Crude output from the Permian is expected to jump 50% by 2025, according to BloombergNEF. ESAI Energy forecasts crude and condensate from the Bakken, another prolific play, will surpass record output into next year.
Decent use of seven minutes on a Friday morning. Nothing you probably don’t already know but it is a good zoom out to the big picture.
HK vilified for not taking part in a stacked committee that doesn’t allow deliberation (hint: there won’t be any) disclosure.
The act is getting really stale.
Contrary to the dissidents’ assertions, David Barry was validly elected in January 2017 by nearly two-thirds of the votes cast. It is now clear that the dissidents have been misleading shareholders about their apparent intentions all along. The dissidents’ motion is nothing other than an effort to seize control of not just one, but two of the three Trustee seats. In doing so, the dissidents have laid bare their apparent intention: to undertake a hostile takeover by seizing control of TPL without paying a control premium to all shareholders.
As opposed to seizing control with no economic stake?
For these reasons, the Court holds that Defendant’s 12(c) motion triggers the automatic discovery stay of the PSLRA. The Court therefore ORDERS that all discovery and other proceedings in this matter are STAYED until Defendant’s motion for judgment on the pleadings is resolved. Additionally, fourteen days after the Court enters its ruling on the Defendant’s motion, the parties shall file a joint proposed discovery schedule. Requests for additional affirmative relief, such as relief from the stay, shall be made by motion.
See docs labeled 6/25.
White card asks court for 1) immediate confirmation of Oliver as Trustee and 2) an injunction on Trustee activity in the absence of Oliver.
It is unclear to me why these two requests weren’t filed immediately post-election or along with the countersuit. It looks like the time requested for trial (1yr from now) was cause to get moving.
Discovery sounds like it’s terrible so far.
I think a risk now is that the blue ribbon commission gets together and converts to a C-Corp very quickly and in doing so installs a very insular board. Maybe I’m crazy but (as we’ve seen) stranger things have happened.
From Press release. Highlighting mine:
“In order to bring the Court case to a prompt resolution, the Investor Group has filed with the United States District Court for the Northern District of Texas a request for a declaratory judgment that (1) the vote at the May 22, 2019 special meeting was valid and Mr. Oliver has been duly elected a TPL Trustee, and (2) David Barry has never been duly elected a TPL Trustee, among other things. To prevent any further abrogation of TPL shareholders’ rights in connection with the May 2019 election, the Investor Group has also requested that the Court issue a preliminary injunction prohibiting Mr. Barry and Mr. Norris from taking any action on TPL’s behalf without Mr. Oliver’s participation as a fully empowered Trustee. The Investor Group has also requested that the Court schedule the hearing on their motion for August 5, 2019, or as soon thereafter as the Court is available. The Court filings are available here: https://horizonkinetics.com/tpl/.
“On June 14, 2019, Mr. Barry and Mr. Norris issued a press release stating they were “obliged to remind shareholders that the proxy solicitation is suspended while the litigation is pending.” One week later, their counsel requested, in a Court filing, a trial on the merits of the lawsuit not commence until at least August 31, 2020. These recent statements – in addition to the daunting discovery requests served last week by Incumbents’ counsel on the Investor Group, including Eric Oliver’s son and Allan Tessler’s two daughters – make clear TPL’s true motivations behind its lawsuit: (1) intimidate the Investor Group, (2) impose on over 15,000 shareholders at least a year-long delay, and (3) incur the costs of protracted litigation. All of these nefarious tactics were taken in an effort to dodge the shareholders’ election of Mr. Oliver as Trustee. In the meantime, the Incumbents continue to illegally manage TPL without the necessary checks Mr. Oliver would bring as a duly elected Trustee. All TPL shareholders should be aligned in asking TPL management to fully cooperate in the prompt resolution of these matters.”
