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American Wave Machines has sued Surf Ranch Florida, LLC, owned by Dirk Ziff and of Kelly Slater Wave Company fame, in Florida state court.
Other named defendants include 80 Acres Surf, AW Property Operations (AWPO), and AW Asset management.
American Wave Machines is one of the earliest surf pool technology companies. Its technology is ubiquitous, with projects including Waco Surf (formally known as BSR Surf Resort) and PerfectSwell® Shizunami, where the US surf team trained in anticipation of the Olympics.
The suit concerns a failed surf pool project in Palm Beach, Florida.
According to the complaint, one year after the World Surf League acquired Kelly Slater Wave Company in 2016, the WSL announced it would be developing a second pool using KSWC’s technology in Palm Beach.
The project promised “substantial” capital investment, 322 jobs, a $33 mill annual economic impact and year-round tourism.
The WSL bought the site for $6.5 million.
Brian Waxman, President of AW Property Operations and AW Asset management, was self-described as the project lead for the Florida project.
In 2019, the WSL announced the cancellation of the project citing an “extremely high water table [that] exposed unforeseen challenges that made the decision around this unique project clear.”
Then, in 2020, according to the complaint, Brian Waxman approached American Wave Machines “to revive the former project as PerfectSwell® Palm Beach.”
Waxman allegedly “made repeated statements that [the] WSL would not be involved [in] the Project.”
Further, “Waxman insisted that PerfectSwell® Palm Beach not be announced publicly.”
According to the complaint, in January 2020, the parties signed a Non-Disclosure Agreement that limited parties from sharing any confidential information unless approved in writing by AWM.
In June 2020, the parties signed an agreement for the construction and installation of AWM’s PerfectSwell® technology for $7.64 million.
The agreement included a payment schedule.
At the behest of Waxman, the first payment was only $250,000, less than 4% of the purchase price.
The second payment, a much larger sum, was slated for 120 days after the initial payment. AWPO was also was permitted to terminate the agreement before making the subsequent payment.
According to Waxman, the purpose of the cancellation plan was designed to “allow [AWPO] to commit to [AWM] in a somewhat significant manner while we spend the next 60 days working with you, learning and getting better organized on this new concept without putting too much at risk.”
During the negotiations, the AWPO allegedly retained Blake Hess, General Manager at the WSL’s Surf Ranch, as a consultant. AWM was apprehensive about Hess’s role, likely due to Hess’s affiliation with a rival pool technology company.
In an email, AWM requested that “communications in the coming months be limited to direct partners, stakeholders, and accredited professionals.”
According to the complaint, the following year, Hess left the WSL to join Beach Street Development, a real estate development company, as its Chief Operating Officer. The following month, AWPO “formally retained Beach Street” for the project.
AWM immediately made its concerns with working with Beach Street known.
In an email, Bruce McFarland, founder and president of AWM, “expressed AWM’s unwillingness to work with a company [Beach Street] that actively tried to undermine us [AWM], are attempting to falsely equate PerfectSwell® in the marketplace, and is licensed to exclusively sell another wave generating system.”
It is unclear what technology Beach Street is licensed to sell, but on its website, it says “Beach Street is pioneering a new segment – barefoot lifestyle destinations and resorts anchored by man-made surfing lagoons.”
The site also lists several pool projects throughout the U.S.
After making the first payment, the AWPO allegedly continued to delay any additional payments, even as they “continued to request, and AWM continued to provide, confidential and proprietary information.”
The second payment was originally scheduled for September 2020; on May 31, 2021, AWPO requested an additional extension.
Then, on July 15, 2021, Waxman and AWPO informed AWM that they would be no longer moving forward with AWM’s technology, alleging that investors “had lost confidence in AWM based on certain representations made during various discussions with unauthorized third parties, including Blake Hess.”
Among the issues cited was the wrongful death suit and subsequent settlement at BSR in Waco, Texas and apparent dissatisfaction with the Japan project.
Following the dismissal of AWM, the Florida project allegedly employed WhiteWater, a company with technology created by an ex-AWM employee.
According to AWM, WhiteWater employs technology that infringers on AWM’s intellectual property.
The complaint alleges that AWPO shared AWM’s “confidential and proprietary information with unauthorized third parties.”
AWM alleges breach of contract, both with respect to the original purchase agreements and the NDA.
They further seek injunctive relief to enjoin defendants from further disclosing AWM confidential or proprietary information.
Under Florida state rules, defendants have until May 25 to file their answer
More as the story develops.
Wanna read the whole 89 pages of the complaint? Click here!