Court Opinion

ID: 3169067
Source: CourtListenerOpinion
Date Created: 2016-01-13 00:01:48.402698+00
Date Added: 2024-06-11T12:02:10.730351
License: Public Domain

Filed 12/15/15; pub. order 1/12/16 (see end of opn.); reposted to remove the “not to be published” legend

             IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                  FOURTH APPELLATE DISTRICT

                                              DIVISION THREE

JAMES G. SPEIRS et al.,

    Plaintiffs and Appellants,                                    G048698

        v.                                                        (Super. Ct. No. 30-2011-00508691)

BLUEFIRE ETHANOL FUELS, INC., et                                  OPINION
al.,

    Defendants and Appellants.

                 Appeal from a judgment of the Superior Court of Orange County, Derek W.
Hunt, Judge. Reversed and remanded with directions.
                 Bryan Cave, Lawrence P. Ebiner and David J. Joerger for Defendants and
Appellants.
                 Wilson Harvey Browndorf and Marc Y. Lazo for Plaintiffs and Appellants.

                                          *              *              *
              Plaintiffs held warrants (i.e., options to buy common stock from a
                                                                                      1
corporation at a particular price by a particular date) issued by defendant BlueFire. The
warrants included an anti-dilution provision, requiring BlueFire to adjust the exercise
price set in the warrants “to equal the consideration paid” by a subsequent investor for
equity interests in BlueFire. But the anti-dilution provision did not apply to certain
issuances of securities, as specified in a list of five categories of exceptions.
              A few years after issuance of the warrants, BlueFire entered into an
agreement with non-party Lincoln Park Capital Fund, LLC (Lincoln). The agreement
created a corporate finance structure known to its aficionados as an “equity line of credit”
                                                2
or a “standby equity distribution agreement.” Lincoln promised to make up to $10
million available to BlueFire (including $150,000 immediately upon execution of the
agreement), to be accessed at the option of BlueFire over a set period of time. In
exchange, BlueFire issued common stock and warrants to Lincoln at the time the
agreement was executed, and promised to issue additional common stock in exchange for
any future cash received from Lincoln.
              Plaintiffs sued BlueFire for breach of contract and declaratory relief when
BlueFire refused to apply the warrants’ anti-dilution provision to the Lincoln agreement.
Plaintiffs also sued individual defendants Arnold R. Klann and Christopher D. Scott for
breach of fiduciary duty. Conducting a bench trial, the court rejected the breach of
fiduciary duty claim against Klann and Scott. But the court ruled the anti-dilution
provision applied to the Lincoln transaction and that BlueFire had breached the warrants.

1
             Plaintiffs are James G. Speirs (individually, as the successor-in-interest to
Quercus Trust, and as real party in interest to the James G. Speirs, SEP IRA) and James
N. Speirs. Defendant BlueFire Renewables, Inc. is the successor entity of defendant
BlueFire Ethanol Fuels, Inc. We will refer to both entities collectively as BlueFire.
2
             (See Securities and Mergers & Acquisitions Bulletin, The Equity Line of
Credit: A Financing Tool That is Gaining Ground in Canada (Nov. 1, 2010)
 (as of Dec. 11, 2015).)

                                               2
The court also reduced the exercise price for the warrants from $2.90 per share to $0 per
share, and authorized plaintiffs to immediately exercise the warrants. The court did not
award monetary damages to plaintiffs. The parties appealed aspects of the judgment
adverse to their respective interests.
              We agree the breach of fiduciary duty cause of action was unmeritorious as
a matter of law; a corporation’s officers do not have a fiduciary duty to warrant holders.
We also agree with the court’s interpretation of plaintiffs’ warrants. The anti-dilution
provision applies to the Lincoln agreement and stock issuances to Lincoln resulting from
that agreement. But substantial evidence does not support the court’s decision to reduce
plaintiffs’ exercise price to $0. We therefore reverse the judgment and remand for retrial
solely on the proper remedy for BlueFire’s breach of contract.

                                          FACTS

              BlueFire was formed and registered as a publicly traded company in 2006.
Its business is transforming organic materials into ethanol fuels. At all relevant times,
defendant Klann was BlueFire’s chief executive officer, a member of BlueFire’s board of
directors, and an owner of a substantial percentage of BlueFire (e.g., 47 percent as of
February 2011). Defendant Scott was chief financial officer of BlueFire at certain
relevant time periods.
              Plaintiffs are a father-son duo of investors. Since 2006, plaintiffs have
owned shares of BlueFire common stock. Before trial began, plaintiff James G. Speirs
(“Jamie”) owned approximately 5 percent of BlueFire.

                                             3
Plaintiffs’ Warrants
                                                                                               3
                At the time of trial, plaintiffs held 5,740,741 warrants issued by BlueFire.
All of the warrants contained the same terms. The warrants entitled plaintiffs “to
purchase up to” 5,740,741 shares of BlueFire’s common stock. The “Exercise Price”
(i.e., the price at which the shares could be purchased) was $2.90 per share. The warrants
could be “exercised in whole or in part” by December 14, 2012 (the “Expiration Date”).
                Section 9 of the warrants, entitled “Adjustment of Exercise Price and
Number of Shares,” included various protections for holders against subsequent events
affecting the value of the warrants, including subsection 9.4 entitled “Anti-Dilution
            4
Protection.” The first two sentences of the anti-dilution provision stated: “This Warrant
is subject to ‘full-ratchet’ anti-dilution protection in relation to the issuance by [BlueFire]
(other than Excluded Issuances) of any additional shares of stock, options, warrants or
any securities exchangeable into any of the foregoing, (the ‘Additional Shares’). If
[BlueFire] issues any Additional Shares in exchange for consideration in an amount per
Additional Share less than the Exercise Price in effect immediately prior to such issuance
or sale of such Additional Share, then the Exercise Price shall be adjusted to equal the
consideration paid per Additional Share.”

3
              We ignore inconsequential complexities in the record pertaining to the
issuance of the warrants and the history of plaintiffs’ acquisition of the warrants. It is
noteworthy, however, that Jamie obtained the vast majority of the warrants (5,555,556)
for $30,000 in October 2010.
4
               Other subsections specifically addressed remedies for the warrant holders
in the event of mergers, reclassification of securities, dividends, and stock splits. Another
subsection, “Other Changes,” stated more generally that “If any other event occurs as to
which the other provisions of this Section 9 are not strictly applicable or if strictly
applicable, would not fairly protect the rights of the Holder in accordance with such
provisions, then the Company shall make an adjustment in the . . . the Exercise Price . . .
so as to protect such rights as aforesaid.”