From court docs on injunction:
Counterclaim Plaintiffs also respectfully move for the issuance of a preliminary injunction that:
1. Either (i) prohibits Counterclaim Defendants from taking any action on TPL’s behalf without Mr. Oliver’s participation as a fully empowered trustee; or (ii) prohibits Counterclaim Defendants from any further unauthorized postponement of the election by requiring the previously scheduled May 22, 2019 special meeting of shareholders be reconvened within five days of entry of the injunction to allow any additional votes to be cast and the official results be confirmed and announced by TPL via press release or securities filing; and
2. Prohibits Mr. Barry from directly or indirectly taking any action on TPL’s behalf until a new election can be held pursuant to the requirements of TPL’s Declaration of Trust.
As explained in the accompanying memorandum of law, the disputes between Incumbents and TPL’s shareholders are ripe for swift resolution by declaratory judgment because the key facts underlying the disputes are uncontroverted. In addition, all four relevant factors weigh in favor of the issuance of interim injunctive relief: Counterclaim Plaintiffs are substantially likely to prevail on the merits; they and other TPL shareholders will suffer irreparable harm if the preliminary injunction does not issue; the balance of harm weighs in their favor; and issuance of preliminary injunction will serve the public interest.
A far more important issue, though, is that the rules of the Charter you constructed require, among other philosophically interesting conditions, that the Committee members deliberate this topic in secret. Nor may they release any information, even after the conclusion of the Committee’s work, without your approval. Yet, that is contrary to the well and universally accepted principles of responsible and ethical corporate governance.
Sounds like the HK rep was being invited to a mob hit.
Questionnaire part 2 in the making if HK declines. “But we asked if you wanted to participate??”
Mayor Larry Vaughn of Amity Island forms committee to explore nuisance fish.
Venezuelian President Maduro calls for fair and honest elections.
In all seriousness, while this appears to be a step in the right direction, this is a troll attempt.
McGinnis is on record as being Blue card friendly. Cook is being put into the position to vote himself out of a potetional job (though he already lost the election). This lineup is so obviously preposterous (4 out of 5 house votes), that one has to conclude the goal of this press release was to antagonize the “dissidents” and holders that actually have capital at stake. You know, more than 300 shares.
If they really cared about C-corp they would put it to a shareholder vote immediately.
The Conversion Exploration Committee will evaluate, from a corporate, corporate governance, tax, accounting and business perspective, whether the Trust should be converted into a C-corp or, in the alternative, whether the Trust should remain a business trust (with potential amendments to the declaration of trust). The Conversion Exploration Committee will begin its work this week. While the process is expected to take several months, the Conversion Exploration Committee will make a recommendation to the Trust as soon as practicable.
The members of the Conversion Exploration Committee are:
- John R. Norris III, incumbent Trustee
- David E. Barry, incumbent Trustee
- Four-Star General Donald Cook, USAF (Ret.)
- Dana McGinnis, Founder and Chief Investment Officer of Mission Advisors, one of the Trust’s largest shareholders
The Trust also invites Horizon Kinetics to designate a person of its choosing as the fifth member of the Conversion Exploration Committee.
See Ted’s excellent reply to the last post for context around 12c in this case. Highligting is mine.
Experienced practitioners are familiar with Federal Rule of Civil Procedure 12, which provides for various pretrial motions to challenge the opposing party’s pleadings and to assert other defenses and objections. If asking attorneys what type of pretrial challenges they consider to be part of their arsenal of motions challenging the adequacy of the pleadings, their response likely would be limited to motions to dismiss for failure to state a claim, motions to strike, or motions for summary judgment. Rule 12(c) motions—allowing a party to move, after the pleadings are closed, for judgment on the pleadings—are often overlooked. Practitioners, however, should consider and incorporate Rule 12(c) motions into their litigation strategies.
