Griffin v. Box

• Decision Date: 29 August 1990
• Docket Number: No. 89-1019,89-1019
• Citation: 910 F.2d 255
• Parties: B.R. GRIFFIN, et al., Plaintiffs-Appellants, v. Cloyce K. BOX, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 255

910 F.2d 255

B.R. GRIFFIN, et al., Plaintiffs-Appellants, v. Cloyce K. BOX, et al., Defendants-Appellees.

No. 89-1019.

United States Court of Appeals, Fifth Circuit.

Aug. 29, 1990.

Alan Bromberg, Jenkens & Gilchrist, Dallas, Tex., Richard G. Smith, Gary D. Babbitt, Boise, Idaho, for plaintiffs-appellants.

Robert L. Meyers, III, Brett A. Ringle, John R. Henderson, William E. Marple, Jones, Day, Reavis & Pogue, Dallas, Tex., David B. Tulchin, Sullivan & Cromwell, New York City, for Box, CKB Assoc., CKB Petro., and Box Bros.

William J. Burnett, Dallas, Tex., for OKC Ltd.

Appeal from the United States District Court for the Northern District of Texas.

Before GOLDBERG, GARWOOD, and DAVIS, Circuit Judges.

GARWOOD, Circuit Judge:

Plaintiffs-appellants B.R. Griffin, Martin Hart, David Hawk, James A. Lyle, Hayden McIlroy, and J.R. Simplot (collectively, appellants) appeal from two orders granting the motions for preliminary injunctive relief of defendants-appellees Cloyce Box, CKB & Associates, Inc., OKC Limited Partnership, CKB Petroleum, Inc., and Box Brothers Holding Co. We affirm.

Facts and Proceedings Below

On May 13, 1980, the shareholders of OKC Corporation (OKC Corp.) adopted a plan to liquidate and dissolve the corporation. Pursuant to the plan, OKC Corp.'s assets were transferred to a limited partnership, with the stockholders then exchanging their stock for similarly proportional limited partner interests in the partnership. The first stage of the plan called for the creation of OKC Limited Partnership (OKC LP), the general partners of which are Cloyce Box and a corporation controlled by him, CKB & Associates, Inc. (collectively, the general partners). The OKC Corp. served as the initial limited partner. The general partners and OKC Corp. signed the Amended and Restated Certificate and Articles of Limited Partnership (partnership agreement) on May 12, 1981 and filed the document with the Texas Secretary of State on May 28, 1981. The next phase entailed CKB, OKC Corp., and OKC LP effecting a depositary agreement with MBank of Dallas, under which OKC Corp. deposited with MBank its limited partnership units. MBank then issued depositary receipts to OKC Corp. shareholders of record as of May 1, 1981 in exchange for their stock certificates. The receipts evidenced ownership of units of limited partnership interest in OKC LP. This agreement was also signed on May 12, 1981. ¹ The depositary receipts are now traded on the Pacific Stock Exchange. ²

On September 18, 1981, the general partners filed a proxy statement with the Securities and Exchange Commission (SEC) regarding a partnership meeting to be held on October 19, 1981. In the proxy statement, the general partners sought approval from all receipt holders of record on August 31, 1981 of Cloyce Box and CKB & Associates as general partners. At the meeting, receipt holders approved the designation of Box and CKB & Associates as general partners.

In 1987, appellants formed a committee of receipt holders disgruntled with the performance of the general partners whose purpose was to replace the general partners with Hydrocarbons Management, Inc., a corporation controlled by the committee, by soliciting consents from OKC LP's receipt holders, beginning November 6, 1987. ³ The consents provided for the replacement of the general partners and were solicited under a provision of the partnership agreement allowing the limited partners to take certain actions by written consents without a formal meeting. On November 18, general partner Cloyce Box mailed letters to all receipt holders urging them not to sign the committee's consent cards. The letters also related that "[a]dditional important information about this opposition group will be mailed to you at the earliest practicable time." Box issued a press release to this effect on November 20, 1987.

