Courtroom Highlights 4/17

The text below was copied from the comment section of a prior post. Thank you to the author and thank you to all of the shareholders who packed the court room Delaware today.

I was present in the courtroom today. A few things I learned…

First, do not expect a ruling any time soon. The parties will decide how to do post-trial briefs for the judge tomorrow. That will impact if those briefs are done before the next scheduled meeting.

The judge seemed to indicate that the future meeting would be a moot point. If he rules for TPL, then Prop 4 will effectively be deemed passed. If he rules for HK/SV, then Prop 4 is effectively dead.

The judge also seemed to think the date of record currently set for voting on the proposal was too far in the past. However, the point is likely moot based on either ruling.

My hunch is that the judge is inclined to rule for HK/SV. However, he will be mindful of any precedent that a ruling could set for broader Delaware Corporate law. I suspect he will look for a narrow issue that allows him to rule for HK/SV that does not have broader implications.


A few things I’ve learned: TPL has spent north of $6, probably closer to $10 million of shareholder money on litigation.

TPL – through its law firm, Sidley Austin – hired a private investigator to determine if Lion Long Term Partners colluded with HK/SV in releasing its pre-vote statement.

The courtroom was over capacity. A reporter for Bloomberg Law said she has never seen so many shareholders appear in person. No shareholders present indicated support for TPL management.

This was probably the first time in years people were sitting on the floor in the Delaware Chancery Court. The floor and benches do not appear to offer different levels of comfort. 

The judge referenced the crime-fraud exception to pierce attorney-client privilege TPL asserted on one its documents.

The statement in question was in a proxy statement: “The Company currently does not currently have sufficient shares available for issuance to meet its existing obligations. We are concerned that the Company is unable to meet its current and potential obligations and believe it is important that the Company obtain additional common shares available for issuance in the future.”

Director Karl Kurz testified that the quote in the proxy did not appear to be accurate. TPL’s lawyers tried to rehabilitate this later.

EO and MS were excellent witnesses. (Humorosly they were quite a contrast. New York HK and West Texas EO.)

The TPL lawyers, at times, came across like high school mock trial participants. They seemed to be trying to create drama and theatrics where none existed.

TPL management does not appear to be a fan of the TPLT Blog. (Ty, Michael, John & David – nice to meet you via blog. I wish it hadn’t come to this.)

My hunch has been that management wants to do an acquisition to dilute HK/SV. Nothing I saw today has changed my opinion.

The trial also convinced me that no one knows TPL better than EO. He and MS are genius-level folks. It had to be unnerving for opposing counsel to be in a situation where the witness was clearly more intelligent than the lawyer asking the question. That’s not something you see all the time. 

By my count there were around 25 attorneys and paralegals there on behalf of TPL. And, as shareholders, we are collectively paying for them to sue the majority of voters.

The expert witness testimony led me to believe this is not a slam-dunk case. Clearly I think HK/SV should win. However, the judge will be thinking about more than just this case. There’s a reason companies choose Delaware. This is why I suspect he will find a narrow point that favors HK/SV and use that rather than staking out new law.


As TPL shareholders we all owe MS & EO a debt of gratitude for spending the huge amounts of money to fight this fight. While they have their own reasons, everyday retail investors are free-riders on their dime.

20 thoughts on “Courtroom Highlights 4/17

  1. I too was in the courthouse today, which was edge-of-your-seat viewing but disappointing that no decision was rendered by the end of the day. The list above captures many of the highlights (and lowlights), and I can offer a few more observations below:

    – So much of the testimony boiled down to semantics around the words in the Stockholder Agreement carve-outs, including “extraordinary transaction,” “recapitalization,” and “governance” (and how broad to it can be defined as the G within ESG).

    – With the dozens of legal folks in the courtroom being paid on our dime, it occurred to me that if the two firms who drafted and subsequently negotiated the Stockholder Agreement in 2020 could have just been clearer about what specific types of votes could be covered by the carve outs, we would never be in this ambiguous mess!

    – (Not sure of spellings) Order of witnesses were 1.) Karl Kurz a board member who only came onboard a year ago; 2) A lead partner from Sidley who was involved in drafting the agreement; 3.) Jay Kesslen who is HK’s attorney and was also involved in the agreement; 4.) Murray Stahl; 5.) Eric Oliver; 6.) David Barry’s video of some of his deposition; 7.) Guhan Subrahmaniam a Harvard professor who was an expert witness for the defense to say recapitalization does include share authorizations and governance; 8/9.) Steven Haas and Marc Weingarten who were expert witnesses called by the plaintiffs to give the opposite opinion but were very rushed due to time constraints.

    – Kurz was not a good witness in my opinion, due to his short tenure with TPL. He was picked apart by defense counsel. The biggest bombshell of the day may have been that he had to admit that the Glass Lewis quote handpicked for the proxy materials about TPL needing the share authorizations to meet its obligations was not accurate. [Note: I recall immediately being shocked by that quote and called IR to get a response that it was a “clumsily” worded statement.] Also, Kurz had to admit that American Water Works (another company where he sits on the Board) did use “board unanimously recommends” language when describing their proxy proposals so why wouldn’t he suggest TPL do that?

    – I had never heard Barry speak and not surprisingly he came across in his video deposition as arrogant and domineering in his whining that TPL couldn’t be taken seriously as a potential acquirer because the lack of authorized shares was hamstringing him and Glover and giving them no credibility at the deal table. When the defense attorney asked something to the effect of “do you have credibility with shareholders?” he said something like, “I don’t know what they felt.” Therein lies a problem! Most shareholders are against a strategy of acquisitions by amateurs and probable dilution, even if you successfully tricked many of them (and the proxy advisory firms) into voting for Prop 4.

