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Texas Pacific Land Trust v. Oliver

United States District Court, N.D. Texas, Dallas Division

July 26, 2019

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, Plaintiffs,
v.
ERIC L. OLIVER, Defendant, and ERIC L. OLIVER, SOFTVEST, L.P., HORIZON KINETICS LLC, and ART-FGT FAMILY PARTNERS LIMITED, Counterclaim Plaintiffs,
v.
DAVID E. BARRY and JOHN R. NORRIS III, in their individual capacities and in their capacities as trustees for the Texas Pacific Land Trust, Counterclaim Defendants,

          MEMORANDUM OPINION AND ORDER

          JANE J. BOYLE UNITED STATES DISTRICT JUDGE.

         Pursuant to the Court's order setting a schedule for matters related to Counterclaim Plaintiffs' motion for a declaratory judgment and preliminary injunction (“preliminary injunction motion”), Plaintiffs filed an expedited motion for limited discovery. Doc. 54, Pls.' Mot. The parties have already agreed to conduct some discovery before the hearing on the preliminary injunction motion. But Plaintiffs seek additional discovery on which the parties have not come to an agreement. After a review of the briefing, the Court GRANTS Plaintiffs' motion (Doc. 54).

         I.

         BACKGROUND

         This case arises out of a dispute over the election of a trustee to the Texas Pacific Land Trust (“TPL”). Doc. 1, Compl. On one side of the dispute there are the two current TPL trustees, Plaintiffs David E. Barry and John R. Norris III, and on the other side there is a group of TPL shareholders holding more than 25% of the TPL's outstanding shares. The shareholder group includes Eric L. Oliver; Softvest, LP; ART-FGT Family Partners Limited; Allan Tessler; Tessler Family Limited Partnership; and Horizon Kinetics LLC (together referred to below as the “Horizon Group”). Horizon Kinetics is the single largest shareholder of the TPL, owning about 23% of its outstanding shares. Doc. 37, Mot. Prelim. Inj., 7. The other members of the Horizon Group own around 2%. Id.

         The TPL is a publicly traded entity listed on the New York Stock Exchange (“NYSE”). Doc. 15, Am. Compl., ¶ 10. It is one of the largest private landowners in Texas, holding around 900, 000 acres of land. Id. ¶ 2. The TPL is managed by three trustees, who serve until death, resignation, or disqualification. Id. On February 25, 2019, one of the trustees resigned. Id. ¶ 19. This left David E. Barry and John R. Norris III as the remaining trustees. Id. The TPL's Declaration of Trust (“DoT”) provides that a new trustee shall be elected at a special meeting of the shareholders by “a majority in the amount of certificate holders present in person or by proxy[.]” Id., Ex. A, 45. After the resignation, the election process for the open trustee position followed, whereby the current trustees identified and investigated candidates. Id. ¶ 24. Sometime after this process started, Allen Tessler recommended Eric L. Oliver for the position. Id. ¶ 25. Barry and Norris reviewed Oliver's credentials and past interactions with the TPL but declined to nominate him for election. Id. ¶ 26. They instead nominated Preston Young, and announced this nomination in a Form 8-K filed on March 4, 2019. Id. The trustees then called for a special meeting to take place in Dallas, Texas on May 8, 2019. Doc. 37, Mot. Prelim. Inj., 6.

         Despite the trustees' nomination of Young, the Horizon Group publicly disclosed in a Schedule 13D form filed on March 15, 2019 that they were nominating Oliver for election as trustee. Doc. 15, Am. Compl., ¶ 27. After this filing, the trustees started a dialogue with Murray Stahl, the CEO of Horizon, to come to some sort of compromise on a candidate. Doc. 15, Am. Compl., ¶ 28. At some point during these conversations, the TPL started a search process where it worked with a recruiting firm and other advisors to find other possible candidates for the position. Id. ¶ 29. In the meantime, the Horizon Group filed a preliminary proxy statement with the SEC on March 25, 2019 regarding Oliver's nomination. Id. ¶ 30. Also on this date, the trustees announced that they were postponing the special meeting scheduled for May 8, 2019 to May 22, 2019. Id. ¶ 37. The trustees allege that the delay was necessary to meet revised timelines for preparing and mailing proxy materials in a contested situation. Id. More discussions between Stahl and the trustees took place to try to reach a compromise on a candidate, but the Horizon Group eventually sent the trustees an email stating that they would not consider candidates other than Oliver. Id. ¶¶ 31-32.

