Union Pacific Resources Group v. Rhone-Poulenc

• Citation: 45 F.Supp.2d 544
• Decision Date: 02 March 1999
• Docket Number: No. 4:98-CV-066-A.,4:98-CV-066-A.
• Parties: UNION PACIFIC RESOURCES GROUP, INC., et al., Plaintiffs, v. RHÔNE-POULENC, INC., Defendant.
• Court: U.S. District Court — Northern District of Texas

45 F.Supp.2d 544

UNION PACIFIC RESOURCES GROUP, INC., et al., Plaintiffs, v. RHÔNE-POULENC, INC., Defendant.

No. 4:98-CV-066-A.

United States District Court, N.D. Texas, Fort Worth Division.

March 2, 1999.

COPYRIGHT MATERIAL OMITTED

Dennis N. Ryan, Andrews & Kurth, Dallas, TX, for plaintiffs.

Oscar Morris Harrell, Locke Liddell & Sapp, Dallas, TX, for defendant.

MEMORANDUM OPINION and ORDER

McBRYDE, District Judge.

Came on for consideration the motion of defendant, Rhône-Poulenc, Inc., for summary judgment. The court, having considered the motion, the response of plaintiffs, Union Pacific Resources Group, Inc., ("UPRG") and Big Island Trona Company ("Big Island"), the reply, the record, the summary judgment evidence, and applicable authorities, finds that the motion should be granted.

I. Plaintiffs' Claims

On January 23, 1998, plaintiffs filed their original complaint in this action. On February 19, 1998, they filed their first amended complaint. Plaintiffs assert claims for breach of contract conversion, negligent misrepresentation, fraud, and violations of § 10(b) of the Securities Exchange Act of 1934. Plaintiffs also plead for application of the discovery rule; that is, they assert that they could not in the exercise of due care have discovered defendant's alleged wrongdoings until 1997.

While not readily apparent from plaintiffs' amended complaint, the thrust of the complaint apparently is that defendant did not transfer enough funds from its retirement plans to successor retirement plans at the time of a stock transfer transaction by which defendant sold its indirect ownership interests in a limited partnership in which plaintiffs also had direct and indirect ownership interests. The transferred funds were for the funding of retirement benefits for the persons who worked for the limited partnership.

II. Grounds of the Motion

By its motion for summary judgment, defendant maintains that plaintiffs cannot prevail on any of their claims in this action. Because the description of the grounds is rather lengthy, the court will not summarize them, but will discuss them in the context of each claim.

III. Undisputed Facts

The facts underlying plaintiffs' claims are, for the most part, undisputed. The facts upon which the parties agree are as follows:

Prior to February 29, 1996, defendant owned one hundred percent of the outstanding stock of Rhône-Poulenc of Wyoming Holding Company ("Holding") and eighty percent of the outstanding common stock of Rhône-Poulenc of Wyoming Company ("RPW"). UPRG owned the remaining twenty percent of the outstanding common stock of RPW. UPRG also owned one hundred percent of the outstanding stock of Big Island. Big Island and Holding were sole general partners in Rhône-Poulenc Wyoming Limited Partnership (the "Wyoming partnership"). The Wyoming partnership existed pursuant to an amended and restated agreement of limited partnership dated December 5, 1991, as amended (the "Wyoming partnership agreement"). Holding owned 50.49% of the Wyoming partnership and Big Island owned 48.51%. The remaining one percent was owned by RPW as the sole limited partner. In the Wyoming partnership agreement, all partners covenanted never to file a bill for a partnership accounting, except with the consent of the partnership committee.

The principal business of the Wyoming partnership was the operation of a trona mine and plant in Green River, Wyoming. Prior to February 29, 1996, the employees providing services to the Wyoming partnership ("Green River employees") participated in defendant's corporate pension plans. One plan, plan 1674, was for salaried employees; the other, plan 1679, was for hourly employees. The plans were not limited to Green River employees. Rather, employees of defendant and its other subsidiaries also participated in the same pension plans. The plans were defined benefit plans. All funds in the pension plans were held for the exclusive benefit of participants in the plans and their beneficiaries and for defraying the reasonable expenses of administering the plans.

