Basin Electric Power Cooperative v. Henry et al

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WILSON DIVISION
IN RE:
LACY M. HENRY and
JUDY B. HENRY,
Debtors. 	Case No. 05-04620-8-JRL
BASIN ELECTRIC POWER
COOPERATIVE,
Plaintiff,
vs. 	Adversary Proceeding No.:
05-00262-8-AP
LACY M. HENRY; JUDY B. HENRY;
MPS GENERATION, INC.;
MECHANICAL PLANT SERVICES,
INC.; QUALIFIED PLANT SERVICES,
INC.; and KEITH HENRY,
Defendants.
and,
MPS GENERATION, INC.;
LACY M. HENRY; and
JUDY B. HENRY,
Third-Party Plaintiffs,
vs.
ORMAT, INC. and CLIFFORD
WADDELL,
Third-Party Defendants.
SO ORDERED.
SIGNED this 06 day of August, 2007.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
Case 05-00262-8-JRL Doc 291 Filed 08/06/07 Entered 08/06/07 13:08:10 Page 1 of 5

2
_____________________________________________________________________________
ORDER
This matter is before the court on the motion to amend the third-party complaint filed by
MPS Generation, Inc. (“MPSG”). On July 17, 2007, the court conducted a hearing on this matter
in Wilmington, North Carolina.
BACKGROUND
Lacy Henry is the sole shareholder of MPSG, a North Carolina corporation. On
November 5, 2003, MPSG entered into a contract with Basin Electric Power Cooperative
(“Basin”), regarding the construction of four waste heat recovery generation systems. The
systems were intended to convert waste heat from four compressor stations along the Northern
Border Natural Gas Pipeline into electricity, which Basis intended to sell to its members.
On February 24, 2005, Basin filed a complaint in the United States District Court of the
District of North Dakota against Lacy Henry, Judy Henry, and MPSG. The Henrys later filed a
chapter 11 bankruptcy petition on June 13, 2005. On September 15, 2005, Basin filed a
complaint against the debtors in this court claiming that they are the alter egos of MPSG. On
November 15, 2005, the debtors answered the complaint, asserted counterclaims, and filed a
third-party complaint against Ormat, Inc. (“Ormat”). On January 5, 2006, the court entered an
order staying the North Dakota lawsuit filed against the debtors and other defendants. Basin was
permitted to amend its complaint filed in this adversary proceeding to include claims against the
other defendants.
On November 21, 2006, the court entered an order approving the Scheduling/Discovery
Plan filed by counsel in this proceeding. The Scheduling/Discovery Plan set forth March 1,
Case 05-00262-8-JRL Doc 291 Filed 08/06/07 Entered 08/06/07 13:08:10 Page 2 of 5

3
2007, as the deadline by which the parties must move to join additional parties or amend
pleadings to add claims or defenses. MPSG filed this motion to amend on May 1, 2007. There
are currently four motions for summary judgment pending in this adversary proceeding, and the
trial is scheduled to begin in September 2007.
ANALYSIS
MPSG seeks to amend its third-party complaint against Ormat to add a new third party
defendant, Ormat Technologies, Inc. (“Ormat Technologies”). MPSG also seeks to amend its
third party complaint to allow all claims MPSG asserted against Ormat in the original third-party
complaint to now be asserted against Ormat Technologies as well. Federal Rule of Civil
Procedure 15 made applicable in bankruptcy by Bankruptcy Rule 7015, generally governs
motions to amend pleadings. Rule 15 requires that “leave shall be freely given when justice so
requires.” Fed. R. Civ. P. 15(a). However, when the motion to amend is filed after the
amendment deadline set forth in the scheduling order, Rule 16(b) is implicated. Under Rule
16(b), the plaintiff must make a “showing of good cause” before the schedule can be amended to
allow further amendment of the complaint. “When a motion to amend implicates both Rule 15(a)
and Rule 16(b), ‘it is necessary to consider first whether Plaintiff satisfies the ‘good cause’
standard of Rule 16(b) before deciding whether Plaintiff satisfies the more liberal standard of
Rule 15(a).’” Cole v. Principi, 2004 WL 878259, at *6, 2004 U.S. Dist. LEXIS 7162, at *19
(M.D.N.C. Apr. 4, 2004).
MPSG asserts that Ormat is the alter-ego of Ormat Technologies, and that Ormat
Technologies used its control over Ormat to cause the injuries complained of by MPSG. MPSG
alleges that Ormat had no employees, no officers or directors, no assets or property, and no bank
Case 05-00262-8-JRL Doc 291 Filed 08/06/07 Entered 08/06/07 13:08:10 Page 3 of 5

4
account. MPSG contends that all the Ormat personnel who were involved in the matters relating
to the supply contract between Ormat and MPSG were and are employees of Ormat
Technologies or its parent company, Ormat Industries, Limited, or Ormat Nevada, a wholly-
owned subsidiary of Ormat Technologies. Ormat is believed to be a shell corporation controlled
directly by Ormat Technologies. Furthermore, MPSG contends that it was not aware of Ormat
Technologies’s total control over Ormat until the March 25, 2007 deposition of Hezy Ram,
Ormat’s primary 30(b)(6) deposition witness.
Ormat provided evidence to rebut the allegations that it had no officers or directors, no
assets, and no bank account. Signed consents from Ormat’s stockholders in lieu of annual
meetings as well as minutes of the annual meetings of the board of directors or signed consents
in lieu of those meetings were provided. Much discovery has been conducted in this adversary
proceeding including 42 interrogatories, 65 requests for admission, and 34 requests for
production all served on Ormat by MPSG. Additionally, Ormat Technologies is a publically
traded company, so information about its corporate structure was readily available to MPSG.
MPSG had plenty of opportunity to learn of the corporate structure of Ormat and any of its
affiliates prior to the March 1, 2007 amendment deadline.
Furthermore, the deposition of Kip Waddell provides that during negotiations of the
supply contract there were discussions as to which entity would do the project. One draft of the
supply contract even had Ormat Technologies, instead of Ormat, as a party to the contract.
However, when MPSG signed the final supply contract it knew that it was not contracting with
Ormat Technologies, but with its subsidiary, Ormat. MPSG’s claim that it did not know of the
relationship of Ormat and Ormat Technologies prior to Hezy Ram’s deposition in March 2007 is
Case 05-00262-8-JRL Doc 291 Filed 08/06/07 Entered 08/06/07 13:08:10 Page 4 of 5

1 The court also notes that MPSG offered little probative evidence that would justify
piercing the corporate veil, as it appears that Ormat met all of the corporate formalities.
Additionally, if there is a substantial judgment against Ormat, then the cause of action for
piercing the corporate veil remains available to MPSG.
5
inconsistent with the evidence.
To allow MPSG to amend its complaint and add a new party at this time would result in
substantial delay in the proceedings and prejudice to Ormat. MPSG has failed to make a showing
of good cause on which to allow it to amend its complaint at this late date, and its motion to
amend is denied. 1
CONCLUSION
Based on the forgoing, MPSG’s motion to amend its third-party complaint is DENIED.
“END OF DOCUMENT”
Case 05-00262-8-JRL Doc 291 Filed 08/06/07 Entered 08/06/07 13:08:10 Page 5 of 5