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Townsend Ventures, LLC v. Hybrid Kinetic Group Ltd.

United States District Court, D. Maryland

August 30, 2017

TOWNSEND VENTURES, LLC, Plaintiffs,
v.
HYBRID KINETIC GROUP LIMITED, et al., Defendants.

          MEMORANDUM OPINION

          George L. Russell, III United States District Judge.

         THIS MATTER is before the Court on Defendants Hybrid Kinetic Group Limited (“Hybrid Kinetic”) and Billion Energy Holdings Limited's (“Billion”) (collectively with Hybrid Kinetic, “HKG”) Motion to Stay Proceedings and Compel Arbitration. (ECF No. 5). The Motion is fully briefed and ripe for disposition. No hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons that follow, the Court will grant the Motion.[1]

         I. BACKGROUND[2]

         A. The Parties

         Plaintiff Townsend Ventures, LLC (“Townsend”) is a Maryland-based investment company that invests in emerging energy technologies. (Compl. ¶ 15, ECF No. 1).

         Townsend is the majority owner of Plaintiffs XALT Energy, LLC (“XALT Energy”) and XALT Energy MI, LLC (“XALT Energy MI”). (Id. ¶ 7). XALT Energy and XALT Energy MI (collectively with XALT Energy and Townsend, “XALT”[3]) are Delaware limited liability companies “engaged in the business of the design, development, manufacture, sales, and service of advanced lithium-based energy storage systems and battery cells.” (Id. ¶¶ 1, 8, 9). XALT Energy MI is a wholly owned subsidiary of XALT Energy. (Id. ¶ 9). XALT Energy and XALT Energy MI have their principal places of business in Midland, Michigan. (Id. ¶¶ 8-9).

         Hybrid Kinetic is “a limited company formed in Bermuda and headquartered in Hong Kong.” (Xu Decl. ¶ 2, ECF No. 5-1). Billion is a “limited company formed and based in Hong Kong.” (Id. ¶ 4). Billion is a wholly owned subsidiary of Hybrid Kinetic. (Id.). HKG “is an electric vehicle manufacturer that purports to manufacture electric transit buses, electric commercial delivery vehicles, and hybrid automobiles.” (Compl. ¶ 1).

         B. The Proposed Joint Venture

         1. Memorandum of Understanding

         In November 2014, the Parties executed a memorandum of understanding (the “MOU”). (Id. ¶ 28). According to the MOU, the Parties would establish a “strategic partnership” under which they would “collaborate on the development and manufacture of a Lithium Titanate Oxide (LTO) based cell and battery pack.” (Id.). The MOU further provides that “HKG shall utilize all XALT battery capacity in Midland exclusively.” (Id. ¶ 30); (Pls.' Opp'n Defs.' Mot. Stay Ex. 1 [“MOU”] § 2.3, ECF No. 13-1). The MOU does not contain an arbitration provision. (See MOU).

         2. Supply Agreement

         Between March 10 and 20, 2015, the Parties negotiated a supply agreement under which “HK[G] would provide XALT with capital funding through deposits and letters of credit, and XALT would manufacture and supply battery cells to HK[G].” (Id. ¶ 39). During the negotiations, “it was contemplated that XALT would supply battery cells exclusively to HK[G], XALT's Midland manufacturing plant would run at or above full capacity (requiring additional personnel and substantial overtime), and HK[G] would purchase every battery cell manufactured at that plant.” (Id.).

         On or about March 20, 2015, the Parties executed an “Agreement for the Supply of Battery Cells” (the “Supply Agreement”), under which XALT formally agreed to manufacture and supply LTO battery cells to HKG. (Id. ¶ 40). The Supply Agreement memorialized HKG's earlier proposal that in addition to the $13 million it already paid XALT, HKG would pay XALT $16 million by March 31, 2015. (Id. ¶ 41).

         The Supply Agreement further addressed letters of credit and purchase quantities. (Id. ¶¶ 42-43). The first letter of credit would be for approximately $95 million and HKG would provide it by May 1, 2015 to cover expenses from March 20, 2015 through the end of the calendar year. (Id. ¶ 42). Then, through calendar year 2020, HKG would provide $240 million letters of credit by January 1 to cover that calendar year's expenses. (Id.). HKG “agreed to purchase a minimum of 972, 800 LTO battery cells from XALT between March 20, 2015 and December 31, 2015, and 2, 560, 000 LTO battery cells during each year from 2016 through 2020.” (Id. ¶ 43). The Parties also “agreed that XALT's Midland plant would operate at more than 100% capacity and that HK[G] would purchase battery cells exclusively from XALT.” (Id. ¶ 44).

         The Supply Agreement also contains the following arbitration provision (the “Arbitration Provision”):

Any dispute, controversy or claim arising out of or relating to this Agreement shall be submitted to the Hong Kong International Arbitration Centre for arbitration in accordance with its then effective arbitration rules. The arbitral award shall be binding and final, and any Party may ...

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