Case: 1:18-cv-01263-CAB Doc #: 1 Filed: 06/04/18 1 of 28.

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IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

ASHLAWN ENERGY LLC, )

6564 Loisdale Court, Suite 600 )
Springfield, VA 22150 )
)
Plaintiff, )
) COMPLAINT
v. )
) (JURY DEMAND ENDORSED
CITY OF PAINESVILLE, ) HEREON)
c/o Joseph Gurley, Esq. )
7 Richmond Street )
P.O. Box 601 )
Painesville, OH 44077 )
)
Defendant. )
)

Plaintiff Ashlawn Energy, LLC brings this Complaint against defendant the City of

Painesville and alleges as follows:

INTRODUCTION

1. This case arises from the City of Painesville’s (“Painesville” or the “City”)

decision to renege on promises made to its business partner, Ashlawn Energy, when those

promises ceased to be politically expedient for Painesville’s City leaders. As a result, millions of

dollars in federal stimulus funds were squandered, hundreds of thousands of Painesville taxpayer

dollars were wasted, City residents were robbed of a crown jewel progressive energy project, and

Ashlawn Energy’s business was effectively crippled.

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2. In 2010, the City Government of Painesville, led by then-City Manager Rita

McMahon, partnered with Ashlawn Energy to win federal grant money to demonstrate

Ashlawn’s revolutionary energy storage technology, the Vanadium Redox Flow Battery, in the

City of Painesville.

3. The project was a major coup for both Painesville and Ashlawn. For Painesville,

the battery project offered an environmentally friendly and economically sound way to alleviate

the growing pressure on the City’s aging coal power plant, and an opportunity to establish the

city as a manufacturing hub for energy storage batteries. It also garnered unprecedented national

attention, with both the Governor of Ohio and the President of the United States pointing to

Painesville as a city on the cutting edge of progressive energy solutions. For Ashlawn, the

Painesville project offered a unique opportunity to partner with federal, state and local

government entities to demonstrate the game-changing capabilities of its VanCharg™ batteries.

With full confidence in its technology, Ashlawn knew that success in Painesville would be a

gateway to widespread commercialization of VanCharg™.

4. The Painesville project got off to a promising start, with both Ashlawn and the

City working diligently to meet their respective obligations. But in 2012, the project

encountered an unexpected hurdle, when Ohio eliminated state funding that the parties had

anticipated receiving. Undeterred and fully invested in their partnership, Ashlawn and Rita

McMahon’s City Government again worked together to find a pathway forward for the project,

one that would utilize new energy market opportunities to attract private investment and create

additional revenue for both Ashlawn and Painesville.

5. Shortly before this new plan was set to be finalized, Rita McMahon retired.

Though the battery project still had its supporters in Painesville’s City Government, McMahon’s

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successors demonstrated apathy, and at times, outright animosity towards Ashlawn. Despite the

fact that the City had already made a substantial investment in the battery project, and that the

private investment concept endorsed by Rita McMahon would not have cost the City any

additional money, Painesville’s new City Managers had little genuine interest in moving forward

with a project for which the credit would be given to their predecessor.

6. As a result, throughout the next five years, despite persistent efforts by Ashlawn

to prepare and test the technology and line up private funding, prodding from the Department of

Energy, and numerous questions raised by the concerned taxpayers of Painesville, the City’s

leadership kept Ashlawn and the battery project in a constant state of limbo. While they had no

problem paying lip service to Ashlawn, the federal government, and their constituents about

wanting to go forward with the project, when the time came for action, Painesville’s leaders

continuously stonewalled and stalled.

7. At present, with more than $4 million invested in the Painesville project and

nothing to show for it, Ashlawn simply wants to move forward with the City to secure private

funding and build the battery system. But Painesville’s leaders have now made it clear that they

have no intention of allowing the battery project to succeed. To the contrary, they have

continued to make excuses for their inaction and have affirmatively interfered with Ashlawn’s

other business opportunities. Ashlawn has been left with no choice but to proceed with litigation

to recover its damages.

PARTIES

8. Ashlawn Energy, LLC (“Ashlawn”) is a Virginia limited liability company with

its principal place of business located at 6564 Loisdale Court, Suite 600, Springfield, Virginia.

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9. The City of Painesville is a municipality located in Lake County, Ohio. Its

mailing address is 7 Richmond Street, P.O. Box 601, Painesville, Ohio 44077.

JURISDICTION AND VENUE

10. This is a controversy between citizens of different states, and the amount in

controversy exceeds $75,000.00.

11. This Court has jurisdiction pursuant to 28 U.S.C. §1332.

12. Venue is proper pursuant to 28 U.S.C. §1391(b)(1) and (2).

FACTUAL BACKGROUND

A. Ashlawn Develops The VanCharg™ Vanadium Redox Flow Battery

13. Ashlawn Energy is a Springfield Virginia-based provider of energy storage

solutions for electricity markets, strategic alliance partners, and communities seeking more

reliable power infrastructures. It was founded by Norma Byron in 2008.

