Southern Union Co. v. Southwest Gas Corp., No. CV-99-1294-PHX-ROS.

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
Writing for the CourtSilver
Citation180 F.Supp.2d 1021
PartiesSOUTHERN UNION COMPANY, a Delaware corporation, Plaintiff, v. SOUTHWEST GAS CORPORATION, a California corporation, et al., Defendants.
Docket NumberNo. CV-99-1294-PHX-ROS.
Decision Date04 January 2002

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180 F.Supp.2d 1021
SOUTHERN UNION COMPANY, a Delaware corporation, Plaintiff,
v.
SOUTHWEST GAS CORPORATION, a California corporation, et al., Defendants.
No. CV-99-1294-PHX-ROS.
United States District Court, D. Arizona.
January 4, 2002.

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N. Warner Lee, William B. McManus, Ryley, Carlock & Applewhite, PA, Phoenix, AZ, Eric D. Hershmann, Jessica Mann, Wendy L. Mirsky, Michael M. Fay, Adam Hirshfield, Kasowitz, Benson, Torres & Friedman, LLP, New York City, Tom Q. Ferguson, Shelly L. Dalrymple, Sam P. Daniel, Jr., Doerner, Saunders, Daniel & Anderson, Tulsa, OK, Christina Carlson Dodds, Daniel W. Bishop, II, PC, Austin, TX, for Plaintiff.

Michael J. O'Connor, Richard R. Thomas, Daouglas F. Behm, Michael Scott McCoy, Michael J. Farrell, Jennings, Strouss & Salmon, PLC, Phoenix, AZ, Seth Aronson, Marc F. Feinstein, Patrick Lynch, Floy E. Andrews, O'Melveny & Myers, LLP, Los Angeles, CA, Michael R. Klein, Steven F. Cherry, Howard M. Shapiro, David P. Donovan, Wilmer, Cutler & Pickering, Washington, DC, Michael J. Bowe, Kasowitz, Benson, Torres & Friedman, LLP, New York City, Todd L. Bice, Schreck, Brignone & Godfrey, Las Vegas, NV, Thomas R. Sheets, Southwest Gas Corp., Las Vegas, NV, Paul J. Cleary, Scott R. Rowland, Boone, Smith, Davis, Hurst & Dickman, Tulsa, OK, Steve Morris, Kristina Pickering, Morris, Pickering & Sanner, Las Vegas, NV, for Southwest Gas Corp.

Mark M. Deatherage, Michael K. Kennedy, Gallagher & Kennedy, PA, Phoenix, AZ, John J. Swenson, Richard Joseph Doren, Thomas E. Holliday, Gibson, Dunn & Crutcher, LLP, Los Angeles, CA, John Henry Rule, Oliver Sterling Howard, Thomas James Kirby, David E. Keglovits, Amelia A. Fogleman, Gable & Gotwals, Tulsa, OK, for ONEOK, Inc.

Michael A. Beale, Keith Thomas Slack, Beale & Micheaels, PC, Phoenix, AZ, Samuel Brett Benham, C, Stanley Hunterton, Hunterton & Associates, Las Vegas, NV, for Thomas Hartley, Gene Dubay, and James M. Irvin.

Michael D. Kimerer, Thomas V. Rawles, Kimerer & Derrick, PLC, Phoenix, AZ, Mark M. Deatherage, Michael K. Kennedy, Tom Henze, Gallagher & Kennedy, PA, Phoenix, AZ, John Henry Rule, Oliver Sterling Howard, Thomas James Kirby, Gable & Gotwals, Tulsa, OK, for John Gaberino and Eugene N. Dubay.

Shane Ray Swindle, Brown & Bain, PA, Phoenix, AZ, John R. Hannah, Hoidal & Hannah, PLC, Phoenix, AZ, J. Daniel Campbell, III, Daniel J. O'Connor, Zahnie L. Soe Myint, Jason Edward Hunter, Bell, O'Connor & Campbell, Phoenix, AZ, for Jack D. Rose.

Christopher M. Skelly, Dennemore Craig, PC, Phoenix, AZ, for Edward Zub.

Order

SILVER, District Judge.


Pending before the Court are fifteen motions for summary judgment and various related motions. On August 24, 2001, a hearing was held to address nine of the summary judgment motions, as well as Defendant Gaberino's Motion for Court to Apply June 21, 2001 Rulings to Him. In its September 26, 2001 Order, the Court ruled on the ten motions argued at the hearing and promised that a written opinion would follow. This is that opinion.