                                               4
               But the next sentence of subsection 9.4 excluded five types of issuances
from anti-dilution protection, including two exceptions defendants deemed applicable to
the Lincoln transaction. “Excluded Issuances’ shall mean any equity securities (or
options, warrants or securities convertible into equity securities) issued . . . (ii) to parties
that are strategic partners investing in connection with a commercial relationship, or
providing [BlueFire] with equipment leases, real property leases, loans, credit lines,
guaranties or similar transactions approved by the Board, (iii) in connection with a
merger or acquisition or in connection with a joint venture or other strategic or
commercial relationship approved by the Board . . . .”
               Subsection 9.6 set forth the obligations of BlueFire upon an issuance of
shares requiring an adjustment of the warrants’ exercise price: “Whenever the Exercise
Price . . . shall be adjusted, [BlueFire] shall issue a certificate signed by [an officer]
setting forth, in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the Exercise
Price . . . after giving effect to such adjustment, and shall cause a copy of such certificate
to be mailed . . . to the Holder.” Section 4 described the procedural mechanism whereby
plaintiffs could exercise the warrants, including the submission of a “Warrant Exercise
Form,” accompanied by payment of the “Exercise Price.”
               The warrants chose New York law as applicable (though the parties freely
cite California cases and make no contention that the resolution of the issues on appeal
turns on the choice of law provision) and included an integration clause (“this
Warrant . . . contains the entire agreement of the parties, and supersedes all existing
negotiations, representations or agreements and other oral, written, or other
communications between them concerning the subject matter of this Warrant”).

                                                5
The Lincoln Agreement and Ensuing Issuances of Securities
                 In January 2011 (i.e., about two years before the warrants’ expiration date),
BlueFire and Lincoln executed a document entitled “PURCHASE AGREEMENT,”
which was approved by BlueFire’s board of directors. The agreement succinctly
described its purpose: BlueFire “wishes to sell to [Lincoln], and [Lincoln] wishes to buy
from [BlueFire], up to Ten Million Dollars ($10,000,000) of [BlueFire’s] common
stock . . . .”
                 The key dispute at trial was whether the Lincoln agreement was an
excluded issuance under subsection 9.4 of plaintiffs’ warrants. We highlight the essential
features of the agreement and its implementation after execution.
                 First, immediately upon execution of the agreement, BlueFire issued
600,000 shares of common stock (“Initial Commitment Shares”) to Lincoln. The
agreement characterized this issuance of shares as “consideration for [Lincoln] entering
into [this] Agreement.” The agreement did not identify the monetary value of this $10
million commitment to BlueFire. No cash was received by BlueFire as payment for the
Initial Commitment Shares.
                 Second, immediately upon execution of the agreement, BlueFire sold to
Lincoln 428,571 “Initial Purchase Shares” of common stock, along with 428,571
warrants with an exercise price of $0.55, in exchange for $150,000. This $150,000 was
the first portion of the $10 million commitment made by Lincoln. Ignoring the value of
the warrants and viewed in isolation from the remainder of the Lincoln agreement, this
transaction amounted to a purchase of common stock at 35 cents per share
($150,000/428,571). This is how the sale of the “Initial Purchase Shares” was
characterized in BlueFire’s form 10-K filing with the Securities and Exchange
Commission (428,571 “[c]ommon shares issued for cash at $0.35 per share in January
2011”) and in a BlueFire press release (“Upon signing the agreement, [Lincoln] invested
$150,000 in BlueFire as an initial investment under the agreement at $.35 per share”).

                                                6
              Third, moving past January 2011, BlueFire had the right to sell up to $10
million (actually, $9,850,000, after deducting the $150,000 already paid) of common
stock to Lincoln, and Lincoln had the obligation to buy shares of common stock from
BlueFire upon demand. These future purchases were subject to various procedural and
substantive conditions; assuming the conditions were met, the price of the shares was to
                                                                                   5
be set based on future circumstances (including “the prevailing market prices”).
              From May 2011 to January 2012, BlueFire received $235,000 from
Lincoln. In exchange, 1,354,842 additional shares of common stock (including 12,183
additional “commitment” shares) were issued to Lincoln. According to a form 10K filed
by BlueFire, common shares were being issued for cash during this time period at prices
ranging from 29 cents to 15 cents per share. The first quarter of 2012 was the last time
Lincoln made any stock purchases from BlueFire.

The Alleged Breach
              Jamie met with Klann and Scott twice at the end of January 2011,
demanding that BlueFire ratchet down the warrants in response to the Lincoln agreement.
Defendants refused to honor plaintiffs’ demand.
              Plaintiffs did not present completed warrant exercise forms pursuant to
section 4 of the warrants in January 2011. Of course, defendants did not comply with the
requirements of section 9.6 (to notify plaintiffs of the ratchet down event, the new
exercise price, and the method utilized to calculate that price) because they took the
position that issuances to Lincoln were excluded from plaintiffs’ anti-dilution protection.
Plaintiffs later submitted warrant exercise forms with a price of $0 on December 4, 2012,

5
               Plaintiffs’ counsel stated at oral argument that either party could
unilaterally revoke the financing agreement. This is inaccurate. Certainly, BlueFire was
not obligated to sell additional shares to Lincoln. But Lincoln was obligated to purchase
BlueFire shares, assuming specified conditions were met.

                                             7
eight days before their deadline to do so. BlueFire declined to honor the attempted
exercise, implicitly rejecting plaintiffs’ contention that the Lincoln agreement triggered
anti-dilution protection resulting in an exercise price of $0.