         On April 7, 2019, the trustees replaced their candidate Young with General Donald Cook, who one of the TPL's third-party advisors recommended. Id. ¶ 33. Counterclaim Plaintiffs allege that the trustees continued to send out proxy materials to shareholders, advocating in favor of Cook's candidacy and against Oliver's. Doc. 37, Mot. Prelim. Inj., 9. With the May 22, 2019 vote approaching, the Horizon Group sought assurances from the trustees that a vote would be held as scheduled. Id. at 10. On May 8, 2019, the trustees announced that a special meeting would occur on May 22, but that no vote would occur; instead, the trustees stated that the meeting would be adjourned until June 6, 2019. Id. at 11. The reason for the delay is disputed: the TPL and the trustees claim that the delay was necessary because of a “fundamental change” in Cook's candidacy that required proxy supplementation; Counterclaim Plaintiffs argue that the delay was manufactured to “buy time” to make a case against Oliver. Compare Doc. 15, Am. Compl., ¶¶ 38-40 with Doc. 37, Mot. Prelim. Inj., 10-11. Additionally, the parties dispute whether the trustees had the power under the TPL's DoT to adjourn or delay the meeting. Compare Doc. 15, Am. Compl., ¶¶ 38-40 with Doc. 37, Mot. Prelim. Inj., 10-11.

         Nonetheless, leading up to the May 22 meeting, the parties continued to wage competing proxy campaigns. Plaintiffs allege that Counterclaim Plaintiffs “engaged in a concerted misinformation campaign intended to manipulate the trustee election process . . . .” Doc. 55, Pls.' Mot., 3 (citing Doc. 15, Am. Compl., ¶¶ 56, 91). Plaintiffs also detail in their amended complaint how they provided Oliver with a questionnaire so they could reconsider his candidacy. Doc. 15, Am. Compl., ¶ 41. Plaintiffs allege the questionnaire solicited information on Oliver's background, business interests, and conflicts. Id. Plaintiffs further allege that while both Young and Cook completed the questionnaire, Oliver refused. Id. In a public response letter, Oliver asserted that the questionnaire was unnecessary because the trustees had already rejected his candidacy and because he would include all necessary information in proxy materials. Doc. 56, Countercl. Pls.' Resp., 6. Counterclaim Plaintiffs aver that between April 8 and May 22, the trustees filed “at least 49 different proxy solicitation materials that attacked Mr. Oliver's character directly and through innuendo.” Id.

         These proxy materials allegedly focused on Oliver's failure to respond to the trustees' questionnaires and requests for information. Id. at 6-7.

         Ultimately, on May 16, 2019, the trustees announced in a public letter that they would disqualify Oliver from serving as a trustee because he had failed to respond to the questionnaire. Id. at 8. This letter also purportedly “demanded” responses to additional information requests by May 20. Id. Oliver responded on May 20. Id. Oliver claims he answered the additional questions asked in the May 16 letter, but he continued to challenge the trustees' demands that he answer the questionnaire as a prerequisite to serve as a trustee. Id. Plaintiffs allege that the answers provided to the additional questions were inaccurate and incomplete. Doc. 15, Am. Compl., ¶ 44.

         On May 21, 2019, the TPL and the trustees filed this lawsuit. Doc. 1, Orig. Compl. The trustees also announced that same day that the special meeting would be “postponed until further notice.” Doc. 15, Am. Compl., ¶ 45. The trustees allege they took these actions because of Oliver's failure to provide the information requested and because of Counterclaim Plaintiffs' misstatements and omissions in proxy materials. Id.

         But the Horizon Group was determined that the meeting take place. Doc. 56, Countercl. Pls.' Resp., 9. The special meeting was originally scheduled to occur on the morning of May 22, at Sidley Austin's office in Dallas, Texas. Doc. 15, Am. Compl., ¶ 48. When the law firm allegedly refused to allow TPL shareholders up to its offices, they were redirected to another floor of that building. Doc. 56, Countercl. Pls.' Resp., 9. A meeting was conducted; an election inspector was appointed; and shareholders cast votes, in person and via proxy. Id. at 9-10. In all, 48.1% of all outstanding shares were voted at this meeting: 47.2% of outstanding shares were voted in favor of Oliver's election, 0.7% were voted against, and 0.2% abstained. Id. at 9. Thus, Oliver received 98.1% of the votes that were cast. Id. at 10. The trustees did not vote their proxies. Id. That same day, the trustees filed an amended complaint, which alleged that the meeting was invalid and that the vote was a sham. Doc. 55, Pls.' Mot., 4. In the amended complaint, they ask this Court to declare that the meeting was unlawful and that any votes cast at the meeting are invalid and void. Doc. 15, Am. Compl., ¶ 55. Plaintiffs also request that this Court declare that Oliver was not duly elected as a trustee and that he must make corrective disclosures before he is eligible to seek election. Id. ¶ 117.

         On June 25, 2019, Counterclaim Plaintiffs filed a motion for a declaratory judgment and preliminary injunction. Doc. 37, Mot. Prelim. Inj. For injunctive relief, Counterclaim Plaintiffs request that trustees Barry and Norris be prohibited from: (1) taking action on the TPL's behalf without Oliver's participation as a “fully empowered trustee”; or (2) further attempting to postpone the election. Id. at 4. For declaratory relief, Counterclaim Plaintiffs seek declarations: (1) that the TPL was required to hold a special meeting to elect a successor trustee; (2) that Barry and Norris had no authority to (a) “unilaterally postpone” the special ...


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