Author: tpltblogger

6/21 Case Management Plan

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Joint Discovery / Case Management Plan

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.

Motion to Extend

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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.

Texas Buildout (post modified and renamed)

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U.S. refiner Phillips 66 enters offshore oil export race

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, Saudis Bet on Plastics Growth in Giant Gulf Coast Plant

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: Barry’s Election Challenged

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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
as trustee.

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.

Motion to Dismiss + More

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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.

 

 

Let’s Talk

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Investor Group Issues Open Letter To Texas Pacific Land Trustees David Barry And John Norris

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.

 

White Card Stays on Offense

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Investor Group Demands Texas Pacific Land Trustees David Barry And John Norris Recognize Eric Oliver As Third Trustee

Strongly worded letter here. There is a material probability that this could all go very south for the Trustees. That said, Trustee actions have defied logic for months now. My guess is that these guys are far away from resolution.

Eric Oliver has been elected as TPL’s third Trustee, and you are required to recognize him as such.  Given your utter disregard of your basic contractual and fiduciary obligations as trustees under the TPL declaration of trust, and the excesses you have engaged in as it relates to your power and authority under such document, we intend to hold you personally liable for your actions.  

With each further action you take from this point on to prevent Eric Oliver from undertaking his responsibilities as Trustee, you are creating incremental personal liability for yourselves.  All the wasteful expenses you are incurring—purportedly on behalf of the Trust—will be reimbursed by you to TPL’s beneficiaries. 

Trustees Respond

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Texas Pacific Land Trust Responds to Dissident Group’s Latest Attempt to Mislead Shareholders

Since the Trust had previously announced that the meeting would be delayed until June 6, millions of shares had not even been voted at the time the Dissident Group decided to hold its sham “meeting” on May 22, 2019 – apparently the Dissident Group had no qualms disenfranchising these shareholders. The Dissident Group failed to mention that a clear majority of the non-Dissident Group shareholders had submitted proxies to elect General Cook at that point; this may explain why the Dissident Group wanted to cut the election short and not wait for the remaining millions of shares to get voted.

Let’s have another meeting then. Oh, right.

 

 

Calling for Action and Turning the Screws

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Investor Group Calls On Texas Pacific Land Shareholders To Hold Trustees David Barry And John Norris Accountable For Their Flagrant Disregard Of Shareholders’ Rights And Investments

We remind all shareholders that they have rights under the declaration of trust, including the power under article Four, to inspect the books of the Trust.  Two weeks ago, SoftVest delivered to TPL a demand to inspect certain records that we believe all shareholders are entitled to review under the declaration of trust.   However, we have yet to receive a single requested document.  What are Mr. Barry and Mr. Norris trying to hide?

We encourage all shareholders to review our demand and submit their own demand directly to Trustee David Barry (DBarry@KelleyDrye.com), with copy to Robert Packer (Robert@tpltrust.com).  We invite shareholders to use our form if they deem the information we requested to also be important to them.  Shareholders might also want to ask whether the votes included in Mr. Barry’s total when he was “elected” trustee in 2017 improperly included broker non-votes.

Highlighting not mine.  Do we take this as evidence that negotiations aren’t going well?  I wonder why?

 

I don’t recall having read about the broker non-vote issue in prior White card releases.  Will do some digging though the cut and paste below from the link directly above would suggest that broker non-votes shouldn’t be applied to Trustee elections.

In short, a stockholder does not actually vote by proxy at a stockholders meeting, but rather instructs the broker how to vote. Sometimes, the broker can vote those shares even if it doesn’t receive any instruction from the beneficial owner. Under stock exchange rules, banks, brokers and other holders of record who hold shares of stock in “street name” for a beneficial owner of those shares, as described above, typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. Such record holders, however, are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine.”

 

For your convenience:

Texas Pacific Land Trust
1700 Pacific Ave., Ste.2770
Dallas, TX 7520l

 

 

 

 

Article Fourth : Open the Books

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Demand to Inspect Certain Books

Reference is made to the Declaration of Trust of Texas Pacific Land Trust, dated February 1, 1888, by Charles J. Canda, Simeon J. Drake and William Strauss (the “Declaration of Trust”). Article Fourth of said Declaration of Trust demands that the trustees cause books to be kept showing all “matters relating to the financial affairs and business of the trust… .” Article Fourth of the Declaration of Trust further demands that such books be open to inspection of the registered certificate holders.