Extrinsic Evidence Regarding Applicability of Anti-Dilution Provision
               Jamie’s understanding of the full-ratchet anti-dilution provision in the
warrants was that it acted as the “sweetener of all sweeteners.” “It would be used
typically to protect an early investor . . . in the event that another investor got . . . a ‘better
deal.’ So if [a later investor was] issued shares in an amount less than the exercise price
of these warrants, these warrants would . . . ratchet down to equal that lowest issuance of
stock from the company.” Klann, conversely, claimed the warrants were designed to
raise additional capital — an additional $15 million or so in addition to the approximately
$15 million invested when the warrants were issued. Scott insisted the exclusions to the
anti-dilution provision “had to be fairly broad so as not to hamper [BlueFire] from getting
additional capital.”
               Jamie also testified about an occurrence from which one might infer
defendants actually believed the Lincoln agreement was not an excluded issuance under
subsection 9.4 of the warrants. Just before execution of the Lincoln agreement in January
2011, Klann offered Jamie the opportunity to make a loan to BlueFire with identical
terms to those received by Klann himself for a similar loan. The term sheet for this
proposed loan included a waiver of the warrants’ anti-dilution rights both as to the
proposed loan and as to a pending equity line of credit transaction (i.e., what we now
know as the Lincoln agreement): “Investor also acknowledges that although [BlueFire’s]
contemplated standby equity line with an as yet unnamed institutional investor (“SEL”)
would be considered an ‘Excluded Issuance’ as defined in Section 9.4 of the 2007
Warrants, Investors will also formally waive their ratchet rights on the SEL transaction as
an inducement for [BlueFire] to enter into this transaction.” Jamie was suspicious about

                                                8
Scott’s motives, who pressured him to sign the waiver while simultaneously saying the
proposed equity line of credit transaction was an excluded issuance under subsection 9.4
of the warrants. Jamie crossed out the waiver term before signing the term sheet, and
BlueFire declined to accept the loan. Scott asserted this episode did not reflect bad faith,
but rather an attempt to avoid a lawsuit.
              Expert testimony was offered to assist the court in its interpretation of the
applicability of the anti-dilution provision to the Lincoln transaction. With regard to
exception (ii) to the anti-dilution provision, plaintiffs’ experts discussed the differences
between equity lines of credit and traditional lines of credit. In essence, this testimony
made clear that the Lincoln transaction “had nothing to do with a loan of money.” “An
equity line of credit . . . is a commitment by an investor to purchase stock, generally over
time, as opposed to one single purchase of stock[,] usually . . . at varying prices at the
time that each increment or tranche is called down or invested.” One hallmark of an
equity line of credit, as opposed to a debt-based line of credit, is that it can cause
“substantial dilution as a result of the draw-downs on the equity line.”
              Scott and defendant’s expert, on the other hand, testified that an equity line
of credit was in fact a “credit line” or “similar transaction” because it has the same
characteristics, purpose, and function as a traditional credit line — access to liquidity at
the option of the party needing liquidity, an obligation imposed on the other party to
provide liquidity, a maximum dollar amount, and a limited duration.
              With regard to the terms “strategic partner” and “strategic relationship”
(used in exceptions (ii) and (iii) respectively), one of plaintiff’s experts testified these
terms were “close enough” to be considered the same thing. Plaintiff’s other expert
defined strategic partnership as an “arrangement between two companies — usually a
large company and a small company — in which the large company has managerial[,]
technological[, or] marketing resources, and the small company has some technology or
product that would be useful to the large company and to the small company to jointly

                                               9
develop and market.” This expert opined that Lincoln was not a strategic partner of
BlueFire; the relationship between the two companies was that of a “private equity fund”
investing in a company. The same expert said the exclusions were designed to apply to
stock issuances “incidental to and not the principal purpose of [a] transaction . . . .”
              Klann “considered [Lincoln] initially to be a very strategic relationship”
because of BlueFire’s need for a funding source to meet government loan guarantee
requirements. According to Klann, Lincoln was the only company willing to give a $10
million commitment to BlueFire at the time of the transaction. But at his deposition,
Klann did not identify Lincoln as a strategic partner, instead identifying as strategic
partners several other firms acting as BlueFire’s long-term suppliers, contractors, and
buyers of BlueFire’s biofuels.

Evidence Pertaining to Consideration Provided in Lincoln Transaction
              Plaintiffs posited that $0 was paid by Lincoln for the 600,000 Initial
Commitment Shares and the transfer of these shares to Lincoln obligated BlueFire to
ratchet down the exercise price in plaintiffs’ warrants to $0 per share. In part, plaintiffs’
position was based on an interpretation of the language of section 9.4: “If [BlueFire]
issues any Additional Shares in exchange for consideration in an amount per Additional
Share less than the Exercise Price in effect immediately prior to such issuance or sale of
such Additional Share, then the Exercise Price shall be adjusted to equal the
consideration paid per Additional Share.” (Italics added.) By plaintiff’s logic, a
commitment to provide capital in the future, no matter how valuable, is not an amount
“paid per Additional Share.” BlueFire was free to exchange common stock for an
intangible commitment of future capital availability, but if it took this step it was required
to reduce plaintiffs’ exercise price to $0.
              In further support of their contention, plaintiffs pointed to BlueFire’s
accounting treatment of the “Initial Commitment Shares.” BlueFire “booked” the Initial

                                              10
Commitment Shares at “no value, at no cost to themselves to the issuance.” A BlueFire
accounting entry listed the $600 par value as the cost of the 600,000 Initial Commitment
Shares, then set forth an offsetting negative $600 entry for additional paid-in capital.
Plaintiff’s expert acknowledged, however, that book value is not the same thing as
economic value. Plaintiffs’ expert also agreed “the 600,000 initial commitment shares
were not worth zero” when they were issued to Lincoln.
              BlueFire contended consideration can be many things, and Lincoln’s
commitment to provide up to $10 million in capital was valuable consideration.
BlueFire’s expert characterized financing placement rights as “a contractual intangible
benefit.” He identified the value of the $10 million commitment as $300,000. He
reasoned that the market value of the BlueFire shares was 50 cents per share (600,000
shares x $0.50 = $300,000) at the time BlueFire and Lincoln agreed to a term sheet. The
market price at the time the commitment shares were actually transferred was 40 cents
per share. If this value were used to value Lincoln’s commitment (600,000 shares x
$0.40), the commitment would be valued at $240,000. This $240,000 figure was featured
in a “journal entry” valuing the “line of credit economic benefit”; this entry was
purportedly made around the time the Lincoln agreement was executed.
              BlueFire also contended that the $150,000 cash provided at execution and
the commitment to provide more cash in the future should be considered together as part
of one transaction. Viewed in this manner, BlueFire exchanged 1,028,571 shares of stock
(600,000 Initial Commitment Shares + 428,571 Initial Purchase Shares) for a combined
value of either $450,000 ($150,000 + $300,000) or $390,000 ($150,000 + $240,000).
Viewed as a single transaction, the higher value comes out to 44 cents per share
($450,000 / 1,028,571) and the lower value comes out to 38 cents per share
($390,000/1,028,571).

