Settlement Agreement

Docs posted on Edgar.  Some things that caught my eye below.  Big things to me are 1) 5 of 7 votes are needed for a decision or recommendation which puts concerns around the perceived 4/3 split to rest and 2) montly updates to investors.


Committee. The Committee will continue to be governed by its charter dated June 23, 2019, as amended and restated on July 30, 2019 (the “Committee Charter”). The CEC shall complete its work by December 31, 2019 (the “Committee Period”), unless the CEC determines otherwise. All decisions and recommendations of the Committee shall require the affirmative vote of at least five of the seven members. Due to the legal obligations of the Trustees as fiduciaries, the Committee’s recommendation will be non-binding on the Trustees and the Trust. If the Committee recommends a plan of Conversion (as defined below) by the end of the Committee Period, the Trustees will have a time period of 30 days following the receipt of such recommendation to decide whether to implement such plan of Conversion (such time period, the “Decision Period”).

Settlement Agreement

The Committee shall be comprised of a maximum of seven members. The members of the Committee shall be: (i) John R. Norris III; (ii) David E. Barry; (iii) General Donald G. Cook, USAF (Ret.); (iv) Dana McGinnis; (v)  Eric Oliver; (vi) Murray Stahl; and (vii) Craig Hodges. The Committee members shall serve for so long as the Committee is in existence or until their earlier resignation or death, in which case the remaining members of the Committee shall as promptly as practicable select a replacement with the approval of five Committee members then serving and consent of the Trustees (such consent not to be unreasonably withheld, delayed or conditioned). Mr. Norris and Mr. Barry shall serve as co-chairmen of the Committee (“Co-Chairmen”). The Co-Chairmen shall coordinate all their activities in consultation with other Committee members. The Committee may remove any member of the Committee (other than the Trustees) with the affirmative vote of five of the other Committee members if the Committee determines, in good faith, that reason exists to remove such member.

All members of the Committee agree to promptly confer and, if necessary, submit to mediation in front of a JAMS mediator in Dallas, Texas, within 20 days of any disputes arising out of or relating to this Charter.

Conversion Exporation Committee Charter

Without the prior written consent of the Trust, neither the Committee nor any of its members shall make any public announcements or other disclosures relating to the Committee and its work that has not previously been disclosed, including, but not limited to, discussions, recommendation, work product, and materials. Beginning in September, the Committee shall provide a report of its work to shareholders on a monthly basis provided that the Trustees approve such report (such approval not to be unreasonably withheld). Upon completion of its work, the Committee shall provide a final report to shareholders with the Committee’s recommendations provided that the Trustees approve such report (such approval not to be unreasonably withheld).

2Q Earnings

Full Press Release

SEC version

2q snapshot

$49,586 / $87,310 = 56.8% Q219 margin

$52,503 / $73,844 = 71.1% Q218 margin

Revenue up 18.4%

Net income down 5.6%

Tough quarter.  Back out the $4.9MM in land sales and it looks even worse.

The word expense is only used in the release twice and the context there was income tax expense.

Share count unchanged on the quarter at 7,756,156.

Time for change.



C-Corp Open Thread

7/31/19:  Would love to hear from readers what they would like to see in terms of governance and structure should TPL be converted to a corporation.

Your comments and replies to comments are welcome.

If the comments get substantive we will figure out a way to pin it to the top for a while so that it doesn’t get missed by our new gang of seven.

Update 8/1/19:  Thanks for your submission so far!

I’m going to leave this post at the top of the blog so we can keep the ideas flowing.  In a few days time I will put together a “top 5” or thereabouts that represents the majority of the sentiment.

We’ll keep the thread going until we capture the concensus of readers.  From there we’ll figure out a way to get it into the right hands.

Update 8/7/19:  Keep ’em coming!  Will start aggregating this weekend. 

Sounds Expensive

Sidley Represents Texas Pacific Land Trust in Settlement of Proxy Contest and Lawsuit

Sidley represented Texas Pacific Land Trust (NYSE: TPL) in its agreement to settle its litigation and proxy contest with an investor group led by Horizon Kinetics.