14. Ashlawn licensed the Vanadium Redox technology, and developed an energy

storage solution called the VanCharg™ Vanadium Redox Fuel Cell Storage Battery

(“VanCharg™”). VanCharg™ is a rechargeable fuel cell flow battery that utilizes the properties

of vanadium, making it unique in its efficient operation from a single active element.

VanCharg™ allows for energy to be stored in sizes up to multi-megawatt ranges for hours at a

time.

15. VanCharg™ presents numerous advantages when paired with traditional energy

production. The system improves power plant efficiency and ability to balance load, reduces

operational and maintenance costs through remote operation, and reduces carbon emissions.

16. VanCharg™ also allows industrial users to purchase and store electricity at

nonpeak rates to be used in lieu of purchasing electricity at peak rates. This tactic, known as

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“Peak Shaving” allows for energy usage to be controlled during intervals of high demand in

order to limit or reduce the financial consequences of increased demand.

B. Painesville Struggles With Growing Energy Demand And A Shortage Of

Environmentally Sound Supply

17. The City of Painesville is a municipality located in Lake County, Ohio. It owns

and operates Painesville Municipal Power, a 32 megawatt 109-year-old coal-fired power plant

(the “Coal Plant”) that provides electrical power to Painesville and surrounding areas.

18. By 2009, it was becoming clear to Painesville’s leadership that the Painesville

Coal Plant could not meet the rapidly growing electricity demands of the City. Accordingly,

Painesville was actively seeking ways to improve the efficiency of the Coal Plant and acquire

electricity from other sources.

19. One of the ways that the City was bridging the gap between supply from the Coal

Plant and demand was to purchase power from other sources. According to then-City Manager

Rita McMahon, in the summer months when demand was at its highest, the City was paying

between $70 and $100 per megawatt hour for electricity.

C. The Federal Government Designates Stimulus Money For Power Grid

Modernization

20. On February 17, 2009, President Barack Obama signed the American Recovery

and Reinvestment Act of 2009 into law. Included in this $831 billion stimulus package was $4.5

billion allocated to the U.S. Department of Energy (“DOE”) Office of Electricity Delivery and

Energy Reliability to support power grid modernization activities.

21. One of the programs to receive stimulus funding from the DOE was the Smart

Grid Demonstration Program (“SGDP”). The SGDP was designed to provide financial support

in the form of grants, up to one-half of the total project cost, to demonstrate how existing and

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emerging smart grid technologies could be applied and integrated into existing power systems to

support power grid modernization throughout the United States.

22. The SGDP included approximately $600 million in government funding to

support 32 projects in two separate areas: Smart Grid Regional Demonstrations and Energy

Storage Demonstrations. The Regional Demonstrations aimed to verify smart grid viability,

quantify smart grid costs and benefits, and validate new smart grid business models at scale that

could be readily replicated across the country.

D. Ashlawn And Painesville Partner To Win Federal Stimulus Money To Demonstrate

VanCharg™ In Painesville

23. In 2009, Norma Byron met with then-Painesville City Manager Rita McMahon to

discuss Painesville’s energy situation. McMahon and other City leaders had already developed a

relationship with Byron, as she had been operating a fuel cell manufacturing operation in

Painesville since 2004.

24. Together, Byron and McMahon formulated a plan to utilize Ashlawn’s advanced

energy storage technology to help alleviate the energy production problems impacting

Painesville. They developed a Smart Grid Regional Demonstration grant proposal (the “DOE

Proposal”) that called for Painesville Municipal Power to work in partnership with the Ohio

Municipal Power Plant Authority and Ashlawn to manufacture and demonstrate a 1 megawatt

(“MW”) 8 megawatt hour (“MWh”) VanCharg™ vanadium redox flow battery (“VRFB”) at the

Painesville Coal Plant (the “VRFB Project” or the “Project”) .

25. Under the terms of the DOE Proposal, Painesville, as the grant recipient, would

manage the Coal Plant and its employees, as well as fund and oversee the design and

construction of a new building at the site of the Coal Plant to house the VRFB Project. Ashlawn,

as the grant’s major sub-recipient, would be subcontracted to build all prototypes, arrange for

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necessary testing, manage and contract with all other necessary subcontractors, prepare all

required reports to the DOE and eventually build and install the final battery at the Coal Plant.

26. Funding for the project was expected to come from multiple sources. Half of the

funds would come from the DOE Smart Grid grant. Ashlawn would be responsible for the

majority of the remaining 50%, but Painesville also assumed a significant financial obligation,

including being responsible for the design and construction of the facility to house the VRFB

demonstration. The parties anticipated that the remaining funding would be provided by the

state of Ohio under the Ohio Air Quality Development Authority (“OAQDA”) Advanced Energy

forgivable loan program.