                                             11
Conflicting Evidence Regarding Monetary Damages Suffered by Plaintiffs
              Plaintiffs also argued they suffered damages as a result of BlueFire’s
breach of contract. Plaintiffs testified they would have immediately sold at least some of
the shares they would have obtained had BlueFire allowed them to exercise the warrants
in January 2011. As of the execution of the Lincoln agreement, BlueFire’s closing stock
price was $0.40 per share, and its 21-day moving average price was $0.442 per share. By
the time of trial, the stock price was down to 12 cents per share. One of plaintiffs’
experts opined that, as of the time of trial, plaintiffs suffered $1,848,518.60 in damages
(($0.442 - $0.12) x 5,740,741 warrants) as a result of BlueFire’s failure to allow exercise
of the warrants at $0.00 in January 2011.
              Defendants argued plaintiffs did not suffer any breach of contract damages.
One angle of attack was levied against the notion that plaintiffs would have immediately
sold BlueFire shares for a profit in or around January 2011. Plaintiffs were long-term
investors in BlueFire stock who cumulatively held 1.6 million shares at the time of trial.
Neither plaintiff had sold any of their BlueFire common stock in the two years prior to
trial. Jamie testified he would have sold “a lot” of shares to get his “head back above
water” with regard to his investment in BlueFire. But Jamie agreed it was “very difficult
to go back in time and see exactly what [he would] have done.”
              A second angle of attack was brought against the assumptions made by
plaintiff’s damages expert. Both the issuance of more than five million shares of
common stock (added to the existing 28 million shares) and an attempt to quickly sell
those shares would have “utterly collapsed” the stock price, making it improbable
plaintiffs actually would have attempted to liquidate their position.

Court’s Rulings
              At the end of plaintiffs’ case-in-chief, the court granted defendants’ motion
for nonsuit on the breach of fiduciary duty cause of action.

                                             12
              After the completion of the trial, the court found for plaintiffs on the first
and third causes of action, for breach of contract and declaratory relief. “The full ratchet
anti-dilution protection offered by the warrants at issue would be rendered illusory by
defendants’ proposed interpretation.” The court declared “plaintiffs’ warrants are entitled
to anti-dilution protection under the terms of the warrants and . . . plaintiffs are
accordingly entitled to immediate exercise of said warrants . . . at the effective price per
share of $0.00.” But the court awarded no monetary damages to plaintiffs. The court
entered judgment accordingly.
              Following the court’s ruling, BlueFire was compelled by the court to
comply with the judgment notwithstanding the pending appeal. Acting under protest,
BlueFire issued 5,740,741 shares of common stock to plaintiffs at a price of $0.00.
              We grant the parties’ respective motions to admit new documentary
evidence on appeal relevant to the issue of whether BlueFire’s appeal is moot. (Cal.
Rules of Court, rule 8.252(c)(3).) Plaintiffs contend that BlueFire’s appeal is moot
because the judgment has been enforced — i.e., the warrants have been exercised by
plaintiffs at a price of $0.00. We reject plaintiffs’ contention because appellate
proceedings can provide effective relief to BlueFire. When a judgment is reversed, Code
of Civil Procedure section 908 authorizes courts to return the parties “‘so far as possible
to the positions they occupied before the enforcement of or execution on the judgment or
order.’” (See Munoz v. MacMillan (2011) 195 Cal. App. 4th 648, 657.) One possible
remedy, assuming plaintiffs are still in possession of the 5,740,741 shares of stock, is to
order plaintiffs to return those shares to BlueFire.

                                              13
                                       DISCUSSION

Court Properly Rejected Breach of Fiduciary Duty Claim
              The operative complaint alleged Klann and Scott, BlueFire officers (and, at
least with regard to Klann, a majority shareholder in combination with other related
shareholders), owed fiduciary duties of loyalty to plaintiffs because of plaintiffs’ status as
BlueFire minority shareholders.
              According to the allegations of the operative complaint, Klann and Scott
allegedly violated their fiduciary duties to plaintiffs in two ways. First, they facilitated a
loan from a Klann-related entity to BlueFire, the terms of which personally enriched
Klann. Prior to trial, plaintiffs abandoned their claim for damages arising from this
transaction, recognizing it might be brought at a later time as a derivative claim.
              Second, as relevant to this appeal, Klann and Scott allegedly breached their
duty of loyalty by “[s]oliciting, arranging, contracting, and/or facilitating the issuance of
voting shares and convertible warrants to [Lincoln] at a fraction of the share and warrant
values of those held by [plaintiffs], in violation of the anti-dilution provision of paragraph
9.4 of the WARRANTS, thereby breaching said defendants’ duty of loyalty to not dilute
[plaintiffs’] warrants.” Plaintiffs’ alleged damages consisted of “[b]eing deprived of the
full ratchet down price of the warrants . . . ; and (2) [i]ncurring the opportunity costs
associated with being unable to liquidate the true value of said warrants.”
              Thus, despite identifying the source of duty in plaintiffs’ status as minority
common shareholders, plaintiffs do not claim the breach of duty was defendants’
authorization of the Lincoln transaction. Nor do plaintiffs identify the harm caused by
the breach as the dilution of their shares of common stock. Instead, plaintiffs allege
Klann and Scott wrongfully refused to apply the anti-dilution protection provided in
plaintiffs’ warrants to the Lincoln transaction.

                                              14
              The theory pursued at trial was consistent with the complaint. Plaintiffs
point to the following evidence in support of their contention that the court wrongly
granted defendants’ nonsuit motion as to breach of fiduciary duty: (1) Scott and Klann
(unsuccessfully) tried to “hoodwink” plaintiffs into waiving their anti-dilution rights in
the warrants; (2) Scott and Klann concealed the nature of the Lincoln transaction from
plaintiffs when they tried to negotiate the waiver of the anti-dilution rights in the
warrants; (3) Scott and Klann insisted the Lincoln transaction was an excluded issuance
from the anti-dilution clause in the warrants; (4) Klann and Scott refused to honor the
anti-dilution clause in the warrants; and (5) Klann protected his own rights as a majority
common shareholder by refusing to honor plaintiffs’ warrant rights, because allowing
plaintiffs to exercise their warrant rights would dilute the value of stock held by common
shareholders. Plaintiffs acknowledge that “the harm to Plaintiffs — Klann’s and Scott’s
deliberate denial of their Anti-Dilution Protection — was to the benefit of other
shareholders. By not honoring Plaintiffs’ full-ratchet anti-dilution rights, Klann and Scott
prevented the other shareholders from having their interests diluted when Plaintiffs
converted their Warrants into over 5.7 million shares of common BlueFire stock at zero
cost, thereby dramatically increasing Plaintiffs’ ownership interest in BlueFire while
simultaneously decreasing the other shareholders’ ownership interests.” Plaintiffs, in
their role as common shareholders, are necessarily included within this group of “other
shareholders” that benefitted from the breach alleged.
              Plaintiffs did not attempt to prove that the Lincoln transaction personally
benefitted BlueFire insiders. Plaintiffs did not attempt to prove that the Lincoln
transaction was unnecessary (i.e., BlueFire did not need a commitment to provide up to
$10 million of capital) or that a better deal was available with another investor or lender.
Plaintiffs did not attempt to prove that the decision to enter the Lincoln transaction fell
outside the business judgment rule. Plaintiffs did not attempt to prove the Lincoln

