Iwatani Corporation of America has filed a Second Amended Complaint (SAC) in its pursuit of claims against Nel, adding the recently spun-out hydrogen fueling entity, Cavendish Hydrogen, as a defendant.
The SAC asserts that the Cavendish entities were created or rebranded as part of a strategy to shield Nel ASA from liability by transferring its hydrogen fueling business, assets, and operations to the newly formed or renamed Cavendish entities. Nel ASA also transferred EUR 50m of cash to the new entity.
In the complaint, Iwatani alleges that Nel and former and current executives, including its CEO, engaged in deceptive practices, such as misrepresenting the capabilities of their hydrogen fueling stations, known as H2Stations, which were sold to Iwatani in 2019 and later deployed in California with disastrous results. Nel denies the accusations and is fighting the claims in court.
Iwatani’s contract for the purchase of hydrogen fueling stations was made with Nel Hydrogen Inc., a California-based entity. This entity, at least on paper, appeared to be the main contracting party responsible for delivering the hydrogen fueling stations and associated services to Iwatani. However, Iwatani alleges in its SAC that Nel Hydrogen Inc. was, in reality, nothing more than a “shell company, skeleton operation” with no meaningful financial resources, operational capabilities, or independent management, completely dominated and controlled by Nel ASA and Nel Hydrogen A/S (now Cavendish Hydrogen A/S). This is Iwatani’s argument for piercing the corporate veil.
According to the SAC, after Iwatani notified Nel ASA of its claims and the impending litigation, Nel ASA orchestrated a transfer of critical business assets, including cash, to the newly formed Cavendish Hydrogen entities. This transfer is portrayed as a strategic move to insulate Nel ASA from the financial consequences of the lawsuit by placing valuable assets beyond the reach of Iwatani.
By shifting assets to Cavendish Hydrogen, Iwatani says, Nel ASA effectively left Nel Hydrogen Inc. as an even more empty shell, devoid of the resources necessary to satisfy any potential judgments. Iwatani contends that this asset transfer not only perpetuates the fraud but also underscores the lack of good faith in the dealings between the parties.
According to Iwatani, which in 2019 had grand ambitions for hydrogen fueling stations in California – it planned to order 100 units over five years – the Nel fueling stations failed almost immediately after commissioning, and never worked properly, leading to years of delays and millions of dollars in added costs.
In aggressively selling its H2Stations to Iwatani, Nel acted out of desperation, Iwatani claims, as its hydrogen fueling business was running at a loss, and Nel was falling far behind its ambition of producing 200 H2Stations each year, with only 30 new stations sold in 2019.
Judge James Selna from the Central District of California recently narrowed the scope of Iwatani’s claims against Nel, but the Japanese industrial gas producer’s core allegations of fraud and contractual breaches will proceed.