Sidley’s proxy contest team was led by partners Kai Haakon Liekefett and Holly Gregory and included associates Reuben Zaramian, Chris Porcelli, Sagar Sritharan and Philipp Nuernberger. Sidley’s litigation team was led by partners Yvette Ostolaza, Yolanda Garcia, Andrew W. Stern and Alex J. Kaplan and included counsel Jon Muenz, as well as associates Tiffanie Limbrick, Isaac G. Lara, Amanda Blau, Daniel Driscoll, Patrick Foley, Meaghan Nowell, David Silva, Kathleen Zink and Mason Parham.

6 partners.  In case you’re keeping score at home.

Joint Motion to Dismiss


On May 22, 2019, Plaintiffs filed an Amended Complaint alleging violations of the Securities Exchange Act of 1934 and seeking a declaratory judgment. Dkt No. 15. On June 18, 2019, Counter-Plaintiffs filed Amended Counterclaims also seeking a declaratory judgment and alleging various causes of action sounding in tort and contract. Dkt. No. 22. Having entered into a settlement agreement on July 30, 2019 (the “Agreement”), the Parties respectfully request that the Court dismiss all claims and counterclaims in this action, in their entirety, without prejudice. The Parties likewise respectfully request that the Court retain exclusive jurisdiction over the Parties for purposes of enforcing the Agreement. Plaintiffs and Counter-Plaintiffs agree that all claims and counterclaims should be dismissed without prejudice.


Settlement Agreement; LITIGATION DISMISSED

Texas Pacific Land Trust Enters into Settlement Agreement with Investor Group

Looks like we may be skipping a step here.

Old path was pro-governance Trustee gets elected; new Trustee pushed for c-corp or other modern governance.  New path could be that we get to modern governance without a Trustee getting elected.

Appears as if the Trustees get to save face by not having Oliver get fully elected.  Barry’s standing at Trustee is no longer challenged.  Personal liability for Trustees is no longer a threat.  Could be the beginnings of a graceful exit.

I’d have to assume that Oliver, Stahl, and Hodges will be pretty strong voices in what was formerly a stacked committee.

That said, one could make the argument that, on it’s face, the Committee looks to be split 4 to 3.

It’s General Cook’s world and we’re just living in it.  Paycheck time.  Let’s see you flex those “governance muscles” you spoke about, General.  All of this without winning a vote!

HK/Oliver/Hodges didn’t just fall off the turnip truck.  There is probably more good here than meets the eye when it comes to how the Committe will operate.


Investor Group to Join TPL’s Conversion Exploration Committee

Parties Agreed to Dismiss Pending Litigation in Federal District Court in Dallas

Third Trustee Seat to Remain Vacant Until Committee’s Work Concludes

July 31, 2019 07:30 AM Eastern Daylight Time

DALLAS–(BUSINESS WIRE)–Texas Pacific Land Trust (NYSE: TPL) (the “Trust” or “TPL”) today announced that it has entered into a settlement agreement (the “Settlement Agreement”) with the investor group led by Horizon Kinetics LLC, SoftVest, L.P., and ART-FGT Family Partners (the “Investor Group”) with respect to the previous proxy contest and the pending litigation between the parties in the U.S. District Court for the Northern District of Texas in Dallas.

Pursuant to the Settlement Agreement, three additional members will join TPL’s Conversion Exploration Committee: Murray Stahl, Chairman of Horizon Kinetics; Eric L. Oliver, Founder and President of SoftVest Advisors; and Craig Hodges, Chief Executive Officer of Hodges Capital. They will join the existing four members of the Committee: John R. Norris III and David E. Barry, the incumbent Trustees of TPL; Four-Star General Donald G. Cook, USAF (Retired); and Dana McGinnis, Founder and Chief Investment Officer of Mission Advisors.

The Committee, which has been charged to make a recommendation as to whether the Trust should be converted into a C-corporation and regarding appropriate governance changes, has been meeting since June on a regular basis and will complete its work by December 31, 2019, unless the Committee decides otherwise. The Committee will be chaired by the incumbent Trustees of TPL.

In connection with the Settlement Agreement, the parties have dismissed their litigation in the U.S. District Court for the Northern District of Texas in Dallas. The parties have further agreed that TPL’s third trustee position will remain vacant at least until the Committee has completed its work.