                                              15
transaction caused them to lose money on their common stock (e.g., the value of the
common stock dropped a particular amount as a result of the Lincoln transaction).
              The warrants did not prohibit the issuance of additional shares to new
investors like Lincoln. The warrants did not even prohibit the issuance of additional
shares to new investors at a price below the designated exercise price in the warrants.
The warrants only prohibited the issuance of additional equity shares of BlueFire at a
price below the designated exercise price in the warrants, without ratcheting down
plaintiffs’ exercise price to match the terms offered to the new investors. The anti-
dilution clause in the warrants protected against dilution of the warrants; it did not protect
against dilution of common shares as a result of BlueFire raising new capital.
              The parties debate numerous issues with regard to the fiduciary duty cause
of action, but we affirm based on the most straightforward ground: Klann and Scott did
not owe a fiduciary duty to warrant holders, which is the role in which plaintiffs were
allegedly harmed by defendants’ actions. (See Amtower v. Photon Dynamics, Inc. (2008)
158 Cal. App. 4th 1582, 1599 [existence of a fiduciary duty is a question of law].)
              “[S]tock warrants are contracts entitling the holder to purchase a specified
number of shares of stock for a specific price during a designated time period.” (Reiss v.
Financial Performance Corp. (N.Y.Ct.App. 2001) 764 N.E.2d 958, 960.) “A
warrantholder is not a stockholder. Warrantholders have paid for an option. They have a
choice: whether to take an investment or not. A warrantholder only becomes a
shareholder by investing something of value that meets the exercise terms of the warrant.
The United States Supreme Court has recognized that a warrantholder’s ‘rights are
wholly contractual’ and that a warrantholder ‘“does not become a stockholder, by his
contract, in equity any more than at law.”’” (Aspen Advisors LLC v. United Artists
Theatre Co. (Del. 2004) 861 A.2d 1251, 1262-1263, fn. omitted; see Daly v. Yessne
(2005) 131 Cal. App. 4th 52, 61 [contractual arrangement entitling party to buy stock in a
company does not make party a stockholder].) As stated in the warrants at issue here,

                                             16
“Prior to the exercise of the Warrant, the Holder, in its capacity hereunder, shall not, by
virtue hereof, be entitled to any rights as a shareholder of the Company, either at law or
in equity, and the right of the Holder, in its capacity hereunder, are limited to those
expressed in this Warrant.”
              Hence, a fiduciary duty is not owed by a corporation or its insiders to
warrant holders. (Daly v. Yessne, supra, 131 Cal.App.4th at p. 63 [board owed employee
stock option holder “no fiduciary duty” before she had exercised options, “thus
precluding her complaint regarding dilution”]; BHC Interim Funding, L.P. v. Finantra
Capital (S.D.N.Y. 2003) 283 F. Supp. 2d 968, 989 [“Under either California or New York
law, an option holder, unlike a shareholder, is not owed a fiduciary duty by a
corporation’s officers”]; Simons v. Cogan (Del. 1988) 549 A.2d 300, 304 [convertible
debenture holders could not bring breach of fiduciary duty claim].) With regard to their
warrant rights, plaintiffs’ causes of action and remedies were appropriately limited to
breach of contract and declaratory relief.
              Plaintiffs cite authorities pertaining to fiduciary duties owed to minority
common stock holders (e.g., Jones v. H.F. Ahmanson & Co. (1969) 1 Cal. 3d 93, 108), but
these authorities are plainly inapplicable to warrant holders. (See Pittelman v. Pearce
(1992) 6 Cal. App. 4th 1436, 1442-1446 [rejecting contention that California should
extend fiduciary duty protection owed to minority shareholders to convertible bond
holders].) It is true plaintiffs owned minority stakes in BlueFire common stock. It is also
therefore true that BlueFire’s corporate insiders were obligated to refrain from enriching
majority shareholders at the expense of the minority shareholders. But plaintiffs’
allegations of wrongdoing pertain to the abuse of their contract rights as warrant holders,
not to alleged malfeasance against plaintiffs’ interests as common stock shareholders.
These distinct legal relationships — (1) the fiduciary relationship of corporate insiders to
minority shareholders and (2) the contractual relationship of corporations and warrant
holders — should not be conflated, even if the same individuals are both minority

                                             17
                                  6
shareholders and warrant holders. The evidence and argument at trial was not about the
effect of the Lincoln transaction on the price of BlueFire stock; the evidence and
argument at trial was about attempts to convince plaintiffs to waive their anti-dilution
protection and the defendants’ refusal to apply the anti-dilution clause to the Lincoln
transaction. The court correctly granted nonsuit to Klann and Scott on the fiduciary duty
                   7
cause of action.

6
             What if BlueFire had purchased real property from plaintiffs in a separate
transaction? Would one say that Klann and Scott had a fiduciary duty to plaintiffs in
connection with this transaction because plaintiffs were minority shareholders in
BlueFire?
7
               Everything in the record suggests the Lincoln transaction was completed at
arms’ length, and did not amount to Klann and Scott enriching themselves by transferring
equity securities to Lincoln for inadequate consideration. Assuming plaintiffs had
pleaded and proved a common stock dilution claim based on the sale of BlueFire
securities for inadequate consideration, we would be forced to decide whether such a
claim could be brought only as a derivative claim on behalf of BlueFire. (See Schuster v.
Gardner (2005) 127 Cal. App. 4th 305, 312.) Arguably, such a claim would need to be
brought derivatively on behalf of the corporation, rather than as individual shareholder
suits. “An action is derivative if ‘“the gravamen of the complaint is injury to the
corporation, or to the whole body of its stock or property without any severance of
distribution among individual holders . . . .”’” (Id. at p. 313.) A corporation, or the
whole body of its stock, is harmed by a giveaway of common stock for inadequate
consideration. (Id. at p. 316 [issuance of new shares to fund “‘ill-conceived acquisition
spree’” was derivative claim].) “A claim for wrongful equity dilution is premised on the
theory that the corporation, by issuing additional stock for inadequate consideration,
made the complaining stockholder’s investment less valuable. . . . [D]ilution claims are
‘not normally regarded as direct, because any dilution in value of the corporation’s stock
is merely the unavoidable result (from an accounting standpoint) of the reduction of the
value of the entire corporate entity, of which each share of equity represents an equal
fraction.’” (Feldman v. Cutaia (Del. 2008) 951 A.2d 727, 732; but see Gentile v.
Rossette (Del. 2006) 906 A.2d 91, 99-100 [majority shareholder’s issuance of shares to
self without adequate consideration can give rise to direct claim].) We need not decide,
however, whether a hypothetical claim not actually made by plaintiffs in this case should
be brought as a derivative or direct lawsuit.

