly that it is the duty of Holdings to
indemnify and hold harmless TDC from all “liabilities, costs, actual damages or
59
ME1 19774246v.1

 expenses (including reasonable attorneys’, consultant’s, and expert fees and
expenses actually incurred)” by a landlord default on any covenant of the Lease.
222. Holdings owes an express contract duty via Lease §11.2 to make TDC
whole for losses caused by Holdings’ default.
223. TDC’s good faith estimate of “hard cost” damages incurred due
entirely to Holdings’ default on the Lease is $5 million.
224. TDC’s damages are increasing every day as it incurs legal and expert
costs to sue Holdings to enforce Lease §11.2.
225. In addition to its entitlement to attorneys’ and expert fees via Lease
§11.2, TDC is also entitled to recover all its attorneys’ fees via Lease §35.
COUNT III – GOOD FAITH AND FAIR DEALING
Bad Faith On The Lease: TDC vs. Holdings
226. All prior paragraphs are incorporated by reference.
227. Count III “good faith and fair dealing” is pled in the alternative to
Count I “breach of contract.”
228. The Lease is subject to the implied covenant of good faith and fair
dealing present in all Delaware contracts.
229. Defendants behaved in bad faith in their performance of the Lease,
with the intent of depriving TDC of the benefit of its bargain.
230. Non-exclusive examples of Defendants’ bad faith include:
60
ME1 19774246v.1

 (a)

Defendants issued a knowingly-false statement to
NRAPP (knowing that NRAPP would disseminate it to
the public) in the April 23rd Letter that the University
never had an agreement or intention to buy steam from
TDC, and that University purchases of steam were not a
basis of the Project, when in fact the University had
signed the Steam LOI to do exactly that;

(b)

The University authorized Bloom Energy to dump
thousands of tons of construction debris onto the
Leasehold, and then attempted to assert delayed
construction as a basis for terminating the Lease, despite
that the delay was caused solely by the University;

(c)

Defendants falsely represented to the press and public
that they misunderstood or were unaware of the size of
the CHP Plant contemplated by the Project as authorized
by the Lease. The University and its agents – at public
hearings and in the press – repeatedly feigned ignorance
of the details of the Project, implying that TDC had
misled the University into signing the Lease. All such
statements and representations were false and known to
be false when made. The University and Holdings were
fully aware of all Project details before signing the Lease,
including the size of the CHP plant; and,

(d)

Other acts of bad faith that discovery shall reveal.

231. In sum, the University quailed under NRAPP’s misinformed protests,
and made a business decision to terminate the Project despite the terms of the
Lease, intentionally depriving TDC of the benefit of its bargain.
232. The University and not TDC bore the risk of Luddite protests against
the Project. The Lease does not render Holdings’ duty to permit TDC to build the
Project contingent upon TDC somehow “winning over” implacable opposition of
environmental activists who irrationally despise natural gas. So long as TDC built
61
ME1 19774246v.1

 the Project within the parameters described by the Lease and within zoning limits,
the NRAPP protestors were the University’s and not TDC’s problem.
233. Despite that TDC owed no duty other than to build the Project within
the parameters of the Lease, TDC acted in good faith toward the University by
attempting to ameliorate NRAPP’s concerns. By non-exclusive example, TDC
invited local environmental groups to an in-person meeting with its senior
management to explain the Project, which occurred on June 6, 2013.

TDC

representatives attended multiple public hearings called on NRAPP requests, in
which its most senior management and experts spent many hours explaining the
Project and addressing the concerns expressed by NRAPP. TDC further authored
many public letters addressing various concerns expressed by NRAPP. In sum,
TDC did all it could – and much more than it was legally required to do – to
explain and justify the Project to its critics.
234. The covenant of good faith and fair dealing required the University to
either publicly defend the Project for which it had signed a binding Lease, or at
least silently meet its contract obligations. Instead, the University issued plethoric
false statements to the public that defamed TDC, in an effort to escape the Lease.
The University for its own business purposes joined the opposition to the Project
that it had induced to come to Delaware, and that it had signed multiple clear
contracts to support. The University took this course with the actual knowledge
62
ME1 19774246v.1

