By Pacific Coast Business Times Staff Monday, August 16th, 2010

A pay dispute has broken out between Continental Wind Power and two of its former engineering consultants, as timelines for the Carpinteria company’s plans to build wind turbines in Santa Paula stretch into the future.

In a lawsuit filed in Santa Barbara County Superior Court, William Miller and Rain Byars say they were not paid $68,737 for nearly a year of consulting they provided to help develop Continental’s Revolution. The Revolution is a 360-kilowatt turbine that would try to fill a niche between tiny units for the home and multimegawatt giants being purchased by utilities for wind farms.

Continental, which says it raised an additional $3 million in funding earlier this year, denies the consultants’ claims and says they won’t affect production schedules. In its response to the suit, Continental said the pair were fired because they didn’t perform their duties, deleted key information about the Continental’s business partners from its computers, took a confidential report and disparaged the company. An attorney for Miller and Byars denied those allegations.

Continental, which has moved from a Santa Barbara incubator to a stand-alone office in Carpinteria, said work on its first turbines is going forward.

“Components for our first wind turbines are being manufactured now by our suppliers,” Marketing Director Sherry Lawson wrote in an e-mail to the Business Times.

Continental said its efforts to construct its first wind turbines have been delayed by the global financial crisis and problems getting incentives for its proposed plant.

In November, CEO Jim Winsayer told the Business Times that Continental aimed to have test turbines up by mid-2010 and to begin serial production in the fourth quarter of this year.

The company now says it expects to assemble and fully test its first units over the next year. If that goes well, Continental would begin low-volume production at the end of 2011, with high-volume manufacturing starting in 2012, the firm said.

Continental’s plan to locate a factory in Santa Paula and create as many as 500 jobs there is also delayed. Site selection for the plant was expected in the fall of 2009, but the company blamed California’s budget woes for delays in obtaining public funds for the plant.

“We understand why Santa Paula has not been able to deliver the incentives they promised to us because of the state’s ill-advised actions in using local redevelopment funds to balance California’s budget,” Lawson said in an e-mailed statement. “We are working with the city of Santa Paula and various programs to secure alternate funding sources and remain hopeful we’ll succeed in these efforts. We are also working on our R&D facility in Ventura so the two facilities are close by.”

In a statement, Santa Paula City Manager Jaime Fontes said the city wants to work with Continental and any other interested businesses.

“The discussions with Continental Wind have the potential to continue as soon as they can provide their financial statements and other technology ownership documents, specifically patents or any patent-pending documents,” Fontes said in the statement. He said he was confident Continental will be able to provide the documents.

In their lawsuit, Miller and Byars said they were hired as consultants to Continental in February 2009 and moved to Santa Barbara to be closer to their work in June 2009. They worked for Continental until January and allege they were promised 200 hours of work each month.

“The true facts were that [Continental] could not and did not pay for anywhere near 200 hours of [Miller’s and Byars’] time each month,” the lawsuit said.

By January 2010, Miller and Byars allege they were owed $68,737. The two claim they were given one check for $7,150, which bounced. They also allege Continental kept proprietary technology and information it didn’t have rights to because Miller and Byars were not paid.

In court documents, Continental denied Miller’s and Byars’ allegations and made claims of its own. It said the pair were terminated. After that, Continental alleges, Miller and Byars “improperly accessed Continental Power’s computer systems and deleted, destroyed and/or otherwise removed from Continental Power’s systems key vendor and supplier-related e-mail communications, contacts, documents and other Continental Power materials.”

Continental also claims in court filings that Miller and Byars took a confidential report and used it “in connection with their own business to license wind turbines.” Continental also accused Miller and Byars of disparaging the company to its partners, damaging its relationships with vendors and suppliers.

Miller and Byars have not responded to Continental’s allegations in court documents. But their attorney, Michael Sohigian, denied the allegations.

“My clients have put in a year of their lives, and they expect to be paid,” he told the Business Times.

Continental said that despite the difficulty of starting a manufacturing business in California, it is committed to creating jobs in the Golden State. Continental said it closed a $3 million Series B round of venture capital in March to complement an earlier $500,000 round.

“[T]he financial crisis made the task of keeping our company growing even more difficult than it would have been in normal times, and it has forced us to delay some of our milestones,” Lawson said in an e-mail. “Nevertheless, we kept pushing forward and continue to accomplish the goals we’ve set for the company.”