27. The DOE Proposal offered significant benefits to Painesville. The Painesville

VRFB Project would allow the City to reduce its carbon emissions while also achieving much-

needed improvements in power distribution and efficiency through Peak Shaving. Ultimately,

this would lead to energy savings for Painesville electricity consumers, and potentially even

participation in revenue streams from the provision of energy services to third parties. In

addition, the plan offered the potential to bring jobs to the City and establish it as a hub of flow

battery design and manufacturing.

28. The DOE Proposal also held the potential to greatly benefit Ashlawn, as the

Painesville VRFB Project would serve as a showpiece for the company to attract additional

partners to move towards scale up and commercialization of VanCharg™.

29. On August 25, 2009, Painesville submitted the DOE Proposal to the DOE.

E. The Painesville/Ashlawn VRFB Project Wins Federal Funding From The DOE

30. On November 24, 2009, the US Department of Energy National Energy

Technology Laboratory announced that the DOE Proposal was one of sixteen Smart Grid

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Demonstration Projects nationwide that had been approved by the DOE to receive federal

funding. Painesville was awarded a Cooperative Agreement, DE-E0000233 (the “Cooperative

Agreement”), to demonstrate the Ashlawn VanCharg™ VRFB at the Coal Plant. The

Cooperative Agreement initially included $3,743,570 in government funding and called for the

grant recipient, Painesville, to contribute an additional $5,023,688. The Cooperative Agreement

was later amended to include $4,243,570 in government funding, and called for the grant

recipient, Painesville, to contribute an additional $5,219,053.

31. Shortly after the DOE’s announcement, then-Ohio Governor Ted Strickland

proclaimed that that the VRFB project would “help ensure that communities relying on the

Painesville [Coal] [P]lant have access to a stable and efficient power supply.”

32. On May 4, 2010, Painesville and Ashlawn entered into a contract for the

execution of the Painesville VRFB Project pursuant to the Cooperative Agreement, which was

further amended on June 23, 2010, August 17, 2010, and February 24, 2011, to incorporated

additional scope and responsibilities added by the DOE (the original and all subsequent

amendments, the “2010 Contract”). The 2010 Contract called for Ashlawn to furnish to the City

project management, labor, materials and equipment, and for the project to span from 2010 to

2014.

F. The Painesville VRFB Project Commences To National Fanfare

33. For the remainder of 2010 and through 2011, both the City and Ashlawn were

hard at work on the VRFB Project. Painesville spent $432,828 of taxpayer funds to build a 4,900

square foot building on the site of the Painesville Coal Plant to house the VRFB Project (the

“Battery Building”). Meanwhile, Ashlawn developed its supplier base, applied for the necessary

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patents, built and tested prototype VRFB battery stacks, and completed an economic business

model.

34. On February 22, 2011, President Barack Obama gave special recognition to the

VRFB project during a small business forum held at Cleveland State University. He praised

Norma Byron and stated that “Ashlawn is poised to manufacture a next-generation energy

storage system in Painesville that will improve efficiency.” President Obama told the crowd that

the Painesville project would “help families and businesses cut down on energy waste, save

money and reduce dangerous carbon pollution.”

35. On February 24, 2011, Ashlawn was presented with a prestigious Advanced

Energy Innovation Award for its progress on the VRFB Project by NorTech, a regional nonprofit

technology-based economic development organization.

36. By October 15, 2011, the Parties had come to a final determination as to how to

allocate responsibility for the portion of the VRFB project that was not funded by the federal

Smart Grid grant money. In an October 15, 2011 revision to the Project Management Plan,

which was a document required by the DOE Cooperative Agreement, Ashlawn agreed to expend

$3,697,000 in matching funding, i.e., Cost Share, the City agreed to be responsible for

$1,473,000 in Cost Share, and the parties agreed that a grant from the state of Ohio through

OAQDA would cover the remaining $1,600,000. The Project Management Plan was adopted by

the parties in Amendment 3 to their 2010 Contract. The Original subcontract, Amendment 3,

and the October 15, 2011 revision to the Project Management Plan are attached hereto as Exhibit

A.

37. On November 15, 2011, a ribbon-cutting ceremony was held to represent the

opening of a 12,000 square foot VanCharg™ final assembly commercial facility rented by

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Ashlawn to manufacture vanadium redox flow batteries. In attendance for the ceremony were

Rita McMahon, members of the Painesville City Council, representatives of Painesville

Municipal Public Power, and a representative of Governor John Kasich’s office.

