ACCEPTED
03-15-00248-CV
7124709
THIRD COURT OF APPEALS
AUSTIN, TEXAS
9/28/2015 1:31:41 PM
JEFFREY D. KYLE
CLERK
No. 03-15-00248-CV
IN THE COURT OF APPEALS FOR THE FILED IN
3rd COURT OF APPEALS
THIRD DISTRICT OF TEXAS AT AUSTIN AUSTIN, TEXAS
9/28/2015 1:31:41 PM
BRIGHAM EXPLORATION COMPANY, BEN M. JEFFREY
BRIGHAM , D. KYLE
Clerk
DAVID T. BRIGHAM, HAROLD D. CARTER, STEPHEN P. REYNOLDS,
STEPHEN C. HURLEY, HOBART A. SMITH, SCOTT W. TINKER,
STATOIL ASA AND FARGO ACQUISITION, INC.,
Appellants,
V.
RAYMOND BOYTIM, ET AL., INDIVIDUALLY AND ON
BEHALF OF OTHERS SIMILARLY SITUATED,
Appellees.
On Appeal from the 201st Judicial District Court of Travis County, Texas,
Trial Court Cause No. D-1-GN-11-003205
BRIEF OF APPELLANTS STATOIL ASA
AND FARGO ACQUISITION, INC.
BECK REDDEN LLP BECK REDDEN LLP
Gretchen S. Sween Russell S. Post
State Bar No. 24041996 State Bar No. 00797258
gsween@beckredden.com rpost@beckredden.com
Christopher R. Cowan Fields Alexander
State Bar No. 24084975 State Bar No. 00783528
ccowan@beckredden.com falexander@beckredden.com
515 Congress Avenue, Suite 1900 Parth S. Gejji
Austin, TX 78701 State Bar No. 24087575
(512) 708-1000 pgejji@beckredden.com
(512) 708-1002 (Fax) 1221 McKinney, Suite 4500
Houston, TX 77010
(713) 951-3700
(713) 951-3720 (Fax)
COUNSEL FOR APPELLANTS, STATOIL ASA AND FARGO ACQUISITION, INC.
Oral Argument Requested
IDENTITY OF PARTIES AND COUNSEL
Appellants: Counsel for Appellants:
Brigham Exploration Company Debora B. Alsup
Ben M. Brigham THOMPSON & KNIGHT LLP
David T. Brigham 98 San Jacinto Boulevard, Suite 1900
Harold D. Carter Austin, TX 78701
Stephen P. Reynolds
Stephen C. Hurley Timothy R. McCormick
Hobart A. Smith Michael Stockham
Scott W. Tinker Mackenzie Wallace
THOMPSON & KNIGHT LLP
(Defendants in the Trial Court) 1722 Routh Street, Suite 1500
Dallas, TX 75201
Statoil ASA Russell S. Post
Fargo Acquisition, Inc. Fields Alexander
Parth S. Gejji
(Defendants in the Trial Court) BECK REDDEN LLP
1221 McKinney Street, Suite 4500
Houston, TX 77010
Gretchen S. Sween
Christopher R. Cowan
BECK REDDEN LLP
515 Congress Avenue, Suite 1900
Austin, TX 78701
Appellees: Counsel for Appellees:
Raymond Boytim Randall J. Baron
David T. Wissbroecker
(Plaintiff in the Trial Court) Steven M. Jodlowski
ROBBINS GELLER RUDMAN & DOWD LLP
655 West Broadway, Suite 1900
San Diego, CA 92101
Samuel H. Rudman
Mark S. Reich
Michael G. Capeci
ROBBINS GELLER RUDMAN & DOWD LLP
58 South Service Road, Suite 200
Medville, NY 11747
Willie C. Briscoe
THE BRISCOE LAW FIRM, PLLC
8150 N. Central Expressway, Suite 1575
Dallas, TX 75206
Michael D. Marin
BOULETTE GOLDEN & MARIN LLP
2801 Via Fortuna, Suite 530
Austin, TX 78746
Hugh Duncan Samuel H. Rudman
Mark S. Reich
(Plaintiff in the Trial Court) Michael G. Capeci
ROBBINS GELLER RUDMAN & DOWD LLP
58 South Service Road, Suite 200
Medville, NY 11747
Joe Kendall
Daniel Hill
Jamie J. McKey
KENDALL LAW GROUP, LLP
3232 McKinney Avenue, Suite 700
Dallas, TX 75204
ii
Michael D. Marin
BOULETTE GOLDEN & MARIN LLP
2801 Via Fortuna, Suite 530
Austin, TX 78746
Walter Schwimmer Evan J. Smith
Marc L. Ackerman
(Plaintiff in the Trial Court) BRODSKY & SMITH, LLC
Two Bala Plaza, Suite 602
Bala Cynwyd, PA 19004
Michael Ohler Hamilton Lindley
Ryan Ohler DUNNAM & DUNNAM L.L.P.
Walter Ohler, Jr. P.O. Box 8418
Waco, TX 76714
(Plaintiffs in the Trial Court)
The Edward J. Goodman Life Shane T. Rowley
Income Trust LEVI & KORSINSKY LLP
30 Broad Street, 24th Floor
(Plaintiff in the Trial Court) New York, NY 10004
Denis F. Sheils
KOHN, SWIFT & GRAF, P.C.
One South Broad Street, Suite 2100
Philadelphia, PA 19107
The Edward J. Goodman Hamilton Lindley
Generation Skipping Trust DUNNAM & DUNNAM L.L.P.
P.O. Box 8418
(Plaintiff in the Trial Court) Waco, TX 76714
Denis F. Sheils
KOHN, SWIFT & GRAF, P.C.
One South Broad Street, Suite 2100
Philadelphia, PA 19107
iii
Robert Fioravanti Katharine M. Ryan
Richard A. Maniskas
(Plaintiff in the Trial Court) RYAN & MANISKAS, LLP
995 Old Eagle School Road, Suite 311
Wayne, PA 19087
Kelly N. Reddell
THE REDDELL FIRM PLLC
100 Highland Park Village, Suite 200
Dallas, TX 75025
Howard Weissberg Patricia C. Weiser
James C. Ficaro
(Plaintiff in the Trial Court) THE WEISER LAW FIRM, P.C.
22 Cassatt Avenue
Berwyn, PA 19312
Jeffrey Whalen Patricia C. Weiser
James C. Ficaro
(Plaintiff in the Trial Court) THE WEISER LAW FIRM, P.C.
22 Cassatt Avenue
Berwyn, PA 19312
Trial Court: 201st District Court of Travis County, TX
Hon. Lora Livingston, Presiding
iv
TABLE OF CONTENTS
Page
IDENTITY OF PARTIES AND COUNSEL ...........................................................................i
TABLE OF CONTENTS .................................................................................................. v
INDEX OF AUTHORITIES............................................................................................ vii
STATEMENT OF THE CASE ........................................................................................... x
STATEMENT REGARDING ORAL ARGUMENT ..............................................................xi
NOTE REGARDING CITATION......................................................................................xi
STATEMENT OF JURISDICTION .................................................................................. xii
ISSUES PRESENTED ................................................................................................... xii
INTRODUCTION ............................................................................................................ 1
STATEMENT OF FACTS ................................................................................................. 3
STANDARD OF REVIEW ................................................................................................ 8
SUMMARY OF THE ARGUMENT .................................................................................... 8
ARGUMENT ................................................................................................................. 9
I. The Trial Court Erred in Certifying the Aiding-and-Abetting
Claim. .................................................................................................... 9
A. The Named Plaintiffs Are Not Adequate Class
Representatives to Pursue an Aiding-and-Abetting
Claim Against Statoil. ................................................................. 9
1. Proving adequacy requires proof that class
representatives, not their lawyers, have specific
knowledge of relevant facts. ............................................. 9
2. The Named Plaintiffs did not prove their
adequacy to represent any class claims against
Statoil. ............................................................................. 12
v
B. The Named Plaintiffs’ Inadequacy Is Further
Highlighted by the Deliberate Lack of “Rigorous
Analysis” in the Trial Plan. ....................................................... 17
II. The Class Definition Fails Because It Contains Members
Who Could Not Have Sustained Any Injury in Fact. ......................... 19
A. A Class Must Be Defined So That All Members Have
Standing. ................................................................................... 20
B. The Class Definition Is So Broad That It Includes
Many Members Who Could Not Have Been Injured,
As a Matter of Law. .................................................................. 21
1. The class definition contains many members
with no standing to assert any breach of
fiduciary duty claim based on the allegedly
unlawful disclosures. ...................................................... 21
2. The class definition contains many members
with no standing to assert an aiding-and-
abetting claim against Statoil. ......................................... 23
C. Plaintiffs Have Tried to Obscure the Mismatch
Created by the Class Definition After Repeatedly
Tweaking That Definition. ........................................................ 23
CONCLUSION AND PRAYER ....................................................................................... 25
CERTIFICATE OF SERVICE .......................................................................................... 27
CERTIFICATE OF COMPLIANCE .................................................................................. 29
vi
INDEX OF AUTHORITIES
Case Page(s)
Berger v. Compaq Computer Corp.,
257 F.3d 475 (5th Cir. 2001) .............................................................................. 10
In re BJ’s Wholesale Club, Inc. Shareholders Litig.,
2013 WL 396202 (Del. Ch. Jan. 31, 2013) ...................................................17, 18
Bowden v. Phillips Petroleum Co.,
247 S.W.3d 690 (Tex. 2008) ................................................................................ 8
City of Livonia Emps’ Ret. Sys. v. Boeing Co.,
711 F.3d 754 (7th Cir. 2013) .............................................................................. 11
DaimlerChrysler Corp. v. Inman,
252 S.W.3d 299 (Tex. 2008) .............................................................................. 20
In re Deepwater Horizon,
732 F.3d 326 (5th Cir. 2013) ........................................................................20, 25
In re Enron Corp. Securities Lit.,
529 F. Supp. 2d 644 (S.D. Tex. 2006) ................................................................ 11
Ford Motor Co. v. Sheldon,
22 S.W.3d 444 (Tex. 2000)................................................................................. 20
Forsyth v. Lake LBJ Inv. Corp.,
903 S.W.2d 146 (Tex. App.—Austin
1995, writ dismissed w.o.j.) ................................................................................ 10
Gen. Motors Corp. v. Bloyed,
916 S.W.2d 949 (Tex. 1996) ................................................................................ 9
Hunt v. Bass,
664 S.W.2d 323 (Tex. 1984) .............................................................................. 20
King v. City of Austin,
2004 WL 578940 (Tex. App.—Austin
Mar. 25, 2004, no pet.)........................................................................................ 10
In re Kosmos Energy Ltd. Securities Litig,
299 F.R.D. 133 (N.D. Tex. 2014) ...........................................................10, 11, 12
vii
M.D. Anderson Cancer Ctr. v. Novak,
52 S.W.3d 704 (Tex. 2001)................................................................................. 20
Malpiede v. Townson,
780 A.2d 1075 (Del. 2001) ................................................................................. 18
Morgan v. Cash,
2010 WL 2803746 (Del. Ch. July 16, 2010) ...................................................... 18
Polaris Indus. v. McDonald,
119 S.W.3d 331 (Tex. App.—Tyler
2003, no pet.) ...................................................................................................... 20
Riemer v. State,
392 S.W.3d 635 (Tex. 2012) ................................................................................ 8
In re Rural Metro Corp. Shareholders Litig.,
88 A.3d 54 (Del Ch. 2014) ................................................................................. 17
S.W. Bell Tel. Co. v. Mktg. on Hold Inc.,
308 S.W.3d 909 (Tex. 2010) ..........................................................................9, 10
Sw. Ref. Co. v. Bernal,
22 S.W.3d 425 (Tex. 2000).......................................................................8, 19, 25
In re Telecomms., Inc.,
2003 WL 21543427 (Del. Ch. July 7, 2003) ...................................................... 18
Tex. Dept. of Mental Health
& Mental Retardation v. Petty,
778 S.W.2d 156 (Tex. App.—Austin
1989, writ dism’d w.o.j.)..................................................................................... 20
STATUTES AND RULES
8 DEL. CODE § 253 ..................................................................................................... 6
TEX. CIV. PRAC. & REM. CODE § 51.014(a)(3) ....................................................... xii
TEX. R. APP. P. 39.1(d) ..............................................................................................xi
TEX. R. CIV. P. 42(a) ................................................................................................. 9
viii
OTHER AUTHORITIES
7A Wright & Miller,
FED. PRAC. AND PRO. § 1766
(3d ed. 2005) ....................................................................................................... 10
1 H. Newberg & A. Conte,
NEWBERG ON CLASS ACTIONS
§ 3:50 (5th ed. 2015) ............................................................................................. 9
ix
STATEMENT OF THE CASE
Nature of the Case Class certification appeal. APP. 1 (Order).
This class action was brought by former shareholders of
Brigham Exploration Company (“Brigham”) in response
to an offer by Statoil ASA (“Statoil”) to buy Brigham.
CR4-55. The principal defendants are Brigham and the
Brigham directors who agreed to accept Statoil’s offer;
Plaintiffs allege that the Brigham Defendants sold cheap,
thereby injuring Brigham’s shareholders. CR5-7.
In addition, Plaintiffs sued Statoil and a related entity
(Fargo Acquisition, Inc.)1 for the successful acquisition.
Plaintiffs allege that Statoil struck too good a deal for
itself and in doing so aided and abetted a breach of the
Brigham directors’ fiduciary duties. Id.
Course of Proceedings During discovery, none of the class representatives was
able to state a viable basis for the claims against Statoil;
some did not even know they were suing Statoil.
Nevertheless, Judge Lora Livingston found them all to be
adequate class representatives and certified a class action.
APP. 1, APP. 3.
After a previous interlocutory appeal in which this Court
reversed class certification for lack of a valid trial plan,
APP. 2, Judge Livingston signed a new order certifying
the class and adopted a trial plan proposed by Plaintiffs
that barely discusses Statoil. APP. 1, APP. 3.
Trial Court Honorable Lora Livingston, presiding
201st Judicial District Court, Travis County, Texas
Disposition Below The trial court signed an order granting class certification
on April 9, 2015.
1
Fargo, a Delaware corporation wholly owned by Statoil, was formed solely to effectuate
Brigham’s acquisition. “Statoil” is used to refer to both Statoil and its subsidiary Fargo.
x
STATEMENT REGARDING ORAL ARGUMENT
Statoil respectfully requests oral argument. This is the second appeal of a
class certification order in this action; the first certification order was reversed.
The district court’s decision involves important questions regarding the standards
for adequacy of a class representative and for standing in a securities class action.
Therefore, oral argument will likely aid the Court. TEX. R. APP. P. 39.1(d).
NOTE REGARDING CITATION
The record citations are to the Reporter’s Record (RR), the Clerk’s Record
(CR), the first Supplemental Clerk’s Record (1SCR), second Supplemental Clerk’s
Record (2SCR), and the third Supplemental Clerk’s Record (3SCR).
The Clerk’s Record also includes exhibits the district clerk filed by hand.
Although part of the Clerk’s Record, they are not paginated. These documents
were initially filed with the district court under seal, but have since been unsealed.
APP. 3 contains “Exhibit 1” filed with the Court on June 5, 2015, which includes
“Plaintiffs’ Proposed Second Amended Plan for Trial of Class Claims.” APP. 4
contains “Exhibit 1” filed with the Court on August 14, 2015, which includes
“Plaintiffs’ Response to Defendants’ Joint Opposition to Class Certification and
Plaintiffs’ Proposed Amended Plan for Trial of the Class Claims.”
xi
STATEMENT OF JURISDICTION
The Court has jurisdiction over this interlocutory appeal from an order
granting class certification. TEX. CIV. PRAC. & REM. CODE § 51.014(a)(3).
ISSUES PRESENTED
In addition to the grounds for relief set forth by the Brigham Defendants,
Statoil files this separate brief to develop two issues unique to Statoil and to
underscore an issue of particular significance to class-action jurisprudence:
I. Did the trial court err in certifying a class on the aiding-and-abetting claims
against Statoil? Specifically:
A. Did the trial court err in finding the Named Plaintiffs adequate to
pursue aiding-and-abetting claims against Statoil where none of them
knows any facts supporting the Plaintiffs’ allegation that Statoil
“knowingly participated” in the Brigham Defendants’ alleged breach
of fiduciary duties?
B. Did the trial court err in certifying an aiding-and-abetting claim
against Statoil based on a trial plan that is facially defective and
betrays a lack of rigorous analysis for that claim?
II. Did the trial court err in certifying a class based on a class definition that
includes class members who could not have sustained the injuries alleged,
depriving them of standing to participate in the class action?
xii
INTRODUCTION
This class action was filed within hours of the announcement that Statoil had
made an all-cash tender offer to purchase all Brigham shares at a price significantly
above the market price. The principal claims are against the Brigham directors
who approved the sale. Statoil, the buyer, was dragged into this lawsuit through a
fanciful aiding-and-abetting theory. Statoil has been subjected to sustained,
expensive litigation simply because it made a cash offer to buy another company
on terms that it viewed as a good deal for its shareholders (not to mention terms
that the vast majority of Brigham’s shareholders accepted and that the market itself
viewed favorably during the entire time the tender offer was pending).
Everyone involved in the underlying merger benefitted: those who accepted
Statoil’s tender offer, those who traded their shares to capture the benefit that
Statoil’s offer created, and even those few who held out until the tender offer was
effected through a short-form merger. Nevertheless, Plaintiffs’ counsel sprinted to
the courthouse to file this lawsuit the instant the merger was announced.
Whatever one thinks of this dubious strategy as to the Brigham Defendants,
the seven Named Plaintiffs are inadequate to represent a class against Statoil.