“We are pleased to have come to an amicable resolution,” said Trustee John Norris. “It is now time for all of us to come together, put aside our differences, and determine the best way forward for the Trust and all of its shareholders.”

Pursuant to the Settlement Agreement, the Trust and the Investor Group have also agreed to certain other terms. To reflect the terms of the Settlement Agreement, the Trust adopted an amended and restated charter for the Committee (the “Amended Charter”). The complete Settlement Agreement and Amended Charter will be included as an exhibit to a Current Report on Form 8-K, which will be filed with the Securities and Exchange Commission.



Stay of Discovery Under the PSLRA is Partially Lifted

7/26 Memorandum Opinion and Order from Judge Boyle

Some highlights:

On discovery relating to the actions on 5/22:

Counterclaim Plaintiffs’ argument—that communications between themselves and others related to the May 22, 2019 meeting are irrelevant—is unpersuasive. Counterclaim Plaintiffs have asked this Court to determine the validity of the vote and Oliver’s status as a trustee. See Doc. 37, Mot. Prelim. Inj., 4. The Court finds that the discovery requests regarding these communications would be relevant to decide these issues.

Last, the Court finds that Plaintiffs would be unfairly prejudiced without this discovery. The “unfairness” in this situation stems from Counterclaim Plaintiffs’ decision to seek an early and expedited preliminary injunction before their motion for judgment on the pleadings was resolved. Thus, Counterclaim Plaintiffs would be “unfairly shielded” from liability in resolving their preliminary injunction motion, while Plaintiffs would be placed at an “unfair advantage to make informed decisions” in defending against Counterclaim Plaintiffs’ motion.

On Oliver’s qualification for candidacy:

The Court believes that Oliver’s qualifications will be relevant in determining whether he made misrepresentations to shareholders in proxy materials before the May 22, 2019 meeting, which in turn could affect the validity of that meeting and the shareholder vote.  It could also be a factor in the Court’s holding on whether to enjoin the TPL from acting without Oliver in place as a trustee and on whether, in the alternative, a new election is needed. Despite Counterclaim Plaintiffs’ objections to the contrary, the Court finds that Plaintiffs would be put at a serious disadvantage in this litigation if they were prevented from seeking this discovery before the preliminary injunction hearing. At its core, the issue the Court is being asked to decide is whether the meeting and the vote electing Oliver as trustee was valid.

Court believes the standards cited above are applicable: the stay should not be used to place Plaintiffs at an informational disadvantage at an evidentiary hearing they never requested. Relatedly, any burden of which Counterclaim Plaintiffs complain is brought about by their own requests for relief. If Counterclaim Plaintiffs truly wished to avoid the costs of discovery here, they would not have requested an immediate evidentiary hearing on the issues raised in Plaintiffs’ complaint.


For the reasons given above, the Court GRANTS Plaintiffs’ Expedited Motion for Limited Discovery Related to Counter-Plaintiffs’ Declaratory Judgment and Preliminary Injunction Motion (Doc. 54). The stay of discovery under the PSLRA is partially lifted for the limited purpose of allowing Plaintiffs to pursue the discovery discussed in their motion and granted herein. For all other purposes, the discovery stay remains in place until the Court rules on the Counterclaim Plaintiffs’ motion for judgment on the pleadings. See Doc. 42, Order Staying Discovery.

Accordingly, Counterclaim Plaintiffs are ORDERED to respond to Plaintiffs’ discovery requests listed in Exhibit 1 to their motion by August 1, 2019. Any privilege log shall be produced by August 4, 2019. Discovery shall be otherwise conducted and produced in accordance with the Court’s July 15, 2019 Order (Doc. 53).

Looks like a slight setback for White Card but the ruling makes sense in my opinion.  The DJ/PI contains some heavy stuff which merits investigation.  Probably best to get it right the first time.