38. Throughout 2011, the City was extremely pleased with Ashlawn’s efforts to get

the VRFB Project completed. In a November 21, 2011, letter from City Manager Rita McMahon

to OAQDA, McMahon remarked that “The City ha[d] been impressed with Ashlawn Energy’s

efforts since awarding of the grant” and that Painesville “look[ed] forward to a long association

as Ashlawn creates high tech jobs in Painesville.”

G. The Painesville VRFB Project Loses Its Funding From OAQDA, But The Parties
Find An Alternative Solution

39. In April 2012, the VRFB Project encountered a significant and unexpected hurdle.

Due to changing priorities at the state government level, the $1.6 million of funding that

Ashlawn and the City had been expecting from OAQDA was eliminated, leaving the project with

a significant shortfall.

40. Undeterred, Rita McMahon and other members of the Painesville City

Government worked with Ashlawn to develop a new strategy to make up for the deficit. From

the outset of the Project, Ashlawn and the City had understood that they would need to enter into

multiple agreements, including battery placement, interconnection, power-purchase, and a

facility lease (the agreements collectively, the “Revenue Sharing Agreement”) in order to

facilitate Peak Shaving. But in addition to sharing revenue from Peak Shaving, Ashlawn and

Painesville determined that they could make up for the OAQDA shortfall by incorporating

additional revenue streams into the Revenue Sharing Agreement from demand response and

frequency regulation. Ashlawn could then offer a percentage of these new revenue streams to

potential investors to spur the investment necessary to complete the VRFB Project.

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41. With this strategy developed, in late 2012, Ashlawn applied to the Development

Fund of the Western Reserve (“Western Reserve”) to receive Federal New Markets Tax Credits

for the VRFB project. These credits, which were designed to spur private investment in Ohio

projects, offered a significant tax credit over seven years for qualified investments.

42. Western Reserve expressed interest in providing tax credits for private investment

in the VRFB project. However, prior to awarding any tax credits, Western Reserve informed

Ashlawn that it needed to produce a Revenue Sharing Agreement, approved by the Painesville

City Council, affirming Painesville’s commitment to allowing Ashlawn to operate its

VanCharg™ battery on Painesville’s premises in the Battery Building, and contract terms

specifying sharing of revenues from third-party energy sales from the battery.

H. Rita McMahon Retires And Painesville’s Interim Leadership Begins Stalling The
Progress Of The VRFB Project

43. On November 1, 2012, Rita McMahon retired as City Manager of Painesville.

She was replaced, on an interim basis, by Assistant City Manager/Community Development

Director Doug Lewis.

44. While this change was occurring, other members of Painesville’s City

Government, including Economic Development Director Cathy Bieterman, were working hard to

draft the Revenue Sharing Agreement necessary for Ashlawn to secure the Western Reserve

New Market Tax Credits (the “Western Reserve Proposal”).

45. The Western Reserve Proposal was first presented to the Painesville City Council

on April 15, 2013 through a “Resolution Authorizing the City Manager to Enter into a Contract

with Ashlawn Energy, LLC for Energy and Services Associated with the Vanadium Redox

Battery Demonstration Project.” It included a power purchase agreement, a building lease

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agreement, and an operations and maintenance agreement with Ashlawn to service the VRFB

Project.

46. According to Doug Lewis’s May 17, 2013 City Manager’s Report, the Western

Reserve Proposal was “structured to be cost neutral” for the city. In addition, it guaranteed that

any cost overruns in the completion of the VRFB project would be reimbursed by Ashlawn,

although nothing in the proposal relieved the City of its existing spending obligations undertaken

pursuant to the original DOE Cooperative Agreement.

47. The Western Reserve Proposal was presented to the City Council on April 15,

again on May 6, and a third time on May 20, 2013. Each time, the Resolution was tabled

without explanation. No vote was ever taken, and eventually, the Tax Credits were given to

other projects.

48. Nevertheless, the Painesville City Government continued to signal that it would

go forward with a Revenue Sharing Agreement, so Ashlawn kept working and expending

resources. In June 2013, Norma Byron continued to meet with potential investors and exchange

drafts of the necessary contracts with Cathy Bieterman.

49. On June 17, 2013, Byron made another presentation to the Painesville City

Council. She informed the Council that she had recently met with a group of investors who were

interested in funding the remaining portion of the VRFB project. She reminded the Council that

proceeding with the Energy Sales Agreement did not place any risk on the City, and that the onus

would be on Ashlawn to secure willing investors. She concluded by saying, “Let’s move ahead

. . . . Put the risk on Ashlawn Energy . . . . Let’s move together in the partnership that we’ve

come to know and come to enjoy working here with the City of Painesville.”

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50. After Byron completed her presentation, Painesville residents were given a

chance to offer their comments. The first resident to speak acknowledged the revenue and job

creation potential of the Ashlawn partnership and bluntly asked the City Council, “What’s the

hold up?”

51. A second resident stood up and stated, “The folks from Ashlawn Energy have

been here a number of times. I guess the first question I would have is what is the hold up? . . .