Background

Southwest Gas Corporation ("Southwest") is a Nevada-based utility that distributes natural gas to customers in Nevada, California, and Arizona. ONEOK, Inc. ("ONEOK") is an Oklahoma-based utility that distributes natural gas to customers in Oklahoma and Texas. On December 14,

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1998, Southwest and ONEOK entered into a merger agreement ("Merger Agreement") under which Southwest was to merge into ONEOK and Southwest's shareholders were to receive $28.50 per share. The Merger Agreement contained a "No Shopping" provision that required Southwest to enter into a "confidentiality and standstill" agreement if Southwest wished to disclose confidential information to any unsolicited third-party suitor that approached Southwest and offered a "Superior Proposal." (Merger Agreement § 5.2(a)). The Merger Agreement also required Southwest to pay ONEOK a $30 million "termination fee" if Southwest terminated the Merger Agreement based on such a proposal. (Id. § 8.3(a)).

Southern Union Company ("Southern Union") is a Texas-based utility that distributes natural gas to customers in Texas, Missouri, Florida, and Pennsylvania. Southern Union obtained a copy of the Merger Agreement within a week after the merger between Southwest and ONEOK was announced. (4/18/00 Bouchard1 Depo. at 22-23). Southern Union knew that pursuant to the terms of the Merger Agreement, "an uninvited bidder would have to enter into a confidentiality agreement essentially identical to the one between Southwest and ONEOK." (Id. at 21).

On February 1, 1999, Southern Union presented its own merger offer to Southwest. (2/1/99 Kelley2 Letter to Maffie3). Southern Union was prepared "to execute an agreement identical in all material respects" to the Merger Agreement entered into by ONEOK and Southwest and to offer Southwest $32 per share, as compared with ONEOK's offer of $28.50 per share. (Id.).

On February 21, 1999, the Southwest Board of Directors ("Board")4 held a special meeting "to determine whether to provide information to or enter into discussions with Southern Union ... regarding its offer." (2/21/99 Minutes). At that meeting, the Southwest Board resolved that Southern Union's merger offer was a "Superior Proposal" to the ONEOK proposal and authorized Southwest's officers to enter into discussions with Southern Union "upon execution by [Southern Union] of a confidentiality agreement." (Id.; see 4/15/99 Cortez Depo. at 113). That same day, Southern Union and Southwest executed a confidentiality and standstill agreement ("Standstill Agreement") essentially identical to the one between Southwest and ONEOK.

Between February and the end of April 1999, Southern Union and Southwest exchanged drafts of a proposed merger agreement that would have supplanted the Merger Agreement between ONEOK and Southwest. (See, e.g., 3/8/99 & 4/22/99 Bouchard Letters to Lossing5). However, Southern Union and Southwest were unable to agree on several terms, including whether Southern Union would pay the

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required $30 million termination fee directly to ONEOK or whether the money would be placed in escrow. (4/22/99 Bouchard Letter to Lossing). The parties also could not agree on the inclusion of a liquidated damages provision. (4/18/00 Bouchard Depo. at 184).

On April 5, 1999, James Irvin, a Commissioner with the Arizona Corporation Commission ("ACC"), wrote a letter ("Irvin Letter") to Maffie and Hartley of Southwest. (4/5/99 Irvin Letter). The Irvin Letter generally advised Maffie and Hartley about the factors that the ACC would consider in evaluating applications for regulatory approval, which Southern Union and ONEOK would need to file and have approved before they could merge with Southwest. (Id.). In addition, the Irvin Letter stated: "I also have spent a considerable amount of time discussing these factors with my colleagues at the Nevada and California utility commissions, and advise you that they share my concerns." (Id.).6 The Irvin Letter did not expressly state that a ONEOK merger was favored, nor did it disparage Southern Union. (Id.).

On April 25, 1999, the Southwest Board held a meeting to consider a revised ONEOK offer of $30 per share. (4/25/99 Minutes). The Southwest Board resolved that ONEOK's offer should be accepted and Southern Union's offer should be rejected. (Id.). On April 27, 1999, Southern Union increased its bid to $33.50 per share. (4/27/99 Kelley Letter). On May 4, 1999, the Southwest Board voted to reject Southern Union's new offer. (5/4/99 Minutes). Several months later on January 21, 2000, Larry Brummett, ONEOK's Chief Executive Officer, sent a letter to Southwest indicating that, pursuant to the terms of the Merger Agreement, ONEOK did not intend to consummate the merger with Southwest. (1/21/00 Brummett Letter).

Procedural History

As a result of these failed merger attempts, the parties filed five lawsuits in three states. Southwest filed the first action, CV-00-452-PHX-ROS, against Southern Union in Nevada on April 30, 1999 ("Nevada Action"). Southern Union asserts counterclaims against Southwest in the Nevada Action. ONEOK filed the second action, CV-00-1812-PHX-ROS, against Southern Union in Oklahoma on May 5, 1999 ("First Oklahoma Action"). Southern Union asserts counterclaims against ONEOK in the First Oklahoma Action. Southern Union filed the third action, CV-99-1294-PHX-ROS, against Southwest, ONEOK, and numerous individual defendants in Arizona on July 19, 1999 ("First Arizona Action"). ONEOK asserts counterclaims against Southern Union in the First Arizona Action. ONEOK filed the fourth action, CV-00-1775-PHX-ROS, against Southwest in Oklahoma on January 21, 2000 ("Second Oklahoma Action"). No counterclaims are asserted in the Second Oklahoma Action. Southwest filed the fifth action, CV-00-119-PHX-ROS, against ONEOK and Southern Union on January 24, 2000 ("Second Arizona Action"). No counterclaims are asserted in the Second Arizona Action.

