A New York state appeals court on Tuesday reignited a high-stakes contract battle, reinstating a lawsuit by three solar facility operators seeking to enforce a more than $77 million arbitration award against Italian energy giant Enel SpA. The court found that Enel’s guaranty agreements—now at the center of the dispute—contain ambiguities too significant to dismiss outright.

Panel Says Guaranty Timing Requirements Unclear

A unanimous five-judge panel ruled it could not conclusively determine whether the operators were required to demand payment from Enel while arbitration was still underway. That question, the court said, was far from settled—and certainly not grounds for dismissal.

Enel has argued the guaranties expired. But given the agreements’ murky language, the appeals court said the trial court erred in tossing the breach-of-contract claim at Enel’s request.

Dispute Rooted in 2013 Mexico Solar Venture

The conflict traces back to Enel’s 2013 venture to build solar facilities in Mexico using separate owner and construction subsidiaries. According to the plaintiffs—three former Enel owner subsidiaries now operating the facilities—Enel used the structure to duck liability.

They allege Enel spun off controlling stakes in the owner entities to private investors while retaining the construction subsidiaries, including Kino Contractor SA, the subsidiary that signed the construction contracts and later fell short on performance standards.

The operators claim Enel intentionally undercapitalized Kino, leaving it unable to pay for construction defects once they surfaced.

$77M ICC Arbitration Award Ignored, Plaintiffs Say

An International Chamber of Commerce arbitration panel ultimately ordered Kino to pay more than $77 million in damages. But the operators say Enel shirked its separate guaranty obligations and refused to honor the award—prompting them to sue in December 2023.

Trial Court Sided with Enel — Until Now

In December 2024, New York County Supreme Court Justice Melissa Crane dismissed the case, agreeing with Enel that the guaranty notification period had ended. She also determined the agreements allowed enforcement without requiring plaintiffs to pursue Kino first.

But the appeals court highlighted another clause that, it said, may create an exception for guaranty enforcement while arbitration was pending. That clause referenced dispute-resolution provisions in the construction contracts—linking the guaranty obligations directly to the arbitration timeline.

That interpretive possibility was enough to revive the suit.

Good-Faith Claim Rejected; No Corporate Veil Piercing

The appellate judges upheld dismissal of the operators’ claim that Enel breached an implied duty of good faith by causing delays in calculating facility performance. The panel said allegations fell short of showing misconduct like commingled funds or fraudulent transfers—conduct necessary to pierce the corporate veil and hold Enel responsible for its subsidiaries’ actions.

“Plaintiffs failed to allege anything more than that defendant owned the majority of its contractor subsidiary’s stock and that the subsidiary was thinly capitalized,” the panel noted.

The panel included Justices Troy K. Webber, Saliann Scarpulla, David Friedman, Julio Rodriguez III and Margaret A. Chan of the Appellate Division, First Department.

Representatives for both sides did not immediately respond to requests for comment.