They have offered no factual basis for suing Statoil; indeed, some did not even
know that they had sued Statoil or who Statoil is. Of the few Named Plaintiffs
who could even identify Statoil, the only basis they could offer for the decision to
sue Statoil was this one: “I think they should have paid a higher price.” 3SCR85.
1
This claim is outlandish. Brigham shareholders are attempting to sue Statoil
for negotiating a merger on terms that they allege were too favorable to Statoil.
Such a claim is at odds with the very notion of a free market; securities litigation
cannot be based on one company’s failure to look out for another’s shareholders.
If this theory were valid, it would mean that the directors of the acquiring company
in every merger are obligated to breach fiduciary duties to their own shareholders
to ensure that shareholders on the other side of the deal are satisfied. It would also
mean that a company must expose itself to the risk of a derivative suit by its own
shareholders to avoid “aiding-and-abetting” liability. This position is nonsensical.
It is unsurprising, therefore, that the Named Plaintiffs cannot explain their suit
against Statoil and the trial plan regarding Statoil is facially flawed.
In addition, the class definition—which has been retooled multiple times—
remains completely out of joint with the alleged injury. The class is now defined
as persons who held Brigham shares on October 17, 2011, the day the tender offer
was announced. Yet the allegedly inadequate disclosures regarding this offer were
not made until 11 days later. By that time, a massive volume of Brigham shares
had been traded—well in excess of the total number of outstanding shares.2 Thus,
the class definition indisputably includes a vast number of shareholders who could
not have been injured by the disclosures, as a matter of law. This flaw is fatal.
2
This trading frenzy is explained by Statoil’s offer to pay $36.50 per share for Brigham shares,
when the day before the announcement the stock had closed at only $30.90 per share. CR148.
2
STATEMENT OF FACTS
Brigham approaches Statoil; eventually, these unrelated companies
strike a win-win merger deal for their shareholders
Statoil began as Norway’s state oil company over four decades ago. Today,
it is a publicly traded energy company with a presence in over thirty countries.
The company is listed on both the New York and Oslo stock exchanges.3
Brigham too was a publicly traded company until Statoil acquired it in 2011
as the result of an all-cash tender offer in response to which 92.6% of Brigham’s
shares were voluntarily tendered. CR1941. The acquisition resulted from inquiries
that Brigham had initiated and followed months of arms-length negotiations.
CR1416; CR1418-28.
Nearly a year after Brigham approached Statoil and other potential buyers,
Statoil’s board approved a proposal to Brigham. CR1420. Brigham countered. Id.
Initially, neither side budged. But given the time and energy both had expended on
the potential deal, they agreed to continue negotiating. Id.
After further negotiations, Statoil increased its offer to $36.50 per share.
CR1424. Brigham’s board later unanimously approved that amount. CR1426.
Thus, on October 17, 2011, Statoil and Brigham executed a merger agreement.
CR1428. That same day, the basic terms of the deal were made public. CR27.
3
See http://www.statoil.com/en/About/History/Pages/default3.aspx (September 25, 2015).
3
Statoil’s tender offer boosts Brigham’s share price
Statoil’s tender offer represented a premium of more than 18% over the
highest price for Brigham shares during the 30 days before the deal was announced
and a 33% premium over the average market price of Brigham shares during that
same period. CR184-85. The $36.50 offer was close to Brigham’s historic high4
and far above its historic low of less than $1 per share. CR143-216.
After Statoil’s offer was announced, Brigham’s stock price shot up in very
active trading. The first day after the announcement, 62 million outstanding shares
(a number exceeding 50% of the outstanding shares) were sold on the open market;
and the closing per-share price that day was $36.40—just 10 cents below the
tender offer per-share price. CR185. Between October 17 and October 28, 2011,
134 million Brigham shares were exchanged on the open market at similar prices.
Id. By the time the merger was effected on December 8, 2011, 262 million shares
had been traded at similar prices. Id.
Plaintiffs file suit, anticipating an injury that never occurs
On October 17, 2011—the very day that Statoil’s tender offer was
announced and 11 days before the tender offer even opened—a lawsuit was filed
that became the template for this class action. CR221-38. That first lawsuit was
filed on behalf of Raymond Boytim, one of the Named Plaintiffs. Id.
4
Brigham’s shares were largely tied to the price of oil. The all-time closing price high of $37.50
lasted for less than a week, when oil prices spiked to over $110 per barrel. CR182; CR194.
Since then, of course, oil prices have plummeted.
4
Astoundingly, Boytim testified that he did not decide to file suit until some
time later, after he had read about “all of these law firms that were filing suit.”
3SCR112. When asked point blank about the lawsuit bearing his name that was,
indisputably, filed on October 17, 2011, Boytim said: “If it -- if it was, I just
wasn’t aware of it.” Id. (emphasis added).
The lawsuit filed in Boytim’s name sought to enjoin the Statoil tender offer
on the ground that Brigham’s board had failed to disclose material information to
Brigham shareholders. CR233-34. More specifically, it alleged that Brigham
board members had failed “to disclose material financial information” related to
the merger “to enable Brigham’s stockholders to cast informed votes on the
Proposed Transaction.” CR234; CR235. And it included a claim against Statoil
for allegedly aiding and abetting the Brigham board’s purported failure to disclose.
CR235-36. But at the time, the tender-offer disclosures did not even exist yet—
they were made later, in required SEC filings. CR1472.
Other lawsuits quickly followed. Between the October 17 announcement
and the October 28 disclosures, nine other putative class actions were filed alleging
similar claims and attacking disclosures that had not yet been made. CR1461-63.
Finally, on October 28, 2011 (11 days after the first lawsuit had been filed)
the required disclosures were filed with the SEC. CR1391-1530. These are the
allegedly defective disclosures subsequently identified in the Named Plaintiffs’
class action trial plan. See APP. 3, Trial Plan at 4.
5
The vast majority of Brigham shareholders embrace the tender offer
The day of the disclosures—October 28, 2011—the tender offer opened.
The tender offer was successful: 92.6% of all shares were voluntarily tendered.
CR1941. Because Statoil acquired more than 90% of Brigham’s outstanding shares
during the first-step tender offer, it was entitled to effect a “short-form merger”
that did not require the approval of Brigham’s shareholders. 8 DEL. CODE § 253.
Using this procedure, each remaining share of Brigham stock was converted into a
right to receive $36.50 per share on December 8, 2011. CR1942.
But even as shareholders were voting with their shares in favor of the deal,
Plaintiffs sought to enjoin the merger. On November 22, 2011, Judge John Dietz
held a hearing and denied Plaintiffs’ request for a temporary injunction. APP. 5.
Thereafter, Plaintiffs sought class certification and damages based on allegations
that individual board members had breached fiduciary duties owed to Brigham
shareholders and that Statoil and Brigham itself had aided and abetted that breach.
CR370-400; CR678-707.
Well after the merger had been concluded, and after evidentiary hearings on
class certification, Judge Lora Livingston granted Plaintiffs’ motion to certify a
class defined as “all holders of common stock of Brigham Exploration Company as
of October 17, 2011.” CR1089; CR1190-95. The class action trial plan devoted
just three sentences to the aiding-and-abetting claim against Statoil. CR1150.
6
After the class is decertified, Plaintiffs obtain the same result on remand
On appeal, this Court held that the trial court had abused its discretion by
certifying a class without an adequate trial plan. APP. 2. The Court did not need to
reach any other issues, leaving for another day serious arguments that Plaintiffs
had failed to satisfy the requirements of Rule 42—such as adequacy. Id. at n.2.
On remand, Plaintiffs again proposed a class defined as “all holders of
common stock of Brigham Exploration Company as of October 17, 2011.”
3SCR664. Plaintiffs also proposed an amended trial plan, which was unchanged
with respect to the claim against Statoil. CR92. After Statoil objected to the
absence of any law relevant to the aiding-and-abetting claim, Plaintiffs submitted a
second amended trial plan that purported to address Statoil’s concerns. APP. 3.
That version, however, still only devotes one paragraph to the claim against Statoil
and merely recites the pleading standard. Id., Trial Plan at 4-5. The Defendants
again objected to certification and to the proposed trial plan on multiple grounds.
CR119-216; 3SCR3-652.
Judge Livingston signed a second class certification order, adopting and
incorporating Plaintiffs’ second amended class action trial plan. APP. 1; APP. 3.
The court authorized the seven Named Plaintiffs to serve as class representatives—
although only four had attended the initial class certification hearing and Plaintiffs
had presented no evidence that any Named Plaintiff knew facts relevant to the
claim against Statoil. CR656-76; CR1589-1859. Statoil appealed again.
7
STANDARD OF REVIEW
A trial court exercises discretion in certifying a class action, but must do so
subject to the requirements of Rule 42; “compliance with class action requirements
must be demonstrated rather than presumed.” Bowden v. Phillips Petroleum Co.,
247 S.W.3d 690, 696 (Tex. 2008). The Texas Supreme Court has rejected a
“certify now and worry later” view of class certification. Sw. Ref. Co. v. Bernal,
22 S.W.3d 425, 435 (Tex. 2000). The court must perform “a ‘rigorous analysis’
before ruling on class certification” in order to assure that Rule 42 is satisfied. Id.;
see also Riemer v. State, 392 S.W.3d 635, 639 (Tex. 2012) (same).
SUMMARY OF THE ARGUMENT
Statoil respectfully adopts the issues presented and the arguments developed
in the Brigham Defendants’ brief.
In addition, this brief focuses on two arguments of importance to Statoil.
First, the Named Plaintiffs are not adequate representatives for the class claims
against Statoil because none of them has any knowledge of facts relevant to the
aiding-and-abetting claim. Second, in attempting to cover up the adequacy defect,
the trial plan is facially defective and betrays a fatal lack of rigorous analysis.
Finally, as currently defined, the class contains numerous shareholders who
could not have sustained the injuries alleged because the conduct in question did
not occur until after the inception of the class. Thus, many class members
(perhaps most) lack standing to bring any of the asserted claims against Statoil.
8
ARGUMENT
I. The Trial Court Erred in Certifying the Aiding-and-Abetting Claim.
A. The Named Plaintiffs Are Not Adequate Class Representatives to
Pursue an Aiding-and-Abetting Claim Against Statoil.
Regardless of the viability of the class certification order with respect to the
Brigham Defendants, there is no basis for class certification with respect to Statoil.
The Named Plaintiffs failed to show that they are adequate class representatives
with respect to Statoil; in fact, their testimony conclusively proved otherwise.
1. Proving adequacy requires proof that class representatives,
not their lawyers, have specific knowledge of relevant facts.
Rule 42(a) requires that class representatives “fairly and adequately protect
the interests of the class.” TEX. R. CIV. P. 42(a). This “adequacy” requirement
implicates paramount due process concerns. See 1 H. Newberg & A. Conte,
NEWBERG ON CLASS ACTIONS § 3:50 at 408 (5th ed. 2015); see also S.W. Bell
Tel. Co. v. Mktg. on Hold Inc., 308 S.W.3d 909, 919 (Tex. 2010) (explaining that
class action requirements “are not only procedural safeguards but are based in the
Due Process clauses of the United States and Texas Constitutions”). Importantly,
these concerns are not satisfied unless both “class representatives and their
counsel are adequate representatives” for the class. Gen. Motors Corp. v. Bloyed,
916 S.W.2d 949, 954 (Tex. 1996). When a district court ignores this requirement,
reviewing courts “have no assurance that the district court fully appreciated the
scope and nature of the interests at stake.” Id.
9
Thus, class representatives must produce “actual, credible evidence” that
they “are informed, able individuals, who are themselves—not the lawyers—
actually directing the litigation.” In re Kosmos Energy Ltd. Securities Litig,
299 F.R.D. 133, 145 (N.D. Tex. 2014)).5 A class action cannot be lawyer-driven:
“the class representative is ‘not simply lending [his or her] name [ ] to a suit
controlled entirely by the class attorney.’” Mktg. on Hold, 308 S.W.3d at 927
(quoting 7A Wright & Miller, FED. PRAC. AND PRO. § 1766 (3d ed. 2005)).
At a bare minimum, class representatives must establish that they possess
personal knowledge of the facts underlying their claims—and must know who they
are pursuing those claims against, and why. See Forsyth v. Lake LBJ Inv. Corp.,
903 S.W.2d 146, 152 (Tex. App.—Austin 1995, writ dismissed w.o.j.) (quoting
federal authority for the principle that an adequate representative is “one who will
check the otherwise unfettered discretion of counsel in prosecuting the suit and
who will provide his personal knowledge of the facts underlying the complaint”).
These adequacy requirements are identical in state and federal court.6
5
Kosmos was decided under the federal analogue to Rule 42(a), but it is especially persuasive
because it involves an attempt to certify a class pursued by the same counsel appointed as lead
counsel here, in reliance on evidentiary submissions markedly similar to those proffered here.
After a rigorous, well substantiated analysis, the class representatives were deemed inadequate.
See Kosmos, 299 F.R.D. at 136-37.
6
See King v. City of Austin, 2004 WL 578940, at *4 (Tex. App.—Austin Mar. 25, 2004, no pet.)
(mem. op.) (named plaintiff who had been “recruited by counsel to be a class representative” and
“did not do independent investigation to assist his attorneys” was held to be inadequate); see also
Berger v. Compaq Computer Corp., 257 F.3d 475, 482-83 (5th Cir. 2001) (explaining that
class representative is required “to possess a sufficient level of knowledge and understanding to
be capable of ‘controlling’ or ‘prosecuting’ the litigation”).
10
Applying these adequacy standards, class certification should be denied
“where the representative lacks knowledge or a basic understanding of what the
suit is about” or the representative is unable to “identify certain named parties or
the roles the defendants played in the alleged fraud.’” Kosmos, 299 F.R.D. at 146
(quoting In re Enron Corp. Securities Lit., 529 F. Supp. 2d 644 (S.D. Tex. 2006)).
A class representative’s “inability to articulate any underlying case specifics
‘beyond conclusory allegations of fraud’” is a telltale sign of inadequacy. Id.
Kosmos offers an apt benchmark for this case. The affidavit in Kosmos,
which was sponsored by the same class counsel as this case, was aptly described as
“little more than formulaic, boilerplate assertions.” Id. It included the following
“conclusory pronouncements”:
“I have participated in the Plan’s decision-making with respect to litigation
matters, and have participated in supervising outside legal counsel in the
Plan’s pending litigation.”
“The Plan has reviewed and monitored the progress of this litigation and has
actively participated in its prosecution. For example, the Plan has” “received
and reviewed” reports and correspondence, “supervised” discovery
preservation, “reviewed pleadings” and “consulted with lawyers.”
Id. Such conclusory statements fail to satisfy the adequacy requirement. Id.
Class counsel in this case have an unfortunate history of aggressive tactics
that abuse the class-action device and devalue its important purposes. See, e.g.,
City of Livonia Emps’ Ret. Sys. v. Boeing Co., 711 F.3d 754, 762 (7th Cir. 2013)
(Posner, J.) (citing cases). This case follows the same pattern.
11
2. The Named Plaintiffs did not prove their adequacy to
represent any class claims against Statoil.
Plaintiffs presumed (incorrectly) that they could rely on written affidavits,
comprised entirely of boilerplate assertions, to prove that their class representatives
were adequate. It is telling that the affidavit that was found wanting in Kosmos,
reproduced in its entirety at footnote 64 of that opinion, was far more detailed than
most of the Named Plaintiffs’ affidavits in this case. The affidavits do little more
than assert that each affiant had “actively monitored the litigation” and planned to
“direct class counsel.” CR656-76. Most of the Named Plaintiffs’ affidavits do not
even mention Statoil, and none of the affidavits suggests any factual basis for the
aiding-and-abetting claim asserted against Statoil. See id. The affidavits are not
“actual, credible evidence” that the affiants are “informed, able individuals,
who are themselves—not the lawyers—actually directing the litigation.”
Kosmos, 299 F.R.D. at 141. They are legally insufficient on their face.
Additionally, the Named Plaintiffs’ deposition testimony demonstrated
conclusively that they had no knowledge to support an aiding-and-abetting claim—
most did not even know who Statoil is or why it was sued:
Myrna Goodman of the Edward J. Goodman Trust
Q: What is Statoil ASA?
A: Don’t know.
Q: Do you know why Statoil ASA is being sued?
12
A: No.
….
Q: What about Statoil, did you do any independent investigation
regarding Statoil?
A: No.
Q: Did you look online onto Statoil’s website?
A: No.
Q: Do you know what type of company Statoil is?
A: No, I do not.
3SCR32; 3SCR 37-38.
Jeffery Whalen
Q: What are you alleging that Statoil did wrong in connection with the
merger of the Brigham Exploration and the share price?
A: That I can’t answer.
3SCR45.
Hugh Duncan
Q: Mr. Duncan, are you suing Statoil in this case?
A: Am I what?
Q: Are you suing Statoil?
....
A: I think the pleadings speak for themselves.
Q: Do you know whether you’ve sued Statoil or not?
A: Pardon me?
Q: Do you know, as we sit here, whether you are suing Statoil?
13
A: I believe we are, aren’t we?
...
Q: Mr. Duncan, why are you suing Statoil?
...
A: I’ll claim the privilege.
3SCR52-53 (objections omitted).
Walter Schwimmer
Q: Why are you suing Statoil? . . . . Dr. Schwimmer, if you have an
independent understanding of why you sued Statoil other than the
outcome of discussion with your attorneys, you can respond.
A: I’m sorry. I don’t have any information other than that which has
been communicated to me by our -- my attorneys.
3SCR60-61 (objection omitted).
Howard Weissberg
Q: My last question was, have you sued Statoil?
A: No.
3SCR68.
