A North Carolina Superior Court denied a motion to dismiss indemnification claims brought by companies that purchased West Virginia timberlands from the defendant. The property was enrolled as a carbon project in the California cap-and-trade program, and the plaintiffs alleged that the California Air Resources Board (CARB) had issued carbon offset credits worth more than $50 million for the timberlands. The plaintiff companies alleged that the defendant overstated the carbon stocks on the property in the initial inventory submitted to CARB, which the plaintiffs allegedly discovered when they conducted an updated carbon inventory of the property in preparation for a seven-year reverification report. The plaintiffs alleged they had or would incur costs that included costs to purchase carbon offsets as well as costs to manage the property based on lower carbon stocking. The court found that the plaintiffs offered a plausible interpretation of indemnification provisions as applying to any overstatement by the seller of carbon deposits in its initial inventory, which occurred prior to the closing date. Because “explicit contractual provisions” governed the circumstances under which indemnification was available, the court dismissed the plaintiffs’ unjust enrichment claim.

Lawsuit seeking indemnification for costs allegedly incurred as a result of the defendants' overstating of the amount of carbon sequestered by timberlands in West Virginia in application for carbon offsets from California Air Resources Board.

LFF IV Timber Holding LLC v. Heartwood Forestland Fund IV, LLC

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North Carolina Court Allowed Timberlands Buyer to Proceed with Indemnification Claim for Alleged Overstatement of Property’s Carbon Stocks

Filed

United States of America

North Carolina

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North Carolina Court Allowed Timberlands Buyer to Proceed with Indemnification Claim for Alleged Overstatement of Property’s Carbon Stocks

Policy instrument

Greenhouse gas

Economic sector

Finance