A New Jersey supplier of energy cogeneration equipment was ordered to pay $8.2 million this week, after a San Diego jury found the company withheld deliveries deliberately to harm a Carlsbad contractor.
The jury's award included almost $6.3 million in punitive damages for breach of faith and other misconduct by New Jersey's Hess Microgen, a subsidiary of Hess Corp., the New York oil company.
Lawyers for Xnergy, a Carlsbad contractor that serves biotechnology and high-technology companies, argued in the trial before San Diego Superior Court Judge Joan Lewis that Hess Microgen sought to damage Xnergy so it could win the contractor's jobs for itself.
Xnergy signed agreements in 2003 and 2004 to serve as the engineering, procurement and construction contractor for energy cogeneration projects at office towers in Orange County and Walnut Creek.
Such cogeneration equipment is used to generate electricity to offset energy consumption during peak demand, and to generate heat energy that is used to supplement a building's heating and cooling systems.
Equity Office Properties, the real estate investment trust that hired Xnergy also hired Hess Microgen to supply the cogeneration equipment for the two projects.
Equity Office and another firm, On-Site Energy Providers, settled with Xnergy before the lawsuit went to trial last month in San Diego.
Hess Microgen “engaged in blatant corporate bullying and corporate blackmail by bringing jobs to a halt, effectively holding the projects hostage,” said Xnergy's lawyer, L.B. “Chip” Edleson of San Diego.
The 12-person jury apparently agreed in verdicts that found Hess Microgen had breached its duty of acting in good faith and intentionally interfering with a contract. The jury determined punitive damages Wednesday afternoon, following additional arguments in the case.
Daniel Harshman, a San Francisco lawyer for Hess Microgen, did not respond to a telephone call and e-mail seeking comment.
“They were just incredibly arrogant,” said Edleson's partner Joanne Rezzo. “They never offered any money to settle the case with our client.”
Rezzo noted that Hess Microgen faces similar lawsuits in San Diego, San Francisco and Reno over three other cogeneration projects. The other San Diego suit against Hess Microgen was filed by the city of San Diego over cogeneration equipment failures and other problems at a San Diego Police Department installation.
The case “appears to be 'greenwashing' on a much larger and more insidious scale,” said Eric Lane, a San Diego patent attorney who writes the “Green Patent Blog” about intellectual property issues in clean technology.
“Greenwashing” involves misleading green-minded consumers into buying goods or services through dubious claims about their environmental benefits, Lane said.
“Energy efficiency technology, particularly recycling waste heat by cogeneration, is too important to be compromised by false claims, faulty equipment and shoddy service,” Lane said.
Bruce Bigelow: (619) 293-1314; bruce.bigelow@uniontrib.com
