Texas Pacific Land Trust and a group of activist investors have halted their contentious proxy battle and reached a settlement in a connected legal fight, both parties announced Wednesday.
That said, U.S. District Judge Jane Boyle did not dismiss the lawsuit with prejudice, so if the relationship sours again between the two sides, future legal action has not been ruled out.
According to the agreement, TPL will add three new members from the activist shareholder group to its conversion exploration committee: Murray Stahl of Horizon Kinetics, Eric Oliver of SoftVest Advisors and Craig Hodges of Hodges Capital. The parties also agreed in the settlement to postpone the appointment of TPL’s third trustee at least until the committee has completed its work.
The proxy battle began after a vacancy on TPL’s board of trustees opened earlier this year. The investor group, which also includes ART-FGT Family Partners and together owns about 25% of TPL’s outstanding shares, endorsed Oliver to become the new trustee. TPL endorsed another candidate, Gen. Donald Cook. With Oliver’s help, the investor group claimed TPL could improve its outdated corporate governance, business decisions and transparency.
TPL’s conversion exploration committee has been charged with recommending whether the Dallas-based trust should be converted into a C corporation (something Oliver’s group advocates) and considering appropriate governance changes. In addition to the newcomers, the committee includes the incumbent trustees, John R. Norris III and David Barry, General Cook and Dana McGinnis of Mission Advisors.
Per the settlement, any decisions made by the committee will be the result of an affirmative vote of at least five of the seven members, which means both schools of thought will be represented in whichever direction the committee steers the future of the trust.
Various events — including a slew of accusations hurled back and forth in press releases — caused tension among the groups, which heightened once TPL filed a lawsuit in Dallas federal court against the investor group on May 21. The lawsuit claimed Oliver was not being forthcoming since he refused to answer a questionnaire that asked about his background, business interests and conflicts — questions the trust said would indicate whether he was fit to be a candidate.
The investor group fired back with a countersuit against TPL a week later, asking Judge Boyle to rule that a vote conducted during a May 22 meeting that elected Oliver as a trustee was valid, and asked her to forbid the other two trustees from conducting any TPL business without including Oliver.
Even as both sides were wrapping up their settlement negotiations, the discovery battle in the litigation had just taken a new turn, court documents show. Judge Boyle on Friday had ordered the investors to provide discovery to TPL related to communication between the investors regarding the May 22 meeting as well as discovery tied to Oliver’s candidacy and conflicts of interest.
This week’s settlement not only cools off the heated battle, which quite literally occurred during some of Texas’s hottest months; it also preempts what could have been an epic showdown between two of the most respected trial lawyers in Dallas: Sidley Austin’s Yvette Ostolaza and Gibson, Dunn & Crutcher’s Rob Walters.
Ostolaza led the negotiations for TPL, while Walters led the negotiations for the investors. Both lawyers declined to comment.
Texas Pacific Land Trust was established in 1888 to help liquidate the assets of the bankrupt Texas and Pacific Railway.
Today the trust is one of the largest landowners in Texas, owning north of 900,000 acres in West Texas, including oil and gas and water assets. Due to its vast presence in the lucrative Permian Basin, the market cap value of TPL has skyrocketed in the past few years from nine figures to 10 figures.
As Oliver’s group sees it, the conversion of TPL into a C-corp would cause TPL to step into a more standard governance structure for modern day public companies, including a board of directors instead of a board of trustees, a simplified tax structure and improved transparency via an increase of required corporate disclosures to the SEC.
TPL seems satisfied to be moving forward with a compromise.
“We are pleased to have come to an amicable resolution,” Norris said in a statement. “It is now time for all of us to come together, put aside our differences, and determine the best way forward for the trust and all of its shareholders.”
For more background on the fight, click here for The Texas Lawbook’s previous reporting on TPL’s initial lawsuit and here for our previous report on the investors’ countersuit.