Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP v. Primexx Energy Corporation, M. Christopher Doyle, Angelo Acconcia, Blackstone Inc., Blackstone Holdings III LP, Blackstone EMA II LLC, BMA VII LLC, Blackstone Energy Management Associates II LLC, Blackstone Energy Partners II LP, Blackstone Management Associates VII LLC, Blackstone Capital Partners VII LP, BCP VII/BEP II Holdings Manager LLC, BX Primexx Topco LLC, and BPP Holdco LLC
Opinion
ACCEPTED 15-25-00120-CV FIFTEENTH COURT OF APPEALS AUSTIN, TEXAS 10/16/2025 11:54 AM No. 15-25-000120-CV CHRISTOPHER A. PRINE CLERK In the Court of Appeals FILED IN 15th COURT OF APPEALS for the Fifteenth District of Texas AUSTIN, TEXAS 10/16/2025 11:54:14 AM CHRISTOPHER A. PRINE Clerk Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP, Appellants, v.
Primexx Energy Corporation, et al., Appellees.
Appeal from the Texas Business Court, First Division Dallas County, Texas Honorable Bill Whitehill
APPELLANTS’ BRIEF
ORAL ARGUMENT REQUESTED
SUSMAN GODFREY L.L.P.
Stephen Shackelford, Jr. Bryan Caforio State Bar No. 24062998 (TX) bcaforio@susmangodfrey.com sshackelford@susmangodfrey.com Lindsey Godfrey Eccles 1000 Louisiana Street, Ste 5100 leccles@susmangodfrey.com Houston, Texas 77002 Sarah Hannigan Telephone: (713) 651-9366 shannigan@susmangodfrey.com Facsimile: (713) 654-6666
Attorneys for Appellants Table of Contents
STATEMENT OF THE CASE................................................................ 1
STATEMENT REGARDING ORAL ARGUMENT ............................. 2
ISSUES PRESENTED ............................................................................ 2
STATEMENT OF FACTS ...................................................................... 4
I. APPELLANTS ALLEGE THAT BLACKSTONE SOLD PRIMEXX IN BAD FAITH IN VIOLATION OF THE PARTNERSHIP AGREEMENT. ................. 4
II. PLAINTIFFS BEGAN SEEKING RECOURSE IN TEXAS COURTS IN 2022. 7
III. THE BUSINESS COURT GRANTED SUMMARY JUDGMENT AND REJECTED APPELLANTS’ REQUEST TO CONDUCT DISCOVERY AFTER PEC AND BPP EXPRESSLY WAIVED RELIANCE ON ANY FACTS. ........................ 9
THE BUSINESS COURT DISMISSED THE MAJORITY OF IV. DEFENDANTS ON SUA SPONTE MOTIONS TO DISMISS............................. 16
THE BUSINESS COURT GRANTED BLACKSTONE’S AND ANGELO V. ACCONCIA’S SPECIAL APPEARANCES. ..................................................... 17
VI. PLAINTIFFS APPEALED THE FINAL JUDGMENT...................... 19
SUMMARY OF THE ARGUMENT ..................................................... 20
ARGUMENT .......................................................................................... 26
I. EXTENSIVE FACTUAL ISSUES PRECLUDE PRE-DISCOVERY SUMMARY JUDGMENT. ........................................................................... 26
A. Appellees must introduce sufficient facts to establish as a matter of law that they acted according to the “Agreed Duties” of “good faith and fair dealing” when liquidating Primexx to satisfy Blackstone’s ESG priorities. ............................................................. 27
ii B. The Business Court erred in denying Appellants’ request to conduct discovery and granting summary judgment when Appellees waived all reliance on any facts. ...................................... 32
C. The Business Court erred in relying on Texas Beef to find that Appellees necessarily act in good faith when acting pursuant to any other purported contractual right. ............................................ 35
D. The drag-along provision does not modify the § 152.002 “obligation of good faith,” and the contractual “Agreed Duties” of “good faith and fair dealing” create an independent separate duty.38
1. The procedural requirements in the drag-along provision are not standards by which to measure good faith. ..... 39 2. Any modification to the minimum statutory obligation of good faith does not impact the separate and independent contractual “Agreed Duties.” ........................................................ 43
E. Section 152.002 prevents the Partnership Agreement from entirely eliminating the duties of loyalty and care. ......................... 43
AT A MINIMUM, THE PARTNERSHIP AGREEMENT IS II. AMBIGUOUS—WHICH ITSELF PRECLUDES SUMMARY JUDGMENT AND MANDATES REVERSAL. .......................................................................... 46
III. APPELLANTS PROPERLY STATE CLAIMS AGAINST BLACKSTONE, THE BLACKSTONE ENTITIES, AND DOYLE. ........................ 48
A. Blackstone and the Blackstone Entities owe fiduciary duties to Appellants based on their control of PEC and BPP. ......... 50
B. Blackstone and the Blackstone Entities are alter egos of BPP and therefore liable for both breach of fiduciary duty and breach of contract on that basis. ...................................................... 56
C. Appellants state derivative claims against Blackstone and the Blackstone Entities. ............................................................. 62
iii D. Section 13.9 of the Partnership Agreement does not compel dismissal of any claims. ....................................................... 64
ACCONCIA AND BLACKSTONE ARE SUBJECT TO SPECIFIC IV. PERSONAL JURISDICTION IN TEXAS. ....................................................... 67
A. Acconcia, President of BPP and Director on the PEC Board, personally traveled to Texas and continuously directed and solicited Texas residents regarding the Primexx investment and Callon Sale in Texas. ........................................................................ 68
B. Blackstone controlled and managed, and directed the sale of, the Texas oil assets of a Texas partnership to profit. ........... 73
PRAYER FOR RELIEF ........................................................................ 77
iv Index of Authorities
Page(s)
Cases
Allen v. Devon Energy Holdings, L.L.C., 367 S.W.3d 355 (Tex. App.—Houston [1st Dist.] 2012, no pet.) ............................................................................................... 55, 56
American Star Energy and Minerals Corp. v. Stowers, 457 S.W.3d 427 (Tex. 2015) ................................................................ 37
Ballantyne v. Champion Builders, Inc., 144 S.W.3d 417 (Tex. 2004) ................................................................ 36
Belliveau v. Barco, Inc., 987 F.3d 122 (5th Cir. 2021) ............................................................... 62
BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (Tex. 2002) .................................................................. 68
Bohatch v. Butler & Binion, 977 S.W.2d 543 (Tex. 1998) ................................................................ 45
Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) ....................................................................... 71, 75
Carlile Bancshares, Inc. v. Armstrong, No. 02-14-00014-CV, 2014 WL 3891658 (Tex. App.—Fort Worth Aug. 7, 2014, no pet.) ............................................................... 71
Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986) ................................................................ 57
CBIF Ltd. P’ship v. TGI Friday’s Inc., No. 05-15-00157-CV, 2017 WL 1455407 (Tex. App.— Dallas Apr. 21, 2017, pet. denied) ................................................ 52, 54
Chien v. Chen, 759 S.W.2d 484 (Tex. App.—Austin 1988, no writ) ........................... 45
v Coleman v. Klockner & Co. AG, 180 S.W.3d 577 (Tex. App.—Houston [14th Dist.] 2005, no pet.) ..................................................................................................... 74
ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858 (Tex. 2018) ................................................................ 47
Cook v. Brundidge, Fountain, Elliott & Churchill, 533 S.W.2d 751 (Tex. 1976) ................................................................ 34
Dalton v.
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ACCEPTED 15-25-00120-CV FIFTEENTH COURT OF APPEALS AUSTIN, TEXAS 10/16/2025 11:54 AM No. 15-25-000120-CV CHRISTOPHER A. PRINE CLERK In the Court of Appeals FILED IN 15th COURT OF APPEALS for the Fifteenth District of Texas AUSTIN, TEXAS 10/16/2025 11:54:14 AM CHRISTOPHER A. PRINE Clerk Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP, Appellants, v.
Primexx Energy Corporation, et al., Appellees.
Appeal from the Texas Business Court, First Division Dallas County, Texas Honorable Bill Whitehill
APPELLANTS’ BRIEF
ORAL ARGUMENT REQUESTED
SUSMAN GODFREY L.L.P.
Stephen Shackelford, Jr. Bryan Caforio State Bar No. 24062998 (TX) bcaforio@susmangodfrey.com sshackelford@susmangodfrey.com Lindsey Godfrey Eccles 1000 Louisiana Street, Ste 5100 leccles@susmangodfrey.com Houston, Texas 77002 Sarah Hannigan Telephone: (713) 651-9366 shannigan@susmangodfrey.com Facsimile: (713) 654-6666
Attorneys for Appellants Table of Contents
STATEMENT OF THE CASE................................................................ 1
STATEMENT REGARDING ORAL ARGUMENT ............................. 2
ISSUES PRESENTED ............................................................................ 2
STATEMENT OF FACTS ...................................................................... 4
I. APPELLANTS ALLEGE THAT BLACKSTONE SOLD PRIMEXX IN BAD FAITH IN VIOLATION OF THE PARTNERSHIP AGREEMENT. ................. 4
II. PLAINTIFFS BEGAN SEEKING RECOURSE IN TEXAS COURTS IN 2022. 7
III. THE BUSINESS COURT GRANTED SUMMARY JUDGMENT AND REJECTED APPELLANTS’ REQUEST TO CONDUCT DISCOVERY AFTER PEC AND BPP EXPRESSLY WAIVED RELIANCE ON ANY FACTS. ........................ 9
THE BUSINESS COURT DISMISSED THE MAJORITY OF IV. DEFENDANTS ON SUA SPONTE MOTIONS TO DISMISS............................. 16
THE BUSINESS COURT GRANTED BLACKSTONE’S AND ANGELO V. ACCONCIA’S SPECIAL APPEARANCES. ..................................................... 17
VI. PLAINTIFFS APPEALED THE FINAL JUDGMENT...................... 19
SUMMARY OF THE ARGUMENT ..................................................... 20
ARGUMENT .......................................................................................... 26
I. EXTENSIVE FACTUAL ISSUES PRECLUDE PRE-DISCOVERY SUMMARY JUDGMENT. ........................................................................... 26
A. Appellees must introduce sufficient facts to establish as a matter of law that they acted according to the “Agreed Duties” of “good faith and fair dealing” when liquidating Primexx to satisfy Blackstone’s ESG priorities. ............................................................. 27
ii B. The Business Court erred in denying Appellants’ request to conduct discovery and granting summary judgment when Appellees waived all reliance on any facts. ...................................... 32
C. The Business Court erred in relying on Texas Beef to find that Appellees necessarily act in good faith when acting pursuant to any other purported contractual right. ............................................ 35
D. The drag-along provision does not modify the § 152.002 “obligation of good faith,” and the contractual “Agreed Duties” of “good faith and fair dealing” create an independent separate duty.38
1. The procedural requirements in the drag-along provision are not standards by which to measure good faith. ..... 39 2. Any modification to the minimum statutory obligation of good faith does not impact the separate and independent contractual “Agreed Duties.” ........................................................ 43
E. Section 152.002 prevents the Partnership Agreement from entirely eliminating the duties of loyalty and care. ......................... 43
AT A MINIMUM, THE PARTNERSHIP AGREEMENT IS II. AMBIGUOUS—WHICH ITSELF PRECLUDES SUMMARY JUDGMENT AND MANDATES REVERSAL. .......................................................................... 46
III. APPELLANTS PROPERLY STATE CLAIMS AGAINST BLACKSTONE, THE BLACKSTONE ENTITIES, AND DOYLE. ........................ 48
A. Blackstone and the Blackstone Entities owe fiduciary duties to Appellants based on their control of PEC and BPP. ......... 50
B. Blackstone and the Blackstone Entities are alter egos of BPP and therefore liable for both breach of fiduciary duty and breach of contract on that basis. ...................................................... 56
C. Appellants state derivative claims against Blackstone and the Blackstone Entities. ............................................................. 62
iii D. Section 13.9 of the Partnership Agreement does not compel dismissal of any claims. ....................................................... 64
ACCONCIA AND BLACKSTONE ARE SUBJECT TO SPECIFIC IV. PERSONAL JURISDICTION IN TEXAS. ....................................................... 67
A. Acconcia, President of BPP and Director on the PEC Board, personally traveled to Texas and continuously directed and solicited Texas residents regarding the Primexx investment and Callon Sale in Texas. ........................................................................ 68
B. Blackstone controlled and managed, and directed the sale of, the Texas oil assets of a Texas partnership to profit. ........... 73
PRAYER FOR RELIEF ........................................................................ 77
iv Index of Authorities
Page(s)
Cases
Allen v. Devon Energy Holdings, L.L.C., 367 S.W.3d 355 (Tex. App.—Houston [1st Dist.] 2012, no pet.) ............................................................................................... 55, 56
American Star Energy and Minerals Corp. v. Stowers, 457 S.W.3d 427 (Tex. 2015) ................................................................ 37
Ballantyne v. Champion Builders, Inc., 144 S.W.3d 417 (Tex. 2004) ................................................................ 36
Belliveau v. Barco, Inc., 987 F.3d 122 (5th Cir. 2021) ............................................................... 62
BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789 (Tex. 2002) .................................................................. 68
Bohatch v. Butler & Binion, 977 S.W.2d 543 (Tex. 1998) ................................................................ 45
Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) ....................................................................... 71, 75
Carlile Bancshares, Inc. v. Armstrong, No. 02-14-00014-CV, 2014 WL 3891658 (Tex. App.—Fort Worth Aug. 7, 2014, no pet.) ............................................................... 71
Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986) ................................................................ 57
CBIF Ltd. P’ship v. TGI Friday’s Inc., No. 05-15-00157-CV, 2017 WL 1455407 (Tex. App.— Dallas Apr. 21, 2017, pet. denied) ................................................ 52, 54
Chien v. Chen, 759 S.W.2d 484 (Tex. App.—Austin 1988, no writ) ........................... 45
v Coleman v. Klockner & Co. AG, 180 S.W.3d 577 (Tex. App.—Houston [14th Dist.] 2005, no pet.) ..................................................................................................... 74
ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858 (Tex. 2018) ................................................................ 47
Cook v. Brundidge, Fountain, Elliott & Churchill, 533 S.W.2d 751 (Tex. 1976) ................................................................ 34
Dalton v. Innov8tive Nutrition, Inc., No. 3:24-CV-00687-N, 2025 WL 391737 (N.D. Tex. Feb. 4, 2025) .............................................................................................. 57, 58
Darnell v. Rogers, 588 S.W.3d 295 (Tex. App.—El Paso 2019, no pet.) ........................... 50
El Paso Nat. Gas Co. v. Minco Oil & Gas, Inc., 8 S.W.3d 309 (Tex. 1999) .................................................................... 37
English v. Fischer, 660 S.W.2d 521 (Tex. 1983) ................................................................ 38
Exxon Corp. v. Atl. Richfield Co., 678 S.W.2d 944 (Tex. 1984) ................................................................ 38
First United Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214 (Tex. 2017) ................................................................ 64
Fjell Tech. Grp. v. Unitech Int’l Inc., No. 14-14-00255-CV, 2015 WL 457805 (Tex. App.— Houston [14th Dist. Feb. 3, 2015, pet. denied)................................... 75
Flores v. Bank of Am., N.A., 697 S.W.3d 243 (Tex. App.—El Paso 2023, no pet.) ........................... 50
Henkel v. Emjo Investments, Ltd., 480 S.W.3d 1 (Tex. App.—Houston [1st Dist.] 2015, no pet.) ..................................................................................................... 71
vi Hoggett v. Brown, 971 S.W.2d 472 (Tex. App.—Houston [14th Dist.] 1997, pet. denied).......................................................................................... 55
Hong v. Havey, 551 S.W.3d 875 (Tex. App.—Houston [14th Dist.] 2018, no pet.) ..................................................................................................... 63
Houle v. Casillas, 594 S.W.3d 524 (Tex. App.—El Paso 2019, no pet.) ..................... 31, 45
Huynh v. Nguyen, 180 S.W.3d 608 (Tex. App.—Houston [14th Dist.] 2005, no pet.) ..................................................................................................... 74
Immobiliere Jeuness Establissement v. Amegy Bank Nat’l Ass’n, 525 S.W.3d 875 (Tex. App.—Houston [14th Dist.] 2017, no pet.) ....................................................................................... 64
In re Facebook, Inc., 625 S.W.3d 80 (Tex. 2021) .................................................................. 50
In re Harwood, 637 F.3d 615 (5th Cir. 2011) ............................................................... 51
In re Whittington, 530 B.R. 360 (Bankr. W.D. Tex. 2014) ............................................... 52
Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (Tex. 2019) .................................................... 31, 41, 42
JNM Express, LLC v. Lozano, 688 S.W.3d 327 (Tex. 2024) .................................................... 57, 60, 61
John Masek Corp. v. Davis, 848 S.W.2d 170 (Tex. App.—Houston [1st Dist.] 1992, writ denied) ................................................................................................. 38
Katy Venture, Ltd. v. Cremona Bistro Corp., 469 S.W.3d 160 (Tex. 2015) ................................................................ 27
vii Keyes v. Weller, 692 S.W.3d 274 (Tex. 2024) ................................................................ 63
Kinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565 (Tex. 1942) ..................................................................... 64
Lenape Res. Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (Tex. 1996) ................................................................ 30
Lucas v. Tex. Indus., Inc., 696 S.W.2d 372 (Tex. 1984) ................................................................ 61
M&F Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., Inc., 512 S.W.3d 878 (Tex. 2017) ............................................ 68, 72, 77
Matter of Bennett, 989 F.2d 779 (5th Cir. 1993) ............................................................... 51
McBeth v. Carpenter, 565 F.3d 171 (5th Cir. 2009) ......................................................... 51, 54
MCI Telecommunications Corp. v. Tex. Utilities Elec. Co., 995 S.W.2d 647 (Tex. 1999) .......................................................... 66, 67
McLeod v. McLeod, 644 S.W.3d 792 (Tex. App.—Eastland 2022, no pet.) ........................ 60
Moncrief Oil Intern. Inc. v. OAO Gazprom, 414 S.W.3d 142, 154 (Tex. 2013) ............................................ 73, 75, 77
Morgan Buildings & Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (Tex. App.—Dallas 2003, pet. denied).................. 43, 46
Nettye Engler Energy, LP v. BlueStone Nat. Res. II, LLC, 639 S.W.3d 682 (Tex. 2022) ................................................................ 47
Old Republic Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550 (Tex. 2018) ................................................................ 68
Point Energy Partners Permian, LLC v. MRC Permian Co., 669 S.W.3d 796 (Tex. 2023) ................................................................ 49
viii Prudential Ins. Co. of Am. v. Fin. Review Services, Inc., 29 S.W.3d 74 (Tex. 2000) .................................................................... 37
R.R. Comm’n of Tex. v. Gulf Energy Expl. Corp., 482 S.W.3d 559 (Tex. 2016) .......................................................... 31, 42
Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333 (Tex. 2009) .................................................... 69, 71, 72
Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217 (Tex. 1999) ................................................................ 27
Rosetta Res. Operating, LP v. Martin, 645 S.W.3d 212 (Tex. 2022) ................................................................ 49
RPC, Inc. v. CTMI, LLC, 606 S.W.3d 469 (Tex. App.—Fort Worth 2020, pet. denied) .............. 47
Shannon Med. Ctr. v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (Tex. App.—Houston [14th Dist.] 2019, no pet.) ..................................................................................................... 46
Spethmann v. Anderson 171 S.W.3d 680 (Tex. App.—Dallas 2005, no pet.) ................ 15, 30, 37
SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444 (Tex. 2008) ................................................................ 61
Texas Beef Cattle Co. v. Green, 921 S.W.2d 203 (Tex. 1996) ........................................................ passim
Tilton v. Marshall, 925 S.W.2d 672 (Tex. 1996) ................................................................ 64
Tryco Enters., Inc. v. Robinson, 390 S.W.3d 497 (Tex. App. — Houston [1st Dist.] 2012, pet. dism’d) ........................................................................ 58, 59, 60, 62
Vejara v. Levior Intern., LLC, No. 04-11-00595-CV, 2012 WL 5354681 (Tex. App.—San Antonio Oct. 31, 2012, pet. denied) .................................................... 55
ix Walker Ins. Services v. Bottle Rock Power Corp., 108 S.W.3d 538 (Tex. App.—Houston [14th Dist.] 2003, no pet.) ..................................................................................................... 68
Wilson v. Davis, 305 S.W.3d 57 (Tex. App.—Houston [1st Dist.] 2009, no pet.) ..................................................................................................... 61
Wren v. Midwestern State Univ., No. 05-22-00207-CV, 2023 WL 6139452 (Tex. App.— Dallas Sept. 20, 2023, no pet.) ............................................................ 60
Yujie Ren v. ANU Res., LLC, 502 S.W.3d 840 (Tex. App.—Houston [14th Dist.] 2016, no pet.) ..................................................................................................... 71
Statutes
Tex. Bus. Org. Code § 152.002 ........................................................ passim
Tex. Bus. Org. Code § 152.204 ................................................................ 41
Tex. Bus. Org. Code § 152.205 ................................................................ 45
Tex. Bus. Org. Code § 152.206 ................................................................ 46
Tex. Bus. Org. Code § 21.223 ...................................................... 61, 62, 63
Rules
Tex. R. Civ. P. 91a.1 ........................................................................ passim
Tex. R. Civ. P. 166a ......................................................................... passim
x Index of Parties and Counsel
Stephen Shackelford Jr. SUSMAN GODFREY LLP Appellants Primexx Energy Opportunity State Bar No. 24062998 Fund, LP and Primexx Energy Fund II, sshackelford@susmangodfrey.com LP 1000 Louisiana Street, Suite 5100 Houston, Texas 77002 Telephone: (713) 651-9366
Roger B. Cowie TROUTMAN PEPPER LOCKE LLP
State Bar No. 00783886 Appellee Christopher M. Doyle roger.cowie@troutman.com 2200 Ross Avenue, Suite 2800 Dallas, Texas 75201 Telephone: (214) 740-8000 Jeremy A. Fielding, P.C. KIRKLAND & ELLIS LLP
State Bar No. 24040895 Appellee Primexx Energy Corporation jeremy.fielding@kirkland.com 4550 Travis Street Dallas, Texas 75205 Telephone: (214) 972-1770
Appellees Blackstone Inc., Angelo Christopher W. Patton Acconcia, Blackstone Holdings III LP, LYNN PINKER HURST & Blackstone EMA II LLC, BMA VII LLC, SCHWEGMANN, LLP Blackstone Energy Management Associates II LLC, Blackstone Energy State Bar No. 24083634 Partners II LP, Blackstone Management cschwegmann@lynnllp.com Associates VII LLC, Blackstone Capital 2100 Ross Avenue, Suite 2700 Partners VII LP, BCP VII/BEP II Dallas, Texas 75201 Holdings Manager LLC, and BX Primexx Telephone: (214) 981-3000 Topco LLC
xi Index of Appendices
Appendix 1 Trial Court’s Final Judgment
Trial Court’s Opinion and Order Partially Granting Summary Appendix 2 Judgment
Appendix 3 Excerpts from Partnership Agreement
Trial Court’s Opinion and Order Denying Motion for Appendix 4 Reconsideration
Appendix 5 Trial Court’s Opinion and Order Granting Special Appearances
Appendix 6 Trial Court’s Opinion and Order Dismissing Blackstone Defendants
Trial Court’s Opinion and Order Dismissing Doyle and Blackstone Appendix 7 Defendants Third Amended and Restated Limited Partnership Agreement of Appendix 8 Primexx Energy Partners, Ltd. Supplemental Record of Oppositions to Acconcia and Blackstone Inc. Appendix 9 Special Appearances
Appendix 10 Statutes and Key Cases
xii STATEMENT OF THE CASE
Plaintiffs-Appellants are two minority investors in Primexx, a
Texas oil partnership that Defendants-Appellees allegedly sold by
violating their contractual and statutory duties of good faith and fair
dealing and statutory duties of loyalty and care. CR5752–53. Appellants
sue for damages. CR5824.
The Business Court entered Final Judgment on June 16, 2025.
CR6126. First, the court granted pre-discovery summary judgment to M.
Christopher Doyle, Primexx Energy Corporation (“PEC”), and BPP
HoldCo LLC (“BPP”). CR6128. Second, the court sua sponte dismissed,
under a motion to dismiss standard, all causes of action against M.
Christopher Doyle and the Blackstone Entities. 1 Id. Third, the court
granted the special appearances of Blackstone Inc. (“Blackstone”) and
Angelo Acconcia. Id. Appellants appeal the Final Judgment in its
entirety.
1 The “Blackstone Entities” are Blackstone Holdings III LP, Blackstone EMA II LLC,
BMA VII LLC, Blackstone Energy Management Associates II LLC, Blackstone Energy Partners II LP, Blackstone Management Associates VII LLC, Blackstone Capital Partners VII LP, BCP VII/BEP II Holdings Manager LLC, and BX Primexx Topco LLC.
1 STATEMENT REGARDING ORAL ARGUMENT
Appellants respectfully request oral argument. Resolving this
appeal will involve applying partnership law and the Texas Business
Organizations Code to issues including contractual interpretation,
contractual waivers of statutory rights, and contractual ambiguity. The
Court’s resolution will also involve an analysis of the standards
articulated in Tex. R. Civ. P. 166a, Tex. R. Civ. P. 91a.1, and Texas law
on specific personal jurisdiction. As the Business Court observed in a
status conference on January 17, 2025, “there are a number of issues in
this case that I think are questions of first impression.” RR Vol. 3 at 26.
Appellants believe that oral argument will assist the Court in resolving
the complex questions presented.
ISSUES PRESENTED
1. Can a partner establish in a pre-discovery motion under Tex. R. Civ. P. 166a that there is no genuine issue as to any material fact of whether it satisfied a contractual obligation that all partners abide by the “Agreed Duties” of “good faith and fair dealing” if that partner presents no evidence in its motion?
2. Is the Business Court’s grant of summary judgment, when PEC, BPP, and Doyle waived all reliance on any facts, irreconcilable with Tex. R. Civ. P. 166a and the court’s finding that the summary judgment movants owed the duties of good faith and fair dealing?
2 3. Does Tex. Bus. Org. Code § 152.002, which prohibits partners from eliminating the obligation of good faith, the duty of loyalty, and the duty of care, preclude the Business Court’s finding that the drag- along provision permitted Appellees’ conduct?
4. Does the drag-along provision in the Partnership Agreement include, pursuant to Tex. Bus. Org. Code § 152.002(b)(4), “standards by which the performance of the obligation [of good faith] is to be measured,” and if it does, are those standards “manifestly unreasonable”?
5. Does the drag-along provision in the Partnership Agreement include, pursuant to Tex. Bus. Org. Code § 152.002(b)(2)–(3), categories or standards that create an exception to the prohibition on the elimination of the duties of loyalty and care, and if so, are those standards or categories “manifestly unreasonable”?
6. Is the Partnership Agreement at least ambiguous, thus precluding summary judgment, since the provision Appellees claim permits partners to act in their own self-interest also requires partners to always act according to the “Agreed Duties” of “good faith and fair dealing”?
7. Do Appellants state claims against M. Christopher Doyle and the Blackstone Entities that have a basis in law or fact and as a result are sufficient to survive a sua sponte Rule 91a.1 motion to dismiss?
8. Do the Texas courts have specific personal jurisdiction over Senior Managing Director Angelo Acconcia of Blackstone in this dispute when he orchestrated the sale of Primexx’s Texas oil assets to another Texas oil company in his capacity as President of BPP and Director of PEC (a Texas company), including traveling to Texas and soliciting business from persons in Texas to effectuate that Texas transaction?
9. Do the Texas courts have specific personal jurisdiction over Blackstone in this dispute when the contacts of Blackstone employees are attributed to it, and when Blackstone, as the
3 majority owner of a Texas oil partnership, appointed and controlled the majority of the board of PEC (a Texas company) and directed and controlled the sale of Primexx’s Texas oil assets to another Texas oil company?
STATEMENT OF FACTS
I. Appellants Allege that Blackstone Sold Primexx in Bad Faith in Violation of the Partnership Agreement.
Primexx Resource Development LLC was an oil company that
successfully operated two rigs in the Delaware Basin. CR5752, CR5783.
Appellants allege that private equity company Blackstone and its
subsidiaries organized a special purpose investment entity called BPP
HoldCo LLC (“BPP”) that Blackstone and the Blackstone Entities used
to become the majority owner of Primexx. CR5753. The investment was
structured as a partnership—BPP, on behalf of Blackstone and the
Blackstone Entities, entered into the Third Amended and Restated
Limited Partnership Agreement (the “Partnership Agreement”) of
Primexx Energy Partners, Ltd. (“Primexx Energy Partners,” and
collectively with the subsidiaries and assets it controlled, “Primexx”).
CR5753. The Blackstone Entities constitute one vertical branch of
Blackstone’s subsidiaries and form the chain connecting the upper
holding companies to BPP. CR5765 (chart describing subsidiary
4 relationships). The chain of Blackstone Entities includes Blackstone
Capital Partners VII LP and Blackstone Energy Partners II LP,
Blackstone funds that it used to fund the investment in Primexx.
CR5774.
Primexx Energy Corporation (“PEC”), the managing general
partner of Primexx Energy Partners, operated as a Blackstone portfolio
company. CR5753. Blackstone had the power to nominate a majority of
the PEC Directors. CR5753. Appellants, minority investors in Primexx
Energy Partners, are two limited partnerships consisting of individual
and private institutional investors. CR5753.
In June 2021, Primexx Energy Partners was independently valued
at $1.43 billion. CR5754. At that valuation, Appellants’ investments in
Primexx Energy Partners were collectively worth more than $200
million. CR5754. Throughout early 2021, Callon Petroleum Company
(“Callon”) made a series of lowball offers to purchase Primexx that the
PEC Board found uncompetitive. CR5754, CR5788. Appellants allege
that on July 28, 2021, M. Christopher Doyle, then the CEO of PEC, told
a PEC Director that Callon’s latest offer was still far too low and would
need to be increased considerably to be taken seriously. CR5788.
5 Appellants allege that around the same time, a Blackstone executive
admitted to a PEC Director that senior Blackstone management gave the
direction to exit the Primexx investment, even though the executive knew
Callon’s offer was a bad deal. CR5788.
On Friday July 30, 2021, Blackstone, BPP, and the Blackstone
Entities informed the PEC Directors of an impending sale of Primexx to
Callon pursuant to the same terms the CEO of PEC said were too low to
consider. CR5789. Blackstone, BPP, and the Blackstone Entities forced
the PEC Directors to formally approve the sale on Monday. CR5792. The
final sale documents were executed on August 3, 2021, only four days
after the PEC Directors first learned of the final terms. CR5792.
Appellants allege that Blackstone, BPP, and the Blackstone
Entities, working with PEC, forced the sale—despite knowing it would
harm the other partners in Primexx—due to Blackstone’s new corporate
focus on environmental, social, and governance (“ESG”) factors, and
specifically on divesting from fossil fuels. CR5794. Blackstone knew that
the Callon sale, at the discount price, would still provide hundreds of
millions of dollars in returns to Blackstone, BPP, and the Blackstone
Entities while almost entirely wiping out the minority investors. CR5795.
6 Appellants have suffered a near-total loss on their investment. CR5797.
Appellants allege, based on Securities and Exchange Commission
(“SEC”) filings, that Blackstone and the Blackstone Entities used their
corporate matrix to siphon funds away from BPP in Texas to further
Blackstone’s focus on ESG in New York and Delaware. CR5799.
II. Plaintiffs Began Seeking Recourse in Texas Courts in 2022.
Appellants originally filed this suit in 2022 in the civil court for
Dallas County. CR5757. While § 14.1 of the Partnership Agreement
contains a forum selection clause in favor of “any United States District
Court located in Dallas, Texas,” there was no jurisdiction to proceed in
federal court. CR5758. Nonetheless, Blackstone, BPP, the Blackstone
Entities, PEC, and Doyle filed a Motion to Dismiss for Improper Venue.
CR5758. On March 29, 2023, the Dallas court dismissed Appellants’
complaint without prejudice, concluding that in the first instance “the
federal court is best situated to determine its own jurisdiction.” CR5758.
Appellants re-filed in the U.S. District Court for the Northern District of
Texas on May 4, 2023. CR5758. That court dismissed the case for lack of
subject matter jurisdiction, emphasizing that “a federal court’s subject
matter jurisdiction cannot be expanded upon agreement of the parties,”
7 so the Partnership Agreement could not “create subject matter
jurisdiction where none exists.” CR5759.
Appellants again filed the case in Dallas County in July 2023, and
BPP, PEC, and Doyle moved for summary judgment. CR1181. The
summary judgment movants refused to answer any of Appellants’
requests for production or interrogatories while the motion was pending,
claiming that no discovery was necessary because the motion depended
on purely legal grounds. CR1182; CR1637 (BPP objecting to each of sixty-
two requests for production and six interrogatories because BPP “has
filed a motion for summary judgment (the ‘Motion’) that outlines the legal
issues that will resolve this case”). Appellants moved to compel on May
8, 2024, which the court orally granted. CR1182.
Once the Business Court began accepting cases, Appellants
removed to the First Business Court Division with Appellees’ consent.
CR5760. The parties then mutually agreed to dismiss and re-file the case
as an original action in the Business Court. CR5761. Appellants filed the
instant lawsuit in the First Business Court Division on October 24, 2024.
CR5761.
8 III. The Business Court Granted Summary Judgment and Rejected Appellants’ Request to Conduct Discovery After PEC and BPP Expressly Waived Reliance on Any Facts.
After Appellants filed the instant lawsuit in the Business Court in
October 2024, the Blackstone Entities and Angelo Acconcia filed Special
Appearances, and BPP, PEC, and Doyle again moved for pre-discovery
summary judgment.2 CR236, CR256, CR299. Appellants amended the
Petition to add Blackstone as a defendant, and Blackstone also filed a
Special Appearance. CR4619. Since the Blackstone Entities voluntarily
appeared and answered in the first, near-identical proceeding in Dallas
without entering special appearances, the Court denied their special
appearances.3 CR4272. The parties conducted limited jurisdictional
discovery related to the special appearances of Blackstone and Acconcia,
but no merits discovery occurred.
In opposing the motion for summary judgment, Appellants
expressly requested a continuance to conduct the discovery that
2 The parties had previously briefed the Special Appearances and the Motion for
Summary Judgment in the second Dallas action, which were still pending at the time of removal. Pursuant to a Rule 11 Agreement, the parties re-filed substantively similar briefing in the Business Court.
3 The Blackstone Entities appealed the denial of their Special Appearances. That
appeal is fully briefed before this Court. See No. 15-25-00014-CV.
9 Appellants required to oppose the summary judgment motion. CR1208;
see also Tex. R. Civ. P. 166a(g). In response to the Business Court’s
written questions in advance of the hearing, BPP, PEC, and Doyle
represented to the court in writing: “[T]o narrow the issues before the
court to purely legal questions—and avoid the need to fight about the
necessity of discovery regarding these other issues—Moving Defendants
hereby withdraw those grounds” based on estoppel and ratification.
CR4263 (emphasis added). As a result, “Moving Defendants will seek
summary judgment solely on the pure legal question of whether the LPA’s
limitation of fiduciary duties and express grant of BPP HoldCo’s Drag-
Along Right dispose of Plaintiffs’ claims as a matter of law.” CR4263
(emphasis added).
At the summary judgment hearing, BPP, PEC, and Doyle again
disclaimed any reliance on any facts: “This is a simple case that involves
a pure question of the law. You saw the e-mail we sent yesterday about
the ratification of the estoppel claims. We’ve done that because we just
want to isolate this to this sole issue that doesn’t require any discovery.”
RR Vol. 2 at 7:11–17. After Appellees disclaimed any factual bases for
their motion for summary judgment, the Business Court resolved the
10 motion without permitting Appellees to conduct any merits discovery.
CR5442.
Since there was no factual record in the case, Appellees represented
that the pre-discovery motion for summary judgment turned only on the
plain text of the Partnership Agreement. CR299. The first key provision
at issue was § 5.9 of the Partnership Agreement, titled “Fiduciary
Duties.” CR5866. Section 5.9(a) provides:
Each Partner and the Managing General Partner shall, to the fullest extent required by Texas law, owe to the Partnership and its Partners the duties of good faith and fair dealing, and in the case of the Managing General Partner, the duty not to exceed in such capacity the bounds of the authority granted to any general partner by this Agreement and Texas law (all such duties collectively, the “Agreed Duties”).
CR5866–67 (bold emphasis added). When the Partnership Agreement
purports to limit or restrict other duties “to the fullest extent permitted
pursuant to applicable law,” it exempts the “Agreed Duties” from any
restriction. CR5867 (§ 5.9(b)(B)).
The second provision at issue, § 6.7, is titled “Drag-Along Rights.”
CR5879. The drag-along provision states:
Subject to the limitations and conditions set forth in this Section 6.7, if at any time after the second (2nd) anniversary of the Effective Date, Blackstone elects to consummate, or to
11 cause the Partnership to consummate, a sale to a Third Party on an arms-length basis that constitutes an Exit Event (a “Drag-Along Transaction”), the other Unitholders will consent to such Drag-Along Transaction, and will take or cause to be taken all other actions, including instructing any Existing Limited Partner Directors to approve such Drag-Along Transaction, reasonably necessary or desirable to cause the consummation of such Drag-Along Transaction on the terms proposed by Blackstone, including entering into a customary registration rights agreement in connection with a public offering of the Partnership . . .
CR5879.
BPP, PEC, and Doyle argued that the “Agreed Duties” of “good faith
and fair dealing” do not apply to any drag-along transaction. CR299.
Appellants argued in opposition that the “Agreed Duties” apply to the
entirety of the Partnership Agreement, including with respect to
executing the drag-along provision. CR1170. Appellants further argued
that Tex. Bus. Org. Code § 152.002 prevents any interpretation of the
Partnership Agreement that entirely eliminates those duties. CR1170.
On March 10, 2025, the Business Court granted summary
judgment in large part. CR5442. The court held that Appellants could not
state any claims for breach of fiduciary duty or breach of contract based
on Appellants’ allegations that BPP and the Blackstone Entities (1)
pushed through the Callon sale while knowing it was a bad deal that
12 would largely wipe out their partners; (2) prioritized Blackstone’s
corporate interest in oil divestment over their obligations to their
partners in a Texas partnership; (3) failed to consider the relative benefit
of continuing to operate as a stand-alone entity or explore other
alternatives (including other potential buyers) in advance of the Callon
sale; (4) failed to conduct the requisite due diligence on the Callon sale;
(5) failed to adequately inform Appellants about the imminent Callon
sale; and (6) forced through the rushed Callon sale in one business day.
CR5492–93.
The court summarized: “In short, the analysis converges on whether
HoldCo acted in good faith when it exercised its drag-along rights and
forced the sale of PRD’s assets to Callon on terms HoldCo selected.”
CR5491 (emphasis added). The court again reiterated that “[i]t is
undisputed that HoldCo and PEC were [Primexx Energy Partners]
partners and owed [Appellants] statutory loyalty and care duties and an
obligation to discharge them in good faith regarding the Callon sale—
subject to their agreed modifications to those responsibilities.” CR5496.
Despite acknowledging the contractual and statutory duties owed
to Appellants, the Business Court concluded that there was no genuine
13 issue as to any material fact with respect to whether any conduct of BPP,
PEC, or Doyle before or during the Callon sale breached their contractual
or statutory duties. The Court did not mention that Appellees waived any
reliance on any facts in connection with the motion. CR4263. With
respect to the duties of loyalty and care, the court concluded that the
drag-along provision met the exceptions described in § 152.002(b)(2)–(3),
but did not consider whether those changes would be “manifestly
unreasonable.”4 CR5496.
In rejecting Appellants’ claims based on the duty of good faith, the
court relied on Texas Beef Cattle Co. v. Green, 921 S.W.2d 203, 211 (Tex.
1996). The court broadly concluded that “one does not act in bad faith by
exercising its lawful rights,” and therefore “one does not lack good faith
by exercising lawful contract rights.” CR5483. It follows, the court
asserted, that “as a matter of law HoldCo and PEC did not act in bad
faith by exercising their contract rights to discharge HoldCo’s drag-along
rights as they did.” CR5508. The court denied summary judgment with
4 The court further added that Appellants “do not claim that any [Partnership Agreement] modifications to those responsibilities is manifestly unreasonable.” CR5496. That is incorrect—in Appellants’ Opposition, Appellants argued that BPP’s and PEC’s interpretation of the drag-along provision is, “to use the language from Section 152.002,” “manifestly unreasonable.” CR3456.
14 respect to two of Appellants’ claims stemming from the distribution of
proceeds between partners after the Callon sale occurred. CR5500–01.
The Business Court then rejected Appellants’ Motion for
Reconsideration, reiterating that Appellants “failed as a matter of law to
raise a genuine issue of material fact supporting liability based on their
claims of bad faith.” CR5555; CR5736, CR5738. Notably, however, in
rejecting Plaintiffs’ argument that the summary judgment opinion
permitted BPP to “act in bad faith” as long as it could point to a
“contractual provision purportedly permitting its conduct,” the court
stated the following:
To begin, the MSJ Opinion concludes only that lawfully exercising contract rights is not acting in bad faith . . . That is, Texas Beef Cattle and the court’s opinion require that the exercised contract right be (i) a lawful right and (ii) exercised ‘in a legal way.’ Id. So, the court did not conclude that Texas Beef Cattle permitted HoldCo to exercise its drag-along rights in bad faith or in an otherwise illegal manner.
Accordingly, the MSJ Opinion agrees with Spethmann that how a fiduciary performs their contract rights is important. See 171 S.W.3d at 696. To that point, the court emphasized that HoldCo had to satisfy its TBOC responsibilities and exercise its drag-along rights in good faith.
CR5741–5742 (emphasis added). The court repeated its conclusion that
“in reviewing the evidence, the court did not find that there was a
15 genuine issue of material fact as to whether PEOFs were misled.”
CR5742 n.22 (emphasis added).
IV. The Business Court Dismissed The Majority of Defendants On Sua Sponte Motions to Dismiss.
Appellees did not move to dismiss any claims at any stage of this
litigation. However, the Business Court sua sponte raised perceived
issues with Appellants’ pleadings with respect to Blackstone, the
Blackstone Entities, and Doyle—issues that Appellees had not previously
raised. The court asked the parties for briefing so it could “consider the
viability of those claims under the analytical standards applicable to a
Rule 91a.1 motion to dismiss.” CR6071. In a series of orders, the Business
Court subsequently dismissed all claims against Blackstone, the
Blackstone Entities, and Doyle.
On May 9, 2025, the Business Court dismissed the breach of
contract and breach of fiduciary duty claims against Blackstone and the
Blackstone Entities. CR6071. The court concluded that, because
Blackstone and the Blackstone Entities “were not parties” to the
Partnership Agreement, they did not owe Appellants any “statutory
responsibilities or contract obligations.” CR6072. The court held that §
13.9 of the Partnership Agreement, titled “No Recourse,” precluded
16 Appellants’ claims against Blackstone and the Blackstone Entities.
CR6072. Finally, the court concluded, without analysis, that Appellants’
“allegations do not support ignoring the defendants’ separate corporate
forms as would be required for plaintiffs to prevail.” CR6074.
On May 19, 2025, the Business Court applied its May 9 Opinion to
Doyle and held that § 13.9 similarly precluded the claims against him.
CR6101, CR6110. The court also determined that § 13.9 barred any
conspiracy, aiding and abetting, and knowing participation claims
against the Blackstone Entities arising from Appellants’ claims against
BPP or PEC.5 CR6111. The court rejected Appellants’ argument that §
13.2 of the Partnership Agreement prevented the non-signatories from
claiming a third-party benefit. CR6113–14. The court further concluded
that § 13.9 did not eliminate unwaivable duties in violation of Tex. Bus.
Org. Code § 152.002. CR6115.
V. The Business Court Granted Blackstone’s and Angelo Acconcia’s Special Appearances.
The Business Court also granted the Special Appearances of
Blackstone and Acconcia. The court granted the Special Appearances in
5 The Opinion and Order does not appear to apply to Blackstone or Acconcia, who as
the Business Court noted, were previously dismissed for lack of jurisdiction. CR6113 at n.1.
17 an Order dated April 28, 2025, followed by an Opinion and Order dated
May 22, 2025. CR6139. While the court only conducted a “specific
jurisdictional analysis” for the limited claims that survived summary
judgment, the court noted that its “conclusions are the same considering
all the claims asserted” in the Second Amended Petition. CR6161.
With respect to Acconcia, the Business Court held that “the
evidence fails to establish that [Appellant]s’ claims against Acconcia
arise from his purposeful contacts with Texas,” and concluded that
“Acconcia’s forum contacts are attributable to a different entity, not
Blackstone.” CR6140. First, the court concluded that Appellants “do not
allege, argue, or adduce evidence that Acconcia committed a tortious act
in whole or in part in Texas that would support personal—meaning
direct—liability against him . . .” CR6161 (emphasis added). Second, the
court determined that “[a]s a threshold matter, it is not appropriate to
assert jurisdiction over a non-resident corporate officer where the only
claims asserted against them are derivative in nature,” and noted that
Appellants “do not even assert direct tort liability against him.” CR6165–
6171. With respect to Blackstone, the Court held that because Appellants’
jurisdictional arguments “are rooted in Acconcia’s actions as their agent,
18 the court lacks jurisdiction over Blackstone too,” and rejected any basis
for jurisdiction resulting from Blackstone’s direct conduct. CR6140,
CR6172, CR6174.
VI. Plaintiffs Appealed the Final Judgment.
On June 3, 2025, the parties filed a Rule 11 Agreement with the
Business Court requesting the entry of final judgment. After the court’s
summary judgment, sua sponte motion to dismiss rulings, and Special
Appearances orders, the only claims remaining were against BPP and
PEC with respect to the distribution of proceeds after the Callon sale.
CR6120. The parties consented to the entry of a “final, appealable
judgment on the claims and defendants dismissed by the Orders,” as
applied to Appellants’ Second Amended Petition. 6 CR6120. The parties
agreed that the remaining claims would be dismissed without prejudice
and subject to the parties’ tolling agreement. CR6121.
The Business Court entered Final Judgment on June 16, 2025.
CR6126. The court dismissed without prejudice the Remaining Claims
6 Appellants filed a Second Amended Petition on May 2, 2025 to incorporate additional alter-ego allegations relevant to the court’s consideration of the sua sponte motion to dismiss. CR5752. The Rule 11 Agreement provided that, “subject to the Court’s approval,” the court’s orders “shall be deemed to apply to the claims and parties in the Second Amended Petition.” CR6120.
19 against the Remaining Defendants, noting that “the parties filed a Rule
11 Agreement in which the parties agreed Plaintiffs shall dismiss
without prejudice the Remaining Claims against the Remaining
Defendants so that the causes of action and claims dismissed by the
Orders can proceed to appealable judgment.” CR6127–28. The Business
Court ordered that it lacks personal jurisdiction over Blackstone and
Angelo Acconcia; all causes of action against M. Christopher Doyle and
the Blackstone Entities are dismissed with prejudice according to the
May 22, 2025 Opinion and Order; and summary judgment is granted to
M. Christopher Doyle, PEC, and BPP except with respect to two
allegations regarding post-sale distribution of proceeds. CR6130. The
court “order[ed] that Plaintiffs take nothing” and stated that the Final
Judgment “finally disposes of all claims, causes of action, and parties
before the court.” CR6128–6129.
Appellants filed a Notice of Appeal on July 7, 2025, from the Final
Judgment and all other rulings ancillary to the Final Judgment. CR6132.
SUMMARY OF THE ARGUMENT
While precluding Appellants from conducting any merits discovery
whatsoever, the Business Court wrongly granted summary judgment to
20 Appellees based on Appellants’ purported failure to introduce facts
establishing Appellees’ misconduct. That decision was procedurally
improper and legally wrong.
In 2021, senior Blackstone executives decided that Blackstone
should completely divest from its fossil fuel investments so it could have
better access to investors concerned with ESG issues. Those executives
in New York directed Acconcia to liquidate Blackstone’s Texas-based
Primexx investment for any price he could get so Blackstone could focus
on ESG elsewhere. Accordingly, Acconcia negotiated with a Texas
company to purchase Blackstone’s Texas-based real oil assets so
Blackstone could receive hundreds of millions of dollars from Texas with
total disregard to its partners and the contractual and fiduciary
responsibilities Appellees owed pursuant to the Partnership Agreement.
Specifically, Section 5.9(a) of the Partnership Agreement requires
all partners, “to the fullest extent required by Texas law,” to comply with
the “Agreed Duties” of “good faith and fair dealing.” CR5866. The duty of
good faith and fair dealing is both written into the Partnership
Agreement and required by the Texas Business Organizations Code,
which also mandates the duties of loyalty and care. See Tex. Bus. Org.
21 Code § 152.002. The obligations are explicit and clear. As the Business
Court explained in denying Appellants’ Motion for Reconsideration, the
court “agrees . . . that how a fiduciary performs their contract rights is
important” and “emphasized that HoldCo had to satisfy its TBOC
responsibilities and exercise its drag-along rights in good faith.”
CR5742 (emphasis added); CR5491 (Summary Judgment Opinion) (“In
short, the analysis converges on whether HoldCo acted in good
faith when it exercised its drag-along rights . . .”).
Yet the Business Court concluded—before any discovery at all
occurred, when the summary judgment movants disclaimed any factual
basis for their motion, and after rejecting Appellants’ request for a
continuance to conduct discovery—that there is no genuine issue as to
any material fact in this case. See Tex. R. Civ. P. 166a(c). Whether a party
acted in good faith or according to the duties of loyalty and care is a
quintessential question of fact. Appellants allege that Appellees violated
the duties of good faith, loyalty, and care, but in their pre-discovery
motion for summary judgment, BPP, PEC, and Doyle did not present any
evidence whatsoever regarding their compliance with those duties in
connection with the allegations in the Petition. The Business Court thus
22 misapplied Tex. R. Civ. P. 166a when it denied Appellants’ request for a
continuance to conduct discovery and granted pre-discovery summary
judgment despite the extensive factual disputes at the heart of
Appellants’ claims.
The drag-along provision does not even purport to modify either the
contractual “Agreed Duties” of “good faith and fair dealing” or the
obligation of good faith required by § 152.002 of the Tex. Bus. Org. Code.
That section prohibits a partnership agreement or partners from
“eliminat[ing] the obligation of good faith under Section 152.204(b),
except that the partners by agreement may determine the standards by
which the performance of the obligation is to be measured if the
standards are not manifestly unreasonable.” Section 152.002 also
prohibits a partnership agreement or partners from eliminating the
duties of care and loyalty.
Under established Texas law, the issue of good faith involves the
subjective motivation of the partners. As a result, the two procedural
requirements in the drag-along provision that Appellees identify are not
“standards by which the performance of the obligation [of good faith] is
to be measured.” The procedural requirements also do not meet the
23 exceptions for “specific types of activities or categories of activities that
do not violate the duty of loyalty” or and do not describe “standard[s] by
which the performance of the obligation [of care] is to be measured.”
At the very minimum, the Partnership Agreement is ambiguous,
which compels reversing the Business Court’s grant of pre-discovery
summary judgment. Appellants assert that the partners’ “Agreed Duties”
of “good faith and fair dealing” established in § 5.9(a) apply throughout
the Partnership Agreement, including when executing the drag-along
provision. That interpretation is reasonable, and a contract is ambiguous
when it is reasonably susceptible to more than one interpretation. The
Texas Supreme Court has repeatedly emphasized that an ambiguous
contract creates a fact issue with respect to the meaning of the contract,
which precludes summary judgment.
Appellants also state claims against Doyle and the Blackstone
Entities that have a basis in law or fact and thus survive a sua sponte
motion to dismiss under Tex. R. Civ. P. 91a.1. At the motion to dismiss
stage, which requires only that a plaintiff state a cause of action with
“basis in law or fact,” Appellants have pled sufficient facts to state claims
directly against Doyle and the Blackstone Entities, and against the
24 Blackstone Entities under an alter-ego theory.
Finally, Acconcia and Blackstone are both subject to specific
personal jurisdiction in Texas for this dispute. Acconcia, then a Senior
Managing Director at Blackstone, was the President of BPP, the special
purpose entity Blackstone used to invest in the Primexx Texas oil
partnership, and was a Director on the board of PEC, the Texas company
that ran Primexx. Acconcia personally traveled to Texas to manage and
direct PEC’s Texas employees while Acconcia’s team evaluated a
potential Callon deal. Acconcia participated in hybrid PEC board
meetings regarding Callon when he knew that other PEC Directors on
the call were physically in Texas. He contacted individuals that he knew
were located in Texas on behalf of Primexx. And, ultimately, Acconcia
was responsible for orchestrating and directing the sale of Primexx’s
Texas oil assets to another Texas oil company.
Acconcia’s Texas contacts, which were conducted in his capacity as
a Blackstone Senior Managing Director, are attributed to Blackstone.
Blackstone was the majority owner of the Texas oil partnership;
appointed and controlled the majority of the PEC Board; directed and
controlled Primexx’s operations in Texas; and forced the PEC Board to
25 approve the sale of Primexx’s Texas oil assets to another Texas oil
company. Both Acconcia and Blackstone repeatedly and intentionally
availed themselves of Texas resources and ultimately made hundreds of
millions of dollars for Blackstone, the Blackstone Entities, and BPP by
forcing the sale of the Texas oil assets of one Texas company to another
Texas company.
ARGUMENT
I. Extensive Factual Issues Preclude Pre-Discovery Summary Judgment.
Section 5.9(a) of the Partnership Agreement provides that partners,
“to the fullest extent required by Texas law,” must abide by the “Agreed
Duties” of “good faith and fair dealing.” CR5866. Whether a person or
entity acts in good faith, which involves consideration of subjective
motive, is an issue of fact. Similarly, Tex. Bus. Org. Code § 152.002
requires partners to act according to the “duty of loyalty,” “duty of care,”
and “obligation of good faith.” Whether partners complied with those
duties is also a fact issue. The Business Court misapplied Rule 166a when
it concluded, while rejecting Appellants’ request to conduct discovery,
that there was no genuine issue as to any material fact.
26 Appellate courts engage in de novo review of whether there is a
genuine issue as to any material fact. See Katy Venture, Ltd. v. Cremona
Bistro Corp., 469 S.W.3d 160, 163 (Tex. 2015). Texas courts must
“examine the record in the light most favorable to the non-movant,
indulge every reasonable inference against the motion and likewise
resolve any doubts against it.” Id. at 163. “The movant must establish its
right to summary judgment on the issues expressly presented to the trial
court by conclusively proving all elements of the movant’s cause of action
or defense as a matter of law.” Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d
217, 223 (Tex. 1999) (emphasis added). Appellees failed to do so here.
A. Appellees must introduce sufficient facts to establish as a matter of law that they acted according to the “Agreed Duties” of “good faith and fair dealing” when liquidating Primexx to satisfy Blackstone’s ESG priorities.