                                             18
Anti-dilution Provision Applies to Lincoln Transaction
              The next issue is one of contract interpretation. Did the court correctly
determine plaintiffs were entitled to a reduction of the exercise price in their warrants “to
equal the consideration paid per” share by Lincoln, or was the Lincoln transaction an
                     8
excluded issuance?
              “Our review of the trial court’s interpretation of a contract generally
presents a question of law for this court to determine anew. [Citation.] ‘The trial court’s
determination of whether an ambiguity exists is a question of law, subject to independent
review on appeal. [Citation.] The trial court’s resolution of an ambiguity is also a
question of law if no parol evidence is admitted or if the parol evidence is not in conflict.
However, where the parol evidence is in conflict, the trial court’s resolution of that
conflict is a question of fact and must be upheld if supported by substantial evidence.’”
(DVD Copy Control Assn., Inc. v. Kaleidescape, Inc. (2009) 176 Cal. App. 4th 697, 713.)
              “‘It is well-settled that when interpreting a contract, the court should arrive
at a construction which will give fair meaning to all of the language employed by the
parties, to reach a practical interpretation of the expressions of the parties so that their
reasonable expectations will be realized’ [citation]. ‘A contract should not be interpreted
in such a way as would leave one of its provisions substantially without force or effect’
[citations].” (Yonkers Contracting Co., Inc. v. Romano Enterprises of New York, Inc.
(N.Y. 2007) 835 N.Y.S.2d 364-365.)

8
              We reserve the question of whether the court appropriately reduced the
exercise price to $0 for later in this opinion.

                                              19
              The anti-dilution provision at issue applied generally to issuances of “stock,
options, warrants or any securities exchangeable into any of the foregoing.” The essence
of the anti-dilution protection was that, after December 2007 and until December 2012,
plaintiffs were entitled to a reduction of the exercise price originally stated in the
warrants ($2.90) to match any lower consideration paid per share by an equity investor
(or debt investor with convertibility rights).
              Plaintiffs’ warrants were not structured to provide anti-dilution protection
only in limited, specified circumstances. (Cf. Amaranth LLC v. National Australia Bank
Ltd. (N.Y. 2007) 835 N.Y.S.2d 177 [warrants “cannot be reasonably read to mandate
anti-dilution except under the conditions plainly specified”].) Instead, anti-dilution
protection was the general rule, with the following issuances excepted: “(i) to
employees, officers, directors, contractors, consultants or advisers approved by the
Board, (ii) to parties that are strategic partners investing in connection with a commercial
relationship, or providing [BlueFire] with equipment leases, real property leases, loans,
credit lines, guaranties or similar transactions approved by the Board, (iii) in connection
with a merger or acquisition or in connection with a joint venture or other strategic or
commercial relationship approved by the Board, (iv) upon the exercise of currently
outstanding convertible securities, options and warrants, and (v) in connection with any
public offering.”
              BlueFire contends exceptions (ii) and (iii) apply to the BlueFire transaction.
Before turning to the exceptions advanced by BlueFire, we note that exceptions (i), (iv),
and (v) all make sense as true exceptions to the general rule, rather than a way of taking
away with the left hand what one has just given with the right. Exception (i) applies to
employees and similar individuals who were compensated with stock or stock options, a
group obviously distinguishable from a typical equity investor. Exception (iv) applies to
predecessor investors; these transactions were already on the books and could not be said
to dilute the value of the warrants obtained by plaintiffs. Exception (v) is a public

                                                 20
offering. A public offering, while potentially dilutive, is a different danger than private
placement investors being offered superior terms to those given to plaintiffs. And
presumably, plaintiffs would be able to purchase BlueFire securities at a public offering.
              Exception (ii) excludes issuances “to parties that are strategic partners
investing in connection with a commercial relationship, or providing [BlueFire] with
equipment leases, real property leases, loans, credit lines, guaranties or similar
transactions approved by the Board.” BlueFire suggests exception (ii) applies to any
                                    9
party (not just a strategic partner) that provides a “line of credit” to BlueFire or enters
into a “similar transaction” with BlueFire, and that Lincoln’s equity line of credit was a
“similar transaction” to a line of credit.
              We disagree with BlueFire’s interpretation and application of exception (ii)
for several reasons. First, a grammatical reading of the warrants dictates that exception
(ii) applies only to “strategic partners,” not to any party providing a line of credit. As the
court observed with regard to the “parallel draftsmanship” utilized in the warrants, there
are two gerunds in exception (ii) — “investing” and “providing” — and “the modifier for
each of those gerunds is ‘parties that are strategic partners.’”
              Second, a reasonable interpretation of exception (ii) limits its applicability
to “strategic partners” providing something other than a pure equity investment in
BlueFire, such as technical expertise or a long-term commitment to purchase BlueFire’s
energy products. BlueFire’s interpretation is unreasonable because it supposes that any
party purchasing equity interests in a transaction structured to resemble a loan or credit
line would be exempt from the anti-dilution provision. As made apparent by the
unorthodox transaction completed with Lincoln, there is no end to the creativity brought
to bear on problems of corporate finance. (See Mathews v. Kidder, Peabody & Co., Inc.
(3d Cir. 2001) 260 F.3d 239, 248, fn. 12 [“modern financial markets, and the widespread
9
               On appeal, BlueFire has abandoned its contention that Lincoln was a
“strategic partner” of BlueFire.