In an Order dated December 15, 2000, the Court granted in part and denied in part portions of several motions to dismiss filed in the First Arizona Action. (Doc. # 556). Subsequently, the five actions were consolidated for purposes of discovery on March 27, 2001 and June 5, 2001. (Doc. # 750 & # 939). In the June 5, 2001 Order, the Court also aligned the parties with respect to the various claims and

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counterclaims asserted in the five actions. (Doc. # 939).

In an Order dated June 21, 2001, the Court granted in part and denied in part the remaining portions of the motions to dismiss filed in the First Arizona Action. (Doc. # 1011). The Court also issued rulings regarding the law governing most of the remaining claims, but did not do so for certain claims that appeared to be duplicative of other claims. (Id.). On July 31, 2001, the...

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  • Mann v. Gtcr Golder Rauner, L.L.C., No. CIV-02-2099-PHX-RCB.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
    • March 30, 2007
    ...with contract and tortious interference with a business relationship. See Southern, Union Company v. Southwest Gas Corporation, 180 F.Supp.2d 1021, 1047 n. 41 (D.Ariz. 2002) (although the elements are "virtually identical ... a claim for tortious interference with contract is distinct from ......
  • City Solutions v. Clear Channel Communications, No. C99-00060 WHA.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • January 24, 2003
    ...recent treatment of this distinction under California law is Judge Roslyn Silver's order in Southern Union Co. v. Southwest Gas Corp., 180 F.Supp.2d 1021 (D.Ariz. 2002). Her order performed a grand-scale review of California authority in the context of a fraudulent-inducement claim. Souther......
  • Southern Union Co. v. Southwest Gas Corp., No. CV991294-PHXROS.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
    • August 1, 2003
    ...profits, and limited Southern Union to recovery of only out-of-pocket reliance damages. See Southern Union Co. v. Southwest Gas Corp., 180 F.Supp.2d 1021, 1051 (D.Ariz. 2002) ("The indeterminacy concerning this basic merger term illustrates that Southern Union's claim for lost profit damage......
  • Soilworks, LLC v. Midwest Indus. Supply, Inc., No. CV-06-2141-PHX-DGC.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
    • August 7, 2008
    ...its tortious interference claim, Soilworks must establish its damages with "reasonable certainty." S. Union Co. v. Southwest Gas Corp., 180 F.Supp.2d 1021, 1050 (D.Ariz.2002) (citing Rancho Pescado, Inc. v. Northwestern Mut. Life Ins. Co., 140 Ariz. 174, 680 P.2d 1235, 1244-47 (1984)). "Dam......
  • Request a trial to view additional results
19 cases
  • Mann v. Gtcr Golder Rauner, L.L.C., No. CIV-02-2099-PHX-RCB.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
    • March 30, 2007
    ...with contract and tortious interference with a business relationship. See Southern, Union Company v. Southwest Gas Corporation, 180 F.Supp.2d 1021, 1047 n. 41 (D.Ariz. 2002) (although the elements are "virtually identical ... a claim for tortious interference with contract is distinct from ......
  • City Solutions v. Clear Channel Communications, No. C99-00060 WHA.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • January 24, 2003
    ...recent treatment of this distinction under California law is Judge Roslyn Silver's order in Southern Union Co. v. Southwest Gas Corp., 180 F.Supp.2d 1021 (D.Ariz. 2002). Her order performed a grand-scale review of California authority in the context of a fraudulent-inducement claim. Souther......
  • Southern Union Co. v. Southwest Gas Corp., No. CV991294-PHXROS.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
    • August 1, 2003
    ...profits, and limited Southern Union to recovery of only out-of-pocket reliance damages. See Southern Union Co. v. Southwest Gas Corp., 180 F.Supp.2d 1021, 1051 (D.Ariz. 2002) ("The indeterminacy concerning this basic merger term illustrates that Southern Union's claim for lost profit damage......
  • Soilworks, LLC v. Midwest Indus. Supply, Inc., No. CV-06-2141-PHX-DGC.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
    • August 7, 2008
    ...its tortious interference claim, Soilworks must establish its damages with "reasonable certainty." S. Union Co. v. Southwest Gas Corp., 180 F.Supp.2d 1021, 1050 (D.Ariz.2002) (citing Rancho Pescado, Inc. v. Northwestern Mut. Life Ins. Co., 140 Ariz. 174, 680 P.2d 1235, 1244-47 (1984)). "Dam......
  • Request a trial to view additional results

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