The Partnership Agreement requires that the parties abide by the
“Agreed Duties” of “good faith and fair dealing,” which applies to the
partners’ conduct with respect to the drag-along provision and
necessarily creates a fact issue that precludes summary judgment.
Section 5.9(a) of the Partnership Agreement provides that “Each
Partner and the Managing General Partner shall, to the fullest extent
27 required by Texas law, owe to the Partnership and its Partners the duties
of good faith and fair dealing . . .” CR5866. Although the Partnership
Agreement purports to limit or restrict other duties, it explicitly exempts
the “Agreed Duties” from any restriction. CR5867, § 5.9(b)(A) (eliminates
fiduciary duties “except for the Agreed Duties” and “except as required
by any provisions of applicable law that cannot be waived”); § 5.9(b)(B)
(eliminates duties “other than the Agreed Duties”); § 5.9(c) (“Subject to
the foregoing clauses (a) and (b),” which includes the “Agreed Duties”); §
5.9(c)(i) (“other than an Agreed Duty”). Notably, even § 5.9(c)(ii), the
provision permitting partners to act in their own interest, still requires
that partners do so “subject to the Agreed Duties.” CR5867 (“. . . [E]ach
Partner, in its capacity as such, may decide or determine any matter in
its sole and absolute discretion taking into account solely its interests
and those of its Affiliates (excluding the Partnership and its Subsidiaries)
subject to the Agreed Duties.”) (emphasis added).
The drag-along provision at § 6.7 does not in any way implicate or
limit the “Agreed Duties” of “good faith and fair dealing.” CR5879. The
Business Court recognized this when it repeatedly acknowledged that
Defendants owed the duty of good faith to Plaintiffs, even with respect to
28 executing the drag-along provision. CR5504 at ¶ 161 (“But HoldCo (and
PEC) had to conduct the sale in good faith.”); CR5504 at ¶ 164 (“But,
HoldCo still had to discharge that obligation [the arms-length
transaction] in good faith.”); CR5516 at ¶ 194 (“HoldCo’s ‘fiduciary’ duties
required it to perform in good faith.”); CR5491 at ¶ 134 (The “analysis
converges on whether HoldCo acted in good faith when it exercised its
drag-along rights and forced the sale of PRD’s assets to Callon on terms
HoldCo selected.”).
Texas courts regularly require a party to satisfy its good faith
obligations when executing other rights found elsewhere in a contract.
For example, in Spethmann v. Anderson, the Court of Appeals for the
Fifth District concluded that a party was required to act with good faith
when executing a contractual right to its own benefit. 171 S.W.3d 680,
695–96 (Tex. App.—Dallas 2005, no pet.). The court concluded: “The issue
is not whether the parties followed the Buy–Sell Agreement but whether
the transaction was fair to SGSI and was performed with the utmost good
faith and scrupulous honesty and without taking advantage of their
position with SGSI at the expense of SGSI.” Id.; see also Lenape Res.
Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565, 571 (Tex. 1996)
29 (“The [contract] does permit the Sellers to increase delivery capacity by
drilling new wells and by unitizing the committed reserves. But nothing
in the [contract] permits the Sellers to undertake these activities in bad
faith.”). The Business Court agrees—in denying Appellants’ Motion for
Reconsideration, the court noted that “the MSJ Opinion agrees with
Spethmann that how a fiduciary performs their contract rights is
important.” CR5741–5742 (emphasis added).
BPP and PEC were thus required to execute the drag-along
provision in compliance with the “Agreed Duties” of “good faith and fair
dealing,” which necessarily involves a factual investigation that
precludes summary judgment. See, e.g., R.R. Comm’n of Tex. v. Gulf
Energy Expl. Corp., 482 S.W.3d 559, 568 (Tex. 2016) (concluding that
definitions of good faith “focus overwhelmingly on subjective state of
mind” and “[b]ecause a fact issue exists on the Commission’s good faith,
we may not render judgment in its favor”); see also Janvey v. GMAG,
L.L.C., 592 S.W.3d 125, 129 (Tex. 2019) (describing subjective nature of
good faith). As a result, Texas courts routinely hold that summary
judgment is inappropriate when any factual dispute surrounds a party’s
good faith. Houle v. Casillas, 594 S.W.3d 524, 552 (Tex. App.—El Paso
30 2019, no pet.) (factual dispute prevents summary judgment regarding
breach of duty of good faith and fair dealing when partner “engaged in a
course of conduct with regard to clearly significant matters affecting the
partnership” without considering other partner’s interest).
Appellants allege throughout the Petition that BPP and PEC acted
in bad faith when they forced the Callon sale despite knowing it was an
unfair deal, at an unjustifiably low price, that would unduly harm their
partners. See, e.g., CR5752 at ¶ 1 (“Yet Defendants forced a quick sale of
Primexx, over a weekend, at a price well below its fair value that
rendered Plaintiffs’ combined investment almost totally worthless, and
distributed those proceeds unfairly in a manner that prioritized
Blackstone over other investors and generated hundreds of millions of
dollars for Blackstone.”); ¶ 98 (“Upon information and belief, Blackstone
prioritized its own corporate interest in fossil fuel divestment over acting
in the best interest of Primexx, as it was required to do under Texas law);
¶ 111 (“Defendants acted with intentional misconduct to recover
hundreds of millions of dollars for themselves while having a deliberate
disregard for the company and its other partners.”). BPP, PEC, and Doyle
filed a pre-discovery motion for summary judgment and presented no
31 facts or evidence whatsoever to establish that they acted in good faith.
Here, fact disputes not only remain—there are no facts in the record that
could even plausibly establish Appellees’ good faith.
B. The Business Court erred in denying Appellants’ request to conduct discovery and granting summary judgment when Appellees waived all reliance on any facts.
The Business Court’s decision that no genuine issue as to any
material fact remains cannot be reconciled with the court’s
acknowledgement that PEC and BPP owed Appellants the duties of good
faith and fair dealing. The summary judgment movants expressly
disclaimed all reliance on any facts, so movants necessarily did not
introduce into the summary judgment record the facts necessary to
establish as a matter of law that they actually complied with the duties
of good faith and fair dealing.
Appellants issued comprehensive discovery requests and
successfully moved to compel in the Dallas proceeding, but Appellees
continued to refuse to engage in discovery while the motion for summary
judgment remained pending. CR1182. As a result, Appellants requested
a continuance to conduct the discovery required to oppose the motion.
CR1208; see also Tex. R. Civ. P. 166a(g) (the court may “order a
32 continuance to permit affidavits to be obtained or depositions to be taken
or discovery to be had or may make such other order as is just”).
The Texas Supreme Court has long and repeatedly held that the
summary judgment movant carries the sole burden of introducing facts
to negate a Plaintiff’s claims:
It was the burden of the law firm as the defendant-movant for summary judgment to establish as a matter of law that no fact issue stands in the way of judgment in its favor. The summary judgment burden was that of establishing the negative of the statutory issues, namely, that Lyon was not apparently carrying on in the usual way the business of the law firm, i.e., was not acting in the ordinary course of its business and hence was not acting within the scope of apparent authority by force of statute. The defendant is required to meet the plaintiff’s case as pleaded and to demonstrate that the plaintiff cannot prevail. There can be no further burden upon the plaintiff if the requisite facts for summary judgment are not established by the summary judgment record.
Cook v. Brundidge, Fountain, Elliott & Churchill, 533 S.W.2d 751, 759
(Tex. 1976) (internal citations omitted) (emphasis added).
Evidently recognizing that their motion depended on fact issues
that would necessarily preclude summary judgment, BPP, PEC, and
Doyle expressly disclaimed and waived reliance on any facts. CR4263 (in
order to “avoid the need to fight about the necessity of discovery
regarding these other issues,” movants “seek summary judgment solely
33 on the pure legal question of whether the LPA’s limitation of fiduciary
duties and express grant of BPP HoldCo’s Drag-Along Right dispose of
Plaintiffs’ claims as a matter of law”) (emphasis added). At the summary
judgment hearing, BPP, PEC and Doyle again waived any factual basis
for summary judgment “because we just want to isolate this to this sole
issue that doesn’t require any discovery.” RR Vol. 2 at 7:11–17.
Nonetheless, the Business Court improperly resolved as a matter
of the law the inherently factual question of whether Appellees complied
with the duties of good faith and fair dealing. The Business Court then
doubled down on the error when denying Appellants’ Motion for
Reconsideration. The court clarified that its summary judgment opinion
“did not conclude that” BPP could “exercise its drag-along rights in bad
faith or in an otherwise illegal manner,” and “emphasized that HoldCo
had to satisfy its TBOC responsibilities and exercise its drag-along rights
in good faith.” CR5741–5742. The Court also acknowledged that the duty
of good faith and fair dealing required “at a minimum” that BPP “could
not have lied or misled its partners in executing its rights.” CR5742 n.22.
But the Court then asserted that “in reviewing the evidence, the court
did not find that there was a genuine issue of material fact as to whether
34 PEOFs were misled.” CR5742 n.22 (emphasis added). But, of course,
there was no evidence—no discovery had occurred; movants disclaimed
reliance on any facts; and the Court rejected Appellants’ request for a
continuance to conduct discovery. While Appellees carried the
affirmative burden “to meet the plaintiff’s case as pleaded and to
demonstrate that the plaintiff cannot prevail,” the Court flipped the
burden upside down and ruled against Appellants because they
apparently failed to negate facts that Appellees disclaimed and never
introduced into the record. That error requires reversal.
C. The Business Court erred in relying on Texas Beef to find that Appellees necessarily act in good faith when acting pursuant to any other purported contractual right.
The Business Court mistakenly relied on Tex. Beef Cattle Co. v.
Green, 921 S.W.2d 203 (Tex. 1996) to support its findings. CR5508. But
the Texas Beef line of cases in no way stands for the proposition that BPP
and PEC can establish, as a matter of law, that they acted in good faith—
as required by both a separate contractual provision and statute—by
pointing to a different contractual provision.
First, Texas Beef does not apply to cases involving fiduciaries. Texas
Beef addresses good faith only in the context of tortious interference with
35 a third-party contract, which does not apply to a partnership relationship
with both statutory duties and an explicit contractual obligation to act in
good faith. See Ballantyne v. Champion Builders, Inc., 144 S.W.3d 417,
427 (Tex. 2004) (noting that Texas Beef involved whether “a justification
defense to a tortious interference claim may be based on a ‘good-faith
claim to a colorable legal right, even though that claim ultimately proves
to be mistaken’”). Moreover, even in that limited context, a party does not
have absolute license to engage in any conduct by merely pointing to a
contractual provision purportedly authorizing that conduct. See
Prudential Ins. Co. of Am. v. Fin. Review Services, Inc., 29 S.W.3d 74, 81
(Tex. 2000) (concluding that a party could not “say or do anything under
the guise of exercising a privilege,” because a party “may not exercise an
otherwise legitimate privilege by resort to illegal or tortious means”).
For example, in Spethmann, which post-dates Texas Beef, the Court
rejected appellants’ argument “that they cannot be held liable for breach
of fiduciary duty because their actions in the sale of their stock were in
accordance with the Buy–Sell Agreement,” holding that appellants were
still required to comply with their fiduciary duties. 171 S.W.3d at 695–
96 (“The issue is not whether the parties followed the Buy–Sell
36 Agreement but whether the transaction was fair to SGSI and was
performed with the utmost good faith and scrupulous honesty and
without taking advantage of their position with SGSI at the expense of
SGSI.”); see also El Paso Nat. Gas Co. v. Minco Oil & Gas, Inc., 8 S.W.3d
309, 313 (Tex. 1999) (“El Paso has a statutory obligation to act in good
faith in the performance, enforcement and modification of these
agreements.”).
Second, Texas Beef predates the relevant statutory provisions. See
American Star Energy and Minerals Corp. v. Stowers, 457 S.W.3d 427,
434 (Tex. 2015) (a later-enacted conflicting statute “eliminates any
instructive or persuasive value those decisions may have once had”).
Section 152.002 took effect in 2006, which is after both Texas Beef (1996)
and the other cases the Business Court cites when discussing Texas Beef.
CR5483. Accordingly, none of those cases evaluate how § 152.002’s
prohibition on the elimination of the obligation of good faith and duties
of loyalty and care applies.
Finally, when discussing the Texas Beef line of cases, the Business
Court relied on cases involving implied duties. The Partnership
Agreement contains, and repeatedly reiterates, an express requirement
37 that partners act according to the “Agreed Duties” of “good faith and fair
dealing,” which further distinguishes the Partnership Agreement from
those where a court must read an implied duty into the contract that does
not otherwise exist in the contract itself. CR5483 (citing Exxon Corp. v.
Atl. Richfield Co., 678 S.W.2d 944 (Tex. 1984); John Masek Corp. v.
Davis, 848 S.W.2d 170 (Tex. App.—Houston [1st Dist.] 1992, writ denied);
English v. Fischer, 660 S.W.2d 521 (Tex. 1983)).
D. The drag-along provision does not modify the § 152.002 “obligation of good faith,” and the contractual “Agreed Duties” of “good faith and fair dealing” create an independent separate duty.
The drag-along provision does not contain any purported or actual
standards that could be used to measure the obligation of good faith
pursuant to § 152.002. Texas Supreme Court precedent demonstrates
that good faith relates to the subjective motivation of the partners. The
two procedural, process requirements in the drag-along provision are not
“standards by which the performance of the obligation is to be measured,”
§ 152.002(b)(4), and if the procedural requirements did in fact purport to
state a standard for the obligation of good faith, that standard would be
“manifestly unreasonable.” Id.
38 More fundamentally, even assuming arguendo that the drag-along
provision did constitute a permissible modification of the statutory
“obligation of good faith,” that modification would have no bearing on
BPP’s and PEC’s contractual duty of “good faith and fair dealing.” The
“Agreed Duties” operate independently from the statute to require
partners to act in accordance with “good faith and fair dealing.” Even if
the drag-along provision modified the “obligation of good faith” required
by § 152.002, BPP and PEC must still introduce evidence to establish as
a matter of law that they complied with their express contractual duties.
1. The procedural requirements in the drag- along provision are not standards by which to measure good faith.
Appellees wrongly rely on two procedural requirements in the drag-
along provision to support their motion. Section 152.002 prohibits
partners from “eliminat[ing] the obligation of good faith under Section
152.204(b),” but permits partners to “determine the standards by which
the performance of the obligation [of good faith] is to be measured.” §
152.002(b)(2)–(4). Section 152.002(b)(4) incorporates the Tex. Bus. Org.
Code’s definition of good faith found in a separate section of the code:
(b) A partnership agreement or the partners may not: . . . (4) eliminate the obligation of good faith under Section
39 152.204(b), except that the partners by agreement may determine the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable[.]
(emphasis added). Section 152.204(b) in turn provides that:
(b) A partner shall discharge the partner’s duties to the partnership and the other partners under this code or under the partnership agreement and exercise any rights and powers in the conduct or winding up of the partnership business: (1) in good faith; and (2) in a manner the partner reasonably believes to be in the best interest of the partnership.
(emphasis added).
The code’s description of good faith in § 152.204 establishes that,
consistent with Texas Supreme Court precedent, the obligation relates to
the subjective motivation of the partners. Section 152.204 governs how a
partner “discharge[s] the partner’s duties” and “exercise[s] any rights
and powers in the conduct” of the partnership, and states that partners
must do so “in good faith.” § 152.204(b)(1). How or the manner in which
a partner executes their rights and duties is a subjective concept that
necessarily implicates intent, state of mind, and motivation. This is
consistent with the second clause of that section, which requires a
partner to act “in a manner the partner reasonably believes to be in the
best interest of the partnership.” § 152.204(b)(2) (emphasis added).
40 In Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (Tex. 2019), the
Supreme Court considered the definition of “good faith” as used in the
Texas Uniform Fraudulent Transfer Act. The Court noted that Black’s
Law Dictionary defines good faith as “[a] state of mind consisting in (1)
honesty in belief or purpose, (2) faithfulness to one’s duty or obligation,
(3) observance of reasonable commercial standards of fair dealing ..., or
(4) absence of intent to defraud or to seek unconscionable advantage.” Id.
at 129. The court stated that, in general, good faith “requires conduct that
is honest in fact and is free of both improper motive and willful ignorance
of the facts at hand.” Id. (quoting R.R. Comm’n., 482 S.W.3d at 569). The
court ultimately concluded that good faith under the particular statute
at issue requires a transferee to demonstrate that “its conduct was honest
in fact, reasonable in light of known facts, and free from willful ignorance
of fraud.” Id.
Those descriptions stand in stark contrast to the procedural,
process requirements in the drag-along provision, which have nothing to
do with Blackstone’s subjective intent or motivation. Section 6.7(a) of the
drag-along provision provides that “if at any time after the second (2nd)
anniversary of the Effective Date, Blackstone elects to consummate, or to
41 cause the Partnership to consummate, a sale to a Third Party on an arms-
length basis that constitutes an Exit Event (a “Drag-Along Transaction”),
the other Unitholders will consent to such Drag-Along Transaction . . .”
CR5182. These procedural and process requirements do not determine
the standards by which the performance of the subjective obligation of
good faith may be measured as they would permit a partner to sell in a
dishonest manner and with negative subjective intentions, as Appellants
alleged happened here. In contrast, a standard to measure the
performance of good faith—a subjective intent requirement—would also
relate to subjective intent, such as a requirement to use “personal best
efforts” or “proceed with honesty and candor in negotiations.”
If the Business Court were correct that those two procedural
requirements were standards by which good faith could be measured,
then those standards would be “manifestly unreasonable” and prohibited
by § 152.002. A standard is not reasonable if it involves completely
waiving duties that, by statute, are unwaivable. Morgan Buildings &
Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871, 881 (Tex. App.—
Dallas 2003, pet. denied) (while standards can be modified under the
UCC statute as long as they are not “manifestly unreasonable,” “there is
42 a limit,” and purported modifications were “manifestly unreasonable in
light of the prohibition of waiver of those provisions”). If, as Appellees
contend, the Partnership Agreement permitted them to force a company
sale in bad faith for a fraction of a company’s valuation with the conscious
intent to wipe out minority partners, then § 152.002 would have no
meaning.
2. Any modification to the minimum statutory obligation of good faith does not impact the separate and independent contractual “Agreed Duties.”
Even if the drag-along provision modified Appellees’ statutory
“obligation of good faith,” it does not modify BPP’s and PEC’s contractual
“Agreed Duties” of “good faith and fair dealing.” The “Agreed Duties”
stand on their own and require partners to act in accordance with the
duties of “good faith and fair dealing,” separate and apart from any
statutory obligations operating in the background. This is further
underscored by the fact that the “Agreed Duties” contain an additional
requirement of “fair dealing” that the statutory language does not.
E. Section 152.002 prevents the Partnership Agreement from entirely eliminating the duties of loyalty and care.
Section 152.002 prohibits the Partnership Agreement from
43 eliminating the duties of loyalty or care, and the drag-along provision
does not contain any “categories” or standards” that can be used to
measure compliance with those duties. Even if the procedural
requirements in the drag-along provision were “categories” or
“standards,” those standards would be “manifestly unreasonable” and
prohibited by § 152.002.
While the Partnership Agreement purports to eliminate fiduciary
duties other than the “Agreed Duties,” it only does so “to the fullest extent
permitted pursuant to applicable law”—and § 152.002 prohibits
eliminating the duties of loyalty and care. 7 CR5867 (§ 5.9(b)(B)). Section
152.002 permits partners to “identify specific types of activities or
categories of activities that do not violate the duty of loyalty” or
“determine the standards by which the performance of the obligation [of
care] is to be measured,” as long as those provisions are not “manifestly
unreasonable.” § 152.002(b)(2)–(3). But the drag-along provision does not
7 Section 152.002 prohibits partnership agreements or partners from eliminating the
obligation of good faith or the duties of loyalty and care. Partners can, however, eliminate other fiduciary duties that may have existed under Texas common law, which recognized a wide-ranging set of duties that partners owed each other. See, e.g., Bohatch v. Butler & Binion, 977 S.W.2d 543, 545 (Tex. 1998); Chien v. Chen, 759 S.W.2d 484, 495 (Tex. App.—Austin 1988, no writ); Houle v. Casillas, 594 S.W.3d at 552.
44 even purport to modify the duties of loyalty or care.
The drag-along provision’s procedural requirements of (1) a two-
year waiting period and (2) an arms-length transaction do not modify the
duties of loyalty and care. Sections 152.002(b)(2)–(3) incorporate the
code’s definitions of the duties of loyalty and care. The code describes the
duty of loyalty in part as preventing partners from “competing or dealing
with the partnership in a manner adverse to the partnership.” § 152.205.
The duty of care requires partners to act “with the care an ordinarily
prudent person would exercise in similar circumstances.” § 152.206.
Procedural requirements do not bear on whether an action is adverse to
the partnership or the care an ordinarily prudent partner would exercise
when considering a transaction that would have severe consequences for
the other partners. See, e.g., Shannon Med. Ctr. v. Triad Holdings III,
L.L.C., 601 S.W.3d 904 (Tex. App.—Houston [14th Dist.] 2019, no pet.)
(“[A]lthough the Partnership Agreement authorizes contracts between
the Partnership and a partner or a partner’s affiliate, a partner entering
into such a contract still must comply with the duty of care by acting
in good faith and in a manner the partner reasonably believes to be in
the partnership’s best interest. The Partnership Agreement could not
45 change this and did not purport to do so.”) (emphasis added).
Again, as discussed above with respect to the duty of good faith, if
the drag-along provision’s procedural requirements somehow did serve to
modify the duties of loyalty and care, then any such modifications would
be “manifestly unreasonable” and prohibited by § 152.002. See Morgan
Buildings, 97 S.W.3d at 881. The statutory prohibition on eliminating the
duties of loyalty and care would have no meaning if a partnership
agreement could permit a partner to actively seek to harm other partners
and the partnership when executing the drag-along provision.
II. At a Minimum, the Partnership Agreement is Ambiguous—Which Itself Precludes Summary Judgment and Mandates Reversal.
At a minimum, the Partnership Agreement is ambiguous on the
question of whether the “Agreed Duties” of “good faith and fair dealing,”
and the other non-waivable statutory duties, apply when executing a
drag-along transaction. That ambiguity requires fact discovery.
“Whether a contract is ambiguous is a question of law,” and
appellate courts “review de novo the trial court’s determination of
whether a contract is ambiguous.” RPC, Inc. v. CTMI, LLC, 606 S.W.3d
469, 483 (Tex. App.—Fort Worth 2020, pet. denied). “A contract subject
46 to more than one reasonable interpretation is ambiguous, giving rise to a
fact issue regarding the parties’ intent.” Nettye Engler Energy, LP v.
BlueStone Nat. Res. II, LLC, 639 S.W.3d 682, 690 (Tex. 2022); see also
ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858, 874 (Tex. 2018) (“A
contract is ambiguous when its meaning is uncertain and doubtful or is
reasonably susceptible to more than one interpretation.”). Appellants
assert that the partners’ non-waivable statutory duties and “Agreed
Duties” of “good faith and fair dealing” established in § 5.9(a) apply
throughout the Partnership Agreement, including to any drag-along
transaction. That interpretation is at least reasonable, and prevents
conflicting with Tex. Bus. Org. Code § 152.002 and deleting the “Agreed
Duties” from the contract.
The reasonableness of Appellant’s interpretation—and the
potential ambiguity in the Partnership Agreement—is reinforced by §
5.9(c)(ii), which permits partners to act in their own interest “subject to
the Agreed Duties.” CR5867. That provision is in the same sub-section as
the Agreed Duties provision and states that “each Partner, in its capacity
as such, may decide or determine any matter in its sole and absolute
discretion taking into account solely its interests and those of its Affiliates
47 (excluding the Partnership and its Subsidiaries) subject to the Agreed
Duties.” (emphasis added). Appellants submit this demonstrates that
the “Agreed Duties” apply throughout the Partnership Agreement,
including to provisions that might otherwise permit partners to act in
their own self-interest. But at the very least, § 5.9(c)(ii) leaves some
ambiguity given that the same provision provides that a party may act
“in its sole and absolute discretion,” “taking into account solely its
interests,” but must do so with “good faith and fair dealing.”
Either way, reversal is required because when a contract is
ambiguous, the court must permit discovery on extrinsic evidence related
to the contract. See Rosetta Res. Operating, LP v. Martin, 645 S.W.3d 212,
219 (Tex. 2022) (“When a contract contains an ambiguity, the granting of
a motion for summary judgment is improper because the interpretation
of the instrument becomes a fact issue.”); see also Point Energy Partners
Permian, LLC v. MRC Permian Co., 669 S.W.3d 796, 804 (Tex. 2023)
(concluding that if an agreement “is subject to more than one reasonable
interpretation, summary judgment is improper”).
III. Appellants Properly State Claims Against Blackstone, the Blackstone Entities, and Doyle.
Appellees did not move to dismiss any claims at any stage of this
48 litigation. However, the Business Court incorrectly raised perceived
issues with Appellants’ pleadings with respect to Blackstone, the
Blackstone Entities, and Doyle sua sponte and dismissed them. At the
pleading stage, Tex. R. Civ. P. 91a.1 requires only that, when all
allegations are construed in favor of the plaintiff, the cause of action have
a basis in law and fact, which Appellants’ claims readily satisfy.
The court stated in its February 14, 2025, Order that it would
“assess the viability” of Claims I and III against the Blackstone
Defendants “under the standards applicable to a Rule 91a.1 motion to
dismiss.” CR6071. The Texas Supreme Court instructs that a plaintiff’s
allegations are to be “construe[d] liberally” when considering a Rule
91a.1 motion to dismiss. See In re Facebook, Inc., 625 S.W.3d 80, 97 (Tex.
2021). “If a petition provides sufficient facts to give fair notice of the
claim, then a motion seeking dismissal based on lack of a basis in fact
should be denied.” Darnell v. Rogers, 588 S.W.3d 295, 301 (Tex. App.—El
Paso 2019, no pet.) (quotation omitted). “Because Rule 91a provides a
harsh remedy, its requirements must be strictly construed.” Flores v.
Bank of Am., N.A., 697 S.W.3d 243, 249 (Tex. App.—El Paso 2023, no
pet.).
49 A. Blackstone and the Blackstone Entities owe fiduciary duties to Appellants based on their control of PEC and BPP.
Appellants’ Petition sufficiently alleges breach of fiduciary claims
against Blackstone and the Blackstone Entities (together, the
“Blackstone Defendants”). The Blackstone Defendants owe fiduciary
duties to Plaintiffs under the Partnership Agreement based on their joint
control of both PEC and BPP.
Non-partner entities owe fiduciary duties to limited partners when
the non-partner controls an entity that in turn controls the limited
partnership. Texas law also recognizes that a majority or controlling
shareholder may owe fiduciary duties to a minority shareholder. Here,
the Blackstone Defendants were the majority shareholders and
controlled both PEC, the managing general partner, and BPP, a limited
partner that exercised control over the partnership. The Blackstone
Defendants therefore exerted complete control over Primexx through
their control of both PEC and BPP.
Texas law recognizes multiple tiers of fiduciary duties in a
partnership—when a defendant is not a partner, it can still owe fiduciary
duties to a limited partner based on the defendant’s control of a partner
50 that does control partnership affairs. “Under Texas law, the usual
general partner fiduciary duties apply in this two-tiered structure where
[defendant] was acting as the general partner of a general partner.”
McBeth v. Carpenter, 565 F.3d 171, 178 (5th Cir. 2009); see also In re
Harwood, 637 F.3d 615, 621 (5th Cir. 2011); Matter of Bennett, 989 F.2d
779, 790 (5th Cir. 1993) (while the defendant was not a partner per se,
the defendant owed the limited partners “the highest fiduciary duty
recognized in the law” due his role “as the managing partner of the
managing partner”). The fact that the controlling entity or individual is
not a direct partner does not “insulate” the defendant from its fiduciary
duties, because “[i]n light of the thorough control” exercised over the
partnership, the defendant “took on a fiduciary duty to the limited
partners.” In re Whittington, 530 B.R. 360, 379 (Bankr. W.D. Tex. 2014)
(collecting cases).
Similarly, when a limited partner takes on a greater role by
“engag[ing] in control over the operation of the business,” the entity that
controls the limited partner—including an LLC entity—owes a fiduciary
duty to the other partners and the partnership. See CBIF Ltd. P’ship v.
51 TGI Friday’s Inc., No. 05-15-00157-CV, 2017 WL 1455407, at *20 (Tex.
App.—Dallas Apr. 21, 2017, pet. denied).
Here, Appellants make specific allegations regarding the
Blackstone Defendants’ extensive control over PEC and BPP:
• Blackstone, through BPP, was the majority shareholder in PEC. CR5754.
• Blackstone had the power to appoint the majority of the PEC Board of Directors. CR5775.
• Through its exercise of the drag-along provision, Blackstone was able to control the votes of the majority of the PEC Board of Directors. CR5758; CR5794.
• Blackstone’s actual enforcement of the drag-along provision in practice demonstrates that PEC understood itself to be controlled by Blackstone. CR5804–05.
• The Blackstone deal team for Primexx supervised and managed the actions of the PEC leadership team, including managing the Callon sale. CR5793–94.
• Blackstone’s control of Primexx and BPP was effectuated by Blackstone employees who worked on behalf of all Blackstone Defendants as part of a “matrix” organization. CR5781. For example, Blackstone employees signed SEC filings related to Primexx on behalf of the Blackstone Defendants. CR5779–80.
• Blackstone Holdings III LP, Blackstone EMA II LLC, BMA VII LLC, Blackstone Energy Management Associates II LLC, Blackstone Management Associates VII LLC, BCP VII/BEP II Holdings Manager LLC, and BX Primexx Topco LLC all completely control the Blackstone affiliate one level down as either the sole member, managing member, or general partner of
52 that entity. CR5781–82. Each of those entities stated in SEC filings related to the Callon sale that their “principal business” is controlling the entity one level down. CR5781–82.
• Blackstone Energy Partners II LP and Blackstone Capital Partners VII LP, which the Term Sheet refers to as “Blackstone,” were part of that “matrix” of management. Those two Blackstone funds contributed the money that made Blackstone (through BPP) the majority shareholder in PEC. CR5775–77.
Those allegations defeat a Rule 91a.1 motion. In McBeth v.
Carpenter, the Fifth Circuit held that a defendant controlled the general
partner of the partnership—and thus the partnership itself—when trial
testimony established that the defendant was “the man in control” and
“heading the efforts” of the partnership. 565 F.3d at 178. Similarly,
Appellants allege that the Blackstone Defendants controlled PEC by
controlling the majority of its Board. And in CBIF, the Dallas Court of
Appeals concluded that because the LLC controlled a limited partner that
in turn “exerted dominant operating control” over the limited
partnership, the LLC owed fiduciary duties:
The jury found, and appellants do not challenge on appeal, that [limited partner] exerted dominant operating control over the affairs of [limited partnership]. Thus, [limited partner] owed [limited partnership] a fiduciary duty. Columbia, managed by Flory and Canseco, was the general partner of [limited partner] and a manager of [limited partnership]. Thus, Columbia owed [limited partnership] a fiduciary duty.
53 2017 WL 1455407 at *20. The same is true here. The Blackstone
Defendants controlled the limited partner BPP, which “exerted dominant
operating control” over the partnership.
Blackstone was ultimately the majority shareholder of PEC, which
also creates fiduciary duties. While the “majority shareholder’s fiduciary
duty ordinarily runs to the corporation,” “in certain limited
circumstances, a majority shareholder who dominates control over the
business may owe such a duty to the minority shareholder.” Hoggett v.
Brown, 971 S.W.2d 472, 488 (Tex. App.—Houston [14th Dist.] 1997, pet.
denied). A majority shareholder owes fiduciary duties when the
relationship between “the majority owner and sole manager” and the
“non-participating minority owner” is “substantially similar to the
relationship between the general partner and a limited partner in a
limited partnership.” Allen v. Devon Energy Holdings, L.L.C., 367 S.W.3d
355, 393 (Tex. App.—Houston [1st Dist.] 2012, no pet.). Similarly, a
shareholder—even if not a majority shareholder—can owe fiduciary
duties to another shareholder based on its level of control and knowledge
of the company’s operations. See Vejara v. Levior Intern., LLC, No. 04-11-
00595-CV, 2012 WL 5354681, at *5 (Tex. App.—San Antonio Oct. 31,
54 2012, pet. denied) (“In this case, while not a majority shareholder,
[defendant] exhibited the same type of control and had intimate
knowledge of [company]’s affairs . . . Thus, we hold [defendant]’s control
and intimate knowledge of the company’s affairs and plans gave rise to
the existence of an informal fiduciary duty to [the other shareholder].”).
Appellants allege in this case that Blackstone was ultimately the
majority shareholder of PEC. Appellants were minority shareholders in
PEC through the Partnership Agreement. Blackstone’s control of PEC
made its relationship with Plaintiffs “substantially similar to the
relationship between the general partner and a limited partner in a
limited partnership.” Devon Energy Holdings, L.L.C., 367 S.W.3d at 393.
Blackstone controlled the PEC Board and the general operations of
Primexx, while Appellants did not have any operational control. The
Blackstone deal team for Primexx supervised and managed the actions
of the PEC leadership team and even excluded the PEC leadership team
from management decisions. Blackstone had the power to force the
Callon sale over strenuous objection from minority shareholders.
Appellants sufficiently stated claims against the Blackstone Defendants.
55 B. Blackstone and the Blackstone Entities are alter egos of BPP and therefore liable for both breach of fiduciary duty and breach of contract on that basis.
Appellants sufficiently allege alter-ego breach of contract and
breach of fiduciary duty claims against the Blackstone Defendants. The
Blackstone Defendants use BPP as an alter-ego shell company—
operated, run, and capitalized by Blackstone employees and the
Blackstone Defendants’ funds—to benefit the Blackstone Defendants.
“Alter ego applies when there is such unity between corporation and
individual that the separateness of the corporation has ceased and
holding only the corporation liable would result in injustice.” JNM
Express, LLC v. Lozano, 688 S.W.3d 327, 335 (Tex. 2024) (quoting
Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex. 1986)). “In Texas, a
finding of alter ego liability is based on factors including ‘the degree to
which . . . corporate and individual property have been kept separately,
the amount of financial interest, ownership, and control the individual
maintains over the corporation, and whether the corporation has been
used for personal purposes.’” Dalton v. Innov8tive Nutrition, Inc., No.
3:24-CV-00687-N, 2025 WL 391737, at *6 (N.D. Tex. Feb. 4, 2025)
56 (quoting Castleberry, 721 S.W.2d at 273). “And when an entity is the
defendant, courts also consider”:
“[1] whether the entities shared a common business name, common offices, common employees, or centralized accounting;
[2] whether one entity paid the wages of the other entity’s employees;
[3] whether one entity’s employees rendered services on behalf of the other entity;
[4] whether one entity made undocumented transfers of funds to the other entity; and
[5] whether the allocation of profits and losses between the entities is unclear.”
Id. (citing Tryco Enters., Inc. v. Robinson, 390 S.W.3d 497, 509 (Tex.
App.—Houston [1st Dist.] 2012, pet. dism’d)).
Appellants make comprehensive allegations regarding the alter-ego
nature of the Blackstone Defendants’ corporate structure:
• Blackstone operates as one entity without distinctions between subsidiaries. Blackstone is a “matrix” organization in which there are no formal distinctions between entities. CR5781.
• Blackstone senior executives view themselves as working on behalf of “Blackstone” as a unitary organization. CR5781.
• All business on behalf of any Blackstone entity (including BPP) is conducted by Blackstone employees using an @blackstone.com email address. CR5781; CR5787.
57 • Blackstone entities, other than Blackstone, do not have any employees. CR5781.
• Blackstone entities, including BPP, use the Blackstone systems and do not have any of their own email or records systems. CR5781.
• Blackstone entities, including BPP, report on SEC filings that their address is “c/o Blackstone,” with the same 345 Park Avenue address as Blackstone. CR5780.
• Blackstone employees serve as presidents/directors of all Blackstone entities and sign SEC filings on their behalf. CR5778– 79.
• Blackstone Holdings III LP, Blackstone EMA II LLC, BMA VII LLC, Blackstone Energy Management Associates II LLC, Blackstone Management Associates VII LLC, BCP VII/BEP II Holdings Manager LLC, and BX Primexx Topco LLC all completely control the Blackstone affiliate one level down as either the sole member, managing member, or general partner of that entity. CR5766–71.
• There is in effect no separate/individual corporate property, as evidenced by the joint beneficial ownership of the Callon shares. CR5800–01.
• BPP was entirely run and operated by Blackstone employees. CR5781; CR5787.
• The Blackstone Defendants siphoned the proceeds from the Callon sale away from BPP. CR5801.
Plaintiffs’ allegations state a basis for alter ego liability. In Tryco
Enterprises, Inc. v. Robinson, the court concluded that the entities were
alter egos when “the evidence showed that [controlling individuals]
58 exercised absolute ownership and control over both corporations,
maintained a very significant personal financial interest in both
corporations, and used them for personal purposes.” 390 S.W.3d at 509.
The controlling individuals “transferred Tryco’s assets to Crown Staffing,
which they had previously incorporated. Crown Staffing had the same
officers as Tryco, including James Dixon, its president; it took over the
offices of Tryco at the same location; it used the same telephone numbers
as Tryco; it shared common employees with Tryco; it performed the same
temporary staffing services for essentially the same companies; and it
was managed by the same managers.” Id. As described above, the
Blackstone Defendants used a similar unitary organizational structure,
with no independent employees or resources. Plaintiffs sufficiently allege
facts to demonstrate that “the allegations, taken as true, together with
inferences reasonably drawn from them,” could establish that the
Blackstone Defendants and BPP are alter egos. Tex. R. Civ. P. 91a.1.
The Blackstone Defendants may be found liable due to their alter-
ego status and the injustice that would result from finding otherwise.
Once a plaintiff establishes that entities are alter egos, liability attaches
59 on tort claims8 when “holding only the corporation liable would result in
injustice.” JNM Express, LLC v. Lozano, 688 S.W.3d 327, 335 (Tex. 2024).
Injustice refers to “the kinds of abuse . . . that the corporate structure
should not shield,” including “fraud” and “evasion of existing obligations.”
Id. (quoting SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d
444, 455 (Tex. 2008)). The plaintiff “must prove that he has fallen victim
to a basically unfair device by which a corporate entity has been used to
achieve an inequitable result.” Id. (quoting Lucas v. Tex. Indus., Inc., 696
S.W.2d 372, 375 (Tex. 1984)).
Appellants allege the Blackstone Defendants siphoned the proceeds
of the Callon sale away from BPP, so an “inequitable result” would arise
in the absence of alter-ego liability. See Wilson v. Davis, 305 S.W.3d 57,
71 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (entity could be liable
when the individual defendant was undercapitalized and had used the
entity’s assets for personal gain). Similarly, Appellants’ allegations
demonstrate that “evasion of existing obligations,” JNM Express, 688
S.W.3d at 335, would arise if the Blackstone Defendants were permitted
8 Breach of fiduciary duty is a tort claim. See McLeod v. McLeod, 644 S.W.3d 792, 806
(Tex. App.—Eastland 2022, no pet.); Wren v. Midwestern State Univ., No. 05-22- 00207-CV, 2023 WL 6139452, at *2 (Tex. App.—Dallas Sept. 20, 2023, no pet.).
60 to use BPP as their conduit and tool, siphon off BPP’s assets to
Blackstone in New York, and then avoid BPP’s obligations.
The Blackstone Defendants may be found liable on the contractual
claims due to the “actual fraud” on Appellants for the individual benefit
of the Blackstone Defendants. Although Tex. Bus. Org. Code §
21.223(a)(2) generally limits liability for contractual obligations based on
alter-ego, Section 21.223(b) creates an explicit exception to that rule,
providing that Section (a)(2) “does not prevent or limit the liability” of an
affiliate or beneficial owner if it “caused the corporation to be used for the
purpose of perpetrating and did perpetrate an actual fraud on the obligee
primarily for the direct personal benefit” of the affiliate or beneficial
owner. Tex. Bus. Org. Code § 21.223(b). The “actual fraud” requirement,
in contrast to a fraud claim, requires only that the affiliate engaged in
“dishonesty of purpose or intent to deceive.” Tryco, 390 S.W.3d at 508.
Here, Appellants alleged that the Blackstone Defendants engaged
in a “dishonesty of purpose or intent to deceive” for the “direct personal
benefit” of the Blackstone Defendants. First, Appellants allege that the
Blackstone Defendants engaged in a “dishonesty of purpose” when they
forced the Callon sale on minority shareholders, resulting in losses of
61 hundreds of millions of dollars compared to Primexx’s independently-
appraised value, and then quickly siphoned off those proceeds from BPP
in Texas for the benefit of the other Blackstone Defendants in New York
and Delaware to remove those assets from Appellants’ reach. See, e.g.,
Belliveau v. Barco, Inc., 987 F.3d 122, 130 (5th Cir. 2021) (“Extremely
insufficient consideration may provide, at least in the fraudulent transfer
context, evidence of actual fraud.”). Second, Appellants allege that the
Blackstone Defendants engaged in the Callon sale and siphoning of
proceeds for their “direct personal benefit.” See Keyes v. Weller, 692
S.W.3d 274, 283 (Tex. 2024); Hong v. Havey, 551 S.W.3d 875, 885 (Tex.
App.—Houston [14th Dist.] 2018, no pet.) (“In cases in which the direct
personal benefit showing has been met, evidence showed that funds
derived from the corporation’s allegedly fraudulent conduct were
pocketed by or diverted to the individual defendant.”). The § 21.223(b)
exception thus applies to Appellants’ contract claims against the
Blackstone Defendants.
C. Appellants state derivative claims against Blackstone and the Blackstone Entities.
Even if this Court determined that the Blackstone Defendants
could not be held directly liable for breach of fiduciary duty, Appellants
62 also state derivative claims against the Blackstone Defendants based on
their participation in PEC’s and BPP’s breaches. Appellants state claims
against the Blackstone Defendants for conspiracy to breach fiduciary
duty, knowing participation in breach of fiduciary duty, and aiding and
abetting breach of fiduciary duty.
First, the Blackstone Defendants may be liable for aiding and
abetting, and knowingly participating in, PEC’s and BPP’s breaches of
fiduciary duty, which do not require that the Blackstone Defendants owe
fiduciary duties directly. See, e.g., Kinzbach Tool Co. v. Corbett-Wallace
Corp., 138 Tex. 565, 574 (Tex. 1942) (“It is settled as the law of this State
that where a third party knowingly participates in the breach of duty of
a fiduciary, such third party becomes a joint tortfeasor with the fiduciary
and is liable as such.”); Immobiliere Jeuness Establissement v. Amegy
Bank Nat’l Ass’n, 525 S.W.3d 875 (Tex. App.—Houston [14th Dist.] 2017,
no pet.) (noting that aiding and abetting involves “assist[ing] the primary
actor”).
Second, with respect to civil conspiracy, “[t]he actions of one
member in a conspiracy might support a finding of liability as to all of
the members.” First United Pentecostal Church of Beaumont v. Parker,
63 514 S.W.3d 214, 224 (Tex. 2017). A claim for conspiracy does not require
that each individual conspirator actually commit the underlying tortious
act. See Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996) (“[A]
defendant’s liability for conspiracy depends on participation in some
underlying tort for which the plaintiff seeks to hold at least one of the
named defendants liable.”) (emphasis added). It is undisputed that PEC
and BPP owe fiduciary duties to Appellants. As a result, even if the
Blackstone Defendants did not owe a direct fiduciary duty to Appellants,
the Blackstone Defendants may still be liable for the role they played in
PEC’s and BPP’s breaches.
D. Section 13.9 of the Partnership Agreement does not compel dismissal of any claims.
Section 13.9 of the Partnership Agreement does not preclude
Appellants’ claims. Section 13.2 prevents the Blackstone Defendants and
Doyle from establishing they are third-party beneficiaries entitled to
invoke § 13.9. And § 13.9 itself is voided by Tex. Bus. Org. Code § 152.002,
which prohibits partnership agreements from eliminating non-waivable
duties.
Section 13.2, titled “Entire Agreement; Applicable Law; Effect,”
provides that the Partnership Agreement “shall be binding upon the
64 parties hereto, their successors, heirs, devisees, permitted assigns, legal
representatives, executors and administrators, but shall not be deemed
for the benefit of creditors or any other Persons.” 9 (emphasis added).
CR5898. Section 13.9, which is included in the same “Miscellaneous”
article of the Partnership Agreement, is titled “No Recourse.” CR5899.
That provision states that the partners “acknowledge[] that no Persons
other than the Partners shall have any obligation hereunder and that it
has no rights of recovery hereunder against, and no recourse hereunder”
against a wide variety of persons, including current and former officers,
directors, and “Affiliates” of partners. CR5899. “Affiliate” is defined in
Exhibit B as “any Person directly or indirectly controlling, controlled by,
or under common control with, such specified Person,” with “control”
further defined as “the power to direct or cause the direction of the
actions, management or policies of such Person, directly or indirectly . .
.” CR5917.
First, § 13.2 establishes that the Blackstone Defendants and Doyle
are not third-party beneficiaries to the Partnership Agreement and may
9 “Person” is defined in Exhibit B and encompasses the Blackstone Defendants and
Doyle. CR5927 (“Person” defined as “an individual, partnership, tenancy-in-common, joint tenancy-in-common, joint tenancy, joint venture, firm, corporation, trust, charitable institution or other business or legal entity.”).
65 not enforce § 13.9 to their benefit. In MCI Telecommunications Corp. v.
Tex. Utilities Elec. Co., 995 S.W.2d 647 (Tex. 1999), the Texas Supreme
Court held that a third-party was not a beneficiary under the contract
and thus could not enforce its provisions “[i]n light of the clear language
in the contract that the agreement not be construed as being for the
benefit of any nonsignatory.” Id. at 651. The contract in MCI provided
that it shall not “be construed as being for the benefit of any party not in
signatory hereto.” Id. at 650. Section 13.2 similarly states that the
Partnership Agreement “shall not be deemed for the benefit” of “any
other Persons.” Accordingly, while § 13.9 may at first appear to provide
a benefit to the Blackstone Defendants and Doyle, the Supreme Court
rejected that argument in MCI: while the contract there “acknowledge[d]
certain protections that TU is entitled to as an earlier licensee to the
right-of-way,” the Court nonetheless found that the “incidental benefit”
did not establish that the parties “entered into the contract directly for
TU’s benefit.” Id. at 651–52.
Second, § 13.9 is voided by § 152.002(b) of the Tex. Bus. Org. Code,
which prohibits a “partnership agreement” from eliminating the
obligation of good faith and duties of loyalty and care. That is exactly
66 what § 13.9 purports to do when it eliminates all liability for any breaches
of those non-waivable duties. Section 13.9 not only eliminates recourse—
it also purports to eliminate the underlying substantive rights by
providing that each partner agrees “no Persons other than the Partners
shall have any obligation hereunder and that it has no rights of recovery
hereunder . . .” CR5899. That provision is invalid.
IV. Acconcia and Blackstone Are Subject to Specific Personal Jurisdiction in Texas.
Acconcia and Blackstone repeatedly and purposely availed
themselves of doing business in the State of Texas to facilitate the sale of
the Texas oil assets of a Texas partnership to another Texas oil company
for hundreds of millions of dollars. Acconcia and Blackstone are therefore
subject to specific personal jurisdiction for this dispute.
“Whether a trial court has personal jurisdiction over a nonresident
defendant is a question of law that we review de novo.” Old Republic Nat’l
Title Ins. Co. v. Bell, 549 S.W.3d 550, 558 (Tex. 2018). The trial court’s
factual findings may be challenged “on legal and factual sufficiency
grounds.” BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794
(Tex. 2002); see also Walker Ins. Services v. Bottle Rock Power Corp., 108
S.W.3d 538, 555 (Tex. App.—Houston [14th Dist.] 2003, no pet.).
67 “Texas’s long-arm statute extends Texas courts’ personal
jurisdiction as far as the federal constitutional requirements of due
process will permit.” M&F Worldwide Corp. v. Pepsi-Cola Metro. Bottling
Co., Inc., 512 S.W.3d 878, 885 (Tex. 2017). Because the “broad doing-
business language” in Texas’ long-arm statute reaches the limits of the
constitutional requirements, courts need “only analyze whether [the
defendant]’s acts would bring [the defendant] within Texas’ jurisdiction
consistent with constitutional due process requirements.” Retamco
Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009).
A. Acconcia, President of BPP and Director on the PEC Board, personally traveled to Texas and continuously directed and solicited Texas residents regarding the Primexx investment and Callon Sale in Texas.
Acconcia is subject to specific personal jurisdiction because he
intentionally and repeatedly availed himself of Texas in connection with
this dispute. In the month before executing the drag-along provision,
Acconcia traveled to Texas to direct PEC employees and met remotely
with Texas bankers regarding the Callon sale. His contacts with Texas
exceed those courts routinely find sufficient for specific jurisdiction.
68 Acconcia served as the president of BPP and Director of PEC.
CR5776, CR6143–44. He served on the investment team and committee
that decided to invest in Primexx, and he signed the Partnership
Agreement on behalf of BPP. CR6144–55. As a director, Acconcia
participated in bi-weekly telephonic board meetings in Texas. CR6145.
Acconcia also had an indirect personal financial interest in Primexx that
could impact his Blackstone compensation based on Primexx’s
performance in Texas. SR38 (Supplemental Record); CR6146.
In June 2021, Acconcia organized and initiated a call titled
“Primexx” with the “senior” Citibank investment bankers based in
Houston and representing Callon in the sale of Primexx to Callon. SR82–
87; SR122–23. And after the Primexx sale to Callon was publicly
announced, Acconcia met with the CEO of Callon to discuss the Primexx
sale. SR91-93; Blackstone Inc. Sealed Exhibits.
But his work on the Primexx transaction began earlier than that.
In April 2021, Acconcia organized and initiated a call with the PEC
executive team and RBC bankers based in Houston titled “Primexx/ RBC/
BX re: general status and next steps discussion.” SR195. Acconcia
arranged a call and discussed a potential Primexx collaboration with an
69 oil and gas company based in Midland, Texas with an investor from
Warburg Pincus while that investor was in Texas. SR114; CR6146. He
remotely participated in a board meeting on June 9, 2021, that was held
“in person in Dallas, Texas and via teleconference.” SR24; Acconcia
Sealed Exhibit. He flew to Dallas in early June 2021 to meet in-person in
Texas with the PEC leadership team, including Doyle, the then-CEO.
SR181; CR6145. Later that month, Acconcia flew to Houston for meetings
and called Doyle, who was in Texas, while in Houston. SR183; CR6145.
Acconcia’s established contacts far exceed what Texas courts
regularly deem sufficient to establish specific jurisdiction.10 See, e.g.,
Yujie Ren v. ANU Res., LLC, 502 S.W.3d 840, 848 (Tex. App.—Houston
[14th Dist.] 2016, no pet.) (“[A] single contact may be sufficient to
establish specific jurisdiction.”); Carlile Bancshares, Inc. v. Armstrong,
No. 02-14-00014-CV, 2014 WL 3891658 (Tex. App.—Fort Worth Aug. 7,
2014, no pet.) (directors were involved in conducting due diligence for the
potential merger, and the court concluded that “[t]he merger discussions
10 For example, there could still be specific jurisdiction over Acconcia even if he never
entered the state of Texas in connection with Primexx. See Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 339 (Tex. 2009) (“[J]urisdiction . . . may not be avoided merely because the defendant did not physically enter the forum state.”) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985)).
70 and exchange of information were not unilateral and showed that [the
directors] were availing themselves of the privilege of conducting
business-a possible corporate merger-with a Texas corporation”); Henkel
v. Emjo Investments, Ltd., 480 S.W.3d 1 (Tex. App.—Houston [1st Dist.]
2015, no pet.) (the “most notabl[e]” evidence of a defendant’s minimum
contacts with Texas was the fact that the defendant’s “membership on [a
Texas-based corporation]’s board of directors created ‘continuing
obligations’ between himself and a Texas-based company, the formation
of which is alleged to be at the center of the alleged fraudulent
investment scheme”).
Appellants’ claims “arise[] from or [are] related to” Acconcia’s Texas
“contacts or activities.” See Retamco, 278 S.W.3d at 337. Acconcia’s
availment of Texas pertained specifically to the dispute in this case.
Appellants allege that Acconcia played a “central” and “instrumental”
role in pushing through the Callon sale. CR6144. Appellants further
allege that Acconcia actively participated in, and facilitated, Blackstone’s
failure to evaluate Primexx’s viable options; conduct a proper due
diligence, sale, or marketing process; consider how a rushed sale would
harm Appellants; and conduct a proper allocation of the proceeds from
71 the Callon sale. CR6144. Acconcia’s intentional contacts with Texas
relate to Acconcia’s ongoing management of Primexx throughout 2021 in
the lead-up to the Callon sale and his involvement in the Callon sale
itself. For example, Acconcia organized and initiated a call with the
Citibank investment bankers based in Houston who represented Callon
in the sale, regarding the Callon sale, shortly before executing the drag-
along transaction in Texas. SR82–87; SR122–23.
The exercise of specific jurisdiction over Acconcia does “not offend
traditional notions of fair play and substantial justice.” See M&F
Worldwide Corp., 512 S.W.3d at 88. Acconcia is not unduly burdened by
appearing in Texas, especially considering his travel to Texas in
connection with his role as a Director of PEC, a Texas corporation, in
which Acconcia represented the majority shareholder. See Moncrief Oil,
414 S.W.3d at 155. Texas has a compelling interest in adjudicating the
claims against Acconcia, which involve Acconcia’s active leadership of a
Texas corporation’s sale of oil assets physically located in Texas to
another oil company based in Texas.
72 B. Blackstone controlled and managed, and directed the sale of, the Texas oil assets of a Texas partnership to profit.
Blackstone, the majority shareholder of a Texas oil partnership
that managed Texas oil assets, forced the sale of those Texas-based assets
to another Texas-based oil company and received hundreds of millions of
dollars from Texas as a result.
Blackstone is the publicly-traded parent company of BPP and each
of the Blackstone Entities. CV5765. Each of the Blackstone Entities, over
which the Business Court already asserted jurisdiction, sit below
Blackstone in a direct chain that starts with Blackstone and ends with
BPP. CV5765, CV5773–78. Blackstone is operated as a “matrix”
organization in which Blackstone employees conduct work on behalf of
BPP and the Blackstone Entities, which do not have their own employees.
CR5779. BPP is operated by employees of Blackstone using an
@blackstone.com email domain. CR5779, CR5785. In its SEC filings, BPP
lists its address as “c/o Blackstone,” and the signatories on BPP’s SEC
filings are Blackstone employees. CR5777.
