Opinion ID: 4854156
Heading Depth: 3
Heading Rank: 2

Heading: Ownership Interests

Text: NPPD argues the change-of-control provision is ambiguous because the term “direct ownership interests” is subject to multiple interpretations. The Project Entities counter that the term “direct ownership interests” has a common, -6- unambiguous meaning, which was properly considered by the district court in its decision to grant summary judgment in the Project Entities’ favor. We conclude that the term “direct ownership interests” is unambiguous. It is undisputed that the PPAs do not define “direct ownership interests.” However, the law supports the Project Entities’ argument that here “ownership interests” and certainly “direct ownership” can only be reasonably interpreted to mean ownership of membership units in a limited liability company. NPPD primarily relies on the dissent in Dole Food Co. v. Patrickson, 538 U.S. 468 (2003), to argue that ownership encompasses a wide variety of interests. NPPD’s argument is misplaced for two reasons. First, as a dissenting opinion it is not controlling precedent. We will not conjure up ambiguity from the Dole dissent when none exists. Second, the Dole majority opinion, while helpful in identifying the common meaning of “ownership,” has limited value due to the term’s interpretation solely within the context of the Foreign Sovereign Immunities Act of 1976 (“FSIA”). Ownership of a corporation or LLC is generally defined by the legal right of possession of stock or membership units, not control. In Dole, the Supreme Court addressed the issue of whether a party’s ownership of shares of a parent company (several entities removed from the subject company) qualified as “direct ownership.” Dole, 538 U.S. at 470–74. However, the Dole analysis was in the context of interpreting the FSIA to determine whether a lawsuit could be removed to federal court. Id. In stating that ownership of an entity several levels removed from the target entity did not qualify as direct ownership for purposes of the FSIA, the Dole majority stated that “[a]n individual shareholder, by virtue of his ownership of shares, does not own the corporation’s assets and, as a result, does not own subsidiary corporations in which the corporation holds an interest.” Dole, 538 U.S. at 475. “A basic tenet of American corporate law is that the corporation and its shareholders are -7- distinct entities.” Id. at 474. Further, “[a] corporate parent which owns the shares of a subsidiary does not, for that reason alone, own or have legal title to the assets of the subsidiary; and, it follows with even greater force, the parent does not own or have legal title to the subsidiaries of the subsidiary.” Id. at 475. NPPD relies on comments raised in the Dole dissent as the basis for its argument that “ownership interests” is an ambiguous term. The Dole dissent recognized that owning the shares of a corporate parent differs from owning the shares of a corporate subsidiary. Dole, 538 U.S. at 481. The Dole dissent argued instead that the term “ownership” should be interpreted to apply to ownership interests of a corporation’s parent entity. That interpretation, they argued, aligns with the Court’s historically expansive use of the term “ownership” to apply to a variety of ownership situations. Id. at 481–82. Next, NPPD argues GIP’s ownership of the Project Entities’ parent corporations improperly manifested itself in GIP’s control over the Project Entities themselves. NPPD’s argument finds some support in the Supreme Court’s case law. The Court has explained that a corporate parent often has a degree of control over its subsidiaries: [A] parent and a wholly owned subsidiary always have a complete ‘unity of purpose or a common design interest. They share a common purpose whether or not the parent keeps a tight rein over the subsidiary; the parent may assert full control at any moment if the subsidiary fails to act in the parent’s best interests. Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 771–72 (1984) (referring to the Sherman Act); see also United States v. Bestfoods, 524 U.S. 51, 61 (1998) (“It is a general principle of corporate law deeply ‘ingrained in our economic and legal systems’ that a parent corporation (so-called because of control through ownership of another corporation’s stock) is not liable for the acts of its subsidiaries.”) (emphasis added) (citations omitted). -8- But Dole clarified that control and ownership are distinct concepts. See Dole, 538 U.S. at 477; see also Janvey v. Libyan Inv. Auth., 840 F.3d 248, 259 (5th Cir. 2016). “[A] parent corporation and its subsidiary are separate corporate forms.” In re Packaged Seafood Prod. Antitrust Litig., 338 F. Supp. 3d 1118, 1143 (S.D. Cal. 2018). Thus, ownership of intermediate corporate entities is not direct ownership. The Supreme Court of Nebraska has not interpreted the term “direct ownership interest” in analyzing a contract. However, in interpreting a Nebraska statute, that court has defined “direct” as “‘stemming immediately from a source,’ ‘natural, straightforward,’ ‘marked by absence of an intervening agency, instrumentality, or influence,’ ‘characterized by close logical, causal, or consequential relationship’ and ‘free from extraneous influence; immediate.’” Jacobitz v. Aurora Coop., 865 N.W.2d 353, 359–60 (Neb. 2015) (cleaned up); see also State v. Gilliam, 874 N.W.2d 48, 57 (Neb. 2016) (“We often turn to dictionaries to ascertain a word’s plain and ordinary meaning.”). Eighth Circuit precedent has also used the phrase “direct ownership” when referring to ownership of stock. Wright v. United States, 482 F.2d 600, 609 (8th Cir. 1973). In this case, we give the “direct ownership” contemplated under the changeof-control provision its common meaning. We interpret the direct ownership interests to mean ownership interest in the Project Entities themselves, and we conclude that ownership in any of the Project Entities’ parent companies constitutes an indirect ownership interest.3