Robert Fioravanti
Q: Why are you suing Statoil?
A: Because they didn’t – I believe they did not pay a fair value of the
company’s worth.
Q: Do you believe they wronged you?
A: I believe they should have paid more for the Brigham stock.
Q: Is that it? Is that the only thing you think they did wrong?
A: I think they should have paid a higher price.
14
Q: Anything else?
A: No.
3SCR84-85 (objections omitted).
Raymond Boytim
Q: What about Statoil, what are you alleging Statoil did wrong?
A: Statoil?
Q: Statoil.
A: That’s a tough one. . . . All the parties here had to be closely
involved to the point that they all had some responsibility with what
happened, the merger of the companies. And if the Brigham side of
the merger was flawed in some way, I feel the other side has got to be
flawed, because they came together so late and so quickly, no
prolonged negotiations, no long discussions. It was just bingo. And -
-- and there’s no explanation for it. It just happened. And I don’t like
things that just happen. You know, a deal – a deal is made. And I –
personally I would like to know how they really got together and
decided on $36.50. And anybody that was a party to agreeing it is
listed on this.
Q: And are you contending that Statoil did something to injure you as
a shareholder of Brigham Exploration? . . . Are you contending that
Statoil injured you as a shareholder of Brigham Exploration? When
you said their processes must have been flawed, are you suggesting
that they are responsible for some sort of injury to you?
A: I don’t know enough about it to make those allegations really. It
is implied. But I – I stand by what I said. They were involved; they
were a party to it.
3SCR122 (objections omitted).
In short, none of the Named Plaintiffs stated a viable basis for suing Statoil.
15
Only four of the Named Plaintiffs attended the class certification hearing.
CR1589-1859.7 Two of the four tried to rehabilitate their testimony about Statoil,
but they were unable to shed any real light on why class counsel had sued Statoil.
First, Whalen testified that “Statoil is the other entity in the merger, and if --
I think that the share price was too low for the acquisition cost, then they would be
liable for any damages because Brigham Oil is now owned entirely by Statoil.”
CR1737-38. But Whalen also admitted: “I just made that up right now.” Id.
Second, Weissberg similarly testified that the Plaintiffs had sued Statoil
“because Statoil is the company that bought Brigham. So, consequently, okay,
they are the ones who now own Brigham and they are the ones responsible for
Brigham, okay?” CR1679-80. “The attorneys decide who to sue.” CR1680.
In other words, the two Named Plaintiffs who testified at the hearing alleged
that Statoil is liable for the Brigham Defendants’ actions as the successor company
(which is false), not that it is responsible for any wrongdoing in the merger itself.
Indeed, their testimony demonstrated not only that they lacked any factual basis for
suing Statoil, but that they did not even understand the theory against Statoil.
This record includes no evidence that will satisfy the adequacy requirement.
Instead, it conclusively demonstrates the Named Plaintiffs’ inadequacy.
7
Boytim was not among them. Perhaps he did not attend the hearing because his deposition had
revealed the awkward fact that he was not even aware that class counsel had filed a lawsuit in his
name on October 17, 2011. He testified that he had not sought a lawyer until after several other
lawsuits had been filed. 3SCR112.
16
B. The Named Plaintiffs’ Inadequacy Is Further Highlighted by the
Deliberate Lack of “Rigorous Analysis” in the Trial Plan.
The sole claim asserted against Statoil is an aiding-and-abetting claim,
which would require the Plaintiffs to prove Statoil’s “knowing participation” in the
Brigham board members’ alleged breaches of fiduciary duty. The trial plan fails to
account for this critical element, allowing class certification on an invalid theory.
Proving the point, Plaintiffs’ trial plan is just a one-paragraph recitation of
the pleading standard for an aiding-and-abetting claim. APP. 3, Trial Plan at 4-5.
It ignores the elements Plaintiffs must prove at trial—because they cannot allege
the facts required to prove the claim. To prove Statoil knowingly participated in a
breach of fiduciary duty by Brigham’s board, Plaintiffs must prove that Statoil:
(1) “directly sought to induce the breach of fiduciary duty”;
(2) “create[d] or exploit[ed] conflicts of interest in [Brigham’s] board,”
(3) “used knowledge of the breach to gain a bargaining advantage” in
negotiations with Brigham’s board, or
(4) knew the “terms of the transaction [were] so egregious or the magnitude
of the side deals [] so excessive as to be inherently wrongful.”
In re BJ’s Wholesale Club, Inc. Shareholders Litig., 2013 WL 396202, at *14
(Del. Ch. Jan. 31, 2013); see also In re Rural Metro Corp. Shareholders Litig., 88
A.3d 54, 99 (Del Ch. 2014) (to prove aiding or abetting a breach of fiduciary duty,
the plaintiff must establish that “the third party, for improper motives of its own,
misleads the directors into breaching their duty of care”).
17
Because Plaintiffs cannot establish these factors, the trial plan omits them.
APP. 3, Trial Plan at 4-5. Instead, it assumes that Plaintiffs could prevail based on
their allegation that Statoil bought Brigham too cheaply. But under Delaware law,
attempting “to reduce [Brigham’s] sale price through arm’s length negotiations”
and “hard bargaining” is insufficient to state a claim as a matter of law. In re BJ’s,
2013 WL 396202 at *14; Malpiede v. Townson, 780 A.2d 1075, 1096 (Del. 2001).
Even if Brigham was “worth substantially more” than the purchase price, that fact
does “not provide a reasonable inference” that Statoil “conspired with the Board to
purchase the Company at a discounted price.” In re BJ’s, 2013 WL 396202 at *15.
Nor could Plaintiffs prevail by proving that Statoil sought to retain members
of the Brigham management team; “retaining management is a routine occurrence
for the obvious reason that an acquiror often wants to keep existing management in
order to ensure that the acquired assets continue to be managed optimally.”
Morgan v. Cash, 2010 WL 2803746, at *5 (Del. Ch. July 16, 2010).
Thus, Plaintiffs’ allegations do not state a cognizable claim against Statoil.
In Delaware state court, this aiding-and-abetting claim against Statoil would have
been dismissed on the pleadings. E.g., Malpiede, 780 A.2d at 1098; In re BJ’s,
2013 WL 396202, at *14; In re Telecomms., Inc., 2003 WL 21543427, at *2-3
(Del. Ch. July 7, 2003). Statoil’s offer to buy Brigham for the best price Statoil
could obtain through arms-length negotiations is simply not a basis for a legitimate
aiding-and-abetting claim.
18
The Texas Supreme Court mandates that, before certifying a class action,
trial courts must undertake a “rigorous analysis” of the “claims ... relevant facts,
and applicable substantive law” in order to “make a meaningful determination of
the certification issues.” Bernal, 22 S.W.3d at 435. That rigorous analysis must be
reflected in the trial plan. Id. This trial plan falls woefully short of that standard,
because none of the Named Plaintiffs has any factual basis for asserting that Statoil
“knowingly participated” in any breach of fiduciary duty by the Brigham board.
APP. 3, Trial Plan at 4-5. This claim is a naked attempt to penalize an acquiring
company for trying to make a good deal, which is nothing but a toll on capitalism.
By certifying the claim for class treatment, the trial plan is fatally defective.
Taken together, the inadequacy of the class representatives and the invalidity
of the trial plan (which was deliberately constructed to cover up that inadequacy)
reveals that the lawyers, and not the class representatives, are driving this lawsuit.
The trial court abused its discretion by certifying a class against Statoil.
II. The Class Definition Fails Because It Contains Members Who Could
Not Have Sustained Any Injury in Fact.
As stated above, Statoil incorporates the Brigham Defendants’ arguments,
which demonstrate additional reasons why the entire class should be decertified.
One of those arguments merits particular emphasis because it is so foundational:
the class has been defined in such a way that it includes numerous individuals who
do not have standing to sue because they could not have sustained any injury.
19
A. A Class Must Be Defined So That All Members Have Standing.
Standing is the first prerequisite to maintaining a legal action. Hunt v. Bass,
664 S.W.2d 323, 324 (Tex. 1984). Class actions are no exception to that rule.
M.D. Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 708 (Tex. 2001) (explaining
that a plaintiff in a class action must satisfy the threshold requirement of standing);
see also DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 304 (Tex. 2008)
(stating that “[a] court has no jurisdiction over a claim made by a plaintiff without
standing to assert it”); Tex. Dept. of Mental Health & Mental Retardation v. Petty,
778 S.W.2d 156, 163-67 (Tex. App.—Austin 1989, writ dism’d w.o.j.) (finding
plaintiff that lacked standing was not a competent class representative).
Because standing is jurisdictional, a class definition cannot include any
claimants who lack standing. See In re Deepwater Horizon, 732 F.3d 326, 342
(5th Cir. 2013) (citing multiple federal authorities). In other words, a class must
“be defined in such a way that anyone within it would have standing” with respect
to the claims asserted. Id. (emphasis added). Federal and state law are consistent
in this area, so “federal decisions and authorities interpreting current federal class
action requirements are persuasive in Texas actions.” Ford Motor Co. v. Sheldon,
22 S.W.3d 444, 452 (Tex. 2000); see also Polaris Indus. v. McDonald, 119 S.W.3d
331, 338 (Tex. App.—Tyler 2003, no pet.) (applying this principle to standing).
Therefore, the Fifth Circuit’s recent Deepwater Horizon decision, which is directly
on point, should be controlling in this case.
20
B. The Class Definition Is So Broad That It Includes Many Members
Who Could Not Have Been Injured, As a Matter of Law.
This class is defined to include “all holders of Brigham common stock as of
October 17, 2011.” CR3167. Many members of that class do not have standing to
bring any claims based on the disclosures that Plaintiffs allege injured them. Thus,
under the rule of Deepwater Horizon, the class definition is defective.
1. The class definition contains many members with no
standing to assert any breach of fiduciary duty claim based
on the allegedly unlawful disclosures.
According to the trial plan, this case turns on an inadequate disclosure theory
involving disclosures that were made on October 28, 2011:
plaintiffs contend that the Individual Defendants disseminated a
Schedule 14D-9 and tender offer statement on Schedule TO, filed
with the Securities and Exchange Commission on October 28, 2011,
which was false and misleading and failed to disclose all material
information to Brigham shareholders in connection with the tender
offer from Statoil.
APP. 3, Trial Plan at 4 (emphasis added). As Plaintiffs put it in their live petition:
The Individual Defendants breached their fiduciary duties of good
faith, loyalty, due care and candor ... by failing to: ... (f) disclose all
material information concerning the transaction to enable Brigham’s
stockholders to, on an informed basis, tender their shares for the
Acquisition. . . . Such breaches of fiduciary duties could not and
would not have occurred but for the conduct of ... Statoil, which,
therefore, aided and abetted such breaches via entering into the
Merger Agreement.
CR47. Thus, the classwide liability theory turns on legally-required disclosures
that were not made until October 28, 2011.
21
Plaintiffs have conceded that, if the Schedule 14D-9 and related tender offer
statement on Schedule TO did not contain material non-disclosures or omissions,
their duty-of-candor claims fail. APP. 4 at 7 (“If plaintiffs do not establish that
shareholders were misled [as alleged], plaintiffs’ claims based on the breach of the
duty of candor fail and defendants are entitled to judgment on that claim”). Thus,
the injury the class members allege arises from disclosure statements that were not
made until after the date of the class definition: no class member could have been
injured by those disclosures until at least 11 days later. CR1391-1530.
Moreover, during that 11-day period, Brigham stock was traded on the open
market so extensively that the volume exceeded 100% of Brigham’s total shares.8
This tremendous trading activity between October 17, 2011 (when the tender offer
was announced) and October 28, 2011 (when the disclosures were made and the
tender offer period opened) conclusively demonstrates that many, if not most,
Brigham shareholders on October 17, 2011 no longer owned that stock when the
critical disclosures were made on October 28, 2011.
As defined, many members of the class could not have a justiciable injury
arising from the challenged disclosures. CR45-47. Because many class members
have no standing to sue any defendant for an injury arising from those disclosures,
the class definition constitutes an abuse of discretion.
8
On October 17, 2011, approximately 117 million Brigham shares were outstanding. CR3164.
From October 17 to October 28, 134 million Brigham shares exchanged hands. CR185-86.
22
2. The class definition contains many members with no
standing to assert an aiding-and-abetting claim against
Statoil.
The only claim asserted against Statoil is an aiding-and-abetting claim.
CR46-48. It assumes (at least in part) that the individual Brigham Defendants
made misleading disclosures regarding the Statoil tender offer. See, e.g., CR47
(alleging that Statoil and Brigham aided and abetted “the Individual Defendants’
breaches of fiduciary duties” and “damaged” the class members “in that they have
been prevented from obtaining a fair price for their shares and were not able to
tender their shares on an informed basis”) (emphasis added).
Because most members of the class lack individual standing to assert the
breach of the duty of candor/disclosure claim, they likewise lack standing to assert
a claim that Statoil aided and abetted such a breach. Class members who owned
Brigham shares on October 17, 2011 and sold them before the relevant disclosures
were made on October 28 cannot claim any injury fairly traceable to the allegation
that Statoil aided and abetted a fiduciary breach with respect to those disclosures.
Thus, with respect to Statoil, the class definition constitutes an abuse of discretion.
C. Plaintiffs Have Tried to Obscure the Mismatch Created by the
Class Definition After Repeatedly Tweaking That Definition.
The current class definition, which has not changed since the first appeal,
was Plaintiffs’ third attempt to define the scope of their class. The evolution of the
class definition exposes the reality of their case, and it is not pretty.
23
At one point, the class included “[a]ll holders of Brigham common stock as
of 12/8/11 who held their shares from consummation of the acquisition of Brigham
by Statoil at a price of $36.50 per share.” CR128. But Plaintiffs abandoned this
definition tethered to December 8 (the date when the tender offer closed),
presumably because it would contain very few members. CR185-86; CR1941.
The frenetic trading that occurred between the announcement of the tender offer
and the date the tender offer closed indicates that very few Brigham stockholders
(1) owned Brigham stock on October 17, 2011, (2) held that stock until after the
October 28 disclosures, and (3) refused to tender their shares by December 8:
As this graphic illustrates, a class limited to the handful of Brigham shareholders
who might claim actual injuries from the disclosures in question would be tiny.
Thus, class counsel gerrymandered the class definition to make it more profitable.
24
The district court should have recognized this ploy and denied certification.
Its duty to engage in a “rigorous analysis” of the class certification criteria, Bernal,
22 S.W.3d at 435, included a duty to determine “whether broad swaths of the
proposed class would have standing.” Deepwater Horizon, 732 F.3d at 343 n.11.
Because this class is “defined so broadly as to include a great number of members
who for some reason could not have been harmed by the defendant’s allegedly
unlawful conduct,” under the Deepwater Horizon test that Texas law should adopt,
“the class is defined too broadly to permit certification.” Id. at 342 n.9 (quoting
Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 824 (7th Cir. 2012)).
Because the district court did not undertake this rigorous analysis, it certified
a class containing many members without standing to assert any disclosure claim,
much less the utterly speculative aiding-and-abetting claim asserted against Statoil.
The district court’s failure to police Plaintiffs’ transparent attempt to obscure their
numerosity problem with an overbroad class definition that is logically inconsistent
with the class liability theory was an abuse of discretion.
CONCLUSION AND PRAYER
For these reasons as well as those set forth in the Brigham Defendants’ brief,
Statoil asks that the trial court be reversed, the class be decertified, and the action
be remanded for further proceedings consistent with this Court’s opinion.
25
Respectfully submitted,
BECK REDDEN LLP
/s/ Russell S. Post
Russell S. Post
State Bar No. 00797258
rpost@beckredden.com
Fields Alexander
State Bar No. 00783528
falexander@beckredden.com
Parth S. Gejji
State Bar No. 24087575
pgejji@beckredden.com
1221 McKinney, Suite 4500
Houston, TX 77010
(713) 951-3700
(713) 951-3720 (Fax)
Gretchen S. Sween
State Bar No. 24041996
gsween@beckredden.com
Christopher R. Cowan
State Bar No. 24084975
ccowan@beckredden.com
BECK REDDEN LLP
515 Congress Avenue, Suite 1900
Austin, TX 78701
(512) 708-1000
(512) 708-1002 (Fax)
Counsel for Appellants,
Statoil ASA and Fargo Acquisition, Inc.
26
CERTIFICATE OF SERVICE
In accordance with the Texas Rules of Appellate Procedure, I hereby certify
that on September 28, 2015, a true and correct copy of the above and foregoing
Brief of Appellants Statoil ASA and Fargo Acquisition, Inc. was properly
forwarded to all counsel of record, by e-file and/or email, addressed as follows:
Class Counsel for Appellees
ROBBINS GELLER RUDMAN ROBBINS GELLER RUDMAN
& DOWD LLP & DOWD LLP
Darren J. Robbins Samuel H. Rudman
Randall J. Baron Mark S. Reich
David T. Wissbroecker Michael G. Capeci
Steven M. Jodlowski 58 South Service Road, Suite 200
655 West Broadway, Suite 1900 Melville, NY 11747
San Diego, CA 92101-3301 srudman@rgrdlaw.com
randyb@rgrdlaw.com mreich@rgrdlaw.com
dwissbroecker@rgrdlaw.com mcapei@rgrdlaw.com
sjodlowski@rgrdlaw.com
Liaison Counsel for Appellees
BOULETTE & GOLDEN LLP
Michael D. Marin
2801 Via Fortuna, Suite 530
Austin, Texas 78746
mmarin@boulettegolden.com
Additional Counsel for Appellees
KENDALL LAW GROUP, LLP THE BRISCOE LAW FIRM, PLLC
Joe Kendall Willie C. Briscoe
Daniel Hill The Preston Commons
Jamie J. McKey 8150 N. Central Expressway, Suite 1575
3232 McKinney Avenue, Suite 700 Dallas, Texas 75206
Dallas, Texas 75204 wbriscoe@thebriscoelawfirm.com
jkendall@kendalllawgroup.com
dhill@kendalllawgroup.com
jmckey@kendalllawgroup.com
27
DUNNAM & DUNNAM L.L.P. BRODSKY & SMITH LLC
Hamilton P. Lindley Evan J. Smith
4125 W. Waco Drive (76710) Marc L. Ackerman
P.O. Box 8418 Two Bala Plaza, Suite 602
Waco, Texas 76714 Bala Cynwyd, Pennsylvania 19004
hlindley@dunnamlaw.com esmith@brodsky-smith.com
mackerman@brodsky-smith.com
LEVI & KORSINSKY LLP KOHN, SWIFT & GRAF, P.C.