Appellants allege that employees of Blackstone, working on behalf
of Blackstone, were responsible for “coordinating, managing, and
73 approving” the Callon Sale, even though they knew that the sale price
was unjustifiably low. CR5792. Appellants further allege that at the time
of the Callon sale, “a Blackstone executive admitted to a Primexx board
member that senior Blackstone executives gave the direction to exit the
investment even though he knew it was a bad deal.” CR5788. The
contacts of Blackstone employees are imputed to Blackstone for purposes
of specific jurisdiction. Huynh v. Nguyen, 180 S.W.3d 608, 620 (Tex.
App.—Houston [14th Dist.] 2005, no pet.) (“The Texas contacts of agents
or employees are attributable to their nonresident principals.”); Coleman
v. Klockner & Co. AG, 180 S.W.3d 577, 588 (Tex. App.—Houston [14th
Dist.] 2005, no pet.) (“An agent’s contacts can be imputed to the principal
for purposes of the jurisdictional inquiry.”).
Blackstone repeatedly and intentionally availed itself of Texas to
profit from its business there, including by orchestrating the Callon sale
and receiving hundreds of millions of dollars from Texas as a result. See,
e.g., Fjell Tech. Grp. v. Unitech Int’l Inc., No. 14–14–00255–CV, 2015 WL
457805, at *1 (Tex. App.—Houston [14th Dist.] Feb. 3, 2015, pet. denied)
(the actions of a Norwegian company constituted purposeful availment of
Texas when the company “sought to profit when they sent mails into
74 Texas for the express purpose of becoming a supplier to Texas-based
companies”). As the Texas Supreme Court described in Moncrief Oil, “the
United States Supreme Court concluded that forming an enterprise in
one state to send payments to a corporation in the forum state was
sufficient to confer specific jurisdiction.” Id. (citing Burger King, 471 U.S.
at 468, 478). That is what happened here: Blackstone joined an enterprise
in Texas, sent money to Texas for that enterprise, directed its executive
employees to manage that investment in Texas for many years,
orchestrated the sale of the Texas-based real property of that Texas
company to another Texas-based company, and accepted the proceeds of
that transaction from Texas.
The Business Court minimized Blackstone’s availment of Texas by
claiming that Appellants’ allegations turned primarily on the role of
Acconcia, and the Business Court concluded that “Acconcia’s Texas-based
contacts were performed on behalf of either PEC or BPP, not Blackstone”
CR6173. As evidenced above, Appellants’ allegations do not solely rely
upon Acconcia. But in any event, the Business Court’s conclusion that
Acconcia acted on behalf BPP, not Blackstone, was wrong.
75 At his deposition, Acconcia did not even recall that he served as
President of BPP, even though he signed the Partnership Agreement on
behalf of BPP as its President. SR26. Acconcia did not recognize the name
BPP on an organizational chart listing the entities at issue in this case.
SR22–24. And he did not recall conducting any work at all for BPP.
SR22–27. Acconcia did remember, however, that he worked for
Blackstone from 2004 to 2021 and served as its “Senior Managing
Director” from approximately 2015 through 2021. SR14–16. Acconcia’s
email signature while managing Primexx read “Senior Managing
Director, Private Equity, The Blackstone Group,” with the same 345 Park
Avenue address Blackstone lists in its SEC filings.11 SR205. Undisputed
evidence demonstrates that Acconcia conducted his Primexx-related
work in his capacity as a Blackstone executive.
The exercise of specific jurisdiction over Blackstone “does not offend
traditional notions of fair play and substantial justice.” See M&F
Worldwide Corp., 512 S.W.3d at 88. Blackstone forced the sale of the
Texas oil assets of a Texas partnership to another Texas-based company
11 The Blackstone Group informed the SEC that it changed its name to Blackstone
effective August 6, 2021. CR5270.
76 and received hundreds of millions of dollars as a result. Texas has a
strong interest in adjudicating alleged breaches of fiduciary duty that
occurred with respect to an investment in a Texas partnership and the
sale of valuable Texas oil assets to another Texas-based company. While
Blackstone is incorporated in Delaware, being subjected to suit in Texas
“imposes a burden on . . . all nonresidents,” and “[d]istance alone cannot
ordinarily defeat jurisdiction.” Moncrief Oil, 414 S.W.3d at 155. The
exercise of jurisdiction over Blackstone comports with the notions of fair
play and substantial justice.
PRAYER FOR RELIEF
The Business Court correctly recognized that BPP, PEC, and Doyle
owed contractual and statutory fiduciary duties to Appellants, but then
wrongly denied Appellants’ request to conduct discovery and granted
summary judgment for Appellees based on factual arguments Appellees
expressly waived. The Partnership Agreement and Texas Business
Organizations Code required Appellees to act in good faith in liquidating
Primexx for pennies on the dollar, which Appellees utterly failed to
establish as a matter of law. Accordingly, Appellants respectfully request
77 that this Court reverse the judgment of the Business Court and remand
for further proceedings consistent with its opinion.
Dated: October 15, 2025 Respectfully submitted, SUSMAN GODFREY L.L.P.
By: /s/ Stephen Shackelford, Jr. Stephen Shackelford, Jr. State Bar No. 24062998 (TX) sshackelford@susmangodfrey.com SUSMAN GODFREY L.L.P. 1000 Louisiana Street, Suite 5100 Houston, Texas 77002 Telephone: (713) 651-9366 Facsimile: (713) 654-6666
Bryan Caforio State Bar No. 261265 (CA) bcaforio@susmangodfrey.com SUSMAN GODFREY L.L.P. 1900 Avenue of the Stars, Suite 1400 Los Angeles, CA 90067 Telephone: (310) 789-3100 Facsimile: (310) 789-3150
Lindsey Godfrey Eccles State Bar No. 33566 (WA) leccles@susmangodfrey.com SUSMAN GODFREY L.L.P. 401 Union Street, Suite 3000 Seattle, WA 98101 Telephone: (206) 516-3880 Facsimile: (206) 516-3883
Sarah Hannigan
78 State Bar No. 5961248 (NY) shannigan@susmangodfrey.com SUSMAN GODFREY L.L.P. One Manhattan West New York, NY 10001 Telephone: (212) 336-8330 Facsimile: (212) 336-8340
Attorneys for Appellees
79 Certificate of Service
This is to certify that on October 15, 2025, a true and correct copy
of the above and foregoing instrument was properly forwarded to counsel
of record in accordance with Rule 21 of the Texas Rules of Civil
Procedure.
/s/ Stephen Shackelford, Jr. Stephen Shackelford, Jr.
Certificate of Compliance
This is to certify that, pursuant to Rule 9.4 of the Texas Rules of
Appellate Procedure, this document contains 14,985 words.
/s/ Stephen Shackelford, Jr. Stephen Shackelford, Jr.
80 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules.
Stephen Shackelford on behalf of Stephen Shackelford Bar No. 24062998 sshackelford@susmangodfrey.com Envelope ID: 106925956 Filing Code Description: Brief Requesting Oral Argument Filing Description: Appellants Brief Requesting Oral Argument Status as of 10/16/2025 12:17 PM CST
Case Contacts
Name BarNumber Email TimestampSubmitted Status
Roger Cowie 783886 roger.cowie@troutman.com 10/16/2025 11:54:14 AM SENT
Christopher Patton 24083634 cpatton@lynnllp.com 10/16/2025 11:54:14 AM SENT
Jeremy Fielding jeremy.fielding@kirkland.com 10/16/2025 11:54:14 AM SENT
Zack Ewing zack.ewing@kirkland.com 10/16/2025 11:54:14 AM SENT
Nicholas Perrone nicholas.perrone@kirkland.com 10/16/2025 11:54:14 AM SENT
Gary Vogt gvogt@kirkland.com 10/16/2025 11:54:14 AM SENT
Griffin Vail griffin.vail@kirkland.com 10/16/2025 11:54:14 AM SENT
Yaman Desai ydesai@lynnllp.com 10/16/2025 11:54:14 AM SENT
Austin Lesch austin.lesch@kirkland.com 10/16/2025 11:54:14 AM SENT
Michael Patton michael.patton@kirkland.com 10/16/2025 11:54:14 AM SENT
Associated Case Party: Primexx Energy Opportunity Fund, LP
Name BarNumber Email TimestampSubmitted Status
Sarah Hannigan shannigan@susmangodfrey.com 10/16/2025 11:54:14 AM SENT
Bryan Caforio bcaforio@susmangodfrey.com 10/16/2025 11:54:14 AM SENT
Michelle Williams mwilliams@susmangodfrey.com 10/16/2025 11:54:14 AM SENT
Josephine Wang jwang@susmangodfrey.com 10/16/2025 11:54:14 AM SENT No. 15-25-000120-CV
In the Court of Appeals for the Fifteenth District of Texas
Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP, Appellants, v.
Primexx Energy Corporation, et al., Appellees.
Appeal from the Texas Business Court, First Division Dallas County, Texas Honorable Bill Whitehill
APPENDIX TO APPELLANTS’ BRIEF
ORAL ARGUMENT REQUESTED
SUSMAN GODFREY L.L.P.
Stephen Shackelford, Jr. Bryan Caforio State Bar No. 24062998 (TX) bcaforio@susmangodfrey.com sshackelford@susmangodfrey.com Lindsey Godfrey Eccles 1000 Louisiana Street, Ste 5100 leccles@susmangodfrey.com Houston, Texas 77002 Sarah Hannigan Telephone: (713) 651-9366 shannigan@susmangodfrey.com Facsimile: (713) 654-6666
Attorneys for Appellants APPENDIX 1 The Business Court of Texas, 1st Division
PRIMEXX ENERGY § OPPORTUNITY FUND, LP and § PRIMEXX ENERGY § OPPORTUNITY FUND II, LP, § Plaintiffs, § § Cause No. 24-BC01B-0010 v. § PRIMEXX ENERGY § CORPORATION, M. § CHRISTOPHER DOYLE, ANGELO § ACCONCIA, BLACKSTONE INC., § BLACKSTONE HOLDINGS III LP, § BLACKSTONE EMA II LLC, BMA § VII LLC, BLACKSTONE ENERGY § MANAGEMENT ASSOCIATES II § LLC, BLACKSTONE ENERGY § PARTNERS II LP, BLACKSTONE § MANAGEMENT ASSOCIATES VII § LLC, BLACKSTONE CAPITAL § PARTNERS VII LP, BCP VII/BEP II § HOLDINGS MANAGER LLS, BX § PRIMEXX TOPCO LLC, and BPP § HOLDCO LLC, Defendants §
═══════════════════════════════════════ FINAL JUDGMENT ═══════════════════════════════════════ The court issued a January 17, 2025, Blackstone Special Appearances
Order, followed by a February 10, 2025, Opinion and Order; March 10, 2025,
Summary Judgment Opinion and Order; April 10, 2025, Reconsideration
Order, followed by an April 15, 2025, Opinion and Order; April 28, 2025,
Acconcia and Blackstone Inc. Special Appearances Order; May 9, 2025,
Counts I and III Order; and May 22, 2025, Doyle and Blackstone Defendants
Opinion and Order (the “Orders”).
In light of the Orders, the remaining claims in the above-captioned
matter are “claims that (i) the Callon sale proceeds were not properly
distributed according to the TAPA waterfall and (ii) the consideration was not
fairly allocated between PEP and BPP” (“Remaining Claims”). See March 10,
2025, Summary Judgment Opinion and Order, ¶ 200. The remaining
Defendants in the above-captioned matter are BPP HoldCo LLC and Primexx
Energy Corporation (collectively, the “Remaining Defendants”).
On June 3, 2025, the parties filed a Rule 11 Agreement in which the
parties agreed Plaintiffs shall dismiss without prejudice the Remaining Claims
against the Remaining Defendants so that the causes of action and claims
dismissed by the Orders can proceed to appealable judgment.
2 Accordingly, the court dismisses without prejudice the Remaining
Claims against the Remaining Defendants.
It is ORDERED, Adjudged, and Decreed that this court lacks personal
jurisdiction over Blackstone Inc. and Angelo Acconcia.
It is ORDERED, Adjudged, and Decreed that all causes of action against
M. Christopher Doyle, Blackstone Holdings III LP, Blackstone EMA II LLC,
BMA VII LLC, Blackstone Energy Management Associates II LLC,
Blackstone Energy Partners II LP, Blackstone Management Associates VII
LLC, Blackstone Capital Partners VII LP, BCP VII/BEP II Holdings Manager
LLC, and BX Primexx Topco LLC are dismissed with prejudice for the reasons
stated in the court’s May 22, 2025, Memorandum Opinion and Order.
It is ORDERED, Adjudged, and Decreed that summary judgment is
granted to M. Christopher Doyle, Primexx Energy Corporation, and BPP
HoldCo LLC on all claims except “claims that (i) the Callon sale proceeds were
not properly distributed according to the TAPA waterfall and (ii) the
consideration was not fairly allocated between PEP and BPP.”
Accordingly, the court orders that Plaintiffs take nothing. This Final
Judgment finally disposes of all claims, causes of action, and parties before
3 the court. To the extent not addressed herein or in a prior order of the court,
all relief requested by Plaintiffs is denied. This judgment is appealable.
It is SO ORDERED.
BILL WHITEHILL Judge of the Texas Business Court, First Division
SIGNED: June 16, 2025
4 APPENDIX 2 FILED IN BUSINESS COURT OF TEXAS BEVERLY CRUMLEY, CLERK ENTERED 2025 Tex. Bus. 9 3/10/2025
The Business Court of Texas, 1st Division
PRIMEXX ENERGY § OPPORTUNITY FUND, LP and § PRIMEXX ENERGY § OPPORTUNITY FUND II, LP, § Plaintiffs, § v. § Cause No. 24-BC01B-0010 § PRIMEXX ENERGY § CORPORATION, M. § CHRISTOPHER DOYLE, § ANGELO ACCONCIA, § BLACKSTONE INC., § BLACKSTONE HOLDINGS III § LP, BLACKSTONE EMA II LLC, § BMA VII LLC, BLACKSTONE § ENERGY MANAGEMENT § ASSOCIATES II LLC, § BLACKSTONE ENERGY § PARTNERS II LP, BLACKSTONE § MANAGEMENT ASSOCIATES § VII LLC, BLACKSTONE § CAPITAL PARTNERS VII LP, § BCP VII/BEP II HOLDINGS § MANAGER LLS, BX PRIMEXX § § TOPCO LLC, and BPP HOLDCO § LLC, Defendants §
═══════════════════════════════════════ OPINION AND ORDER ═══════════════════════════════════════
Syllabus*
This opinion addresses the nature, scope, adaptability, and enforcement of a partner’s statutory duties of loyalty and care and obligation to perform them in (i) good faith and (ii) a manner it reasonably believes to be in the partnership’s best interest when that partner exercised its drag-along rights and sold the partnership’s business.
Texas’s freedom of contract principles give partners wide latitude to expand or limit their conduct standards. But the loyalty and care duties and related performance obligations cannot be eliminated. This partnership agreement expressly limits those duties and obligations to the greatest extent permitted by law. This case centers on the enforceability of those limits.
I. OPINION
[¶ 1] This is a drag-along sale case arising from a private equity
investment in a limited partnership. The controlling partner exercised its
partnership agreement drag-along sale rights to force an exit event sale, and
two minority owners complain that the sale was unlawful.
[¶ 2] Drag-along rights are a normal vehicle for majority owners to force
minority owners—potentially against their will—to sell their interests to a
* This syllabus is provided for the reader’s convenience; it is not part of the Court’s opinion; and it is not legal authority.
OPINION AND ORDER, Page 2 third party on terms and conditions the majority owner decides. So, there may
be conflicts between the owners when the majority decides to sell at a price or
on terms the minority dislikes. The issues can be more acute where the parties
hold different equity positions. Thus, parties creating such agreements often
negotiate terms protecting themselves in a future drag-along sale.
[¶ 3] Two limited partners sued the controlling partner and managing
general partner alleging that they breached “fiduciary” and contract duties
and obligations by, among other things, (i) accepting too low a price; (ii) failing
to perform adequate due diligence, consider continuing the business as a viable
stand-alone business or other alternatives, consider whether the sale was fair
to the partnership and other partners; and (iii) not giving timely notice of the
sale. They also sued the managing partner’s chief executive for conspiracy and
other “derivative theory” causes of action.1
[¶ 4] Those defendants moved for traditional summary judgment.2 The
material facts are undisputed, and the result turns on the extent to which (i)
1 Plaintiffs sued numerous other parties, but they are not included in this summary judgment motion. 2 Movants’ attacked plaintiffs’ original petition, which was their then live pleading. Plaintiffs since filed their first amended petition (FAP), which adds an additional defendant but no new causes of action. The parties agreed that the FAP would not moot the summary judgment motion. So, this opinion and order is directed to the FAP.
OPINION AND ORDER, Page 3 the Texas Business Organizations Code (TBOC) displaces common law
partnership fiduciary duty law and (ii) partners may limit a partner’s
“fiduciary like” responsibilities to the partnership and other partners.
[¶ 5] The court denies the motion regarding plaintiffs’ claims that the
sales proceeds (i) were misapplied under the partnership agreement and (ii)
were unfairly allocated between the partnership and a “sidecar” business sold
in the same transaction.
[¶ 6] However, based on the partnership agreement’s plain text, the
court otherwise concludes that the controlling partner’s drag-along rights
meet minimum statutory requirements. Further, except as described in ¶ 5,
the evidence conclusively proves that the controlling partner and the
managing general partner met their modified statutory and contract duties and
obligations.
[¶ 7] Additionally, for the reasons discussed in ¶ 6, the court grants the
motion regarding “derivative liability” theories regarding the managing
partner and its chief executive to the same extent the court grants the
controlling partner’s motion.
[¶ 8] Moreover, the court directs the parties to provide additional
briefing regarding plaintiffs’ remaining derivative liability theories.
OPINION AND ORDER, Page 4 [¶ 9] The summary judgment motion concerns only the duty and breach
elements of plaintiffs’ causes of action. Thus, the court expresses no opinion
regarding plaintiffs’ injury causation and resulting damages elements.
II. JURISDICTION AND VENUE
[¶ 10] This court has subject matter jurisdiction since this is a
partnership governance dispute and the amount in controversy exceeds $5
million. TEX. GOV’T CODE § 25A.004(b)(2) and (4)–(6).
III. THE SUMMARY JUDGMENT RECORD
[¶ 11] The court considered the parties’ summary judgment filings and
proper summary judgment evidence. It did not consider evidence movants
filed with their prior supplemental briefing because they did not seek leave to
supplement the record and plaintiffs in substance objected to that evidence.
Neither party objected to any other summary judgment evidence.
IV. FACTS AND PEOFS’ CLAIMS
[¶ 12] The court derives these facts from the parties’ summary
judgment evidence and PEOFs’ FAP admissions.
OPINION AND ORDER, Page 5 A. The Parties and Related Entities
[¶ 13] Primexx Energy Partners, Ltd. (PEP) was a limited partnership.3
Its Third Amended and Restated Partnership Agreement (TAPA) is the
applicable agreement.4 PEP owned Primexx Resource Development, LLC
(PRD).5 PEP and PRD are not parties.
[¶ 14] Primexx Energy Opportunity Fund LP (PEOF I) and Primexx
Energy Opportunity Fund II (PEOF II) were PEP limited partners.6 PEOF I
signed the TAPA through its representative Whittier Management GP LLC, by
Steven A. Anderson as the Vice President of Whittier Holdings, Inc.7
[¶ 15] BPP HoldCo LLC (HoldCo or Blackstone) was a PEP limited
partner.8 HoldCo is a Blackstone Inc. affiliate.9
3 FAP ¶ 1. 4 FAP ¶ 1; Movants’ Ex. 2 (TAPA). 5 FAP ¶ 1. 6 FAP ¶s 42, 55. 7 TAPA at 73. 8 Movants’ Ex. 1 (PIPA); FAP ¶ 1. 9 FAP ¶ 20.
OPINION AND ORDER, Page 6 [¶ 16] Primexx Energy Corporation (PEC) was PEP’s managing general
partner.10 PEC was formed in September 2000, and in 2021 was governed by
its July 2016, Second Amended and Restated Bylaws (Bylaws).11
[¶ 17] A nine-member board of directors controlled PEC.12 HoldCo
appointed five such directors, PEOF I appointed two, and Tom Fagadau
appointed two. 13 Thus, at all relevant times HoldCo controlled PEC’s Board.14
[¶ 18] Angelo Acconcia and four others were HoldCo’s initial-appointed
directors.15 Jim Jeffs and Robert Holland were PEOF I’s appointed directors,
and Tom and Chip Fagadau were Fagadau’s appointed directors. 16
[¶ 19] Under the Bylaws, Tom Fagadau was PEC’s President and Chief
Executive Officer.17 However, as of August 2, 2021, Christopher Doyle held
those positions. 18
10 FAP ¶s 1, 42. 11 Movants’ Ex. 10 (Bylaws). 12 FAP ¶ 82. 13 Bylaws at Art. III, § 2; Schedule I. The Bylaws do not define “Blackstone,” however, context shows that it means HoldCo. Both the TAPA and the PIPA, entered contemporaneously with the Bylaws, define “Blackstone” to mean HoldCo. (TAPA at 1; PIPA at 1). Furthermore, the Bylaws were signed by HoldCo. (Bylaws at 21). 14 FAP ¶ 53. 15 Movants’ Ex. 10 (Bylaws) at Schedule I. 16 Movants’ Ex. 10 (Bylaws) at Schedule I. 17 Movants’ Ex. 10 (Bylaws) at Schedule II. 18 FAP ¶ 33; Movants’ Ex. 3 (Aug. 2, 2021, Board Minutes).
OPINION AND ORDER, Page 7 [¶ 20] PEOFs sued Doyle, PEC, HoldCo, Blackstone Inc., various
Blackstone Inc. affiliates19, and Angelo Acconcia. Acconcia, Blackstone Inc.,
and the Blackstone Inc. affiliates did not join this motion.
B. PEP’s Background
[¶ 21] PEP’s operating company, PRD, developed horizontal drilling
properties in the Permian Basin. 20
[¶ 22] In 2016, PEP engaged firms to identify opportunities for reducing
its debt and raising capital.21 After considering several proposals and multiple
financing options, PEP chose “The Blackstone Group’s” offer as the most
attractive based on its valuation, capital commitment, and reputation.22
[¶ 23] Before signing the TAPA, “Blackstone,” certain members of
PEP’s management team, and PEP’s existing equity holders created a term
sheet outlining expected terms for “Blackstone’s” potential investment.23 Per
the term sheet, they expected a transaction whereby (i) “Blackstone” would
19 FAP ¶ 20 (“All of the other Blackstone Defendants are direct subsidiaries of Blackstone Inc.”). 20 FAP ¶s 1, 37. 21 FAP ¶ 40. 22 FAP ¶ 41. In 2021, The Blackstone Group changed its name to Blackstone Inc. Id. 23 FAP ¶ 48; TAPA at Annex B. The court uses “Blackstone” throughout this opinion where PEOFs are unclear regarding which Blackstone entity or related person they refer to.
OPINION AND ORDER, Page 8 invest up to $500 million; (ii) “Blackstone” would control a management
company with five of nine board members; (iii) with three exceptions not
relevant here, all “Board matters” would be decided by a majority vote; (iv)
“Blackstone” could at any time force an in-kind distribution of all Company
assets in a “Liquidity Event” in accordance with an agreed distributions
waterfall; and (v) “Blackstone” would have “customary drag-along rights”
regarding a potential sale of the partnership Units.24
[¶ 24] HoldCo and PEP signed a fifty-four-page Partnership Interest
Purchase Agreement (PIPA) stating terms whereby HoldCo would invest in
PEP.25
[¶ 25] HoldCo signed the TAPA as a limited partner (Unitholder). 26
PEC remained PEP’s Managing General Partner27 and, at some point,
contributed $1,000 as a Managing General Partner Capital Contribution. 28
24 FAP ¶ 48; TAPA at Annex B. The term sheet and other documents do not say which “Blackstone” entities would provide the new equity or how “Blackstone” would internally structure its investment. 25 PIPA; see also TAPA at 1. 26 FAP ¶ 42; TAPA at 1, 83. 27 FAP ¶ 42. 28 TAPA § 3.2.
OPINION AND ORDER, Page 9 C. Partners’ Duties to the Partnership and other Partners
[¶ 26] Per the TAPA, HoldCo and PEC owe PEP and its partners the
duty of good faith and fair dealing to the fullest extent Texas law requires:
Each Partner and the Managing General Partner shall, to the fullest extent required by Texas Law, owe to the Partnership and its Partners the duties of good faith and fair dealing, and in the case of the Managing General Partner, the duty to not exceed in such capacity the bounds of authority granted to any general partner by this Agreement and Texas law (all such duties collectively, the “Agreed Duties”). 29
[¶ 27] But the TAPA then limits—to the extent the law permits—
HoldCo’s and PEC’s duties to the partnership and other partners, including
giving HoldCo and PEC the right to make partnership decisions in their sole
and absolute discretion and in their own sole interests. 30 For example,
(ii) To the extent that, at law or in equity, a Partner owes any duties (including fiduciary duties) to the Partnership, any other Partner or any Assignee pursuant to the applicable law, any such duty, other than the Agreed Duties, is hereby eliminated to the fullest extent permitted pursuant to applicable law, it being the intent of the Partners that to the extent permitted by law and except to the extent set forth in this Section 5.9 or expressly specified elsewhere in this Agreement, no Partner or the Managing General Partner, in their capacities as such, shall owe any duties of any nature whatsoever to the Partnership, the other Partners or any Assignee, other than the Agreed Duties, and each Partner, in its capacity as such, may decide or
29 TAPA § 5.9(a) (emphasis original). 30 TAPA §§ 5.9(b)–(c).
OPINION AND ORDER, Page 10 determine any matter in its sole and absolute discretion taking into account solely its interests and those of its Affiliates (excluding the Partnership and its Subsidiaries) subject to the Agreed Duties. Each Partner further acknowledges and agrees that it would not have become a Partner in the Partnership if this agreement were not acceptable to it.31
D. HoldCo’s Drag-Along Sale Rights
[¶ 28] Next, TAPA Article VI describes the Unitholders’ rights, duties,
and obligations.32 In particular, § 6.7 gives HoldCo “drag-along” rights
authorizing it to negotiate and ultimately force the other Unitholders to
consummate a sale of PEP’s business to a third party—provided the sale
results from an arm’s-length transaction after July 12, 2018. 33 That section
also provides for distributing the resulting proceeds pursuant to a TAPA
waterfall.34
E. PEOF II and BPP Sidecar
[¶ 29] PEOF II soon became a PEP Unitholder. 35
31 TAPA § 5.9(c)(ii) (emphasis added). The emphasized parenthetical shows that even if the partnership itself could be considered an affiliate of a partner, the partner is still free to disregard the interests of the partnership. So, the TAPA establishes that partners may put their interests above the partnership, to the extent allowed by applicable law. 32 TAPA at Art. VI. 33 TAPA § 6.7(a); see What Is an Arm’s Length Transaction, Investopedia, https://www.investopedia.com/terms/a/armslength.asp (last visited March 5, 2025). 34 TAPA § 6.7(b). 35 FAP ¶ 55.
OPINION AND ORDER, Page 11 [¶ 30] “Blackstone” later created a “sidecar vehicle,” BPP Acquisition
LLC (BPP), to buy additional acreage in PEP’s acreage footprint.36
F. The Callon Sale
[¶ 31] PEP’s valuations improved in 2020 and 2021. 37 By June 2021,
PEOFs’ stakes were worth more than $200 million.38
[¶ 32] In early Spring 2021, Jim Jeffs learned that PEC’s management,
led by Doyle, was exploring a potential sale.39 At that time, Jeffs was a PEC
board member and received updates from PEC “management” and the
“Blackstone” board members about the sale process.40
[¶ 33] In early May, Callon Petroleum made an initial offer of interest to
purchase PEP and BPP for $375 million and 8.5 million Callon shares.41 Three
weeks later, it increased the cash portion to $425 million.42
36 FAP ¶ 58. See Sidecar, Investopedia, https://www.investopedia.com/terms/s/sidecar- investment.asp (last visited March 5, 2025). 37 See FAP ¶s 62–64. 38 FAP ¶ 64. 39 PEOFs’ Ex. 3 (Jeffs Dec.) ¶ 3. 40 Jeffs Dec. ¶ 3. 41 FAP ¶ 69. 42 FAP ¶ 69.
OPINION AND ORDER, Page 12 [¶ 34] On June third, Doyle emailed PEC’s Board (including Jeffs) that
Callon’s enhanced offer was not nearly as compelling as continuing to operate
as a stand-alone entity. 43
[¶ 35] It was reported during a PEC Board meeting a week later that (i)
PRD’s and BPP’s balance sheets had strengthened over the past six months
and remained healthy, (ii) they met forecast expectations through the first-
quarter 2021, and (iii) the efficient execution and capital acceleration with a
second rig expected to grow the companies meaningfully.44
[¶ 36] Throughout June and July 2021, Doyle told PEC’s Board that he
continued speaking with Callon, but it was unable to close the gap and had not
presented an attractive offer.45 During that same period, Callon increased its
offer to $440 million cash and 9.2 million shares; however, its share price also
decreased so the actual offer remained unimproved. 46
[¶ 37] On July twenty-eighth, Jeffs and Doyle discussed the potential
Callon deal. 47 By then, Callon’s stock price had decreased, making its offer
43 FAP ¶ 69; Jeffs Dec. ¶ 5. 44 FAP ¶ 70. 45 FAP ¶ 74. 46 FAP ¶ 75. 47 Jeffs Dec. ¶ 6.
OPINION AND ORDER, Page 13 worth $50 million less than the prior month. 48 Doyle told Jeffs that Callon’s
offer was “too low” to be taken seriously and that Callon needed to
dramatically increase its offer before he would even consider it a realistic
offer.49
[¶ 38] Then, “without any warning or explanation,” on July thirtieth
“Blackstone” told the Board that it had accepted Callon’s offer at the same
price Doyle two days earlier told Jeffs was too low to even consider.50
[¶ 39] Based on information Doyle and the “Blackstone” directors
provided directly to Jeffs, he did not understand that a sale was close until
Doyle formally announced the sale at the end of July.51
[¶ 40] Once Jeffs heard from “Blackstone” about the final sale terms,
he spoke with Eric Derrington and Steve Anderson, PEOFs’ representatives
with Whittier Trust Company.52 They in no way suggested that PEOFs
supported the deal and expressed their belief that it was hastily put together
without sufficient opportunity to evaluate the sale.53
48 Jeffs Dec. ¶ 6. 49 Jeffs Dec. ¶ 6. 50 Jeffs Dec. ¶ 7. 51 Jeffs Dec. ¶ 4. 52 Jeffs Dec. ¶ 9. 53 Jeffs Dec. ¶ 9; PEOFs’ Ex. 4 (Derrington Dec.) ¶s 7–9.
OPINION AND ORDER, Page 14 [¶ 41] PEC’s board and BPP’s board of managers met on August 2,
2021, and after discussion unanimously approved the Callon deal. 54 However,
Tom Fagadau said he did not personally support the sale but was voting for it
“only pursuant to drag-along obligations.”55 Steve Pully similarly voted for
the sale, expressing the same sentiment.” 56 No other PEC director, including
Jeffs and Langdon, expressed that reservation.57
[¶ 42] The sale closed on October 1, 2021. 58
[¶ 43] In a phone call around “the time of sale,” a “Blackstone”
executive told a “Primexx board member” that senior “Blackstone”
executives directed the exit although “he” knew it was a bad deal.59
G. Summary of Claims
[¶ 44] According to PEOFs:
85. By forcing the Board to vote on (and approve) the proposed transaction over a weekend, Blackstone necessarily precluded the Managing General Partner or the Board from engaging in a reasoned and fully informed decision-making process or satisfying their contractual and fiduciary duties. Yet all
54 Movants’ Ex. 3 (Aug. 2, 2021, Board Minutes). 55 Movants’ Ex. 3 (Aug. 2, 2021, Board Minutes) at 2. 56 Movants’ Ex. 3 (Aug. 2, 2021, Board Minutes) at 3. Chip Fagadau approved the deal for BPP with the same reservation. Id. 57 Movants’ Ex. 3 (Aug. 2, 2021, Board Minutes) at 2–3. 58 FAP ¶ 94. 59 FAP ¶ 76.
OPINION AND ORDER, Page 15 Blackstone-controlled Board Members voted to approve the sale without conducting any analysis or due diligence to fairly evaluate the transaction and whether it would be fair to all Primexx investors.
86. The final sale documents were executed on August 3, 2021.
***
87. In the weeks and months leading up to the Callon transaction, Defendants did not hold regularly scheduled Board meetings to discuss and consider whether a sale transaction made sense from the point of view of the company and all of its unitholders, engage in any non-cursory review or analysis of the company’s intrinsic fair value or future prospects, or retain experts to conduct thorough due diligence or review of the fairness of the forced sale. 60
[¶ 45] PEOFs further allege that (i) “Blackstone” structured the sale
terms, which included both PRD’s assets and “Blackstone’s” sidecar (BPP),
so “Blackstone” was the only entity to receive any significant sale proceeds61
and (ii) although PEOFs owned preferred shares, after the Callon sale closed,
“Blackstone” paid compensation to common Unitholders, who were behind
PEOFs in the payment waterfall.62
60 FAP ¶s 85–87. 61 FAP ¶s 96, 107. 62 FAP ¶ 98.
OPINION AND ORDER, Page 16 H. Procedural History
[¶ 46] PEOFs sued defendants, except Acconcia, in a state district
court. 63 That court dismissed the case based on a forum-selection clause
requiring the suit to be brought in federal court.64
[¶ 47] PEOFs added Acconcia and refiled in federal court. 65 That court
sua sponte dismissed the case before any defendant appeared.66
[¶ 48] PEOFs again sued in state court.67 Later, in May 2024, movants
filed a traditional summary judgment motion challenging the breach element
of PEOFs’ causes of action and moved to stay discovery.
[¶ 49] In September 2024, PEOFs removed the case to this court.68
Based on the parties’ agreement, the court dismissed the case without
prejudice.69 The parties filed a district court Rule 11 agreement providing that
63 FAP ¶ 6. 64 FAP ¶ 7. 65 FAP ¶ 8. 66 FAP ¶s 9–10; FAP Exs. 4, 5. 67 FAP ¶ 11. 68 FAP ¶ 12. 69 FAP ¶ 12.
OPINION AND ORDER, Page 17 earlier discovery could be used here and outlining the parties’ agreement
regarding dispositive motions.70 PEOFs then filed this action. 71
[¶ 50] The court held arguments regarding movants’ motion and
requested supplemental briefing on certain issues. The parties responded with
additional briefing and evidence. The court considered the briefing but did not
consider the supplemental evidence because it was not properly submitted.
V. APPLICABLE LAW
A. Summary Judgment Standards
[¶ 51] At any time, a defendant may move with or without supporting
evidence for a summary judgment as to all or any part of any causes of action
asserted against it. TEX. R. CIV. P. 166a(b). The motion must state its specific
grounds. Id. at 166a(c).
[¶ 52] Thereafter, the court shall render judgment if the pleadings,
summary judgment filings, and properly filed evidence show that, except as to
the amount of damages, there is no genuine issue as to any material fact and
the movant is entitled to judgment as a matter of law on the issues stated in
70 FAP ¶ 13. 71 FAP ¶ 13.
OPINION AND ORDER, Page 18 the motion or in an answer or any other response. Id.; JLB Builders, L.L. C. v.
Hernandez, 622 S.W.3d 860, 864 (Tex. 2021).
[¶ 53] A court can grant a defendant traditional summary judgment only
if the defendant’s evidence as a matter of law either proves all elements of its
defense or disproves at least one element of the nonmovant’s claim. See, e.g.,
Park Place Hosp. v. Estate of Milo, 909 S.W.2d 508, 511 (Tex. 1995) (causation
disproved as a matter of law).
[¶ 54] So, a summary judgment motion
. . . is essentially a motion for a pretrial directed verdict. * * * Once such a motion is filed, the burden shifts to the nonmoving party to present evidence raising an issue of material fact as to the elements specified in the motion. * * * [Courts] review the evidence presented by the motion and response in the light most favorable to the party against whom the summary judgment was rendered, crediting evidence favorable to that party if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. * * *
Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 581–82 (Tex. 2006) (citations
omitted).
[¶ 55] A genuine fact issue exists if more than a scintilla of evidence
supports the alleged fact. See Amazon.com Servs. LLC v. Grant, No. 05-23-
01306, 2024 WL 5053063, *2 (Tex. App.—Dallas Dec. 10, 2024, no pet.).
OPINION AND ORDER, Page 19 Evidence is more than a scintilla when it “rises to a level that would enable
reasonable and fair-minded people to differ in their conclusions.” King Ranch
v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003) (quoting Merrell Dow Pharms.,
Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)). However, less than a
scintilla exists when the evidence is “so weak as to do no more than create a
mere surmise or suspicion” of a fact. Id. (quoting Kindred v. Con/Chem,
Inc., 650 S.W.2d 61, 63 (Tex. 1983)).
[¶ 56] When a partnership agreement’s terms are unambiguous and the
material facts are undisputed, compliance with those terms is a question of
law for the court. Hrdy v. Second St. Props., 649 S.W.3d 522, 554 (Tex. App.—
Houston [1st Dist.] 2022, pet. denied).
[¶ 57] Accordingly, to decide this motion the court must apply contract
and statutory construction principles to the TAPA, movants’ motion, PEOFs’
response, and the summary judgment evidence. 72
72 At common law, transactions between a partner and the partnership or other partners are presumed unfair, and the partner seeking to justify the transaction must prove its fairness. Hrdy, 649 S.W.3d at 539; Texas Bank & Tr. Co. v. Moore, 595 S.W.2d 502, 507 (Tex. 1980). However, the court need not address whether that burden allocation applies to statutory causes of action at trial because movants must conclusively establish the Callon sale’s fairness to negate the breach element of PEOFs’ “fiduciary” breach claims as a matter of law. Hrdy, 649 S.W.3d at 539, 554.
OPINION AND ORDER, Page 20 B. Contract Construction Rules
[¶ 58] Courts construe partnership agreements like contracts. Id. A
court’s primary objective when construing contracts “is to ascertain and give
effect to the parties’ intent as expressed in the instrument.” U.S. Polyco, Inc.
v. Texas Cent. Bus. Lines Corp., 681 S.W.3d 383, 387 (Tex. 2023) (quoting
URI, Inc. v. Kleberg Cty, 543 S.W.3d 755, 763 (Tex. 2018)).
[¶ 59] Usually, courts deem the contract alone to express the parties’
intent because it is objective, not subjective, intent that controls. Id.
[¶ 60] With unambiguous contracts, courts “can determine the parties’
rights and obligations under the agreement as a matter of law.” Inwood Nat’l
Bank v. Fagin, No. 24-0055, 2025 WL 349890, *4 (Tex. January 31, 2025)
(per curiam) (quoting ACS Invs., Inc. v. McLaughlin, 943 S.W.2d 426, 430
(Tex. 1997)).
[¶ 61] Additionally, context is a permissible indicator of meaning, and
courts are to harmonize and give effect to all contract terms by analyzing them
regarding the whole contract. Polyco, 681 S.W.3d at 390.
[¶ 62] Appropriate context includes the circumstances that existed
when the parties made their contract:
OPINION AND ORDER, Page 21 Context is not, however, confined to the two-dimensional contractual environs in which the words exist but may also encompass the circumstances present when the contract was entered. This is so because words are the skin of a living thought, and our quest is to determine, objectively, what an ordinary person using those words under the circumstances in which they are used would understand them to mean.
Board of Regents of the Univ. of Texas Sys. v. IDEXX Labs., Inc., 691 S.W.3d
438, 444 (Tex. 2024) (per curiam) (quoting URI, Inc., 543 S.W.3d at 764).
Stated differently, context includes the business context and realities the
words were meant to address. Id. at 445.
C. Statutory Construction Rules
[¶ 63] Statutory construction’s purpose is to implement the
Legislature’s intent by giving effect to every word, clause, and sentence.
Sunstate Equip. Co. v. Hegar, 601 S.W.3d 685, 689–90 (Tex. 2020). Indeed,
statutory text is the “first and foremost” indication of legislative intent.
Greater Hous. P’Ship v. Paxton, 468 S.W.3d 51, 58 (Tex. 2015). Thus, courts
apply the words’ common, ordinary meaning unless (i) the text supplies a
different meaning or (ii) the common meaning produces absurd results. Fort
Worth Transp. Auth. v. Rodriguez, 547 S.W.3d 830, 838 (Tex. 2018).
[¶ 64] Further, courts derive statutory meaning from the entire statute.
TEX. GOV’T CODE § 311.021(2); Janvey v. Golf Channel, Inc., 487 S.W.3d 560,
OPINION AND ORDER, Page 22 572 (Tex. 2016). So, courts “presume the Legislature chose statutory
language deliberately and purposefully,” Crosstex Energy Servs., L.P. v. Pro
Plus, Inc., 430 S.W.3d 384, 390 (Tex. 2014), and that it likewise excluded
language deliberately and purposefully, Cameron v. Terrell & Garrett, Inc., 618
S.W.2d 535, 540 (Tex. 1981).
[¶ 65] Absent contrary text, courts assume the Legislature uses
statutory terms having a supreme-court-developed common law meaning to
convey a consistent statutory meaning. SandRidge Energy, Inc. v. Barfield,
642 S.W.3d 560, 566 (Tex. 2022). But a statutory provision inconsistent
with prior common law decisions “eliminates any instructive or persuasive
value those decisions may have once had.” American Star Energy and
Minerals Corp. v. Stowers, 457 S.W.3d 427, 434 (Tex. 2015).
[¶ 66] Finally, but critically, Texas upholds parties’ contractual
freedom to narrow general fiduciary duties consistent with statutory minimum
requirements:
Unless otherwise provided by statute or law, duties owed by an agent to his or her principal may be altered by agreement. Accordingly, factors which must be taken into consideration when determining the scope of an agent’s fiduciary duty to his or her principal include not only the nature and purpose of the relationship, but also agreements between the agent and principal.
OPINION AND ORDER, Page 23 National Plan Adm’rs, Inc. v. National Health Ins. Co., 235 S.W.3d 695, 700
(Tex. 2007) (principal’s contract with third-party administrator limited
agent’s fiduciary duties to its principal according to agreed terms); Strebel v.
Wimberly, 371 S.W.3d 267, 284 (Tex. App.—Houston [1st Dist.] 2012, pet.
denied) (partnership agreement may limit partners’ fiduciary duties).
[¶ 67] That is, “the substance of an agreement to act on behalf of a
principal must be considered in determining the exact nature of the
relationship.” National Plan, 235 S.W.3d at 702–03. Even more specifically,
parties may agree to limit an agent’s general duty to act solely for the
principal’s benefit in all matters connected with their relationship. Id. at 703.
[¶ 68] Thus, courts will not impose a general fiduciary duty when the
parties agreed that a partner can take actions that would otherwise violate it.
Id. at 703. This is especially so where the contract results from a transaction
between sophisticated parties represented by experienced representatives and
counsel. Id. at 702.
D. Interpretive Canons
[¶ 69] Further, the expressio unius est exclusio alterius canon, which
presumes that purposeful inclusion of specific terms implies the purposeful
exclusion of terms that do not appear, is a proper construction maxim absent a
OPINION AND ORDER, Page 24 valid alternative construction. City of Houston v. Williams, 353 S.W.3d 128,
145 (Tex. 2011); Antonin Scalia and Bryan A. Garner, READING LAW 107
(2012).
[¶ 70] Conversely, the noscitur a sociis canon—“it is known by its
associates”—provides that a word or phrase’s meaning, especially one in a list,
should be known by the words immediately surrounding it. Paxton, 468
S.W.3d at 61. Courts rely on this canon to avoid giving a word a meaning so
broad that it is incompatible with the statutory context. Id.
E. Intermediate Appellate Court Precedents
[¶ 71] This court began operating September 1, 2024, and the
simultaneously created Fifteenth Court of Appeals has exclusive intermediate
appellate jurisdiction over business court decisions. See Act of May 25, 2023,
88th Leg., R.S., ch. 380, §§ 8, 2023 TEX. SESS. LAW SERV. 919, 929 (H.B. 19)
(business court creation); TEX. GOV’T CODE § 254.007 (appellate
jurisdiction). And neither the Fifteenth Court nor this court has decided cases
addressing this case’s partnership issues. Thus, Texas Supreme Court
decisions are currently the only judicial precedents addressing these issues.
However, this court considers other intermediate appellate decisions for
whatever persuasive value they have.
OPINION AND ORDER, Page 25 F. Applicable Business Organizations Code Provisions
1. Introduction
[¶ 72] A limited partnership is a partnership formed by two or more
persons, with one or more general partners and one or more limited partners.
TBOC § 1.002(50); Byron F. Egan, EGAN ON ENTITIES 467 (4th Ed. 2023).
[¶ 73] TBOC Chapter 153 governs limited partnerships. However, Ch.
152’s general partnership laws and other rules of law and equity compatible
with Ch. 153 also apply to limited partnerships. TBOC § 153.003(a)–(b).
[¶ 74] Specifically, limited partnership managing partners are subject to
Ch. 152’s general partner duties and obligations. Id. §§ 152.204(a),
153.152(a)(1)–(2), 153.153(1)–(2); EGAN ON ENTITIES 475. Thus, PEC was
subject to a partner’s Ch. 152 statutory responsibilities. Further, the parties
assume HoldCo exercised sufficient control over PEP such that rules
applicable to general partners also apply to HoldCo’s conduct. 73
2. Chapter 152 Responsibilities
[¶ 75] PEOFs allege that HoldCo and PEC breached TBOC’s loyalty and
care duties and the related obligation to discharge them in good faith and in a
73 Movants’ Motion at 16, n.34; see also Strebel, 371 S.W.3d at 279 (fiduciary duties that otherwise do not exist may arise when a limited partner exercises control over the partnership).
OPINION AND ORDER, Page 26 manner the defendant reasonably believes to be in the partnership’s best
interests. 74 The applicable statutes include:
General Conduct Standards
(a) A partner owes to the partnership [and] the other partners . . .:
(1) a duty of loyalty; and
(2) a duty of care.
(b) A partner shall discharge the partner’s duties to the partnership and the other partners under this code or under the partnership agreement and exercise any rights and powers in the conduct . . . of the partnership business:
(1) in good faith; and
(2) in a manner the partner reasonably believes to be in the best interest of the partnership.
(c) A partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner’s conduct furthers the partner’s own interest.
(d) A partner, in the partner’s capacity as partner, is not a trustee and is not held to the standards of a trustee.
TBOC § 152.204.
Duty of Loyalty
A partner’s duty of loyalty includes:
74 FAP ¶s 105–09, 112–114.
OPINION AND ORDER, Page 27 (1) accounting to and holding for the partnership property, profit, or benefit derived by the partner: (A) in the conduct . . . of the partnership business; or . . . ;
(2) refraining from dealing with the partnership on behalf of a person who has an interest adverse to the partnership; and
(3) refraining from competing or dealing with the partnership in a manner adverse to the partnership.
Id. § 152.205.
Duty of Care
(a) A partner’s duty of care to the partnership and the other partners is to act in the conduct . . . of the partnership business with the care an ordinarily prudent person would exercise in similar circumstances.
(b) An error in judgment does not by itself constitute a breach of the duty of care.
(c) A partner is presumed to satisfy the duty of care if the partner acts on an informed basis and in compliance with Section 152.204(b).
Id. § 152.206.
Effect of Partnership Agreement and Nonwaivable Provisions
(a) Except as provided by Subsection (b), a partnership agreement governs the relations of the partners and between the partners and the partnership. To the extent that the partnership agreement does not otherwise provide, this chapter and the other partnership provisions govern the relationship of the partners and between the partners and the partnership.
(b) A partnership agreement or the partners may not:
OPINION AND ORDER, Page 28 (1) unreasonably restrict a partner’s or former partner’s right of access to books and records under Section 152.212;
(2) eliminate the duty of loyalty under Section 152.205, except that the partners by agreement may identify specific types of activities or categories of activities that do not violate the duty of loyalty if the types or categories are not manifestly unreasonable;
(3) eliminate the duty of care under Section 152.206, except that the partners by agreement may determine the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable;
(4) eliminate the obligation of good faith under Section 152.204(b), except that the partners by agreement may determine the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable;
***
Id. § 152.002 (emphasis added).
Information Regarding Partnership
(a) On request and to the extent just and reasonable, each partner and the partnership shall furnish complete and accurate information concerning the partnership to:
(1) a partner; . . .
Id. § 152.213.
[¶ 76] In short, the partners’ agreement is the baseline for determining
their responsibilities to the partnership and each other—subject to TBOC’s
minimum requirements. TBOC § 152.002(a).
OPINION AND ORDER, Page 29 [¶ 77] Like 1994’s Texas Revised Partnership Act (TRPA) before it,
these statutes provide a more specific and explicit statement of a partner’s
duties to the partnership and other partners than existed under the common
law and the prior Texas Uniform Partnership Act (TUPA). See Miller, Partner
Duties Under the Common Law and the Texas Business Organizations Code, 68
The Advocate Ch. 18, § 1 (Miller, Partner Duties).
[¶ 78] However, because courts and commentators have been unclear
regarding the extent to which the TBOC and its predecessors modified
common law fiduciary principles, reviewing that statutory history aids their
proper construction and application.
G. Legislative Background
[¶ 79] Before 1961, the common law governed Texas partnership law,
Ingram v. Deere, 288 S.W.3d 886, 894–95 (Tex. 2009), and recognized
fiduciary duties between partners, Crim Truck & Tractor Co. v. Navistar Int’l
Transp. Corp., 823 S.W.2d 591, 593–94 (Tex. 1992) (citing Johnson v.
Peckham, 120 S.W.2d 786, 787 (Tex. 1938)).
[¶ 80] In 1961, Texas adopted the TUPA. Ingram, 288 S.W.3d at 894.
Without expressly defining partners as fiduciaries, the TUPA stated a partner’s
duty to account for partnership profits and hold them as “a trustee” and the
OPINION AND ORDER, Page 30 section governing partners’ duties was titled “Partner Accountable as a
Fiduciary.” TUPA § 21(1). Thus, TUPA comported with treating partners as
trustee-fiduciaries but did not unambiguously call them that.
[¶ 81] At common law and under TUPA, partners owed each other
fiduciary duties to: (i) fully disclose all matters affecting the partnership, (ii)
account for all partnership profits and property, (iii) refrain from self-dealing,
and (iv) refrain from competing with the partnership. Bohatch v. Butler &
Binion, 905 S.W.2d 597, 602 (Tex. App.—Houston [14th Dist.] 1995, aff’d,
977 S.W.2d 543 (Tex. 1998)).
[¶ 82] For example, the common law imposed a strict duty on partners
to disclose material facts affecting the partnership or other partners—even if
the partners have strained relationships and adverse interests. See Johnson,
120 S.W.2d at 787 (duty to disclose negotiations with third parties to resell
partnership’s property); Erin Larkin, Comment, Partners’ Duties Without the
Word Fiduciary, 59 Baylor L. Rev. 895, 899 (2010).
[¶ 83] Nonetheless, TUPA’s text appeared to alter Johnson’s voluntary
disclosure requirement by imposing the disclosure duty on demand:
Partners shall render on demand true and full information of all things affecting the partnership to any partner . . .
OPINION AND ORDER, Page 31 TUPA § 20.
[¶ 84] But § 20’s commentary said that § 20 should not be construed to
limit the disclosure duty to instances without demand when fiduciary
principles would require full disclosure. See Larkin at 900–12; Alan R.
Bromberg, The Proposed Texas Uniform Partnership Act, 14 Sw L. J. 437, 448
(1960) (comment to § 20, citing Byron D. Sher and Alan R. Bromberg, Texas
Partnership Law in the 20th Century – Why Texas Should Adopt the Uniform
Partnership Act, 12 Sw L.J. 263, 298–300 (1958)). And case law continued
to express the full disclosure duty. See Bohatch, 905 S.W.2d at 602.
[¶ 85] However, effective January 1, 1994, Texas adopted the TRPA.
Ingram, 288 S.W.2d at 894. TRPA § 4.03(c) provided that
. . . [e]ach partner and the partnership shall furnish, on request and to the extent just and reasonable, to a partner complete and accurate information regarding the partnership.
[¶ 86] Despite nearly identical language as TUPA § 20, the Bar
Committee Notes to TRPA § 4.03 (TRPA’s successor to TUPA § 20 and
predecessor to TBOC § 152.213) reached a different conclusion regarding the
disclosure duty:
Subsection (c) is based on TUPA § 20 and provides that partners must be furnished, on demand, complete and accurate information concerning the partnership to the extent just and
OPINION AND ORDER, Page 32 reasonable. This information right arises only on request; the information need not be volunteered. * * *
Comment of Bar Committee—1993, Art. 6132b-4.03 (emphasis
added).
[¶ 87] Commentators and courts debated the extent to which the TRPA
changed the common law, including whether it eliminated Johnson’s voluntary
full-disclosure duty. See Elizabeth S. Miller, Overview of Fiduciary Duties,
Exculpation, and Indemnification in Texas Business Organizations, 49-SUM
Tex. J. Bus. L. 1, 36–47 (2020) (Miller, Overview); Larkin at 900–12.
[¶ 88] Although the Legislature derived TRPA from the Uniform Law
Commission’s Revised Uniform Partnership Act (RUPA), there are informative
differences. For example, RUPA § 404 describes its “General Standards of
Partner’s Conduct” as fiduciary duties, but TRPA does not. And TRPA
§ 4.04(f)’s added provision that a partner is not a trustee and is not held to the
standards of a trustee arguably further evidenced that TRPA replaced
partners’ common law fiduciary principles with specific statutory standards,
while leaving the common law as a gap-filler. Larkin at 900–12. That is,
unlike RUPA § 404, TRPA § 4.04 created ambiguity by providing that a
partner’s loyalty duty was not limited to only those duties stated in the text.
OPINION AND ORDER, Page 33 Compare RUPA § 404(b) (“A partner’s duty of loyalty to the partnership and
the other partners is limited to the following . . .” (emphasis added)) with TRPA
§ 4.04(b) (“A partner’s duty of loyalty includes . . .” (emphasis added)).
[¶ 89] Soon after TRPA’s enactment, the supreme court described a
partner’s statutory duties to the partnership and other partners as “in the
nature of a fiduciary duty in the conduct” of partnership business. M.R.
Champion, Inc. v. Mizell, 904 S.W.2d 617, 618 (Tex. 1995). However, that
statement’s effect on the TRPA is unclear because the prior TUPA and
common law governed that case. Id. at 618, n.1. And the court held that the
applicable principle—former partners have no duty to offer a business
opportunity to each other—is the same under the old and new laws. Id.
[¶ 90] So, the Fifth Circuit Court of Appeals commented on the lack of
clarity regarding TRPA’s effect on prior TUPA and common law principles. In
re Gupta, 394 F.3d 347, 351–52 (5th Cir. 2004).
