SFF-TIR, LLC v. Stephenson, CIV 14-0369 JB\FHM
| Decision Date | 03 June 2020 |
| Docket Number | No. CIV 14-0369 JB\FHM,CIV 14-0369 JB\FHM |
| Parties | SFF-TIR, LLC; STUART FAMILY FOUNDATION, INC.; ALAN STUART 2012 GST FAMILY TRUST; STUART 2005 GST FAMILY TRUST; CELEBRATION, LLC; ANURAG AGARWAL; PETER BUCKLEY; VINCENT SIGNORELLO; and RODNEY M. REYNOLDS, Plaintiffs, v. CHARLES C. STEPHENSON, JR.; CYNTHIA A. FIELD; PETER BOYLAN, III; LAWERENCE FIELD; CYPRESS ENERGY PARTNERS-TIR, LLC; CEP CAPITAL PARTNERS, LLC; CYPRESS ENERGY HOLDINGS, LLC; and TULSA INSPECTION RESOURCES, LLC, Defendants. |
| Court | U.S. District Court — Northern District of Oklahoma |
THIS MATTER comes before the Court on: (i) the Defendants' Motion to Strike Plaintiffs' Contentions in Proposed Pretrial Order Relating to Disgorgement and Punitive Damages, filed July 19, 2017 (Doc. 307)("Motion to Strike"); (ii) the Plaintiffs' Objection to the Introduction of Testimony or Evidence from Defendants' Undisclosed Proferred [sic] Expert, Stout Risius Ross, filed August 22, 2017 (Doc. 363)("Stout Objection"); and (iii) the Plaintiffs' Objection to Defendants' Attempted Use of Demonstrative Exhibits without Foundation, filed September 2, 2017 (Doc. 387)("Exhibits Objection"). The Court held a hearing on the Motion to Strike on August 15, 2017, and the Court addressed the Stout Objection and the Exhibits Objection at the September 6, 2017, proceeding, and the September 5, 2017, proceeding, respectively. See Minutes of Proceedings, filed September 5, 2017 (Doc. 397)(text-only entry). The primary issues are: (i) whether the Court should strike from the Pretrial Order, filed August 9, 2017 (Doc. 346), the Plaintiffs' contentions that disgorgement and punitive damages are issues to be tried, because the Court already denied the Plaintiffs' attempts to pursue a disgorgement remedy, and because punitive damages are unavailable for breaches of fiduciary duty under Delaware law; (ii) whether the Court should admit expert testimony or materials relating to Stout, Risius, Ross, LLC, a valuation advisory, investment banking, and consulting firm, because the Pretrial Order does not include five of the Defendants' exhibits that Stout, Risius, Ross, LLC produced, and because the Defendants did not submit an expert report for their witness, Shishir Khetan, who is Stout, Risius, Ross, LLC's Valuation Advisory Group Managing Director; (iii) whether the Defendants' Demonstrative Exhibit Nos. 9, 12, 13, 14, 15, 16, 23, and 24 are based on admissible evidence such that the Defendants may use the exhibits during their opening statement; (iv) whether the Defendants' Demonstrative Exhibit Nos. 1, 4, 5, 9, 12, 13, 14, 15, 16, 23, and 24 rely on undisclosed expert opinion to summarize or support their disclosed experts' opinion, such that the Court should exclude the exhibits as untimely; and (v) whether the Defendants' Demonstrative Exhibit Nos. 25 and 26 summarize undisclosed, inadmissible evidence such that the Court should exclude both exhibits. The Court concludes that: (i) it will not strike the Plaintiffs' arguments pertaining to disgorgement and punitive damages from the Pretrial Order, because, although all parties understand that disgorgement and punitive damages are not part of this trial, the Plaintiffs seek to preserve their positions, and thus striking their contentions from the Pretrial Order is not warranted; (ii) it will admit testimony and materials relating to Stout, Risius, Ross, LLC, because such evidence is factual evidence, and the Court can give the jury limiting instructions to ensure that the jury does not treat Khetan's testimony as expert testimony; (iii) the Defendants'Demonstrative Exhibit Nos. 9, 12, 13, 14, 15, 16, 23, and 24 are based on admissible evidence, and thus the Court will not exclude the exhibits; (iv) the Defendants' Demonstrative Exhibit Nos. 1, 4, 5, 9, 12, 13, 14, 15, 16, 23, and 24 will aid the jury's ability to organize and digest voluminous information and rely on evidence already in the record, and thus the Court will not exclude the exhibits; and (v) the Defendants' Demonstrative Exhibit Nos. 25 and 26 do not summarize undisclosed, inadmissible information and will aid the jury's ability to organize and digest voluminous information, and thus the Court will not exclude the exhibits.