Shane T. Rowley Denis F. Sheils
30 Broad St., 24th Floor One South Broad Street, Suite 2100
New York, NY 10004 Philadelphia, PA 19107-3389
srowley@zlk.com dsheils@kohnswift.com
THE WEISER LAW FIRM, P.C. RYAN & MANISKAS, LLP
Patricia C. Weiser Katharine M. Ryan
James M. Ficaro Richard A. Maniskas
22 Cassatt Avenue 995 Old Eagle School Road, Suite 311
Berwyn, PA 19312 Wayne, PA 19087
pw@weiserlawfirm.com kryan@rmclasslaw.com
jmf@weiserlawfirm.com rmaniskas@rmclasslaw.com
THE REDDELL FIRM PLLC
Kelly N. Reddell
100 Highland Park Village, Suite 200
Dallas, Texas 75025
kelly@reddell-law.com
Counsel for Brigham Exploration Company and Individual Appellants
THOMPSON & KNIGHT LLP THOMPSON & KNIGHT LLP
Timothy R. McCormick Debora B. Alsup
Michael W. Stockham Thompson & Knight LLP
Mackenzie Wallace 98 San Jacinto Blvd., Suite 1900
1722 Routh Street, Suite 1500 Austin, TX 78701
Dallas, Texas 75201 debora.alsup@tklaw.com
timothy.mccormick@tklaw.com
michael.stockham@tklaw.com
mackenzie.wallace@tklaw.com
/s/ Russell S. Post
Russell S. Post
28
CERTIFICATE OF COMPLIANCE
1. This brief complies with the type-volume limitation of
Tex. R. App. P. 9.4 because it contains 6,093 words, excluding the parts of the
brief exempted by Tex. R. App. P. 9.4(i)(2).
2. This brief complies with the typeface requirements of Tex. R. App. P.
9.4(e) because it has been prepared in a proportionally spaced typeface using
Microsoft Word 2007 in 14 point Times New Roman font.
Dated: September 28, 2015.
/s/ Russell S. Post
Russell S. Post
Counsel for Appellants,
Statoil ASA and Fargo Acquisition, Inc.
29
No. 03-15-00248-CV
IN THE COURT OF APPEALS
FOR THE THIRD DISTRICT OF TEXAS
AT AUSTIN
BRIGHAM EXPLORATION COMPANY, BEN M. BRIGHAM,
DAVID T. BRIGHAM, HAROLD D. CARTER, STEPHEN P. REYNOLDS,
STEPHEN C. HURLEY, HOBART A. SMITH, SCOTT W. TINKER,
STATOIL ASA AND FARGO ACQUISITION, INC.,
Appellants,
V.
RAYMOND BOYTIM, ET AL., INDIVIDUALLY AND ON
BEHALF OF OTHERS SIMILARLY SITUATED,
Appellees.
On Appeal from the 201st Judicial District Court of Travis County, Texas,
Trial Court Cause No. D-1-GN-11-003205
APPENDIX TO BRIEF OF APPELLANTS
STATOIL ASA AND
FARGO ACQUISITION, INC.
TAB
1 Trial Court’s Order (CR3163-3167)
2 Court of Appeals’ memorandum opinion in previous appeal of
class certification
3 “Exhibit 1” filed with the Court by the district clerk on June 5,
2015, which includes “Plaintiffs’ Proposed Second Amended
Plan for Trial of Class Claims”
4 “Exhibit 1” filed with the Court on August 14, 2015, which
includes “Plaintiffs’ Response to Defendants’ Joint Opposition
to Class Certification and Plaintiffs’ Proposed Amended Plan
for Trial of the Class Claims”
5 Judge Dietz’s order denying the request for a temporary
injunction (CR305-307)
2
Tab 1
Trial Court’s Order (CR3163-3167)
DC BK1M03 PG100
Flied In The District Court
of Travis County, Texas
AfR · 9 2015
At fj· (p f M.
Velva L Price, District Clerk
Cause o 0-J-G;-.:·11-003205
(Con oliduceition:
(b) \.\hether the former members of llrigham's Hoard engogcd in a plan and
scheme to benefit themse lves and/or Statoil al the expense of' lhc! members of the Class;
(c) whether the former members t1f Uriglrnm's Bou rd brcuchcd their fid uciary
duly to secure and ubtnin the best price reasonable under the circums1nnccs for the benefit of
plaintiffs and the other members of the Class in connection with the Acqui.,ition:
(d) \.\hcther Brigham and/or 1atoil aided 3nd abetted the breach of fiduciary
dutie.s b} the Inc.Ji" i1 majorit) of the Cln.ss, especially in light of the
potc!ntially small dollar amount of their indh idu:il claim'>, nnd that Cla's members' interests are far
bcuer el"\cd b) the cl:iss nction device lhan pur uing im.li\iJual actions; and
(b) Plaimiffs have submnted trial plan '"hich offers a rigorous analysis and a
:.pcc1fic explanation or ho"' the class claims arc to pro\,;eed to triul Alter cvnlua1ing che plan, the
Courl finds that o trial in Lhis action will be manogcnblc 1n that it involves lhc upplication of the Jaws
of a single stutc (Dcluwurc), there are no indi vidt~ul lssm:s to b~ resolv1::d by lh<.l l'ucl-finder, and that
the so le individual bsuc (the amount of shares held by each class member on October 17, 2011) can
be rcsol\led through a po I-judgment proceeding. ·yhe oun hcn:by adopts and incmporates
J>J3in1iff • Propo cd 1.:cond Amended Plan for Trial of Cla s C laims, liled ~1arch 19. 2015.
8. Phi inti fl! · Amended ~otice of Pendenc) of Clas Action, Bllal.!hcd as Exhibit I 0 to
Pluintiff~ · Amended Motion for Class Certification. ~tis lie Ruic 42( c )(2 XB) of the Texas Rules of
Ci\·il Procedure. h concise I) and clear!") stales in pl:iin, casil} understood l:ingu3gc: (i) the oatme of
. 3.
3166
DC BK15103 PG104
the action; (ii) the definition of the Class certified; (iii) the Class claims, issues and defenses;
(iv) that a member of the Class may enter an appearance through counsel if the member so desires;
(v) that the judgment, whether favorable or not, will include and bind all members who do not
request exclusion by the specified date; (vi) that the court will exclude any members of the Class if
they request exclusion; and (vii) when and how a member may be exclude themselves from the
Class.
Good cause appearing, IT IS HEREBY ORDERED that:
l. Plaintiffs' Motion for Class Certification is GRANTED.
2. The Class is defined as all holders of common stock of Brigham Exploration
Company as of October 17, 2011. Excluded from the Class are defendants and any person, firm,
trust, corporation or other entity related to or affiliated with any defendant.
3. Plaintiffs are appointed as representatives of the Class.
4. Robbins Geller Rudman & Dowd LLP is appointed as Class Counsel, and Boulette
Golden & Marin L.L.P. is appointed as Liaison Counsel.
5. The Court approves Plaintiffs' Amended Notice of Pendency of Class Action. Within
30 days, the parties shall meet and confer regarding a proposed plan for dissemination of the notice.
ORDER
IT IS SO ORDERED.
DATED:
THE HO
-4 -
3167
Tab 2
Court of Appeals’ memorandum opinion in
previous appeal of class certification
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-13-00191-CV
Brigham Exploration Company, Ben M. Brigham, David T. Brigham, Harold D. Carter,
Stephen P. Reynolds, Stephen C. Hurley, Hobart A. Smith, Scott W. Tinker, Statoil ASA
and Fargo Acquisition, Inc., Appellants
v.
Raymond Boytim, Hugh Duncan, Robert Fioravanta, Walter Schwimmer, Michael Ohler,
Ryan Ohler, Walter Ohler, Jr., The Edward J. Goodman Life Income Trust and The
Edward J. Goodman Generation Skipping Trust, Jeffrey Whalen, and Howard Weissberg,
Individually and on Behalf of Others Similarly Situated, Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT
NO. D-1-GN-11-003205, HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING
MEMORANDUM OPINION
Appellants Brigham Exploration Company, Ben M. Brigham, David T. Brigham,
Harold D. Carter, Stephen P. Reynolds, Stephen C. Hurley, Hobart A. Smith, Scott W. Tinker,
Statoil ASA and Fargo Acquisition, Inc., bring this interlocutory appeal challenging the trial court's
order granting class certification. See Tex. Civ. Prac. & Rem. Code§ 5 l.014(a)(3). For the reasons
that follow, we decertify the class, reverse, and remand this cause for further proceedings consistent
with this opinion.
BACKGROUND
Appellant Brigham Exploration Company (Brigham) was a publically traded
company. Appellant Statoil ASA (Statoil) made a tender offer for all shares of stock in Brigham at
$36.50 per share, and Brigham's Board of Directors approved the transaction on October 16, 2011.
Brigham announced the transaction the following day, and Statoil commenced the tender offer on
October 28, 2011. After shareholders had voluntarily tendered over 92 % of the outstanding shares
in December 2011, Statoil effected a short-form merger, converting each remaining share of stock
into a right to receive $36.50.
Appellees brought suit shortly after Brigham's announcement of the transaction,
seeking to enjoin the transaction based on the Brigham Board's alleged failure to disclose material
information to the shareholders. After a hearing on November 22, 2011, the trial court denied
appellees' request for an injunction. Appellees proceeded with their suit, seeking class certification
and damages based on their claims that individual Board members breached their fiduciary duties
and that Brigham and Statoil aided and abetted the Board members' breaches of their fiduciary
duties. Appellants denied the allegations and asserted affirmative defenses including acquiescence
and waiver.
Appellees filed a proposed order granting class certification and a proposed amended
preliminary plan for the trial of the class claims. In their proposed amended plan, appellees set out
Delaware substantive law that they contend applies to their claims and describe how they plan to
prove their claims and damages at trial with common evidence. Appellees describe their plan for
the trial as follows:
2
At this time, plaintiffs envision a single trial with the following procedural
steps:
1. Plaintiffs will present their case-in-chief, submitting common evidence of
defendants' wrongdoing, class-wide injury, and total damages;
2. The Individual Defendants will present the defenses they wish to advance;
3. Brigham and Statoil will present the defenses they wish to advance;
4. Plaintiffs will present their rebuttal case; and
5. The case will be submitted to the jury, which will enter a verdict based on a
proposed jury charge.
Appellees' proposed order granting class certification and their amended preliminary plan did not
otherwise address appellants' pleaded defenses.
Appellants objected to appellees' proposed order and trial plan. Their objections
included that "the proposed trial plan is insufficient because it does not correctly identify the
elements for each claim or defense asserted in the pleadings" and that it "contains only Plaintiffs'
allegations and theory of the law without incorporating any of the Defendants' theories or defenses."
The trial court held an evidentiary hearing on appellees' motion for class certification in October
2012 and a subsequent hearing in February 2013. After the hearing in February, appellants filed a
document titled "Attachment to Plaintiffs' Proposed Amended Preliminary Plan for Trial of Class
Claims." In the document, appellants describe their defensive theories and cite Delaware substantive
law that they contend applies to appellees' claims and appellants' affirmative defenses.
The trial court thereafter granted appellees' motion for class certification and
certified a class "defined as all holders of common stock of Brigham Exploration Company as of
3
Oct. 17, 2011," the date the transaction was announced, excluding from the class defendants and
other persons and entities related to or affiliated with defendants. In its order granting class
certification, the trial court made findings concerning appellees' claims, including that "Plaintiffs
have submitted [a] trial plan which offers a rigorous analysis and a specific explanation of how the
class claims are to proceed to trial." Based on its evaluation of appellees' trial plan, the court also
found that "a trial in this action will be manageable in that it involves the application of the laws of
a single state (Delaware), there are no individual issues to be resolved by the fact-finder, and that the
sole individual issue (the amount of shares held by each class member on October 17, 2011) can be
resolved through a post-judgment proceeding."
In the order granting class certification, the trial court expressly adopted and
incorporated appellees' proposed amended preliminary plan for the trial of the class claims.
Although the trial court also refers to "Defendants' position with respect to Plaintiffs' Trial Plan as
set forth in its Attachment to Plaintiffs' Proposed Amended Preliminary Plan for Trial of Class
Claims," it does not adopt or incorporate the attachment in its order or otherwise analyze the
substance of appellants' position set forth in the attachment. This interlocutory appeal followed.
ANALYSIS
In six issues, appellants challenge the trial court's order granting class certification.
In their first four issues, they contend that the trial court abused its discretion in concluding that the
named plaintiffs and their counsel are adequate, that the named plaintiffs' claims are typical, and that
individualized issues do not predominate. See Tex. R. Civ. P. 42(a)(3), (4), (b)(3). In their fifth
issue, appellants urge that the trial court abused its discretion "in failing to 'rigorously analyze' all
4
certification requirements under Rule 42, as evidenced by the legally deficient class-action 'trial
plan' approved by the [trial] court." In their sixth issue, they urge that the trial court abused its
discretion in certifying the class and approving the trial plan.
Class Certification Requirements and Standard of Review
Appellate courts review a class certification order for abuse of discretion. Bowden
v. Phillips Petroleum Co., 247 S.W.3d 690, 696 (Tex. 2008); Compaq Computer Corp. v. Lapray,
135 S.W.3d 657, 671 (Tex. 2004). "A trial court abuses its discretion if it acts arbitrarily,
unreasonably, or without reference to any guiding principles." Bowden, 247 S.W .3d at 696 (citing
Walkerv. Packer, 827 S.W.2d 833, 839 (Tex. 1992)). We do not indulge every presumption in the
trial court's favor, however, "as compliance with class action requirements must be demonstrated
rather than presumed." Id. (citing Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 691 (Tex.
2002)). "Courts must perform a 'rigorous analysis' before ruling on class certification to determine
whether all prerequisites have been met." Southwestern Ref Co. v. Bernal, 22 S.W.3d 425, 435
(Tex. 2000). The Texas Supreme Court has rejected a "certify now and worry later" approach. Id.
at 435. Trial courts must determine the underlying substantive law prior to certification "as courts
can hardly evaluate the claims, defenses or applicable law without knowing what the law is."
Lapray, 135 S.W.3d at 672.
All class actions must satisfy the four threshold requirements contained within Rule
42(a) of the Texas Rules of Civil Procedure: (1) numerosity ("the class is so numerous thatjoinder
of all members is impracticable"); (2) commonality ("there are questions oflaw or fact common to
the class"); (3) typicality ("the claims or defenses of the representative parties are typical of the
5
claims or defenses of the class"); and (4) adequacy of representation ("the representative parties will
fairly and adequately protect the interests of the class"). Tex. R. Civ. P. 42(a)(l)-(4); Bernal,
22 S.W.3d at 433. In addition to the subsection (a) prerequisites, class actions also must satisfy at
least one of the subdivisions of Rule 42(b). See Tex. R. Civ. P. 42(b) (subsection (b) directs that
only certain kinds of actions can be class actions); Bernal, 22 S.W.3d at 433.
Here the trial court granted class certification under Rule 42(b)(3). To certify a class
under Rule 42(b )(3), in addition to the subsection (a) prerequisites, the trial court must "find that
'questions of law or fact common to the members of the class predominate over any questions
affecting only individual members, and a class action is superior to other available methods for the
fair andefficientadjudicationofthe controversy."' Lapray, 135 S.W.3d at663 (quoting Tex. R. Civ.
P. 42(b)(3)) (emphasis in original). Subsection (c )(l)(D) of Rule 42 also requires certain statements
to be included in an order granting or denying certification under Rule 42(b)(3). Relevant to this
appeal, the order "must state ... the elements of each claim or defense asserted in the pleadings."
Tex. R. Civ. P. 42(c)(l)(D)(i).
The Trial Court's Trial Plan
We begin with appellants' fifth issue because it is dispositive. Appellants urge that
the trial court abused its discretion "in failing to 'rigorously analyze' all certification requirements
under Rule 42, as evidenced by the legally deficient class-action 'trial plan' approved by the [trial]
6
court." Appellants focus, among other alleged deficiencies in the trial plan, on the omission of any
discussion or analysis of their affirmative defenses. 1
"[A] trial plan is required in every certification order to allow reviewing courts to
assure that all requirements for certification under Rule 42 have been satisfied." State Farm Mut.
Auto. Ins. Co. v. Lopez, 156 S.W.3d 550, 556 (Tex. 2004) (emphasis in original). "The formulation
of a trial plan assures that a trial court has fulfilled its obligation to rigorously analyze all
certification prerequisites and 'understands the claims, defenses, relevant facts, and applicable
substantive law in order to make a meaningful determination of the certification issues."' Id.
(quoting Bernal, 22 S.W.3d at 435 (quoting Castano v. American Tobacco Co., 84 F.3d 734, 744
(5th Cir. 1996))). "'Thus it is improper to certify a class without knowing how the claims can and
will be tried.'" Id. at 5 5 5.