[¶ 91] Moreover, it is hard to tell whether the fiduciary duty discussions
in Cruz v. Ghani, No. 05-17-0056-CV, 2018 WL 6566642, *6 (Tex. App.—
Dallas 2018, no pet); Shannon Medical Center v. Triad Holdings III, L.L.C.,
601 S.W.3d 904, 909–15 (Tex. App.—Houston [14th Dist.] 2019, no pet.);
and Red Sea Gaming, Inc. v. Block Invs. (Nevada) Co., 338 S.W.3d 562, 568
OPINION AND ORDER, Page 34 (Tex. App.—El Paso 2010, pet. denied) (and similar cases) state the applicable
law because they involve unobjected to jury charges. 75
[¶ 92] In sum, the extent to which the TRPA and the TBOC replaced
common law principles—and especially the disclosure duty—is unclear. It is
with that background that the court discusses the TBOC’s application here.
H. The Nature and Scope of HoldCo’s and PEC’s Duties and Obligations
1. Introduction
[¶ 93] PEOFs posit ten causes of action. All but one allege direct or
indirect (conspiracy, aiding and abetting, and knowing participation in)
fiduciary breach claims without delineating between common law or TBOC
duties. 76 PEOFs’ summary judgment response is equally non-
differentiating.77 Therefore, the court begins by discussing the current status
of TBOC partnership “fiduciary duties.”
2. Applicable Loyalty and Care Duties and Discharge Obligations
[¶ 94] It is axiomatic that the court must identify the nature and scope
of HoldCo’s duties and obligations to PEP and its partners before it can
75 Where an appellant did not object to the jury charge, evidentiary sufficiency issues are measured against the charge as written and not necessarily the correctly stated law. Cruz, 2018 WL 6566642, at *6. Red Sea Gaming, 338 S.W.3d at 566. 76 FAP ¶s 104–68. 77 See PEOFs’ MSJ Resp. at 11–30 (combining common law and statutory principles).
OPINION AND ORDER, Page 35 address whether HoldCo conclusively established that it did not breach those
responsibilities as PEOFs claim.78 (The court collectively refers to a partner’s
“fiduciary” duties and obligations as “responsibilities.”) The existence of a
legal duty is a threshold legal question for the court to decide. Humble Sand
& Gravel, Inc. v. Gomez, 146 S.W.3d 171, 181, n.20 (Tex. 2004).
[¶ 95] Where, as here, determining the nature and scope of a partner’s
duties and obligations is a matter of statutory and contract construction, that
process begins with the TAPA:
[A] partnership agreement governs the relations of the partners and between the partners and the partnership. To the extent that the partnership agreement does not otherwise provide, this chapter and the other partnership provisions govern the relationship of the partners and between the partners and the partnership.
TBOC § 152.002(a)
[¶ 96] Because here, the partners agreed that they would have the
“duties of good faith and fair dealing” to the fullest extent required by Texas
law (TAPA § 5.9(a)) but otherwise disclaimed any “fiduciary duties” to the
78 For clarity, “causes of action” are legal theories supporting a right to relief such as negligence or contract breach. “Claims,” when used as a noun, are assertions a party makes to describe the factual basis supporting a cause of action or affirmative defense. For example, “Defendant breached the contract by . . .” “Grounds” are legal bases underlying a party’s request for court action. For example, “the court should grant summary judgment because . . .” Parties should be careful to properly use these terms.
OPINION AND ORDER, Page 36 fullest extent permitted by law (TAPA §§ 5.9(b)–(c)), we turn to applicable
TBOC sections to determine what duties and obligations remained. That
analysis produces these results:
a. Affirmative Responsibilities
[¶ 97] At common law, a trustee is held to strict fiduciary standards:
Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ʻdisintegrating erosion’ of particular exceptions. *** Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd.
Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546 (1928) (citation
omitted) (trustee standards applied to joint venturer).
[¶ 98] However, TBOC § 152.204(d) provides that partners are not held
to a trustee’s standards. And TBOC, like its predecessor TRPA, omits the
word “fiduciary” when prescribing partners’ duties to the partnership and
other partners. So, based on plain text, traditional trustee-fiduciary duties, as
such, do not apply to partners except (i) as TBOC imposes analogous statutory
OPINION AND ORDER, Page 37 duties and obligations; (ii) the TBOC incorporates compatible common law
principles; or (iii) partners agree to impose them on themselves.
[¶ 99] Loyalty and care duties and the obligations to perform them (i) in
good faith and (ii) in a manner the partner reasonably believes to be in the
partnership’s best interest are among the responsibilities TBOC imposes. Id.
§ 152.204(a)–(b).
[¶ 100] TBOC’s list of loyalty duties is not exclusive because
“includes” precedes that list. Id. § 152.205. So, common law loyalty
principles apply if compatible with Ch. 152 and the partnership agreement. Id.
§ 152.003. And, under the noscitur a sociis canon, any supplemental common
law loyalty duties must be of the type listed in § 152.205 and consistent with
other partnership statutes and permitted TAPA terms. See Paxton, 468
S.W.3d at 61.
[¶ 101] However, TBOC’s duty of care definition is exclusive because it
omits expansive language. 79 See TBOC § 152.206; City of Houston, 353
S.W.3d at 145. That is,
79 § 152.206(c)’s statement that a partner is presumed to satisfy its duty of care if it acts on an informed basis and in compliance with its § 152.206 obligations is an evidentiary presumption, not a separate statutory responsibility. Id.
OPINION AND ORDER, Page 38 Nothing is to be added to what the text states or reasonably implies (casus omissus pro omisso habendus est).
READING LAW 93.
[¶ 102] And, unless modified, the TBOC retains the common law
obligations to act in good faith and in a manner the partner reasonably believes
to be in the partnership’s best interest. TBOC § 152.204(b).
[¶ 103] The TBOC also imposes a duty upon request and to the extent
just and reasonable to provide partners with accurate information concerning
the partnership. Id. § 152.213.
b. Modifications to Responsibilities
[¶ 104] One of the principal trustee duties the TBOC removes from
partners’ duties is a trustee’s duty to place its beneficiary’s interest above the
trustee’s interest. See TBOC §152.204(d) (elimination of trustee status and
duties); BOGERT’S THE LAW OF TRUSTS AND TRUSTEES § 543 (Trustee’s duty of
loyalty to the beneficiaries).
[¶ 105] Further, partners do not violate their responsibilities merely
because the partner acts in its own interest. Id. § 152.204(c).
[¶ 106] Although partners may not completely eliminate their
responsibilities, they may define specific conduct that does not violate them
OPINION AND ORDER, Page 39 provided those terms are not manifestly unreasonable. Id. § 152.002(b). The
TBOC does not state any “magic words” that are required to implement these
contractual carveouts to the statutory responsibilities.
[¶ 107] However, partners may eliminate the obligation to perform their
duties and exercise any rights and powers under the partnership agreement in
a manner the partner reasonably believes to be in the partnership’s best
interest if such terms are not manifestly unreasonable. See id.
§ 152.002(b)(4). That is because § 152.002(b)’s list of unwaivable
responsibilities mentions a partner’s obligation to perform its duties in good
faith under § 152.204(b)(1) without also listing a partner’s obligation to
discharge its duties in a manner it reasonably believes to be in the
partnership’s best interest under § 152.204(b)(2). Id. § 152.002(b)(4).
[¶ 108] That partners may waive the obligation to act in a manner the
partner reasonably believes to be in the partnership’s best interest comports
with §§ 152.204(c), (d).
[¶ 109] Moreover, the expressio unius est exclusion alterius canon
further supports that result because § 152.002(b)(4) mentions the good faith
obligation while not mentioning the separate obligation to perform those
OPINION AND ORDER, Page 40 obligations in a manner the partner reasonably believes is in the partnership’s
best interest. City of Houston, 353 S.W.3d at 145.
3. Good Faith and Fair Dealing
[¶ 110] Although TBOC § 152.204(b)(1) requires partners to discharge
their contract rights and duties and TBOC loyalty and care duties in good faith,
that obligation does not rise to the level of a separate “fiduciary” duty as such:
Though courts may be tempted to elevate this language to an independent duty, this obligation is not stated as a separate duty, but merely as a standard for discharging a partner’s statutory or contractual duties.
Elizabeth S. Miller, Fiduciary Duties, Exculpation, and Indemnification in
Texas Business Organizations, State Bar of Texas Advanced Business Law
Course 30 (2023) (Miller, Fiduciary Duties); see Comment of Bar
Committee—1993, Art. 6132b-4.04 (good faith obligation “is not a separate
duty” it is “merely a statement of how any duty . . . must be discharged”).
[¶ 111] Unlike loyalty and care duties, the TBOC does not define the
“good faith” discharge obligation. See TBOC § 152.204(b)(1). Thus, courts
refer to the common law for that meaning. Id. § 152.003; SandRidge, 642
S.W.3d at 566.
OPINION AND ORDER, Page 41 [¶ 112] Fitz-Gerald v. Hull, holds that partners owe each other the
“utmost good faith and the most scrupulous honesty.” 237 S.W.2d 256, 265
(Tex. 1951). Bohatch v. Butler & Binion, subsequently reiterated that principle
but concluded that terminating a partner for reporting alleged overbilling did
not violate the principle. 977 S.W.2d 543, 545–47 (Tex. 1998).
[¶ 113] Later, the supreme court clarified that, although a partner’s
common law fiduciary duty includes a duty of good faith and fair dealing, that
duty requires only that the parties “deal fairly” with each other and does not
include the more onerous fiduciary duty to place the other party’s interests
before its own:
Although a fiduciary duty encompasses at the very minimum a duty of good faith and fair dealing, the converse is not true. The duty of good faith and fair dealing merely requires the parties to “deal fairly” with one another and does not encompass the often more onerous burden that requires a party to place the interest of the other party before his own, often attributed to a fiduciary duty.
Crim, 823 S.W.2d at 594. However, the court did not further define “deal
fairly.” Nor has it since done so.
[¶ 114] Case law indicates that the statutory good faith obligation
includes, at a minimum, not lying to or misleading other partners. See, e.g.,
Shannon Medical, 603 S.W.3d at 912–915 (partner misled partners regarding
OPINION AND ORDER, Page 42 permitted affiliate business); Cruz, 2018 WL 6566642, *10–16 (partner
misrepresented reasons for closing one business and misled partner regarding
permitted competing business); Red Sea Gaming, 338 S.W.3d at 568–69
(failure to disclose resale opportunity while negotiating buyout).
[¶ 115] However, one does not act in bad faith by exercising its lawful
rights:
Improper motives cannot transform lawful actions into actionable torts. “Whatever a man has a legal right to do, he may do with impunity, regardless of motive, and if in exercising his legal right in a legal way damage results to another, no cause of action arises against him because of a bad motive in exercising the right.”
Texas Beef Cattle Co. v. Green, 921 S.W.2d 203, 211 (Tex. 1996) (quoting
Montgomery v. Phillips Petroleum Co., 49 S.W.2d 967, 972 (Tex. Civ. App.—
Amarillo 1932, writ ref’d) (quoting 1 R.C.L. § 6 at 319)).
[¶ 116] Thus, one does not lack good faith by exercising lawful contract
rights. See Exxon Corp. v. Atlantic Richfield Co., 678 S.W.2d 944, 947 (Tex.
1984) (“There can be no implied covenant as to a matter specifically covered
by the written terms of the contract.”); English v. Fischer, 660 S.W.2d 521,
523 (Tex. 1983) (No implied covenant of good faith and fair dealing required
mortgagee to disburse insurance proceeds contrary to contract terms.); John
OPINION AND ORDER, Page 43 Masek Corp. v. Davis, 848 S.W.2d 170, 174 (Tex. App.—Houston [1st Dist.]
1992, writ denied) (approved jury instruction that a “fiduciary duty [] does
not extend so far as to create duties in derogation of the express terms of the
partnership agreement”).
[¶ 117] Further, good faith is often best described as not in bad faith.
Good faith, as judges generally use the term in matters contractual, is best understood as an “excluder” – a phrase with no general meaning or meanings of its own. Instead, it functions to rule out many different forms of bad faith. It is hard to get this point across to persons used to thinking that every word must have one or more general meanings of its own – must be either univocal or ambiguous.
See Robert S. Summers, “Good Faith” in General Contract Law and the Sales
Provisions of the Uniform Commercial Code, 54 Va. L. Rev. 195, 262 (1968).
4. Duties of Candor and Mandatory Disclosures
a. Introduction
[¶ 118] Some courts have recently held that partners owe a fiduciary
duty (i) to make full disclosure of all matters affecting the partnership,
including a duty to account for all partnership profits and property and (ii) a
strict duty of good faith and candor. See Zinda v. McCann Street, Ltd., 178
S.W.3d 883, 890–91 (Tex. App.—Texarkana 2005, pet. denied); Houle v.
Casillas, 594 S.W.3d 524, 552 (Tex. App.—El Paso 2019, no pet.).
OPINION AND ORDER, Page 44 [¶ 119] Such rulings concern two issues: (i) does the good faith
obligation encompass the honesty requirement; and (ii) does the Johnson v.
Peckham mandatory duty to disclose all facts that could materially affect the
partnership, or other partners, continue after TRPA § 4.03 and TBOC
§ 152.213. “Yes” is the answer to the former, and “it depends on the
circumstances” is the answer to the second.
b. Good Faith and Candor
[¶ 120] To begin, Zinda for example equates good faith and candor. 178
S.W.3d at 890–91. Because “candor” means “[t]he quality of being open,
honest, and sincere; frankness; outspokenness,” Candor, BLACK’S LAW
DICTIONARY (12th ed. 2024), the TBOC effectively incorporates the candor
duty to be honest in § 152.204(b)(1)’s good faith obligation.
c. Voluntary Disclosure
[¶ 121] Although Zinda cited TRPA § 4.04 as authority for a broad duty
to disclose all information affecting the partnership, that court did not address
whether § 4.03 retained the prior Johnson v. Peckham duty to voluntarily
disclose, even without request, all material information. 178 S.W.3d at 890–
91.
OPINION AND ORDER, Page 45 [¶ 122] Like TRPA § 4.03, the TBOC requires partners to provide
information on reasonable request. TBOC § 152.213. So, the debate regarding
the Johnson rule after TRPA § 4.03 applies to TBOC § 152.213 too. However,
although the TBOC does not expressly so state, the common law good faith
obligation also applies to § 152.213. See id. § 152.003 (common law
supplement to TBOC). However, those concepts are limited to (i) the common
law definition of “good faith” to mean “deal fairly,” Crim, 823 S.W.2d at 593–
94, and (ii) statutory constraints that §§ 152.204(c), (d), and 152.213 and any
applicable partnership agreement terms impose.
[¶ 123] Since Texas adopted TRPA § 4.03, the Texas Supreme Court has
provided little guidance regarding a partner’s duty to voluntarily provide
information affecting the partnership. For example, in American Star Energy
and Minerals Corp. v. Stowers, the Supreme Court suggested in dicta that there
are circumstances when the duty of care may require a partner to disclose
material information affecting the partnership’s operation. 457 S.W.3d at
434–35.
[¶ 124] That statement is dicta because the issue there was when do
limitations begin to run in a suit to enforce a partnership’s contract liability
against a partner. The Supreme Court held that, based on the partnership as
OPINION AND ORDER, Page 46 an entity theory, partners were not individually liable until the partnership’s
liability was finally established at which time limitations began running
against the individual partner. Id. at 428–30, 435.
[¶ 125] Responding to the partners’ argument that due process required
that they be joined in the suit against the partnership, the court explained that
(i) as a matter of law the partners had notice of their potential liability when
they became partners; (ii) citing Zinda, the court stated that the duty of care
“may” require partner to inform other partners of a suit against the
partnership; and (iii) partners can agree in their partnership agreement for a
partner served with a lawsuit against the partnership to provide that
information to the other partners. Stowers, 457 S.W.3d at 434–35.
[¶ 126] Regarding the second point, the court did not discuss TRPA
§ 4.03 or TBOC 152.213. Id. Nor did it explain what circumstances “may”
require disclosures. Id. Finally, the court did not explain why such a duty falls
under the care duty instead of the good faith obligation. Id. So, Stowers does
not guide as to when partners must voluntarily disclose information to other
partners. And that statement may be construed as a “suggestion” that such
an obligation survives after TRPA § 4.03 and TBOC § 152.213. Miller,
Fiduciary Duties 30.
OPINION AND ORDER, Page 47 [¶ 127] Additionally, “[a]s a general rule, silence may be equivalent to a
false representation only when the particular circumstances impose a duty on
the party to speak and he deliberately remains silent.” 80 Bradford v. Vento, 48
S.W.3d 749, 755 (Tex. 2001). And, in an arm’s-length transaction, a duty to
disclose facts does not exist absent a misleading statement about facts and the
complaining party lacked an equal opportunity to discover the facts. See id.
756.
[¶ 128] Without firm rules concerning when a partner must volunteer
information regarding circumstances not expressly mentioned in § 152.213,
the court applies these standards in this case:
• A partnership agreement may address the issue either directly or
indirectly by omission. See TBOC §§ 152.002(a) (partnership agreement
governs the relations among partners and the partnership), 152.002(b)(2)–(4)
(ability to modify loyalty and care duties and good faith obligation); Nafta
Traders, Inc. v. Quinn, 339 S.W.3d 84, 95–96 (Tex. 2011) (contract freedom);
80 For example, fraud by omission may occur where a person discovers new information that makes an earlier material representation false or misleading, Dewayne Rogers Logging, Inc. v. Propac, Ltd., 299 S.W.3d 374, 391 (Tex. App.—Tyler 2009, pet. denied); or a person makes a partial disclosure that leaves a false impression, Mercedes-Benz USA, LLC v. Cardusco, Inc., 583 S.W.3d 553, 561–62 (Tex. 2019).
OPINION AND ORDER, Page 48 FPL Energy, LLC v. TXU Portfolio Mgmt. Co., L.P., 426 S.W.3d 59, 68 (Tex.
2014) (omissions may be read as intentional).
• Absent a partnership agreement standard, partners must disclose
material information affecting the partnership or other partners that ordinarily
would not be expected to be covered by a partnership agreement. For example,
a partner must tell at least partnership management when the partner is served
with a suit against the partnership. See Stowers, 457 S.W.3d at 434–35.
• A partner may not mislead the partnership or other partners where fraud
by omission principles would apply absent the partnership relationship. See
¶s 114, 127.
• That a partner is acting in its self-interest does not by itself create a duty
to voluntarily disclose information regarding its conduct if the partnership
agreement lawfully permits that conduct. See TBOC § 152.204(c), (d).
• A partner need not disclose facts that would be immaterial under the
circumstances, including circumstances contemplated by the partnership
agreement.
5. Separate Analysis Required
[¶ 129] TBOC’s text divides partners’ loyalty and care duties on one
hand from their obligation to discharge them in good faith (and when applicable
OPINION AND ORDER, Page 49 in a manner the partner reasonably believes to be in the partnership’s best
interest) on the other hand. See TBOC § 152.204.
[¶ 130] For example, one can perform its loyalty duty according to the
partnership agreement’s terms but discharge that duty in bad faith by lying to
or misleading its partners while doing so. See, e.g., Shannon Medical, 603
S.W.3d at 912–915; Cruz, 2018 WL 6566642, *10–16; Red Sea Gaming, 338
S.W.3d at 568–69. On the other hand, the good faith obligation is irrelevant
for liability purposes if the partner breached the duty by engaging in prohibited
conduct.
[¶ 131] So, courts should analyze whether a duty is breached before
considering whether the defendant acted in good faith and, when applicable,
in a manner it reasonably believed was in the partnership’s best interest.
VI. APPLICATION
A. Introduction
[¶ 132] Movants basically argue that PEOFs’ claims fail in their entirety
because (i) the TAPA authorized HoldCo to exercise its drag-along rights and
force the other partners to participate in selling PRD’s assets in an Exit Event;
(ii) HoldCo complied with its TAPA conditions to wait two years and conduct
the sale in an arm’s-length transaction; and (iii) its contract rights and conduct
OPINION AND ORDER, Page 50 satisfied Texas law’s minimum requirements since TAPA defines conduct that
meets the minimum requirements of loyalty and care and it acted in good faith.
[¶ 133] Conversely, PEOFs primarily argue that “Blackstone” breached
its contract good faith duty and statutory responsibilities in several ways—
including by failing to act in the partnership’s best interest regarding the
consideration received and the processes HoldCo used to analyze the deal.
[¶ 134] In short, the analysis converges on whether HoldCo acted in
good faith when it exercised its drag-along rights and forced the sale of PRD’s
assets to Callon on terms HoldCo selected. Because movants seek complete
dismissal of all claims against them, the court addresses all claims PEOFs
assert against movants regardless of whether movants expressly addressed
every such claim.
B. PEOFs’ Claims by Category
[¶ 135] PEOFs’ petition and the parties’ submissions do not divide their
arguments between distinct breach of loyalty, care, or good faith
OPINION AND ORDER, Page 51 responsibilities. And several of PEOFs’ claims are variations of the same idea.
Nonetheless, PEOFs’ claims include these categories: 81
• Loyalty: (i) failing to act in the partnership’s best interest; (ii)
structuring the deal to benefit “Blackstone;” (iii) prioritizing “Blackstone’s”
interest in fossil fuel divestment over acting in Primexx’s best interests; (iv)
acting in “Blackstone’s” sole interest; (v) structuring a deal that would
provide no return for PEOFs but would generate a substantial recovery for
Blackstone; (vi) accepting an unfair sales proceeds’ allocation; (vii) directing
the sale to proceed despite knowing it was a bad deal; (viii) failing to maximize
the value and return for PEP or other Unitholders aside from furthering
“Blackstone’s” interests; and (ix) failing to ensure “Blackstone” had no
conflicts of interest.
• Care: (i) failing to keep PEOFs informed about the potential sale leading
up to the sale; (ii) failing to conduct regular board meetings to discuss whether
the sale made sense from the company’s perspective; (iii) forcing a rushed sale;
(iv) forcing the sale with only one business days’ notice of the final terms; (v)
81 Any claims not mentioned here are variations of what is discussed and are treated in the same manner. If the court calls a loyalty claim a care claim or vice-versa, it is regarded as such.
OPINION AND ORDER, Page 52 failing to take steps to maximize the value for PEP or the Unitholders; (vi)
inadequate due diligence and marketing; (vii) preventing the board or other
Unitholders from analyzing the terms; (viii) failing to professionally market
the business or its assets; (ix) failing to analyze whether it was more profitable
to run the business as a stand-alone operation than to sell it; (x) failing to
consider alternatives; (xi) failing to consider whether a rushed sale would be
fair to PEP or its partners, including PEOFs; and (xii) failing to properly
distribute proceeds according to the waterfall.
• Good faith: All the above.
C. Overall Considerations
[¶ 136] The court must analyze PEOFs’ claims under the TAPA subject
to TBOC minimum standards. That is, Texas recognizes these sophisticated
parties’ freedom to contract within TBOC’s minimum standards. See, e.g.,
TBOC § 152.002(a); Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467
S.W.3d 494, 504 (Tex. 2015). Indeed, Texas regards parties’ freedom to
contract as they wish (within public policy) a sacred right:
As a fundamental matter, Texas law recognizes and protects a broad freedom of contract. We have repeatedly said that “if there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their
OPINION AND ORDER, Page 53 contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice.”
Nafta Traders, 339 S.W.3d at 95–96 (quoting Fairfield Ins. Co. v. Stephens
Martin Paving, LP, 246 S.W.3d 653, 664 (Tex. 2008)).
[¶ 137] Moreover, freedom of contract principles require courts to
“recognize that ʻsophisticated parties have broad latitude in defining the terms
of their business relationship,’ and courts are obliged to enforce the parties’
bargain according to its terms.” Sundown Energy LP v. HJSA No. 3 P’ship,
622 S.W.3d 884, 889 (Tex. 2021) (quoting FPL Energy, 426 S.W.3d at 67).
Therefore, courts may not rewrite a contract under the guise of interpretation.
Id.
[¶ 138] Here, the parties agreed to minimize HoldCo’s and PEC’s
loyalty and care duties to the extent Texas law permits and agreed that HoldCo
would discharge the remaining duties in good faith to the fullest extent Texas
law requires.
[¶ 139] The court’s analysis is also informed by these undisputed facts:
• These are sophisticated parties represented by counsel.
• Drag-along rights are established vehicles used to facilitate equity
investments.
OPINION AND ORDER, Page 54 • PEOFs empowered HoldCo and PEC to exercise HoldCo’s drag-along
rights in their sole interest and discretion and in a manner that served
HoldCo’s (and by extension its affiliates’) and PEC’s interests—if it waited
two years, completed an arm’s-length transaction, and dealt fairly in doing so.
• PEOFs agreed that PEP’s Unitholders must follow HoldCo’s
instructions when it exercised its drag-along rights.
• That is, PEOFs agreed to a structure that gave Blackstone, Inc.—acting
through HoldCo—a majority of PEC’s board seats; required all Unitholders to
fulfill HoldCo’s directions regarding the sale, thereby requiring all partner
appointed directors and, thus, PEC to approve the sale at HoldCo’s direction;
and removed any discretionary PEC power to disobey HoldCo’s directions
regarding the Callon sale. 82
[¶ 140] In short, that is the deal PEOFs made and the deal the court is
to enforce to the full extent Texas law permits.
82 See TAPA § 6.7 (Unitholders must instruct their directors to approve the sale).
OPINION AND ORDER, Page 55 D. Breach of Statutory Responsibilities
1. Introduction
[¶ 141] Although PEOFs’ “fiduciary” breach causes of action are
properly TBOC breach causes of action, the court uses the elements of a
common law fiduciary breach claim to frame a TBOC cause of action’s
elements as: (i) a statutorily recognized relationship between the plaintiff and
defendant, (ii) the defendant’s breach of a statutory responsibility to the
plaintiff, and (iii) the defendant’s breach caused an injury to the plaintiff or a
benefit to the defendant. 83 See McLeod v. McLeod, 644 S.W.3d 792, 804 (Tex.
App.—Eastland 2022, no pet.) (fiduciary breach elements).
[¶ 142] It is undisputed that HoldCo and PEC were PEP partners and
owed PEOFs statutory loyalty and care duties and an obligation to discharge
them in good faith regarding the Callon sale—subject to their agreed
modifications to those responsibilities.84 And PEOFs do not claim that any
TAPA modifications to those responsibilities is manifestly unreasonable. See
TBOC §§ 152.002(b)(2)–(4); Cruz, 2018 WL 6566642, *14.
83 There are not two separate breach of fiduciary duty causes of action: one under the statute and one under the common law. Rather, there is only a cause of action based on the code that may incorporate certain common law aspects that are compatible with the code. 84 See ¶ 74.
OPINION AND ORDER, Page 56 [¶ 143] Accordingly, the court must (i) define the nature and scope of the
applicable responsibilities and (ii) decide whether PEOFs raised a genuine
issue of material fact regarding their alleged breach regarding the Callon sale.
2. First Cause of Action: “Fiduciary” Breach (HoldCo)
a. Preface
[¶ 144] The Callon sale resulted from agreements the parties created
five years earlier. Their term sheet shows that “Blackstone” expected, among
other things, (i) control over PEC’s board with five of nine directors and (ii)
“customary drag-along rights” regarding a proposed sale of 100% of the
partners’ interests.85 The TAPA embodies those points.
[¶ 145] The parties implemented this arrangement through the PIPA;86
the TAPA;87 and PEC Bylaws. 88 PEOFs do not claim those contracts were
signed under duress or they did not understand their risks.
[¶ 146] Whittier Trust Co., by Steven Anderson, signed the TAPA as
PEOF I’s general partner. 89 PEC’s Bylaws identified Jim Jeffs and Robert
85 TAPA at Annex B (Summary of Proposed Terms, Term Sheet-Royalties Vehicle). 86 PIPA. 87 TAPA. 88 Movants’ Ex. 10 (Bylaws). 89 TAPA.
OPINION AND ORDER, Page 57 Holland as PEOF I’s “Fund Directors” and Holland as PEC’s General Counsel
and Secretary.90 Jeffs’ declaration confirms that he was appointed to serve as
a PEC director.91 Whittier’s professional financial managers represented
PEOFs. 92
[¶ 147] PEOF I, PEC, and HoldCo made that deal, which PEOF II
accepted.
b. Loyalty and HoldCo’s Drag-Along Rights
i. Introduction
[¶ 148] At a high level, the loyalty duty concerns a transaction’s
substance and whether a partner acted with conflicts of interest. See TBOC
§ 152.205 (loyalty includes refraining from (i) acting on behalf of a conflicted
person, (ii) competing with the partnership, or (iii) dealing with the
partnership in a manner adverse to the partnership).
[¶ 149] Thus, the court begins with those requirements and considers
the extent to which the TAPA lawfully limits those duties. In sum, the TAPA
and TBOC combine to produce these Callon sale results: (i) HoldCo must give
90 Movants’ Ex. 10 (Bylaws). 91 Jeffs Dec. ¶ 2. 92 See Derrington Dec. ¶s 3, 6.
OPINION AND ORDER, Page 58 PEOFs reasonable access to books and records, including a duty to account for
and distribute Callon sale profits according to the waterfall; (ii) HoldCo need
not conduct the sale in a manner it reasonably believed was in PEP’s or
PEOFs’ interests; (iii) HoldCo could negotiate the sale terms in its sole
discretion and in its own sole interest (including PEC’s and “Blackstone’s”
interests) without subordinating its interests to PEP’s or the other partners’
interests—if it waited two years and conducted an arm’s-length transaction;
and (iv) HoldCo had to comply with the TAPA’s terms and “deal fairly” with
PEP and its partners while exercising its drag-along rights.
ii. Accounting for Proceeds
[¶ 150] PEOFs allege that HoldCo did not properly distribute Callon
sale proceeds according to the TAPA waterfall.93 Movants’ motion asserts that
“[t]he sale proceeds were [] distributed to the partners pursuant to the agreed
waterfall in the Limited Partnership Agreement” and includes some evidence
93 FAP ¶ 98.
OPINION AND ORDER, Page 59 to that effect.94 PEOFs did not respond to movants’ argument or provide any
corresponding evidence.95
[¶ 151] However, a summary judgment motion itself is not evidence.
Americana Motel, Inc. v. Johnson, 610 S.W.2d 143 (Tex. 1980). And movants’
evidence does not conclusively negate PEOFs’ improper payment claim. Frost
Nat. Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010). So, PEOFs “ha[d]
no burden to respond to [the] summary judgment motion” on this issue. M.D.
Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000).
[¶ 152] Movants’ evidence tends to show that PEOF II (but not PEOF
I) received money and Callon shares and the value of those shares.96 However,
that does not disprove PEOFs’ claim that common Unitholders may have been
paid ahead of preferred Unitholders contrary to the waterfall. So, the court
denies movants’ motion to the extent it seeks dismissal of PEOFs’ claim that
94 Movants’ MSJ at 3; Movant’s Exs. 7, 8, 11. 95 See PEOFs’ Resp. at 8. PEOFs’ only reference to the waterfall payment structure in their response was that “Blackstone was the only investor to receive any significant proceeds from the sale,” citing to a different portion of their petition than where this allegation appears. Id. Accordingly, the court understands this statement was offered in support of PEOFs’ allegation that the Callon sale was fundamentally unfair to the non-HoldCo investors, not that the waterfall was distributed improperly. 96 Movant’s Exs. 7 (PEOF II Distribution Letter), 8 (AST Callon Petroleum Share Registration Statement), 11 (NASDAQ Historical Data for CPE).
OPINION AND ORDER, Page 60 HoldCo failed to properly account for and distribute the Callon sale profits
according to the waterfall.
iii. Allocation of Proceeds between PEP and BPP
[¶ 153] PEOFs allege that HoldCo unfairly structured the allocation of
sales proceeds between PEP and BPP (the sidecar business) to advantage
BPP’s owners and disadvantage PEP’s owners. 97 Movants’ motion did not
address that claim. Thus, the court denies summary judgment regarding it.
iv. Remaining Loyalty Claims
[¶ 154] TAPA § 6.7 addresses the nature and scope of HoldCo’s Callon
loyalty duty by defining permitted conduct. And, reading § 6.7 together with
§ 5.9 and the circumstances surrounding HoldCo’s private equity investment
in PEP further inform the parties’ objective understanding regarding the
nature and scope of HoldCo’s Callon sale responsibilities. Polyco, 681 S.W.3d
at 391 (construe contracts as a whole giving effect to all contract terms).
[¶ 155] That is, the parties broadly met TBOC § 152.002(b)(2) contract-
created loyalty standards by framing specific activities that do not violate the
loyalty duty. For example, TAPA §§ 5.4 through 5.9 and 5.11 span more than
97 FAP ¶s 96, 107, and 108.
OPINION AND ORDER, Page 61 three pages discussing “arm’s-length” or fair market value requirements and
fairness standards for potential conflicted transactions that might otherwise
breach loyalty duties.98 So, the partners identified those circumstances,
considered their risks, and negotiated protections. Thus, they knew how to
identify and negotiate regarding risks.
[¶ 156] More specifically, TAPA § 5.9 defines conduct that would not
violate loyalty duties, including granting all partners—including PEC—the
ability to
. . . decide or determine any matter in its sole and absolute discretion taking into account solely its interest and those of its Affiliates (excluding the Partnership and its Subsidiaries) subject to the Agreed Duties. Each Partner further acknowledges and agrees that it would not have become a Partner in the Partnership if this arrangement were not acceptable to it.
[¶ 157] They further defined Agreed Duties to mean “to the fullest
extent required by Texas law, . . . the duties of good faith and fair dealing . . .,”
which means the duty to “deal fairly.” Crim, 823 S.W.2d at 593–94.
98 TAPA § 5.4 Gas Purchasing Lines; § 5.05 Farmouts; § 5.6 Sales of Properties to Partnership; § 5.7 Purchases Properties from Partnership; § 5.8 Fair Market Value; and § 5.11 Competitive Activities and AMI.
OPINION AND ORDER, Page 62 [¶ 158] Those agreements extend to HoldCo’s § 6.7 drag-along rights
involving an “Exit Event,” which includes “(i) the consummation of a sale of
the Partnership substantially as a whole in one transaction or a series of
closely related transactions or a sale of all or substantially all of the assets of
the Partnership.” In short, TAPA §§ 5.9(c) and 6.7 authorized HoldCo to
negotiate and complete the Callon sale in its sole discretion and interest if it
waited at least two years and conducted an arm’s-length transaction.
[¶ 159] However, TAPA § 6.7 provides more deferential standards for
HoldCo’s drag-along rights. The differences between HoldCo’s sole discretion
and sole interest standards that do not require a fair market value, and the
TAPA Article V standards for those potentially conflicted transactions that do
require a fair market value shows that the parties knowingly negotiated for and
accepted the risks that § 6.7 created. Thus, they met TBOC § 152.205’s
minimum standards, and it is undisputed that HoldCo waited roughly five
years and the Callon sale was an arm’s-length sale. 99
99 FAP ¶s 2 (referring to “third party” Callon), 42 (TAPA signed July 12, 2016), 94 (Callon sale closed October 1, 2021); Nov. 21, 2024, Hrg. Tr. at 8:2–22, 22:11–25:12, 26:16– 27:18.
OPINION AND ORDER, Page 63 [¶ 160] So, except as to the sale proceeds’ allocation and distribution,
HoldCo conclusively met its loyalty duty regarding the Callon sale.
[¶ 161] But HoldCo (and PEC) had to conduct the sale in good faith.
c. Care and HoldCo’s Drag-Along Rights
[¶ 162] In contrast to the loyalty duty, the care duty concerns the
conduct or process a partner used while operating the business or deciding
whether to do a third-party deal. See TBOC § 152.206 (care requires acting
without negligence in conducting the partnership’s business). That is, the
TBOC adopts a form of business judgment rule as its care duty standard. See
id.; Miller, Fiduciary Duties 27.
[¶ 163] Here, the parties’ arm’s-length sale standard as a matter of law
satisfied TBOC § 152.206(a)’s care duty regarding the Callon sale by adopting
an alternative minimum sale process procedure. See Cruz, 2018 WL
6566642, *14. It is undisputed that the Callon sale was an arm’s-length
transaction.100 Thus, HoldCo satisfied its care duty with the Callon sale.
[¶ 164] But, HoldCo still had to discharge that obligation in good faith.
FAP ¶s 2 (“third party” Callon), 42 (TAPA signed July 12, 2016), 94 (Callon sale closed 100
October 1, 2021); Nov. 21, 2024, Hrg. Tr. at 8:2–22, 22:11–25:12, 26:16–27:18.
OPINION AND ORDER, Page 64 d. Good Faith
i. Introduction
[¶ 165] Texas courts have not drawn clear distinctions between the
loyalty, care, good faith, and candor responsibilities. See, e.g., Zinda, Ltd., 178
S.W.3d at 890–91 (analyzed duties of full disclosure, candor, and good faith
as a single fiduciary duty); Cruz, 2018 WL 6566642, *10–11 (combined
loyalty and good faith analysis). Nor has the court found Texas cases applying
those principles to drag-along sales.
[¶ 166] However, the risks inherent with drag-along rights are well
known. See, e.g., Evan Tarver, What are Drag-Along Rights? Meaning,
Benefits, and Example, Investopedia June 11, 2024,
https://www.investopedia.com/terms/d/dragalongrights.asp. Thus, they are
typically negotiated at the beginning of a relationship and are recognized as
one of the best ways for a majority owner to maintain control over future
transactions that may involve minority owners. Soren Lindstrom and Lindsey
Reighard, II. How to Deal with Minority Shareholder Investments, 2016
TXCLE Advanced Bus. L. 14.II (2016).
[¶ 167] Indeed:
Drag-Along rights, or drag rights, which give the majority owner the right to force minority owners to participate in a sale
OPINION AND ORDER, Page 65 of the company, can be a fiercely negotiated provision in a company’s governing documents.
***
In negotiating these provisions, the minority owner seeks to ensure that such a sale will not disadvantage the minority. In light of what is at stake and the inherent uncertainty drag rights engender, parties are understandably cautious when approaching the negotiating table.
Robert B. Little & Joseph A. Orien, Issues and Best Practices in Drafting Drag-
Along Provisions, Harvard Law School Forum on Corporate Governance
(2016) (Little and Orien).
[¶ 168] With PEOFs having accepted those risks and HoldCo having
met the TAPA’s minimized standards, PEOFs rely on good faith-based
arguments to support their claims. 101 The court addresses PEOFs’ arguments
as follows:
ii. Fair Price and Process
[¶ 169] Many of PEOFs’ claims share the core premise that the
consideration HoldCo negotiated and the process used to value and negotiate
the sale was unfair because the consideration was too low and produced too
little return for PEOFs.102 Central to that premise is the notion that HoldCo
101 See, e.g., FAP ¶s 52, 53, 105; PEOF Resp. at 3–6, 11–20. 102 See, e.g., FAP ¶s 2, 80–81, 84, 100–103, 107; PEOF Resp. at 8–9, 27–30, 35.
OPINION AND ORDER, Page 66 had to conduct different processes and negotiate a fair price for the partnership
as a whole, including PEOFs, instead of a price that suited HoldCo as decided
in its sole discretion. 103 Yet HoldCo’s freedom to do exactly that is what TAPA
§§ 5.9 and 6.7 provide for and what PEOFs agreed to five years earlier when
they wanted “Blackstone’s” money.
[¶ 170] Nonetheless, PEOFs ask the court to alter the risk allocation
equation and imply non-existent § 6.7 fair price and required process terms.104
But no such terms exist in the TAPA, and imposing them would violate Texas’s
sacred contract freedom rights. See Nafta Traders, 339 S.W.3d at 95–96.
Instead, PEOFs negotiated away those potential protections for
“Blackstone’s” promised at least two-year capital infusion. 105
[¶ 171] Furthermore, PEOFs presuppose that HoldCo had to act “in a
manner the partner reasonably believes to be in the best interest of the
103 See, e.g., FAP ¶s 85, 92, 99; PEOF Resp. at 28. 104 See PEOF Resp. at 26–30. 105 TAPA § 6.7.
OPINION AND ORDER, Page 67 partnership.” See TBOC § 152.204(b)(2). 106 Not so. As discussed in ¶s 107–
09 and 149, the parties disclaimed that obligation.107
[¶ 172] Moreover, as a matter of law HoldCo and PEC did not act in bad
faith by exercising their contract rights to discharge HoldCo’s drag-along
rights as they did. E.g., Texas Beef Cattle, 921 S.W.2d at 211 (Tex. 1996); John
Masek, 848 S.W.2d at 174.
[¶ 173] PEOFs’ argue that applying the TAPA as written could lead to
absurd results such as HoldCo selling the business for a dollar. 108 The court
rejects that argument because, although courts will not enforce unambiguous
terms that lead to absurd results, that safety valve is reserved for only truly
exceptional cases where it is unthinkable, unfathomable, or quite impossible
that a rational person could have intended it. Fairfield Indus., Inc. v. EP Energy
E&P co., L.P., 531 S.W.3d 234, 248–49 (Tex. App.—Houston [14th Dist.]
2017, pet. denied). Here, the consideration was far greater than a dollar.
106 See, e.g., FAP ¶ 92 (“Blackstone prioritized its own corporate interest … over acting in the best interest of Primexx.”). 107 See TAPA §§ 5.9(b)–(c). PEOFs’ reliance on Houle v. Casillas for the premise that HoldCo had to consider their interests is misplaced because there was no written agreement in that case excluding that responsibility. PEOFs’ Resp. at 14; see 594 S.W.3d at 547. 108 PEOFs’ Resp. at 25.
OPINION AND ORDER, Page 68 [¶ 174] Furthermore, it is not the court’s role “to question the wisdom
of the parties’ agreement or to rewrite its provisions under the guise of
interpreting it.”109 Id. at 242.
[¶ 175] Accordingly, based on the undisputed facts, the parties’
business purposes when they signed the TAPA, its unambiguous terms, and
TBOC’s unambiguous provisions applicable to this case, as a matter of law
HoldCo’s drag-along rights were not so unthinkable, unfathomable, or
impossible that a reasonable person in the parties’ positions could not have
rationally agreed to their application when they created the TAPA. Indeed,
TAPA § 5.9(c)(ii) unambiguously records the parties’ agreement that they
would not have entered into the TAPA if its terms were not acceptable to them.
[¶ 176] Had these results not been the product of risks PEOFs accepted
at the outset, they would have negotiated different standards as they
repeatedly did in §§ 5.4–5.8. Or they would have rejected what they deemed
to be their best option at the time. But they did none of those things.
Accordingly, the court (i) declines to retroactively add diligence standards or
Fairfield cites Combs v. Health Care Servs. Corp., 401 S.W.3d 623, 630 (Tex. 2013), for 109
support. Although Combs is a statutory construction case, the same principles apply here.
OPINION AND ORDER, Page 69 a fair price requirement and (ii) and dismisses all PEOFs’ claims regarding
HoldCo’s pre-sale process or negotiated consideration.
iii. Information Disclosures
[¶ a] Drag-sale Notice Provisions
[¶ 177] The nature of HoldCo’s disclosure and good faith
responsibilities requires blending common law and statutory principles with
contract terms.110
[¶ 178] And the amount of notice a majority owner must give the
minority owners before invoking drag rights is a common issue parties may
address. Little and Orien. For example, in Halpin v. Riverstone Nat’l, Inc., the
court refused to enforce drag-along rights where the majority owners did not
comply with a pre-merger notice requirement. C.A. No. 9796, 2015 WL
854724, *5–7 (Del. Ch. February 26, 2015).
[¶ 179] Furthermore, the TAPA refers to “notice” over one hundred
times. 111 That is, PEOFs could have negotiated for an advance notice
protection as they did elsewhere in the TAPA but did not do so in § 6.7.
See ¶s 110–28. 110
See, e.g., TAPA §§ 3.6(b)(v) (in certain circumstances the partnership must give ten days’ 111
notice to Series A Preferred Unitholders prior to a liquidation event).
OPINION AND ORDER, Page 70 [¶ b] Voluntary Advance Notice
[¶ 180] The PEP partnership agreement is silent on whether HoldCo or
PEC had to give PEP, PEOFs, or any other partners advance notice regarding
the Callon Sale. For these reasons, the court declines to rewrite the TAPA to
include that requirement:
• To begin, as discussed in ¶ 178, advance notice requirements are
common with drag-along rights. Yet, the parties did not include an advance
notice requirement.
• Further, given HoldCo’s unambiguous authority to conduct the sale in
its sole discretion in its sole interests (including its affiliates and PEC’s sole
discretion and interests), advance notice to PEOFs was not material to that
deal. That is, the Unitholders, and thus a majority of the directors had to
follow HoldCo’s directions.
[¶ 181] Accordingly, the court declines to inject notice provisions into
§ 6.7’s drag-along rights that the parties omitted. See FPL Energy, 426 S.W.3d
at 68 (Tex. 2014) (omissions intentional where parties negotiated for similar
terms elsewhere in the contract).
OPINION AND ORDER, Page 71 iv. Sales Proceeds Allocation and Distribution
[¶ 182] For the reasons the court denies HoldCo’s motion regarding
whether it breached its loyalty duty regarding the allocation and distribution
Callon sale proceeds, HoldCo did not conclusively negate the good faith
obligation regarding those claims.
v. Requested or Misleading Information
[¶ 183] PEOFs do not allege that HoldCo, PEC, or Doyle failed to
provide any information PEOFs requested regarding the Callon sale. Thus,
TBOC § 152.213’s duty to provide requested information is not implicated.
[¶ 184] Similarly, PEOFs do not allege that HoldCo, PEC, or Doyle gave
them, or the board false or misleading information regarding the deal. Indeed,
those persons could not have provided misleading information to PEOFs if (i)
none of those persons communicated with PEOFs and (ii) Jeffs and Langdon
were not, as PEOFs posit, their agents on the board. So, the court need not
consider whether any such bad faith breach occurred.
vi. Regular Board Meetings
[¶ 185] PEOFs say that in the weeks and months before the Callon sale,
HoldCo failed to hold regularly scheduled board meetings to discuss whether
OPINION AND ORDER, Page 72 a sale made sense from the company’s or partners’ viewpoints.112 Central to
that claim is that there were missed regularly scheduled board meetings.
However, PEC’s Bylaws do not say when such meetings were to occur.113 And
PEOFs did not respond with evidence on that issue. Since HoldCo submitted
evidence that there were no regularly scheduled meetings to be missed, and
PEOFs not having submitted contrary evidence, the court grants HoldCo’s
motion regarding the claim that it failed to hold regularly scheduled PEC board
meetings to discuss the Callon sale.
e. Conclusion
[¶ 186] Excluding PEOFs’ claims directed to the allocation and
distribution Callon sale proceeds, as a matter of law HoldCo did not breach its
duties of loyalty or care or its obligation of good faith in the execution of Callon
sale pursuant to its drag right.
3. Second Cause of Action: “Fiduciary Breach” (PEC)
[¶ 187] With limited exception, PEOFs’ arguments regarding PEC are
the same as for HoldCo. Thus, the court’s conclusions regarding HoldCo are
at least the same as for PEC.
112 FAP ¶ 87. 113 See Movants’ Ex. 10 (Bylaws at Art. III).
OPINION AND ORDER, Page 73 [¶ 188] Additionally, TAPA § 5.9 provides PEC additional support. For
example, § 5.9(b) provides that PEC, as the Managing General Partner,
. . . shall not owe any fiduciary or similar duty or obligation whatsoever to the Partnership, any Partner or Assignee, except as required by any provision of applicable law that cannot be waived, and
(B) to the extent that, at law or in equity, the Managing General Partner owes any duties (including fiduciary duties) to the Partnership, any other Partner or assignee pursuant to applicable law, any such duty other than the Agreed Duties is hereby eliminated to the fullest extent permitted pursuant to the applicable law.
[¶ 189] PEOFs argue that PEC breached its responsibilities by
participating in the sale because no provisions in the TAPA required PEC to
comply with “Blackstone’s” drag-along instructions. Although the TAPA
does not expressly require PEC to follow HoldCo’s direct instructions, PEOFs’
argument ignores reality. The reality is that HoldCo controlled PEC’s board.
And TAPA § 6.7 required all Unitholders to consent to the sale and take all
steps needed to complete the sale—including instructing any Existing Limited
Partner Directors to approve the drag-along sale. Indeed, PEC had no choice
but to do what its directors voted to do, and they all voted to approve the sale
and the Transaction Resolutions authorizing PEC’s officers to take actions
OPINION AND ORDER, Page 74 necessary to complete the sale.114 Notably, PEOF appointed directors Jeffs
and Langdon voted for the sale without reservation.115
[¶ 190] Additionally, FAP ¶ 85 concedes that forcing the Callon sale by
using its drag-along rights was under HoldCo’s sole control:
By forcing the Board to vote on (and approve) the proposed transaction over a weekend, Blackstone necessarily precluded the Managing General Partner or the Board from engaging in a reasoned and fully informed decision-making process or satisfying their contractual and fiduciary duties. Yet all Blackstone-controlled Board members voted to approve the sale without conducting any analysis or due diligence to fairly evaluate the transaction and whether it would be fair to all of Primexx’s investors.
[¶ 191] So, the court resolves PEOFs’ Second Cause of Action as it does
their First.
E. Third Cause of Action: Breach of Contract (HoldCo)
[¶ 192] The elements of a contract breach claim are: (i) a valid contract
exists; (ii) the plaintiff performed; (iii) the defendant breached the contract;
and (iv) the plaintiff was damaged as a result. E.g., Williams v. First Tenn. Nat.
Movants’ Ex. 3 (Aug. 2, 2021, Board Minutes at Ex. A). 114
Movants’ Ex. 3 (August 2, 2021, Board Minutes). PEOFs deny that they controlled Jeffs 115
and Langdon as of August 2, 2021. However, PEOFs was entitled to control two seats on the board. Whether PEOFs chose to abandon that right is not material to this motion because board approval was a non-discretionary function since all Unitholders had to cooperate in closing the deal, including the § 6.7 requirement that they direct their appointed directors to approve the deal. And HoldCo controlled five of nine seats.
OPINION AND ORDER, Page 75 Corp., 97 S.W.3d 798, 802 (Tex. App.—Dallas, 2003, no pet). Here, the third
element is the only one before the court.
[¶ 193] It is undisputed that HoldCo waited the required two years and
it conducted the Callon deal in an arm’s-length sale.116 Nonetheless, PEOFs’
Third Cause of Action posits that HoldCo breached the TAPA based on the
same alleged good faith breaches they say support their First Cause of Action.
[¶ 194] Because HoldCo’s “fiduciary” duties required it to perform in
good faith, its contract duty to perform in good faith is no greater than its
TBOC-based responsibilities. Accordingly, the court resolves PEOFs’ Third
Cause of Action same as it disposes of their First.
F. Fourth, Fifth, Sixth, Seventh, and Eighth Causes of Action: Derivative Liability Causes of Action (Holdco, PEC, and Doyle)
1. Introduction
[¶ 195] PEOFs’ Fourth, Fifth, Sixth, Seventh, and Eighth Causes of
Action assert civil conspiracy, aiding and abetting fiduciary breach, and
knowing participation in fiduciary breach causes of action against Holdco,
PEC, and Doyle.117 These are derivative liability torts because they involve a
116 FAP ¶s 2 (referring to “third party” Callon), 42 (TAPA signed July 12, 2016), 94 (Callon sale closed October 1, 2021); Nov. 21, 2024, Hrg. Tr. at 8:2–22, 22:11–25:12, 26:16–27:18. 117 FAP ¶s 136–154.
OPINION AND ORDER, Page 76 defendant’s participation in another person’s torts where the defendant
otherwise would not be liable for the tort. See Agar Corp., Inc. v. Electro
Circuits Int’l, LLC, 580 S.W.3d 136, 140–42 (Tex. 2019) (civil conspiracy a
vicarious—not direct—liability tort); Grant Thornton LLP v. Prospect High
Income Fund, 314 S.W.3d 913, 930 (Tex. 2010) (aiding abetting claim failed
for same reason civil conspiracy failed, but noted that the Texas Supreme
Court has not recognized an independent aiding and abetting claim); Kinzbach
Tool Co v. Corbett-Wallace Corp., 160 S.W.2d 509, 514 (Tex. 1942) ( joint and
several liability for knowingly participating in agent’s fiduciary breach to
principal).
2. Aiding and Abetting (HoldCo and Doyle)
[¶ 196] Neither the supreme court nor the Fifteenth Court of Appeals
have recognized aiding and abetting as a separate liability theory apart from
civil conspiracy. See First United Pentecostal Church of Beaumont v. Parker,
514 S.W.3d 214, 224 (Tex. 2017); Palliative Plus LLC v. A Assure Hospice,
Inc., No. 03-23-00770-CV, 2025 WL 284920, *10 (Tex. App.—Beaumont
January 24, 2025, no pet. h.). So, subject to those courts later recognizing
this theory, the court dismisses PEOFs’ aiding and abetting cause of action
against Holdco and Doyle. See TEX. R. CIV. P. 166(g), (p).
OPINION AND ORDER, Page 77 3. Civil Conspiracy and Knowing Participation (Holdco, PEC, and Doyle)
[¶ 197] PEOFs’ civil conspiracy and Kinzbach claims depend on the
viability of their fiduciary breach claims. Thus, at a minimum, the court’s
rulings regarding PEOFs’ fiduciary breach claims apply equally to these
causes of action; and the court incorporates those prior rulings here.
[¶ 198] The following discussion concerns issues that movants’ motions
implicate but that the parties did not previously discuss. So, the court does
not rule on them now. However, pursuant to Rules 166(g), (p) the court directs
the parties to brief these issues:
• To what extent were PEC or Doyle legally capable of the civil
conspiracies alleged against them (consider the various combinations alleged
against them)?
• Is knowing participation in a fiduciary breach a viable cause of action
where HoldCo controlled the Board, the Unitholders, and Doyle regarding the
Callon sale?
[¶ 199] For causes of action concerning them, PEC and Doyle are to
submit their briefs within ten days of this opinion’s signature date. PEOFs are
to submit their responses, if any, within ten days of the later submission by
OPINION AND ORDER, Page 78 PEC or Doyle. The briefs are to be no more than ten pages excluding the style,
caption, and preliminary tables.
VII. CONCLUSION
[¶ 200] Accordingly, the court denies movants’ motion regarding
causes of action asserted against them based on claims that (i) the Callon sale
proceeds were not properly distributed according to the TAPA waterfall and
(ii) the consideration was not fairly allocated between PEP and BPP.
Otherwise, the court grants movants’ motion and dismisses the causes of
action against them as described above.
It is, SO ORDERED.