What exactly is the problem that is holding this up?”

52. Then-City Council President Joseph Hada responded, stating: “I would say that

Council wants to make sure that, uh, you know we have everything in order, and until we feel

comfortable with that, uh, we’ll leave it on the table and, uh, once we feel that we have the

information we need to make a decision, we’ll make the decision.”

53. The second resident persisted, asking “Do we have a timeframe at all for these

folks at Ashlawn? Or are they just going to keep coming back and . . . .”

54. Hada responded by stating, “That’s a determination for Council to make.”

55. The second resident concluded by reminding the Council that the City had already

built the Battery Building, signifying that the Council obviously thought the VRFB project was a

good idea at some point, and that he believed that the Council should move forward and make a

decision.

56. The Ashlawn proposal was then immediately tabled again, purportedly to be

addressed at a later date.

I. Anthony Carson Replaces Doug Lewis as Painesville City Manager And Continues
To Keep Ashlawn In Limbo

57. On July 1, 2013, Anthony Carson took over as Painesville City Manager,

replacing Interim City Manager Doug Carson.

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58. Shortly thereafter, on July 5, 2013, an article appeared in Mentor Patch entitled

Painesville, Ohio: All American Energy City. In the article, City Councilperson Lori DiNallo

commented on the status of the VRFB Project. After noting that the loss of OAQDA funding

had created an “unexpected shortfall,” DiNallo stated that Painesville was currently “finalizing a

revised contract to make sure that the city is in the best position.”

59. Painesville Electric Power Superintendent Jeff McHugh was also quoted in the

article as stating that “The [Painesville] electric department has been working tirelessly for [the

VRFB Project].”

60. According to the article, the Painesville City Council would vote on proceeding

with the VRFB Project after the Revenue Sharing Agreement was finalized, with a positive vote

giving the “green light” to Ashlawn to secure its own financing.

61. Behind the scenes however, new City Manager Anthony Carson was signaling to

Ashlawn that while he still intended to go forward with the negotiation of the Revenue Sharing

Agreement, he did not share Rita McMahon’s same enthusiasm for the project. In an July 23,

2013 e-mail to Norma Byron, in which Carson was responding to a request by Byron to finalize

the Revenue Sharing Agreement, Carson stated, “I know that Rita [McMahon] said that as

City Manager she would sign the [Revenue Sharing] agreement[], but as you are aware I did

not make the same acknowledgements.” (emphasis added.) Carson then told Byron to have

Ashlawn’s attorneys contact Painesville Law Director Joseph Gurley for further review of the

agreements.

62. Following Carson’s instructions, Ashlawn attempted to engage Law Director

Gurley to finalize the Revenue Sharing Agreement, but its efforts were unsuccessful. Despite

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repeated contacts by Ashlawn during the summer of 2013, Gurley would not even engage in any

meaningful dialogue, let alone sign off on the pending agreements.

63. Even though the City was clearly stalling, it was still communicating to Ashlawn

that it intended to honor its commitments and finish the Project. Thus, Ashlawn pressed forward

and continued to spend time and money moving the Project toward completion. In his February

20, 2015 Interim Report to the Painesville City Council, Painesville Electric Power

Superintendent Jeff McHugh confirmed that the Project’s Interoperability and Cyber Security

Plan, Project Definitization plan, Project Management Plan, and National Environmental Policy

Act Requirements were all completed on schedule.

J. The Parties Seek And Receive A Two-Year Extension From DOE To Complete The
VRFB Project, As Painesville Continues To Signal That It Will Enter Into The
Revenue Sharing Agreement

64. The 2010 Cooperative Agreement between Painesville and the DOE required the

VRFB Project to be completed by January 31, 2014.

65. With Painesville continuing to stall on the Revenue Sharing Agreement and the

original completion date drawing close, the parties decided to apply to the DOE for a two-year

extension to complete the VRFB Project. On January 27, 2015, they entered into an Extension

Agreement memorializing this plan.

66. The Department of Energy eventually consented to the extension, and the

Project’s completion date was changed to January 31, 2016.

K. Ashlawn Continues To Invest In The VRFB Project While The Department Of

Energy Raises Questions About Painesville’s Conduct

67. Through the remainder of 2014 and 2015, Ashlawn continued to invest in the

VRFB Project. It also prepared and submitted the required reports to the DOE in order to meet

the new January 31, 2016 deadline. In addition, it met with investor groups, at least two of

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whom expressed a willingness to finance the completion of the Project, subject to the City’s

acceptance of a Revenue Sharing Agreement.

