Days before trial was set to begin in long-running litigation that began following the 2016 payment of two $100 million bonuses for executives at family-owned Thompson Petroleum, a recent summary judgment ruling brought the case to a close — at least for the time being.
The last vestige of the case was a claim from the company’s former chief financial officer, Paul Rudnicki, alleging Thompson Petroleum should have to foot the bill for costs he incurred defending claims from the company’s former general counsel, Justin Clarke. Clarke had alleged he was orally promised and not paid a $10 million bonus.
Thompson Petroleum’s motion for summary judgment, granted by Dallas County District Judge Emily Tobolowsky on Jan. 19, just ahead of the Jan. 23 trial date, means the company owes Rudnicki nothing.
“Judge Tobolowsky’s ruling puts an end to five years of litigation between these parties, and although we had already resolved the $100 million case against Mr. Rudnicki, finishing on top with a resounding win like this is very satisfying,” said Jon Patton of Tillotson Johnson & Patton, who represents Thompson Petroleum.
On Monday, Rudnicki filed a notice of appeal with the court. His attorney, Don Godwin of Godwin Bowman, said while he has “the utmost respect” for Judge Tobolowsky, she failed to recognize fact issues in this dispute that should have precluded summary judgment.
“I think that the judge misconstrued the document as a matter of law and made a decision that the court of appeals will take a look at,” he said.
To understand this piece of the litigation, a history lesson is in order.
After the founder of Thompson Petroleum, J. Cleo Thompson, died in 2010, his widow and two daughters took over ownership of the company and brought in two executives to manage the business — first hiring Frank Peterman to serve as a vice president and chief operating officer and then Rudnicki as CFO.
The duo commenced selling the company’s oil field assets, culminating in 2016 with a sale that yielded about $1.1 billion in profits.
In separate litigation in 2016, Thompson Petroleum was facing a suit from T. Boone Pickens, who alleged he was entitled to a cut of proceeds from the sale of certain Permian Basin assets. As the heirs would later allege in a breach of fiduciary duty lawsuit against Peterman and Rudnicki, they were pressured by the executives into doling out the $100 million bonuses so they would stick around to help defend Thompson Petroleum from a suit they feared could bankrupt the company.
In January 2018 the breach of fiduciary duty suit was filed against Rudnicki and Peterman related to the payment of the bonuses.
Eventually both Peterman and Rudnicki reached settlements with Thompson Petroleum before trial. Peterman settled in the fall of 2019, Rudnicki settled in February 2022.
Godwin said the terms of Rudnicki’s settlement were “very favorable” to his client.
This lawsuit was filed in December 2017 by Clarke, who alleged that while he was general counsel at Thompson Petroleum, around the same time the $100 million bonuses were paid out, Rudnicki promised him a $10 million bonus.
Initially, Rudnicki and Thompson Petroleum were aligned in that lawsuit, both arguing Clarke isn’t owed anything.
“Our position was, regardless of what Mr. Rudnicki said, he certainly had no authority to award a bonus on behalf of the company,” Patton said.
Then came Rudnicki’s crossclaim, alleging that under Thompson Petroleum’s governing documents he was entitled to indemnification of his legal fees incurred in defending Clarke’s claim.
Thompson Petroleum reached a settlement with Clarke over the summer, leaving just Rudnicki’s indemnification claim before Judge Tobolowsky.
Judge Tobolowsky didn’t buy the argument that Thompson Petroleum’s governing documents mean the company is required to indemnify Rudnicki.
“Indemnification and advancement is an often-overlooked area of the law that can really alter the landscape and dynamics of an underlying case,” Patton said. “I’ve used it to my advantage on the plaintiff side to help settle cases, but here that experience helped notch a win on the defense side.”
In this case, Patton said, the company’s bylaws and agreements are “older, more antiquated and more narrow” than what is typically seen in such documents today.
“It is a frequently litigated issue in Delaware, the leading court system for big corporate disputes, so I give a lot of credit to these judges for showing that Dallas County can be a respectable forum for business cases, too.”
Godwin said interpretation of those bylaws will be the crux of the appeal.
Thompson Petroleum is represented by Jon Patton, Jeff Tillotson and J. Austen Irrobali of Tillotson Johnson & Patton.
Rudnicki is represented by Donald E. Godwin, Todd Shadle and James Johanns of Godwin Bowman.
Clarke was represented by David Elrod and Worthy Walker of Shackelford Bowen McKinley & Norton.
The case number is DC-17-16848.