On October 23, 1995, defendant gave a letter to Big Island confirming its intent to sell and transfer one hundred percent of its interests in Holding and RPW to OCI America, Inc. ("OCI"). On the same date, defendant forwarded to Big Island an October 20, 1995, copy of the proposed stock purchase agreement. Article 1 of the agreement governed the sale and purchase, including the price to be paid. Section 1.02 provided:

1.02 Purchase Price. The aggregate purchase price for (a) the Shares, (b) the Related Assets, and (c) the covenant of Seller contained in Section 4.11 consists of (y) U.S. $150,000,000, as such cash amount may be adjusted from time to time, both prior to and after the Closing, pursuant to Section 1.03 and (z) the assumption of the obligations to be assumed by Purchaser at the Closing pursuant to the Assignment and Assumption Agreement. The purchase price shall be allocated as set forth in Schedule 1.02. Such allocations shall be adjusted upward or downward appropriately (in the reasonable discretion of Purchaser) with any adjustment to the purchase price provided in Section 1.03.

Def.'s App. at 00632. Section 1.03, in turn, provided, in pertinent part:

(i) The Closing Purchase Price shall be reduced by an amount equal to (i) 51% of the excess of the projected benefit obligation as defined in Financial Accounting Statement 87, attributable to Employees and Former Employees ("PBO") as of the Closing, over the ABO as of the Closing, determined in accordance with Section 8.04(c) and (ii) $1,530,000, representing the estimated present value of the cost of the obligation assumed by Purchaser pursuant to Section 8.05(b).

Id. Article 8 of the agreement covered employee benefits matters. Section 8.04 provided:

8.04 Retirement Plans. (a) Effective as of the Closing, as required by Section 8.01 hereof, Purchaser shall take all actions necessary and appropriate to cause Employees who are participants under the Rhône-Poulenc, Inc. Retirement Plan ("Plan 1674") and the Rhône-Poulenc, Inc. Basic Hourly Retirement Plan ("Plan 1679," together with Plan 1674, the "Seller Pension Plans") to be eligible for participation under a defined benefit plan or plans of Purchaser or an Affiliate of Purchaser that is qualified under Section 401(a) of the Code ("Purchaser's Pension Plan"). Purchaser's Pension Plan or Plans shall be substantially similar to Seller Pension Plans, and shall assume the liability to provide the benefits accrued by Employees and all former Employees of Holding, RPW, the Wyoming Partnership, Overland or any Subsidiary not actively employed by any of them as of the Closing Date (the "Former Employees") under the Seller Pension Plans as of the Closing.

(b) As soon as practicable after the Closing, Seller shall cause the transfer of assets, in cash or, if mutually agreed by the parties, in kind, from the Seller Pension Plans to the Buyer Pension Plans in an amount equal to the accumulated benefit obligation, as defined in Financial Accounting Statement 87, attributable to Employees and Former Employees ("ABO"), determined as of the date of such transfer. Seller represents that the amount to be transferred shall not be limited by the application of Section 414(1) or 401(a)(12) of the Code.

(c) For purposes of Section 8.04(b) and Section 1.03, ABO and PBO shall be determined by Seller's actuary by applying reasonable actuarial assumptions and methods that are consistent with past practice. The calculation of these amounts shall be subject to confirmation by Purchaser's actuary. The Seller and Purchaser shall cooperate in the gathering and sharing of necessary data to be used by their respective actuaries and shall certify the accuracy of such data to such actuaries. In the event the actuaries of the parties do not agree, the determination of an independent actuary, as selected and agreed upon by the parties, shall be deemed final.

Id. at 00704-05.

Provisions of the Wyoming partnership agreement obligated defendant to give Big Island a first right of refusal ("FOFR") to acquire the interests defendant proposed to sell to OCI.¹ Big Island had thirty days after receipt by it of written notice of defendant's intent to sell, given pursuant to the provisions of the Wyoming partnership agreement, within which to elect to purchase the interests defendant proposed to sell on the terms specified in OCI's purchase offer to defendant. Defendant maintained that its October 23, 1995, letter to Big Island constituted the notice that started the running of the thirty-day period. The Wyoming partnership agreement further provided that a transferee of a partnership interest would be admitted as a general partner only if all the other partners consented to such admission and the transferee satisfied the requirements regarding net worth of a corporate general partner. If the transferee was not accepted as a general partner, the partnership agreement provided that the transferor would continue to be a general partner and that the transferee would not have any authority to act for or bind the partnership, to inspect its books, or otherwise to be treated as a general partner. The agreement required consent for the transferee of a limited partnership interest to have the rights of a limited partner. A stockholder's agreement between the shareholders of RPW created a ROFR in the event one shareholder wished to sell some or all of its shares in RPW.

Even before receiving the October 23, 1995, letter from defendant, plaintiffs knew that defendant was considering the sale of its indirect interests in the Wyoming partnership. On October 6, 1995, UPRG filed Amendment No. 2 to Form S-1 with the SEC, stating that defendant was considering such a sale and outlining the options UPRG would have if defendant gave notice under the ROFR created in the Wyoming partnership agreement.

By letter dated October 25, 1995, UPRG...