Here, the trial court's order and the adopted trial plan fail to meaningfully address
appellants' pleaded defenses. We cannot ignore the trial court's failure to comply with the express
requirement in Rule 42 to state the elements of those defenses in its order. Tex. R. Civ. P.
42(c)(l)(D)(i). Further, by failing to include analysis of the pleaded defenses, the trial court failed
1
Appellants' other asserted deficiencies in the trial plan include that their affirmative
defenses require individualized proof, that the plan improperly includes claims for breach of the duty
of care and disclosure claims, that the plan improperly omits the element of bad faith as to the claim
of breach of the duty of loyalty, that the plan fails to address the effects of the aiding and abetting
claims against Statoil, and that the plan and the trial court's order make improper factual findings.
They specifically challenge the following sentence in the trial court's order: "Plaintiffs have
demonstrated that each member of the Class is the victim of a common course of conduct engaged
in by defendants" and the following sentence in the trial plan: "The Board allowed itself to be
steered into a transaction with Statoil by a management team who was intent on achieving a liquidity
event for their tens of millions of dollars in otherwise illiquid holdings in the Company."
7
to conduct the required "rigorous analysis" before ruling on the class certification. See Bernal,
22 S.W.3d at 435; see also Texas S. Rentals, Inc. v. Gomez, 267 S.W.3d 228, 247 (Tex.
App.-Corpus Christi 2008, no pet.) (noting that "difficult, if not impossible, for [the appellate
court] to determine if the class should have been certified" and "surmis[ing] that the trial court's
failure to include any discussion of these items in the trial plan is a result of its failure to rigorously
analyze [the issues] in light of the predominance requirement").
We conclude that the trial court abused its discretion by certifying a class without an
order complying with the express requirements of Rule 42 and "without formulating a trial plan
confirming that it has rigorously analyzed the requirements of Rule 42." See State Farm,
156 S.W.3d at 557 (emphasis in original). Thus we must decertify the class and remand the case to
the trial court. SeeBMG DirectMktg.,Inc. v. Peake, 178 S.W.3d 763, 778 (Tex. 2005)(decertifying
class and remanding so that trial court "may determine effect of ... defense on the requirements for
class certification"); National W. Life Ins. Co. v. Rowe, 164 S.W.3d 389, 390 (Tex. 2005) (per
curiam) (reversingjudgment of court of appeals that affirmed class certification and remanding cause
to trial court because trial court "did not conduct the rigorous analysis of the issues to be tried").
CONCLUSION
For these reasons, we decertify the class that the trial court certified, reverse, and
remand the cause for further proceedings consistent with this opinion. 2
2
Having concluded that certification was improper because the trial court's order and its trial
plan fail to meaningfully address pleaded defenses, we do not consider appellants' additional
challenges to the other certification prerequisites. See Union Pac. Res. Grp., Inc. v. Hankins,
111 S. W.3d 69, 75 (Tex. 2003) (reversing certification because none of the issues identified in trial
8
Melissa Goodwin, Justice
Before Justices Puryear, Goodwin, and Field
Reversed and Remanded
Filed: August 15, 2014
plan satisfied commonality requirement and noting that the court "need not consider [appellant]'s
additional challenges to the other certification prerequisites"); Texas Parks & Wildlife Dep 't v.
Dearing, 240 S.W.3d 330, 361 (Tex. App.-Austin 2007, pet. denied) (deferring further analysis of
propriety of class certification because impact of case on claims and defenses "will be integral to the
district court's consideration of class certification on remand"). Further, we express no opinion on
the proper outcome of a rigorous analysis under Rule 42. See North Am. Mortg. Co. v. 0 'Hara, l 53
S.W.3d 43, 44-45 (Tex. 2004) (per curiam) (declining to examine whether certification proper in
absence of trial plan and noting that court of appeals should have remanded case for further
certification proceedings "without dictating the result").
9
Tab 3
“Exhibit 1” filed with the Court by the district clerk on
June 5, 2015, which includes “Plaintiffs’ Proposed
Second Amended Plan for Trial of Class Claims”
filed in ~h~ou~i.'J, Teitas
of Travis
4:t
Oi"tr\cl court
June 5, 2015 03-15-00248-CV MAR i 9 'l.\J\5 ,
~·IC> {). M.
At ' '·oistricJClerl<
Velva l.. price,
Cause No. D-1-GN-11-003205
(Consolidated)
RAYMOND BOYTIM, et al., Individually and § IN THE DISTRICT COURT OF
on Behalf of All Others Similarly Situated, §
§
Plaintiffs, § TRAVIS COUNTY, TEXAS
§
vs. §
26lst JUDICIAL DISTRICT
BRIGHAM EXPLORATION COMPANY, et ~
al., §
§
Defendants.
§
~~~~~~~~~~~~~~§
AFFIDAVIT OF STEVEN M. JODLOWSKI IN SUPPORT OF PLAINTIFFS' RESPONSE
TO DEFENDANTS STATOIL ASA AND FARGO ACQUISITION, INC.'S
SUPPLEMENTAL BRIEF IN SUPPORT OF OPPOSITION TO CLASS
CERTIFICATION AND OBJECTION TO PLAINTIFFS' PROPOSED
AMENDED PLAN FOR TRIAL OF CLASS CLAIMS
1014504_1
I, STEVEN M. JODLOWSKI, declare as follows:
1. I am an attorney duly licensed to practice before all of the courts of the State of
California and am admitted pro hac vice in this action. I am associated with the law firm ofRobbins
Geller Rudman & Dowd LLP, one of counsel of record for plaintiffs. I have personal knowledge of
the matters stated herein and, if called upon, I could and would competently testify thereto.
2. I submit this affidavit in support of Plaintiffs' Response to Defendants Statoil ASA
and Fargo Acquisition, Inc.' s Supplemental Brief in Support of Opposition to Class Certification and
Objection to Plaintiffs' Proposed Amended Plan for Trial of Class Claims.
3. Attached are true and correct copies of the following exhibits:
Exhibit 1: Plaintiffs' Proposed Second Amended Plan for Trial of Class Claims;
and
Exhibit 2: Havens, et al. v. Pate, No. 2002-16085, Defendants' Fourth Amended
Original Answer (Harris Cnty. Dist. Ct. Aug. 19, 2005).
I declare under penalty ofperjury that the foregoing is true and correct. Executed this 19th
day of.March, 2015, at San Diego, California.
DLOWSKI
A Notary Public or other officer completing thi~cate verifies only the
identity of the individual who signed the document to which this certificate is
attached and not the truthfulness accurac or validi of that document.
State of California )
) ss:
County of San Diego )
Subscribed and sworn to (or affirmed) before me on this \'\ day of Y'l\ucl.--, ¢D\5', by
Steven M. Jodlowski, proved to me on the basis of satisfactory evidence to be the person who
appeared before me.
1014504_1
CERTIFICATE OF SERVICE
Pursuant to the attached Declaration of Service by E-Mail, I hereby certify that a true and
correct copy of the foregoing instrument has been served in accordance to the Texas Rules of Civil
Procedure, to those listed on the attached service list, on this 19th day of March 2015.
Isl Michael D. Marin
MICHAEL D. MARIN
-2-
1014504_1
DECLARATION OF SERVICE BY E-MAIL
I, June P. Ito, not a party to the within action, hereby declare that on March 19, 2015, I served
the attached AFFIDAVIT OF STEVEN M. JODLOWSKI IN SUPPORT OF PLAINTIFFS'
RESPONSE TO DEFENDANTS STATOIL ASA AND FARGO ACQUISITION, INC.'S
SUPPLEMENTAL BRIEF IN SUPPORT OF OPPOSITION TO CLASS CERTIFICATION AND
OBJECTION TO PLAINTIFFS' PROPOSED AMENDED PLAN FOR TRIAL OF CLASS
CLAIMS on the parties in the within action by e-mail addressed as follows:
.
Counsel for Defendant(s) ··-.--••
Timothy R. McCormick Thompson & Knight LLP timothy.mccormick@tklaw.com
Michael W. Stockham michael.stockham@tklaw.com
Timothy E. Hudson tim.hudson@tklaw.com
Debora B. Alsup debora.alsup@tklaw.com
Danley Comvn danlev.comvn(a).tklaw.com
Michael C. Holmes Vinson & Elkins L.L.P. mholmes@velaw.com
Jennifer B. Poppe jpoppe@velaw.com
Thomas S. Leatherburv tleatherburv@.velaw.com
Fields Alexander Beck Redden LLP falexander@beckredden.com
Parth S. Gejji pgejji@beckredden.com
Christopher R. Cowan ccowan@.beckredden.com
Counsel for Plaintiff( s)
Michael Burnett Armburst & Brown. PLLC mburnettlalabaustin.com
Kellv N. Reddell Baron & Budd. P. C. kreddell(a),baronbudd.com
Michael D. Marin Boulette & Golden LLP mmarinlalboulettegolden.com
Evan J. Smith Brodsky & Smith, LLC esmith@brodsky-smith.com
Marc L. Ackerman mackermanial.brodskv-smith.com
Hamilton Lindley Dunnam & Dunnam hlindlevlal dunnamlaw.com
Shane T. Rowlev Levi & Korsinskv LLP srowlevlalzlk.com
Joe Kendall Kendall Law Group, LLP jkendall@kendalllawgroup.com
Daniel Hill dhill@kendalllawgroup.com
Jamie J. McKev imckevlal,kendalllawgrouo.com
Denis F. Sheils Kohn. Swift & Graf. P.C. dsheils@.kohnswift.com
Brian J. Robbins Robbins Arroyo LLP brobbins@robbinsarroyo.com
Stephen J. Oddo soddo@robbinsarroyo.com
Edward B. Gerard egerardlalrobbinsarrovo.com
Katharine M. Ryan Ryan & Maniskas, LLP kryan@rmclasslaw.com
Richard A. Maniskas rmaniskaslalrmclasslaw.com
Jonathan M. Stein Saxena White P.A. isteinlalsaxenawhite.com
Willie C. Briscoe The Briscoe Law Firm wbriscoelalthebriscoelawfirm.com
Patricia C. Weiser The Weiser Law Firm, P.C. pw@weiserlawfirm.com
James M. Ficaro imflalweiserlawfirm.com
I declare under penalty of perjury that the foregoing is true and correct. Executed on
•~ ~ ._Ji!. ·. .J. •.· .
~ 4~fKl
March 19, 2015, at San Diego, California. ·. . ·.. .
JUNEP.ITO .~""-.- - - -
1014504_1
EXHIBIT 1
Cause No. D-1-GN-11-003205
(Consolidated)
RAYMOND BOYTIM, et al., Individually and § IN THE DISTRICT COURT OF
on Behalf of All Others Similarly Situated, §
§
Plaintiffs, § TRAVIS COUNTY, TEXAS
§
vs. §
261st JUDICIAL DISTRICT
BRIGHAM EXPLORATION COMPANY, et :
tl, §
§
Defendants.
§
~~~~~~~~~~~~~~~§
PLAINTIFFS' PROPOSED SECOND AMENDED PLAN
FOR TRIAL OF CLASS CLAIMS
1014363_1
TABLE OF CONTENTS
Page
I. PLAINTIFFS' CLAIMS ...................................................................................................... 2
A. Plaintiffs' Claim for Breach of Fiduciary Duty Against the Individual
Defendants ............................................................................................................... 3
B. Aiding and Abetting Breach of Fiduciary Duty Against Brigham and
Statoil ...................................................................................................................... .4
II. DEFENDANTS' PLEADED DEFENSES .......................................................................... 5
A. Defense Nos. I and 9 ............................................................................................... 6
B. Defense No. 2 ........................................................................................................... 6
C. Defense Nos. 3, 5-6 .................................................................................................. 7
D. Defense No. 4 ........................................................................................................... 8
E. Defense No. 7 ........................................................................................................... 9
F. Defense No. 8........................................................................................................... 9
G. Defense Nos. 10 and 11 ......................................................................................... 10
H. Defense No. 12.................................................................................... ,.................. 11
I. Defense No. 13 ....................................................................................................... 12
III. CLASS ISSUES ................................................................................................................. 12
A. Procedural History ................................................................................................. 12
B. Common Questions of Law and Fact Predominate ............................................... 13
I. Plaintiffs Will Prove Breach of Fiduciary Duty Through Common
Evidence ..................................................................................................... 14
2. Plaintiffs Will Prove with Common Evidence Causation and
Amount of Damages .................................................................................. 16
3. Defendants' Defenses Are Susceptible to Common Proof.. ...................... 17
- 1 -
1014363_1
Pursuant to Tex. R. Civ. P. 42(d), this Court hereby adopts the following trial plan in connection
with its order granting certification of plaintiffs' claims against defendants. This plan provides a
detailed assessment of how a single trial can be conducted against Brigham Exploration Company
("Brigham" or the "Company"), the members of its Board of Directors (the "Individual Defendants" or
the "Board"), and Statoil ASA ("Statoil") on behalf of a proposed class of all holders of Brigham
common stock as of October 17, 2011. Based upon the voluminous written submissions of the parties
in connection with plaintiffs' motion for class certification, as well as hearings held on October 22,
2012, February 22, 2013, December 17, 2014, and March 31, 2015, it is evident to the Court that trial of
this action on a class-wide basis will present no unduly challenging manageability issues.
This plan addresses the class certification issues, the claims arising from defendants' actions,
the manner in which defendants' common course of conduct will be proven at trial, and other issues
relating to the management and superiority of a class-wide trial. As discussed below, this action
stems from the sale of Brigham to Statoil for $36.50 per share of Brigham stock. That sale was
completed on December 8, 2011, one-and-a-half months after Brigham and Statoil announced to
shareholders that the companies had entered into a definitive merger agreement. Plaintiffs allege
that Brigham's directors breached their fiduciary duties to shareholders in agreeing to and facilitating
the sale. Plaintiffs also bring a claim against Brigham and Statoil for aiding and abetting the breach
of fiduciary duty. In response to plaintiffs' claims, defendants have pleaded several defenses, which
are addressed below.
The Court envisions a single trial with the following procedural steps:
I. Plaintiffs will present their case-in-chief, submitting common evidence of defendants'
wrongdoing, class-wide injury, and total damages;
2. The Individual Defendants will present the defenses they wish to advance;
-1-
1014363_1
3. Brigham and Statoil will present the defenses they wish to advance;
4. Plaintiffs will present their rebuttal case; and
5. The case will be submitted to the jury, which will enter a verdict based on a proposed
jury charge.
Counsel for plaintiffs are deeply experienced in takeover litigation, especially in takeover
cases after the acquisition closes, and have prepared similar cases for trial. Counsel for plaintiffs
have also tried numerous takeover cases on a class-wide basis, including at least one action in Texas.
See Ellowayv. Pate, 238 S.W.3d 882 (Tex. App.-Houston [14thDist.] 2007, no pet.). Plaintiffs will
present their case through the testimony of their experts; the testimony and documents of the
Individual Defendants, Brigham and Statoil; the testimony and documents of defendants' financial
advisors; and, potentially, the documents and testimony of Shell, ENI, Chevron and Total, four
potential buyers.
If a verdict for the plaintiffs results, judgment in a total, single monetary sum will be entered
in favor of the Class. A post-judgment proceeding will follow, in which the Court will approve the
procedure for distributing checks (or direct deposits) to each individual Class member based on
plaintiffs' expert's damage calculations. Plaintiffs will ask the Court to approve the final allocation
of damages. If a verdict is returned in favor of defendants, judgment dismissing the action with
prejudice would be entered.
I. PLAINTIFFS' CLAIMS
This action involves claims against Brigham's Board for breach of its fiduciary duties, and a
claim against the Company and Statoil for aiding and abetting the Board's breach of fiduciary duties.
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A. Plaintiffs' Claim for Breach of Fiduciary Duty Against the Individual
Defendants
The primary claim in this case is a claim for breach of fiduciary duty against the members of
Brigham's Board at the time of the acquisition. That claim is governed by Delaware law because
Brigham was a Delaware corporation. Article 8.02 of the Texas Business Corporation Act provides
that the internal affairs (including the actions of its Board Members) of a foreign corporation doing
business in Texas are controlled by the substantive law of the state of incorporation.
Directors owe fiduciary duties of care and loyalty to the corporation and its shareholders.
Mills Acquisition Co. v. MacMillan, Inc., 559 A.2d 1261, 1280 (Del. 1989); accord Revlon, Inc. v.
MacAndrews &Forbes Holdings, Inc., 506 A.2d 173, 179 (Del.1986). In the context of a change of
control, such as this, courts review directors' conduct under the enhanced scrutiny standard and must
employ "less tolerance for slack by the directors" and be cognizant of the fact that "[a]lthough the
directors have a choice of means, they do not comply with their [fiduciary] duties unless they
undertake reasonable steps to get the best deal." In re Netsmart Techs., Inc. S'holders Litig., 924
A.2d 171, 192 (Del. Ch. 2007); see also Omnicare, Inc. v. NCS Healthcare, Inc., 818 A.2d 914, 928
(Del. 2003); Revlon, 506 A.2d 173. The enhanced scrutiny test requires:
(a) a judicial determination regarding the adequacy of the decisionmaking process
employed by the directors, including the information on which the directors based
their decision; and (b) a judicial examination of the reasonableness of the directors'
action in light of the circumstances then existing.
Paramount Commc'ns v. QVC Network, 637 A.2d 34, 45 (Del. 1994); Omnicare, 818 A.2d at 931.
Under the enhanced scrutiny test, "[t]he directors have the burden of proving that they were
adequately informed and acted reasonably." Paramount, 637 A.2d at 45.