68. The City continued to express to Ashlawn and the DOE that it was still invested

in completing the Project, and that it was willing to enter into a Revenue Sharing Agreement. A

February 20, 2015 Technology Performance report submitted by the parties to the DOE stated:

“[T]he political change of Administration in the State of Ohio and subsequent reprioritizing of

state funding zeroed out the anticipated matching state funding program, so the project was re-

scoped to allow for commercial funding. As a prerequisite to attracting commercial investment,

it was necessary to rescope the project’s goals in order to achieve the highest economic return. It

was determined that the revenues stream providing the highest economic return was frequency

regulation.”

69. Yet despite giving the clear impression to the DOE and to Ashlawn that it was on

board with taking steps to attract commercial funding, the City would never respond to

Ashlawn’s draft proposals or engage in any serious negotiations. City Manager Carson would

claim that the draft agreements were being reviewed by Law Director Gurley, but neither would

provide any substantive responses to Ashlawn.

70. Painesville’s obvious obstruction caught the attention of the DOE. On June 23,

2014, Ronald Staubly, the DOE’s VRFB Project Manager from the National Energy Technology

Laboratory, sent an e-mail to Painesville Finance Director Andy Unetic, City Manager Anthony

Carson, Electric Power Superintendent Jeff McHugh, and Law Director Joseph Gurley.

71. Staubly first took issue with Painesville’s position that “it was never part of the

deal to come up with revenue streams” for the VRFB Project. He stated that it was obvious that

some sort of “operations contract” between the City and Ashlawn “was envisioned from the

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beginning of the project” and that the Revenue Sharing Agreement was “not something new or

additional to the project but a component of the project from the beginning.”

72. Second, Staubly questioned why Painesville was refusing to move forward with

the execution of the Revenue Sharing Agreement when Ashlawn’s proposal created no financial

risk for the City, and if anything, presented the opportunity to create additional revenue streams.

73. Finally, Staubly raised questions about Painesville’s real motives. He noted that

recipients of federal financial assistance agreements are required to put forth their “best efforts”

and that “some aspects of the [VRFB Project], as appearing to the casual observer, do give pause

as to whether this was the City’s ‘best effort’”. Staubly then noted that “The city’s commitment

to [the VRFB] project has been somewhat suspect since late 2012, when the changeover in city

personnel resulted in the loss of many of the project’s prior supporters.”

74. The January 31, 2016 deadline for the DOE passed. Meanwhile, Ashlawn

continued to try to finalize a Revenue Sharing Agreement, and Painesville continued to represent

that it was interested in moving the project forward while abstaining from any activity that might

actually allow for progress.

75. On September 19, 2016, Painesville Electric Power Superintendent Jeff McHugh

made a presentation at a Painesville City Council Meeting, during which he suggested that

Painesville was talking to battery producers other than Ashlawn about using the Battery Building

at the Coal Plant. With regard to the VRFB Project, McHugh said, “That project hasn't really

settled yet with the DOE, the Department of Energy, based on the other side, so what we're

trying to do is to either find an easy exit out or put another project in there. So in that sense

we've been in ongoing discussions with some developers who’ve come up with different

batteries . . . so they're working on proposals . . . .”

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76. At no time prior to September 19, 2016 did anyone in the Painesville City

Government inform Ashlawn that the City was looking for an “easy out” from the VRFB Project.

77. To the contrary, during this time, Painesville was still representing to Norma

Byron that it was working toward finalizing a Revenue Sharing Agreement. During that very

same September 19, 2016 City Council Meeting, McHugh responded to a question about Norma

Byron by admitting that the City was still in ongoing discussions with Ashlawn.

L. Painesville Rejects Ashlawn’s Final Attempts To Find A Cooperative Solution in

2017

78. As of 2017, Ashlawn had invested $3,817,479.33 in the VRFB Project to obtain

DOE matching funds, which exceeded the $3,697,000 to which it had contractually committed in

2011. In addition to the $3,817,479.33, it had incurred additional project-related expenses of

$652,415.16. On the other hand, Painesville had expended just $763,261.21 on the VRFB

Project, roughly half of the $1,473,000 it had agreed to expend in the Project Management Plan

incorporated into the 2010 Contract.

79. In August 2017, with millions already invested and the City showing no

inclination to move forward, Ashlawn retained legal counsel. Ashlawn’s counsel drafted a letter

to Painesville Law Director Joseph Gurley that asked Painesville to work with Ashlawn to find a

cooperative solution to move the VRFB Project forward.

80. Gurley responded on September 8, 2017, stating that Ashlawn and Painesville had

no contractual relationship, and that the City had satisfied all of its contractual obligations.

81. Further, Gurley claimed that the City’s decision to abandon the VRFB Project

was in part due to the fact that the battery demonstrated by Ashlawn during testing was not

1MW. This claim showed the City’s basic misunderstanding of the nature of the Project. The

Project Management Plan for the Project laid out a step-by-step approach for Ashlawn to scope

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out project development, and then build and test 10 kilowatt (“KW”) batteries. These 10 KW

batteries are the basic building blocks, or modules, of the VanCharg™ battery system. The

1 MW battery that the VRFB Project called for consisted of stacking 100 10KW VanCharg™

batteries, but production and installation on this scale was only possible if the Project became

fully funded. Because of the City’s senseless obstruction, it never did.