The Court has already recounted the factual background of this case at some length. See Memorandum Opinion and Order, 250 F. Supp. 3d 856, 869-89 (N.D. Okla. 2017)(Browning, J.)("April 25 MOO"). To summarize briefly, the Plaintiffs were minority shareholders in Tulsa Inspection Resources, Inc. ("TIR, Inc.") when, on December 9, 2013, TIR, Inc. and a new entity, Defendant Tulsa Inspection Resources, LLC ("TIR, LLC"), completed a merger. April 25 MOO, 250 F. Supp. 3d at 873-83. TIR Inc.'s majority shareholders received equity in TIR, LLC proportional to their ownership interest -- relative to the other majority shareholders -- in TIR, Inc., see April 25 MOO, 250 F. Supp. 3d at 873-74, while the minority shareholders of TIR, Inc. received $451,000.00 per share but did not receive any equity in TIR, LLC, see April 25 MOO, 250 F. Supp. 3d at 879-80.
The Plaintiffs sued the Defendants -- TIR, Inc.'s directors and majority shareholders -- asserting that the Defendants owed fiduciary duties to the Plaintiffs -- TIR, Inc.'s minority shareholders. See Complaint ¶¶ 141, 154, at 28, 31, filed July 3, 2014 (Doc. 1)("Complaint"). According to the Plaintiffs, the Defendants breached those duties when they implemented themerger. See Complaint ¶¶ 142, 155, at 28, 31. On October 27, 2014, the Defendants offered to settle all claims against them "by offering a money judgment" for each Plaintiff and "against the Defendants in the total sum of $10,000.00." Defendants' Offer of Judgment Pursuant to Fed.R.Civ.P. 68 and 12 O.S. § 1101.1(B) at 2, 6, 10, 14, 18, 22, 26, 30, 34, filed October 3, 2017 (Doc. 459-1)("Offer of Judgment"). Because Buckley and Signorello accepted the Defendants' offers, Buckley and Signorello stipulated to dismissing the "action with prejudice to refiling all claims made herein without costs or fees to any party." Stipulation of Dismissal with Prejudice at 1, filed December 29, 2014 (Doc. 66). Plaintiffs SFF-TIR, LLC, Stuart Family Foundation, Inc., Alan Stuart 2012 GST Family Trust, Stuart 2005 GST Family Trust, Celebration, LLC, Anurag Agarwal, and Reynolds rejected the Defendants' Offer of Judgment, and they gave the following counteroffers to settle their claims: (i) SFF-TIR, LLC counteroffered "to each Defendant that judgment be entered against such Defendant . . . in the amount of $6,9703,360.00"; (ii) the Stuart Foundation counteroffered "to each Defendant that judgment be entered against such Defendant . . . in the amount of $413,640.00"; (iii) Alan Stuart 2012 GST Family Trust counteroffered "to each Defendant that judgment be entered against such Defendant . . . in the amount of $632,340.00"; (iv) Stuart 2005 Trust counteroffered "to each Defendant that judgment be entered against such Defendant . . . in the amount of $632,340.00"; (v) Celebration, LLC counteroffered "to each Defendant that judgment be entered against such Defendant . . . in the amount of $2,700,000.00"; (vi) Agarwal counteroffered "to each Defendant that judgment be entered against such Defendant . . . in the amount of $4,222,800"; and (vii) Reynolds counteroffered "to each Defendant that judgment be entered against such Defendant . . . in the amount of $1,441,800." Notice of Counteroffers at 2, 6, 10, 14, 18, 22, 26.
At the summary-judgment stage, the Court first determined that it has federal-question jurisdiction over the Plaintiffs' federal-securities claims, and the Court considered sua sponte whether it has diversity jurisdiction over the case. See April 25 MOO, 250 F. Supp. 3d at 1022 ( ). The Court concluded that it has diversity jurisdiction over the case. See April 25 MOO, 250 F. Supp. 3d at 1023 (). The Court then granted summary judgment to the Defendants on the Plaintiffs' federal-securities claims and dismissed those claims. See April 25 MOO, 250 F. Supp. 3d at 1045.
The Court also considered the contract defenses that the Defendants raised in the Defendants' Motion for Summary Judgment on Acquiescence Defense and Brief in Support ¶ 1, at 7, filed April 3, 2015 (Doc. 83)("Defendants' Acquiescence MSJ"), and in the Defendants' Second Motion for Summary Judgment and Brief in Support Thereof, filed September 14, 2015 (Doc. 154)("Defendants' Estoppel MSJ"). April 25 MOO, 250 F. Supp. 3d at 1030-46. The Court determined that Delaware law applies to the Defendants' acquiescence defense, and Oklahoma law applies to the Defendants' contract defenses of equitable estoppel, waiver, and unclean hands. See April 25 MOO, 250 F. Supp. 3d at 868. The Court denied the Defendants' Acquiescence MSJ; denied the Defendants' Estoppel MSJ in part as it relates to the Oklahoma common-law clean hands doctrine, the Oklahoma common law of waiver, and the Oklahoma common law of estoppel; and granted the Defendants' Estoppel MSJ in part as it relates to securities claims, dismissing the securities claims. See April 25 MOO, 250 F. Supp. 3d at 868.
Last, the Court determined that Delaware law governs the Plaintiffs' breach-of-fiduciary-duty claims, see April 25 MOO, 250 F. Supp. 3d at 867, 1026, and that the Defendants bear the burden of proving that the merger is entirely fair to the minority shareholders, see April 25 MOO, 250 F. Supp. 3d at 1034. See also id. at 1047-48 (...
To continue reading
Request your trial