BILL WHITEHILL Judge, Texas Business Court- First Division
SIGNED: March 10, 2025
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Karyn Cooper karyn.cooper@kirkland.com 3/10/2025 2:35:27 PM ERROR APPENDIX 3 other Person to construct or purchase, gathering lines from Partnership Wells to gas transportation systems, and whenever the Managing General Partner does so, the Partnership shall pay the Managing General Partner or such Affiliate an amount that is within the range of prices that an unrelated party could have reasonably charged in an arm’s-length transaction for similar services in the area, as a transportation fee for the transportation of all gas through the gathering system so constructed or acquired, and no other transportation fee shall be paid to the Managing General Partner or to any of its Affiliates. Contractual arrangements to transport gas that are in existence on the date of this Agreement shall be deemed to comply with the provisions of the preceding sentence.
5.5 Farmouts. The Managing General Partner may, in its sole discretion, acquire leases for the purpose of subsequent sale or Farmout. Neither the Managing General Partner nor any of its Affiliates will enter into a Farmout or other similar agreement with the Partnership unless (i) the Managing General Partner, exercising the standard of a prudent Operator, determines that the Farmout is in the best interests of the Partnership, and (ii) the terms of the Farmout are consistent with and in any case no less favorable than those utilized for similar arrangements in the geographic area in which the subject property is located. The decision with respect to making a Farmout, and the terms of the Farmout to another Person, will be in the sole discretion of the Managing General Partner. A Farmout of an undeveloped property from the Partnership to the Managing General Partner or its Affiliates must be made in accordance with Section 5.8 below.
5.6 Sales of Properties to Partnership. The Managing General Partner and its Affiliates may sell properties to the Partnership; provided that the Managing General Partner and its Affiliate shall not sell any properties to the Partnership except pursuant to transactions that are fair and reasonable to the Unitholders, and at a price that is not more than its fair market value as provided in Section 5.8.
5.7 Purchases of Properties From Partnership. Neither the Managing General Partner nor any Affiliate, may purchase or acquire any property from the Partnership, except pursuant to transactions that are fair and reasonable to the Unitholders and in any event in compliance with the provisions of Section 5.11(b), and at a price that is not less than its fair market value as provided in Section 5.8.
5.8 Fair Market Value. For purposes of Farmouts or purchases and sales of properties in accordance with the requirements of Sections 5.5, 5.6 and 5.7 above, the fair market value of a property shall be the price set forth in an Appraisal, which shall obtained by the Managing General Partner within a reasonable period of time prior to the closing of such sale or purchase. The Appraisal shall be maintained in the records of the Partnership for at least four years. The cost of the Appraisal shall borne equally by the Partnership and the Managing General Partner.
5.9 Fiduciary Duties.
(a) Each Partner and the Managing General Partner shall, to the fullest extent required by Texas law, owe to the Partnership and its Partners the duties of good faith and fair dealing, and in the case of the Managing General Partner, the duty not to exceed in such capacity
31 EXH. 1 - PAGE 37 5639
Page 5637 the bounds of the authority granted to any general partner by this Agreement and Texas law (all such duties collectively, the “Agreed Duties”).
(b) To the fullest extent permitted by Law,
(A) except for the Agreed Duties and as expressly provided in this Agreement, the Managing General Partner shall not owe any fiduciary or similar duty or obligation whatsoever to the Partnership, any Partner or Assignee, except as required by any provisions of applicable law that cannot be waived, and
(B) to the extent that, at law or in equity, the Managing General Partner owes any duties (including fiduciary duties) to the Partnership, any other Partner or any Assignee pursuant to applicable law, any such duty other than the Agreed Duties is hereby eliminated to the fullest extent permitted pursuant to applicable law.
(c) Subject to the foregoing clauses (a) and (b), the Partnership and the Partners acknowledge and agree that the Managing General Partner may decide or determine any matter subject to the Board’s approval hereunder in the sole and absolute discretion of the Managing General Partner, it being the intent of all Partners the Managing General Partner have the right to make such decision or determination solely on the basis of the interests the Managing General Partner desires to consider, including the Managing General Partner’s own interests, the interests of the Partner that designated such any directors of the Managing General Partner and the interests of such Partner’s Affiliates.
(i) The Partnership and the Partners agree that any claims against, actions, rights to sue, other remedies or recourse to or against the Managing General Partner (except for such claims, actions, rights to sue, remedies or recourse that may be initiated or brought solely by the Partner that appointed directors on the Board) grounded in or alleging any breach of any fiduciary or similar duty, other than an Agreed Duty, are expressly released and waived by the Partnership and each Partner (and each Assignee), to the fullest extent permitted by law, as a condition to and as part of the consideration for the execution of this Agreement and the undertaking to incur the obligations provided for in this Agreement.
(ii) To the extent that, at law or in equity, a Partner owes any duties (including fiduciary duties) to the Partnership, any other Partner or any Assignee pursuant to applicable law, any such duty, other than the Agreed Duties, is hereby eliminated to the fullest extent permitted pursuant to applicable law, it being the intent of the Partners that to the extent permitted by law and except to the extent set forth in this Section 5.9 or expressly specified elsewhere in this Agreement, no Partner or the Managing General Partner, in their capacities as such, shall owe any duties of any nature whatsoever to the Partnership, the other Partners or any Assignee, other than the Agreed Duties, and each Partner, in its capacity as such, may decide or determine any matter in its sole and absolute discretion taking into
32 EXH. 1 - PAGE 38 5640
Page 5638 account solely its interests and those of its Affiliates (excluding the Partnership and its Subsidiaries) subject to the Agreed Duties. Each Partner further acknowledges and agrees that it would not have become a Partner in the Partnership if this arrangement were not acceptable to it.
(iii) Nothing herein is intended to create a partnership, joint venture, agency or other relationship creating fiduciary or quasi-fiduciary duties or similar duties or obligations, otherwise subject the Partners to joint and several liability or vicarious liability or to impose any duty, obligation or liability that would arise therefrom with respect to any or all of the Partners or the Partnership.
5.10 No Duty of Third Parties to Investigate Authority. No Person, dealing with the Partnership shall be required to inquire into the authority of the Managing General Partner to take any action or make any decision.
5.11 Competitive Activities and AMI.
(a) Subject only to the provisions of this Section 5.11, during the continuation of the Partnership (i) any of the Partners may acquire, promote, develop, operate and manage any oil and gas property on his or their own behalf or on behalf of any Affiliate; and (ii) the Managing General Partner and any Affiliate of the Managing General Partner may, notwithstanding the existence of this Agreement, engage in any activities it chooses, whether the same are competitive with the Partnership or otherwise without having or incurring any obligation to offer any interest in such activities to the Partnership or any party hereto and, as a material part of consideration for the Managing General Partner’s execution hereof, each Unitholder hereby waives, relinquishes and renounces any such right of claim of participation.
(b) Except as provided in the next two sentences of this Section 5.11(b), the Managing General Partner and each Limited Partner hereby agrees that neither it nor any of its Affiliates shall purchase or make an investment in any oil and gas property of the type that is (i) within the scope of the Partnership’s business as set forth in Section 2.4 and (ii) within AMI Area except, in each case, if the Partnership is offered a reasonable opportunity to purchase or make such investment during a period of 10 days and declines or is unable to effect such purchase or investment; provided, that in the event the Partnership does not pursue such opportunity within such period, such applicable Limited Partner or the Managing General Partner and/or its Affiliates, as applicable, shall be permitted to pursue such opportunity without restriction. The provisions of this Section 5.11(b) shall not be applicable to (x) existing activities relating to (i) Bluegrove NRG, Ltd., NRG Pipeline Company of Texas and Possum Kingdom Processing Corporation, (ii) any of the limited partnerships in which Affiliates of the Managing General Partner are presently general partners (including the F&B limited partnerships), (iii) any oil and gas interest held by the Managing General Partner or its Affiliates as of the Effective Date, (iv) investments by the Managing General Partner or its Affiliates in not more than five percent (5%) of the issued and outstanding shares of capital stock of any publicly traded corporation or entity and (v) activities approved by the Unanimous Consent of the Managing General Partner. The provisions of this Section 5.11(b) shall terminate with respect to the Managing General Partner and its Affiliates upon the earlier to occur of (i) five (5) years from the Effective Date, (ii) at such time as the Managing General Partner or any of its Affiliates shall
33 EXH. 1 - PAGE 39 5641
Page 5639 APPENDIX 4 FILED IN BUSINESS COURT OF TEXAS BEVERLY CRUMLEY, CLERK ENTERED 4/15/2025
2025 Tex. Bus. 13
The Business Court of Texas, 1st Division
PRIMEXX ENERGY § OPPORTUNITY FUND, LP et al. § Plaintiffs, § v. § Cause No. 24-BC01B-0010 § PRIMEXX ENERGY § CORPORATION, et al., § Defendants
═══════════════════════════════════════ MEMORANDUM OPINION AND ORDER ═══════════════════════════════════════
[¶ 1] By order signed April 10, 2025, the court denied Plaintiffs’
(PEOFs) Motion for Reconsideration (Mot.) of the court’s Opinion and Order
granting in part BPP HoldCo LLC, Primexx Energy Corporation, and M.
Christopher Doyle’s Motion for Summary Judgment (MSJ). 1
1 Primexx Energy Opportunity Fund, LP v. Primexx Energy Corp., 2025 Tex. Bus. 9, — S.W.3d — (Tex. Bus. Ct. 2025) (MSJ Opinion). I.
[¶ 2] “After a court grants a summary judgment motion, the court
generally has no obligation to consider further motions on the issues
adjudicated by the summary judgment.” Macy v. Waste Mgmt., Inc., 294
S.W.3d 638, 651 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (quoting
Kelly v. Gaines, 181 S.W.3d 394, 416 (Tex. App.—Waco 2005), rev’d on other
grounds, 235 S.W.3d 179 (Tex. 2007)). Nonetheless, the court addresses
PEOFs’ arguments.2
II.
[¶ 3] The court’s MSJ Opinion did not conclude, as PEOFs contend, that
HoldCo was “allow[ed] to act in bad faith” so long as it “rel[ies] on a
contractual provision purportedly permitting its conduct.”3
[¶ 4] Instead, as the court stated, movants’ summary judgment motion
distilled to whether there was a genuine issue of material fact regarding
whether they failed to act in good faith (that is, acted in bad faith) regarding
the Callon sale. 2025 Tex. Bus. 9, ¶ 134.
2 This memorandum opinion does not expressly address every argument PEOFs’ reconsideration motion asserts. Nonetheless, the court considered all of PEOFs’ arguments and rejects them. 3 Mot at 1, 17.
MEMORANDUM OPINION AND ORDER, Page 2 [¶ 5] PEOFs’ motion concedes as much:
As is required by the text of the Partnership Agreement, the Court found in its Opinion that PEC and BPP HoldCo owed the duty of good faith to Plaintiffs, including with respect to the execution of the drag-along provision. See Op. at ¶ 161 (“But HoldCo (and PEC) had to conduct the sale in good faith.”); ¶ [1]64 (“But, HoldCo still had to discharge that obligation in good faith.”); ¶ 194 (“HoldCo’s ʻfiduciary’ duties required it to perform in good faith”). In fact, the Opinion recognizes that the “analysis converges on whether HoldCo acted in good faith when it exercised its drag-along rights and forced the sale . . .” Id. at ¶ 134. 4
[¶ 6] The court’s analysis considered PEOFs’ causes of action, claims
(which allege several ways in which they posit movants failed to act in good
faith regarding the Callon sale), arguments, and all proper summary judgment
evidence. That evidence includes movants’ summary judgment evidence,
PEOFs’ responsive evidence, and PEOFs’ FAP admissions.
[¶ 7] After considering the parties’ arguments and all the proper
summary judgment evidence, the court concluded that, except for instances
described in the court’s opinion (see id. ¶ 200), PEOFs failed as a matter of law
to raise a genuine issue of material fact supporting liability based on their
claims of bad faith. See id. ¶ 172.
4 Mot. at 18–19 (emphasis original).
MEMORANDUM OPINION AND ORDER, Page 3 III.
A. Arguments PEOFs Previously Made
[¶ 8] PEOFs’ reconsideration motion repeats these rejected arguments:
• Texas Beef Cattle Co. v. Green, 921 S.W.2d 203 (Tex. 1996) does not apply in cases involving fiduciary duties. 5 PEOFs raised this argument during the November 21, 2024, hearing6 and specifically referred to Spethmann v. Anderson.7 PEOFs argued the same in their supplemental reply brief.8
• Cases discussed at ¶s 116 and 172 of the MSJ Opinion address only implied fiduciary duties, not an explicit duty written into the contract.9 PEOFs made this argument in their opposition10 and at the November 21, 2024, hearing.11
• Defendants adduced no evidence establishing that they acted in good faith.12 PEOFs’ opposition made this argument.13
• Section § 152.002 explicitly prohibits a partnership agreement from entirely eliminating the duties of loyalty, care, or good faith. 14 PEOFs made this argument throughout their briefing and at the November 21, 2024, hearing.15
5 Mot. at 11 (citing Spethmann v. Anderson, 171 S.W.3d 680, 695–96 (Tex. App.—Dallas 2005, no pet.); see also id. at 2, 11–15. 6 Nov. 21, 2024, Hrg. Tr. at 77:17–82:11. 7 Nov. 21, 2024, Hrg. Tr. at 81:16–82:11. 8 PEOFs’ Jan. 3, 2025, Suppl. Reply. at 25–26. 9 Mot. at 16; see also at 3, 12, 16–17. 10 PEOFs’ Nov. 1, 2024, Opp. at 15–16. 11 Nov. 21, 2024, Hrg. Tr. at 67:25–68:22. 12 Mot. at 19; see also at 1–2, 18–21. 13 PEOFs’ Nov. 1, 2024, Opp. at 4, 6, 17, 23. 14 Mot. 22; see also at 3–4, 22–26. 15 PEOFs’ Nov. 1, 2024, Opp. at 18, 21–23; PEOFs’ Dec. 13, 2024, Suppl. Br. at 7, 25; PEOFs’ Jan. 3, 2025, Suppl. Reply at 8, 27; Nov. 21, 2024, Hrg. Tr. at 89:24–92:21.
MEMORANDUM OPINION AND ORDER, Page 4 • Defendants’ proposed interpretation would render “Agreed Duties” meaningless and therefore makes the contract ambiguous.16 The court asked PEOFs at the November 21, 2024, hearing if the contract was ambiguous.17 PEOFs said “no” under their interpretation of the contract, which they argued was the only way to read the contract. 18
• Plaintiffs allege breaches by Defendants well before invoking the drag- along provision.19 PEOFs’ briefing made this argument.20
[¶ 9] The court rejects those arguments for the reasons expressly stated
in or impliedly covered by its prior MSJ Opinion.
B. PEOFs’ Additional Arguments
[¶ 10] PEOFs motion makes these additional arguments or expands
prior arguments that the court also rejects:
1. Texas Beef Cattle
[¶ 11] PEOFs argue that Texas Beef Cattle is inapplicable because (i) it
does not apply to cases involving fiduciaries; (ii) it predated the Business and
16 Mot. at 26; see also 4–5, 30–34. 17 Nov. 21, 2024, Hrg. Tr. At 64:20–21. 18 Nov. 21, 2024, Hrg. Tr. At 64:22–25 (“No. We think it’s perfectly consistent, and we think it can be enforced as written. And in fact, our reading is the only one that does work.”). 19 Mot. at 21; see also at 8, 20–22. 20 PEOFs’ Nov. 1, 2024, Opp. at 5; PEOFs’ Dec. 13, 2024, Suppl. Br. at 16, 19; PEOFs’ Jan. 3, 2025, Suppl. Reply at 33.
MEMORANDUM OPINION AND ORDER, Page 5 Organizations Code; and (iii) it and its progeny apply to only implied duties.21
PEOFs read too much into the court’s reference to that case.
[¶ 12] To begin, the MSJ Opinion concludes only that lawfully
exercising contract rights is not acting in bad faith. 2025 Tex. Bus. 9, ¶s 115–
16, 172. Specifically, the court’s Texas Beef Cattle reference quotes
Montgomery v. Phillips Petroleum Co., 49 S.W.2d 967, 972 (Tex. App.—
Amarillo 1932, writ ref’d) (which has the same precedential value as a
supreme court opinion) for the point that one does not act in bad faith by
exercising its lawful rights provided one does so “in a legal way.” 2025 Tex.
Bus. 9, ¶ 115. That is, Texas Beef Cattle and the court’s opinion require that
the exercised contract right be (i) a lawful right and (ii) exercised “in a legal
way.” Id. So, the court did not conclude that Texas Beef Cattle permitted
HoldCo to exercise its drag-along rights in bad faith or in an otherwise illegal
manner.22
Mot. at 11–18. 21
For instance, the court concluded that “at a minimum” HoldCo could not have lied or 22
misled its partners in executing its rights. See 2025 Tex. Bus. 9, ¶ 114: Case law indicates that the statutory good faith obligation includes, at a minimum, not lying to or misleading other partners. See, e.g., Shannon Medical, 601 S.W.3d at 912–915 (partner misled partners regarding permitted affiliate business); Cruz, 2018 WL 6566642, *10–16 (partner misrepresented reasons for closing one business and misled partner regarding permitted
MEMORANDUM OPINION AND ORDER, Page 6 [¶ 13] Accordingly, the MSJ Opinion agrees with Spethmann that how a
fiduciary performs their contract rights is important. See 171 S.W.3d at 696.
To that point, the court emphasized that HoldCo had to satisfy its TBOC
responsibilities and exercise its drag-along rights in good faith. See 2025 Tex.
Bus. 9, ¶s 138, 142, 161, 164, 194.
[¶ 14] Furthermore, nothing in the Business Organizations Code nor its
predecessors preclude applying Texas Beef Cattle’s general principle to a
partner’s applicable legal responsibilities.
2. PEOFs’ “Manifestly Unreasonable” Argument
[¶ 15] PEOFs argue that the court did not consider whether any
purported modifications to movants’ statutory responsibilities are “manifestly
unreasonable.” 23 They are wrong.
competing business); Red Sea Gaming, 338 S.W.3d at 568–69 (failure to disclose resale opportunity while negotiating buyout). But in reviewing the evidence, the court did not find that there was a genuine issue of material fact as to whether PEOFs were misled. See, e.g., id. ¶ 184: Similarly, PEOFs do not allege that HoldCo, PEC, or Doyle gave them[] or the board false or misleading information regarding the deal. Indeed, those persons could not have provided misleading information to PEOFs if (i) none of those persons communicated with PEOFs and (ii) Jeffs and Langdon were not, as PEOFs posit, their agents on the board. So, the court need not consider whether any such bad faith breach occurred.
23 Mot. at 32.
MEMORANDUM OPINION AND ORDER, Page 7 [¶ 16] The TBOC does not define “manifestly unreasonable.” However,
PEOFs argued that HoldCo’s interpretation of the TAPA produced “absurd
results,” and they used the absurd results doctrine as a proxy. 24 Regardless of
the label used for PEOFs’ argument, the court considered and rejected it:
[¶ 173] PEOFs[] argue that applying the TAPA as written could lead to absurd results such as HoldCo selling the business for a dollar. The court rejects that argument because, although courts will not enforce unambiguous terms that lead to absurd results, that safety valve is reserved for only truly exceptional cases where it is unthinkable, unfathomable, or quite impossible that a rational person could have intended it. Fairfield Indus., Inc. v. EP Energy E&P Co., L.P., 531 S.W.3d 234, 248–49 (Tex. App.—Houston [14th Dist.] 2017, pet. denied). Here, the consideration was far greater than a dollar.
[¶ 174] Furthermore, it is not the court’s role “to question the wisdom of the parties’ agreement or to rewrite its provisions under the guise of interpreting it.” Id. at 242.
[¶ 175] Accordingly, based on the undisputed facts, the parties’ business purposes when they signed the TAPA, its unambiguous terms, and TBOC’s unambiguous provisions applicable to this case, as a matter of law HoldCo’s drag-along rights were not so unthinkable, unfathomable, or impossible that a reasonable person in the parties’ positions could not have rationally agreed to their application when they created the TAPA. Indeed, TAPA § 5.9(c)(ii) unambiguously records the
24 See PEOFs’ Nov. 1, 2024, Opp. at 25 (“Defendants’ argument that they could invoke the drag-along provision at any time without owing any duty of loyalty or care whatsoever would lead to absurd results. . . . That interpretation is absurd, contrary to Texas law and the Partnership Agreement, and (to use the language from Section 152.002) ‘manifestly unreasonable.’”).
MEMORANDUM OPINION AND ORDER, Page 8 parties’ agreement that they would not have entered into the TAPA if its terms were not acceptable to them. 25
2025 Tex. Bus. 9, ¶s 173–75 (footnotes omitted). Indeed, MSJ Opinion ¶ 173,
footnote 108 cited to PEOFs’ specific argument.
IV.
[¶ 17] In sum, as a matter of law the record negated every instance of a
lack of good faith (that is, bad faith) PEOFs alleged, and PEOFs failed to
adduce evidence of other facts constituting a lack of good faith. So, on March
10, 2025, the court granted in part the MSJ and on April 10, 2025, the court
denied PEOFs’ Motion for Reconsideration for the reasons described in this
opinion.
V.
[¶ 18] Accordingly, the court vacates in part its March 14, 2025, Order
to Stay and Amend Scheduling Order except as to its briefing deadlines, which
remain in place. It is, SO ORDERED.
25 Having previously concluded that TAPA’s relevant terms are unambiguous, the court also rejects PEOFs’ reconsideration argument that “the inherent tension between the Agreed Duties provision and other provisions of the Partnership Agreement renders the contract ambiguous, which precludes summary judgment and requires the parties to engage in discovery.” Mot. at 27.
MEMORANDUM OPINION AND ORDER, Page 9 BILL WHITEHILL Judge, Texas Business Court- First Division
SIGNED: April 15, 2025
MEMORANDUM OPINION AND ORDER, Page 10 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules.
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Karyn Cooper karyn.cooper@kirkland.com 4/15/2025 11:18:41 AM ERROR APPENDIX 5 2025 Tex. Bus. 26
The Business Court of Texas, 1st Division
PRIMEXX ENERGY § OPPORTUNITY FUND, LP and § PRIMEXX ENERGY § OPPORTUNITY FUND II, LP, § Plaintiffs, § v. § Cause No. 24-BC01B-0010 § PRIMEXX ENERGY § CORPORATION, M. § CHRISTOPHER DOYLE, § ANGELO ACCONCIA, § BLACKSTONE INC., § BLACKSTONE HOLDINGS III § LP, BLACKSTONE EMA II LLC, § BMA VII LLC, BLACKSTONE § ENERGY MANAGEMENT § ASSOCIATES II LLC, § BLACKSTONE ENERGY § PARTNERS II LP, BLACKSTONE § MANAGEMENT ASSOCIATES § VII LLC, BLACKSTONE § CAPITAL PARTNERS VII LP, § BCP VII/BEP II HOLDINGS MANAGER LLS, BX PRIMEXX TOPCO LLC, and BPP HOLDCO LLC, Defendants
═══════════════════════════════════════ MEMORANDUM OPINION ═══════════════════════════════════════
[¶ 1] Angelo Acconcia and Blackstone Inc. filed special appearances.
Having considered those special appearances, the responses, the pleadings,
the materials on file, and counsels’ arguments, the court concluded that it
lacked personal jurisdiction over those defendants, granted their special
appearances, and dismissed the claims against them.
[¶ 2] The court concluded that the evidence fails to establish that
PEOFs’ claims against Acconcia arise from his purposeful contacts with
Texas, and so the court lacks specific personal jurisdiction over him. Because
PEOFs’ Blackstone Inc. arguments are rooted in Acconcia’s actions as their
agent, the court lacks jurisdiction over Blackstone Inc. too. Moreover,
Acconcia’s forum contacts are attributable to a different entity, not Blackstone
Inc.
I. BACKGROUND
[¶ 3] Because the court previously released several opinions in this
action, it discusses only the facts relevant to the present issues. See 2025 Tex.
MEMORANDUM OPINION, Page 2 Bus. 5; 2025 Tex. Bus. 9; 2025 Tex. Bus. 13; 2025 Tex. Bus. 21. The court
uses abbreviations consistent with those opinions.1
A. Procedural History
[¶ 4] PEOFs filed their Original Petition (Pet.) on October 25, 2024.
[¶ 5] Acconcia filed his special appearance, and the parties briefed the
issue.2
[¶ 6] In January 2025, PEOFs filed a First Amended Petition (FAP)
adding Blackstone Inc. as a defendant.
[¶ 7] Later, Blackstone Inc. filed its special appearance.3 PEOFs
opposed Blackstone Inc.’s special appearance and supplemented their
opposition to Acconcia’s special appearance on March 7, 2025. 4 The March
seventh filings included in support confidential evidence obtained through
discovery.
1 E.g., Third Amended Partnership Agreement (TAPA); Plaintiffs Primexx Energy Opportunity Fund LP and Primexx Energy Opportunity Fund II (PEOFs); Defendant BPP HoldCo LLC (BPP HoldCo); Primexx Energy Corporation (PEC); Primexx Energy Partners (PEP). 2 Acconcia’s 10/30/2024 Special Appearance (Acconcia’s Br.); PEOFs’ 11/1/2024 Opposition (PEOFs’ Opp. to Acconcia); Acconcia’s 11/4/2025 Reply (Acconcia’s Reply). 3 Blackstone Inc.’s 2/14/2025 Special Appearance (Blackstone Br.). 4 PEOFs’ 3/7/2025 Opposition (PEOFs’ Opp. to Blackstone); PEOFs’ 3/7/2025 Supplemental Opposition (PEOFs’ Suppl. Opp. to Acconcia).
MEMORANDUM OPINION, Page 3 [¶ 8] On March 10, 2025, the court entered 2025 Tex. Bus. 9, granting
in part other defendants’ summary judgment motion (MSJ Opinion).
[¶ 9] Later, in response to questions from the court whether PEOFs
intended to (i) file an amended pleading and (ii) take more jurisdictional
discovery regarding the special appearances, PEOFs asked the court to decide
the special appearances on the current record.
[¶ 10] Two days later, the court granted Acconcia and Blackstone Inc.’s
special appearances and dismissed the claims against them.
[¶ 11] Thereafter, PEOFs filed their Second Amended Petition (SAP).
[¶ 12] On May ninth and twenty-second, the court entered additional
orders dismissing further claims against certain defendants.
[¶ 13] A month later, the parties filed a Rule 11 agreement wherein
PEOFs agreed to dismiss without prejudice their remaining claims against the
remaining defendants for a tolling agreement while the parties appeal the
court’s previous rulings. Their agreement stipulates, subject to the court’s
approval (which was granted), that the court’s previous rulings (including its
April 28, 2025, order on Acconcia and Blackstone Inc.’s special appearances)
“shall be deemed to apply to the claims and parties in the [SAP].”
MEMORANDUM OPINION, Page 4 [¶ 14] On June 16, 2025, the court entered a final judgment. This court
retains its plenary power for thirty days following the final judgment, which
expires July 16, 2025. See TEX. R. CIV. P. 329b.
B. Jurisdictional Facts
[¶ 15] The court considers allegations contained in the SAP and related
evidence submitted in response to Acconcia and Blackstone Inc.’s special
appearances. See Kelly v. Gen. Interior Const., Inc., 301 S.W.3d 653, 658–59
(Tex. 2010). The court does not consider allegations made outside the SAP
and only considers additional evidence to the extent it supports or undermines
the SAP’s allegations. Id.
[¶ 16] Below are the allegations and evidence that are material to this
opinion. The court considered every allegation contained within PEOFs’
pleadings as well as all the evidence submitted by the parties on these issues
framed by the pleadings.
1. Acconcia
a. SAP Allegations
• Acconcia is a Massachusetts citizen. ¶ 34.
• Acconcia served as a Senior Managing Director of Blackstone Inc., the President of BPP HoldCo, a director on the PEC Board, and a
MEMORANDUM OPINION, Page 5 member of Blackstone Management Partners LLC. ¶s 4, 34, 45, 51, 72, 90.
• Acconcia signed the TAPA for BPP HoldCo. ¶s 45, 50, 51.
• Acconcia was one of Blackstone Inc.’s most senior oil and gas dealmakers. ¶ 51.
• Acconcia was responsible (among others) for managing “Blackstone’s”5 Primexx investment. ¶ 72.
• Acconcia (among others) played a “central” and “instrumental” role in pushing through the Callon sale. ¶s 90–91, 96.
• Acconcia actively participated in, and facilitated, “Blackstone” and PEC’s failures to (i) evaluate Primexx’s viable options; (ii) conduct a proper due diligence, sale, or marketing process; (iii) consider whether a rushed sale without proper marketing would be fair to PEP or PEOFs; and (iv) properly allocate waterfall proceeds. ¶s 78–80, 104.
b. Opposition Evidence
• Acconcia (as a director) attended remote/hybrid PEC board meetings on June ninth and July thirteenth, 2021. 6
5 PEOFs at times do not distinguish between “Blackstone” generally and Blackstone Inc. or individual Blackstone Inc. affiliated parties. However, the court attempts to distinguish between PEOFs’ general allegations regarding “Blackstone” versus Blackstone Inc. because “each defendant’s actions and contacts with the forum [must be considered] separately” (i.e., so called “group pleading” is not sufficient to maintain personal jurisdiction over a particular defendant). Morris v. Kohls-York, 164 S.W.3d 686, 693 (Tex. App.—Austin 2005, pet. dism’d); see Calder v. Jones, 465 U.S. 783, 790 (1984). 6 PEOFs’ Opp. to Acconcia Exhibits 2 & 3 (it was not established whether Mr. Acconcia attended these meetings in person or remotely).
MEMORANDUM OPINION, Page 6 • Callon is based in Houston and maintains a Dallas registered agent.7
• Acconcia and others received a June 3, 2021, email from Chris Doyle regarding the Callon sale. 8
• Acconcia admitted he was on the investment team and investment committee that decided to invest in Primexx.9
• Acconcia admitted that as a director, and part of his continuing obligations following “Blackstone’s” investment, he participated in bi-weekly telephonic meetings of the PEC board.10
• The June 9, 2021, PEC board meeting (see above) was held in Dallas and via teleconference.11 Acconcia is noted as discussing matters unrelated to the Callon sale.
• Emails show Acconcia traveled to Dallas in early June 2021 to meet with the PEC leadership team.12
• Emails show Acconcia flew to Houston in late-June 2021.13
7 PEOFs’ Opp. to Acconcia Exhibit 4. 8 PEOFs’ Opp. to Acconcia Exhibit 5. 9 PEOFs’ Suppl. Opp. to Acconcia Exhibit 1 (in camera) (Feb. 21, 2025, Deposition of Angelo Acconcia) at 31:16–23, 33:9–34:2. 10 PEOFs’ Suppl. Opp. to Acconcia Exhibit 1 (in camera) at 41:21–43:18, 67:10–69:3; Exhibit 6 (in camera). 11 PEOFs’ Suppl. Opp. to Acconcia Exhibit 1 (in camera) at 71:17–76:22; Exhibit 5 (in camera). 12 PEOFs’ Suppl. Opp. to Acconcia Exhibit 1 (in camera) at 53:4-55:4; Exhibit 2 (in camera). 13 PEOFs’ Suppl. Opp. to Acconcia Exhibit 1 (in camera) at 48:2–49:16, 57:13–59:14; Exhibits 3 & 4 (in camera).
MEMORANDUM OPINION, Page 7 • Acconcia admitted he discussed Primexx business with third parties who appear to be located or have an address in Texas.14
• Acconcia admitted he had an indirect personal financial interest in the Primexx investment.15
2. Blackstone Inc.
a. SAP Allegations
• Blackstone Inc. is a Delaware corporation with its principal place of business in New York. ¶ 21.
• Blackstone Inc. and its subsidiaries, employees, and agents “control” and operate BPP HoldCo as well as the other Blackstone Inc. affiliated defendants and were responsible for managing and approving the Callon sale. ¶s 1, 22–23, 46, 52, 56, 72–73, 90–91. The “principal business” of each entity in the “Blackstone” structure is controlling the entity one-level down as either the general partner of a limited partnership or the sole or managing member of an LLC—with Blackstone Inc. at the top and BPP HoldCo at the bottom. ¶s 56–58.
• Acconcia was a Senior Managing Director of Blackstone Inc. (and therefore its agent). ¶s 4, 34, 45, 51, 72, 90. Other agents include Erik Belz, Omar Rehman, Tabea Hsi, Mark Henle, Jonathan Hamilton, Jeff Kelly, and Anika Gautam. ¶s 52, 72–73, 91.
• Blackstone Inc.’s agents were responsible for managing “Blackstone’s” investment in Primexx. ¶ 72. Its agents conducted business related to Primexx and the Callon sale on its behalf using “@blackstone.com” email addresses and sent
14 PEOFs’ Suppl. Opp. to Acconcia Exhibit 1 (in camera) at 62:11–64:15, 79:14–80:5, 80:22–83:10, 83:11–87:2; Exhibits 7, 8, 9, & 10 (in camera). 15 PEOFs’ Suppl. Opp. to Acconcia Exhibit 1 (in camera) at 38:23–39:8.
MEMORANDUM OPINION, Page 8 thousands of emails to PEC while managing its investment in Primexx. ¶ 74. BPP HoldCo lacks its own email system. ¶ 75.
• Blackstone Inc. orchestrated the Callon sale despite knowing the price was too low and prioritizing its own interest and those of its subsidiaries. ¶s 91, 98. “Blackstone” structured the deal terms to (i) favor “Blackstone’s” sidecar and (ii) misallocate profits according to the waterfall provision. ¶s 102–03, 105–06.
• Blackstone Inc. (along with the other Blackstone affiliated defendants) made joint SEC filings in connection with the Callon sale. ¶ 57. SEC forms for BPP HoldCo list its address as “c/o Blackstone Inc.” ¶ 52.
• Blackstone Inc. executives gave the direction to exit the Primexx investment. ¶ 83.
• The “Blackstone Defendants” operate out of the same address. ¶ 53. They are all operated solely by employees of Blackstone Inc. and use “@blackstone.com” email domains. ¶ 54. Blackstone Inc. employees conduct business on behalf of each of the Blackstone affiliated defendants. Id. “Blackstone” is operated as a “matrix” organization in which Blackstone Inc. employees conduct work for the Blackstone affiliated defendants. ¶ 55. Blackstone Inc. executives describe themselves as working on behalf of “Blackstone” as a collective organization. Id. “Blackstone” used its corporate structure to siphon proceeds from the Callon sale away from BPP HoldCo. ¶s 107–09.
• BPP HoldCo transferred proceeds of the Callon sale (including Callon shares) to the “Blackstone Defendants.” ¶s 108–09.
b. Opposition Evidence
• The evidence submitted in PEOFs’ supplemental opposition to Acconcia’s special appearance.
MEMORANDUM OPINION, Page 9 • Two additional Acconcia communications showing his management of “Blackstone’s” investment in Primexx. 16
• Testimony from Mr. Acconcia that PEOFs argue shows he was acting on behalf of Blackstone Inc.—and not BPP HoldCo—in managing “Blackstone’s” investment in Primexx and the Callon sale, including: he did not recall serving as the President of BPP HoldCo; he reported directly to senior Blackstone Inc. management; he used an “@blackstone.com” email address and his signature block included Blackstone Inc.’s principal address; he did not recall receiving compensation directly from BPP HoldCo; he served on the Blackstone Inc. investment committee that decided to invest in Primexx; etc.17
• A talking points memo Mr. Acconcia received from Blackstone Inc. employee Mark Henle following the Callon sale.18
• A press release stating that the sale of Primexx to Callon included leasehold interests.19
C. Parties’ Arguments
1. Acconcia
[¶ 17] Acconcia argued that he was not subject to general jurisdiction,
but regardless would be protected in that context by the fiduciary shield
doctrine because he was acting in his role as a PEC director and BPP HoldCo
16 PEOFs’ Opp. to Blackstone Exhibits 6 & 10 (in camera). 17 PEOFs’ Opp. to Blackstone Exhibit 4 at 26:11–27:21, 18:21–19:3, 17:18–25, 35:7–19, 33:14–34:2; Exhibit 6 (in camera). 18 PEOFs’ Opp. to Blackstone Exhibit 17 (in camera). 19 PEOFs’ Opp. to Blackstone Exhibit 18.
MEMORANDUM OPINION, Page 10 officer. 20 He further challenged the sufficiency of specific jurisdiction because
PEOFs had not alleged that he performed acts in Texas on his own behalf that
give rise to this dispute, other than conclusory allegations that he “played a
key role” in the Callon sale.21 Furthermore, that he served as BPP HoldCo’s
President and signed the TAPA on its behalf did not support asserting
jurisdiction.22 He replied that none of PEOFs’ evidence supports a different
outcome and the director cases PEOFs cited are distinguishable.23
[¶ 18] In opposition, PEOFs did not assert general jurisdiction. As to
specific jurisdiction, they argued that “Mr. Acconcia’s personal and direct
involvement in the [TAPA] and investment in Primexx; the governance of
Primexx during the Callon sale process; and orchestration of the Callon sale
itself grants this Court specific personal jurisdiction.” 24 PEOFs focused on
the fact that Acconcia “served as a director of a Texas corporation” and
“routinely participated in PEC board meetings” and “discussions over email”
20 Acconcia’s Br. at 3–4. 21 Acconcia’s Br. at 5–7. 22 Acconcia’s Br. at 2. 23 Acconcia’s Reply at 10–12. Acconcia did not file a supplemental response to PEOFs’ March 7, 2025, supplemental opposition. Accordingly, he only responded to the evidence proffered with PEOFs’ November 1, 2024, original opposition. 24 PEOFs’ Opp. to Acconcia at 3–4, 12.
MEMORANDUM OPINION, Page 11 concerning the Callon sale. 25 PEOFs cited cases they argued supported
asserting jurisdiction over a non-resident director.26
[¶ 19] Later, PEOFs filed a supplemental opposition attaching the
products of jurisdictional discovery (listed in the previous section). They
argued that this evidence “confirms Mr. Acconica’s robust purposeful contacts
in Texas” and that he “conducted business related to Primexx while he was
physically located in Texas.”27 They further argued that the fiduciary shield
doctrine does not apply because they were asserting specific jurisdiction.28
2. Blackstone Inc.
[¶ 20] Blackstone Inc. argued that this was not an “exceptional case”
where general jurisdiction would be appropriate.29 It added that specific
jurisdiction did not apply because PEOFs did not allege that Blackstone Inc.
25 PEOFs’ Opp. to Acconcia at 4, 6 (citing Exhibits 2, 3, 5), 12–16. 26 See In Glencoe Cap. Partners IL L.P. v. Gernsbacher, 269 S.W.3d 157, 164 (Tex. App.— Fort Worth 2008, no pet.); Fjell Tech. Grp. v. Unitech Int’l Inc., No. 14-14-00255-CV, 2015 WL 457805, at *6 (Tex. App.—Houston [14th Dist.] Feb. 3, 2015, pet, denied); Henkel v. Emjo Investments Ltd., 480 S.W.3d 1, 7 (Tex. App.—Houston [1st Dist.] 2015, no pet.); Carlile Bancshares, Inc. v. Armstrong, No. 02-14-00014-CV, 2014 WL 3891658 (Tex. App.—Fort Worth Aug. 7, 2014, no pet.). 27 PEOFs’ Suppl. Opp. to Acconcia at 2 (emphasis omitted). 28 PEOFs’ Suppl. Opp. to Acconcia at 6 n.3. 29 Blackstone Br. at 8.
MEMORANDUM OPINION, Page 12 or any of its employees performed any acts in Texas giving rise to this
dispute.30 It further argued that PEOFs did not distinguish between acts
performed by individuals—such as Mr. Acconcia—in their capacity as
Blackstone Inc. employees as opposed to their capacity as directors and
officers of BPP HoldCo or PEC. Additionally, the receipt of Callon shares as
proceeds of the Callon sale was insufficient to confer jurisdiction. 31 Finally, it
argued that PEOFs had not carried their burden to establish that BPP HoldCo
was Blackstone Inc.’s alter ego, and that the TAPA contractually prohibited
them from attempting to do so.32
[¶ 21] PEOFs’ response largely attached the same jurisdictional
discovery gathered against Acconcia. They argued that Blackstone Inc.
directly controlled its investment in Primexx through its agents—such as Mr.
Acconcia—and disavowed any reliance on alter ego allegations.33 They argued
specific jurisdiction was proper over Blackstone Inc. because it (i) raised
capital to invest in a Texas partnership governing the assets of a Texas oil
30 Blackstone Br. at 9–11. 31 Blackstone Br. at 14–16. 32 Blackstone Br. 12–14. 33 PEOFs’ Opp. to Blackstone at 6, 22.
MEMORANDUM OPINION, Page 13 company, (ii) exercised control over the subsidiary operating the Texas oil
company, (iii) was responsible for directing the fire sale of the Texas oil assets
to another Texas-based company, and (iv) received hundreds of millions of
dollars from the sale of the Texas oil assets. 34
II. APPLICABLE LAW
A. Special Appearances
[¶ 22] Rule of Civil Procedure 120a governs special appearances. TEX.
R. CIV. P. 120a(1). A party availing itself of Rule 120a must strictly comply
with its terms because failure to do so results in waiver. PetroSaudi Oil Servs.
Ltd. v. Hartley, 617 S.W.3d 116, 136 (Tex. App.—Houston [1st Dist.] 2020,
no pet.).
[¶ 23] A party waives its special appearance when it (i) invokes the
court’s judgment on any question other than the court’s jurisdiction; (ii)
recognizes by its acts that an action is properly pending; or (iii) seeks
affirmative action from the court. Exito Elecs. Co. v. Trejo, 142 S.W.3d 302,
304 (Tex. 2004) (per curiam) (citing Dawson-Austin v. Austin, 968 S.W.2d
319, 322 (Tex. 1998)). But a party does not waive its jurisdictional challenge
34 PEOFs’ Opp. to Blackstone at 17.
MEMORANDUM OPINION, Page 14 by seeking affirmative relief consistent with the special appearance.
Nationwide Distrib. Servs., Inc. v. Jones, 496 S.W.3d 221, 225 (Tex. App.—
Houston [1st Dist.] 2016, no pet.).
B. In Personam Jurisdiction
[¶ 24] A nonresident defendant is subject to personal jurisdiction in
Texas if (i) the Texas long-arm statute authorizes the exercise of jurisdiction
and (ii) the exercise of jurisdiction does not violate federal or state
constitutional due process guarantees. Kelly, 301 S.W.3d at 657.
[¶ 25] The long-arm statute permits courts to exercise jurisdiction over
a defendant who “does business in this state,” which the Legislature defines
to include a nonresident defendant who “commits a tort in whole or in part in
this state.” LG Chem Am., Inc. v. Morgan, 670 S.W.3d 341, 346 (Tex. 2023)
(quoting TEX. CIV. PRAC. & REM. CODE § 17.042(2)).
[¶ 26] The statute’s broad “doing business” language (that is,
committing a tort in whole or in part in Texas) allows the trial court’s
jurisdiction to “reach as far as the federal constitutional requirements of due
process will allow.” Moki Mac River Expeditions v. Drugg, 221 S.W.3d 569,
575 (Tex. 2007) (quoting Guardian Royal Exch. Assurance, Ltd. v. English
China Clays, P.L.C., 815 S.W.2d 223, 226 (Tex. 1991)).
MEMORANDUM OPINION, Page 15 [¶ 27] Therefore, courts need “only analyze whether [the defendant]’s
acts would bring [the defendant] within Texas’ jurisdiction consistent with
constitutional due process requirements.” Retamco Operating, Inc. v. Republic
Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009).
[¶ 28] A state’s exercise of jurisdiction comports with federal due
process if (i) the nonresident defendant has “minimum contacts” with the
state and (ii) the exercise of jurisdiction “does not offend traditional notions
of fair play and substantial justice.” M&F Worldwide Corp. v. Pepsi-Cola
Metro. Bottling Co., Inc., 512 S.W.3d 878, 885 (Tex. 2017) (quoting Walden v.
Fiore, 571 U.S. 277, 283 (2014)).
1. Minimum Contacts
[¶ 29] A defendant establishes minimum contacts with a state when it
“purposefully avails itself of the privilege of conducting activities within the
forum state, thus invoking the benefits and protections of its laws.” Retamco,
278 S.W.3d at 338.
[¶ 30] Courts consider three issues in determining whether a defendant
purposefully availed itself of the privilege of conducting activities in Texas:
First, only the defendant’s contacts with the forum are relevant, not the unilateral activity of another party or a third person. Second, the contacts relied upon must be purposeful rather than
MEMORANDUM OPINION, Page 16 random, fortuitous, or attenuated. … Finally, the defendant must seek some benefit, advantage or profit by availing itself of the jurisdiction.
Id. at 339 (quoting Moki Mac, 221 S.W.3d at 575); Michiana Easy Livin’
Country, Inc. v. Holten, 168 S.W.3d 777, 785 (Tex. 2005).
[¶ 31] The minimum-contacts analysis focuses on the “quality and
nature of the defendant’s contacts,” not quantity. Retamco, 278 S.W.3d at
339.
[¶ 32] “The defendant’s activities, whether they consist of direct acts
within Texas or conduct outside Texas, must justify a conclusion that the
defendant could reasonably anticipate being called into a Texas court.” Id. at
338 (quoting Am. Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801,
806 (Tex. 2002)).
a. General Personal Jurisdiction
[¶ 33] A court has general jurisdiction over a nonresident defendant
whose “affiliations with the State are so ʻcontinuous and systematic’ as to
render [it] essentially at home in the forum State.” TV Azteca v. Ruiz, 490
S.W.3d 29, 37 (Tex. 2016) (alteration in original) (quoting Daimler v. Bauman,
571 U.S. 117, 127 (2014)). This test requires “substantial activities within the
forum” and presents “a more demanding minimum contacts analysis than for
MEMORANDUM OPINION, Page 17 specific jurisdiction.” BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d
789, 797 (Tex. 2002). When a court has general jurisdiction over a
nonresident, it may exercise jurisdiction “even if the cause of action did not
arise from activities performed in the forum state.” Spir Star AG v. Kimich,
310 S.W.3d 868, 872 (Tex. 2010).
b. Specific Personal Jurisdiction
[¶ 34] Specific jurisdiction requires that “(1) the defendant
purposefully avails itself of conducting activities in the forum state, and (2)
the cause of action arises from or is related to those contacts or activities.”
Retamco, 278 S.W.3d at 338 (buying Texas real estate) (citing Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). “The ʻarise from or relate to’
requirement lies at the heart of specific jurisdiction by defining the required
nexus between the nonresident defendant, the litigation, and the forum.” Moki
Mac, 221 S.W.3d at 579; Guardian Royal, 815 S.W.2d at 228 (specific
jurisdiction focuses on “the relationship among the defendant, the forum and
the litigation”).
[¶ 35] For a nonresident defendant’s forum contacts to support an
exercise of specific jurisdiction, “there must be a substantial connection
between those contacts and the operative facts of the litigation.” Moki Mac,
MEMORANDUM OPINION, Page 18 221 S.W.3d at 585. The “operative facts” of a litigation are those that “will
be the focus of the trial” and “will consume most if not all of the litigation’s
attention.” Id. at 585.
[¶ 36] Specific jurisdiction requires courts to analyze jurisdictional
contacts on a claim-by-claim basis. Moncrief Oil Int’l Inc. v. OAO Gazprom,
414 S.W.3d 142, 150 (Tex. 2013); see also Seiferth v. Helicopteros Atuneros,
Inc., 472 F.3d 266, 274–75 (5th Cir. 2006) (“If a defendant does not have
enough contacts to justify the exercise of general jurisdiction, the Due Process
Clause prohibits the exercise of jurisdiction over any claim that does not arise
out of or result from the defendant’s forum contacts.”). But a court need not
assess contacts on a claim-by-claim basis if all claims arise from the same
forum contact. Moncrief, 414 S.W.3d at 150–51.
2. Fair Play and Substantial Justice
[¶ 37] If the minimum contacts requirements are met, it is “rare” for
exercising personal jurisdiction to not comply with fair play and substantial
justice. Retamco, 278 S.W.3d at 341. Nonetheless, courts still consider
factors to ensure that exercising jurisdiction does not offend traditional
notions of fair play and substantial justice:
MEMORANDUM OPINION, Page 19 (1) the burden on the defendant; (2) the interests of the forum state in adjudicating the dispute; (3) the plaintiff’s interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several States in furthering fundamental substantive social policies.
Id. (citing Burger King, 471 U.S. at 477–78).
3. The Parties’ Burdens
[¶ 38] The plaintiff “bears the initial burden to plead sufficient
allegations to bring the nonresident defendant within the reach of Texas’s
long-arm statute.” Kelly, 301 S.W.3d at 658. If the plaintiff fails to plead
facts bringing the defendant within reach of the long-arm statute, the
defendant need only prove that it does not live in Texas to negate jurisdiction.
Id. at 658–59. “Once the plaintiff has pleaded sufficient jurisdictional
allegations, the defendant filing a special appearance bears the burden to
negate all bases of personal jurisdiction alleged by the plaintiff.” Id. at 658.
[¶ 39] “Because the plaintiff defines the scope and nature of the
lawsuit, the defendant’s corresponding burden to negate jurisdiction is tied to
the allegations in the plaintiff’s pleading.” Id. Defendant can negate
jurisdiction on either a factual or legal basis. Id. at 659.
MEMORANDUM OPINION, Page 20 [¶ 40] Factually, a defendant can present evidence that it has no
contacts with Texas, effectively disproving the plaintiff’s allegations. Id. The
plaintiff must then respond with its own evidence that affirms its allegations
or else risk dismissal. Id. However, the court considers “additional evidence,”
including, “stipulations made by and between the parties, such affidavits and
attachments as may be filed by the parties, the results of discovery processes,
and any oral testimony,” to the extent it supports or undermines the pleadings’
allegations. Id. at 658 n.4 (citing TEX. R. CIV. P. 120a(3)). If the plaintiff’s
evidence is not within the scope of the pleadings’ factual allegations, the
plaintiff should amend the pleadings for consistency. Id. at 659 n.6; see also
Steward Health Care Sys. LLC v. Saidara, 633 S.W.3d 120, 129 (Tex. App.—
Dallas 2021, no pet.).
[¶ 41] The defendant can show that even if the plaintiff’s alleged facts
are true, the evidence is legally insufficient to establish jurisdiction either (i)
because the defendant’s contacts with Texas fall short of purposeful availment
(including that the claims do not arise from the contacts) or (ii) that traditional
notions of fair play and substantial justice are offended by the exercise of
jurisdiction. Id. at 659.
MEMORANDUM OPINION, Page 21 III. DISCUSSION
A. The Remaining Claims
[¶ 42] The court had issued its MSJ Opinion when it issued its April 28,
2025, order granting Acconcia and Blackstone Inc.’s special appearances.
That opinion dismissed PEOFs’ claims that (i) the accepted Callon sale price
was too low, (ii) defendants performed inadequate due diligence, and (iii)
defendants gave inadequate notice to PEOFs. Primexx Energy Opportunity
Fund, LP v. Primexx Energy Corp., 2025 Tex. Bus. 9, ¶ 3, 709 S.W.3d 619,
628 (1st Div.), reconsideration denied 2025 Tex. Bus. 13, 713 S.W.3d 416.
Only PEOFs’ claims that (iv) the Callon sale proceeds were not properly
distributed according to the TAPA waterfall and (v) the consideration was not
fairly allocated between PEP and BPP survived the motion (Surviving
Claims). Id. ¶ 200.
[¶ 43] The parties never discussed whether the court’s jurisdictional
analysis should address only the Surviving Claims or all asserted claims. See
Moncrief, 414 S.W.3d at 150 (specific jurisdiction requires claim-by-claim
analysis).
[¶ 44] The Texas Supreme Court has warned that courts should not
delve into “the underlying merits” when resolving jurisdictional issues. See
MEMORANDUM OPINION, Page 22 Searcy v. Parex Res., Inc., 496 S.W.3d 58, 70 (Tex. 2016) (quoting Michiana,
168 S.W.3d at 790). However, that court’s reasoning does not apply where a
court has already adjudicated particular issues. See Michiana, 168 S.W.3d at
790. Accordingly, this court concludes that the specific jurisdictional analysis
should concern only the claims that survived summary judgment. However,
the court’s conclusions are the same considering all the claims asserted in the
SAP (as discussed further below).
B. Acconcia
[¶ 45] PEOFs did not argue general jurisdiction over Acconcia. For the
following reasons, the court concludes that it lacks personal jurisdiction over
Acconcia.
[¶ 46] In short, PEOFs do not allege, argue, or adduce evidence that
Acconcia committed a tortious act in whole or in part in Texas that would
support personal—meaning direct—liability against him such as making a
fraudulent statement, breaching a personal duty, stealing a trade secret,
committing a trespass, or converting an asset. Instead, they seek to impute
other persons’ conduct to him (be it BPP HoldCo or PEC), which imputation
is improper. See Nikolai v. Strate, 922 S.W.2d 229, 240 (Tex. App.—Fort
Worth 1996, writ denied) (“Texas law is clear that a business’s contacts may
MEMORANDUM OPINION, Page 23 not be imputed to its personnel to establish personal jurisdiction over them.”).
Thus, their jurisdictional arguments do not meet even the statutory test for
personal jurisdiction as broadly as that statute may be interpreted. See TEX.
CIV. PRAC. & REM. CODE § 17.042(2) ( jurisdiction is proper over a defendant
that “commits a tort … in this state”); Morgan, 670 S.W.3d at 346.
1. PEOFs’ Original Opposition Arguments
[¶ 47] PEOFs’ original opposition to Acconcia’s special appearance
argued that “Mr. Acconcia’s personal and direct involvement in the [TAPA]
and investment in Primexx; the governance of Primexx during the Callon sale
process; and orchestration of the Callon sale itself grants this Court specific
personal jurisdiction.”35
Signing the TAPA
[¶ 48] The TAPA’s negotiation and signing are not substantially
connected to this lawsuit’s operative facts. PEOFs’ claims (both its original
claims and the Surviving Claims) concern breaches of contract and fiduciary
duties arising out of the Callon sale. The “focus of the trial” and therefore the
operative facts will be centered on defendants’ conduct surrounding the sale,
35 PEOFs’ Opp. to Acconcia at 3–4, 12.
MEMORANDUM OPINION, Page 24 not the initial investment into Primexx or the signing of the TAPA. See Moki
Mac, 221 S.W.3d at 585. While the TAPA’s terms may be relevant to the
ultimate trial, the facts surrounding its signing will not be. See Elliott–
Williams Co. v. Diaz, 9 S.W.3d 801, 803 (Tex. 1999) (contract construction is
a matter of law).
Governance of Primexx and Orchestration of the Callon Sale
[¶ 49] PEOFs argue that Acconcia “purposefully availed himself of the
Texas forum through choosing to sit on the board of a Texas-based
company.”36 Were that enough to find jurisdiction is proper over a defendant,
it would vitiate the fiduciary shield doctrine.