Motions for judgment on the pleadings are essentially trials on the pleadings. Rule 12(c) was designed to prevent the piecemeal process of judicial determination that prevailed under the old common law practice.2 It allows for a decision on the merits of the claims based upon the pleadings in special circumstances, such as when the parties do not dispute the facts in the pleadings. Thus, Rule 12(c) motions can help dispose of baseless claims or defenses when the formal pleadings reveal their lack of merit. Because a motion for judgment on the pleadings can highlight for the court its ability to resolve the case, merely by examining the initial papers,3 its use can mean the difference between unnecessarily protracted litigation and a prompt resolution of the dispute. As one author described a winning motion practice, albeit in the context of summary judgment:
[w]ith one successful roll of the . . . dice, an attorney can win the trial-court round, put an opponent on the defensive, save time and money that would be spent in court, and emerge a hero to the client. Used correctly and shrewdly, [a dispositive motion] is a lethal weapon that can resolve lengthy, expensive, and exhausting litigation years before a case reaches the trial stage.4
Plaintiffs’ Position: As stated above in Plaintiffs’ Positions in paragraphs 4 and 6(a), the PSLRA discovery stay does not apply to this case and there is no reason to delay scheduling trial. Indeed, at the Rule 26(f) conference, the Parties discussed and agreed to a trial date in the summer of 2020. Accordingly, Plaintiffs respectfully request a trial on August 31, 2020, or on a date thereafter convenient to the Court and anticipate that the trial will take a total of eighty (80) hours divided evenly between the sides. Neither side has demanded a jury trial.
I’m no lawyer. Would love to hear your thoughts on this as you read it.
Also, reading the Plaintiff’s Position makes me want to puke.
AGREED JOINT MOTION FOR EXTENSION OF TIME
Plaintiffs Texas Pacific Land Trust and, solely in their respective capacities as trustees for Texas Pacific Land Trust, David E. Barry and John R. Norris III (collectively, “Plaintiffs”) and Defendant Eric L. Oliver (“Defendant”) hereby file this Agreed Joint Motion for Extension of Time.
On June 17, 2019, Defendant filed a Fed. R. Civ. P. 12(c) Motion for Judgment on the Pleadings [Dkt. 19], resulting in a deadline for Plaintiffs to respond on July 8, 2019 and a deadline for Defendant to file a reply on July 22, 2019. The Parties respectfully request a one- week extension of the deadline for Plaintiffs to respond to Defendant’s Motion, until July 15, 2019. The Parties likewise respectfully request a corresponding extension of the Defendant’s deadline to reply, to August 5, 2019.
These extensions are requested for good cause and not for the purpose of delay. Plaintiffs and Defendant agree to the requested extensions.
The project, which is being developed with the Port of Corpus Christi, would compete with nearby shale export terminals proposed by investor Carlyle Group and commodities trader Trafigura AG. Its project would be at least the ninth project proposed for the Gulf Coast.
U.S. crude exports hit 3.12 million barrels per day (bpd) this month from zero before the U.S. lifted a ban on exports in late 2015. Shale oil from fields in Texas, Colorado, New Mexico and North Dakota is projected to push U.S. output to 12.32 million bpd this year, according to U.S. forecasts.
The facility could load up to 1.56 million bpd, nearly the capacity of a supertanker. If approved by the U.S. Maritime Administration, U.S. Coast Guard and Texas regulators, operations could begin in mid-2021, said a person familiar with its plans.
Exxon Mobil Corp. and Saudi Arabia’s state-controlled petrochemicals company formally approved construction of a new chemical complex in Texas that will process production from the Permian Basin’s booming oil and natural gas wells.
The project near Corpus Christi will be the world’s largest steam cracker and create $50 billion of “economic output” in the first six years, Exxon and Saudi Basic Industries Corp., known as Sabic, said in a joint statement on Thursday. The facility will convert hydrocarbons such as ethane and propane to ethylene, a chemical used to make everything from plastics to antifreeze.
AMENDED COUNTERCLAIMS OF ERIC L. OLIVER, SOFTVEST, L.P., HORIZON KINETICS LLC, AND ART-FGT FAMILY PARTNERS LIMITED AGAINST DAVID E. BARRY AND JOHN R. NORRIS III
Posted to the HK TPL page today. Thanks to a couple of blog readers for the heads up! Looks like a big one. As foreshadowed in White’s “Open the Books!” letter, the group is now officially contesting David Barry’s election. See excerpt below.
In addition to newly stated facts (highlighted below), counts #2 (page 24) and #7 (page 30) appear to be new causes of action (forgive me if I’m butchering this). #2 claims breach of Declaration of Trust for ghosting shareholders who came into Dallas to attend the 5/22 meeting. #7 is a request to get Barry’s election OVERTURNED.
Do we need two new Trustees?
