Hudson Clean Energy Partners, a private equity firm formed last year by alternative energy bankers from Goldman Sachs, has been hit with a lawsuit by UK-based wind power giant Renewable Energy Systems Ltd. The complaint was filed in New Jersey District Court, and includes allegations of trade secret misappropriation and inducing, aiding and assisting breach of fiduciary duty.
At issue is Hudson’s July hiring of Mike O’Neill, who had been second-in-command at RES and a director on the company’s board. According to the complaint:
For several months before O’Neill gave notice to RES, he was actually serving in part as Hudson’s top-level “inside man” within RES, helping Hudson develop its competitive venture, working on numerous business planning and other documents for Hudson, and inevitably providing to Hudson the benefit of RES’ proprietary, trade secret and confidential information. If RES had not discovered that O’Neill was secretly helping Hudson to develop its competitive venture while remaining in the employ of RES, and thereafter commenced an investigation, it is unknown for how much longer Hudson would have continued to use him in this manner.
The “competitive venture” to which RES refers is Element Power, a global platform focused on utility-scale wind and solar energy development. O’Neill was officially hired to launch the company — alongside Hudson co-founder Slamm – and has already helped it acquire Spanish renewable power company Helium Energy SLU.
RES also alleges that Hudson has tried inducing other high-level executives to follow O’Neill’s lead, and that the firm retains possession of unspecified RES documents and other trade secrets. It is asking the court for a return of all such information, an enjoinder against future “interference” with RES employees and monetary damages.
Hudson has denied all of RES’ claims in a subsequent legal reply, adding that RES has suffered no damages and that the O’Neill hiring breached neither contract nor fiduciary duty.
peHUB today contacted RES, Hudson and Hudson’s outside counsel for comment, but has not yet received any. If we do, we’ll update this post. According to legal documents, Judge Patty Shwartz has removed the case from arbitration, and scheduled a settlement hearing for December 9.
In the meantime, we’re left to speculate as to what this may mean for Hudson’s fund-raising prospects. The Teaneck, N.J.-based firm had originally targeted $1 billion for its debut fund, and earlier this year received a $300 million commitment from Credit Suisse. As of last month, the firm was telling prospective investors that it had closed on $425 million and was expecting to rope in another $250 million to $350 million. C.P. Eaton is serving as placement agent.
“I hadn’t previously heard about [the lawsuit],” says an institutional investor who has had discussions with Hudson about becoming a limited partner. “It could make the fund a tough sell, because none of us are really too eager to make new commitments right now.”
Another source added that if prospective investors are unaware of the suit, it indicates that they haven’t read all of their paperwork. “Everything about this has been disclosed in the due diligence materials,” he says.DON'T MISS IT! Now in its 10th year, PartnerConnect Midwest is bringing you 300 attendees, over 400 private ExecConnect meetings between LPs and GPs, and three insightful tracks including Buyouts Funds, Buyouts Deals and Co-Investments. REGISTER TODAY!