The general partners responded to the committee's actions in a November 24 letter addressed to it by asserting that recent amendments filed by OKC LP to its partnership agreement required "a meeting and vote for the removal of a General Partner." The general partners also informed the committee in the letter that, "in the unlikely event the Amendments are held by some competent authority to be invalid," they were invoking a December 5, 1987 deadline for the return of consents pursuant to section 4.02 of the partnership agreement, which states in pertinent part: "For purposes of obtaining a written consent, a General Partner may require response by a specified date not later than 30 days after the date any proposal is submitted to the Limited Partners." In this regard, the general partners took the position that only receipt holders who were originally shareholders of OKC Corp., as opposed to their transferees, had been admitted by the general partners as limited partners of OKC LP and were thereby eligible to vote on its matters.

As of December 24, 1987, appellants had received executed consents from the owners of 10,830,969 depositary receipts voting in favor of removing Cloyce Box and CKB & Associates as general partners. Despite an attempt on the part of the general partners to solicit revocations of the consents, according to the audit partner of Arthur Young & Company who tabulated the OKC LP vote, appellants' committee carried slightly over fifty percent of the outstanding votes as of February 11, 1988.

In a letter of December 30, 1987, appellants informed the general partners of the consent solicitation results as of December 24. Appellants then filed documents with the Texas Secretary of State on January 21, 1988 to amend the OKC LP partnership agreement in purported conformity with the results of the election. As a result of this action, the general partners moved in the pending suit, see note 3 supra, for a preliminary injunction to restrain appellants from interfering with the management of OKC LP. Appellants countered by filing in the same proceedings a Request for Injunctive Relief seeking a judicial determination of the identity of the general partners following the voting contest or, in the alternative, a determination of who is eligible to vote as a limited partner.

On February 22, 1988, the district court made several rulings in the case. First, it determined that the purported amendments to the partnership agreement eliminating the consent solicitation procedure when removal of the general partners is sought were invalid. The court also ruled that the general partners properly imposed a deadline by which consents had to be returned. Third, the court held that depositary receipt transferees were not entitled to vote in partnership matters because the general partners had not admitted any depositary receipt transferees as substituted limited partners, a matter that under the partnership agreement was within the discretion of the general partners. The court also ruled that the general partners had not waived the requirement under the partnership agreement that a transferee must be admitted as a substituted limited partner before voting on OKC LP's affairs. Finally, the court held that even if the general partners had made statements asserting that transferees are limited partners, the general partners cannot be estopped from enforcing the partnership agreement because they cannot waive its terms.

As a result of the foregoing, the court on February 22, 1988 entered an order which granted in part and denied in part the respective motions for preliminary injunction of both appellants and appellees. The court enjoined appellants from representing themselves or Hydrocarbons Management as general partners of OKC LP; from undertaking any action on behalf of the partnership or in any way interfering with the general partners' ability to manage it; and from filing any documents with the Texas Secretary of State purporting to reflect the election of a new general partner or to name transferees as limited partners. The court also ordered both appellants and the general partners to cancel their purported amendments of the partnership agreement. On December 6, 1988, the court, without a further evidentiary hearing denied appellants' motion to alter or amend the February 22 order, as well as their supplemental request for a preliminary injunction ordering the general partners to admit as limited partners all transferees who have shown themselves to be eligible citizens under the partnership agreement and have requested admission as substituted limited partners. The court observed that "all the arguments made by plaintiffs were raised or could have been raised at the preliminary injunction hearing."

The case remains pending on the merits in the district court, and this interlocutory appeal is before us under the provisions of 28 U.S.C. Sec. 1292(a)(1). We accordingly limit our review to the granting or denial of the temporary injunctive relief sought. See, e.g., Association of Co-Operative Members, Inc. v. Farmland Industries, Inc., 684 F.2d 1134, 1138 (5th Cir.1982), cert. denied, 460 U.S. 1038, 103 S.Ct. 1428, 75 L.Ed.2d 788 (1983).

Discussion

On appeal, appellants seek a reversal of the district court's order on the requests for preliminary injunction granting the general partners injunctive relief and denying insurgents the same. The effect of the district court's complained of orders is in essence to maintain the status quo as it existed when this suit was filed. Particularly in these circumstances, we review under an abuse of discretion standard. The clearly erroneous standard insulates the district court's factual determinations, but its legal conclusions are subject to full review. See, e.g., White v. Carlucci, 862 F.2d 1209, 1211 (5th Cir.1989); Apple Barrel Productions, Inc. v. Beard, 730 F.2d 384, 386 (5th Cir.1984). The findings of fact and conclusions of law made in connection with an action on a request for preliminary injunction generally "are not binding at trial on the merits."...