 and intent that it would deprive TDC of the benefit of the Lease and the other
Major Contracts.
235. TDC was damaged by the Defendants’ breach of the covenant of good
faith and fair dealing in the manner described in this Complaint.
COUNT IV – BREACH OF CONTRACT
Breach of the Steam LOI: TDC vs. The University
236. All prior paragraphs are incorporated herein.
237. The parties to the Steam LOI are the University and TDC.
238. One basis of the University’s successful bid to bring the Project to the
STAR Campus was its promise to negotiate in good faith to purchase steam from
TDC. This promise is embodied by the Steam LOI.
239. The Steam LOI was signed contemporaneously with the Lease.
240. TDC would not have signed the Lease without the Steam LOI.
241. From January to August 2013, the University and TDC negotiated the
Steam Term Sheet.
242. TDC negotiated in good faith with the University about steam
purchases.
243. The Steam Term Sheet embodied the fundamental terms such as
pricing formula that would be necessary for the University and TDC to sign a final
Steam Sale Agreement.
63
ME1 19774246v.1

 244. In or around late 2013, the University made an internal decision to
satisfy NRAPP’s protests by terminating the Project.
245. In late 2013, the University decided not to negotiate the Steam Sale
Agreement with TDC as required by the Steam LOI.
246. The University’s decision to stop negotiating the Steam Sale
Agreement was not based on any disagreement about terms such as price or mode
of delivery. Instead, the University had decided it wanted to bar TDC from
making steam at all by unlawfully terminating the Project.
247. In the April 23rd Letter and elsewhere, the University falsely
represented to the public that it had never agreed to negotiate a Steam Sale
Agreement, that provision of steam by TDC to co-tenants was not a basis for
bringing the Project to the STAR Campus, and that the University had flatly
rejected proposals by TDC to sell steam “early on” in the Project.
248. All of the statements in the April 23rd Letter were false and known to
be false at the time they were made.
249. All of the statements in the April 23rd Letter directly contradict the
Steam LOI. The April 23rd Letter in effect denies the existence of the Steam LOI.
When placed next to each other, the two letters are irreconcilable.
250. The Steam LOI is a valid and binding agreement to negotiate in good
faith within the meaning of Delaware law.
64
ME1 19774246v.1

 251. The University breached its duty to negotiate a Steam Sale Agreement
in good faith as contemplated by the Steam LOI.
252. TDC was damaged by the University’s breach of contract as described
in this Complaint, in an exact amount to be determined by the trier of fact.
COUNT V – TORTIOUS INTERFERENCE
WITH PROSPECTIVE ECONOMIC ADVANTAGE
TDC vs. Defendants
253. All prior paragraphs are incorporated by reference herein.
254. TDC had a reasonable expectancy of a business relationship with
DEMEC as embodied by the Electricity LOI, the PPA Term Sheet, and the PPA.
255. The University at all times knew of TDC’s expectation of having a
business relationship with DEMEC. Such relationship was a condition of the
University’s winning bid to bring the Project to the STAR Campus.
256. The University intentionally interfered with TDC’s expected business
relationship with DEMEC in at least the following ways:
(a)

The University connived with NRAPP to create a
“working group” to recommend whether the University
should breach the Lease. NRAPP then used the
“working group” process as a fulcrum via the Council
Resolution to prevail upon DEMEC not to sign the PPA,
which it otherwise intended to do.

(b)

The University breached the Lease and terminated the
Project, with the express knowledge that doing so would
deprive TDC of its relationship with DEMEC.
65

ME1 19774246v.1

 (c)

Other such interferences as discovery will reveal.

257. TDC was damaged by Defendants’ tortious interference in the amount
of the full Net Present Value of the PPA.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff respectfully requests that the Court enter an order
stating that:
A.

Holdings is ordered to indemnify TDC as required by Lease §17;

B.

Defendants are jointly and severally ordered to pay Plaintiff specific

damages in the amount of at least $5 million, with the exact amount to be proven at
trial;
C.

Defendants are ordered to pay Plaintiff general damages in an amount

to be determined at trial;
D.

Defendants are ordered to pay Plaintiff exemplary and punitive

damages to compensate Plaintiff for their willful, malicious, and fraudulent
conduct, and to deter others from committing same; and
E.

Granting any other relief that the Court deems just and proper.

66
ME1 19774246v.1

 MCCARTER & ENGLISH, LLP
/s/ Michael P. Kelly
Michael P. Kelly (DE # 2295)
Andrew S. Dupre (DE # 4621)
Christopher A. Selzer (DE # 4305)
405 N. King Street – 8th Floor
Wilmington, DE 19801
Telephone: (302) 984-6300
Facsimile: (302) 984-6399
mkelly@mccarter.com
adupre@mccarter.com
cselzer@mccarter.com
Dated: February 4, 2015

Attorneys for Plaintiff

67
ME1 19774246v.1