                                              21
use of complicated derivative instruments, have blurred the once-sharp distinction
between debt and equity”].) BlueFire’s interpretation would allow exception (ii) to
swallow the general anti-dilution rule, so long as BlueFire was clever enough in
structuring transactions with equity investors. The best interpretation of exception (ii) is
that it was designed to apply to incidental issuances of equity securities to strategic
partners, not to any party providing an “equity line of credit” (or, perhaps, a “loan” to be
“repaid” with shares of common stock).
              Similarly, exception (iii) — “in connection with a merger or acquisition or
in connection with a joint venture or other strategic or commercial relationship approved
by the Board” — makes sense within the scheme of the anti-dilution protection provision
only if “strategic relationship” means something more than an equity investor like
Lincoln. The essentials of the Lincoln transaction (memorialized in a “PURCHASE
AGREEMENT”) are Lincoln providing money to BlueFire in exchange for equity
interests in BlueFire. Pointing out that this financing scheme was a strategy and noting
that this type of transaction is sometimes referred to as an “equity line of credit” does not
change the underlying reality of the investment. Securing sufficient capital to continue
operations and pursue profitable ventures is always a strategy engaged in by corporations.
“Strategic relationship” must nonetheless mean something more than an equity investor
                          10
in a private placement.        And the use of a transaction structure somewhat resembling a
line of credit (with equity substituted for debt) does not transform an equity investor into
a strategic partner or strategic relationship.

10
               For example, one would suppose that Arkenol, Inc., a firm that licenses its
technology to convert cellulose and waste materials into ethanol to BlueFire, would
qualify as a strategic partner or strategic relationship.

                                                 22
              In sum, we agree with the court’s interpretation of the warrants. The
warrants are not ambiguous as to the applicability of the anti-dilution provision to the
Lincoln transaction. The exceptions cannot apply under a fair reading of the warrants.
Defendants’ proposed interpretation of the warrants would render the anti-dilution
protection largely illusory. Such an interpretation would not only violate general
principles of contract interpretation, but would also conflict with section 9.5 of the
warrants, which (as quoted above in footnote 4) indicates warrant holders should be
provided with the benefit of their contractual protections even if specific protections “are
not strictly applicable.” Plaintiffs were therefore entitled to a reduction of the exercise
price “to equal the consideration paid per Additional Share” by Lincoln. BlueFire
breached section 9.6 of the warrants by not notifying plaintiffs of a reduction in the
exercise price of the warrants following the execution of the Lincoln agreement.
              Even if we are mistaken and the warrants are ambiguous as to the
interpretive questions presented, there was substantial evidence supporting the court’s
interpretation of the relevant phrases in the warrants. Conflicting extrinsic evidence
(both percipient and expert testimony, and various exhibits) was admitted to assist the
court in interpreting the meaning of the anti-dilution provision and the exceptions thereto.
In particular, witnesses testified regarding the purpose of section 9.4 of the warrants,
whether the Lincoln transaction was a “credit line” or a “similar transaction,” and the
meaning of the phrases “strategic partner” and “strategic relationship.” If all or some
portion of section 9.4 was ambiguous, there is substantial evidence supporting the court’s
conclusion that the Lincoln transaction was not an excluded issuance.

                                             23
Substantial Evidence Does Not Support Reducing the Exercise Price to $0
              The warrants state that upon purchase of additional securities, “the Exercise
Price in effect shall be adjusted to equal the consideration paid per” share. Plaintiffs
contend (and the court may have agreed — the record is unclear) that, as a matter of
contract interpretation, the anti-dilution provision means only money directly paid in
exchange for securities should count toward establishing a new exercise price for their
warrants. In other words, regardless of whether the $10 million capital commitment was
worth something, it did not count as “consideration paid per” share. According to
plaintiffs’ interpretation of the warrants, the only reasonable conclusion is to reduce the
exercise price to $0.
              We disagree with plaintiffs’ interpretation of the warrants. “Consideration
consists of either a benefit to the promisor or a detriment to the promisee. It is enough
that something is promised, done, forborne, or suffered by the party to whom the promise
is made as consideration for the promise made to him.” (Anand v. Wilson (N.Y. 2006)
821 N.Y.S.2d 130.) The more reasonable interpretation of the phrase “adjusted to equal
the consideration paid per” share is that consideration might include any number of
things, including the present value of a commitment to provide up to $10 million in
capital in the future. This interpretation is also supported by section 9.6 of the warrants,
which requires BlueFire to notify the warrant holders of “the method by which such
adjustment [of the exercise price] was calculated . . . .” This phrasing implies that
valuing consideration paid for securities might not always be as simple as dividing the
                                                             11
amount of money paid by the number of shares purchased.
              The issue then becomes one of substantial evidence. What was the
economic value of Lincoln’s $10 million commitment in the context of the terms and

11
              Here, of course, BlueFire breached the warrants by not describing its
method of calculation or completing this calculation for plaintiffs following the execution
of the Lincoln agreement.

                                             24
conditions of the agreement executed by Lincoln and BlueFire, and the circumstances in
which BlueFire found itself in January 2011? As set forth above, there is substantial
evidence for a number of answers to this question — 50 cents per share (the value of the
600,000 shares at the time BlueFire and Lincoln committed to their agreement), 40 cents
per share (the value of the 600,000 shares at the time of delivery), 44 cents or 38 cents
per share (combinations of the two facets of the Lincoln agreement occurring
                                                                12
immediately upon execution), or perhaps some lesser amount.          Another option
supported by the evidence is 35 cents per share (the price paid per share for the Initial
Purchase Shares, ignoring the warrants also issued to Lincoln as part of this transfer).
But there is not substantial evidence for assigning a value of $0 to the $10 million
commitment made by Lincoln. BlueFire’s accounting entries referencing the 600,000
Initial Commitment Shares reflected technical accounting concepts (e.g., the par value of
the 600,000 Initial Commitment Shares, the paid-in capital for these shares, the $0 cost
for BlueFire to issue the shares). These entries had no connection to economic reality.
And plaintiff’s damages expert’s opinion was based on the accounting treatment of the
                                                                           13
transaction, not the economic reality of the value of the consideration.

12
               We disagree with BlueFire that the implicit valuation of the $10 million
Lincoln commitment by BlueFire’s board of directors was conclusive for purposes of
plaintiffs’ warrant rights. It is preposterous to suggest that a party with contract rights
adverse to those of BlueFire and its common shareholders (like plaintiffs and their
warrants) is bound by a unilateral determination made by BlueFire’s board of directors
affecting a provision of the contract. As explained above, this case is not about plaintiffs
seeking damages based on the harm done to the value of the common stock by the
Lincoln transaction.
13
               BlueFire contends the court erred by allowing this expert to testify despite
an allegedly insufficient expert designation. Our resolution of the issues on appeal moots
this question, as we conclude the expert’s testimony does not support the $0 per share
adjustment of the exercise price.