82. Gurley’s letter concluded with the same oddly ambiguous language that had been

communicated to Ashlawn since the departure of Rita McMahon: “[T]he City continues to seek

methods to improve electric service to its customers. Vendors who have in their immediate

possession, items that can facilitate the City’s desire to improve electric service to its customers

are encouraged to contact the City concerning their existing products. If Ashlawn is such a

vendor, it should proceed accordingly.”

M. Painesville Defames Ashlawn and Tortiously Interferes With Its Potential Customer

83. Beginning in 2017 and continuing into 2018, Ashlawn had been working to obtain

an agreement with the New York City Transit Authority (“NYCTA”) to complete a lucrative

battery project at one of NYCTA’s terminals.

84. On May 11, 2018, Thomas Lamb, the Chief of Innovation and Technology of

NYCTA, informed Ashlawn that, after having discussions with representatives from the City

Government of Painesville about Ashlawn’s performance in furtherance of the VRFB Project,

NYCTA could not enter into an agreement with Ashlawn for the NYCTA terminal project.

Citing specifically to “Ashlawn’s Energy’s Past Performance Issues and Technology Readiness

Level demonstrated in a curtailed effort to deliver a 1MW battery system,” Lamb claimed that

working with Ashlawn simply presented “too much risk.”

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85. Telephone conversations between Thomas Lamb and Ashlawn confirmed that

representatives of Painesville had engaged in communications with Lamb, and on May 16, 2018,

Lamb reconfirmed his discussion with Painesville in writing.

86. Lamb was told by representatives of the Painesville Government that Ashlawn

failed to live up to its contractual obligations in furtherance of the VRFB Project, and that it had

not possessed the technological capability to deliver the promised battery.

87. These statements are completely false and defamatory, and the Painesville

representative or representatives who made them knew they were false when communicating

them to NYCTA.

N. Painesville’s City Government Rejects Ashlawn’s Final Attempt To Work

Cooperatively

88. On May 10, 2018, after learning that Painesville had interfered with the NYCTA

deal, Ashlawn’s counsel sent a letter and an e-mail to Painesville’s city leadership, including

Joseph Gurley, current Painesville City Manager Monica Irelan, and the entire City Council.

89. The letter requested that Painesville cease and desist from making

misrepresentations about Ashlawn, and to retract and correct any misstatements that had already

been made.

90. The e-mail informed the City Government that Ashlawn still wanted to find a

mutually acceptable solution to move the VRFB Project forward, but that if the City was not

even willing to talk, Ashlawn would be left with no choice but to pursue a lawsuit to recover its

damages. The letter concluded by asking the City Government to provide a list of available

dates and times for a face-to-face meeting to explore potential solutions.

91. Ashlawn never received a list of available meeting dates. Instead, it received a

letter, dated May 16, 2018, from Joseph Gurley, in which the City stated that it had “no

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evidence” that its policy against defamation had been breached, and it referred Ashlawn back to

its September 8, 2017 letter regarding the future of the VRFB Project. The City was not even

willing to meet with Ashlawn.

COUNT ONE
(Breach of Contract)

92. Ashlawn incorporates the allegations of the foregoing paragraphs as if fully set

forth herein.

93. On May 4, 2010, Ashlawn and Painesville entered into the 2010 Contract.

94. The 2010 Contract was amended to incorporate the Project Management Plan. In

2011, the 2010 Contract was amended to state that “The CITY and ASHLAWN cost share shall

be as outlined in the approved Project Management Plan Section F . . . .”

95. The approved Project Management Plan called for Ashlawn to expend $3,697,000

in cost share in furtherance of the VRFB Project.

96. Ashlawn exceeded this requirement, and performed its obligations under the 2010

Contract.

97. The Project Management Plan called for Painesville to expend $1,473,000 in cost

share in furtherance of the VRFB Project.

98. Painesville failed to expend the $1,473,000 required by the contract. Instead, it

breached the 2010 Contract by spending only $763,261.21 on the Project.

99. The 2010 Contract also assumed that Painesville would work with Ashlawn to

take the steps necessary to operate and monetize the VRFB Project.

100. As the DOE itself pointed out in June 2014, the Revenue Sharing Agreement was

“not something new or additional to the project but a component of the project from the

beginning . . . .”

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101. Instead of working with Ashlawn in a reasonable and honest way, and remaining

faithful to the parties’ common purpose and their original expectations, the City refused to

finalize the Revenue Sharing Agreement, or even negotiate its terms.

