In a moment of Texas litigation history, the state’s new business court heard oral arguments Thursday in Dallas in a lawsuit by minority investors over what they’ve called the “rushed” $788 million sale of an energy company at a price well below its fair value.
The minority investors filed suit in May 2022 in state district court in Dallas, alleging that the August 2021 sale effectively rendered their roughly $200 million in investments “almost totally worthless, while generating hundreds of millions of dollars” for Blackstone Inc., one of the world’s largest private equity firms.
The case was subsequently transferred to the business court, a legislative creation that came into being Sept. 1 of this year to handle complex commercial disputes.
Thursday’s oral arguments, on a motion for summary judgment by the defendant business entities that orchestrated the sale, are believed to be the first on a dispositive motion — and one of the first substantiative hearings of any kind — in the short history of the business court.
Judge Bill Whitehill of Coppell, a former justice of the Texas Fifth Court of Appeals in Dallas, did not rule from the bench.
Jeremy Fielding of Kirkland & Ellis, representing business entities associated with Primexx Energy Corp., which negotiated the sale of the energy concern to Callon Petroleum Corp., argued Friday the lawsuit brought against 13 defendants by Primexx Energy Fund LP, representing minority investors, should be summarily dismissed because his clients had every right under the “drag-along” provision of an intricate partnership agreement to sell the concern without the approval of its minority partners.
Bryan Caforio of Susman Godfrey, arguing for the minority investors, said their suit should not be dismissed on summary judgment but, rather, that its merits should be decided at trial. The plaintiffs’ suit said one independent third party had valued the energy company at $1.43 billion a month before the sale.
Both lawyers said the terms under which the sale could have taken place are clearly spelled out in the owners’ partnership agreement, then argued that the agreement says diametrically opposite things.
The setting of the arguments, a modest, nondescript, tucked-away classroom in Florence Hall at the Dedman School of Law at Southern Methodist University, was illustrative of the Texas business court’s infancy. Judge Whitehill, in a white shirt and maroon bow tie, had no judicial robe, no bench, no nameplate. He was seated in the back row of the tiered classroom directly facing the arguing lawyers, who stood at what would normally have been the professor’s lectern. The only adornments in the courtroom/classroom were framed, color group photos of the SMU law school’s graduating classes from 2011, 2012, 2013, 2014, and 2015.
Most of the time, the electronic connection from the lawyers’ laptops to the video screens mounted behind them worked. Sometimes, it did not.
In justifying the Dallas court’s location at SMU, at least until it can find more magisterial quarters, advocates said seating the court on campus would give SMU law students an opportunity to witness first-hand the adjudication of major commercial disputes. But my late Uncle Sammy, who was missing two fingers, could have counted on one hand the number of students who attended Thursday’s arguments.
The case number in the business court is 24-BC01B-0010