C. The SoftVest Plaintiffs Learn That One Of The Incumbent Trustees, David E.
Barry, Was Never Duly Elected
53. Following the May 22, 2019 special meeting at which Mr. Oliver was elected a TPL
trustee, the SoftVest Plaintiffs learned that one of the Incumbent Trustees, David E. Barry, had actually never been duly elected as a trustee of TPL in the first place.
54. Prior to September 27, 2016, TPL’s three trustees were James K. Norwood, Maurice
Meyer III, and John R. Norris III.
55. On September 27, 2016, Mr. Norwood passed away.
56. On November 4, 2016, Messrs. Meyer and Norris nominated Mr. Barry for election
57. On December 7, 2016, Messrs. Meyer and Norris formally noticed a special
shareholder meeting on January 12, 2017 to elect a new trustee and stated in the notice that only record holders of TPL shares as of December 6, 2016 would be eligible to vote. As of December 6, 2016, there were 7,929,780 TPL shares outstanding.
58. Mr. Barry was the only candidate for the new trustee position.
59. The Declaration of Trust provides that, “[i]n the event of the death . . . of any of the
trustees a successor shall be elected at a special meeting of the certificate holders by a majority in the amount of the certificate holders present in person or by proxy at such meeting whose names shall have been registered in the books of the trustees at least fifteen days before such meeting.”
60. After the meeting on January 12, 2017, TPL claimed that 6,905,319 shares were present in person or by proxy at the meeting, of which 4,421,776 (64%) voted for Mr. Barry and 2,483,543 (36%) voted against him. Horizon Kinetics was one of the shareholders to vote against the election of Mr. Barry. TPL announced that Mr. Barry was elected given that he purportedly received a majority of the votes cast in person or by proxy at the meeting.
61. As the SoftVest Plaintiffs recently learned, however, TPL’s vote count was based a
significant error and improperly included votes that were not legally cast.
62. The vast majority of beneficial owners of TPL hold their shares through brokers,
banks or custodians (“brokers”).
63. Proxy solicitations of beneficial owners are typically made through the broker, which
transmits the proxy statement to the beneficial owners. Instead of sending a proxy card, the broker sends the beneficial owners an instruction sheet that the beneficial owners can return to the broker with voting instructions.
64. Rule 452 of the NYSE, approved by the SEC, comes into play when the beneficial
owner does not instruct the broker how to vote the shares. The rule specifies the conditions under which the broker can vote the shares without having received voting instructions from the beneficial owner.
65. NYSE Rule 452 allows a broker to vote shares held in street name on “routine”
proposals if the broker’s customer, the beneficial owner of the shares, has not provided specific voting instructions to the broker at least ten days before a scheduled meeting. Shares for which no instructions are received are referred to as “uninstructed shares.”
66. But NYSE Rule 452 prohibits brokers from voting shares on “non-routine” proposals,
such as director elections, without specific voting instructions from the beneficial owner.
67. In June 2019, a representative of the New York Stock Exchange confirmed that the
2017 election in which Mr. Barry was a candidate was, at the time, erroneously classified as a “routine” proposal. That representative further confirmed that the election clearly should have been classified as a “non-routine” proposal under NYSE rules. TPL, its trustees, and its agents failed to take corrective action to notify the NYSE when they became aware prior to the scheduled meeting that such mistake had been made, and allowed the “special meeting” to invalidly proceed.
68. The “error” in how the 2017 election was classified greatly inflated the number of
votes cast for Mr. Barry in that election, because it permitted brokers to cast votes on behalf of shares that otherwise would not have voted. On information and belief, but for the error that TPL failed to correct, Mr. Barry would not have received the vote needed to claim an electoral win.
69. TPL has never taken any steps to correct this error. Upon information and belief,
because brokers typically vote in favor of uncontested company proposals, most if not all of the votes that were erroneously cast in 2017 were cast in favor of Mr. Barry; as a result, Mr. Barry did not receive a majority of the votes that were legally cast, and thus was never duly elected a TPL trustee.
HK just posted links to three recent court docs.
The first document is a motion to dismiss.