[¶ 50] As a general rule, jurisdiction over an individual cannot be based
upon jurisdiction over a corporation. Nichols v. Tseng Hsiang Lin, 282 S.W.3d
743, 750 (Tex. App.—Dallas 2009, no pet.). “The fiduciary shield doctrine
protects a nonresident corporate officer or employee from a trial court’s
exercise of general jurisdiction over the individual when all of his contacts
with Texas were made on behalf of the employer.” Id.; see also Nikolai, 922
S.W.2d at 240.
36 PEOFs’ Opp. to Acconcia at 12.
MEMORANDUM OPINION, Page 25 [¶ 51] In its supplemental opposition, PEOFs argue that the fiduciary
shield doctrine does not apply because (i) they allege specific jurisdiction over
Acconcia, and the doctrine only protects against general jurisdiction and (ii)
corporate agents can always be found liable for their own fraudulent or tortious
acts even when acting on behalf of an entity.37
[¶ 52] The facts that Acconcia was a director of PEC and President of
BPP HoldCo do not by themselves give rise to this litigation. Moki Mac, 221
S.W.3d at 585. Therefore, those facts, standing alone, are possibly relevant to
only general jurisdiction. Cf. id. 576 (“[G]eneral jurisdiction is established
whether or not the defendant’s alleged liability arises from those contacts.”).
Thus, the court rejects that Acconcia “purposefully availed himself of the
Texas forum through choosing to sit on the board of a Texas-based
company.”38
[¶ 53] However, PEOFs are correct that “a corporate officer is not
protected from the exercise of specific jurisdiction, even if all of his contacts
were performed in a corporate capacity, if the officer engaged in tortious or
37 PEOFs’ Suppl. Opp. to Acconcia at 6 n.3 (citing Keyes v. Weller, 692 S.W.3d 274, 279 (Tex. 2024) and Tabacinic v. Frazier, 372 S.W.3d 658, 669 (Tex. App.—Dallas 2012, no pet.)). 38 PEOFs’ Opp. to Acconcia at 12.
MEMORANDUM OPINION, Page 26 fraudulent conduct directed at the forum state for which he may be held
personally liable.” Tabacinic, 372 S.W.3d at 668–69 (emphasis added).
[¶ 54] As a threshold matter, it is not appropriate to assert jurisdiction
over a non-resident corporate officer where the only claims asserted against
them are derivative in nature. None of the SAP’s causes of actions against
Acconcia are based on direct personal liability.39 Instead, each is based on a
“derivative,” vicarious, or secondary liability theory where he is only liable as
a joint tortfeasor. 40
[¶ 55] That PEOFs never asserted a claim for which Acconcia may be
independently liable supports the court’s conclusion. See Tabacinic, 372
S.W.3d at 668–69; see also National Indus. Sand Ass’n v. Gibson, 897 S.W.2d
769, 773 (Tex. 1995) ( jurisdiction may not be “based solely upon the effects
or consequences of an alleged conspiracy”).
39 See SAP Eighth (conspiracy), Eleventh (aiding and abetting), and Twelfth (knowing participation) Causes of Action. 40 See Agar Corp., Inc. v. Electro Cirs. Int’l, LLC, 580 S.W.3d 136, 142 (Tex. 2019) (civil conspiracy is a theory of vicarious liability and not an independent tort); Nettles v. GTECH Corp., 606 S.W.3d 726, 738 (Tex. 2020) (aiding and abetting and conspiracy are theories of derivative or vicarious liability); Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509, 514 (1942) (same as to knowing participation).
MEMORANDUM OPINION, Page 27 [¶ 56] Accordingly, we must examine the actual allegations and
evidence of Acconcia’s contacts with Texas and their connection to the Callon
sale.
[¶ 57] At the time PEOFs filed their opposition, only the Original
Petition was on file. The Original Petition alleged that Acconcia played a
“key,” “central,” or “instrumental” role in pushing through the Callon sale
without further specifics.41 The court concludes that these conclusory
allegations “are insufficient to meet [PEOFs’] burden of establishing
jurisdiction.” PermiaCare v. L.R.H., 600 S.W.3d 431, 444 (Tex. App.—El
Paso 2020, no pet.) (citing State v. Lueck, 290 S.W.3d 876, 884–85 (Tex.
2009)).
[¶ 58] As the concurrence remarked in Steward Health Care,
“[c]orporations do not have a corporeal existence and can only act through
their agents” and thus every corporate tort might inevitably subject at least
one individual to a personal capacity suit if PEOFs’ conclusory allegations
were sufficient. 633 S.W.3d at 150–51 (J. Schenck concurring). However, this
would “eviscerate the fiduciary shield doctrine and render it meaningless.” Id.
41 Pet. ¶s 4, 71, 77.
MEMORANDUM OPINION, Page 28 at 151. Instead, a plaintiff must still plead and, when challenged, provide facts
that would justify personal jurisdiction in a tort action by showing that the
defendant committed a direct liability tort in whole or in part while in Texas,
even as broadly as the long-arm statute may be construed. See TEX. CIV. PRAC.
& REM. CODE § 17.042(2); Kelly, 301 S.W.3d at 658–59.
[¶ 59] PEOFs’ opposition included proof that (i) Acconcia attended
remote/hybrid PEC board meetings on June 9, 2021 and July 13, 2021, that
were at least partially held in Texas and (ii) he received an email from Chris
Doyle (who was located in Texas) regarding the Callon sale. 42 However, that
evidence fails to show that (i) Acconcia committed a tort in whole or in part in
Texas that would support direct liability against him and (ii) PEOFs’ causes of
action arise from those contacts. Retamco, 278 S.W.3d at 338.
[¶ 60] First, neither of the board meetings to which PEOFs point are the
July 30, 2021, or August 2, 2021, meetings where the Callon sale was
announced or voted on.43 Second, the June ninth and July thirteenth meeting
minutes do not show that Acconcia took any action.44 As discussed above,
42 See ¶ 16. 43 SAP ¶s 3, 4. 44 PEOFs’ Opp. to Acconcia Exhibits 2 & 3.
MEMORANDUM OPINION, Page 29 Acconcia’s mere attendance of PEC board meetings, without any indication
that he took any role or action regarding the Callon sale, are insufficient.
[¶ 61] Regarding the email, receipt of emails from a Texas resident do
not support jurisdiction because it constitutes the unilateral act of another
party. Retamco, 278 S.W.3d at 339; see also Moncrief, 414 S.W.3d at 152–53
(Michiana overruled a myriad of cases where jurisdiction was predicated
solely on receipt of out-of-state communications).
[¶ 62] In comparison, the cases cited by PEOFs demonstrate scenarios
where the out-of-state director/manager defendant’s contacts with Texas were
more significant and plaintiff’s causes of action directly arose from those
contacts. See Glencoe, 269 S.W.3d at 167 (defendant directors’ own
misrepresentations during board meetings were the “operative facts of the
[fraud] litigation”); Carlile, 2014 WL 3891658, at *12 (defendant directors
conducted the due diligence that allegedly failed to disclose information in
Texas during merger negotiations); Fjell Tech., 2015 WL 457805, at *8
(defendant manager’s emails sent to Texas residents were the basis of
plaintiff’s trade secret causes of action); Henkel, 480 S.W.3d at *7 (formation
of Texas-based company itself, and defendant director’s role on the board, was
at the center of the alleged fraudulent investment scheme).
MEMORANDUM OPINION, Page 30 [¶ 63] Those cases are all distinguishable and demonstrate why
personal jurisdiction is improper here.
2. PEOFs’ Supplemental Opposition Arguments
[¶ 64] The SAP and PEOFs’ supplemental opposition added additional
allegations and evidence that PEOFs allege support specific jurisdiction over
Acconcia.45
[¶ 65] The SAP’s allegations substantially overlap with the ones
included in the Original Petition, except that PEOFs now additionally allege
that Acconcia “actively participated in,” and facilitated “Blackstone’s” and
PEC’s failures to (i) evaluate Primexx’s viable options; (ii) conduct a proper
due diligence, sale, or marketing process; (iii) consider whether a rushed sale
without proper marketing would be fair to PEP or PEOFs; and (iv) properly
allocate waterfall proceeds. 46
[¶ 66] Despite being marginally more specific than PEOFs’ original
allegations, they are no less conclusory. PermiaCare, 600 S.W.3d at 444.
Indeed, they are essentially a recitation of the court’s characterization of
45 See ¶ 16. 46 SAP ¶s 78–80, 104.
MEMORANDUM OPINION, Page 31 PEOFs’ claims from its MSJ Opinion. See Primexx, 2025 Tex. Bus. 9, ¶s 3,
200.
[¶ 67] PEOFs’ new evidence obtained through discovery includes
admissions from Acconcia and documents showing that he travelled to Texas
on at least two occasions during his work on the board of PEC and that he
communicated with several individuals that appeared to be in Texas
concerning Primexx. 47 Assuming this evidence suggests purposeful Texas
contacts, “[f]or specific-jurisdiction purposes, purposeful availment has no
jurisdictional relevance unless the defendant’s liability arises from or relates to
the forum contacts.” Moki Mac, 221 S.W.3d at 579 (emphasis added).
[¶ 68] PEOFs’ evidence of Acconcia’s contacts with Texas are not
substantially connected with the operative facts of either the Surviving Claims
or all asserted claims. While his contacts may have been related to his work
on the PEC board, none of the evidence shows any connection to the Callon
sale.48 Indeed, for example, PEOFs note that Acconcia “actively participated”
in a June 9, 2021, hybrid board meeting that was held in Dallas and
47 See ¶ 16. 48 See ¶ 16.
MEMORANDUM OPINION, Page 32 telephonically, but they fail to address that none of Acconcia’s recorded
comments have anything to do with the Callon sale. 49
[¶ 69] And while Acconcia may have been in Texas on two occasions,
the evidence shows only that he was in the state and potentially on Primexx
business, but not that he took any actions related to the Callon sale, let alone
that he did anything in Texas that would be independently tortious as to
PEOFs. 50 They do not even assert direct tort liability against him.
*****
[¶ 70] Therefore, the court concludes that it lacks personal jurisdiction
over Acconcia.
C. Blackstone Inc.
1. Minimum contacts
[¶ 71] PEOFs did not argue general jurisdiction regarding to Blackstone
Inc. Instead, they argued four theories for specific jurisdiction over
Blackstone Inc.: (i) it raised capital to invest in a Texas partnership governing
the assets of a Texas oil company, (ii) it exercised control over the subsidiary
49 PEOFs’ Suppl. Opp. to Acconcia at 3, Exhibits 1 & 5 (in camera). 50 PEOFs’ Suppl. Opp. to Acconcia Exhibits 1, 2, 3, 4 (in camera).
MEMORANDUM OPINION, Page 33 operating the Texas oil company, (iii) it was responsible for directing the fire
sale of the Texas oil assets to another Texas-based company, and (iv) it
received hundreds of millions of dollars from the sale of the Texas oil assets. 51
None of these arguments support jurisdiction over Blackstone Inc.
Raised Capital
[¶ 72] PEOFs’ first theory fails because raising capital to invest in
Primexx is not sufficiently connected to the operative facts of this lawsuit and
their argument is contradicted by their own pleadings (nor is it independently
tortious conduct). PEOFs’ claims (both its original claims and the Surviving
Claims) concern breaches of contract and fiduciary duties arising out of the
Callon sale. The “focus of the trial” and therefore the operative facts will be
centered on defendants’ conduct surrounding the sale, not the initial
investment into Primexx. Moki Mac, 221 S.W.3d at 585. Furthermore,
PEOFs’ argument is contradicted by their own pleadings, which consistently
allege that defendants Blackstone Energy Partners II LP and Blackstone
51 PEOFs’ Opp. to Blackstone at 17.
MEMORANDUM OPINION, Page 34 Capital Partners VII LP raised and committed capital for the investment, not
Blackstone Inc.52
Control over BPP HoldCo and Responsibility for the Callon Sale
[¶ 73] PEOFs’ second and third theories essentially rely on the same
allegations and facts asserted against Acconcia contending that he was
Blackstone Inc.’s agent. See Huynh v. Nguyen, 180 S.W.3d 608, 620 (Tex.
App.—Houston [14th Dist.] 2005, no pet. For the reasons discussed earlier
regarding Acconcia’s special appearance, see ¶s 49–69, those arguments fail
to establish this court’s jurisdiction over Blackstone Inc.
[¶ 74] Furthermore, while “[t]he Texas contacts of agents or employees
are attributable to their nonresident principals,” 180 S.W.3d at 620, PEOFs
still had to adequately identify Acconcia’s principal in question. See IRA Res.,
Inc. v. Griego, 221 S.W.3d 592, 597 (Tex. 2007) (“Texas law does not presume
agency, and the party who alleges it has the burden of proving it.”).
[¶ 75] The court concludes that Acconcia’s Texas-based contacts were
performed on behalf of either PEC or BPP HoldCo, not Blackstone Inc.
Acconcia was President of BPP HoldCo and a director of PEC. 53 He attended
52 SAP ¶s 45, 48. 53 SAP ¶ 34.
MEMORANDUM OPINION, Page 35 joint board meetings in his capacity as a PEC director and BPP HoldCo
manager.54 It is his performance of duties as director of the general partner
and manager of one of the limited partners that is relevant to PEOFs’ causes
of action. The reason he was a PEC director was because BPP HoldCo
appointed him to the role. 55 It was therefore BPP HoldCo that had the power
to remove Acconcia as a director if it was unhappy with his performance, not
Blackstone Inc.56 So, Acconcia’s activities are not attributable to Blackstone
Inc.
Callon Sale Proceeds
[¶ 76] PEOFs’ fourth theory fails because the proceeds “Blackstone”
received from the Callon sale were fungible assets, which do not support
jurisdiction, rather than Texas real estate, which may.
[¶ 77] Blackstone Inc. argues that receipt of Callon shares does not
support jurisdiction because they are “a fungible asset” and create “no
54 PEOFs’ Opp. to Acconcia Exhibits 2 & 3; PEOFs’ Suppl. Opp. to Acconcia Exhibit 5 (in camera). 55 See 2025 Tex. Bus. 9, ¶s 17–18. 56 PEOFs’ Opp. to Acconcia at 13 (“Mr. Acconcia served as the President of BPP HoldCo, the company that managed Blackstone’s investment in the Primexx Texas oil assets.”).
MEMORANDUM OPINION, Page 36 continuing presence in Texas,” like the cash transfer in Old Republic Nat. Title
Ins. Co. v. Bell, 549 S.W.3d 550, 563–64 (Tex. 2018). 57
[¶ 78] PEOFs argue that Old Republic does not apply because that case
involved cash transfers between two friends and noted that the analysis may
have been different had the defendant been “a corporate lender distributing
funds … with the expectation of collecting interest.” Id. at 562; cf. Retamco,
278. S.W.3d at 341 (oil and gas interests are real property interests that create
a continuing relationship with the forum).58
[¶ 79] PEOFs’ attempt to distinguish Old Republic misses the mark
because they cite to the portion of the opinion concerning the defendants’
transfer of money to Texas, not the transfer of money away from Texas, which
is the relevant section here. Compare 549 S.W.3d. at 562 (no personal
jurisdiction based on sending money to a friend in the state) with id. at 563–
64 (no jurisdiction based on receiving money from the sale of real estate in
Texas). Furthermore, as discussed previously, “Blackstone’s” transfer of
57 Blackstone Br. at 15–16. 58 PEOFs’ Opp. to Blackstone at 30.
MEMORANDUM OPINION, Page 37 money to Texas is not an operative fact because the initial investment into
Primexx will not be the focus at trial. Moki Mac, 221 S.W.3d at 585.
[¶ 80] Furthermore, as Old Republic explains, selling Texas-based
assets does not create the same continuing connection with the forum as
receiving Texas-based assets. See 549 S.W.3d at 563–64 (distinguishing
Retamco). The defendant in Old Republic received cash proceeds from the sale
of Texas real estate. The supreme court said that transfer of “a fungible
asset—money—with no continuing presence in Texas … is of negligible
significance for purpose of determining whether a foreign defendant had
sufficient contacts in Texas.” Id. at 564 (quotations omitted). Here, the
parties sold Texas oil and gas interests and received cash and Callon shares.
Callon is a public company. 59 Shares in a public company are fungible assets.60
Thus, the present case is more like Old Republic than Retamco.
*****
[¶ 81] Accordingly, Blackstone Inc. does not have sufficient minimum
contacts with Texas to support specific jurisdiction.
59 See SAP ¶ 82. 60 See Fungibility: What It Means and Why It Matters, Investopedia.com (last accessed 7/11/2025) https://www.investopedia.com/terms/f/fungibility.asp.
MEMORANDUM OPINION, Page 38 2. Alter Ego Jurisdiction
[¶ 82] Blackstone Inc. further argued that PEOFs failed to overcome the
presumption against imputing the jurisdictional contacts of one entity against
a related entity.61 In response, PEOFs explicitly disclaimed that they were
relying on any “alter ego” basis for establishing personal jurisdiction. 62
However, later, PEOFs included alter ego allegations in the SAP. 63 The court
therefore addresses this issue.
[¶ 83] PEOFs make allegations regarding whether Blackstone Inc.
exerted the level of “control” that is “greater than normally associated with
common ownership and directorship.” BMC, 83 S.W.3d at 798–99.64
However, the court does not address whether Blackstone Inc. broke that
barrier.
[¶ 84] Rather, to establish alter ego jurisdiction, the evidence must
show “that the two entities cease[d] to be separate so that the corporate fiction
should be disregarded to prevent fraud or injustice.” Id. Here, there could not
61 Blackstone Br. at 12–14. 62 PEOFs Opp. to Blackstone at 32. 63 SAP ¶s 53–58, 107. 64 See SAP ¶s 53–58, 107 (the Blackstone Inc. affiliated entities share the same address, email domain name, employees, etc.).
MEMORANDUM OPINION, Page 39 have been any fraud or injustice regarding the corporate structure because
PEOFs admit they were fully aware of the structure that “Blackstone” created
for its Primexx investments—with Blackstone Inc. at the top, seven-layers
removed from BPP HoldCo, who became a partner in Primexx.65 PEOFs, as
sophisticated parties, saw that “HoldCo” was constructed precisely to
insulate its ultimate parent from liability.66
[¶ 85] It is important that parties may “structure their primary conduct
with some minimum assurance” where they are liable to suit so that
corporations may make “business and investment decisions.” See BRP-Rotax
GmbH & Co. KG v. Shaik, ---- S.W.3d ----, 2025 WL 1727903, at *12 (Tex. June
20, 2025) (J. Busby concurring) (internal quotations and citations omitted);
see also Michiana, 168 S.W.3d at 785. So, the court concludes that Blackstone
Inc. could not have “reasonably anticipate[d] being called into a Texas court”
based on the structure of its investment into Primexx and its management of
the same. Retamco, 278 S.W.3d at 338.
65 SAP ¶ 23, 44. 66 See PEOFs’ Opp. to Acconcia at 5 (“Blackstone used a subsidiary called BPP HoldCo LLC to serve as the investment vehicle for its majority stake in Primexx.”).
MEMORANDUM OPINION, Page 40 3. Waiver
[¶ 86] Finally, the court concludes that Blackstone Inc. did not waive
its special appearance by raising TAPA § 13.9 in its brief. 67 Blackstone Inc.
did not invoke the court’s judgment on any question other than the court’s
jurisdiction, recognize by its acts that this action is properly pending, or seek
affirmative action from the court through its brief reference to TAPA § 13.9.
Exito Elecs., 142 S.W.3d at 304. And the court does not rest its opinion on
TAPA § 13.9.
IV. CONCLUSION
[¶ 87] For these reasons, the court previously granted Acconcia and
Blackstone’s special appearances on April 28, 2025.
BILL WHITEHILL Judge of the Texas Business Court, First Division
SIGNED: July 16, 2025
67 Blackstone Br. 14; PEOFs’ Opp. to Blackstone at 32–33.
MEMORANDUM OPINION, Page 41 APPENDIX 6 The Business Court of Texas, 1st Division
PRIMEXX ENERGY § OPPORTUNITY FUND, LP and § PRIMEXX ENERGY § OPPORTUNITY FUND II, LP, § Plaintiffs, § § Cause No. 24-BC01B-0010 v. § PRIMEXX ENERGY § CORPORATION, M. § CHRISTOPHER DOYLE, ANGELO § ACCONCIA, BLACKSTONE INC., § BLACKSTONE HOLDINGS III LP, § BLACKSTONE EMA II LLC, BMA § VII LLC, BLACKSTONE ENERGY § MANAGEMENT ASSOCIATES II § LLC, BLACKSTONE ENERGY § PARTNERS II LP, BLACKSTONE § MANAGEMENT ASSOCIATES VII § LLC, BLACKSTONE CAPITAL § PARTNERS VII LP, BCP VII/BEP II § HOLDINGS MANAGER LLS, BX § PRIMEXX TOPCO LLC, and BPP § HOLDCO LLC, Defendants §
═══════════════════════════════════════ ORDER ═══════════════════════════════════════ On February 13, 2025, the court ordered the parties pursuant to TEX. R.
CIV. P. 166(g), (p) to provide briefing regarding the legal viability of plaintiffs’
First Amended Petition’s (FAP) First and Third Causes of Action against the
“Blackstone Defendants,”1 excluding BPP HoldCo LLC (HoldCo). The court
later informed the parties that it would consider the viability of those claims
under the analytical standards applicable to a Rule 91a.1 motion to dismiss.
Under the FAP and SAP, plaintiffs’ first count asserts breach of
fiduciary duties against the Blackstone Defendants arising out of the July 12,
2016, Third Amended and Restated Limited Partnership Agreement (TAPA).
Plaintiffs’ count three asserts that Blackstone Defendants breached the
TAPA.
Having considered the pleadings, the parties’ briefing, and additional
arguments heard during a May 9, 2025, status conference, the court concludes
that plaintiffs’ count one and count three allegations, taken as true, together
with inferences reasonably drawn from them do not in this case support valid
causes of action against the Blackstone Defendants, excluding HoldCo. The
court reaches that conclusion for at least these reasons:
1 The court referred to “Blackstone Defendants” as used by plaintiffs in the First and Third Causes of Action. See FAP at 47 n.14; see also Plaintiffs’ Second Amended Petition (SAP) at 50 n.16.
2 First, those defendants were not parties to the TAPA and thus, did not
owe plaintiffs any TBOC statutory responsibilities or contract obligations
arising from or related to the TAPA.
Second, TAPA § 13.9 precludes plaintiffs’ breach of fiduciary duty and
breach of contract causes of action against those defendants.
Third, plaintiffs’ the allegations do not support ignoring the defendants’
separate corporate forms as would be required for plaintiffs to prevail. See
JNM Express, LLC v. Lozano, 688 S.W.3d 327, 335 (Tex. 2024); First Reserve
Mgmt., L.P., 671 S.W.3d 653, 660–61 (Tex. 2023). The court concludes that
two additional cases plaintiffs cited during the May 9, 2025, status conference
are inapplicable. See MRT of Kemp TX-SNF, LLC v. Lloyd Douglas Enters., LC,
698 S.W.3d 607, 614–18 (Tex. App.—Dallas 2024, no pet.); USX Corp. v.
West, 759 S.W.2d 764, 767 (Tex. App.—Houston [1st Dist.] 1988, no writ).
Accordingly, the court dismisses these causes of action without
prejudice. 2
So ORDERED.
2 The court’s order applies equally to the FAP and SAP. 3 BILL WHITEHILL Judge of the Texas Business Court, First Division
SIGNED: May 9, 2025
4 APPENDIX 7 2025 Tex. Bus. 21
The Business Court of Texas, 1st Division
PRIMEXX ENERGY § OPPORTUNITY FUND, LP et al., § Plaintiffs, § § Cause No. 24-BC01B-0010 v. § PRIMEXX ENERGY § CORPORATION, et al., Defendants §
═══════════════════════════════════════ MEMORANDUM OPINION AND ORDER NUNC PRO TUNC ═══════════════════════════════════════
I.
[¶ 1] Before the court is the parties’ request for the court to rule on Third
Amended Partnership Agreement (TAPA) § 13.9’s potential effect on Primexx
Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP’s
(PEOFs) claims against Christopher Doyle and all remaining Blackstone entity defendants (Blackstone Defendants) 1 besides BPP HoldCo LLC. 2 0F 1F
[¶ 2] This order relates to the court’s summary judgment rulings
discussed in (i) 2025 Tex. Bus. 9 and 2025 Tex. Bus. 13 and (ii) the court’s
May 9, 2025, order dismissing PEOFs’ fiduciary breach and contract breach
causes of action against the Blackstone Defendants.
[¶ 3] The issue is whether TAPA § 13.9 exempts Doyle and the
remaining Blackstone Defendants from potential conspiracy, aiding and
abetting, and knowing participation liability for any claims PEOFs may have
against HoldCo or PEC regarding the Callon sale. 3 The court concludes that 2F
§ 13.9 does so because (i) Doyle and the Blackstone Defendants are within the
class of persons § 13.9 exempts from potential liability regarding that sale and
(ii) § 13.9 applies notwithstanding any other TAPA terms, including TAPA
§ 13.2’s terms disclaiming third-party beneficiaries.
II.
[¶ 4] Because the parties know the facts and procedural background,
the court does not address those items except as needed for this decision. For
1 The court dismissed Blackstone Inc. and Angelo Acconcia for lack of personal jurisdiction. 2 See Defendants Christopher Doyle and Primexx Energy Corporation’s (PEC) Supplemental Briefing on TAPA § 13.9 (Doyle Br.) and Plaintiffs’ Supplemental Briefing Regarding Section 13.9 (PEOFs Br.). On May 21, 2025, the parties asked the court to include the Blackstone Defendants in this analysis and ruling. 3 Section 13.9 does not cover PEC because it is a Primexx partner.
MEMORANDUM OPINION AND ORDER, Page 2 convenience, references to Doyle’s and PEOFs’ arguments also apply to the
Blackstone Defendants.
[¶ 5] Doyle was a PEC director and its CEO while the Callon sale was
negotiated and approved pursuant to HoldCo’s drag-along sale rights, but he
was not a Primexx partner. 4 Citing § 13.9 and Pratt-Shaw v. Pilgrim’s Pride 3F
Corp., 122 S.W.3d 825, 830 (Tex. App.—Dallas 2003, no pet), he posits that
§ 13.9 waives potential claims against him as a “Partner Affiliate,” which is
defined in § 13.9. 5 4F
[¶ 6] PEOFs argue two counterpoints: One, TAPA § 13.2’s “Entire
Agreement” clause providing that the TAPA “shall not be deemed for the
benefit of creditors or any other Persons” means Doyle cannot be a third-party
beneficiary of § 13.9’s provisions; and two, applying § 13.9 to Doyle would
violate Business Organizations Code §§ 152.002(b)(2)–(4)’s provisions
precluding the elimination of certain partner responsibilities. TEX. BUS. ORG.
CODE §§152.002(b)(2)–(4).
4 Counts Six, Seven, and Eight of PEOFs’ First Amended Petition (FAP) and Eight, Nine, and Ten of their Second Amended Petition (SAP). The court permitted the SAP for purposes of assessing whether pleading amendments would cure factual deficits in PEOFs’ claims against Angelo Acconcia and the Blackstone Defendants (excluding HoldCo). 5 Doyle Br. at 2–3.
MEMORANDUM OPINION AND ORDER, Page 3 III.
[¶ 7] As discussed in the court’s May 9th order, TAPA § 13.9 waives
potential liability claims against various TAPA nonparties. Conceding that
§ 13.9 “may appear to provide a benefit to Mr. Doyle,” PEOFs rely on § 13.2
and MCI Telecomm. Corp. v. Tex. Util. Elec. Co. 995 S.W.2d 647, 651 (Tex.
1999) to argue otherwise. In that case, the supreme court held that a nonparty
to that contract could not obtain relief as a third-party beneficiary in “light of
the clear language in the contract that the agreement not be construed as being
for the benefit of any nonsignatory.” Id. Likewise, PEOFs argue § 13.9 does
not apply to Doyle because he is not personally a party to the TAPA and § 13.2
disclaims third-party beneficiaries. 6 However, PEOFs misread §§ 13.2 and 5F
13.9.
[¶ 8] To begin, § 13.2 provides that the TAPA “contains the entire
agreement [between] the parties” and “shall not be deemed for the benefit of
creditors or any other Persons.” However, § 13.9 begins by excepting its terms
from § 13.2’s broader scope: “Notwithstanding anything that may be
expressed or implied in this Agreement . . . .” That is, § 13.9’s protection for
6 PEOFs’ Br. at 2–3.
MEMORANDUM OPINION AND ORDER, Page 4 non-partners is a narrow exception that applies notwithstanding § 13.2. E.g.,
Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133–34 (Tex. 1994) (specific
contract provisions control over broader terms). Thus, § 13.9 applies to Doyle.
[¶ 9] Next, PEOFs’ reliance on MCI for a contrary premise is misplaced
because the contract clauses there are the inverse of the clauses here.
Specifically, that case involves a right of use agreement that required MCI to
broadly exercise its granted rights to lay fiber optic cable in MoPac’s right of
way “in such a manner as to not interfere in any way with any existing prior
rights.” The prior rights at issue were Texas Utilities’ prior rights to use that
right of way for electricity transmission towers and lines.
[¶ 10] TU argued that MCI’s cable trenches caused four TU towers to
tilt, which needed to be fixed, and that it was entitled to recover attorneys’ fees
based on a claim that TU was a third-party beneficiary of MCI’s contract
obligation with MoPac to not interfere with TU’s prior rights. The supreme
court reversed TU’s attorneys’ fees award based on a contract breach cause of
action because a different MCI-MoPac contract clause expressly limited
contract beneficiary status to only the parties to that contract. 995 S.W.2d at
649–50. So, TU could not recover contract relief as a third-party beneficiary
of the MCI-MoPac contract. Id.
MEMORANDUM OPINION AND ORDER, Page 5 IV.
[¶ 11] PEOFs next argue that § 13.9 is voided by Business Organization
Code §§ 152.002(b)(2)–(4)’s provisions that prohibit parties from eliminating
certain unwaivable partner responsibilities. 7 The court rejects that argument 6F
for two reasons.
[¶ 12] First, those provisions apply to partners and Doyle was not a
Primexx partner and did not owe any such duties to PEOFs. Second, TAPA
§ 13.9 is a liability waiver and does not waive any partner’s duties toward
other partners. See Elizabeth S. Miller, Fiduciary Duties, Exculpation, and
Indemnification in Texas Business Organizations, State Bar of Texas Advanced
Business Law Course (2023) at 39. Thus, those TBOC provisions do not apply
to PEOFs’ § 13.9 agreement to waive any liability claims they might have
otherwise had against Doyle regarding the Callon sale.
V.
[¶ 13] The same conclusions apply to the Blackstone Defendants
because § 13.9’s “Partner Affiliate” definition includes an “Affiliate … of any
Partner.” Further “Affiliate” means “any Person directly or indirectly
controlling, controlled by, or under common control with, such specified
7 PEOFs’ Br. at 3.
MEMORANDUM OPINION AND ORDER, Page 6 Person.” 8 HoldCo is a Partner. HoldCo and the Blackstone Defendants are 7F
under Blackstone Inc.’s control. 9 8F So, § 13.9 applies to the Blackstone
Defendants too. 10 9F
VI.
[¶ 14] Accordingly, the court dismisses with prejudice PEOFs’ causes
of action against Doyle and the Blackstone Defendants.
So ORDERED.
BILL WHITEHILL Judge of the Texas Business Court, First Division
SIGNED: May 22, 2025
8 TAPA, Ex. B (Definitions) at 1. 9 See SAP ¶ 23. 10 Counts Four, Five, and Six of PEOFs’ FAP and Counts Five, Six, and Eight under PEOFs’ SAP.
MEMORANDUM OPINION AND ORDER, Page 7 APPENDIX 8 Execution Version
THIRD AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
PRIMEXX ENERGY PARTNERS, LTD.
THE OFFER AND SALE OF THE PARTNERSHIP INTERESTS REFERENCED IN THIS THIRD AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE. THE PARTNERSHIP INTERESTS WHICH ARE REFERENCED HEREIN MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED AND/OR QUALIFIED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION AND/OR QUALIFICATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THERE IS NO TRADING MARKET FOR THE PARTNERSHIP INTERESTS, AND IT IS NOT ANTICIPATED THAT ONE WILL DEVELOP. THERE ARE SUBSTANTIAL RESTRICTIONS UPON THE TRANSFERABILITY AND VOTING RIGHTS OF THE PARTNERSHIP INTERESTS SET FORTH HEREIN. NO SALE, TRANSFER OR OTHER DISPOSITION BY A PARTNER OF ITS PARTNERSHIP INTERESTS MAY BE MADE EXCEPT IN ACCORDANCE WITH THE TERMS SET FORTH HEREIN. THEREFORE, PARTNERS MAY NOT BE ABLE TO READILY LIQUIDATE THEIR INVESTMENTS.
KE 42042246 EXH. 1 - PAGE 2 5604
Page 5602 TABLE OF CONTENTS
Page
Article I Definitions........................................................................................................................2
Article II Organizational Matters ................................................................................................2 2.1 Formation .................................................................................................................2 2.2 Partnership Name .....................................................................................................2 2.3 Location of Principal Place of Business and Registered Office ..............................2 2.4 Business of the Partnership ......................................................................................3 2.5 Term .........................................................................................................................3 2.6 Qualification to Do Business ...................................................................................3
Article III Capital Contributions; Units ......................................................................................3 3.1 Capital Contributions of Unitholders .......................................................................3 3.2 Capital Contributions of Managing General Partner ...............................................3 3.3 Capital Contributions of Management Partner ........................................................3 3.4 Return of Capital Contributions ...............................................................................3 3.5 No Interest on Capital Contributions .......................................................................4 3.6 Authorization and Issuance of Units ........................................................................4 3.7 Additional Capital Contributions ...........................................................................11 3.8 Repurchase Rights. ................................................................................................12
Article IV Computation and Allocation of Financial and Tax Items; Distributions .............14 4.1 Computation of Profit and Loss .............................................................................14 4.2 Allocation of Profit and Loss .................................................................................15 4.3 Allocation of Net Gain and Net Loss From an Exit Event ....................................16 4.4 Allocation to Legacy Unitholders ..........................................................................18 4.5 Special Allocations ................................................................................................19 4.6 [Reserved] ..............................................................................................................20 4.7 Requirement of Distributions .................................................................................20 4.8 Withholding ...........................................................................................................23 4.9 Other Allocation Rules ..........................................................................................23 4.10 Tax Treatment of Partnership Interests Subject to Vesting ...................................25
Article V The Managing General Partner: Rights, Duties and Obligations ..........................25 5.1 Powers of Managing General Partner ....................................................................25 5.2 Admission of Additional Partners ..........................................................................28 5.3 Management Interests ............................................................................................29 5.4 Gas Gathering Lines ..............................................................................................30 5.5 Farmouts ................................................................................................................31 5.6 Sales of Properties to Partnership ..........................................................................31 5.7 Purchases of Properties From Partnership .............................................................31 5.8 Fair Market Value ..................................................................................................31 5.9 Fiduciary Duties. ....................................................................................................31 5.10 No Duty of Third Parties to Investigate Authority ................................................33
i EXH. 1 - PAGE 3 5605
Page 5603 5.11 Competitive Activities and AMI............................................................................33 5.12 Events of Withdrawal ............................................................................................34 5.13 Withdrawal of the Managing General Partner .......................................................35 5.14 Assignment of Rights and Interest of Managing General Partner .........................35 5.15 Insolvency or Bankruptcy of Managing General Partner ......................................36 5.16 Additional Conditions to Substitution of Managing General Partner ....................36 5.17 [Reserved] ..............................................................................................................36 5.18 [Reserved] ..............................................................................................................36 5.19 Closing Costs .........................................................................................................37 5.20 Reimbursement of Expenses ..................................................................................37 5.21 Compensation for Services ....................................................................................37 5.22 Budgets ..................................................................................................................37 5.23 VCOC Management Rights ...................................................................................37 5.24 Management Equity Matters ..................................................................................37
Article VI The Unitholders: Rights, Duties and Obligations ...................................................38 6.1 Limited Liability of Limited Partners ....................................................................38 6.2 Transfers of Units ..................................................................................................38 6.3 Effect of Assignment or Transfer of Units on Voting Rights; Unadmitted Assignees ...............................................................................................................40 6.4 Delivery of Further Instruments.............................................................................40 6.5 Right of First Refusal .............................................................................................40 6.6 Tag-Along Rights...................................................................................................42 6.7 Drag-Along Rights .................................................................................................44 6.8 Certain Transfers, Death, Bankruptcy or Incompetency .......................................45 6.9 Confidentiality .......................................................................................................46 6.10 Management Partner Termination .........................................................................46 6.11 Initial Public Offering ............................................................................................46 6.12 ................................................................................................................................46
Article VII Meetings of Voting Unitholders ..............................................................................48 7.1 Call .........................................................................................................................48 7.2 Notice .....................................................................................................................49 7.3 Record Date ...........................................................................................................49 7.4 Time and Place .......................................................................................................49 7.5 Adjournment ..........................................................................................................49 7.6 Waiver of Notice by Attendance............................................................................50 7.7 Quorum ..................................................................................................................50 7.8 Voting ....................................................................................................................50 7.9 Conduct of Meeting ...............................................................................................50 7.10 Action Without Meeting ........................................................................................51
Article VIII Indemnification of Managing General Partner ...................................................51 8.1 Limitation of Liability of the Managing General Partner and Its Affiliates ..........51 8.2 Indemnification ......................................................................................................51
Article IX Accounts, Records and Reports................................................................................52
ii EXH. 1 - PAGE 4 5606
Page 5604 9.1 Books of Account; Fiscal Year ..............................................................................52 9.2 Capital Accounts ....................................................................................................52 9.3 Unitholder List .......................................................................................................55 9.4 Records Required by TBOC ..................................................................................55 9.5 Bank Accounts and Investment of Funds ..............................................................55 9.6 Information Furnished Annually to Unitholders....................................................56 9.7 Other Reports .........................................................................................................56
Article X Preparation of Returns; Elections .............................................................................56 10.1 Tax Reporting Information ....................................................................................56 10.2 Elections .................................................................................................................56 10.3 Basis Adjustments ..................................................................................................56 10.4 Tax Matters Partner; Partnership Representative. .................................................57 10.5 Other Elections.......................................................................................................60
Article XI Duration and Termination ........................................................................................60 11.1 Death, Insanity or Bankruptcy of Unitholder ........................................................60 11.2 Events of Dissolution .............................................................................................60 11.3 Reconstitution Following Dissolution ...................................................................60 11.4 Winding Up and Liquidation .................................................................................60 11.5 No Recourse if Assets Insufficient ........................................................................62
Article XII Amendment ...............................................................................................................62 12.1 Amendment by Managing General Partner ...........................................................62 12.2 Amendment Procedures .........................................................................................62
Article XIII Miscellaneous ..........................................................................................................63 13.1 Communications ....................................................................................................63 13.2 Entire Agreement; Applicable Law; Effect ...........................................................63 13.3 Modification; Waiver or Termination ....................................................................63 13.4 Counterparts ...........................................................................................................63 13.5 Severability ............................................................................................................64 13.6 Section Headings ...................................................................................................64 13.7 Word Meanings ......................................................................................................64 13.8 Further Actions ......................................................................................................64 13.9 No Recourse ...........................................................................................................64 13.10 Royalties Vehicle ...................................................................................................65
Article XIV Disputes ....................................................................................................................65 14.1 Consent to Jurisdiction and Service of Process; Appointment of Agent for Service of Process ..................................................................................................65 14.2 Waiver of Jury Trial ...............................................................................................65
iii EXH. 1 - PAGE 5 5607
Page 5605 Exhibit A Schedule of Partners Exhibit B Definitions Exhibit C Series A Conversion Notice Exhibit D Form of Assignment of Preferred Units Exhibit E AMI Area Exhibit F Class G Equity Plan Exhibit G Legacy Waterfall Exhibit H Legacy Waterfall Allocations Annex A Form of VCOC Management Rights Letter Annex B Royalties Term Sheet
iv EXH. 1 - PAGE 6 5608
Page 5606 THIRD AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
PRIMEXX ENERGY PARTNERS, LTD.
This THIRD AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (the “Agreement”), dated as of July 12, 2016 (the “Effective Date”) is made and entered into by and among PRIMEXX ENERGY CORPORATION, a Texas corporation, as Managing General Partner, the Persons listed as Series A Preferred, Series B Preferred, Class A, Class B, Class C, Class D, Class E or Class F Unitholders on the signature pages hereto and such other Persons who are hereafter admitted to the Partnership pursuant to the terms of this Agreement as Limited Partners.
RECITALS
WHEREAS, the Partnership was formed as a limited partnership pursuant to the TBOC (as defined below) by filing a certificate of limited partnership with the Secretary of State of Texas on September 11, 2000;
WHEREAS, the Partnership is currently governed by that certain Second Amended and Restated Limited Partnership Agreement (the “Second A&R Partnership Agreement”) effective as of November 1, 2013;
WHEREAS, the Partnership and BPP Holdco LLC (“Blackstone”) are parties to that certain Partnership Interest Purchase Agreement dated as of the Effective Date (the “Partnership Interest Purchase Agreement”);
WHEREAS, pursuant to the Partnership Interest Purchase Agreement, Blackstone has agreed to make capital contributions to the Partnership with respect to Series B Preferred Units and Class F Units issued to Blackstone under the Partnership Interest Purchase Agreement;
WHEREAS, Blackstone Capital Partners VII L.P. and Blackstone Energy Partners II L.P. (the “Blackstone Investors”) have executed and delivered an Equity Commitment Letter, as of July 12, 2016, pursuant to which the Blackstone Investors have committed, subject to the terms and conditions set forth therein, to contribute capital to Blackstone, in order to provide Blackstone with the necessary funds to make capital contributions to the Partnership for purposes of the Second Series B Preferred Units Issuance (as defined herein) pursuant to the terms hereof;
WHEREAS, Blackstone and the Partnership have entered into that certain Second Lien Term Loan Agreement dated July 12, 2016, the proceeds of which were utilized to refinance previously existing second lien debt of the Partnership with Ares Capital Corporation;
WHEREAS, certain of the Series A Preferred and Class A, B, C, D and E Unitholders identified on Exhibit A, on the terms and subject to the conditions set forth in this Agreement, were previously admitted as Unitholders of the Partnership and will be entitled to receive distributions from the Partnership as set forth herein;
EXH. 1 - PAGE 7 5609
Page 5607 WHEREAS, Class G Unitholders identified on Exhibit A, on the terms and subject to the conditions set forth in this Agreement, including Exhibit F hereto, will be admitted as Partners of the Partnership and will receive distributions from the Partnership as set forth herein; and
WHEREAS, the Unitholders desire to amend and restate the Second A&R Partnership Agreement to, among other things, provide for the management of the Partnership and set forth their respective rights and obligations.
NOW, THEREFORE, for and in consideration of the promises and the mutual covenants and agreements contained herein and other good and valuable consideration (the receipt and sufficiency of which are hereby confirmed and acknowledged), the parties agree as follows:
WITNESSETH:
Article I Definitions
Any capitalized term used in this Agreement without definition shall have the meaning set forth in Exhibit B annexed hereto.
Article II Organizational Matters
2.1 Formation. The Partnership was formed as a limited partnership under and pursuant to the TBOC by the filing of the original certificate of limited partnership with the Secretary of the State of Texas on September 11, 2000 and the execution of a Limited Partnership Agreement as of July 1, 2000 (the “Original Partnership Agreement”). This Agreement amends and restates in its entirety and supersedes in all respects the Original Partnership Agreement, as amended by that certain Amended and Restated Partnership Agreement, dated effective June 1, 2001 and further amended by that certain Second A&R Partnership Agreement. The rights and liabilities of the Partners of the Partnership shall be as provided in the TBOC and this Agreement.
2.2 Partnership Name. The name of the Partnership shall be “PRIMEXX ENERGY PARTNERS, LTD.” The business of the Partnership, however, may be conducted under any other name deemed necessary or desirable by the Managing General Partner; provided that the business of the Partnership shall not be conducted under a name that contains the name of a Limited Partner without first obtaining the consent to the use of such name from such Limited Partner.
2.3 Location of Principal Place of Business and Registered Office. The principal place of business of the Partnership and of the Managing General Partner shall be 4849 Greenville Avenue, Suite 1600, Dallas, Texas 75206. The registered agent of the Partnership shall be CT Corporation System and the registered office of the Partnership shall be 350 N. St. Paul Street, Suite 2900, Dallas, Texas 75201-4234. The Managing General Partner may, from time to time, change the principal place of business and/or the registered office of the Partnership to any other location and may establish such other offices or places of business for
2 EXH. 1 - PAGE 8 5610
Page 5608 the Partnership as it may deem necessary or desirable; provided, however, that the Managing General Partner shall give prompt notice of a change of its principal place of business and/or registered office to all of the other Partners.
2.4 Business of the Partnership. The business of the Partnership shall be to acquire, explore, drill, develop, operate and dispose of oil and gas properties (including, without limitation, Prospects); to produce, collect, store, treat, deliver, market, sell or otherwise dispose of oil, gas and related minerals from Prospects; and to take all such actions which may be incidental thereto as the Managing General Partner may determine. The Partnership may also purchase or acquire equipment, processing and transmission facilities (including gas gathering and pipeline transmission facilities) and other property associated with Prospects. In addition, the Partnership may participate in any other type of transaction relating to Prospects or the drilling and completion of Partnership Wells thereon if the economic effect of such transactions is the same as the ownership of such Prospects by the Partnership.
2.5 Term. The Partnership came into being upon the execution of the Original Partnership Agreement and the filing of the original certificate of limited partnership with the Secretary of the State of Texas, and shall remain in being, unless sooner terminated as hereinafter provided, in perpetuity.
2.6 Qualification to Do Business. Prior to conducting any business in any jurisdiction, the Managing General Partner shall either cause the Partnership to comply with all requirements for the qualification of the Partnership to conduct business as a limited partnership in such jurisdiction or to conduct business in such jurisdiction, through other partnerships, through the Managing General Partner as its agent or by such other means as the Managing General Partner, upon the advice of counsel, deems appropriate in order to preserve the limited liability of the Limited Partners to the fullest possible extent.
Article III Capital Contributions; Units
3.1 Capital Contributions of Unitholders. A Unitholder’s Capital Contributions (including the Managing General Partner’s contribution as a Unitholder) shall consist of cash and/or the assets (net of liabilities) transferred to the Partnership by such Unitholder. Except as otherwise expressly set forth in this Agreement, no Unitholder shall be required to make any additional Capital Contributions to the Partnership.
3.2 Capital Contributions of Managing General Partner. The Managing General Partner’s Capital Contributions, as Managing General Partner, consisted of $1,000. The Managing General Partner shall not be required to make any additional Capital Contributions, except as required by law.
3.3 Capital Contributions of Management Partner. Except as otherwise expressly set forth in this Agreement, no Management Partner shall be required to make any Capital Contributions to the Partnership.
3.4 Return of Capital Contributions. Except as otherwise expressly set forth in this Agreement, none of the Partners shall be entitled to demand a refund or return of any Capital 3 EXH. 1 - PAGE 9 5611
Page 5609 Contributions nor to withdraw any part of his Capital Account nor to receive any Distribution from the Partnership.
3.5 No Interest on Capital Contributions. Except as otherwise expressly set forth in this Agreement, no Partner shall be entitled to the payment of interest of any kind on his Capital Contributions.
3.6 Authorization and Issuance of Units.
(a) Classes. There shall be three classifications of interests of the Partnership, with such classifications consisting of: (i) Series A Preferred Units, (ii) Series B Preferred Units, and (iii) Common Units.
(b) Series A Preferred Units. The Partnership hereby authorizes the issuance of up to 70,000 Series A Preferred Units, of which that number set forth on Exhibit A are outstanding as of the date hereof.
(i) Except as provided by applicable provisions of the TBOC, and this Agreement, the outstanding Series A Preferred Units shall have no voting rights.
(ii) The Series A Preferred Units will not be evidenced by certificates.
(iii) Conversion.
(A) At any time the Series A Preferred Units owned by any Series A Preferred Unitholder shall be convertible, upon the request of the Series A Preferred Unitholder into a number of Class A-1 Units determined by multiplying the number of Series A Preferred Units held by such Series A Preferred Unitholder by the Series A Conversion Rate. Immediately upon any conversion of Series A Preferred Units, all rights of the Converting Unitholder in respect thereof shall cease, and such Converting Unitholder shall be treated for all purposes as the owner of Class A-1 Units. Conversion of the Series A Preferred Units by a Series A Preferred Unitholder into Class A-1 Units shall be permitted only if all Series A Preferred Units held by such Series A Preferred Unitholder are so converted.
(B) To convert Series A Preferred Units into Common Units pursuant to Section 3.6(b)(iii), the Converting Unitholder shall give written notice (a “Series A Conversion Notice”) to the Partnership in the form of Exhibit C attached hereto stating that such Series A Preferred Unitholder elects to so convert the Series A Preferred Units and shall state therein the following: (a) the name or names in which such Series A Preferred Unitholder wishes the Class A-1 Units to be issued, and (b) such Series A Preferred Unitholder’s computation of the number of Class A-1 Units to be received by such Series A Preferred Unitholder (or designated recipient(s)) upon the Series A Conversion Date. The date any Series A Conversion Notice is received by the Partnership shall be hereinafter
4 EXH. 1 - PAGE 10 5612
Page 5610 referred to as a “Series A Conversion Date.” The Converting Unitholder shall also provide an assignment of the Series A Preferred Units in the form of Exhibit D attached hereto. Converted Series A Preferred Units may not be reissued.
(C) If a Series A Conversion Notice is delivered by a Series A Preferred Unitholder to the Partnership in accordance with Section 3.6(b)(iii)(A), the Partnership shall issue to such Series A Preferred Unitholder (or designated recipient(s)), effective as of the Series A Conversion Date, the number of Class A-1 Units to which such holder shall be entitled. Upon issuance of Class A-1 Units to the Converting Unitholder, effective as of the Series A Conversion Date, all rights under the converted Series A Preferred Units shall cease, and such Converting Unitholder shall be treated for all purposes as the record holder of such Class A-1 Units.
(D) If, after the Series A Issuance Date, the Partnership (i) makes a distribution on its Legacy Common Units in Legacy Common Units, (ii) subdivides or splits its outstanding Legacy Common Units into a great number of Legacy Common Units, (iii) combines or reclassifies its Legacy Common Units into a smaller number of Legacy Common Units or (iv) issues by reclassification of its Legacy Common Units any Partnership interests (including any reclassification in connection with a merger, consolidation or business combination in which the Partnership is the surviving Person), then the Series A Conversion Rate in effect at the time of the Record Date for such distribution or of the effective date of such subdivisions split, combination, or reclassification shall be proportionately adjusted so that the conversion of the Series A Preferred Units after such time shall entitle the holder to receive the aggregate number of Class A-1 Units (or shares of any Partnership Securities into which such shares of Class A-1 Units would have been combined, consolidated, merged or reclassified pursuant to clauses (iii) and (iv) above) that such holder would have been entitled to receive if the Series A Preferred Units had been converted into Class A-1 Common Units immediately prior to such Record Date or effective date, as the case may be, and in the case of a merger, consolidation or business combination in which the Partnership is the surviving Person, the Partnership shall provide effective provisions to ensure that the provisions in this Section 3.6(b)(iii)(D) relating to the Series A Preferred Units shall not be abridged or amended and that the Series A Preferred Units shall thereafter retain the same powers, preferences and relative participating, optional and other special rights, and the qualifications, limitations and restrictions therein, that the Series A Preferred Units had immediately prior to such transaction or event. An adjustment made pursuant to this Section 3.6(b)(iii)(D) shall become effective immediately after the Distribution Record Date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification
5 EXH. 1 - PAGE 11 5613
Page 5611 (including any reclassification in connection with a merger, consolidation, or business combination in which the Partnership is the surviving Person) or spilt. Such adjustment shall be made successively whenever any event described above shall occur. If, in the future, the Partnership issues any options, warrants, or other rights to purchase Legacy Common Units, (herein collectively “Legacy Common Units Purchase Rights”) the Managing General Partner shall either (y) amend the provisions of this Agreement relating to antidilution protection to (i) revise any such provision that is less favorable than the corresponding provision offered in the terms of such Legacy Common Unit Purchase Rights (or any related purchase agreement) so that such provision is the same as such provision offered in the terms of such Legacy Common Unit Purchase Rights (or any related purchase agreement) and (ii) incorporate any provision(s) offered in the terms of such Legacy Common Unit Purchase Rights (or any related purchase agreement” that is not currently provided for in this Agreement and which would make the antidilution protection provisions of this Agreement more favorable to the holders of the Series A Preferred Units, which amendment shall be effective concurrently with the issuance and/or execution of documentation relating to such Legacy Common Unit Purchase Rights, or (z) if consented to by the holders of a majority of the outstanding Series A Preferred Units, retain the antidilution language applicable to the Series A Preferred Units at such time. The Partnership agrees to provide as much prior notice of an issuance of any such Legacy Common Unit Purchase Rights and/or execution or documentation relating to such issuance of Legacy Common Unit Purchase Rights as reasonably practicable (and in any event, such notice shall be provided at least ten (10) Business Days prior to such issuance and/or execution).
(iv) Nonassessable. Any Class A-1 Unit(s) delivered pursuant to this Section 3.6(b)(iv) shall be validly issued, fully paid and nonassessable (except as such nonassessability may be affected by applicable provisions of the TBOC), free and clear of any liens, claims, rights or encumbrances other than those arising under the TBOC or this Agreement or created by the holders thereof.
(v) Liquidation or Exit Event. At the time of an Exit Event or the dissolution of the Partnership, subject to Section 153.210 of the TBOC, the recordholders of the Series A Preferred Units shall become entitled to receive any distributions in respect of the Series A Preferred Units that are accrued and unpaid as of the date of such distribution in priority over any entitlement of any other Legacy Unitholders or their Assignees with respect to any distributions by the Partnership to such other Legacy Unitholders or their Assignees; provided, however, that the Managing General Partner, as such, will have no liability for any obligations with respect to such distributions to any record holder(s) of Series A Preferred Units. The Partnership shall provide written notice to the Series A Preferred Unitholders not later than ten (10) days prior to the date of consummation (or, if not practicable, as much prior notice as is reasonably practicable) of any liquidation event or Exit Event, describing in reasonable detail the terms of the liquidation event or Exit Event and setting forth the Partnership’s calculation of the
6 EXH. 1 - PAGE 12 5614
Page 5612 amount (if any) to which the Series A Preferred Unitholders would be entitled presuming conversion of the Series A Preferred Units prior to such liquidation or Exit Event.