    – It was a big slap to MS and EO that TPL’s proxy materials referred to Prop 4 as a “Board Recommendation” and did not clarify their opposition to it. They had suggested that the word “unanimous” be used for the proposals that had full board support, but that was rejected.

    – MS and EO basically were told by Barry and Dobbs to not say anything at the Nov. annual meeting. It was awkward for them to even attend.

    – Much of the case plaintiffs were trying to make is that MS and EO were violating their Stand Still requirements by discussing TPL with friends and associates. Some emails seemed to indicate this happened, so plaintiffs scored points here, but I don’t know if that issue ultimately relates to this case.

    – I honestly went in with anticipation that HK/SV would clearly prevail, and I still think they will, but the plaintiff lawyers did a decent job of making their case also. They scored some points by arguing that there was opportunity to make the Agreement carve-outs more explicit and that MS and EO at times did vote in lockstep with the Board when they felt obligated to.

    – I made a point of thanking MS and EO on our way out the door for fighting the good fight on behalf of all shareholders. It is so apparent that they are the only Board members who respect us.

    I’m no legal or finance expert so want to be careful not to mischaracterize anything I heard, but I took a ton of notes if anyone has specific questions about the trial I may be able to answer.

    Liked by 3 people

  2. I’d like to see a list of the ‘Current obligations’ they will not be able to satisfy” without the additional shares’. They have not disclosed any and I think that’s why the judge raised the issues of crime-fraud not being protected. There should NOT BE ANY obligations tied to something (the shares) that doesn’t exist and may never be approved.

    The judge referenced the crime-fraud exception to pierce attorney-client privilege TPL asserted on one its documents.
    The statement was: “The Company currently does not currently have sufficient shares available for issuance to meet its existing obligations. We are concerned that the Company is unable to meet its current and potential obligations and believe it is important that the Company obtain additional common shares available for issuance in the future.”

    I hope that HK’s & EO’s attorneys hit on that hard in their post- trial brief.

    Liked by 1 person

    • Management argued that the compensation plan would not be fully funded without more shares.l and this ISS was correct. MS pointed out if they did the authorized buybacks they would have plenty of shares. Even if management is right – when management’s witness who is a director misunderstands proxy material, that’s not great.

      If the Court wants to rule in favor of HK/SV without creating substantive law that could ripple to other cases, this potential misrepresentation could provide a way. The judges mentioned “unclean hands” as a possible option. I do not know how it applies in Delaware but generally the court would say TPL is not entitled to relief because it’s wrongful act.

      Kurz seemed to suggest that saying “the board recommends” gave shareholders enough notice that the vote was not unanimous. However, management refused to provide the vote or whether the vote was unanimous to shareholders requesting that info before the meeting.

      One other fun detail: MS does not use email and shreds documents he doesn’t sign each day. The plaintiff’s lawyers weren’t happy about this.

      Liked by 2 people

      • I would submit that a ‘Compensation Plan’ intended to enrich the Board and Management is just that, a plan, not an ‘Obligation. It’s internal only and doesn’t involve any 3rd parties.

        Liked by 1 person

  3. It reflects poorly on Glass Lewis to have written that – clearly they did so after being pitched by management. But it shows Glass Lewis did little work. The company has never issued shares since its founding in 1888. Also, by including it in the proxy, it shows their intent is to do deals, which gets back to this being extraordinary.

    Liked by 2 people

  4. dont even understand why us shareholders have to go through this nonsense…

    to be honest, why is it even a case? majority of the shareholders invested in the company (and numerous shareholders have been very long term shareholders holding their shares for a decade if not longer) because they believed the ORIGINAL business model of collecting royality and repurchasing shares. If the management wants to do “VALUE ACCRETIVE” deals, so much to the extent where they will SUE existing shareholders for their own good, TPL is not the place for you to work for these clowns.

    this all just to show how greedy these crooks are. the fact is the collection the royalty payments, buy back shares (which requires ZERO SKILL or INSIGHTS at all) WHILE EARNING HUNDREDS OF THOUSANDS if not MILLIONS in compensation is NOT ENOUGH to quench their greed and they want to make big acquistions in order to justify their existence in order to milk this cash cow for their own good. The word ridiculous is not enough to describe this situation…

    check out what these crooks have done for TPL’s share price since this case mess, all the same time while PBT is up >20% for the year, well done management! You guys will go down in the history books to be in the top 10 list of worst senior management ever.

    Liked by 2 people

    • The judge proposed two courses of action – rapid simultaneous briefs. The alternative was four part briefs. The plaintiff would file a brief, defendants would respond, and repeat.

      This is what prompted the discussion of how the next meeting date was essentially a moot point.

      The judge also pointed out that whichever side loses is likely to appeal. He said something to the effect of “you’ll have your real answer when the DE Supreme Court rules.”

      The parties were to decide today. You could almost see Sidley counting up the billable hours that would come from the longer timeline.

      I’d also suggest that management knows that HK/SV are paying 100% of their own legal bills and effectively 20ish% of management’s legal bills. The process becomes a punishment. …and a warning to others who would take on the Company.

      Liked by 1 person

  5. Delaware Law states that a company needs to have its annual meeting within 13 months of the previous meeting. Interesting dynamic if this gets pushed out too long.

    Liked by 1 person

  6. My observation of 39+ years in the business is that lawyers seek to write docs that are ambiguous. Partly to create flexibility where it’s truly needed. The practical impact is that ambiguity creates litigation…that pays the lawyers who wrote the docs.

    Liked by 1 person

Comments are closed.