Based on the foregoing, we hereby demand that you immediately make available….

Declaration of Trust (for your clicking convenience) 

Fracturing Tech Trajectory

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JPT: Exploring the Innovative Evolution of Hydraulic Fracturing

  • Laterals lengthen to reach more rock and hydrocarbons. For example, in the Utica Shale of the Appalachia region, lateral lengths almost doubled to 8,628 ft during 2011–2017, according to DrillingInfo data. In the Williston Basin, the average lateral now stretches more than 2 miles with a limited surface footprint thanks in part to North Dakota setting the standard drilling and spacing unit at 1,280 acres.
  • Proppant and fluid volumes grow to new heights. During 2010–2017, average proppant mass spiked to 1,600 lb/ft from 500 lb/ft, and fluid volumes increased to 33 bbl/ft from 13 bbl/ft. Operators are shattering basin records, Weijers et al. noted, with some wells taking in a proppant mass equivalent to a 100-car unit train, surpassing 20 million lbs/well. This has come with the increased use of high-viscosity friction reducers.
  • Stage count and intensity boom. The average stage count has risen to 40 stages/well, with average stage spacing dropping to 200 ft/stage in 2017 from 350 ft/stage in 2010.
  • Pump rates take off. The rate per lateral foot increased to 0.42 bpm/ft in 2017 from 0.16 bpm/ft in 2010 in an effort to improve diversion, accompanied by a rapid increase in frac fleet horsepower.

During the downturn, operators tweaked designs to incorporate cheaper sand and lower gel loadings with cheaper fluid systems. The impact on D&C spending was dramatic. Citing data from Coras Research, Weijers et al. noted that the average well cost in four major US liquids-rich basins fell to $5.1 million in 2017 from $7.2 million in 2012. The average cost per barrel of oil produced—meaning all D&C costs for barrels in the first year of production—was just $46/bbl in 2017, compared with $128/bbl in 2012.

Crude Build, or Maybe Not?

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SL Advisors: Miscounting America’s Crude

In simple terms, the EIA counts production, exports, imports, change in storage and refinery usage. This should pick up every barrel of oil moving through the U.S. It must frustrate the EIA’s number crunchers that the figures never foot, so they use a balancing item which used to be called “Unaccounted for Crude Oil”, nowadays simply the Adjustment. Since June 2018, the Adjustment has almost tripled.

Undercounting crude oil production seems the most likely explanation. If so, this would reinforce a couple of important themes:

1) The U.S. continues to gain market share in world energy markets

2) Growing volumes even with moderate pricing defy those who argue that much of our shale activity is unprofitable

Oil and gas production continue to surprise to the upside, which can only be good for midstream energy infrastructure.

Investor Articles

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Came across a couple new ones yesterday:

http://www.oddballstocks.com/2019/06/activism-story-texas-pacific-land-trust.html

https://seekingalpha.com/article/4268478-lawsuits-countersuits-thrills-spills-shh-buying-texas-pacific-land

The Texas Pacific Land Trust was created in 1888 as a liquidating trust. The trustees of this trust have but one job: liquidate it in order to pay off the bondholders who created the trust. These bondholders (and their heirs and the persons they have long since sold their rights to) are the real owners of those 7,683 square miles of what was once desert scrubland (until the Permian Basin burst on the scene as the biggest oil and gas-producing region in the country.)

We must not lose sight of this fact, no matter the slings, arrows, brickbats, and mud that is being thrown in the current proxy fight: the trust was designed to liquidate its assets in order to pay off the bondholders who organized the trust. The bondholders created the Trust and converted their bonds to “shares of proprietary interest” in the Trust, making their rights more liquid via these shares. TPL is now the second-oldest “stock” on the NYSE.

I might be displaying my ignorance here but does anyone have a document/reference that proves the above to be a FACT?  The Declaration of Trust isn’t super clear on this subject.

Docket Update 5/31: Status Report Order

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https://www.pacermonitor.com/public/case/28272476/Texas_Pacific_Land_Trust_et_al_v_Oliver

STATUS REPORT ORDER: Lead counsel for each party (or a designee attorney with appropriate authority) must meet face-to-face at a mutually agreeable location, and no later than seven (7) calendar days before the Joint Status Report due date. Status Report due by 6/21/2019. (Ordered by Judge Jane J. Boyle on 5/31/2019)