(c) Series B Preferred Units. The Partnership hereby authorizes the issuance of up to 300,000 Series B Preferred Units (plus any additional Series B Preferred Units contemplated for issuance pursuant to Section 4.2(h) of the Partnership Interest Purchase Agreement and Series B Preferred Units issued as a Payment in Kind pursuant to Section 3.6(c)(ii)(C)) with a stated liquidation value of $1,000.00 per Series B Preferred Unit, of which that number set forth on Exhibit A are outstanding as of the date hereof.
(i) Except as provided by applicable provisions of the TBOC, and this Agreement, the outstanding Series B Preferred Units shall have no voting rights.
(ii) The Series B Preferred Units will not be evidenced by certificates. The holders of each outstanding Series B Preferred Unit will be entitled to receive distributions from the Partnership equal to Series B Unit Distribution at the applicable time as herein provided:
(A) Distributions on the Series B Preferred Units will be prior and in preference to any declaration or payment of any distributions on any other Units including the Series A Preferred Units and any other series of Units created after the date hereof. Distributions on the Series B Units will be cumulative and will accrue at the Series B Distribution Rate from the date of issuance of such Units, whether or not declared and whether or not there will be funds legally available for the payment thereof. All Series B Unit Distributions payable by the Partnership pursuant to this Section 3.6(c)(ii) will be payable without regard to income of the Partnership and will be treated for federal income tax purposes as guaranteed payments for the use of capital under Section 707(c) of the Code.
(B) The distributions to the holders of the Series B Preferred Units will be payable quarterly on each of January 2, April 1, July 1, and October 1 of each year commencing on October 1, 2016 (each such date, the “Distribution Date”), except that if any such date is not a Business Day and the applicable distribution is payable in cash, then such distribution will be payable on the first Business Day immediately thereafter. Distributions payable on the Series B Units will accrue quarterly on each Distribution Date.
(C) Except as provided in Section 3.6(c)(ii)(D), any distribution payable to the Series B Preferred Unitholders shall be paid in additional Series B Preferred Units at a per-Series B Unit issue price equal to the Series B Issue Price (a “Payment in Kind”) payable to the holders of the Series B Units as of the Distribution Date. The Series B Preferred Units issuable as Payment in Kind to a holder of Series B Preferred Units will be equal to that number (rounded to the second decimal point; provided that
7 EXH. 1 - PAGE 13 5615
Page 5613 the Partnership may elect not to issue any fractional Series B Preferred Units, and to pay each applicable holder of Series B Preferred Units an amount of cash equal to the proportional amount of the Series B Issue Price of such fractional Series B Preferred Unit that would otherwise be issued to such holder) of Series B Preferred Units derived by dividing (A) the aggregate distribution otherwise payable to such holder on the subject Distribution Date (using the Series B Distribution Rate) in respect of all such holder’s Series B Preferred Units, less any amount of such distribution payable in cash pursuant to Section 3.6(c)(ii)(D) below, by (B) the Series B Issue Price. The Partnership will immediately reflect on its books and records the issuance of such additional Series B Preferred Units and will provide to the Partners a schedule that sets forth, in detail reasonably satisfactory to the holders of Series B Preferred Units, the calculation of the number of additional Series B Preferred Units so issued and the total number of Series B Preferred Units owned by the holders of Series B Preferred Units after giving effect to such issuance.
(D) The Partnership at the direction of the Managing General Partner may pay up to fifty percent (50%) of the Series B Unit Distribution for each Fiscal Quarter in cash.
(E) For purposes of maintaining Capital Accounts, if the Partnership issues one or more Payment in Kind with respect to a Series B Unit, (i) the Partnership will be treated as distributing cash with respect to such Series B Preferred Unit in an amount equal to the Series B Issue Price of the Series B Preferred Unit issued as Payment in Kind, which deemed payment will be treated for federal income tax purposes as a guaranteed payment for the use of capital under Section 707(c) of the Code and (ii) the holder of such Series B Preferred Unit will be treated as having contributed to the Partnership in exchange for such newly issued Payment in Kind Series B Preferred Unit an amount of cash equal to the Series B Issue Price of the Series B Unit issued as Payment in Kind.
(iii) Upon the first (1st) anniversary of the Effective Date, the Partnership will issue an additional 100,000 Series B Preferred Units to Blackstone and such other holders of Series B Preferred Units (each such holder of Series B Preferred Units, the “Series B Preferred Holders”) participating in such issuance pursuant to Section 8.8 of the Partnership Interest Purchase Agreement, on a pro rata basis in exchange for an aggregate Capital Contribution of $100,000,000.00 (the “Second Series B Preferred Units Issuance”); provided, however, that the Managing General Partner may effectuate such Second Series B Preferred Units Issuance prior to the first (1st) anniversary of the Effective Date with Unanimous Consent.
(iv) At any time, and from time to time, the Partnership at the direction of the Managing General Partner may redeem the Series B Preferred Units, in whole or in part, for an amount per Series B Preferred Unit equal to the Liquidation Preference of such Series B Preferred Unit. Any such redemption pursuant to this Section 3.6(c)(iv)
8 EXH. 1 - PAGE 14 5616
Page 5614 shall be made pro rata among all Series B Preferred Holders based on the relative Liquidation Preferences of the Series B Preferred Units. To effectuate such redemption, the Partnership shall fix a date (a “Redemption Date”) for such redemption of the Series B Preferred Units (or part thereof) to be redeemed and shall deliver a notice of such redemption not less than thirty (30) nor more than sixty (60) days prior to the Redemption Date, addressed to the Series B Preferred Holders with respect to the Series B Preferred Units (or part thereof) being redeemed as they appear in the records of the Partnership. Each notice must state the following: (A) specification of the Series B Preferred Units being redeemed, (B) the portion of such class of Series B Preferred Units being redeemed, (C) the Redemption Date, and (D) the Liquidation Preference for the Series B Preferred Units (or part thereof) being redeemed, as of the Redemption Date.
(v) At any time, and from time to time, after the seventh (7th) anniversary of the Effective Date, each Series B Preferred Holder may cause the Partnership to redeem the Series B Preferred Units, in whole or in part, for an amount equal to the Liquidation Preference (a “Redemption Election”) for each Series B Preferred Unit. If the Series B Preferred Holders make such a Redemption Election and the Partnership does not have sufficient Available Cash to redeem in full all Series B Preferred Units that the Series B Preferred Holders have elected to redeem, then the Series B Distribution Rate shall increase by 2.0% per annum for all Series B Preferred Units for which Series B Holders have made a valid Redemption Election but are unable to be redeemed as a result of a deficiency of Available Cash until such time that all Series B Preferred Units the Series B Preferred Holders have elected to redeem have been redeemed.
(vi) At any time, and from time to time, if (A) an Exit Event occurs, (B) the Partnership undertakes any follow-on equity offering or otherwise issues equity to any Person (excluding the Second Series B Preferred Units Issuance and any incentive equity to management and equity issued in connection with an acquisition or business combination), (C) the Partnership makes a sale or other disposition of assets for consideration in excess of $20,000,000 in one or a series of related transactions, or (D) there is an event of default and acceleration under any Financing Facility or any other material debt instrument of the Partnership or any of its Subsidiaries or otherwise an acceleration event occurs thereunder (other than as a result of actions expressly taken or permitted to be taken by Blackstone or a Blackstone Director) (each such event a “Redemption Event”), then the Series B Preferred Holders shall have the right to cause the Partnership to redeem the Series B Preferred Units, in whole or in part, for an amount per Series B Preferred Unit equal to the Liquidation Preference; provided that, for any Redemption Event triggered by clauses (B) or (C) in this Section 3.6(c)(vi), each Series B Preferred Holder’s right to cause the Partnership to redeem Series B Preferred Units shall be limited to the number of Series B Preferred Units which may be redeemed using solely the cash proceeds from such Redemption Event, and any other Series B Preferred Units held by Blackstone shall remain outstanding. In the event that multiple Series B Preferred Holders elect to cause the Partnership to redeem Series B Preferred Units pursuant to this Section 3.6(c)(vi), then in any event such redemption shall be made pro rata among all Series B Preferred Holders electing redemption based on the relative
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Page 5615 Liquidation Preference of the Series B Preferred Units of such Series B Preferred Holders electing redemption.
(vii) [Reserved].
(viii) So long as any Series B Preferred Units remain outstanding, the Partnership shall not, and will not permit any of its Subsidiaries to, without the affirmative vote of the Series B Preferred Holders acting by majority vote:
(A) create, authorize or issue any class or series of interests ranking senior to or pari passu with the Series B Preferred Units (or any security convertible into such interests) or increase the total number of authorized or issued Series B Preferred Units;
(B) amend, alter or change this Agreement (or any other organizational document), or take any other action, so as to affect adversely in any material respect the specified rights, preferences, privileges or voting rights of the Series B Preferred Units; or
(C) effect any redemption, acquisition or other purchase of any class or series of equity securities of the Partnership ranking pari passu with or junior to the Series B Preferred Units.
(d) Common Interests. Common Units may be issued in whole or fractional interests. The Partnership is hereby authorized to issue seven (7) classes of Common Units: the “Class A Units,” the “Class A-1 Units,” the “Class B Units,” the “Class C Units,” the “Class D Units,” the “Class E Units,” the “Class F Units” and the “Class G Units.” A total of 10,000 Class A Units are hereby authorized for issuance, a total of 70,000 Class A-1 Units are hereby authorized for issuance, a total of 125,000 Class B Units are hereby authorized for issuance, a total of 10,000 Class C Units are hereby authorized for issuance, a total of 5,000 Class D Units are hereby authorized for issuance, a total of 10,000 Class E Units are hereby authorized for issuance, a total of 200,000 Class F Units are hereby authorized for issuance and a total of 100,000 Class G Units are hereby authorized for issuance. The holders of Class A Units, Class A-1 Units, Class B Units, Class C Units, Class D Units, Class E Units, Class F Units and Class G Units shall have the respective rights, preferences, privileges, restrictions and obligations set forth in this Agreement.
(e) Admission of Class G Unitholders. On the Effective Date, upon the execution and delivery by the parties of this Agreement, the Partnership shall be deemed to have issued Class G Units to the Class G Unitholders as provided on Exhibit A and each such Person shall be admitted to the Partnership as a Class G Unitholder, effective as of the date hereof.
(f) Amendments to Exhibits A and H. The Units issued and outstanding are set forth on Exhibit A hereto. Exhibit A and, as applicable, Exhibit H, shall be amended from time to time to reflect changes and adjustments resulting from (i) the admission of any new Unitholder, (ii) any transfer in accordance with this Agreement or (iii) any additional Partnership interests issued, in each case as permitted by this Agreement (provided, that a failure to reflect such change or adjustment on Exhibit A or Exhibit H shall not prevent any otherwise valid 10 EXH. 1 - PAGE 16 5618
Page 5616 change or adjustment from being effective); provided, that the Managing General Partner shall provide each Partner with a copy of any amendment to Exhibit A or Exhibit H within thirty (30) Business Days after adoption thereof.
(g) Class G Units.
(i) The Class G Units are intended to be “Profits Interests” under IRS Revenue Procedure 93-27, IRS Revenue Procedure 2001-43 and IRS Notice 2005-43, and the provisions of this Agreement shall be interpreted and applied consistently therewith; provided that no party hereto is making any covenant, representation or warranty that any taxing authority or third party shall agree with this interpretation or accept the position that such Class G Units are “Profits Interests” for income tax purposes. In the event that the Partnership issues any Class G Units after the date hereof, the Board may take such actions in order for such Class G Units to be treated as a “Profits Interest” as described in the immediately preceding sentence, including, without limitation, (i) establishing a Participation Threshold of such Class G Units being issued or (ii) authorizing a new series of Class G Units (e.g., Series 1 Class G Units, Series 2 Class G Units, etc.) and establishing a Participation Threshold applicable to all Class G Units issued as part of such series.
(ii) This Agreement together with the documents, instruments or agreements pursuant to which the Class G Units are issued are intended to qualify as a compensatory benefit plan within the meaning of Rule 701 of the Securities Act (and any similarly applicable state “blue-sky” securities laws) and the issuance of Class G Units pursuant thereto is intended to qualify for the exemption from registration under the Securities Act provided by Rule 701 (and any similarly applicable state “blue-sky” securities laws); provided that the foregoing shall not restrict or limit the Partnership’s ability to issue any Class G Units pursuant to any other exemption from registration under the Securities Act available to the Partnership.
(h) Issuances of Legacy Units. After the Effective Date, except with respect to the conversion of Series A Preferred Units into Class A-1 Units pursuant to the terms of this Agreement, (i) issuances of Legacy Units may only be made with the Unanimous Consent of the Board and (ii) issuances of Series A Preferred Units and Class A-1 Units shall also require the prior written approval of holders of a majority of the outstanding Series A Preferred Units.
3.7 Additional Capital Contributions.
(a) Additional Funds. The Board by Unanimous Consent (or majority consent pursuant to Section 5.2(b)) may agree at any time from time to time that additional funds are required by the Partnership in addition to the then-existing Capital Contributions to the Partnership and any financing that the Partnership may have obtained, or that may be available to the Partnership, in accordance with this Agreement (“Additional Capital Requirement”); provided, that, notwithstanding anything herein to the contrary, Unanimous Consent shall be deemed granted (and only ordinary approval of the Board necessary) in respect of additional funds (i) required to the extent that the Partnership would otherwise be in default under, or materially breach, any Financing Facility or other material debt instrument within twenty (20)
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Page 5617 Business Days from the applicable date of determination or be insolvent or (ii) required to address any additional bona fide emergency liquidity needs of the Partnership as reasonably determined by the Board in good faith. In such instances, the Partners may (but are not obligated to) provide immediate additional funds to the Partnership based on their respective Economic Percentage. In the event that such Capital Contributions are not made by the Partners at the same time in accordance with their respective Economic Percentage and Partners with an Economic Percentage of greater than 5% in the aggregate fail to fund their pro rata share of such Capital Contributions, the Partner contributing more than its proportionate share of funds shall, notwithstanding anything to the contrary in this Agreement, but subject in all cases to any applicable restrictions under the Financing Facilities, be reimbursed by the Partnership for an amount equal to 2.0 times the portion of such Partner’s optional contribution (provided that to the extent Partners are funding in excess of their pro rata portion with respect to a deficiency of less than 5% of the required funding in the aggregate, such excess portion will be reimbursed by the Partnership at an amount equal to 2.0 times solely with respect to such excess funding), including in excess of its pro rata share of the Partnership (based on its Economic Percentage), which amount shall be paid promptly to such Partner by the Partnership from the Partnership’s then Available Cash as such funds become available prior to any distributions to the Partners; provided, that, without Unanimous Consent of the Board, a Partner shall only be entitled to reimbursement (without the multiplier) with respect to the provision of funds pursuant to clause (i) or to otherwise pay debt under clause (ii), in each case, to the extent related to debt held by such Partner or its Affiliates. All amounts due to a Partner in respect of an optional contribution under this Section 3.7 shall be treated as a loan from such Partner to the Partnership (or, if such characterization as a loan is prohibited under any of the Financing Facilities, a preferred equity interest of the Partnership junior to the Series B Preferred Units and senior to all other equity interests of the Partnership) and not as a Capital Contribution; provided, however, that, notwithstanding anything in this Agreement to the contrary, without the consent of the Managing General Partner no such additional funds provided by a Partner shall dilute any Partner’s Economic Percentage.
(b) Mandatory Capital Contributions. Notwithstanding anything herein to the contrary, the Second Series B Preferred Units Issuance shall be deemed a mandatory capital contribution pursuant to which all Series B Preferred Unitholders shall be required to contribute Capital Contributions pro rata to their ownership of Series B Preferred Units. The Partnership shall issue a Mandatory Call Notice to effectuate such requirement, which notice shall state the Call Amount pursuant to this Section 3.7.
3.8 Repurchase Rights.
(a) In the event of any Termination of a Class G Unitholder by the Partnership or any of its Affiliates or Subsidiaries for Cause or because such Class G Unitholder leaves his or her employment with the Partnership or its Affiliates without Good Reason, (i) all unvested Class G Units held by such terminated Class G Unitholder shall be cancelled and forfeited without payment of any kind with respect thereto and (ii) the Partnership (or its designees) shall have the right (but not the obligation) to purchase from such terminated Class G Unitholder and its Permitted Affiliates all or any portion of the Vested Class G Units held by such Class G Unitholder or its Permitted Affiliates (collectively, the “Subject Interests”) for consideration equal to the lesser of (A) the book value of the Subject Interests as determined by the Board
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Page 5618 (acting reasonably) and (B) the Fair Market Value of such Subject Interests as determined by the Board (acting reasonably); provided, however, that the Board acting by Unanimous Consent and in its sole discretion, shall have the option (but not the obligation) to elect to have the Partnership (or its designees) purchase such Subject Interests for consideration in excess of the consideration amount determined pursuant to clause (ii) of this Section 3.8(a).
(b) In the event of any Termination of a Class G Unitholder without Cause (other than a termination by such Class G Unitholder for Good Reason), or because such Class G Unitholder leaves his or her employment with the Partnership or its Affiliates with Good Reason, (i) all unvested Class G Units held by such terminated Class G Unitholder shall be cancelled and forfeited without payment of any kind with respect thereto, and (ii) the Partnership (or its designees) shall have the right (but not the obligation) to purchase from such terminated Class G Unitholder and its Permitted Affiliates all or any portion of the Subject Interests for consideration equal to the Fair Market Value of such Subject Interests as determined by the Board (acting reasonably).
(c) In the event a Class G Unitholder is in material breach of the terms of any agreement between such Class G Unitholder, on the one hand, and the Partnership and/or any of its Subsidiaries, on the other hand, the Partnership (or its designees) shall have the right (but not the obligation) from time to time to purchase from such Class G Unitholder and its Permitted Affiliates all or any portion of the Subject Interests for consideration equal to the lesser of (A) the book value of the Subject Interests as determined by the Board (acting reasonably) and (B) the Fair Market Value of such Subject Interests as determined by the Board (acting reasonably).
(d) Notwithstanding anything in this Section 3.8 to the contrary, if within five (5) Business Days of receipt of a Fair Market Value determination by the Board pursuant to Sections 3.8(a), (b) or (c), the Class G Unitholder delivers written notice to the Partnership disputing the Board’s determination of Fair Market Value (which notice shall include the Class G Unitholder’s good faith proposal for Fair Market Value of the Subject Interests), then the Partnership and the Class G Unitholder shall engage in good faith negotiations for fifteen days (15) following the Partnership’s receipt of notice to resolve such dispute, which period may be extended upon mutual agreement. If at the end of such fifteen-day (15) period (or such longer mutually agreeable period), the parties have not resolved such dispute, the parties shall engage a mutually agreeable third-party valuation firm that is experienced in valuing Hydrocarbon Interests (the “Subject Interest Valuator”), to determine the Fair Market Value of the Subject Interests. The parties shall use their commercially reasonable efforts to cause the Subject Interest Valuator to render a determination of Fair Market Value of the Subject Interests within thirty (30) days of engagement; provided, that the Subject Interest Valuator’s determination shall not be higher than the highest Fair Market Value proposal presented by the parties or lower than the lowest Fair Market Value proposal presented by the parties. The determination of Fair Market Value by the Subject Interest Valuator shall be final and binding on the parties. The fees and expenses of the Subject Interest Valuator shall be paid 100% by the party - either the Partnership or the Class G Unitholder - whose Fair Market Value proposal is furthest from the Fair Market Value determined by the Subject Interest Valuator.
13 EXH. 1 - PAGE 19 5621
Page 5619 (e) The Partnership (or its designees) may exercise the foregoing purchase options, by written notice to the applicable Class G Unitholder and their Permitted Affiliates, beginning on the date that is six (6) months and one day, and by no later than the date that is 211 days following the applicable Termination. Each of the Partners hereby agrees that the foregoing remedy is a liquidated damage, and not a penalty. The Partnership shall pay for the Subject Interests to be purchased by it pursuant to this Section 3.8, to the maximum extent permitted by law, by first offsetting amounts outstanding under any bona fide undisputed debts owed by the Class G Unitholder to the Partnership or any of its Subsidiaries (including any amounts advanced to the Class G Unitholder during the course of the Class G Unitholder’s employment), and thereafter the remainder of the purchase price by a check or wire transfer of immediately available funds. The Partnership (or its designees) will receive customary representations and warranties from the applicable Class G Unitholder and/or its Permitted Affiliate(s) regarding the sale of the Subject Interests, including but not limited to the representation that the applicable Class G Unitholder and/or each of its Permitted Affiliate(s) has good and marketable title to the Subject Interests to be Transferred free and clear of all liens, claims and other encumbrances on the date of closing the Transfer. The Class G Unitholders hereby consent to the taking of any steps which the Partnership reasonably deems are necessary or convenient to effect any legal formalities in relation to such Transfer. If the Partnership (or its designees) shall make available the consideration for the Subject Interests to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the Person from whom such Subject Interests are to be repurchased shall no longer have any rights as a holder of such Subject Interests (other than the right to receive payment of such consideration in accordance with this Agreement), and such Subject Interests shall be deemed purchased in accordance with the applicable provisions hereof and the Partnership (or its designees) shall be deemed the owner and holder of such Subject Interests. Notwithstanding anything to the contrary contained in this Agreement, all repurchases of the Subject Interests by the Partnership shall be subject to applicable restrictions contained in the Securities Act and in the Partnership’s and any of its Subsidiaries’ debt financing agreements.
(f) Notwithstanding anything to the contrary, the Partnership (and its designees) shall not have a right to purchase Class G Units of Thomas Fagadau or his Permitted Affiliates under (i) Section 3.8(b) or (ii) otherwise in connection with a Termination without Cause, because he left his employment with Good Reason or resulting from his death or Disability (as defined in his employment agreement).
Article IV Computation and Allocation of Financial and Tax Items; Distributions
4.1 Computation of Profit and Loss. For purposes of maintaining the Capital Accounts, the Profit and Loss of the Partnership for any Fiscal Year or other period shall be an amount equal to the Partnership’s taxable income or loss for such period (computed in accordance with Section 703(a) of the Code), with the following adjustments:
(a) any income of the Partnership for the period that is exempt from federal income tax and not otherwise taken into account in computing Profit and Loss under this Section 4.1 shall be added to such taxable income or loss;
14 EXH. 1 - PAGE 20 5622
Page 5620 (b) any Section 705(a)(2)(B) Expenditure that is not otherwise taken into account in computing Profit and Loss under this Section 4.1 shall be subtracted from such taxable income or loss;
(c) gain or loss resulting from the disposition during the period of any asset (in a taxable transaction) shall be computed by reference to the book value of such asset;
(d) in lieu of the depreciation, amortization, or other cost recovery deduction with respect to any item taken into account in computing such taxable income or loss, there shall be taken into account depreciation, amortization or either cost recovery in respect of the item determined by applying the method used by the Partnership for federal income tax purposes with respect to such item to the book value of such item (or, if the tax basis of such item is zero, the method the Partnership would have used for such purpose); and
(e) any items that are specially allocated under Sections 4.4 or 4.5, shall not be taken into account.
4.2 Allocation of Profit and Loss. After giving effect to the special allocations in Sections 4.5, 4.9(a) and (b), and 11.4(a)(iv), Profit and Loss for any Fiscal Year other than Net Gain from an Exit Event and Net Loss From an Exit Event, shall be allocated as follows:
(a) Profit.
(i) First, 100% to the Managing General Partner until the aggregate Profits allocated to the Managing General Partner pursuant to this Section 4.2(a)(i) for the current and all previous Fiscal Years is equal to the aggregate Losses allocated to the Managing General Partner pursuant to Section 4.2(b)(iii) for all previous Fiscal Years;
(ii) Second, 100% to the Series B Preferred Unitholders, pro rata in proportion to the aggregate number of Series B Preferred Units held by each such Series B Preferred Unitholders, until the aggregate Profits allocated to the Series B Preferred Unitholders pursuant to this Section 4.2(a)(ii) for the current and all previous Fiscal Years is equal to the aggregate Losses allocated to the Series B Unitholders pursuant to Section 4.2(a)(ii) for all previous Fiscal Years;
(iii) Third, 100% to the Unitholders (including the Series A Preferred Unitholders but excluding the Series B Preferred Unitholders) in accordance with their Percentage Interests, until the aggregate Profits allocated to the Unitholders pursuant to this Section 4.2(a)(iii) for the current and all previous Fiscal Years is equal to the aggregate Losses allocated to the Unitholders (including the Series A Preferred Unitholders but excluding the Series B Preferred Unitholders) pursuant to Section 4.2(b)(i) for all previous Fiscal Years;
(iv) Fourth, 100% to the Class A Unitholders in proportion to and to the extent of the excess if any of (x) the Class A Preferred Return in respect of the Class A Units held by such Class A Unitholders, over (y) the aggregate amount of Profits allocated to such Class A Unitholders pursuant to this Section 4.2(a)(iv) for all prior Fiscal Years; and
15 EXH. 1 - PAGE 21 5623
Page 5621 (v) Fifth, the balance, if any to all Common Unitholders (excluding the Class F Unitholders) in accordance with their Percentage Interests. For avoidance of doubt, no portion of such balance allocable pursuant to this Section 4.2(a)(v) shall be allocated to the Series A Preferred Unitholders or the Series B Preferred Unitholders.
(b) Loss.
(i) First, 100% to the Unitholders (including the Series A Preferred Unitholders but excluding the Series B Unitholders) in accordance with their Percentage Interests, until the Capital Account in respect of each Unit has been reduced to zero, but not below zero;
(ii) Second, 100% to the Series B Preferred Unitholders, pro rata in proportion to the aggregate number of Series B Preferred Units held by each such Series B Preferred Unitholders, until the Capital Account in respect of each Series B Preferred Unit has been reduced to zero, but not below zero; and
(iii) Third, the balance, if any, to the Managing General Partner.
4.3 Allocation of Net Gain and Net Loss From an Exit Event. After giving effect to the special allocations in Sections 4.5, 4.9(a) and (b), and 11.4(a)(iv), Net Gain From an Exit Event and Net Loss From an Exit Event for any Fiscal Year shall be allocated as follows:
(a) Net Gain From an Exit Event.
(i) First, 100% to the Managing General Partner until the Managing General Partner has been allocated an amount equal to the excess if any, of (x) the sum of (1) the aggregate Losses allocated to the Managing General Partner pursuant to Section 4.2(b)(iii) for the current and all prior Fiscal Years, plus (2) the aggregate Net Loss From an Exit Event allocated to the Managing General Partner pursuant to Section 4.3(b)(iv) for the current and all prior Fiscal Years, over (y) the aggregate Net Gain From an Exit Event allocated to the Managing General Partner pursuant to this Section 4.3(a)(i) for all prior Fiscal Years;
(ii) Second, 100% to the Series B Preferred Unitholders, pro rata in proportion to the aggregate number of Series B Preferred Units held by each such Series B Preferred Unitholders, until each Series B Preferred Unitholder has been allocated an amount equal to the excess, if any, of (x) the sum of (1) the aggregate Losses allocated to such Series B Preferred Unitholder pursuant to Section 4.2(b)(ii) for the current and all prior Fiscal Years, plus (2) the aggregate Net Loss From an Exit Event allocated to such Series B Preferred Unitholder pursuant to Section 4.3(b)(iii) for the current and all prior Fiscal Years, over (y) the aggregate Net Gain From an Exit Event allocated to such Series B Preferred Unitholder pursuant to this Section 4.3(a)(ii) for all prior Fiscal Years;
(iii) Third, 100% to the Common Unitholders pro rata in proportion to the aggregate number of Common Units held by each such Common Unitholders, until each Common Unitholder has been allocated an amount equal to the excess, if any, of (x) the sum of (1) the aggregate Losses allocated to such Common Unitholder pursuant to
16 EXH. 1 - PAGE 22 5624
Page 5622 Section 4.2(b)(i) for the current and all prior Fiscal Years, plus (2) the aggregate Net Loss From an Exit Event allocated to such Common Unitholder pursuant to Section 4.3(b)(ii) for the current and all prior Fiscal Years, over (y) the aggregate Net Gain From an Exit Event allocated to such Common Unitholder pursuant to this Section 4.3(a)(iii) for all prior Fiscal Years;
(iv) Fourth, 100% to the Series A Preferred Unitholders, pro rata in proportion to the aggregate number of Series A Preferred Units held by each such Series A Preferred Unitholders, until each Series A Unitholder has been allocated an amount equal to the excess, if any, of (x) the sum of (1) the aggregate Losses allocated to such Series A Preferred Unitholder pursuant to Section 4.2(b)(i) for the current and all prior Fiscal Years, plus (2) the aggregate Net Loss From an Exit Event allocated to such Series A Preferred Unitholder pursuant to Section 4.3(b)(i) for the current and all prior Fiscal Years, over (y) the aggregate Net Gain From an Exit Event allocated to such Series A Preferred Unitholder pursuant to this Section 4.3(a)(iv) for all prior Fiscal Years;
(v) Fifth, 100% to the Legacy Unitholders in accordance with Section 4.4 until the aggregate Net Gain From an Exit Event allocated to such Legacy Unitholders pursuant to this Section 4.3(a)(v) for the current and prior Fiscal Years is equal to $100,000,000;
(vi) Sixth, (v) 45% to the Legacy Unitholders in accordance with Section 4.4, (w) 0.6875% to the Series A Unitholders and the Class A-1 Unitholders in accordance with their Respective Payout Percentages, (x) 0.6875% to the Legacy Common Unitholders (Ex. Class A-1) in accordance with their Respective Payout Percentages, (y) 48.125% to the Class F Unitholders, pro rata in proportion to the aggregate number of Class F Units held by each such Class F Unitholders, and (z) 5.5% to the holders of the Management Interests pro rata, until the Capital Account in respect of the Management Interests has been allocated an amount equal to the First Incentive Distribution;
(vii) Seventh, (v) 45% to the Legacy Unitholders in accordance with Section 4.4, (w) 1.2375% to the Series A Unitholders and the Class A-1 Unitholders in accordance with their Respective Payout Percentages, (x) 1.2375% to the Legacy Common Unitholders (Ex. Class A-1) in accordance with their Respective Payout Percentages, (y) 42.625% to the Class F Unitholders, pro rata in proportion to the aggregate number of Class F Units held by each such Class F Unitholders, and (z) 9.9% to the holders of the Management Interests pro rata, until the Capital Account in respect of the Management Interests has been allocated an amount equal to the excess of the Second Incentive Distribution over the First Incentive Distribution;
(viii) Eighth, (v) 45% to the Legacy Unitholders in accordance with Section 4.4, (w) 1.7875% to the Series A Unitholders and the Class A-1 Unitholders in accordance with their Respective Payout Percentages, (x) 1.7875% to the Legacy Common Unitholders (Ex. Class A-1) in accordance with their Respective Payout Percentages, (y) 37.125% to the Class F Unitholders, pro rata in proportion to the aggregate number of Class F Units held by each such Class F Unitholders, and (z) 14.3%
17 EXH. 1 - PAGE 23 5625
Page 5623 to the holders of the Management Interests pro rata, until the Capital Account in respect of the Management Interests has been allocated an amount equal to the excess of the Third Incentive Distribution over the Second Incentive Distribution;
(b) Net Loss From an Exit Event.
(i) First, 100% to the Series A Preferred Unitholders, pro rata in proportion to the aggregate number of Series A Preferred Units held by each such Series A Preferred Unitholders, until the Capital Account in respect of each Series A Preferred Unit has been reduced to zero, but not below zero;
(ii) Second, 100% to the Common Unitholders in accordance with their Percentage Interests, until the Capital Account in respect of each Common Unit has been reduced to zero, but not below zero;
(iii) Third, 100% to the Series B Preferred Unitholders, pro rata in proportion to the aggregate number of Series B Preferred Units held by each such Series B Preferred Unitholders, until the Capital Account in respect of each Series B Preferred Unit has been reduced to zero, but not below zero;
(iv) Fourth, the remaining balance, if any, to the Managing General Partner.
4.4 Allocation to Legacy Unitholders. Any Net Gain From an Exit Event allocable to the Legacy Unitholders pursuant to Section 4.3(a)(v), (vi), (vii) or (viii) shall be allocated in the following order:
(a) First, 100% to the Series A Preferred Unitholders, pro rata in proportion to the aggregate number of Series A Preferred Units held by each such Series A Preferred Unitholders, until the Capital Account in respect of each Series A Preferred Unit is equal to the Series A Liquidation Value with respect to such Series A Preferred Unit;
(b) Second, 100% to the Class A Unitholders, pro rata in proportion to the aggregate number of Class A Units held by each such Class A Unitholders, until the Capital Account in respect of each Class A Unit is equal to excess of (x) the Class A Preferred Return in respect of such Class A Unit, over (y) the sum of all prior distributions made on such Class A Unit;
(c) Third, 100% to the Class A Unitholders, the Class A-1 Unitholders and Class B Unitholders in accordance with their Percentage Interests until the aggregate Capital Accounts of all such Unitholder is equal to the Threshold Value;
(d) Fourth, 100% to the Class C Unitholders, to the extent necessary such that their respective Capital Account equal the amount distributed to such Class C Unitholders pursuant to Section 4.7(a); and
(e) Fifth, 100% among the Legacy Unitholders in accordance with their Percentage Interests.
18 EXH. 1 - PAGE 24 5626
Page 5624 4.5 Special Allocations. The following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided by Section 1.704-2(f) of the Treasury Regulations, if there is a net decrease in the Minimum Gain during any Fiscal Year, there shall be allocated to each Partner (before any other allocation is made under this Section 4.3) items of income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in proportion to, and to the extent of, an amount equal to such Partner’s share of the net decrease in the Minimum Gain during such Fiscal Year (determined in accordance with Section 1.704-2(g) of the Treasury Regulations). The items to be allocated for any Fiscal Year under this Section 4.5(a) shall be determined in accordance with Section 1.704- 2(j)(2) of the Treasury Regulations. This Section 4.5(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Treasury Regulations and shall be interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided by Section 1.704-2(i)(4) of the Treasury Regulations, if during any Fiscal Year there is a net decrease in the Partner Minimum Gain attributable to a Partner Nonrecourse Debt, there shall be allocated (before any allocation for such Fiscal Year is made under this Section 4.5 other than Section 4.5(a)) to each Partner with a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt (as determined under Section 1.704-2(i)(5) of the Treasury Regulations) items of income and gain for such Fiscal Year (and, if necessary, for subsequent Fiscal Years) in proportion to, and to the extent of such Partner’s share of the net decrease during such Fiscal Year in the Partner Minimum Gain attributable to such Partner Nonrecourse Debt (determined under Section 1.7042(i)(4) of the Treasury Regulations). The items to be allocated for any Fiscal Year under this Section 4.5(b) shall be determined in accordance with Section 1.704-2(j)(2) of the Treasury Regulations. This Section 4.5(b) is intended to comply with the partner minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. If during any Fiscal Year any Partner unexpectedly receives any adjustment described in Section 1.704-1 (b)(2)(ii)(d)(4) to the Capital Account maintained for him on the books of the Partnership, any allocation described in Section 1.704-1(b)(2)(ii)(d)(5), or any distribution described in Section 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations to such Partner; there shall be allocated (before any allocation is made under this Section 4.5, other than Sections 4.5(a) or 4.5(b)) to such Partner items of income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit balance, if any, in the Adjusted Capital Account of such Partner as quickly as possible, provided that an allocation pursuant to this Section 4.5(c) shall be made only if and to the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 4.5 have been tentatively made as if this Section 4.5(c) were not in the Agreement. Any allocation of income or gain for any Fiscal Year made under this Section 4.5(c) shall consist of a pro rata portion of each item of income of the Partnership (including gross income) and gain for such period (other than income or gain for such period allocated under Section 4.5(a) or Section 4.5(b)).
19 EXH. 1 - PAGE 25 5627
Page 5625 (d) Gross Income Allocation. If there is a deficit balance in the Capital Account of any Partner at the end of any Fiscal Year which is in excess of the amount of such Partner’s Deficit Restoration Obligation at that time, each such Partner shall be specially allocated items of income and gain in the amount of such excess as quickly as possible, provided that an allocation to a Partner pursuant to this Section 4.5(d) shall be made only if and to the extent that such Partner would have a deficit balance in its Capital Account in excess of any Deficit Restoration Obligation after all other allocations provided for in this Section 4.5 have been made as if Section 4.5(c) and this Section 4.5(d) were not in the Agreement.
(e) Section 754 Adjustments. To the extent an adjustment pursuant to Section 734(b) or Section 743(b) of the Code to the tax basis of any asset is required pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations to be taken into account in determining Capital Accounts as the result of a distribution to a Partner in complete liquidation: of such Partner’s Units or as the result of the sale of a Partner’s Units, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in accordance with their interests in the Partnership in the event Section 1.704-1 (b)(2)(iv)(m)(2) of the Treasury Regulations applies, or to the distributee in the event Section 1.70 4-1(b) (2)(iv)(m)(4) of the Treasury Regulations applies.
(f) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year shall be allocated as determined by the Managing General Partner in a manner that is consistent with the principles of Sections 1.704-1 and 1.704-2 of the Treasury Regulations.
(g) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any Fiscal Year shall be allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Section 1.704-2(i)(1) of the Treasury Regulations.
(h) Allocations in Event of Forfeiture. If any holder of Class C or D Units forfeits all or any portion of such units, such holder shall be allocated items of loss or deduction in the year of forfeiture in an amount equal to the portion of such holder’s Capital Account attributable to the forfeited Units.
4.6 [Reserved].
4.7 Requirement of Distributions.
(a) Subject to the provisions of Section 11.4 pursuant to an actual dissolution of the Partnership but notwithstanding any other provisions of this Agreement to the contrary, distributions of assets and properties of the Partnership shall be made by the Partnership at such times as determined by the Managing General Partner. Distributions of assets and properties other than cash and Cash Equivalents shall require Unanimous Consent and be based upon the Fair Market Value (as determined by the Unanimous Consent of the Board, acting reasonably) of the applicable assets or properties and in accordance with the terms of this Section 4.7 as if such assets and properties were cash or Cash Equivalents equal to their Fair Market Value.
20 EXH. 1 - PAGE 26 5628
Page 5626 Distributions of cash shall be made to the Partners by wire transfer of immediately available funds to the account designated by the relevant Partner. Subject to Section 4.7(b), any distribution shall be made to the Partners as follows:
(i) First, to the holders of outstanding Series B Preferred Units (ratably among the holders of Series B Preferred Units based upon the proportion that each such holder’s Unreturned Capital bears to the aggregate Unreturned Capital), until (A) the Unreturned Capital with respect to each outstanding Series B Preferred Unit has been reduced to zero dollars ($0), and (B) each holder of the Series B Preferred Units has received cumulative Distributions in an amount sufficient to pay any then accrued but unpaid Series B Unit Distributions with respect to each Series B Preferred Unit;
(ii) Second, 100% to the Legacy Unitholders in accordance with the Legacy Waterfall until the aggregate amount distributed pursuant to this Section 4.7(a)(ii) is equal to $100,000,000;
(iii) Third, thereafter, (A) 45% to the Legacy Unitholders in accordance with the Legacy Waterfall, (B) 0.6875% to the Series A Preferred Unitholders and Class A-1 Unitholders in accordance with their Respective Payout Percentages, (C) 0.6875% to the Legacy Common Unitholders (Ex. Class A-1) in accordance with their Respective Payout Percentages and (D) 53.625% to the holders of Class F Units (with a portion of such 53.625% amount allocated to the holders of the Management Interests pro rata in an aggregate amount equal to (1) 10.25641026% of the portion of any distribution to which this Section 4.7(a)(iii)(D) applies multiplied by (2) the Aggregate Vested Management Interests Percentage (the “First Incentive Distribution”)), until (x) Blackstone has received cumulative Distributions in an amount sufficient to achieve a 20% Internal Rate of Return on its Aggregate Contributions Amount and (y) Blackstone has received cumulative Distributions in an amount equal to 2.05 multiplied by Blackstone’s Aggregate Contributions Amount;
(iv) Fourth, thereafter, (A) 45% to the Legacy Unitholders in accordance with the Legacy Waterfall, (B) 1.2375% to the Series A Preferred Unitholders and Class A-1 Unitholders in accordance with their Respective Payout Percentages, (C) 1.2375% to the Legacy Common Unitholders (Ex. Class A-1) in accordance with their Respective Payout Percentages and (D) 52.525% to the holders of Class F Units (with a portion of such 52.525% amount allocated to the holders of the Management Interests pro rata in an aggregate amount equal to (1) 18.84816754% of the portion of any distribution to which this Section 4.7(a)(iv)(D) applies multiplied by (2) the Aggregate Vested Management Interests Percentage(the “Second Incentive Distribution”)), until (x) Blackstone has received cumulative Distributions in an amount sufficient to achieve a 30% Internal Rate of Return on its Aggregate Contributions Amount and (y) Blackstone has received cumulative Distributions in an amount equal to 3.05 multiplied by Blackstone’s Aggregate Contributions Amount; and
(v) Fifth, thereafter, (A) 45% to the Legacy Unitholders in accordance with the Legacy Waterfall, (B) 1.7875% to the Series A Preferred Unitholders and Class A-1 Unitholders in accordance with their Respective Payout Percentages, (C) 1.7875% to
21 EXH. 1 - PAGE 27 5629
Page 5627 the Legacy Common Unitholders (Ex. Class A-1) in accordance with their Respective Payout Percentages and (D) 51.425% to the holders of Class F Units (with a portion of such 51.425% amount allocated to the holders of the Management Interests pro rata in an aggregate amount equal to (1) 27.80748663% of the portion of any distribution to which this Section 4.7(a)(v)(D) applies multiplied by (2) the Aggregate Vested Management Interests Percentage (the “Third Incentive Distribution”)).
For purposes of the foregoing, if payments are made by or on behalf of the Partnership to a holder of Common Units or an Affiliate thereof other than in respect of such holder’s Common Units (e.g., in respect of salary, indebtedness for borrowed money, property rentals or services), then such payments shall not be considered a distribution for purposes of determining the allocation of a distribution pursuant to this Section 4.7.
(b) Notwithstanding the foregoing:
(i) Subject to applicable restrictions contained in the Partnership’s and any of its Subsidiaries’ debt financing agreements, the Managing General Partner shall cause Available Cash to be distributed on or prior to each April 15, June 15, September 15 and January 15 (or next succeeding Business Day if such date falls on a date other than a Business Day) (each an “Estimated Tax Payment Date”), with respect to the Fiscal Year related to each Estimated Tax Payment Date (each, an “Estimated Tax Period”), to each Partner in an amount equal to the excess, if any, of (A) the product of (x) the amount of net taxable income (taking into account income and deductions resulting from any guaranteed payment made by the Partnership) allocable to such Partner in respect of such Estimated Tax Period (net of (I) cumulative taxable losses allocated to such Partner for any prior taxable period and not previously taken into account under this clause (b) and (II) any depletion calculated at the Partner level, utilizing the cost depletion method) times (y) an assumed tax rate equal to the highest maximum combined marginal federal, state and local income tax rates applicable to an individual or corporate taxpayer resident in New York, NY (taking into account the character of such taxable income and the deductibility of state and local income tax for federal income tax purposes) (the “Tax Rate”), over (B) distributions previously made during the Fiscal Year such Estimated Tax Period pursuant to Section 4.7(a) to such Partner.
(ii) Distributions pursuant to this Section 4.7(b) shall be treated as advances against, and shall reduce any Partner’s entitlement to, any subsequent distributions made pursuant to Section 4.7(a) or Section 11.4(a)(iv).
(c) Notwithstanding anything in Section 4.7(a) to the contrary, (i) if at any time and from time to time after any distribution has been made pursuant to Section 4.7(a) (such distribution, the “Prior Distribution”) there occurs an increase in a Management Partner’s Applicable Vested Participation Percentage (the incremental portion of the Applicable Vested Participation Percentage, the “Incremental Applicable Vested Participation Percentage”), all amounts that would have been distributable to such Management Partner pursuant to Section 4.7(a)(iii), Section 4.7(a)(iv), or Section 4.7(a)(v), upon the Prior Distribution if the Incremental Applicable Vested Participation Percentage had applied to such Management Partner at the time of the Prior Distribution shall, if and when a subsequent distribution of assets and properties is
22 EXH. 1 - PAGE 28 5630
Page 5628 made pursuant to Section 4.7(a) after such increase, be distributed to such Management Partner (pro rata based on the aggregate amount of Vesting Catch Up Distributions then to be made) as a priority distribution before any amounts are distributed to the Partners pursuant to Section 4.7(a)(iii), Section 4.7(a)(iv), or Section 4.7(a)(v) (such priority Distribution, the “Vesting Catch Up Distribution”) until all such Vesting Catch Up Distributions have been made to such Management Partner and each such Management Partner has received the applicable Vesting Catch Up Distribution in respect of his or her Management Interests; provided, that once the applicable Vesting Catch Up Distribution has been made in full to a Management Partner in respect of any Incremental Applicable Vested Participation Percentage pursuant to this Section 4.7(c) with respect to such Partner’s Management Interests, as applicable, such Management Partner shall no longer have the right to receive any Vesting Catch Up Distribution with respect to such Incremental Applicable Vested Participation Percentage under this Section 4.7(c) with respect to such Management Interests. The implementation of, and all decisions with respect to, this Section 4.7(c) shall be determined by the Managing General Partner acting in good faith.
(d) For purposes of Section 4.7(a), any amounts paid by the Partnership to repurchase any Class G Unit pursuant to Section 3.8 shall be considered Distributions made by the Partnership to the holder of the applicable Class G Units.
4.8 Withholding. To the extent the Partnership or any other entity in which the Partnership holds an interest is required by law to withhold or to make tax payments on behalf of or with respect to any Partner (including any taxes arising under the Partnership Tax Audit Rules) (“Tax Advances”), the Partnership (or other such entity) may withhold such amounts and make such tax payments as so required. All Tax Advances made on behalf of a Partner shall be repaid by reducing the amount of the current or next succeeding distribution or distributions which would otherwise have been made to such Partner or, if such distributions are not sufficient for that purpose, by so reducing the proceeds of liquidation otherwise payable to such Partner. If at the time of liquidation of the Partnership, any such Tax Advances to a Partner exceed the proceeds of liquidation to the Partner, such Partner shall repay such excess to the Partnership. If a distribution to a Partner is actually reduced as a result of a Tax Advance, for all other purposes of this Agreement such Partner shall be treated as having received the amount of the distribution that is reduced by the Tax Advance. Each Partner hereby agrees to indemnify and hold harmless the Partnership and the other Partners from and against any liability from such Partner’s failure to repay Tax Advances. For the avoidance of doubt, any taxes, penalties and interest payable under the Partnership Tax Audit Rules by the Partnership or any fiscally transparent entity in which the Partnership owns an interest shall be treated as specifically attributable to the Partners and the Managing General Partner shall use commercially reasonable efforts to allocate the burden of (or any diminution in distributable proceeds resulting from) any such taxes, penalties or interest to the Partners to whom such amounts are specifically attributable (whether as a result of their status, actions, inactions or otherwise) as determined by the Managing General Partner.
4.9 Other Allocation Rules.
(a) Special Loss Limitation. Loss allocated to the Partners for any Fiscal Year pursuant to Section 4.2 and 4.3 shall not exceed the maximum amount of such Loss that can be so allocated without causing any Partner to have a deficit balance in its Adjusted Capital Account at the end of such Fiscal Year. In the event some but not all of the Partners would have
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Page 5629 such a deficit balance in its Adjusted Capital Account as a consequence of an allocation of Loss for a Fiscal Year pursuant to Section 4.2 and 4.3, the limitation set forth in the first sentence of this Section 4.9(a) shall be applied so as to allocate the maximum permissible amount of such Loss to each Partner under Section 1.704-1 (b)(2)(ii)(d) of the Treasury Regulations.
(b) Determination of Profits and Losses. For purposes of determining the Profits, Losses and items in the nature of income, gain, expense, or loss for any period, Profits, Losses and any such items shall be delineated on a daily, monthly, or other basis, as determined by the Managing General Partner using any permissible method under Section 706 of the Code and the Treasury Regulations issued thereunder.
(c) Excess Nonrecourse Liabilities. The Excess Nonrecourse Liabilities of the Partnership shall be allocated among the Partners in proportion to their respective Percentage Interests.
(d) Attribution of Distributions to Nonrecourse Liabilities. To the extent permitted by Section 1.704-2(h)(3) of the Treasury Regulations, the Partnership shall endeavor to treat distributions made under Section 4.7 or 4.8 as having not been made from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse Liability.
(e) Section 704(c) Considerations. Items of income, gain, loss and deduction with respect to any asset contributed to the capital of the Partnership shall, solely for income tax purposes, be allocated between the Partners so as to take account of any variation between the adjusted basis of such asset to the Partnership for federal income tax purposes and the gross fair market value of such asset at the time of contribution. In the event the book value of any asset contributed to the capital of the Partnership is revalued on the Partnership’s books, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset to the Partnership for federal income tax purposes and the book value of such asset immediately following such revaluation in the same manner as under Section 704(c) of the Code and the Treasury Regulations thereunder. Any elections or other decisions relating to allocations made pursuant to this Section 4.9(e) shall be made by the Managing General Partner in any manner that reasonably reflects the purposes and intentions of this Agreement. Allocations pursuant to this Section 4.9(e) are solely for purposes of federal, state and local income taxes and shall not affect the determination of any Partner’s Capital Account or share of Profits or Losses determined under any provisions of this Agreement. Unless otherwise agreed by the Managing General Partner and the Partner contributing property to the Partnership subject to Section 704(c) of the Code, the Partnership will use the remedial method described in Section 1.704-3(d)(i) of the Treasury Regulations with respect to such property contribution.
(f) Recapture Income. For purposes of determining the character (as ordinary income or capital gain) of any taxable income of the Partnership, such portion of the taxable income of the Partnership which is treated as ordinary income attributable to the recapture of depreciation (or cost recovery) shall, to the extent possible, be allocated between the Partners (or other successors in interest) in the same proportions that the depreciation (or cost recovery) deductions directly or indirectly giving rise to such income were previously allocated. The
24 EXH. 1 - PAGE 30 5632
Page 5630 provisions of this Section 4.9(f) shall not alter the amount of any allocation to a Partner under Article IV, but merely the character of income so allocated.
(g) Transfers of Partnership Units. If, during any taxable year of the Partnership, there is a change in any Partner’s Units in the Partnership, then each Partner’s distributive share of each item of Partnership income, gain, loss and deduction shall be delineated for federal income tax purposes as if the taxable year of the Partnership closed on the date of such change. For purposes of this Section 4.9(g), a transfer of a Unit in the Partnership made during the first fifteen (15) days of any calendar month will be deemed to have been effected at the opening of such month, and a transfer made after the fifteenth (15th) day of any calendar month will be deemed to have been effected at the opening of the following month.
(h) Allocations for Tax Purposes. Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated.
4.10 Tax Treatment of Partnership Interests Subject to Vesting. The Partnership and each Partner agree to treat the Class C Units, Class D Units and Class E Units as a separate Profits Interest within the meaning of IRS Revenue Procedure 93-27, IRS Revenue Procedure 2001-43 and IRS Notice 2005-43. Absent a change in law, the Partnership shall treat a Partner holding an unvested Profits Interest as the owner of such Profits Interest from the date such Profits Interest is granted, and shall file its IRS form 1065, and issue appropriate Schedule K-ls to such Partner, allocating to such Partner its distributive share of all items of income, gain, loss, deduction and credit associated with such Profits Interest as if it were fully vested. Each such Partner agrees to take into account such distributive share in computing its Federal income tax liability for the entire period during which it holds the Profits Interest. Except as required pursuant to a “determination” as defined in Code Section 1313(a) or a change in law, the Partnership and each Partner agree not to claim a deduction (as wages, compensation or otherwise) for the fair market value of such Profits Interest issued to a Partner, either at the time of grant of the Profits Interest, or at the time the Profits Interest becomes substantially vested. The undertakings contained in this Section 4.10 shall be construed in accordance with Section 4 of Rev. Proc. 2001-43, 2001-2 C.B. 191. The provisions of this Section 4.10 shall apply regardless of whether or not the holder of a Profits Interest files an election pursuant to Section 83(b) of the Code.