In addition, as part of their fiduciary duties to Brigham's shareholders, the Board must fully and
fairly disclose all material information within the Board's control. See Netsmart, 924 A.2d at 202; In re
Pure Resources, Inc., S'holders Litig., 808 A.2d 421, 448 (Del. Ch. 2002) ("When a document ventures
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into certain subjects, it must do so in a manner that is materially complete and unbiased by the omission
of material facts."). Here, plaintiffs contend that the Individual Defendants disseminated a Schedule
l 4D-9 ("Schedule l 4D-9") and a tender offer statement on Schedule TO ("Schedule TO"), filed with
the Securities and Exchange Commission on October 28, 2011, which was false and misleading and
failed to disclose all material information to Brigham shareholders in connection with the tender offer
from Statoil. The determination of whether the Board breached that duty in this instance turns on the
materiality of the alleged non-disclosures and omissions. Under relevant case law, courts determine
materiality by assessing whether there is a substantial likelihood that a reasonable shareholder would
consider the fact important in deciding how to vote. See Arnold v. Soc'y for Sav. Bancorp, 650 A.2d
1270, 1277 (Del. 1994); TSC Indus. v. Northway, Inc., 426 U.S. 438, 449 (1976).
B. Aiding and Abetting Breach of Fiduciary Duty Against Brigham and
Statoil
Plaintiffs also have a claim against Brigham and Statoil, for aiding and abetting of the
breaches of fiduciary duties by the Individual Defendants, as members of the Board of Brigham.
Rand v. Western Airlines, No. 8632, 1989 Del. Ch. LEXIS 118, at *14 (Del. Ch. Sept. 11, 1989)
("[I]fthere were objective evidence that the transaction benefits the fiduciaries at the stockholders'
expense, knowing participation by a third party might be inferable."). To prevail on their claim for
aiding and abetting a breach of fiduciary duty, plaintiffs must prove: (1) the existence of a fiduciary
relationship; (2) a breach of the fiduciary's duty; (3) knowing participation in that breach by Statoil;
and (4) damages proximately caused by the breach. Malpiede v. Townson, 780 A.2d 1075, 1097
(Del. 2001); In re Rural Metro Corp. S'holders Litig., 88 A.3d 54, 80 (Del. 2014). As to the third
element - knowing participation, plaintiffs must show that the buyout group "'sought to induce the
breach of a fiduciary duty"' or '"make factual allegations from which knowing participation may be
inferred."' In re Bj's Wholesale Club, Inc., C.A. No. 6623-VCN, 2013 Del. Ch. LEXIS 28, at *54-
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*55 (Del. Ch. Jan. 31, 2013). Knowing participation may be inferred where a buyout group:
(1) "directly 'sought to induce [a] breach of fiduciary duty'" by the board; (2) attempted to '"create
or exploit conflicts of interest in the board"'; (3) "'used knowledge of the breach to gain a bargaining
advantage in negotiations"' with the board; or (4) knew the "'terms of the transaction [were] so
egregious or the magnitude of the side deals ... so excessive as to be inherently wrongful."' Id.
II. DEFENDANTS' PLEADED DEFENSES
On January 13, 2015, defendants filed a Third Amended Answer to plaintiffs' petition. In it,
defendants plead the following defenses:
1. Plaintiffs' petition fails to state a claim for which relief can be granted;
2. The negotiation and process leading up to the signing of the merger agreement and
tender offer, as well as the decision to recommend the tender offer by the Individual Defendants, are
protected by the business judgment rule;
3. Defendants did not know, and in the exercise of reasonable care could not have
known, of any untruths or omissions in the Schedule 14D-9 or the Schedule TO;
4. The alleged misrepresentations and omissions were not material and did not
proximately cause any damages to plaintiffs;
5. Defendants acted in good faith and without any intent to deceive;
6. Defendants' alleged misstatements or omissions were made in good faith, with
genuine belief;
7. Pursuant to 8 Del C. §14l(e), defendants are not liable because they relied in good
faith upon the records of the corporation;
8. Plaintiffs' claims are barred because of payment or accord and satisfaction;
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9. Plaintiffs' generalized allegations of purported misrepresentations, deceit, or failure to
disclose are barred because of a failure to plead those claims with requisite specificity;
10. Plaintiffs' claims for damages are barred as a matter of law;
11. Plaintiffs' claims are barred under the 8 Del. C. § 102(b)(7) exculpation clause in
Brigham's Certificate of Incorporation;
12. Plaintiffs' claims are barred by the doctrines of waiver, acquiescence, acquiescence in
price, ratification, and estoppel; and
13. The recovery by plaintiffs, if any, should be precluded or reduced by virtue of the
doctrine of proportionate responsibility.
A. Defense Nos. 1 and 9
Defendants' first and ninth defenses are directed at the sufficiency of plaintiffs' pleadings,
which is a legal matter for the Court. Texas follows a "fair notice" standard for pleading, in which
courts assess the sufficiency of pleadings by determining whether an opposing party can ascertain
from the pleading the nature, basic issues, and the type of evidence that might be relevant to the
controversy. See Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 230 (Tex. 2004);
Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 896-97 (Tex. 2000); Boyles v. Kerr, 855
S.W.2d 593, 601 (Tex. 1993); see also Tex. R. Civ. P. 47(a). The test of fair notice is whether an
opposing attorney of reasonable competence, with the pleadings before him or her, could ascertain
the nature and basic issues of the controversy and the testimony that is probably relevant. Hand v.
Dean Witter Reynolds Inc., 889 S.W.2d 483, 489 (Tex. App.-Houston [14th Dist.] 1994, writ
denied).
B. Defense No. 2
In their second defense, defendants contend that the business judgment rule bars plaintiffs'
claims.
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The business judgment rule is an evidentiary presumption. Cede & Co. v. Technicolor, 634
A.2d 345, 360 (Del. 1993). Where shareholders challenge transactions approved by the board of a
corporation, the business judgment rule operates as "a presumption that in making a business decision
the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the
action taken was in the best interests of the company." Aronson v. Lewis, 473 A.2d 805, 812 (Del.
1984). A shareholder plaintiff may rebut the presumption by showing that a defendant breached any
one of the triads of their fiduciary duty - good faith, loyalty or due care. Citron v. Fairchild Camera &
Instrument Corp., 569 A.2d 53, 64 (Del. 1989). If the plaintiff makes this evidentiary showing, the
presumption is rebutted and the burden shifts to the defendant directors, the proponents of the
challenged transaction, to prove to the trier of fact the "entire fairness" of the transaction to the
shareholder plaintiff. Nixon v. Blackwell, 626 A.2d 1366, 1376 (Del. 1993).
C. Defense Nos. 3, 5-6
Defendants have raised three defenses alleging that they acted in good faith and without any
intent to deceive Brigham's shareholders.
The duty to act in good faith is technically a subset of the duty of loyalty. "Encompassed
within the duty of loyalty is a good faith aspect as well. 'To act in good faith, a director must act at all
times with an honesty of purpose and in the best interest and welfare of the corporation."' Shocking
Techs., Inc. v. Kosowsky, No. 7164-VCN, 2012Del. Ch. LEXIS 224, at *29 (Del. Ch. Sept. 28, 2012)
(citation omitted). Stated alternatively, a director who acts "reckless and indifferent as to the rights of
the stockholders" may breach the duty of good faith. Perrine v. Pennroad Corp., 47 A.2d 479, 489
(Del. Ch. 1946) (citing Karasik v. Pacific Eastern Corp., 180 A. 604 (Del. Ch. 1935)).
With respect to the defense that defendants did not know, or could not have known, of any
untruths or omissions in the Schedule l 4D-9 or Schedule TO, directors of a Delaware corporation
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are under a fiduciary duty to disclose all material information within the Board's control when they
seek shareholder action. Stroud v. Grace, 606 A.2d 75, 84 (Del. 1992); Arnold, 650 A.2d at 1277.
"The disclosure obligation . . . is said to be one that requires the disclosure of all material
information within the knowledge of the corporation (and thus available to the directors)." Behrens
v. United Investors Mgmt. Co., No. 12876, 1993 Del. Ch. LEXIS 217, at *42 (Del. Ch. Oct. 1, 1993).
D. Defense No. 4
In their fourth defense, defendants assert that the alleged misrepresentations and omissions
are not material and did not proximately cause damages or injuries to plaintiffs.
The Delaware Supreme Court has stated that the essential inquiry in analyzing a disclosure
claim is whether the alleged omission or misrepresentation is material. Arnold, 650 A.2d at 1277.
The objective definition of materiality employed by Delaware courts is adopted from the United
States Supreme Court's decision in TSC, 426 U.S. 438, which states, in pertinent part:
An omitted fact is material if there is a substantial likelihood that a reasonable
shareholder would consider it important in deciding how to vote . . . . It does not
require proof of a substantial likelihood that disclosure of the omitted fact would
have caused the reasonable investor to change his vote. What the standard does
contemplate is a showing of a substantial likelihood that, under all the circumstances,
the omitted fact would have assumed actual significance in the deliberations of the
reasonable shareholder. Put another way, there must be a substantial likelihood that
the disclosure of the omitted fact would have been viewed by the reasonable investor
as having significantly altered the "total mix" of information made available.
Id. at449.
Under Delaware law, once materiality has been shown, causation is satisfied. In In re Rural
Metro Corp. Stockholders Litig., 88 A.3d 54 (Del. Ch. 2014), the Court of Chancery held that,
"[w]hen seeking post-closing damages for breach of the duty of disclosure, however, the plaintiff
must prove quantifiable damages that are 'logically and reasonably related to the harm or injury for
which compensation is being awarded."' Id. at 104 (citing In re J.P. Morgan Chase & Co. S 'holder
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Litig., 906 A.2d 766, 773 (Del. 2006)). There, the court explained, "a [financial advisor's] actions
resulted in stockholders voting on the merger based on a proxy statement that contained materially
false disclosures and omissions about [financial advisor's] valuation analyses and conflicts.
Stockholders were denied the information necessary to make an informed decision whether to seek
appraisal. Causation is satisfied." Rural Metro, 88 A.3d at 107. In a later opinion, the court entered
judgment and awarded damages to the stockholder class at an identical $4.17 per share for the
plaintiff and each eligible class member. In re Rural/Metro Corp. Stockholders Litig., 102 A.3d 205
(Del. Ch. 2014). The showing of causation involved no individual issues of proof.
E. Defense No. 7
Defendants also invoke §141(e) of Delaware's corporation law, 8 Del. C. §141(e), as a
defense. Section 141 (e) provides that directors are protected from a breach of the duty of care when
the directors reasonably believe the information upon which they rely has been presented by an
expert selected with reasonable care and is within that person's professional or expert competence.
8 Del. C. § 141(e); see also Brehm v. Eisner, 746 A.2d 244, 262 (Del. 2000).
Section 141(e) does not reach claims for breaches of loyalty and good faith. See, e.g.,
Selectica, Inc. v. Versata Enters., No. 4241-VCN, 2010 Del. Ch. LEXIS 39, at *62 (Del. Ch.
Feb. 26, 2010) (recognizing that board's reliance on expert's advice may, in certain circumstances,
defeat a "due care claim"), aff'd, 5 A.3d 586 (Del. 2010).
F. Defense No. 8
In their eighth defense, defendants contend that plaintiffs' claims are barred because of
payment or accord and satisfaction. Three elements are necessary to prove an accord and
satisfaction: (1) that a bona fide dispute existed as to the amount owed that was based on mutual
good faith; (2) that the debtor tendered an amount to the creditor with the intent that payment would
be in total satisfaction of the debt; and (3) that the creditor agreed to accept the payment in full
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satisfaction of the debt. CitiSteel USA, Inc. v. Connell Ltd. P' shp, Luria Bros. Div., 758 A.2d 928,
931 (Del. 2000) (citing Acierno v. Worthy Bros. Pipeline Corp., 693 A.2d 1066, 1068 (Del. 1997)).
The burden to prove these elements is on the party alleging that the accord and satisfaction took
place. Id. at 1068-69.
G. Defense Nos. 10 and 11
Defendants also contend that plaintiffs' claims for monetary damages are barred as a matter
of law and under the 8 Del. C. § 102(b)(7) exculpation clause in Brigham's Certificate of
Incorporation. Although § 102(b )(7) provision does not operate to defeat the validity of a plaintiffs
claim on the merits, it permits a corporation to adopt a clause eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except in certain circumstances. Emerald Partners v. Berlin, 787 A.2d
85, 92 (Del. 2001).
Section 102(b)(7) applies only to directors; it does not authorize exculpation of officers.
Chen v. Howard-Anderson, 87 A.3d 648, 686 (Del Ch. 2014); McPadden v. Sidhu, 964 A.2d 1262,
1275-76 (Del. Ch. 2008). Nor does §102(b)(7) shield a corporation from monetary damages
stemming from the actions of its directors or officers. 8 Del. C. §102(b)(7).
A §102(b)(7) exculpation clause also cannot eliminate or limit the liability of a director for
any breach of the duty of loyalty or good faith, including a claim for non-disclosure. 8 Del. C.
§102(b)(7); accord Levy v. Stern, No. 211, 1996 Del. LEXIS 468, at *6 n.4 (Del. Dec. 20, 1996)
(§ 102(b)(7) "is inapplicable ... where the alleged breach entails bad faith, intentional misconduct, or
a breach of the duty ofloyalty"); Wayne Cnty. Emps. 'Ret. Sys. v. Corti, No. 3534-CC, 2009 Del. Ch.
LEXIS 126, at *25-*28 (Del. Ch. July 24, 2009), aff'd, 996 A.2d 795 (Del. 2010).
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"Because [§ 102(b)(7)] is an affirmative defense, the defendants would normally shoulder the
burden of establishing each of its elements, and the inapplicability of each of its four exceptions."
Rothenberg v. Santa Fe Pacific C01p., No. 11749, 1992 Del. Ch. LEXIS 106, at *12-*13 (Del. Ch.
May 18, 1992); In re Orchard Enters., Inc., 88 A.3d 1, 48 (Del. Ch. 2014).
H. Defense No. 12
Defendants' twelfth defense raises four related doctrines of equity-waiver, acquiescence,
ratification and estoppel - all of which defendants bear the burden of proving under Delaware law.
'"Waiver is the voluntary and intentional relinquishment of a known right. . . . It implies
knowledge of all material facts and intent to waive.' Moreover, 'the facts relied upon must be
unequivocal in nature."' Am. Family Mortg. Corp. v. Acierno, No. 290, 1994 Del. LEXIS 105, at
*13 (Del. Mar. 28, 1994) (quoting Realty Growth Investors v. Council of Unit Owners, 453 A.2d
450, 456 (Del. 1982)) (internal citations omitted). To be subject to the defense of acquiescence,
defendants must prove every plaintiff: (i) had full knowledge of their rights and all material facts;
(ii) possessed a meaningful choice in determining how to act; and (iii) acted voluntarily in a manner
showing unequivocal approval of the challenged conduct. N.J. Carpenters Pension Fund v.
infoGROUP, Inc., No. 5334-VCN, 2013 Del. Ch. LEXIS 43, at *25 (Del. Ch. Feb. 13, 2013). To
obtain the benefits of ratification, the defendants must prove, by a preponderance of the evidence,
that the plaintiffs consented to the switch after all material facts were disclosed. 0 'Malley v. Boris,
No. 15735-NC, 2002 Del. Ch. LEXIS 33, at *22 n.28 (Del. Ch. Mar. 18, 2002). "[T]he ratification
doctrine does not apply to transactions where shareholder approval is statutorily required." Gantler
v. Stephens, 965 A.2d 695, 714 (Del. 2009). '"Estoppel is the effect of the voluntary conduct of a
party whereby he is absolutely precluded ... from asserting rights which might perhaps have
otherwise existed, ... as against another person, who has in good faith relied upon such conduct, and
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has been led thereby to change his position for the worse."' Kahn v. Household Acquisition Corp.,
591A.2d166, 176 (Del. 1991).
I. Defense No. 13
Defendants' last defense is based on the doctrine of proportionate responsibility. Under
Chapter 33 of the Texas Civil Practice and Remedies Code, if a liability finding has been made by
the jury, the jury may be asked to detennine if other parties contributed to the harm for which
damages are sought. Tex. Civ. Prac. & Rem. Code Ann. §33.003(a) (2006). If so, the jury may
detennine the percentage of responsibility of each party and reduce or eliminate any damages owed
to a plaintiff. Id.
III. CLASS ISSUES
A. Procedural History
This action was initiated on October 17, 2011, when Raymond Boytim filed a petition
stemming from the announcement by Brigham and Statoil that the companies had entered into a
merger agreement. Several additional Brigham shareholders filed similar actions. The actions were
thereafter consolidated. On November 10, 2011, plaintiffs moved for an order preventing defendants
from closing the tender offer and taking down any tendered shares until defendants cured the
breaches of fiduciary duty set forth in plaintiffs' petition. That motion was denied, and Statoil
closed the transaction on December 8, 2011.
After the sale was consummated, plaintiffs filed a second amended consolidated petition,
which added a claim for damages. Plaintiffs also added factual allegations based on their review of
the documents and deposition testimony provided by defendants prior to the close of the transaction.
In early March 2012, plaintiffs filed a third amended class action petition for breach of fiduciary
duty. The petition added several additional named plaintiffs, but was otherwise identical to the
second amended petition filed in January. Discovery is ongoing.
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On September 17, 2012, plaintiffs moved for class certification of their claim that defendants
had breached their duties to Brigham's shareholders. Both parties have submitted voluminous
filings, and the Court has held numerous hearings, in connection with that motion. On October 22,
2012, the trial court held a hearing during which counsel for the parties providing opening
statements in support of their respective positions and four class representatives provided live
testimony. The Court held a second hearing on February 22, 2013. At that hearing, the Court
addressed defendants' objections to the class certification order and proposed trial plan. Five days
later, the Court issued an order certifying a class of former Brigham shareholders. An interlocutory
appeal followed.
