Federal Derivative Lawsuits
On March 7, 2016, a purported
shareholder derivative action was filed in the United States
District Court for the Central District of California against us
and certain of our current and former officers and directors under
the following caption: Haber v. Jamison, et al., No. CV16-01569-DMG
(RAOx). The lawsuit alleges that certain of our current and former
officers and directors knew or should have known that BPC would be
unable to fulfill its obligations to us, but allowed us to make
false and misleading statements regarding BPC and our financial
condition. The complaint asserts a cause of action for breach of
fiduciary duty. It demands damages for the amount of damage
sustained by us as a result of the individual defendants’ alleged
breach of fiduciary duties, and equitable relief, including that we
institute appropriate corporate governance reforms. On May 11,
2016, the parties filed a stipulation and proposed order seeking to
stay this action until such time as the defendants’ motion(s) to
dismiss the federal securities class action were either granted
with prejudice or denied in whole or in part. On May 13, 2016, the
Court entered that proposed order.
On July 12, 2016 and July 18, 2016, respectively, two additional
purported shareholder derivative actions were filed in the United
States District Court for the Central District of California
against us and certain of our current and former officers and
directors, under the caption Tuttle v. Atkinson, et al., No.
CV16-05127, and Boll v. Jamison, et al., No. CV16-5282,
respectively. The lawsuits allege that certain of our current and
former officers and directors knew or should have known that BPC
would be unable to fulfill its obligations to us, but allowed us to
make false and misleading statements regarding BPC and our
financial condition. The Tuttle complaint asserts causes of action
for breach of fiduciary duty, gross mismanagement, and unjust
enrichment, and the Boll complaint asserts causes of action for
breach of fiduciary duty, unjust enrichment, abuse of control,
gross mismanagement, and waste of corporate assets. Both complaints
demand damages sustained by us as a result of the individual
defendants’ alleged breaches of fiduciary duties, and equitable
relief, including that we institute appropriate corporate
governance reforms. The federal derivative actions were stayed
until such time as the defendants’ motion(s) to dismiss the federal
securities class action were either granted with prejudice or
denied in whole or in part. On March 9, 2018, following the Court’s
order denying defendants’ motion to dismiss in the federal
securities class action, the parties filed a stipulation and
proposed order seeking to stay this action until the close of fact
discovery in the federal securities class action. On March 13,
2018, the Court granted the parties’ stipulation.
The parties in the above federal derivative lawsuits participated
in a mediation held on September 24, 2018. On May 6, 2019, the
parties reached an agreement in principle regarding corporate
governance reforms to be implemented in settlement of the action.
The parties fully executed a stipulation of settlement on July 14,
2020. A motion for preliminary approval of the settlement was filed
in the United States District Court for the Central District of
California on July 27, 2020. A hearing on the motion for
preliminary approval of the settlement is currently scheduled for
August 28, 2020. We have not recorded any liability as of June 30,
2020 as our insurance carrier will fund the settlement amount.
Capstone Turbine Corporation v.
Turbine International, LLC.
On February 3, 2020, Capstone Turbine Corporation filed suit
against its former distributor, Turbine International, LLC
(“Turbine Intl.”), in the Superior Court of California for the
County of Los Angeles under the following caption: Capstone Turbine
Corporation v. Turbine International, LLC; Case No. 20STCV04372
(“Capstone-Turbine Intl. Litigation”). We have alleged claims
against Turbine Intl. for breach of contract and for injunctive
relief relating to the parties’ prior distributor relationship,
which terminated at the end of March of 2018, and Turbine Intl.’s
failure to satisfy its payment obligations under certain financial
agreements, namely an accounts receivable agreement and promissory
note in favor of Capstone. As remedies for these claims, we are
seeking compensatory, consequential, along with injunctive relief
and attorney’s fees, interest, and costs.
On March 18, 2020, Turbine Intl. filed its answer and cross-claims
in the Capstone-Turbine Intl. Litigation. In its cross-claims,
Turbine Intl. has asserted claims against Capstone, and
individually against Mr. James Crouse, Capstone’s Chief Revenue
Officer, for breach of contract under the distributor agreement,
accounts receivable agreement and promissory note, fraud, breach of
the covenant of good faith and fair dealing, unjust enrichment and
constructive trust, negligent misrepresentation, violation of the
unfair practices act, violation of racketeer influenced corrupt
organizations act, and conspiracy to commit fraud. As remedies for
these alleged claims, Turbine Intl. are seeking compensatory,
consequential, and punitive damages along with attorney’s fees,
interest, and costs. Capstone answered the cross-claims on May 7,
2020. On July 8, 2020, Capstone filed a motion to amend its
complaint. A hearing on said motion and a case management
conference is scheduled for August 19, 2020. We have not recorded
any liability as of June 30, 2020, as the matter is too early to
estimate.