                                             25
              BlueFire is entitled to a new trial on the proper remedy afforded to
plaintiffs for BlueFire’s breach of contract. Assuming plaintiffs still seek specific
performance of the warrants on retrial, it may be 15 cents per share (or less), based on the
last recorded purchase of shares by Lincoln from BlueFire. Plaintiffs focused on $0 as
the correct exercise price based on the issuance of the 600,000 commitment shares; they
did not emphasize the subsequent issuances of securities, which had even lower prices
than the $150,000 sale of the Initial Purchase Shares.

The Court Appropriately Refused to Award Contract Damages
              “‘Damages for breach of contract include general (or direct) damages,
which compensate for the value of the promised performance, and consequential
damages, which are indirect and compensate for additional losses incurred as a result of
the breach’ [citation]. Direct damages are typically expectation damages, measured by
what it would take to put the non-breaching party in the same position that it would be in
had the breaching party performed as promised under the contract [citations]. Special, or
consequential damages, on the other hand, are ‘extraordinary in that they do not so
directly flow from the breach [and] are recoverable only upon a showing that they were
foreseeable and within the contemplation of the parties at the time the contract was made’
[citation].” (Latham Land I, LLC v. TGI Friday’s, Inc. (N.Y. 2012) 948 N.Y.S.2d 147,
151-152.)
              The judgment awarding no damages to plaintiffs on their breach of contract
claim was appropriate. Plaintiffs failed to come to grips with an election of remedies
issue. (See Rogers v. Davis (1994) 28 Cal. App. 4th 1215, 1220 [“plaintiffs cannot receive
both specific performance and damages for breach of contract”].) Plaintiffs successfully
asked the court to order specific performance of the warrants (though this relief was
labeled as “declaratory” relief); the judgment declared an applicable exercise price of $0
per share and ordered BlueFire to allow plaintiffs to exercise all of their warrants at that

                                             26
price. At the same time, plaintiffs unsuccessfully requested damages (up to $1.8 million),
claiming they would have sold shares of common stock had they been able to exercise the
warrants in January 2011. But if plaintiffs had exercised the warrants in January 2011
and sold the common stock between the exercise date and the trial date, they would not
have possessed the shares of stock anymore, just the profits (if any) from the sale of the
shares of stock. Plaintiffs never elected to sue for damages only, based on BlueFire’s
breach of contract (which might have been wise in this case, given BlueFire’s anemic
stock price at the time of trial). Neither did plaintiffs disclaim damages and choose
specific performance of the warrants only (which might have been wise in a case in
which the price of BlueFire stock had increased since January 2011). One plausible
interpretation of the judgment is the court made this decision for plaintiffs by authorizing
the exercise of all of the warrants at a price of $0. An award of damages in addition to
                                                        14
this relief would have amounted to a double recovery.

14
                Plaintiffs apparently convinced themselves that they were not seeking a
duplicative recovery because they sought only the difference between the market value of
BlueFire shares at the time of the Lincoln transaction (around 42 cents) and the market
value at the time of trial (around 12 cents), rather than the difference between 42 cents
and the posited exercise price (0). But this approach essentially seeks recovery of “paper
losses” of the stock (the 30 cent per share reduction in value between January 2011 and
trial) while still retaining the potential upside of owning the stock.
                Perhaps the court could have adopted a hybrid approach to the judgment,
awarding some damages (based on a finding that plaintiffs likely would have sold some
shares for a profit after exercising the warrants) and providing some specific performance
(allowing plaintiffs to exercise the warrants for shares they would not have sold). But the
court could not give plaintiffs everything they requested (i.e., by allowing plaintiffs to
obtain 5,740,741 shares of stock for $0, plus damages for the profit on shares that would
have been sold had those same shares been obtained earlier), as this would put plaintiffs
in a better position than if the warrants had never been breached.

                                             27
              The judgment also might be interpreted to indicate the court did not believe
plaintiffs would have sold a significant number of shares of BlueFire stock had they been
able to exercise the warrants in January 2011, or that plaintiffs could have profited by
making substantial sales of stocks between January 2011 and the trial date. Defense
expert testimony supports an inference that the issuance of more than five million
common shares and the attempt to sell those shares would have wreaked havoc with the
already low price of BlueFire stock. Plaintiffs admitted they had not sold any of the 1.6
million shares of common stock they owned from before the Lincoln transaction. These
two facts support a conclusion that plaintiffs’ damages case was speculative even
assuming they were entitled to a reduction in the warrants’ exercise price to $0 in January
2011. (See Kenford Co., Inc. v. County of Erie (N.Y. 1986) 67 N.Y.2d 257, 261
[damages cannot be recovered if they are “merely speculative, possible or imaginary, but
must be reasonably certain”].)
              In sum, the court’s decision to award no damages was justified because the
court ordered specific performance of the warrants. Substantial evidence also supported
a finding that alleged contract damages were too speculative and uncertain to be awarded.
It is unclear whether the court intended to rely on one or both of these reasons for
awarding no damages to plaintiffs. Regardless, we now conclude that a new trial must be
conducted to determine the proper remedy to be provided to plaintiffs for BlueFire’s
breach of contract.

                                       DISPOSITION

              The judgment is reversed and remanded for retrial, solely as to plaintiffs’
remedy for BlueFire’s breach of the warrants. Pursuant to Code of Civil Procedure
section 908 and pending retrial, we refer to the trial court the task of returning the parties
so far as possible to the positions they occupied before the enforcement of the judgment

                                              28
(i.e., so long as it is possible, by ordering plaintiffs to return the stock they received as a
result of the enforcement of the judgment to BlueFire). The parties’ respective motions
for the court to admit new documentary evidence on appeal for purposes of assessing
mootness are granted. In the interests of justice, the parties shall pay their own costs
incurred on appeal, as BlueFire was unsuccessful in its continued effort to claim its
transaction with Lincoln was an excluded issuance.

                                                    IKOLA, J.

WE CONCUR:

RYLAARSDAM, ACTING P. J.

FYBEL, J.

                                               29
Filed 1/12/16

                             CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                              FOURTH APPELLATE DISTRICT

                                      DIVISION THREE

JAMES G. SPEIRS et al.,

    Plaintiffs and Appellants,                         G048698

        v.                                             (Super. Ct. No. 30-2011-00508691)

BLUEFIRE ETHANOL FUELS, INC., et                       ORDER
al.,

    Defendants and Appellants.

                  On the court’s own motion, the above-entitled unpublished opinion, filed
December 15, 2015, is certified for publication in the Official Reports. The opinion
meets the standards for publication set forth in California Rules of Court, rule 8.1105(c).

                                                    IKOLA, J.

WE CONCUR:

RYLAARSDAM, ACTING P. J.

FYBEL, J.