Looks like the other two are supporting docs. One is a memorandum of law containing supporting materials to justify the dismissal. The other is a request that the court reviews much the material we’ve linked to in the past.
The memorandum of law is a fun read. Some highlights:
Plaintiffs’ contrived claims are nothing but a stalling tactic. Despite their claims of
irreparable harm arising out of alleged misstatements dating back to March 25, 2019, and demands for injunctive relief, Plaintiffs did not file suit until May 21, on the eve of the scheduled shareholder vote, and, to this day, have not moved for injunctive relief. Having lost the debate before TPL’s shareholders, Plaintiffs should not be permitted to frustrate the exercise of those shareholders’ rights through meritless and harassing litigation.
It’s rich that the questionnaire came from Kelley Drye.
On March 25, 2019, TPL announced that it was postponing the special shareholder
meeting, which had not yet been formally called and noticed, from May 8 to May 22. Although Incumbents had expressly declined to consider Mr. Oliver’s nomination just three weeks earlier, TPL’s March 25 press release claimed the postponement was needed to “provide the Trustees with sufficient time to consider [Mr. Oliver’s] nomination.”
Just three days later on March 28, TPL filed a preliminary proxy statement stating that“[t]he Trustees do not endorse Mr. Oliver” and “strongly recommend” that shareholders elect Mr. Young. Ex. 3. Earlier that same day, Kelley Drye—the law firm that promotes Mr. Barry as “a partner in the firm’s New York office,” sent Mr. Oliver for the first time a 66-page “Trustee Questionnaire.” Despite having already summarily rejected Mr. Oliver, Plaintiffs claim that the questionnaire was sent to Mr. Oliver in order to discharge their “duties pursuant to the Trust’s governing documents, to ensure that trustees are not disqualified, both with respect to capabilities and personal character and integrity.” The questionnaire, however, stated that its “purpose” was to collect information for TPL to use in its proxy statement—i.e., in its campaign against Mr. Oliver. Plaintiffs also claim that the questionnaire was needed “to secure a fully informed shareholder vote,” but have never publicly disclosed even their own candidate’s questionnaire, if it exists.
Did I say Trustee? I meant concerned holder of 300 shares.
There is no express private right of action under Section 14(a) of the Exchange Act.
Rather than “open a Pandora’s box by extending” the judicially created private right of action under Section 14(a) to “any person potentially injured by a proxy statement,” the Fifth Circuit has made clear that only stockholders “with voting rights” have standing to pursue a Section 14(a) claim. 7547 Corp. v. Parker & Parsley Dev. Partners, L.P., 38 F.3d 211, 229–30 (5th Cir. 1994) (citing Virginia Bankshares, Inc., v. Sandberg, 501 U.S. 1083, 1106–08 (1991)).
Plaintiff TPL is an issuer, not a shareholder with voting rights. In dismissing a Section
14(a) claim at the pleading stage, Judge Godbey explained that a “corporation with no voting rights in its own stock . . . lacks standing to bring a claim under section 14(a)” because Section 14(a) “protect[s] only interest-holders with voting rights.” Ashford, 2017 WL 2955366, at *9. The Amended Complaint does not allege that Messrs. Barry or Norris are TPL shareholders, but expressly states that each “brings this suit solely in his capacity as a Trustee.” ¶¶ 11–12 (emphasis added). Plaintiffs do not, and cannot, allege that, Messrs. Barry or Norris had any voting rights in their capacities as trustees. See 7547 Corp., 38 F.3d at 229–30 (unit holders who were not entitled to vote at meeting did not have standing under Section 14(a)). Because “voting rights are critical to standing under section 14(a),” id., none of the three Plaintiffs in this action have standing to bring a Section 14(a) claim.
The primary role of fiduciaries is to put the interests of beneficiaries above their own, yet you appear to not even acknowledge our right of inspection that is unambiguously included in the Declaration of Trust. Accordingly, we call on you to state in an open letter to all TPL beneficiaries your conception of corporate governance and your conception of the rights of TPL beneficiaries, including the right to inspection.
We look forward to your response and sincerely hope it will lead to a more civilized and constructive discussion concerning corporate governance with the participation of all beneficiaries.