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Solar City, Inc, v. Crystal Clear Concepts, LLC

United States District Court, M.D. Florida, Tampa Division

January 10, 2020

SOLAR CITY, INC., Plaintiff,
v.
CRYSTAL CLEAR CONCEPTS, LLC, and AUSTIN FORD, Defendants. CRYSTAL CLEAR CONCEPTS, LLC, Counterclaim-Plaintiff,
v.
SOLAR CITY, INC., and THE INDEPENDENT SAVINGS PLAN COMPANY, Counterclaim-Defendants.

          ORDER

          VIRGINIA M. HERNANDEZ COVINGTON UNITED STATES DISTRICT JUDGE

         This matter comes before the Court upon consideration of Counterclaim-Defendant The Independent Savings Plan Company's Motion to Dismiss Claims (Doc. # 32), filed on November 26, 2019. Counterclaim-Plaintiff Crystal Clear Concepts, LLC responded in opposition on December 20, 2019. (Doc. # 43). With the Court's permission, Independent Savings filed a reply on January 8, 2020. (Doc. # 48). For the reasons that follow, the Motion is denied.

         I. Background

         Solar City initiated this action against Crystal Clear and Defendant Austin Ford in state court on September 15, 2019, asserting claims for breach of contract, breach of guaranty, account stated, and quantum meruit. (Doc. # 1-1). The case was removed to this Court on the basis of diversity jurisdiction on October 14, 2019. (Doc. # 1). Crystal Clear filed its answer and counterclaim against Solar City and Independent Savings on October 30, 2019. (Doc. # 15).

         According to the counterclaim, Solar City “produces Westinghouse® brand water treatment systems referred to as the ‘Dynamic' and/or ‘Reliance' models and distributes a full line of water treatment equipment for treating water quality challenges experienced by homeowners and sells its products throughout the United States through a network of authorized dealers.” (Id. at 7). Independent Savings “provides consumer financing to homeowners for a variety of home improvement products and equipment, including but not limited to home water treatment systems.” (Id.).

         Independent Savings and Solar City “are affiliated entities that share common ownership and management.” (Id. at 8). For example, “Robert W. Schabes is a director and officer of both entities.” (Id.). Solar City “offers consumer financing in connection with the sales of its products and systems exclusively through” Independent Savings and Independent Savings “provides consumer financing exclusively to customers of [Solar City] authorized dealers.” (Id.).

         Crystal Clear sells “water purification and filtration systems to homeowners in the Dallas-Fort Worth, Texas metro area.” (Id.). “On March 24, 2015, Crystal Clear completed and submitted a ‘Dealer Application' in an effort to become an authorized [Solar City] dealer” and eventually became an authorized Solar City dealer in August 2015. (Id. at 8-9).

         “In connection with and further to the dealer relationship between Crystal Clear and [Solar City], Crystal Clear as of August 13, 2015, entered into a Merchant Agreement with” Independent Savings. (Id. at 10). “Under the Merchant Agreement, [Independent Savings] would provide consumer financing mechanisms only to purchasers of [Solar City] products sold by Crystal Clear under the Dealer Agreement.” (Id. at 11). “As of December 19, 2017, Crystal Clear and [Independent Savings] entered into a Turn-Down Program Addendum to Merchant Agreement (the ‘TD Addendum'), ” which is a supplement to and is subordinate to the Merchant Agreement. (Id.). “The TD Addendum was intended to provide financing ‘to qualifying high credit risk applicants who otherwise may not qualify for financing under [Independent Savings'] usual and customary underwriting and credit acceptance criteria . . . .'” (Id. at 12).

         The TD Addendum provided that, in the event that a customer defaulted, Independent Savings could delegate to Crystal Clear the authority to repossess the equipment. (Id.). Crystal Clear would have to accept this delegation, repossess the equipment from the customer, and inform Independent Savings of the repossession. (Id.). Independent Savings would then accept the equipment in full satisfaction of the debt. (Id.). “The TD Addendum also gave [Independent Savings] the option to sell the repossessed equipment to Crystal Clear for re-sale to another customer.” (Id.). Alternatively, if Crystal Clear did not perform its repossession responsibilities properly, Independent Savings held a “charge-back” right under the TD Addendum against Crystal Clear. (Id.).

         Crystal Clear, Solar City, and Independent Savings worked together smoothly under these agreement for years. (Id. at 11).

         In early 2018, the current owner of Crystal Clear, Michael Bodnar, owned another company called Galt Strategies, LLC. (Id. at 13). Galt proposed a sales and marketing platform for home water purification systems, called “Growth Potential Program” or “GPP, ” to Solar City and Independent Savings. (Id.). “Galt and [Solar City] entered into the GPP Acquisition Agreement dated May 31, 2018” under which Solar City “agreed to pay Galt a total purchase price of $2, 000, 000.” (Id.). Solar City paid Galt $1, 000, 000 and eventually entered into an Amended and Restated GPP Acquisition Agreement in September 2018. (Id.).

         Within weeks, the relationship between Galt and Solar City deteriorated, with Solar City accusing Galt of fraud and other improper conduct in connection with the GPP transaction. (Id. at 14). “On or about March 18, 2019, [Solar City] and Galt executed a Termination and Release Agreement effective as of January 23, 2019 [] releasing each other and [Solar City]'s dealers from their respective obligations in connection with the GPP Agreement [and] the Amended GPP Agreement.” (Id.). Galt kept the $1, 000, 000 it was paid under the GPP Agreement. (Id.). But the termination of the GPP Agreement with Galt did not affect the various agreements between Crystal Clear, Solar City, and Independent Savings. (Id.).

         Crystal Clear alleges that Solar City and Independent Savings “engaged in a conspiracy to damage and destroy Crystal Clear's business” in retaliation for the failed GPP transaction. (Id. at 22). Soon after the GPP transaction was terminated, “Crystal Clear began to experience an unusually high rate of customer complaints concerning the [Solar City] products being sold and installed by Crystal Clear.” (Id. at 14). “This was further evidenced by a dramatic and otherwise inexplicable increase in the number of service calls received by Crystal Clear.” (Id.). As a result of these quality issues and negative reviews, Crystal Clear's business suffered dramatically. (Id. at 15).

         “Because Crystal Clear determined that the equipment shipped by [Solar City] in April and May [2019] was either defectively manufactured or intentionally and maliciously altered to cause harm to Crystal Clear in its business, it refused to pay the invoices for said equipment.” (Id. at 16). According to Crystal Clear, Solar City knowingly supplied Crystal Clear with defective or maliciously altered products so that ...


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