Team Trustee Replies on Discovery Needs

Link to doc

Counter-Plaintiffs1 have already agreed that discovery is appropriate for the Declaratory Judgment/PI Motion—the only question before the Court is the scope of such discovery. CounterPlaintiffs have requested significant discovery from Plaintiffs, and Plaintiffs agreed to respond to all discovery requested by Counter-Plaintiffs, including additional requests for discovery beyond that included in the Court’s July 15, 2019 Scheduling Order (Dkt. 53). Indeed, Plaintiffs are working hard to provide responses to the broad discovery sought by Counter-Plaintiffs. Yet despite a mutual exchange of discovery,2 Counter-Plaintiffs insist that they can selectively use the PSLRA stay in a way that it was never intended—as both a sword to allow it to marshal evidence in its sole possession in favor of its position3 and as a shield to prevent Plaintiffs from being able to access key evidence relating to disputed fact issues.

WSJ on Mineral Rights

WSJ: As Drillers Struggle, Shale Investors Seek Safety in Mineral Rights

Mineral rights-owning companies aren’t without risk. Royalty payments are tied to both production levels and commodity prices, neither of which mineral owners typically control. Many shale companies have cut spending on drilling this year, while oil prices have hovered around $60 a barrel. Less production paired with lower prices means the value of royalty payments will drop.

“Part of the risk associated with the investments is you are a passive investor,” said Justin Stolte, a partner at law firm Gibson, Dunn & Crutcher.

Still, the value of large mineral owners such as Texas Pacific Land Trust, formed after Texas and Pacific Railway went bankrupt in the late 1800s, has soared as the booming Permian Basin of West Texas and New Mexico transformed the U.S. into the world’s top oil producer. The price of shares in the trust has more than quadrupled in the past five years to more than $760.

They forgot management agency risk…

Response to Discovery Request

Team Oliver, the Counterclaim Plaintiff, responded today to the Trust’s appeal for more discovery related to the requested declatory judgement and preliminary injunction.

Doc here

Supporting Doc aka “how the sausage gets made” which shows initial but fading collaboration on discovery. 

Recall that the DJ/PI is really trying to solve the following: 1) do Trustees have a duty to hold a meeting, 2) and do they have the authority to postpone indefinately?, 3) do Trustees have the power to disqualify Eric Oliver from the election?, 4) was the vote on 5/22 legit?, and 5) was David Barry properly elected to his post?

Counterclaim Plaintiff (Oliver) contends that discovery isn’t really needed as the doc that governs the decisions above is the Trust’s Declaration of Trust which is readily available for observers.

Remember all of this is going on whilst discovery is technically stayed as ordered by the court on 6/25 in response to Oliver’s 12(c) motion.

Highlighting below is mine. (Still not a lawyer)

Feels like we have some decent clarity here.  Stay technically in place due to 12(c).  In the spirit of good faith, some discovery conversations were taking place anyhow but the Trust went overboard.  We await resolution of both 12(c) on the federal securities claims and DJ/PI on the five BIG issues above.

Legal bills stack up in the meantime.

On June 25, 2019, Counterclaim Plaintiffs, shareholders of Plaintiff Texas Pacific Land Trust, moved for a declaratory judgment and preliminary injunction (the “DJ/PI Motion,” Dkt. 36). The legal issues raised in the DJ/PI Motion concern the scope of the authority and obligations of TPL’s trustees: (i) whether they were required to hold a special meeting of shareholders to elect a trustee after one of TPL’s trustees resigned; (ii) whether they have the authority to determine that a shareholder nominee for trustee is “disqualified” from ever becoming a trustee; and (iii) whether they have the authority, without prior approval from TPL shareholders or a court, to postpone a noticed special meeting of shareholders to elect a successor trustee (and, if not, whether shareholders were entitled to proceed with the meeting).

Because the powers and duties of TPL’s trustees are governed by TPL’s constitution, its Declaration of Trust—not any documents or information in Counterclaim Plaintiffs’ possession—Counterclaim Plaintiffs explained in their motion papers that no discovery was needed to resolve the motion and sought an expedited hearing in early August 2019. Dkt. 41 at 8. But Plaintiffs and Counterclaim Defendants John A. Norris III, a TPL trustee, and David E. Barry, a purported TPL trustee, refused to agree to any expedition until Counterclaim Plaintiffs agreed to (i) voluntarily produce 15 categories of documents; (ii) voluntarily produce four witnesses (and direct a non-party to produce a fifth witness) for deposition; (iii) voluntarily respond to 24 interrogatories; and (iv) provisions allowing the parties to move for compulsory production of additional documents, depositions, or interrogatory responses and a continuance of the (late September 2019) hearing date due to any “delay” resulting from additional discovery. In a good faith effort to resolve the matter, Counterclaim Plaintiffs agreed.