102. The City was well aware that in doing this, it was impeding Ashlawn’s ability to

get the necessary funding for the Project, and thus, was effectively terminating it.

103. The actions taken by Painesville to prevent Ashlawn from completing the Project

constitute a breach of the implied covenant of good faith and fair dealing.

104. As a result of Painesville’s failure to perform its contractual obligations, the

Project was never completed, and Ashlawn suffered financial harm in an amount to be

determined at trial.

COUNT TWO
(Promissory Estoppel)

105. Ashlawn incorporates the allegations of the foregoing paragraphs as if fully set

forth herein.

106. From the time the 2010 Contract was signed, Painesville promised Ashlawn that it

would work cooperatively with Ashlawn to complete the VRFB Project.

107. Even after the loss of OAQDA funding in 2012, Painesville’s City Government,

led by Rita McMahon, made a specific promise to Ashlawn that it would sign a Revenue Sharing

Agreement, thus paving the way for Ashlawn to eliminate the shortfall with funding from private

investors.

108. McMahon and the Painesville City Government knew that Ashlawn would rely on

this promise, and its reliance was entirely reasonable and foreseeable.

109. Ashlawn did in fact rely on this promise, as it continued to expend time and

money on the VRFB Project.

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110. McMahon’s successor as City manager, Anthony Carson was well aware of the

prior administration’s promise, as he confirmed in his July 23, 2013 e-mail to Normal Byron.

111. Despite stating that he would not blindly honor the prior administration’s

commitments, Carson promised Ashlawn that the City would work with it to finalize the

Revenue Sharing Agreement.

112. Carson intended to induce Ashlawn’s reliance on this promise so that it would

continue to work on the VRFB Project, and Painesville could continue to give the outward

appearance that it was complying with the DOE Cooperative Agreement.

113. Ashlawn did in fact rely on Carson’s promise, and continued to expend resources

to its detriment.

114. As a result of Ashlawn’s reliance on the foregoing promises, it suffered damages

in an amount in excess of $4,000,000.00.

COUNT THREE
(Defamation)

115. Ashlawn incorporates the allegations of the foregoing paragraphs as if fully set

forth herein.

116. In 2018, Painesville communicated to NYCTA that Ashlawn had failed to live up

to its contractual obligations in furtherance of the VRFB Project, and that it did not possess the

technological capability to deliver the battery called for to complete the Project.

117. Painesville made this statement to NYCTA without privilege.

118. Painesville knew when it made this statement to NYCTA that it was untrue, and

that it was likely to harm Ashlawn’s ability to win NYCTA’s business.

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119. As a result of Painesville’s false and defamatory communication, Ashlawn did not

win NYCTA’s business, and suffered a resulting financial harm in an amount to be determined at

trial.

COUNT FOUR
(Intentional Interference With Prospective Economic Advantage)

120. Ashlawn incorporates the allegations of the foregoing paragraphs as if fully set

forth herein.

121. Ashlawn engaged in lengthy negotiations with NYCTA to win its business for the

terminal project, and had an expectancy that the relationship would result in the formation of a

contract.

122. When NYCTA reached out to Painesville, the City became aware of the fact that

Ashlawn was on the cusp of a contractual relationship with NYCTA.

123. When Painesville communicated to NYCTA that Ashlawn had failed to live up to

its contractual obligations in furtherance of the VRFB Project, and that it did not possess the

technological capability to deliver the battery called for to complete the Project, it intentionally

and improperly interference with Ashlawn’s relationship with NYCTA, and caused NYCTA to

terminate the relationship.

124. Painesville’s interference was the result of an improper motive. The City did not

want Ashlawn to demonstrate the viability and benefits of VanCharg™ elsewhere, thus proving

that the City, not Ashlawn or its product, was the reason for the failure of the VRFB Project.

125. As a result of Painesville’s tortious interference, Ashlawn suffered financial harm

in an amount to be determined at trial.

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WHEREFORE, Plaintiff Ashlawn Energy, LLC demands judgment in its favor and

against Defendant City of Painesville as follows:

a. On Count One, for the sum of $10,000,000, plus interest;

b. On Count Two, for the sum of $4,469,894.49, plus interest;

c. On Count Three, for the sum of $1,992,667, plus interest;

d. On Count Four, for the sum of $1,992,667, plus interest;

e. For its court costs; and

f. For such other and further relief as this Court finds just and equitable.

JURY DEMAND

Plaintiff demands a jury on all issues presented in this complaint.

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Respectfully submitted,

Seth J. Linnick (0083494)

John Q. Lewis (0067235)
TUCKER ELLIS LLP
950 Main Avenue
Suite 1100
Cleveland, OH 44113
Telephone: 216.696.5000
Facsimile: 216.592.5000
[email protected]
[email protected]

Attorneys for Plaintiff

Ashlawn Energy LLC

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