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Etowah Envtl. Group, LLC v. Walsh

Court of Appeals of Georgia

July 15, 2015

WALSH et al

Reconsideration denied July 29, 2015 -- Cert. applied for.

Page 221

Fraud, etc. Fulton Superior Court. Before Judge Westmoreland, Senior Judge.

McGuireWoods, H. Wayne Phears, J. Malcolm Cox, for appellant.

King & Spalding, David L. Balser, Lawrence A. Slovensky, Kathleen A Sacks; Bruce P. Brown, for appellees.

BRANCH, Judge. Andrews, P. J., concurs. Miller, J., concurs in judgment only.


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Branch, Judge.

In August 2006, defendant Highstar Capital Fund II, LP (" Highstar" ) acquired Advanced Disposal Services, Inc. (" ADS" ) for $470 million. In a lawsuit later filed against ADS, plaintiff Etowah Environmental Group, LLC (" Etowah" ) claimed that ADS had presented Etowah with an artificially low price for Federal Road, a Forsyth County waste management facility owned by ADS and Etowah, and that ADS had thus induced Etowah to forego its right to " tag along" in Highstar's acquisition of ADS. An arbitration panel later found that ADS had breached its fiduciary duty to Etowah in the context of the ADS acquisition and awarded Etowah approximately $19 million for the value of Federal Road.

In February 2012, after collecting the arbitration award, Etowah brought this action for fraud and other claims, and seeking punitive damages and attorney fees, against Highstar and its principals Michael Walsh and Christopher Beall, as well as Highstar's subsidiary Adstar Waste Holdings Corporation (" the Highstar defendants" ). The Highstar defendants moved for summary judgment on the ground that the issue of the value of Federal Road had already been determined by the arbitration panel such that Etowah was collaterally estopped from raising that issue in its action against the Highstar defendants. On appeal from the trial court's grant of the Highstar defendants' motion, Etowah argues that the issue of the value of its share of Federal Road is not precluded. Etowah also argues that the trial court erred when it granted summary judgment as to Etowah's claims for other compensatory and punitive damages against Highstar and when it excluded documents produced by Highstar's consultants as privileged. We conclude that although the trial court did not err when it barred Etowah from relitigating that portion of its fraud claim that would have involved the issue of Federal Road's value and when it excluded the documents, genuine issues of fact remain as to Etowah's claim for attorney fees and costs incurred before the arbitration panel in discovering the extent of Highstar's fraud, and thus as to punitive damages arising from that claim. We therefore affirm in part and reverse in part.

To prevail at summary judgment under OCGA § 9-11-56, the moving party must demonstrate that there is no genuine issue of material fact and that the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law. OCGA § 9-11-56 (c). A defendant may do this by showing the court that the documents, affidavits, depositions and other evidence in the record reveal that there is no evidence sufficient to create a jury issue on at least one essential element of plaintiff's case.

Lau's Corp. v. Haskins, 261 Ga. 491 (405 S.E.2d 474) (1991).

Thus viewed in favor of Etowah, the record shows that in 2001, Etowah and Advanced Disposal Services, Inc. (" ADS" ) agreed to form Federal Road, LLC, which would acquire and operate the Eagle Point landfill in Forsyth County.[1] ADS held a 75%

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interest in Federal Road, with Etowah owning the remaining 25%. Section 10.6 of Federal Road's operating agreement provided for Etowah's " tag-along right" as follows:

(a) In the event a Member elects to transfer ... all or a portion of its [Federal Road] Interest (the " Selling Member" ) to an unaffiliated third party ..., all remaining Members (" Non-Selling Members" ) shall have the right to cause the Selling Member to effect the transfer of such Non-Selling Members' respective [Federal Road] Interest to such Third Party at an incremental price and on the same terms and conditions (" the Offer" ) as the Selling Members proposes to transfer its [Federal Road] Interest to such Third Party (the " Tag-Along Right" ).

Section 10.10 of the operating agreement, entitled " Consent to Merger," provided in relevant part:

[E]ach Member hereby irrevocably consents to the merger or consolidation by any legal means of [Federal Road] with [ADS] (or its successor) upon (i) the election of [ADS] (or its successor); and (ii) the adoption of a plan of merger or other consolidation by Majority Vote which provides Units of relatively equal value in [ADS] or successor entity in exchange for the [Federal Road] Interest held by each Member.

Section 10.10 also provided that the " unit value" to be used in calculating each Federal Road member's interest " shall be made in accordance with paragraph 10.9 (b)," which ...

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