Because Counterclaim Plaintiffs maintain that no discovery is required to resolve theDJ/PI Motion, they do not seek compulsory production of any discovery from Plaintiffs. By contrast, TPL and Messrs. Norris and Barry now seek to impose on Counterclaim Plaintiffs the additional unnecessary cost and burden of responding by August 1, 2019 to what they euphemistically call “limited discovery,” but that collectively amounts to 59 additional document requests and 13 additional interrogatories. PBr. Ex. 1. Plaintiffs profess that “Counter-Plaintiffs Hold All Relevant Evidence,” PBr. 17 (emphasis in original), but never explain in their motion why any evidence regarding the scope and authority of TPL’s trustees would be in Counterclaim Plaintiffs’ possession, rather than TPL’s possession.

In reality, the discovery Plaintiffs seek is not related to the legal issues raised in the DJ/PI Motion. Instead, Plaintiffs seek to bolster their federal securities claims against Defendant Eric Oliver and fish for information from which to manufacture new claims against Mr. Oliver or other parties, all while causing further delay and continuing to frustrate the rights of TPL’s shareholders. On June 17, Mr. Oliver filed a Rule 12(c) motion against Plaintiffs’ Amended Complaint. Dkt. 19. On June 25, the Court entered an order holding that “Defendant’s 12(c) motion triggers the automatic discovery stay of the PSLRA,” explained that the purpose of the
stay is to “prevent costly extensive discovery and disruption of normal business activities, until a court could determine whether a filed suit has merit,” and stayed “all discovery” until resolution of the Rule 12(c) motion. Dkt. 42 (“Stay Order”) at 2 (internal citations omitted).

To lift the PSLRA discovery stay, Plaintiffs bear the burden of showing the discovery
they seek to impose on Counterclaim Plaintiffs is “particularized” and “necessary” to “prevent undue prejudice.” Stay Order at 2 (quoting 15 U.S.C. § 78u-4(b)(3)). But Plaintiffs’ 59 document requests and 13 interrogatories are not “particularized,” and none of the documents or interrogatory responses sought are needed to resolve the legal issues raised in the DJ/PI Motion.


More Discovery

Recall the prior agreed upon motion on discovery.

Yesterday, team Trustee filed this motion looking for more discovery prior to the requested declaratory judgement.

While the Parties have negotiated and agreed to a limited exchange of discovery, there are additional particularized categories of discovery that are necessary for Plaintiffs to defend themselves against Counter-Plaintiffs’ Declaratory Judgment/PI
Motion. Given the accelerated timetable of the Parties’ agreed briefing schedule, Plaintiffs respectfully request expedited consideration of these matters.

Accompanying the motion was this memorandum of law.

On June 25, 2019, the Court entered an order to stay discovery in this action pursuant to the PSLRA, after Defendant filed a motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure (the “Rules”). [Dkt. 42.] On that same day, Defendant and Counter-Plaintiffs filed the Declarator Judgment/PI Motion, seeking a preliminary injunction and declaratory relief. Given Counter-Plaintiffs’ request for a judgment on the merits of the instant dispute, the Parties agree that discovery is necessary to allow for the proper resolution of the Declaratory Judgment/PI Motion presently before the Court. To that end, Plaintiffs have agreed, subject to standard discovery objections and privilege, to respond to all discovery that CounterPlaintiffs have sought regarding the Declaratory Judgment/PI Motion, including the requests contained in the agreed discovery entered by this Court [Dkt. 53], and additional requests propounded as recently as July 15, 2019.

