Author: tpltblogger
Trustee Opposition to 12(c)
Legal Update
Ted writes with the following (thanks Ted!):
On Monday, July 8th an unopposed motion was filed. “MOTION Unopposed Motion for an Order Setting a Schedule For Counterclaim Plaintiffs’ Motion for a Declaratory Judgment and Preliminary Injunction filed by ART-FGT Family Partners Limited, Horizon Kinetics LLC, Eric L Oliver, SoftVest LP (Falconer, Russell)”
Translated, this means both side have agreed to a court hearing on the Declaratory Judgement (motion to dismiss with a declared judgement in favor of HK, Oliver, etc). The judge is going to take the argument briefs from each side and there will then be a hearing where each side will present their arguments, with questions from Judge Boyle before ahe makes a ruling. Before this agreement her ruling was going to be a written response without a hearing.
There has been some date movement on the filing dates for this motion. The Trustees have been granted additional time to file their arguments against this motion, now July 26th, a move from the original date of July 15th. HK/Oliver, etc will have until August 5th to respond. Since a time extension was granted to the Trustees, often one will granted routinely to HK/Oliver, etc if requested. However, if they feel the arguments of the Trustees are weak, they may just hold to the August 5 date, so they can move faster to the hearing.
The Judge wanting a hearing suggests she is interested in asking questions and uncovering additional information that may not be in the briefs before making a ruling. This also suggests its an important ruling, so going by the book is important to avoid appeals.
Fyi: source information is below. https://www.pacermonitor.com/public/case/28272476/Texas_Pacific_Land_Trust_et_al_v_Oliver
When Shareholder Votes Count
Update: Rice Brothers Win Control of EQT
They did it. They held the meeting.
Rice group set to take control of EQT board in proxy contest
It was a classy move by the EQT board to actually count the votes and to not tell the shareholders to drop dead the night before the meeting. I guess they still technically have time to do so.
Enough votes have been cast for the Rice brothers to defeat EQT’s slate of directors and take over the board in what has become the most prominent fight for control of a board since Starboard Value waged and won its proxy contest at Darden Restaurants Inc in 2014, the sources said.
Two sources said that the pair is expected to have won seven seats on the 12-member board.
Investors can vote until EQT’s annual meeting begins in Pittsburgh at 8 a.m. on Wednesday. But with big investors ranging from T.Rowe Price to the California Teachers Retirement System pension fund having already thrown their support to the brothers, sources say their win is all but assured.
Upon Further Reflection
It’s safe to say our nation’s foremost proxy advisors missed the TPL target by a country mile.
Glass Lewis Joins ISS in Recommending that Texas Pacific Land Trust Shareholders Vote FOR General Don Cook
In its May 10, 2019 report, Glass Lewis concludes that: 1
“upon a full and objective review of the arguments put forward by the Dissidents and the Trust, we ultimately see a stronger case for shareholders to support the election of General Cook. While he may lack expertise in the various business activities presently occurring on TPL’s land, in our view, General Cook has much broader and more impressive experience as a board member, including service on large public and private company boards, as well as a proven track record of advocating for and practicing good corporate governance, which we believe makes him the better choice for TPL shareholders at this time.”
In its analysis, Glass Lewis further noted that
“the upcoming shareholder vote should not be construed as a referendum on whether the Trust should immediately pursue a C-Corp conversion, in our opinion. Rather, we believe this proxy contest, like most others, comes down to which nominee is better suited to serve on the board and more likely to represent and advocate for the best long-term interests and rights of all shareholders.”
The silence is deafening.
Murray Writes
Investor Group Sends Letter To Texas Pacific Land Trustees Highlighting Urgent Need For Corporate Governance Reform At TPL
Happy July. We start the month off with a letter from Murray Stahl appealing for clean governance. MS fighting back against the takeover narrative started by the Trustees.
Your press release and the examples you cite simply calls attention with clarity to the range of abuses possible within the current framework. It is for that reason that the other day I called upon you to provide each shareholder with an updated shareholder list to facilitate the formation of open discussion groups among shareholders with a view of developing a consensus regarding alternative governance structures.
Incidentally, I declined to join your exploratory committee since I would have been required to sign a confidentiality agreement regarding governance discussions. I wished to retain the liberty of open discourse and I hope that the shareholders who read this letter will find it to be a constructive effort to promote discussion.
USA Breaks 12MM
U.S. Oil Output Tops 12 Million Barrels a Day for First Time
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.
WSJ Permian Overview Video
How the Permian Basin Became North America’s Hottest Oilfield
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.
Shocker
Trustees Reveal the “Gotcha!”
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?
Court Orders Stay on Discovery
12(c) triggers automatic stay
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.
Injunction + Request for Immediate Seat
New court docs at HK site
See docs labeled 6/25.
Press Release
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.
Deliberate in Secret
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.
Gotcha
Questionnaire part 2 in the making if HK declines. “But we asked if you wanted to participate??”
Blue Ribbon Panel to Explore C-Corp Conversion
Texas Pacific Land Trust Forms Conversion Exploration Committee to Consider C-Corp Conversion
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.
12(c)
WINNING WITHOUT TRIAL: RULE 12(C) MOTIONS FOR JUDGMENT ON THE PLEADINGS
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
The Texas Pacific Land Trust Investor 