On December 17, 2014, following disposition of defendants' interlocutory appeal, the Court
held a hearing to address the development of a revised trial plan which complies with Tex. R.
Civ. P. 42. Specifically, the Court explored the various defenses pleaded by defendants and the
defenses they expected to pursue at trial, and the Court analyzed the sources of proof defendants will
offer in support of these defenses. These issues were further explored through subsequent briefing
by the parties and a follow-up hearing held on March 31, 2015.
B. Common Questions of Law and Fact Predominate
Under Rule 42(b)(3) of the Texas Rules of Civil Procedure, the moving party must show that
the class should be maintained because common questions of fact or law predominate over any
questions affecting only individual members. Sw. Ref Co. v. Bernal, 22 S.W.3d 425, 435 (Tex.
2000) (if the moving party seeks to certify a predominance-of-common-questions action, the
commonality determination under Rule 42(a) is subsumed under the predominance determination).
The test for predominance is whether common or individual issues will be the object of most of the
efforts of the litigants and the Court. Id. at 434; Snyder Commc'ns, L.P. v. Magana, 142 S.W.3d
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295, 300 (Tex. 2004) ("In evaluating whether common issues predominate, courts must identify the
controlling substantive issues of the case and assess which issues will predominate to determine
whether those issues are in fact common to the class. Courts must therefore determine 'whether
common or individual issues will be the object of most of the efforts of the litigants and the court."')
(citing Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 693 (Tex. 2002)).
For all of their claims, plaintiffs will rely on common proof derived directly from Brigham's
directors, officers and executives, and from plaintiffs' expert(s), to prove their claims. Below is an
evidentiary outline demonstrating how this case will be tried as a class action without manageability
problems.
1. Plaintiffs Will Prove Breach of Fiduciary Duty Through
Common Evidence
The elements of breach of fiduciary duty are common to each member of the stockholder
class. Plaintiffs intend to prove at trial that defendants breached their fiduciary duties to
shareholders when they agreed to the sale of Brigham.
To prove their claims, plaintiffs will offer evidence of the defendants' activities found in the
contemporaneously created internal Brigham and Statoil documents; testimony from Brigham's
directors and officers, and certain of its executives; testimony from Statoil's executives; documents
and testimony from Jefferies, the financial advisor retained by the Brigham Board; and documents
and testimony from Shell, ENI, Chevron and Total, four other potential buyers of Brigham.
Plaintiffs believe that this evidence will show that defendants were acting in their own interests,
rather than in the interests of stockholders.
Plaintiffs also allege that the Board disregarded hundreds of millions of dollars in shareholder
value represented in the stand-alone plan of the Company, when it agreed to and recommended the
tender offer and approved the acquisition. Common evidence of this breach will include various
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minutes from the Board meetings, internal analyses conducted by Company management and
presented to the Board, as well as presentations provided by Jefferies to the Board. It will also
include expert testimony concerning the intrinsic value of the Company at the time it was sold.
Because a breach of fiduciary duty claim and an aiding and abetting claim share many of the
same elements, much of the evidence supporting plaintiffs' breach of fiduciary duty claim will also be
used to support the aiding and abetting claim. In addition to the evidence outlined above, the Court
understands that plaintiffs intend to introduce at trial evidence that, in the days leading up to the
merger, Statoil was informed that Ben Brigham did not have Board authorization to agree to a deal at
$36.50, yet Statoil nevertheless encouraged Ben Brigham to obtain full Board approval of the deal.
The Court also understands that plaintiffs will introduce evidence that Statoil negotiated
extensively with the Company and enjoyed access to the Company's confidential information during
the negotiation process and Statoil requested, and obtained, an exclusivity agreement from Brigham
to prevent competing bidders from topping or competing with its bid. According to plaintiffs, this
concession prevented Brigham from pursuing discussions with other potential bidders who were
interested in making a bid for the Company during this time. Moreover, as the Court understands,
plaintiffs intend to introduce evidence that Statoil sought to induce the Board's breaches of fiduciary
duty by ensuring that certain Board members and company insiders received various benefits that the
Company's unaffiliated public shareholders did not receive. For example, when the deal closed,
company insiders received over $60 million dollars for unvested stock options. Statoil also provided
golden parachutes to the rest of the management team, including post-merger employment contracts.
While this evidence is only illustrative of the type of evidence plaintiffs' intend to use to support
their aiding and abetting claim, it is common to the class and shows that the claim can be tried on a
class-wide basis. See In re Rural Metro Corp., 88 A.3d at 80.
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With respect to plaintiffs' claim that the Board breached its duty of candor, plaintiffs intend to
prove this claim through the Company's Schedule 14D-9 and Schedule TO, various internal documents
and testimony from Brigham's directors, officers and executives reflecting the true facts, and the
likelihood that those facts would be important to the shareholders' decision to tender their shares to
Statoil. In short, the focus of plaintiffs' claims is on defendants' actions leading up to the sale.
2. Plaintiffs Will Prove with Common Evidence Causation and
Amount of Damages
Plaintiffs intend to demonstrate causation through, inter alia, documents and testimony from
Brigham, its Board and Statoil, showing that the injury to Class members in the form of inadequate
consideration was foreseeable and an intended consequence of the actions of defendants in
structuring and agreeing to a sale of the Company. Oliver v. Boston Univ., No. 16570-NC, 2002
Del. Ch. LEXIS 21, at *24-*25 (Del. Ch. Feb. 28, 2002) (in merger cases, all shareholders suffer "a
common harm that is related to the allegedly wrongful merger and the inadequate disclosures
associated with it").
With the assistance of their expert(s), plaintiffs will use common proof to demonstrate injury
to Class members and calculate total damages for the Class without the need to resort to information
collected from individual Class members. That common proof will be expert testimony establishing
the difference between the true value of the Company and the amount actually received by the
shareholders. The amount actually received is the $36.50 that all shareholders received when they
either tendered their shares to Statoil or were cashed-out. If plaintiffs establish liability and
damages, class members will claim their pro rata portion of the judgment by submitting a claim
form showing the number of shares of Brigham stock they held at the time the merger was
announced. See Joseph v. Shell Oil Co., No. 7450, 1985 Del. Ch. LEXIS 458, at *14 (Del. Ch.
Feb. 8, 1985) ("In short, if a finding of damages occurs, the damages will be mathematically
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allocated on a per share basis to all the stockholders in similar circumstances. There is a total
absence of individual issues and therefore there would be no reason for the Court to make a separate
finding of damages as to each share or each shareholder."); Rural/Metro, 102 A.3d at 224-25.
3. Defendants' Defenses Are Susceptible to Common Proof
Once plaintiffs have concluded their case-in-chief, the burden will shift to defendants to
present evidence in support of their defenses. Based upon the parties' submissions in connection
with plaintiffs' motion, the Court believes that the defenses pleaded by defendants are subject to
common proof and will not present manageability problems. The Court assumes for purposes of this
trial plan that all of the defenses pleaded by defendants apply to plaintiffs' claims and will be
presented at trial.
As an initial matter, several of defendants' pleaded defenses (Nos. 1 and 9) are legal matters
for the Court, not factual matters for the jury, and can be resolved through pre-trial motion practice.
Moreover, because these defenses will resolve the claims of the entire class, if they have merit, they
do not present individualized issues which would preclude a class-wide trial on the merits of
plaintiffs' claims. With respect to defense No. 2 - regarding the business judgment rule - the
appropriate burden(s) shouldered by each of the parties at trial will be reflected in the jury
instructions. Because the burdens will govern the claims of the entire class, they will not present
individualized issues.
Defendants have raised three defenses (Nos. 3, 5 and 6) in which they assert that they acted
in good faith and without intent to deceive, and that they did not know of the untruths or omissions
at issue. These defenses will depend on many of the same sources of common proof used to support
plaintiffs' claims, including the testimony of the Individual Defendants, the testimony of current and
former executives, officers and managers at Brigham and Statoil, correspondence to and from the
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defendants during the sales process, and the Schedule 14D-9 and Schedule TO disseminated to
Brigham's shareholders. In similar vein, defendants' 8 Del C. §141(e) defense will center on the
Individual Defendants' testimony and beliefs regarding the opinions of the Board's financial
advisors, and internal corporate documents about the competence, selection and performance of
those advisors during the sales process.
With respect to defendants' fourth pleaded defense, materiality does not present an issue that
requires proof from individual Class members. As noted above, materiality is judged according to
an objective standard, Arnold, 650 A.2d 1277, and TSC, 426 U.S. 438, and, as such, can be proved
through evidence common to the Class. Malone v. Brincat, 722 A.2d 5, 12 (Del. 1998) (directors
who fail to disclose all material information breach their duty of candor to each and every one of the
Company's shareholders); see also Weatherly v. Deloitte & Touche, 905 S.W.2d 642, 653 (Tex.
App.-Houston [14th Dist.] 1995, writ dism'd w.o.j.) (concluding that where shareholders' injuries
arise from defendants' uniform scheme of misrepresentations, typicality is satisfied). Also, as noted
above, causation and damages do not raise individual issues of proof under Delaware law for post-
merger disclosure claims for damages. See infra §Il.D (citing Rural Metro, 88 A.3d 54, and
Rural/Metro, 102 A.3d 205). A failure of proof on these questions will not result in individual
inquiries; instead, it will simply end plaintiffs' disclosure claims.
In support of the defenses based upon §102(b)(7) (Nos. 10 and 11), the Individual
Defendants intend to offer, inter alia, proof of their positions on the Board and their actions leading
up to the acquisition; that they retained sophisticated financial and legal advisors during the process;
that they performed due diligence prior to agreeing to and recommending the tender offer and
consummating the transaction, including due diligence about the value of the Company; and that
they held numerous Board meetings to discuss and explore the various options available to the
- 18 -
1014363_1
Company going forward. This proof will come in the form of testimony from the Individual
Defendants and internal corporate documents created during the process. Evaluating this evidence,
the jury will decide whether the Individual Defendants' actions (a) were that of a director as opposed
to an officer and (b) constituted a breach of care as opposed to breach of loyalty - thereby
immunizing a particular defendant (or defendants) from monetary damages. 8 Del. C. §102(b)(7);
Emerald Partners, 787 A.2d at 92.
Defendants also assert defenses based on the equitable doctrines of accord and satisfaction,
waiver, acquiescence, ratification and estoppel. The certified Class is comprised of"[ a]11 holders of
Brigham common stock as of October 17, 2011." The Class includes both shareholders who
tendered their Brigham shares to Statoil and shareholders who did not. Based upon defendants'
submissions, the Court understands that defendants intend to attempt to prove at trial that the former
group is subject to these defenses because they tendered their shares voluntarily and with full
knowledge of their rights and the material facts surrounding the acquisition. Defendants intend to do
so through evidence showing that Brigham entered into a merger agreement with Statoil, that Statoil
commenced a tender offer pursuant to that agreement, and that a percentage of Brigham's
shareholders tendered their shares to Statoil and were paid a single price - $36.50- for each of their
shares. They will also offer the Schedule 14D-9 and Schedule TO.
As a practical matter, these defenses merge with the merits of plaintiffs' non-disclosure
claims. Both claims turn on whether the Schedule 14D-9 and Schedule TO disclosed all material
facts to Brigham's shareholders. 1 If plaintiffs establish that defendants did not disclose all material
facts, plaintiffs will prevail on their non-disclosure claims and will negate one of the elements of the
Plaintiffs have stipulated that, if defendants can prove that all material information relating to the
merger was disclosed in the Schedule l 4D-9 or Schedule TO, or otherwise public! y made available,
defendants need not prove that each Class member was individually aware of these facts.
- 19 -
1014363_1
defenses - i.e., that Brigham's shareholders had full know ledge of all material facts surrounding the
acquisition when they tendered their shares to Statoil. The doctrines of ratification, waiver,
acquiescence and estoppel only apply if the shareholder was fully informed. infoGROUP, 2013 Del.
Ch. LEXIS 43, at *25; Am. Family, 1994 Del. LEXIS 105, at* 13; O'Malley, 2002 Del. Ch. LEXIS
33, at *22 n.28.
If plaintiffs do not establish that shareholders were misled, plaintiffs' non-disclosure claims
fail and defendants are entitled to judgment on that claim, without the need for a separate finding on
the defenses. Either way, these defenses will be disposed of as the parties litigate the merits of
plaintiffs' claims.
Any issues concerning defendants' remaining defense - that another party may be
responsible· for all or a portion of any harm to the Class - can be resolved through the use of an
appropriate jury form. The jury will not be required to decide the issue of proportionate
responsibility unless and until, there is first an appropriate finding of liability. No issue of
proportionate responsibility arises unless there is first a determination of some responsibility for
damages by at least one defendant. If there is a finding ofliability, the jury can be asked in a verdict
form to determine how much of the responsibility for the harm, in percentage terms, to place on
defendants and any culpable non-parties.
DATED: March 19, 2015 Respectfully submitted,
ROBBINS GELLER RUDMAN
&DOWDLLP
RANDALL J. BARON
DAYID T. WISSBROECKER
STEVEN M. JODLOWSKI
- 20-
1014363_1
655 West Broadway, Suite 1900
San Diego, CA 92101
Telephone: 619/231-1058
619/231-7423 (fax)
ROBBINS GELLER RUDMAN
&DOWDLLP
SAMUEL H. RUDMAN
MARKS.REICH
MICHAEL G. CAPECI
58 South Service Road, Suite 200
Melville, NY 11747
Telephone: 631/367-7100
631/367-1173 (fax)
Class Counsel for Plaintiffs
BOULETTE & GOLDEN LLP
MICHAEL D. MARIN
Texas Bar #00791174
2801 Via Fortuna Drive, Suite 530
Austin, TX 78746
Telephone: 512/732-8900
5121732-8905 (fax)
Liaison Counsel
KENDALL LAW GROUP, LLP
JOE KENDALL
DANIEL HILL
JAMIEJ. McKEY
3232 McKinney A venue, Suite 700
Dallas, TX 75204
Telephone: 214/744-3000
2141744-3015 (fax)
THE BRISCOE LAW FIRM, PLLC
WILLIE C. BRISCOE
8150 N. Central Expressway, Suite 1575
Dallas, TX 75206
Telephone: 214/239-4568
281/254-7789 (fax)
ARMBURST & BROWN, PLLC
MICHAEL BURNETT
100 Congress A venue, Suite 1300
Austin, TX 78702
Telephone: 512/435-2300
512/435-2360 (fax)
- 21 -
1014363_1
ROBBINS ARROYO LLP
BRIAN J. ROBBINS
STEPHEN J. ODDO
EDWARD B. GERARD
JUSTIN D. RIEGER
600 B Street, Suite 1900
San Diego, CA 92101
Telephone: 619/525-3990
619/525-3991 (fax)
DUNNAM DUNNAM HARMON WEST
LINDLEY &RYANLLP
HAMILTON P. LINDLEY
4125 W. Waco Drive
Waco, TX 76710
Telephone: 2541753-6437
2541753-7434 (fax)
BRODSKY & SMITH, LLC
EVAN J. SMITH
MARC ACKERMAN
Two Bala Plaza, Suite 510
Bala Cynwyd, PA 19004
Telephone: 610/667-6200
610/667-9029 (fax)
LEVI & KORSINSKY, LLP
SHANE T. ROWLEY
30 Broad Street, 24th Floor
New York, NY 10004
Telephone: 212/363-7500
866/367-6510 (fax)
KOHN, SWIFT & GRAF, P.C.
DENIS F. SHEILS
One South Broad Street, Suite 2100
Philadelphia, PA 19107-3389
Telephone: 215/238-1700
215/238-1968 (fax)
THE WEISER LAW FIRM, P.C.
PATRICIA C. WEISER
JAMES M. PICARO
22 Cassatt A venue
Berwyn, PA 19312
Telephone: 610/225-2677
610/225-2678 (fax)
- 22 -
1014363_1
RYAN & MANISKAS, LLP
KATHARINE M. RYAN
RICHARD A. MANISKAS
995 Old Eagle School Road, Suite 311
Wayne, PA 19087
Telephone: 484/588-5516
484/450-2582 (fax)
SAXENA WHITE P.A.
JONATHAN M. STEIN
5200 Town Center Circle, Suite 601
Boca Raton, FL 33486
Telephone: 561/394-3399
561/394-3382 (fax)
Additional Counsel for Plaintiffs
-23 -
1014363_1
EXHIBIT 2
CAUSE NO. 2002-16085
JOHN F. HAVENS and PETER § IN THE DISTRICT COURT OF
ELLOWA Y, ON BEHALF OF HIMSELF §
AND ALL OTHERS SIMILARLY §
SITUATED, §
§
Plaintiff, §
§ HARRIS COUNTY, TEXAS
····-···-·--···--·---.§.....- -
§
DONNA C. PATE in her capacity as §
Independent Executor of the Estate of James §
L. Pate, TERRY L. SAVAGE, H. JOHN §
GREENIAUS, BRENT SCOWCROFT, §
LORNE R. W AXLAX, FORREST R. §
HASELTON, C. BERDON LAWRENCE, §
JAMES J.POSTL and GERALD B. § 295TH JUDICIAL DISTRICT
SMITH,
Defendants.
§ IN THE DISTRICT COURT OF
[consolidated with] §
§
HOWARD LASKER, ON BEHALF OF §
HIMSELF AND ALL OTHERS §
SIMILARLY SITUATED, §
§ HARRIS COUNTY, TEXAS
Plaintiff, §
§
vs. §
§
DONNA C. PATE in her capacity as §
Independent Executor of the Estate of J arhes §
L. Pate, TERRY L. SAVAGE, H. JOHN §
GREENIAUS, BRENT SCOWCROFT, §
LORNE R. W AXLAX, FORREST R. § 295TH JUDICIAL DISTRICT
HASELTON, C. BERDON LAWRENCE,
JAMES J. POSTL and GERALD B.