While Defendant has agreed to allow Plaintiffs access to limited discovery, Defendant continues to oppose certain requests for critical information. In particular, Defendant disputes Plaintiffs’ need for discovery related to communications between Defendant and TPL’s shareholders and for information related to Defendant’s background. These requests, however, bear directly on the issues implicated by the Declaratory Judgment/PI Motion which attacks
Plaintiffs’ fiduciary responsibility to review the qualifications of candidates for trustee and seeks a declaration that the invalid meeting held by Defendant and a small minority of shareholders on May 22, 2019 was proper because Plaintiffs lacked the authority to postpone the meeting to correct Defendant’s false and misleading communications with shareholders.

In case you forgot the reason for the declaratory judgement request, here is the background.  It’s a big one.

On June 14, 2019, Incumbents issued a press release stating they were “obliged to remind shareholders that the proxy solicitation is suspended while the litigation is pending.” On June 21, 2019, Incumbents requested in a Rule 26(f) report that a trial on the merits not commence until at least August 31, 2020. Dkt. 25, ¶ 12. These recent statements – in addition to the daunting discovery requests served last week by Incumbents’ counsel on nonparties affiliated with the Investor Group—including Mr. Oliver’s son and Allan Tessler’s two daughters—make clear TPL’s true motivations behind its lawsuit: intimidate the Investor Group, impose on over 15,000 shareholders at least a year-long delay, and incur the costs of protracted litigation—all 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.

On June 17, 2019, Mr. Oliver moved for dismissal of the federal securities claims
asserted against him in Incumbents’ Amended Complaint.

To restore and confirm TPL shareholders’ rights, Counterclaim Plaintiffs now request a declaratory judgment that: (i) TPL was required to hold a special meeting to elect a successor trustee after one of its trustees resigned in February 2019; (ii) Incumbents had no authority to unilaterally and indefinitely postpone the special meeting they had noticed; (iii) Incumbents have no authority to “disqualify” Mr. Oliver from election; (iv) the vote at the May 22, 2019 special meeting was valid and Mr. Oliver has been duly elected a TPL trustee; and (v) the vote at the January 12, 2017 special meeting was invalid and Mr. Barry has never been duly elected a TPL

To prevent any further abrogation of TPL shareholders’ rights in connection with the May 2019 election, Counterclaim Plaintiffs request a preliminary injunction (i) prohibiting Incumbents from taking any action on TPL’s behalf without Mr. Oliver’s participation as a trustee; or (ii) prohibiting Incumbents from any further unauthorized postponement of the election. To prevent any further denial of TPL shareholders’ rights in connection with the January 2017 election, Counterclaim Plaintiffs request a preliminary injunction prohibiting Mr. Barry from taking any action on TPL’s behalf until a new election can be held.

Doesn’t seem like this request will delay the show.  It does turn the heat on the Oliver team to produce more information.  I’m still somewhat surprised that the Trust is playing ball in not opposing the declatory judgement.  Perhaps they are confident in the merits of their side of the case.

Legal fun aside, I’d rather the Trust be buying shares back whilst being overseen by confidence inspiring indivuals with skin in the game.  Oh what great times we had.




Discovery Timeline for Declaratory Judgement + Injunction Set

Signed version at HK website

The proposed order linked a few posts down has been signed by Judge Boyle.

See Ted’s comment for some good analysis.

Is the 12(c) judgement still in play?  I’d have to say yes.  One notable doc we saw Monday was the one linked above where both parties agreed to a discovery timeline.  That motion was granted.  The other notable doc was the Trust’s dispute of the validity of a 12(c) motion for judgement on the pleadings.  We have not had a ruling on that yet (or at least I’m not aware of one).

Warning, I’m not a lawyer; way out of my element.

WSJ on Texas Water

WSJ : Neighbors Face Off Over Texas’ Other Lucrative Resource: Water

Frackers in the region pay an average 50 to 75 cents for a barrel of water, according to Bluefield Research, a water advisory firm. That amounts to more than $200,000 a well. Supplying water for fracking in the Permian is a roughly $1.2 billion industry annually, and including transportation and other costs, water spending for fracking there will surge to as much as $54 billion over the next decade, the firm said.

By the 1980s, Mr. Williams had amassed about 18,000 acres above a number of aquifers, deep deposits trapped in a natural underground dam some scientists believe an asteroid impact formed millions of years ago. The aquifers are valuable because they fill every winter from nearby mountains. The Williamses are Texas’ largest private water owners, some hydrogeologists estimate.