SMITH,
Defendants.
DEFENDANTS' FOURTH AMENDED ORIGINAL ANSWER
HOU02o 1039583. I
Donna C. Pate in her capacity as Independent Executor of the Estate of J arnes L
Pate, Terry L. Savage, H. John Greeniaus, Brent Scowcroft, Lome R. Waxlax, Forrest R.
Haselton, C. Berdon Lawrence, James J. Post! and Gerald B. Smith, (collectively "Defendants")
I
answer Plaintiffs' Fourth Amended (Consolidated) Petition as follows:
I. General Denial
Pursuant to Texas Rule of Civil Procedure 92, Defendants generally deny the
material allegations, charges and claims contained in Plaintiffs' Fourth Amended (Consolidated)
Petition. Plaintiffs therefore must prove these allegations to the jury by the greater weight of the
believable evidence, as required by the Constitution and laws of this State.
II. Special Exceptions
L Defendants specially except to Plaintiffs' Fourth Amended (Consolidated)
Petition in its entirety because Plaintiffs failed to make a pre-suit demand on the Pennzoil board
of directors as required by Delaware law.
2. Defendants further specially except and object to Plaintiffs' Fourth
Amended (Consolidated) Petition in its entirety because a party seeking to maintain a
shareholder derivative action must allege with particularity either (I) that he has made a demand
upon the corporation's board of directors to bring the lawsuit, or (2) that such a demand would be
futile and is excused. Plaintiffs failed to make such a demand upon Pennzoil's board of directors
and do not and cannot allege with any particularity that the demand would have been futile.
3. Defendants specially except to Paragraphs 74 and 75 of Plaintiffs' Fourth
Amended (Consolidated) Petition, in which Plaintiffs assert a claim for aiding and abetting
breach of fiduciary duty, because those paragraphs fail to give adequate notice ofthe Defendants
against whom the aiding and abetting claim is asserted. Plaintiffs should be required to identify
HOU02:1039583.I 2
which Defendants allegedly breached fiduciary duties and which Defendants did not breach
fiduciary duties but rather allegedly aided and abetted other Defendants in doing so.
4. Defendants specially except to Plaintiffs' Fourth Amended (Consolidated)
Petition in its entirety because it fails to state the maximum amount of damages Plaintiffs seek.
III. · Affirmative Defenses
5. Plaintiffs lack standing and therefore are not entitled to recover for
themselves or derivatively for PelU!Zoi! in the capacity in which they sue.
6. Plaintiffs failed to make demand on PelU!Zoil and therefore are not entitled
to recover in the capacity in which they sue.
7. Plaintiffs' claims for monetary damages for Defendants' alleged breaches
of the duty of care and to disclose are barred by the Limitation of Liability provision in
Article IX of PelU!Zoil's certificate of incorporation.
8. Plaintiffs' claims for monetary damages for Defendants' alleged breaches
of the duty of care were extinguished by the fully informed shareholder vote approving and
ratifying the merger.
IV. Attorneys' Fees and Costs
9. Pursuant to Article 5.14 (J) of the Texas Business Corporation Act,
Defendants seek to recover from Plaintiffs all expenses, including attorneys' fees and costs,
incurred by Defendants and PelU!Zoil-Quaker State Company in investigating and defending this
proceeding.
V. Further Amendment
10. Defendants reserve the right to amend this answer in accordance withthe
Tex.as Rules of Civil Procedure or any order of the Court.
HOU02:!0395B3.l 3
WHEREFORE, PREMISES CONSIDERED, Defendants pray that the Court deny
all of Plaintiffs' requests for relief; enter judgment that Plaintiffs take nothing; order Plaintiffs to
pay expenses as provided by Article 5.14 (J) of the Texas Business Corporation Act; and grant
Defendants all the other relief to which they may be justly entitled.
Respectfully submitted,
BAKER Borrs L.L.P.
~s~~
State Bar No. 12881500
Paul R. Elliott
State Bar No. 06547500
Michael C. Massengale
State Bar No. 24003704
Rebeca Aizpunl Huddle
State Bar No. 24012197
One Shell Plaza
910 Louisiana
Houston, Texas 77002
713.229.1234 Telephone
713.229.1522 Telecopier
ATTORNEYS FOR DEFENDANTS
HOU02ol039583.1 4
CERTIFICATE OF SERVICE
I certify that on this ~ COMPLAINT
Defendants Rural/Metro Corporation ("Rural/Metro" or the "Company").
Christopher S. Shackelton, Michael P. DiMino. Eugene l. Davis. Earl P. Holland, Conrad
A. Conrad, and Henry 0. Walker (collectively "the Rural/Metro Defendants"), by and
through their undersigned counsel, hereby respond to the Verified Second-Amended
Complaint (the "Amended Complaint'') as follows:
GENERAL DENIAL
Except as otherwise expressly recognized herein, the Rural/Metro Defondant~
deny each and every allc11ation contained in the Amended Complaint. The Ruml/Metro
Defendnnts state U1at the headings and sub-headings throughout the Amended Complaint
do not constitute well-pleaded allegations of fact and therefore require no response. To
the extent a response is required, the allegations of the headings and sub-headings in the
Amended Complaint are denied. The Rurul/Metro Defendants expressly reserve the right
to seek to amend and/or supplement their Answer as may be necessary.
•' .
8. The Rural/Metro Defendants are fully protected from liability under 8 Def.
C. § 141(e).
9. Plaintiff's putntive claims and remedies arc barred by the doctrines of
acquiescence, estoppel, Inches, unclean hands, or waiver.
I 0. Without conceding that Plaintiff or any forme1· Rural/Metro stockholder is
entitled to appraisal rights, any claim for appraisal or quasi-appraisal by any member ot'
the class who fails to follow lhe procedure set forth in 8 Del. C. § 262(d) is barred by
such class member's failure to perfccl appraisal rights in the manner specified in § 262
and as !let forth in the proxy statement.
11. The equitable remedy of quasi-uppruisal is not avuiluble in whole or in
pnrt.
The Rur.:11/Metro Defendants reserve the right to assert additional defenses as may
be warranted by future discovery or investigation in this action.
J•RA YER FOR RELIEF
WHEREFORE, the RuraVMetro Defendants respectfully rcqut:st that lhe Court
enter judgment in their favor, ond against Plaintiff, as follows:
I. That Plaintiffs Verified Second-Amended Complainl be dismissed with
prejudice and that judgment be entered against Plaintiff and in favor of the Rural/Metro
Detendonts;
2. That the Rural/Metro Defendants be awarded the costs of this suit,
includillg their disbursements and reasonable nttorncys' fees and expert foes (if any); and
86
EXHIBITB
' .. _J ..
)
IN RE DOLE FOOD COMPANY, INC. ) C.A. No. 8703-VCL
STOCKHOLDER LITIGATION )
)
)
IN RE APPRAISAL OF DOLE FOOD ) C.A. No. 9079-VCL
COMP ANY, INC.
~ Public Inspection Version
Filed November 17, 2014
James L Holzman (DE Bar l.D. 663)
J. Clayton Athey (DE Bar l.D. 4378)
Patrick W. Flavin (DE Bar I.D. 5414)
OF COUNSEL: PRICKETT, JONES & ELLIOTT, P.A.
1310 King Street
Peter M. Stone P.O. Box 1328
Edward Han Wilmington, DE 19899-1328
PAUL HASTINGS LLP (302) 888-6500
1117 S. California Avenue
Palo Alto, California 94304-1106 Attorneys/or Defendants David H.
(650) 320-1800 Murdock and DFC Holdings, LLC and
Non-Party DFC Merger Corp.
Dated: November 7, 20 l 4
FIFTEENTH AFFIRMATIVE DEFENSE
(Estoppel)
Plaintiffs' purported claims are barred in whole or in part because of
or based on the doctrine of estoppel.
SIXTEENTH AFFIRMATIVE DEFENSE
(Laches)
Plaintiffs' purported claims are barred in whole or in part based on the
doctrine of laches.
SEVENTEENTH AFFIRMATIVE DEFENSE
(Waiver)
Plaintiffs' purported claims are barred in whole or in part because the
Plaintiffs have waived their claims and/or their right to seek damages.
EIGHTEENTH AFFIRMATIVE DEFENSE
(Acquiescence)
Plaintiffs' purported claims are barred in whole or in part based on the
doctrine of acquiescence.
NINETEENTH AFFIRMATIVE DEFENSE
(Exculpatory Provision)
Plaintiffs' purported claims are barred in whole or in part because
245
• .c ...
Dole's Amended and Restated Articles of Incorporation exculpate Defendants
from liability to the fullest extent permitted under Delaware law pursuant to
8 Del. C. § 102(b)(7).
TWENTIETH AFFIRMATIVE DEFENSE
(Ratification)
Plaintiffs' purported claims are barred by the doctrine of ratification
as a result of the vote of Dole stockholders approving the transaction.
TWENTY-FIRST AFFIRMATIVE DEFENSE
(Reserve All Rights)
Defendants hereby reserve and assert all affirmative defenses
available. Defendants presently have insufficient knowledge or information upon
which to form a belief as to whether they may have other, as yet unstated,
affirmative defenses available. Therefore, Defendants reserve the right to assert
additional affirmative defenses in the event that discovery indicates that it would
be appropriate.
PRAYER FOR RELIEF
Wherefore, Defendants pray for a judgment in favor of Defendants and
against Plaintiffs as follows:
A. That Plaintiffs take nothing by their Second Amended Complaint;
246
CERTIFICATE OF SERVICE
Pursuant to the attached Declaration of Service by E-Mail, I hereby certify that a true and
correct copy of the foregoing instrument has been served in accordance to the Texas Rules of
Civil Procedure, to those listed on the attached service list, on this 161h day of March 2015.
Isl Michael D. Marin
MICHAEL D. MARIN
(' ... ' ,.
~
DECLARATION OF SERVICE BY E-MAIL
I, June P. Ito, not a party to the within action, hereby declare that on March 16, 2015, I served
the attached PLAINTIFFS' RESPONSE TO DEFENDANTS' JOINT OPPOSITION TO CLASS
CERTIFICATION AND PLAINTIFFS' PROPOSED AMENDED PLAN FOR TRIAL OF CLASS
CLAIMS on the parties in the within action by e-mail addressed as follows:
Counsel for Defendant(s)
Timothy R. McConnick Thompson & Knight LLP timothy.mcconnick@tklaw.com
Michael W. Stockham michael.stockham@tklaw.com
Timothy E. Hudson tim.hudson@tklaw.com
Debora B. Alsup debora.alsup@tklaw.com
Danley Comvn danley.comvn@.tklaw.com
Karl S. Stem Vinson & Elkins L.L.P. kstem@velaw.com
Michael C. Holmes mholmes@velaw.com
Jennifer B. Poppe jpoppe@velaw.com
Thomas S. Leatherburv tleatherburv@.velaw.com
Counsel for Plaintiff(s)
Michael Burnett Annburst & Brown. PLLC mbumett@.abaustin.com
Kelly N. Reddell Baron & Budd, P.C. kreddell@.baronbudd.com
Michael D. Marin Boulette & Golden LLP mmarin@.boulettegolden.com
Evan J. Smith Brodsky & Smith, LLC esmith@brodsky-smith.com
Marc L. Ackennan mackerman@.brodskv-smith.com
Shane T. Rowley Farucii & Faruoi. LLP srow lev@.faruq ilaw .com
Hamilton Lindley Dunnam & Dunnam hlindley@. dunnamlaw .com
Joe Kendall Kendall Law Group, LLP jkendall@kendalllawgroup.com
Daniel Hill dhill@kendalllawgroup.com
Jamie J. McKey imckev@.kendalllawgrouo.com
Denis F. Sheils Kohn, Swift & Graf. P.C. dsheils@.kohnswift.com
Brian J. Robbins Robbins Arroyo LLP brobbins@robbinsarroyo.com
Stephen J. Oddo soddo@robbinsarroyo.com
Edward B. Gerard eu;erard@.robbinsarrovo.com
Katharine M. Ryan Ryan & Maniskas, LLP kryan@nnclasslaw.com
Richard A. Maniskas rmaniskas@.nnclasslaw.com
Jonathan M. Stein Saxena White P.A. istein@.saxenawhite.com
Willie C. Briscoe The Briscoe Law Finn wbriscoe@.thebriscoelawfirm.com
Patricia C. Weiser The Weiser Law Finn, P.C. pw@weiserlawfirm.com
James M. Ficaro imf@.weiserlawfinn.com
I declare under penalty of perjury that the foregoing is true and correct. Executed on
~ d~
March 16, 2015, at San Diego, California.
JJµ .
JUNEP. ITO
ffJ
1012652_1
Tab 5
Judge Dietz’s order denying the request for a
temporary injunction (CR305-307)
Notlct s~r;;: Finr1! ir.:er1{.>cutoq1 None
~
Disp Parties:_ ~ DC BK11327 PG689
Dlsp code: CVD / CLS - ·
Redact pgs:_ _........ --.-- --~ ... -
Judge 5/kD Cterk mvm
CAUSE NO. D-1-0N-11..003205
RAYMOND BOYTlM, Individually and oo § IN THE DISTRICT COURT OF
Behalf of AU Others Similarly Situated, §
§
Plaintiff. §
§
vs. §
§
Brigham EXPLORATION COMPANY. BRN § TRAVIS COUNTY, TEXAS_·
M. Brigham, DAVID T. Brigham. HAROLD §
D. CARTER, STEPHEN C. HURLEY, §
STEPHEN P. REYNOLDS, HOBART A. §
SMITH, SCOTT W. TINKER. STATOIL §
ASA, and FARGO ACQUISITION, INC., §
§
Defendants. §
§ 20 Ist JUDICIAL DISTRICT
ORDER DENYING TEMPORARY INJUNCTION
1. On this 22nd day of November, 201 t came on to be heard Motion for Temporary
Injunction (..Motion") filed by Plaintiff Raymond Boytim.
2. The Court having found that all prerequisites of law have been satisfied and that
this Court has jurisdiction over the parties and the subject matter of this cause, and having
considered the pleadings on file, the arguments of counsel, and the evidence offered, finds as
follows.
3. Plaintiff asks the Court to enjoin the close of the tender offer by Statoil until
-----
._
=
Brigham Exploration discloses a net asset value analysis (~AV") created by Jefferies in June
-
--'
2011 (the "June 2011 NAV"). Plaintiff argues that Brigham Exploration~s directors breached
-
=
'--
their fiduciary duty to the Brigham shareholders because they did not disclose the June 201 l
NA V in the Schedule 140-9, fi1ed with the Securities and Exchange Commission and delivered
to the Brigham shareholders.
us 709961\.'1
88 88 305
·····-------·--·······--------------------
DC BK11327 PG690
4. The June 20ll NAV was created by Brigham Exploration's financial advisor.
Jefferies. as marketing material to show potential buyers with more capital what could
potentially be done with Brigham Exploration's as.sets. Brigham's CEO. Ben Brigham, testified
that the June 2011 NAV is not a reliable indicator of Brigham Exploration's current value
because Brigham Exploration lacks the capital to execute the model that is the basis fur the June
~Ji>
20ll NAV. The Brigham board of directors did not 111' &u the June 2011 NAV when it
recommended that the Brigham Explorati.on sh.areholders accept the tender offer, R,alph Bads, a IA'°"
-/61'tlfui~b
representative of Jefferies, also testified that theJune 201 l NAV is unrenabQ Jefferies did not
rely on the June 20 I l NAV when it issued its fairness opinion in connection with the proposed
tender offer.
5. A temporary injunction may only be entered if the rt1oving party demonstrates: ( l}
a probable right to the relief sought; (2) a probable, imminent, and irreparable injury in the
absence of an injunetion; and (3) that the balance of the equities favors the issuance of an
injunction. See Butnaru v. FordMotor Co., 84 S.W. 198, 204 (Tex. 2002).
6. ln order to demonstrate that he has a probable right to the relief sought, Plaintiff is
required to show that the June 2011 NAV is likely to be material under Delaware Law. See
Solomon v. Arntstrongt 747 A.2d 1098, 1128 (Del. Ch. 1999), a.ff'd, 746 A.2d 277 (Del. 2000).
In order to be considered material, theJune 2011 must be reliable. Van de Walle v. Unimation,
Inc., Civ. A. No. 7046, 1991 WL 29303. at *17 (Del. Ch. Mar. 7, 1991). "[V]aluations intended
solely as sales pitches1• need not be disclosed because they are not "responsible estimates of a
company's value." lnre Pennaco, 787 A.2d 691, 713 (Del.Ch. 2001).
7. Plaintiff has not satisfied its burden to demonstrate that he has a reasonable
probability of success on the merits. Because the June 2011 NA V constitute marketing
US 709%lvl -2-
89 89 306
DC BK11327 PG691
materials, Plaintiff is unUkety to demonstrate that the June 2011 NAV is either material or
reliable, and that it therefore should have been disclosed.
8, Plaintiff further failed to $how that there wm be irreparable injury if an
injunction is not issued, and that the harm he will suffer absent an injunction is greater than the
ha.rm Defendants wm suffer with an injunction.
9. IT IS THEREFORE ORDERED that Plaintiff's Motion fur Temporary Injunction
is DENIED.
SIGNED this the 1.J... day of ~ A>t''~~-2011 at-··-··: _ o'elock a.m./p.m.
US 709961 v I -3-
90 90 307