Article V The Managing General Partner: Rights, Duties and Obligations
5.1 Powers of Managing General Partner.
(a) The Managing General Partner shall have the full and exclusive power and authority on behalf of the Partnership to manage, control, administer and operate the business and affairs of the Partnership in accordance with the provisions of this Agreement and the TBOC, and to do or cause to be done any and all acts deemed to be necessary or appropriate thereto, and the scope of such power and authority shall encompass all matters in any way
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Page 5631 connected with or incident to such business, including, but not limited to, the power and authority on behalf of the Partnership:
(i) to invest any Partnership funds, pending their use for other Partnership purposes, in accordance with Section 9.5 hereof;
(ii) to expend the Partnership’s capital, Revenues, borrowings and profits in furtherance of the business of the Partnership and to execute and deliver all checks, drafts, endorsements and other orders for the payment of Partnership funds;
(iii) to acquire and manage Prospects within the continental United States, and hold them in the name of the Partnership, or the Managing General Partner, or any other name selected by the Managing General Partner and, in this connection, title to Partnership Property of any kind or character, and contracts or other documents made or executed by the Managing General Partner on behalf of the Partnership, may be taken, made or executed in the name of the Partnership or on a temporary basis solely in the name of the Managing General Partner or any nominee or trustee, or in the name of a nominee entity organized solely for the purpose of holding record title to oil and gas properties, without disclosure to third parties of the existence of the Partnership;
(iv) to execute such instruments and agreements, do such acts, and employ such Persons and services as are reasonably necessary to acquire Prospects for the Partnership; to engage Operators, including itself and its Affiliates, and to pay for costs of operation, leasehold costs, delay rentals, scientific services, drillings and completions, testing, plugging and abandoning dry holes, dry hole and bottom hole contributions, and any other expenses incurred in connection with the business of the Partnership; to execute contracts for the sale of oil, gas and other minerals for periods consistent with industry practices, and division orders and transfer orders necessary or incident to the sale of production;
(v) to enter into natural gas or oil hedging arrangements with respect to a portion of production from Partnership Wells by the purchase or sale on the New York Mercantile Exchange or in the over-the-counter market of price floors or price caps, or a combination thereof, or the sale of future natural gas or oil production in a fixed price instrument or exchange of such instruments;
(vi) to execute offers for United States oil and gas leases in any state or federal waters; to execute and file requests for approval of assignments of United States oil and gas leases, together with any and all contracts for the option, sale or purchase of such leases or the sale or purchase of any products therefrom; to execute any unitization, pooling or communization agreement, plans of development under unit agreements, Farmout contracts, divisions and transfer orders, contracts, conveyances, subleases, mortgages, deeds of trust, affidavits or reports concerning the drilling of wells and production, designations of Operator, lease bonds, Operator’s bond and consents of surety; and in general to do all things necessary or desirable regarding any United States oil and gas lease or United States oil and gas lease offer;
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Page 5632 (vii) to enter into any partnership agreement, sharing arrangement, or joint venture with any Person acceptable to the Managing General Partner and which is engaged in any business or transaction in which the Partnership is authorized to engage;
(viii) to enter into, execute, deliver and perform deeds, assignments, leases, subleases, drilling contracts, Farmouts, operating agreements, unitization agreements, pooling agreements, unit or pooling designations, processing agreements, gas sales agreements, transportation agreements, gasoline plant agreements, recycling contracts, dry hole, bottom hole and acreage contribution letters and agreements, participation agreements, agreements and conveyances respecting rights-of-way, agreements respecting installation and operation of surface facilities, agreements respecting surface and subsurface storage and any other agreements customarily employed in the oil and gas industry in connection with the acquisition, exploration, development, operation, or abandonment of any leases or other property interests, and any and all other instruments or documents considered by the Managing General Partner to be necessary or appropriate to conduct the business of the Partnership;
(ix) to sell, dispose of, trade, exchange, quitclaim, surrender, release, abandon or hypothecate Prospects and other Partnership Property, or any interests therein, to any Person, including the Managing General Partner or its Affiliates, and in connection therewith to receive such consideration, consisting of cash, securities and other property of any form, or any combination thereof, as it deems fair and in the best interests of the Partnership, and to enter into, execute, deliver and perform all such deeds, assignments and other instruments or documents as the Managing General Partner shall deem necessary or appropriate to effect any such transaction;
(x) to borrow monies, whether nonrecourse borrowings or otherwise, and pursuant thereto and from time to time, to draw, make, execute and issue promissory notes and other negotiable or non-negotiable instruments and evidences of indebtedness, to repay any such borrowings and to secure the payment of the sums so borrowed and to mortgage, pledge, transfer or assign in trust all or any part of the Partnership Property in support of such borrowings, including, without limitation, production and proceeds of production, or to assign any monies owing or to be owing the Partnership, and to engage in any other means of financing customary in the petroleum industry;
(xi) to employ agents, employees, accountants, lawyers, geologists, geophysicists, landmen, clerical help, and such other assistance and services as may seem proper, and to pay therefor such remuneration as the Managing General Partner may deem reasonable and appropriate;
(xii) to purchase, lease, rent, or otherwise acquire or obtain the use of machinery, equipment, tools, materials, and all other kinds and types of real or personal property that may be deemed necessary, convenient, or advisable in connection with carrying on the business of the Partnership, and to incur expenses for travel, telephone, telegraph, insurance, and for such other things, whether similar or dissimilar, as may be deemed necessary or appropriate for carrying on and performing the business of the Partnership;
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Page 5633 (xiii) to make and enter into such agreements and contracts with such parties and to give such receipts, releases, and discharges with respect to any and all of the foregoing and any matters incident thereto as the Managing General Partner may deem advisable or appropriate;
(xiv) to guarantee the payment of money or the performance of any contract or obligation by any Person;
(xv) to sue and be sued, complain and defend in the name and on behalf of the Partnership;
(xvi) to make such classifications, determinations, and allocations as it may deem advisable, having due regard for any relevant generally accepted oil and gas industry practices and generally accepted accounting principles;
(xvii) to purchase insurance, or extend the Managing General Partner’s insurance at the Partnership’s expense, to protect the Partnership and the business of the Partnership against loss, and to protect the Managing General Partner against liability to third parties arising out of Partnership activities; provided, however, that the Partnership shall not incur the cost of the portion of any insurance which insures any party against any liability as to which such party is prohibited from being indemnified under Article VIII hereof;
(xviii) to lend money on a recourse basis to the Partnership and charge the Partnership interest on the money so loaned;
(xix) to enter into agreements with Affiliates of the Managing General Partner or with the Managing General Partner itself or the rendering by such Persons to the Partnership of services or the sale or leasing to the Partnership of equipment or supplies;
(xx) to be appointed and act upon any dissolution of the Partnership as liquidating agent for the winding up of Partnership affairs and the liquidation and distribution of the assets of the Partnership; and
(xxi) to take such other action and perform such other acts as it deems appropriate, necessary or convenient to carry out the business of the Partnership.
5.2 Admission of Additional Partners.
(a) Subject to the preemptive rights of the existing Partners as hereinafter provided, the Managing General Partner is specifically authorized to admit additional Partners to the Partnership, and issue Units having such rights, powers and duties to such proposed Partners, as the Managing General Partner shall determine; provided that (i) the Managing General Partner, in good faith, reasonably determines that the admission of such proposed additional Partners and the issuance of such Units would be in the best interests of the Unitholders taken as a whole and (ii) within a reasonable period of time prior to the admission of such proposed additional Partners, the Managing General Partner obtains an Appraisal of all Partnership
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Page 5634 Properties and any non-cash property to be contributed by such proposed additional Partners for their Units if the issuance of additional Units is at a valuation of the Partnership less than $100,000,000. In connection with any proposed admission of additional Partners, the Managing General Partner shall endeavor, to the extent the Managing General Partner deems it to be in the best interest of the Unitholders taken as a whole, to offer to the existing Limited Partners (pro rata in accordance with their respective Economic Percentage) the first right to subscribe to any such additional units to be issued to such proposed additional Partners on the same terms as proposed to such proposed additional Partners; provided that if the proposed admission consists only of a contribution of cash the Managing General Partner shall offer to the existing Limited Partners the first right to subscribe to any such additional units to be issued to such proposed additional Partners. The terms of exercise of such preferential right (including the period during which such right shall be exercisable) shall be as reasonably established by the Managing General Partner. The Managing General Partner is specifically authorized under this Section 5.2 to amend Exhibit A to reflect any such admission made in compliance with the foregoing provisions of this Section 5.2.
(b) After the second (2nd) anniversary of the Effective Date, at any time prior to an Exit Event, the Managing General Partner at the direction of the Board acting by majority vote may elect to raise additional capital by offering to sell, and selling, for cash to each Limited Partner (excluding the holders of Management Interests and the Series B Preferred Units (in their capacity as Series B Preferred unitholders)) new Partnership interests of the Partnership (“Additional Partnership Interests”), having such rights (including with respect to Distributions) as the Managing General Partner may determine, in an amount equal to its pro rata portion of such Additional Partnership Interests based on the percentage of Distributions such Limited Partner would receive if the Partnership were sold for its Fair Market Value (as determined by the following sentence) and the proceeds thereof were paid to the Limited Partners pursuant to Section 4.7(a) (assuming for purposes hereof that if clause (i) of Section 4.7(a) would not be satisfied in such a Distribution, then the pro rata percentage for purposes of this Section 5.2(b) shall be determined based on an allocation pursuant to clause (iii) of Section 4.7(a)). The purchase price for any Partnership interests issued pursuant to this Section 5.2(b) shall be determined in good faith by the Managing General Partner based on the Fair Market Value of the Partnership as determined by an Independent Expert selected by the Managing General Partner in good faith. To the extent any eligible Limited Partners do not elect to purchase their pro rata portion of any issuance contemplated by this Section 5.2(b), the Limited Partners participating therein shall have the right to acquire such pro rata portion of a non-participating Limited Partner based upon the relative percentage of such Partnership interests such participating Limited Partners initially elected to purchase pursuant to the initial sentence of this Section 5.2(b).
5.3 Management Interests. The Managing General Partner shall have the authority to issue Management Interests to Persons providing services to the Partnership.
(a) The Managing General Partner shall be entitled to: (i) determine the Persons to whom Management Interests shall be issued, (ii) determine the conditions under which the Management Interests may become vested, forfeited or redeemed, as may be specified in the agreement providing for the award of the Management Interest (the “Award Agreement”) pursuant to a particular issuance, and (iii) admit a Management Partner as a Partner of the Partnership, subject to applicable vesting requirements.
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Page 5635 (b) [Reserved].
(c) All Management Interests are intended as Profits Interests in the Partnership. Accordingly, each Management Interest shall have an initial Capital Account of zero ($0.00) and, upon issuance of a Management Interest, the Partnership shall adjust the Capital Accounts of the Partnership’s other Partners to the extent necessary pursuant to Section 9.2(b)(ii) to effect the intent that the Management Interest, as of the grant, be classified as a Profits Interest (so that if, immediately after a particular grant of a Management Interest, the Partnership’s assets were sold at their fair market value and then the proceeds were distributed in a complete liquidation of the Partnership, the Management Partner’s share of such distribution with respect to such Management Interest would be zero ($0.00)).
(d) No Person, either pursuant to this Agreement or pursuant to their status as an employee, independent contractor or manager to the Partnership shall be entitled to the right to receive any Management Interests, to participate as a Partner or to any other rights or claims under this Agreement except through the grant of Management Interests as evidenced by any document determined at the discretion of the Managing General Partner, and then only to the extent and on the terms and conditions set forth in this Agreement and such other document. There is no obligation for uniformity of treatment of Management Partners. The terms and conditions of a grant of Management Interests need not be the same with respect to each Management Partner.
(e) The grant of a Management Interest hereunder shall not be construed as giving a Management Partner the right to be retained in the employ of the Partnership or any of its Affiliates, to continue to provide services, or to remain on the governing board of any such Person, as applicable. Further, the Partnership or any of its Affiliates may, at any time, dismiss a Management Partner from employment or service free from any liability or any claim against the Partnership or its Affiliates under this Agreement, unless otherwise expressly provided in this Agreement or other agreement.
(f) Neither this Agreement nor any grant hereunder shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Partnership or any participating Affiliate and a Management Partner or any other Person. To the extent that any person acquires a right to receive payments from the Partnership pursuant to a grant, such right shall be no greater than the right of any general unsecured creditor of the Partnership.
(g) Notwithstanding anything herein to the contrary, if Management Interests are to be granted to the Managing General Partner or any of its Affiliates (including for these purposes relatives (by blood or marriage) of the controlling shareholder of the Managing General Partner), the grant shall have been approved by Unanimous Consent of the Board.
5.4 Gas Gathering Lines. The Managing General Partner may cause the Partnership to construct or purchase compression or related facilities or gas gathering lines or other gas gathering arrangements if, in the opinion of the Managing General Partner, it would be economically feasible and otherwise consistent with prudent operating practice to do so. The Managing General Partner may, in its discretion, construct or purchase, or cause an Affiliate or
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Page 5636 other Person to construct or purchase, gathering lines from Partnership Wells to gas transportation systems, and whenever the Managing General Partner does so, the Partnership shall pay the Managing General Partner or such Affiliate an amount that is within the range of prices that an unrelated party could have reasonably charged in an arm’s-length transaction for similar services in the area, as a transportation fee for the transportation of all gas through the gathering system so constructed or acquired, and no other transportation fee shall be paid to the Managing General Partner or to any of its Affiliates. Contractual arrangements to transport gas that are in existence on the date of this Agreement shall be deemed to comply with the provisions of the preceding sentence.
5.5 Farmouts. The Managing General Partner may, in its sole discretion, acquire leases for the purpose of subsequent sale or Farmout. Neither the Managing General Partner nor any of its Affiliates will enter into a Farmout or other similar agreement with the Partnership unless (i) the Managing General Partner, exercising the standard of a prudent Operator, determines that the Farmout is in the best interests of the Partnership, and (ii) the terms of the Farmout are consistent with and in any case no less favorable than those utilized for similar arrangements in the geographic area in which the subject property is located. The decision with respect to making a Farmout, and the terms of the Farmout to another Person, will be in the sole discretion of the Managing General Partner. A Farmout of an undeveloped property from the Partnership to the Managing General Partner or its Affiliates must be made in accordance with Section 5.8 below.
5.6 Sales of Properties to Partnership. The Managing General Partner and its Affiliates may sell properties to the Partnership; provided that the Managing General Partner and its Affiliate shall not sell any properties to the Partnership except pursuant to transactions that are fair and reasonable to the Unitholders, and at a price that is not more than its fair market value as provided in Section 5.8.
5.7 Purchases of Properties From Partnership. Neither the Managing General Partner nor any Affiliate, may purchase or acquire any property from the Partnership, except pursuant to transactions that are fair and reasonable to the Unitholders and in any event in compliance with the provisions of Section 5.11(b), and at a price that is not less than its fair market value as provided in Section 5.8.
5.8 Fair Market Value. For purposes of Farmouts or purchases and sales of properties in accordance with the requirements of Sections 5.5, 5.6 and 5.7 above, the fair market value of a property shall be the price set forth in an Appraisal, which shall obtained by the Managing General Partner within a reasonable period of time prior to the closing of such sale or purchase. The Appraisal shall be maintained in the records of the Partnership for at least four years. The cost of the Appraisal shall borne equally by the Partnership and the Managing General Partner.
5.9 Fiduciary Duties.
(a) Each Partner and the Managing General Partner shall, to the fullest extent required by Texas law, owe to the Partnership and its Partners the duties of good faith and fair dealing, and in the case of the Managing General Partner, the duty not to exceed in such capacity
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Page 5637 the bounds of the authority granted to any general partner by this Agreement and Texas law (all such duties collectively, the “Agreed Duties”).
(b) To the fullest extent permitted by Law,
(A) except for the Agreed Duties and as expressly provided in this Agreement, the Managing General Partner shall not owe any fiduciary or similar duty or obligation whatsoever to the Partnership, any Partner or Assignee, except as required by any provisions of applicable law that cannot be waived, and
(B) to the extent that, at law or in equity, the Managing General Partner owes any duties (including fiduciary duties) to the Partnership, any other Partner or any Assignee pursuant to applicable law, any such duty other than the Agreed Duties is hereby eliminated to the fullest extent permitted pursuant to applicable law.
(c) Subject to the foregoing clauses (a) and (b), the Partnership and the Partners acknowledge and agree that the Managing General Partner may decide or determine any matter subject to the Board’s approval hereunder in the sole and absolute discretion of the Managing General Partner, it being the intent of all Partners the Managing General Partner have the right to make such decision or determination solely on the basis of the interests the Managing General Partner desires to consider, including the Managing General Partner’s own interests, the interests of the Partner that designated such any directors of the Managing General Partner and the interests of such Partner’s Affiliates.
(i) The Partnership and the Partners agree that any claims against, actions, rights to sue, other remedies or recourse to or against the Managing General Partner (except for such claims, actions, rights to sue, remedies or recourse that may be initiated or brought solely by the Partner that appointed directors on the Board) grounded in or alleging any breach of any fiduciary or similar duty, other than an Agreed Duty, are expressly released and waived by the Partnership and each Partner (and each Assignee), to the fullest extent permitted by law, as a condition to and as part of the consideration for the execution of this Agreement and the undertaking to incur the obligations provided for in this Agreement.
(ii) To the extent that, at law or in equity, a Partner owes any duties (including fiduciary duties) to the Partnership, any other Partner or any Assignee pursuant to applicable law, any such duty, other than the Agreed Duties, is hereby eliminated to the fullest extent permitted pursuant to applicable law, it being the intent of the Partners that to the extent permitted by law and except to the extent set forth in this Section 5.9 or expressly specified elsewhere in this Agreement, no Partner or the Managing General Partner, in their capacities as such, shall owe any duties of any nature whatsoever to the Partnership, the other Partners or any Assignee, other than the Agreed Duties, and each Partner, in its capacity as such, may decide or determine any matter in its sole and absolute discretion taking into
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Page 5638 account solely its interests and those of its Affiliates (excluding the Partnership and its Subsidiaries) subject to the Agreed Duties. Each Partner further acknowledges and agrees that it would not have become a Partner in the Partnership if this arrangement were not acceptable to it.
(iii) Nothing herein is intended to create a partnership, joint venture, agency or other relationship creating fiduciary or quasi-fiduciary duties or similar duties or obligations, otherwise subject the Partners to joint and several liability or vicarious liability or to impose any duty, obligation or liability that would arise therefrom with respect to any or all of the Partners or the Partnership.
5.10 No Duty of Third Parties to Investigate Authority. No Person, dealing with the Partnership shall be required to inquire into the authority of the Managing General Partner to take any action or make any decision.
5.11 Competitive Activities and AMI.
(a) Subject only to the provisions of this Section 5.11, during the continuation of the Partnership (i) any of the Partners may acquire, promote, develop, operate and manage any oil and gas property on his or their own behalf or on behalf of any Affiliate; and (ii) the Managing General Partner and any Affiliate of the Managing General Partner may, notwithstanding the existence of this Agreement, engage in any activities it chooses, whether the same are competitive with the Partnership or otherwise without having or incurring any obligation to offer any interest in such activities to the Partnership or any party hereto and, as a material part of consideration for the Managing General Partner’s execution hereof, each Unitholder hereby waives, relinquishes and renounces any such right of claim of participation.
(b) Except as provided in the next two sentences of this Section 5.11(b), the Managing General Partner and each Limited Partner hereby agrees that neither it nor any of its Affiliates shall purchase or make an investment in any oil and gas property of the type that is (i) within the scope of the Partnership’s business as set forth in Section 2.4 and (ii) within AMI Area except, in each case, if the Partnership is offered a reasonable opportunity to purchase or make such investment during a period of 10 days and declines or is unable to effect such purchase or investment; provided, that in the event the Partnership does not pursue such opportunity within such period, such applicable Limited Partner or the Managing General Partner and/or its Affiliates, as applicable, shall be permitted to pursue such opportunity without restriction. The provisions of this Section 5.11(b) shall not be applicable to (x) existing activities relating to (i) Bluegrove NRG, Ltd., NRG Pipeline Company of Texas and Possum Kingdom Processing Corporation, (ii) any of the limited partnerships in which Affiliates of the Managing General Partner are presently general partners (including the F&B limited partnerships), (iii) any oil and gas interest held by the Managing General Partner or its Affiliates as of the Effective Date, (iv) investments by the Managing General Partner or its Affiliates in not more than five percent (5%) of the issued and outstanding shares of capital stock of any publicly traded corporation or entity and (v) activities approved by the Unanimous Consent of the Managing General Partner. The provisions of this Section 5.11(b) shall terminate with respect to the Managing General Partner and its Affiliates upon the earlier to occur of (i) five (5) years from the Effective Date, (ii) at such time as the Managing General Partner or any of its Affiliates shall
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Page 5639 no longer be a general partner of the Partnership, (iii) the consummation of an Exit Event or (iv) at such time as the Partnership shall no longer have any funds available to make the purchase or investment in oil and gas properties. Notwithstanding the foregoing, the provisions set forth in this Section 5.11(b) shall not in any way limit (i) the activities of any Affiliate of Blackstone in its business other than the investments made by the “Blackstone Capital Partners VI”, “Blackstone Capital Partners VII”, “Blackstone Energy Partners I” and/or “Blackstone Energy Partners II” investment funds, successor funds thereto and funds managed by Blackstone Directors, in each case, Affiliated with or managed by Blackstone Management Partners L.L.C. or its successor (such funds, the “BCP/BEP Funds”), (ii) the activities of GSO Capital Partners L.P. or any investment funds or vehicles managed by it, (iii) the acquisition in any transaction of any oil and gas properties in the AMI Area, or of any equity interests in any entity that owns oil and gas properties in the AMI Area, by the BCP/BEP Funds or any of their Affiliates, in each case, to the extent that the Fair Market Value of any oil and gas properties in the AMI Area that would be conveyed in such transaction does not exceed thirty-five percent (35%) of the Fair Market Value of such transaction overall or (iv) the acquisition by any investment funds or vehicles managed by Blackstone Management Partners L.L.C. or any of its Affiliates of any class of securities of an entity that owns any oil and gas property within the AMI Area, if such entity is listed on a national or foreign securities exchange.
5.12 Events of Withdrawal. The Managing General Partner will cease to be the Managing General Partner of the Partnership on the occurrence of any of the following events of withdrawal:
(a) subject to the provisions of this Section 5.12, the Managing General Partner voluntarily withdraws as the Managing General Partner from the Partnership;
(b) the Managing General Partner:
(i) makes a general assignment for the benefit of creditors;
(ii) files a voluntary bankruptcy petition;
(iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceeding;
(iv) files a petition or answer seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any law;
(v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed in a proceeding of the type described in paragraphs (i) through (iv) above; or
(vi) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the Managing General Partner or of all or any substantial part of its properties;
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Page 5640 (c) 120 days expire after the date of the commencement of a proceeding against the Managing General Partner seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any law if the proceeding has not been previously dismissed, or 90 days expire after the date of the appointment, without the Managing General Partner’s consent or acquiescence, of a trustee, receiver, or liquidator of the Managing General Partner or of all or any substantial part of the Managing General Partner’s properties if the appointment has not previously been vacated or stayed, or 90 days expire after the date of expiration of a stay, if the appointment has not previously been vacated; or
(d) the filing of a certificate of dissolution or its equivalent for the Managing General Partner or the revocation of its charter and the expiration of 90 days after the date of notice to the Managing General Partner of revocation without a reinstatement of its charter.
5.13 Withdrawal of the Managing General Partner. The Managing General Partner may not withdraw from the Partnership without the Unanimous Consent of the Board. Upon withdrawal as a Managing General Partner, the interest of the former Managing General Partner shall be forfeited without consideration. For so long as Blackstone holds a majority of the Series B Preferred Units or a majority of the Class F Units, any successor Managing General Partner shall be designated solely by Blackstone, however any such designation shall be subject to the affirmative vote or consent (not to be unreasonably withheld, delayed or conditioned) of the holders of a majority of the Voting Units (other than Blackstone and its Affiliates); provided, that such affirmative vote or consent shall not be required (i) to the extent that (x) the successor General Partner is an Affiliate of Blackstone, Thomas Fagadau or the Managing General Partner being succeeded and (y) if the operating agreement or other governing documents of such successor Managing General Partner contain substantially similar economic and governance rights (including with respect to the composition of the Board) as those contained in the operating agreement or other governing documents of the predecessor Managing General Partner or (ii) in connection with the consummation of an Exit Event. If Blackstone does not hold a majority of the Series B Preferred Units or a majority of the Class F Units, any successor Managing General Partner shall be as elected by the holders of a majority of the Voting Units.
5.14 Assignment of Rights and Interest of Managing General Partner. The Managing General Partner may assign or pledge all or any portion of its right to receive Distributions, without the consent of the Unitholders. No such assignment or pledge shall be considered an event of withdrawal under this Agreement. Notwithstanding anything else to the contrary set forth in this Agreement, the Managing General Partner may not assign any portion of its voting, managerial or other rights as Managing General Partner under this Agreement, and any such assignment shall be deemed null and void ab initio. The Managing General Partner may assign its rights and interest in the Partnership to, and substitute as Managing General Partner, another corporation or partnership in connection with (i) a merger or consolidation with, or (ii) a transfer of all or substantially all of the assets of the Managing General Partner to such corporation or partnership, provided that such corporation or partnership (x) assumes all of the obligations of the Managing General Partner with regard to the Partnership, (y) is controlled by Blackstone, Thomas Fagadau, or both, and (z) the operating agreement or other governing documents of such successor Managing General Partner contain substantially similar economic and governance rights (including with respect to the composition of the Board) as those contained in the operating agreement or other governing documents of the predecessor Managing
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Page 5641 General Partner. No such assignment pursuant to a merger, consolidation or sale of assets shall be deemed an event of withdrawal of the merging, consolidating or selling Managing General Partner.
5.15 Insolvency or Bankruptcy of Managing General Partner. If the Managing General Partner suffers an event that with the passage of the specified period of time becomes a potential event of withdrawal under this Article V, the Managing General Partner shall notify the other Partners of the potential event of withdrawal within 30 days after the date of occurrence thereof. The substitution of a new Managing General Partner for the withdrawing Managing General Partner shall be effective only if and when the conditions set forth in Section 5.13 above for substitution of a Managing General Partner in the event of the Managing General Partner’s voluntary withdrawal have been satisfied. Effective as of the date at which all of the conditions set forth in this Article V have been satisfied, the withdrawal of the withdrawing Managing General Partner and the substitution of the substitute Managing General Partner shall be deemed to occur simultaneously, so that at no time will the Partnership have been without a Managing General Partner. Until such time as the terms and conditions set forth in this Article V have been satisfied, the Managing General Partner shall not be deemed to have withdrawn and shall continue as Managing General Partner.
5.16 Additional Conditions to Substitution of Managing General Partner. No substitution of a new Managing General Partner for a removed or withdrawing Managing General Partner shall be effective until the following conditions have been satisfied, in addition to those set forth above in this Article V;
(a) The substitute Managing General Partner shall have agreed to accept the responsibilities of the removed or withdrawing Managing General Partner and to continue the business of the Partnership following the removal or withdrawal of the removed or withdrawing Managing General Partner. The substitute Managing General Partner shall have also agreed to assume liability on any Partnership obligations or guarantees arising from and after the date of substitution. The removed or withdrawing Managing General Partner shall remain liable on any Partnership obligations or guarantees that arose before such date, unless the substitute Managing General Partner shall agree to assume such liabilities.
(b) This Agreement and the Partnership’s certificate of limited partnership shall have been amended to name the substitute Managing General Partner as the new Managing General Partner (and, if applicable, as the new registered agent of the Partnership), and to reflect the removal or withdrawal of the removed or withdrawing Managing General Partner.
Additionally, the Partnership shall cause written notice of any removal or withdrawal of the Managing General Partner of the Partnership to be sent to all creditors of the Partnership, and shall place an advertisement announcing the removal or withdrawal in a newspaper of general circulation in each place at which the Partnership’s business is regularly conducted.
5.17 [Reserved].
5.18 [Reserved].
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Page 5642 5.19 Closing Costs. The Managing General Partner and Blackstone shall be reimbursed by the Partnership for all costs and expenses incurred (including the fees and expenses of attorneys, consultants, accountants, financial advisors and other advisors, travel costs and miscellaneous expenses) in connection with the transactions contemplated by this Agreement, including with respect to the negotiation, preparation, execution and delivery of this Agreement and any other document or agreement referred to herein or therein.
5.20 Reimbursement of Expenses. The Partnership shall bear and be responsible for the costs and expenses of operating and administering the Partnership. Accordingly, the Partnership shall reimburse the Managing General Partner and its Affiliates to the extent that it has paid any expenses in connection with the operation or administration of the Partnership, including, without limitation, all expenses relating to (i) the acquisition, development, maintenance and operation of Partnership Properties, including the expenses of investigating and acquiring Prospects, (ii) legal fees incurred in the administration of the Partnership, (iii) the preparation of the Partnership’s financial statements by an independent certified public accountant, (iv) the preparation of annual tax returns, (v) regulatory compliance with any federal or state securities laws (but not including any initial blue sky or state filing fees required to offer and sell the Units in any state), (iv) engineering and reserve evaluation fees, (v) investor communications and (vi) director fees to the directors of the Managing General Partner.
5.21 Compensation for Services. The Managing General Partner and its Affiliates may render oil field, equipage and other services to the Partnership and sell or lease equipment or supplies to the Partnership and receive compensation or rental therefor, subject to any express restrictions of this Agreement. The Managing General Partner may charge gas transportation fees to the Partnership, subject to the restrictions of Section 5.4 of this Agreement.
5.22 Budgets. The Partnership shall conduct its business and operations, including incurring operating expenditures and capital expenditures, in a manner consistent in all material respects with the then-applicable budget, which shall be adopted by the Managing General Partner (as adopted and as amended or modified from time to time, the “Budgets”).
5.23 VCOC Management Rights. The Partnership and each Partner agrees that (x) on the date hereof the Partnership shall enter into a letter agreement with Blackstone substantially in the form of Annex A hereto, and (y) the Partnership shall enter into a VCOC letter agreement with any affiliate of Blackstone on request of Blackstone substantially in the form of Annex A hereto.
5.24 Management Equity Matters. From time to time with Unanimous Consent, the Partnership may issue up to an aggregate amount of the authorized number of Class G Units to individuals in accordance with the terms of the Class G Incentive Plan set forth on Exhibit F hereto. The Class G Incentive Plan is hereby deemed approved by all of the Partners and the Board by Unanimous Consent.
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Page 5643 Article VI The Unitholders: Rights, Duties and Obligations
6.1 Limited Liability of Limited Partners. No Limited Partner, as such, shall be personally liable for any of the debts of the Partnership or any of the losses thereof except to the extent set forth in Section 153.103 of the TBOC and any amounts as to which he accepts personal liability. No Limited Partner, as such, shall participate in the control of the business of the partnership within the meaning of Section 153.102 of the TBOC.
6.2 Transfers of Units. Except for Permitted Transfers, a Unitholder (other than with respect to Management Interests) may not transfer, directly or indirectly his Units until the second (2nd) anniversary of the Effective Date. After the second (2nd) anniversary of the Effective Date, subject to Section 6.5 (Right of First Refusal), Section 6.6 (Tag-Along Rights), and Section 6.7 (Drag-Along Rights), a Unitholder (other than with respect to Management Interests) may transfer his Units subject to the following conditions and restrictions:
(a) The Unitholder desiring to transfer his Units shall so notify the Managing General Partner, in writing.
(b) In the event any Unitholder proposes to transfer his Units, the Unitholder shall first offer his Units (or interest or portion) to the other Unitholders pursuant to Section 6.5 hereof.
(c) For the avoidance of doubt and notwithstanding anything in this Agreement to the contrary, no holder of Management Interests shall, directly or indirectly, transfer all or any portion of such holder’s Management Interests unless (x)(A) such Management Interests have become Vested Management Interests and (B) the Managing General Partner have provided its prior written consent to such transfer or (y) such transfer is made pursuant to Section 6.6, Section 6.7 or Section 6.8. Except as provided in Section 6.8, the Managing General Partner shall not effect the transfer until it shall have approved the transfer, the granting or denial of which approval shall be determined by Unanimous Consent of the Managing General Partner. By way of example, a proposed transfer may be denied if the Managing General Partner determines that such transfer would or could (i) endanger the limited liability status or federal partnership tax status of the Partnership or (ii) violate state or federal securities laws applicable to the proposed transfer. In its discretion, the Managing General Partner may condition its approval of a proposed transfer upon the delivery by the transferor and/or transferee, at their own expense, of an opinion of counsel (which counsel shall be acceptable to the Managing General Partner) as to any of the foregoing matters or other legal matters relevant to the proposed transfer. If approval of a transfer is denied, the Managing General Partner shall notify the transferor Unitholder in writing that the desired transfer may not be effected.
(d) If the proposed transfer will involve an actual change of beneficial ownership of the Units, the Managing General Partner shall deliver to the Unitholder, and the Unitholder and his intended transferee shall execute and return to the Managing General Partner, an instrument of transfer for the Units. The instrument of transfer shall contain (i) a representation by the transferee that he satisfies the Unitholder eligibility requirements set forth
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Page 5644 in a subscription agreement in a form satisfactory to the Managing General Partner in its sole discretion, (ii) an agreement by the transferee to be bound by all of the terms and provisions of this Agreement, (iii) a statement of the address to which Distributions and Partnership reports and communications are to be mailed following the transfer, and (iv) such other agreements and representations as the Managing General Partner shall reasonably require. The parties to a proposed transfer involving a change of beneficial ownership of Units shall pay to the Managing General Partner a fee, in an amount specified by the Managing General Partner but not to exceed $1,000, as reimbursement for costs and expenses incurred to effect the transfer.
(e) If the proposed transfer will not involve an actual change of beneficial ownership of the Units (as determined by the Managing General Partner in its sole discretion) the Managing General Partner shall deliver to the transferor Unitholder, and the Unitholder and his intended transferee shall execute and return to the Managing General Partner, a reaffirmation of this Agreement, evidencing the fact that record but not beneficial ownership of the Units has changed, and that the new Unitholder of record shall be bound by the terms and provisions of this Agreement as if it had been an original Unitholder. The parties to a proposed transfer not involving any change of beneficial ownership of Units shall not be required to pay any fee to the Managing General Partner.
(f) Except as provided in Section 6.8, in no event shall any transferee of any Unit be deemed to become a “Partner” (as that term is used under this Agreement and under the TBOC) with respect to such Unit or any interest therein without the express written approval of the Managing General Partner, the granting or denial of which approval shall be within the sole, absolute discretion of the Managing General Partner. In its sole discretion, the Managing General Partner may request reasonable additional documentation and information to verify that the representations of the transferor and transferee contained in the instrument of assignment or reaffirmation of this Agreement (as applicable) are true and correct, and that the Persons signing such documents were duly authorized to do so.
(g) The Managing General Partner and the parties to the proposed transfer shall have executed all certificates, instruments and documents and taken all such other actions as the managing General Partner shall deem appropriate to obtain any required consents of governmental authorities to the proposed transfer.
(h) The Managing General Partner shall amend the Partnership’s books and records at least once each Fiscal Quarter to reflect transfers of record ownership of Units.
(i) A Unitholder may pledge or encumber all or a portion of its Units to secure such Unitholder’s indebtedness or obligations, so long as the pledgee agrees with the Partnership in writing that (x) the pledgee will cooperate with the Unitholder in effecting the release of the Units from such pledge or encumbrance in connection with the consummation of a purchase or sale pursuant to Section 6.5 as contemplated by the following clause (y), and (y) prior to foreclosing or otherwise realizing upon the Units so pledged or encumbered as a result of a default in the payment or other terms of the indebtedness or obligations secured by such pledged or encumbered Units, the pledgee will offer to sell such Units to the other Unitholders (as the price at which such pledgee proposes to foreclose or otherwise realize upon such Unit) as if the pledgee were a Unitholder proposing to make a transfer of the Units subject to this
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Page 5645 Section 6.2 and Section 6.5 and the pledging Unitholder shall be bound by and shall join in the conveyance of any Units so purchased by the other Unitholders pursuant to Section 6.5.
6.3 Effect of Assignment or Transfer of Units on Voting Rights; Unadmitted Assignees. Any transfer, pledge, assignment or other conveyance of all or any portion of a Unit that does not strictly comply with the provisions of this Article VI shall be null and void and of no force of effect. Except for transfers made pursuant to and in compliance with Sections 6.2 and 6.8, in no event shall a transferee of a Unit acquire any voting or other similar rights with respect to the Units so transferred nor shall such transferee become or be deemed to become a “partner” as that term is used in this Agreement or under the TBOC with respect to any such transferred Unit or portion thereof but shall only have the rights of an “assignee” under Section 153.251 of the TBOC with respect to such Units. A Unitholder that has assigned or otherwise transferred all of any Unit or all of such Unit holder’s rights to receive Distributions, shall no longer have any voting or other similar rights with respect to such Unit and shall cease to be a “partner” as that term is used in this Agreement and under the TBOC with respect to such Unit.
6.4 Delivery of Further Instruments. Each Unitholder agrees to execute and deliver to the Managing General Partner within five (5) days after receipt of the Managing General partner’s written request therefor, designations, powers of attorney and such other instruments as the Managing General Partner may reasonably deem necessary to evidence a transfer permitted by the provisions of this Article VI.
6.5 Right of First Refusal.
(a) Except as provided for in Section 6.8, any Unit intended to be transferred pursuant to Section 6.2 (“Offered Interest”) by any Limited Partner (excluding Blackstone) must in any event be first tendered to (i) Blackstone and, regardless of the class of interests intended to be transferred, then, if Blackstone does not submit an Acceptance Notice within fifteen (15) days after the mailing date of the Sales Notice pursuant to the procedures in this Section 6.5, to (ii) the other non-selling Unitholders of the same class by notice (“Sales Notice”) on a pro rata basis (determined on the basis of each Unitholder’s percentage of the aggregate Unitholders’ Percentage Interests of such class, excluding in the computation of such percentage the Units of the selling Unitholder), for a consideration and upon other terms and conditions no less favorable than those which the selling Unitholder would receive from the prospective transferee, whose identity shall be disclosed in the Sales Notice. The non-selling Unitholders within such class shall have fifteen (15) days after the mailing date of the Sales Notice in which to accept the offer by written notice to the selling Unitholder and to the Managing General Partner (“Acceptance Notice”). To the extent that the selling Unitholder’s entire Offered Interest is not accepted by the non-selling Unitholders within such class, the remainder thereof shall be re-offered by notice (“Second Sales Notice”) to the Unitholders within such class having given timely Acceptance Notices, on a pro rata basis (determined on the basis of each such accepting Unitholder’s percentage of the aggregate Unitholders’ Percentage Interest of such class, excluding in the computation of each such percentage the Units of the selling Unitholder and the non-accepting Unitholders within such class), for the same consideration and on the other terms and conditions as were previously offered. Such Unitholders shall have fifteen (15) days after the mailing of the Second Sales Notice in which to deliver an Acceptance Notice for that portion of the Offered Interest being offered by the Second Sales Notice. The procedure set forth in this Section 6.5(a)
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Page 5646 shall be continued until either Acceptance Notices are received for the entire Offered Interest or no Unitholder of the same class remains who wants to purchase any part of the remaining portion thereof. For avoidance of doubt, for purposes of this Section 6.5, the Percentage Interests of the Series A Preferred Unitholders shall be determined on an as-converted basis.
(b) In the event that Acceptance Notices for the entire Offered Interests are not timely given by the Unitholders within such class in accordance with Section 6.5(a), the remaining position thereof shall be offered for the same consideration and on the other terms and conditions by notice of all remaining Unitholders within other classes (“Third Sales Notice”). The remaining Unitholders shall have fifteen (15) days after mailing of the Third Sales Notice within which to accept the offer by giving written notice to the selling Unitholder (“Remaining Unitholders’ Acceptance Notice”) in accordance with their respective Percentage Interest (excluding in the computation of such interest the Units of the Unitholders within the class of the offered Units) or Unitholders otherwise agree. If any such remaining Unitholder does not exercise its pro rata share of such right, the other Unitholders may do so pro rata, by giving a further Remaining Unitholders’ Acceptance Notice, all in accordance with the ratio of their respective Percentage Interest to the aggregate Percentage Interests of all accepting remaining Unitholders.
(c) All Acceptance Notices delivered in accordance with Section 6.5(a) and shall be accompanied by the accepting Unitholder’s payment for the portion of the Offered Interest accepted thereby.
(d) In the event that the entire Offered Interest (as reduced under the provisions of Section 6.5(a)) together with the Units (if any) elected to be included in such sale under the provisions of Section 6.5(a)) are not sold to the other Unitholders pursuant to the terms of Sections 6.5(a) through 6.5(b), none of the acceptances given under Sections 6.5(a) through 6.5(b) shall be consummated and the selling Unitholder shall be free for a period of sixty (60) days after the expiration of the time during which the last of the eligible Unitholders would have had to give their Acceptance Notice, and subject always to the other provisions of this Article VI, to transfer all, but not less than all, of the Offered Interest (as reduced under the provisions of Section 6.5(a)) together with the Units (if any) elected to be included in such sale under the provisions of Section 6.5(a)) to the prospective transferee identified in the Sales Notice for a consideration and on such other terms and conditions no more favorable than those offered to the other Unitholders; provided that the breach by a participating Unitholder to convey its Units to the prospective purchaser shall not be deemed to prohibit the selling Unitholder and all other complying participating Unitholders from consummating such sale. If the identity of such transferee is different, the consideration or other terms or conditions offered to such transferee are more favorable than those offered to the other Unitholders, the selling Unitholder must reoffer such interest in the Partnership to the other Unitholders pursuant to the provisions of this Section 6.5. In the event that a transfer of the selling Unitholder’s interest is effected pursuant to this Section 6.5(d), the selling Unitholder shall, within ten (10) days thereafter, certify to the Managing General Partner the identity of the transferee, the actual consideration and other terms and conditions of such transfer. In the event that the transfer of an Offered Interest is not consummated pursuant to the provisions hereof within six (6) months after the first Sales Notice is given with respect thereto pursuant to Section 6.5(a), the provisions of this Section 6.5 shall apply to any subsequent offer or transfer for consideration.
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Page 5647 6.6 Tag-Along Rights.
(a) If at any time following the second (2nd) anniversary of the Effective Date and prior to the consummation of an Exit Event, a Unitholder proposes to transfer all or any portion of its Units to a Third Party purchaser in an aggregate amount representing (1) an Economic Percentage greater than 10% or (2) a number of Series B Preferred Units representing greater than 10% of the outstanding Series B Preferred Units ( in each case, as applicable, a “Proposed Sale”) and otherwise in accordance with this Agreement, other than in a Drag-Along Transaction (in which case Section 6.7 shall govern), then such Unitholder shall furnish to the other Unitholders a written notice of such Proposed Sale (the “Tag-Along Notice”) and provide them the opportunity to participate in such Proposed Sale on the terms described in this Section 6.6. The Tag-Along Notice will include:
(i) the material terms and conditions of the Proposed Sale, including (A) the number of Units and the Economic Percentage represented thereby or the percentage of Series B Preferred Units represented thereby, as applicable, proposed to be so transferred, (B) the name of the proposed transferee (the “Proposed Transferee”), (C) the proposed amount and form of consideration (including the consideration payable to each Unitholder assuming each Unitholder included the maximum number of Units it would be entitled to sell in such Proposed Sale, such amounts calculated based on a hypothetical application of Section 4.7), (D) the proposed transfer date, if known, which date shall not be less than thirty (30) Business Days after delivery of such Tag-Along Notice and (E) with respect to a Proposed Sale of Common Units, the fraction, expressed as a percentage, determined by dividing (I) the Economic Percentage represented by the number of Units to be transferred by such transferring Unitholder by (II) the Economic Percentage represented by the total number of Common Units held by such transferring Unitholder, or with respect to a Proposed Sale of Series B Preferred Units, (1) the number of Series B Preferred Units to be transferred by such transferring Unitholder by (2) the total number of Series B Preferred Units held by such transferring Unitholder (in each case, as applicable, the “Tag-Along Sale Percentage”); and
(ii) an invitation to the other Unitholders to include in the Proposed Sale Units up to a number equal to (A) the Tag-Along Sale Percentage multiplied by (B) with respect to a Proposed Sale of Common Units, the Economic Percentage represented by the total number of Units held by such other Unitholder or, with respect to a Proposed Sale of Series B Preferred Units, the total number of Series B Preferred Units held by such other Unitholder, as applicable. The transferring Unitholder will deliver or cause to be delivered to the other Unitholders copies of all transaction documents relating to the Proposed Sale as promptly as practicable after they become available.
(iii) The other Unitholders must exercise the tag-along rights provided by this Section 6.6 within twenty one (21) calendar days following delivery of the Tag-Along Notice by delivering a notice (the “Tag-Along Offer”) to the transferring Unitholder indicating its desire to exercise its rights hereunder and specifying the number of Units it elects to include in the Proposed Sale pursuant to this Section 6.6. If such other Unitholder does not make a Tag-Along Offer within twenty one (21) calendar days following delivery of the Tag-Along Notice, such other Unitholder shall be deemed to
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Page 5648 have waived its rights under this Section 6.6 with respect to such Proposed Sale, and the transferring Unitholder shall thereafter be free to transfer its Common Units or Series B Preferred Units, as applicable, to the Proposed Transferee, for the same form of consideration set forth in the Tag-Along Notice, at a per Unit price no greater than the per Unit price set forth in the Tag-Along Notice and on other terms and conditions which are not more favorable to the transferring Unitholder than those set forth in the Tag-Along Notice. If such other Unitholder elects to participate in the Proposed Sale pursuant to this Section 6.6, such other Unitholder shall agree to make to the Proposed Transferee the same representations and warranties, covenants and indemnities as the transferring Unitholder agrees to make in connection with the Proposed Sale; provided that (w) such other Unitholder shall not be liable for the breach of any covenant by the transferring Unitholder and vice versa, (x) in no event shall any Unitholder be required to make representations and warranties or provide indemnities as to any other Unitholder, (y) any liability relating to representations and warranties (and related indemnities) or other indemnification obligations regarding the business of the Partnership in connection with the Proposed Sale shall be shared by the Unitholders pro rata in proportion to the consideration to be received in the Proposed Sale by each Unitholder and (z) in no event shall any Unitholder other than the transferring Unitholder be responsible for any liabilities or indemnities in connection with such Proposed Sale in excess of the proceeds received by such Unitholder in the Proposed Sale.
(iv) The offer of any Unitholder contained in such Unitholder’s Tag-Along Offer shall be irrevocable, and, to the extent such offer is accepted, such Unitholder shall be bound and obligated to transfer in the Proposed Sale on the same terms and conditions, with respect to each Unit transferred, as the transferring Unitholder, up to such number of Units and of such series as such Unitholder shall have specified in its Tag-Along Offer; provided, however, that if the material terms of the Proposed Sale change with the result that the per Unit price shall be less than the per Unit price set forth in the Tag-Along Notice, the form of consideration shall be different or the other terms and conditions shall be less favorable to such Unitholder than those set forth in the Tag-Along Notice, such Unitholder shall be permitted to withdraw the offer contained in the applicable Tag-Along Offer by written notice to the transferring Unitholder and upon such withdrawal shall be released from such holder’s obligations.
(v) In the event that the consideration received in connection with a Proposed Sale consists of securities that are not registered under the Securities Act, and one or more Unitholders exercise their tag-along rights hereunder in connection with such Proposed Sale, if such Unitholders are entitled to registration rights in respect of such securities, such Unitholders shall ensure that such other Unitholders will receive pro rata piggy-back registration rights on any registration in which such Unitholders are entitled to register such securities (including any demand registrations exercised by such Unitholders).
(vi) If a Unitholder exercises its rights under this Section 6.6, the closing of the sale of each Unitholder’s Units in the Proposed Sale will take place concurrently. If the closing with the Proposed Transferee (whether or not a Unitholder has exercised its rights under this Section 6.6) shall not have occurred by 5:00 p.m.
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Page 5649 Eastern Time on the date that is sixty (60) days after the date of the Tag-Along Notice, as such period may be extended up to an additional sixty (60) days to obtain any required regulatory approvals, and on terms and conditions not more favorable to the transferring Unitholder than those set forth in the Tag-Along Notice, all the restrictions on Transfer contained herein shall again be in effect with respect to such Units and proposed Transfer.
(vii) Each Unitholder will bear its own costs in connection with the transactions contemplated by this Section 6.6.
6.7 Drag-Along Rights.
(a) Subject to the limitations and conditions set forth in this Section 6.7, if at any time after the second (2nd) anniversary of the Effective Date, Blackstone elects to consummate, or to cause the Partnership to consummate, a sale to a Third Party on an arms- length basis that constitutes an Exit Event (a “Drag-Along Transaction”), the other Unitholders will consent to such Drag-Along Transaction, and will take or cause to be taken all other actions, including instructing any Existing Limited Partner Directors to approve such Drag-Along Transaction, reasonably necessary or desirable to cause the consummation of such Drag-Along Transaction on the terms proposed by Blackstone, including entering into a customary registration rights agreement in connection with a public offering of the Partnership. The Unitholders will execute any applicable merger, asset purchase, security purchase, recapitalization or other agreement negotiated by Blackstone in connection with such Drag- Along Transaction; provided, that (v) each Unitholder shall make the same representations and warranties, covenants and indemnities as Blackstone agrees to make in connection with the Drag-Along Transaction; (w) no Unitholder other than Blackstone shall be liable for the breach of any covenants of Blackstone and vice versa; (x) in no event shall any Unitholder be required to make representations and warranties or provide indemnities as to any other Unitholder; (y) any liability relating to representations and warranties (and related indemnities) or other indemnification obligations regarding the business of the Partnership in connection with the Drag-Along Transaction shall be shared by the Unitholders pro rata on a several (but not joint) basis in proportion to the proceeds received by each Unitholder in the Drag-Along Transaction and (z) each Unitholder’s aggregate liability relating to the representations and warranties (and related indemnities) or other indemnification obligations will not exceed the purchase price to be received in the Drag-Along Transaction by such Unitholder.
(b) In connection with a Drag-Along Transaction, (i) all of the Unitholders shall be allocated the same form of consideration, or if any Unitholders are given an option as to the form and amount of consideration to be received, all Unitholders will be given the same option, and (ii) the consideration to be received by the Unitholders in a Drag-Along Transaction will be calculated by taking the aggregate proceeds from such Drag-Along Transaction and allocating such proceeds among the Unitholders in such relative amounts as would have resulted if the Partnership had liquidated and sold its assets for a cash amount equal to such consideration, valuing any non-cash consideration at its Fair Market Value, and immediately distributed such proceeds to the Unitholders in accordance with Section 4.7.
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Page 5650 (c) In the event that the consideration received in connection with a Drag- Along Transaction consists of securities that are not registered under the Securities Act, if Blackstone or its Affiliates are entitled to registration rights in respect of such securities, Blackstone shall ensure that such other Unitholders will receive pro rata piggy-back registration rights on any registration in which Blackstone or its Affiliates are entitled to register such securities (including any demand registrations exercised by such parties).
(d) The Partnership shall bear the reasonable and documented costs incurred by each Unitholder arising pursuant to a Drag-Along Transaction; provided that costs incurred by or on behalf of a Unitholder for its sole benefit will not be considered costs to be borne by the Partnership hereunder.
(e) Notwithstanding anything contained in this Section 6.7 to the contrary, there shall be no liability or obligation on behalf of Blackstone or its Affiliates or the Partnership determine, for any reason, not to consummate a Drag-Along Transaction, and Blackstone shall be permitted to, and shall have the authority to cause the Partnership to, discontinue at any time any Drag-Along Transaction initiated by Blackstone by providing written notice to the Partnership and the other Unitholders.
(f) Notwithstanding anything contained in this Section 6.7 to the contrary, any transaction provided in Section 6.7(a) which takes place within the first eighteen (18) months of the Effective Date will require approval by at least one Existing Limited Partner Director.
6.8 Certain Transfers, Death, Bankruptcy or Incompetency. Subject to all of the provisions of this Article VI (other than Sections 6.2(b) and 6.5), any Unitholder may transfer, in each such case whether or not for consideration, all or any part of his Units to (i) in connection with his death, his estate or to the heirs under his will, (ii) any of his relatives by blood or marriage, (iii) any trust solely for the benefit of such relatives or such Unitholder, (iv) any charitable institution, (v) any corporation, partnership or limited liability company which he or such relatives control, or (vi) if such Unitholder is a corporation, partnership or limited liability company, to any of the owners thereof who were owners thereof on the date such entity became a party to this Agreement or to any Affiliates thereof ((i) through (vi) each a “Permitted Transfer”). Such assignment shall not be subject to the conditions and restrictions of Sections 6.2(b), 6.2(c) and 6.5 above (including the necessity of obtaining the Managing General Partner’s approval of such assignment), except that the assignment shall not be permitted if the Managing General Partner determines that such transfer would or could (i) endanger the federal partnership tax status of the Partnership, or (ii) violate state or federal securities laws applicable to the proposed assignment. Upon compliance with the applicable provisions of Section 6.2(d) or 6.2(e) any transferee of a Unit pursuant to this Section 6.8 shall automatically become a “Partner” (as that term is used in the Agreement and under the TBOC) with respect to the Units so transferred. For the avoidance of doubt and notwithstanding anything in this Agreement to the contrary, no Class G Unitholder shall, directly or indirectly, Transfer all or any portion of such Class G Unitholder’s Class G Units unless (x)(A) such Class G Units have become Vested Class G Units and (B) the Board has provided its prior written consent to such Transfer by Unanimous Consent or (y) such Transfer is (A) to a Permitted Affiliate or (B) otherwise expressly permitted pursuant to this Agreement.
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Page 5651 6.9 Confidentiality. Each Limited Partner covenants that so long as he is a Limited Partner of the Partnership and at all times thereafter he will not intentionally disclose to any third person any information conveyed to him by the Partnership or the Managing General Partner concerning the investments and holdings of the Partnership, or the performance of the Partnership, except (i) to his personal accountants and other income tax advisers (but, in such event, the Limited Partner shall request that such accountants or other advisers keep such information confidential), (ii) to the extent such information is in the public domain other than as a result of such Limited Partner’s breach of this Section 6.9, or (iii) where required to be disclosed by court order, subpoena or other governmental process. In the event that a Limited Partner shall be required to make disclosure pursuant to the provisions of clause (iii) of the preceding sentence, such Limited Partner shall promptly, but in no event more than forty-eight (48) hours after learning of such court order, subpoena, or other governmental process, notify the Partnership and, at the Partnership’s expense, such Limited Partner shall (a) take all reasonable steps requested by the Partnership to defend against the enforcement of such subpoena, court order or other government process, and (b) permit the Partnership to intervene and participate with counsel of its choice in any proceeding relating to the enforcement thereof. Notwithstanding the foregoing, the Managing General Partner agrees that if a Limited Partner is a partnership or other collective investment vehicle with beneficial owners bound by confidentiality obligations substantially equivalent to those contained in this Agreement, such Limited Partner may disclose the information described in Section 6.9 to its investors and prospective investments; provided, that such (i) Limited Partner shall request that such persons keep such information confidential and (ii) persons do not participate in any activities directly competitive with the Partnership. Notwithstanding anything to the contrary herein, each Limited Partner (and each employee, representative, or other agent of such Limited Partner) may disclose to such Person’s advisors, the tax treatment and tax structure of (i) the Partnership, and (ii) its transactions, and materials (including opinions or other tax analyses) that are provided to such Limited Partner relating to such tax treatment and tax structure; provided, that such Limited Partner shall request that such persons keep such information confidential.
6.10 Management Partner Termination. Upon a Termination Event, as defined in a Management Partner’s Award Agreement, the Managing General Partner shall have the option, if so provided in the applicable Award Agreement, to cause such Management Partner’s Management Interest to be automatically forfeited in its entirety, and to cause the partnership to pay to such Management Partner, the Buyout Amount as defined in, and subject to the terms and conditions of, the applicable Management Partner’s Award Agreement.
6.11 Initial Public Offering.
(a) An IPO may be approved and effectuated by the Managing General Partner at any time after the second (2nd) anniversary of the Effective Date.
(b) In connection with any proposed IPO approved in accordance with this Agreement, if required by the Managing General Partner, the outstanding Partnership interests may be converted or exchanged in accordance with this Section 6.11 (the “IPO Exchange”) into equity securities of the IPO Issuer and/or its general partner (an “IPO GP”) (if applicable) (“IPO Securities”). IPO Securities issued in connection with any IPO Exchange in exchange for Partnership interests may or may not include, in whole or
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Page 5652 in part, equity securities of the IPO Issuer of the same class or series as the securities of the IPO Issuer proposed to be offered to the public in an IPO (the “Publicly Offered Securities”). In connection with any IPO Exchange, each outstanding Partnership interests will be converted into or exchanged for IPO Securities such that each holder of Partnership interests will receive IPO Securities having a value equal to the amount that such holder would have received if, immediately prior to the consummation of an IPO, all of the Partnership’s assets had been sold for their Fair Market Values (which Fair Market Values shall be determined, if applicable, to reflect the expected offering price per Publicly Offered Security in an IPO, net of any underwriting discounts and commissions) and the resulting amount had been distributed by the Partnership pursuant to the rights and preferences set forth in Section 4.7 as in effect immediately prior to such distribution. Notwithstanding the foregoing:
(i) any IPO Securities issued with respect to any unvested Class G Units shall remain subject to any applicable vesting conditions in accordance with, and to the extent provided in, this Agreement and the applicable Award Agreements;
(ii) if the IPO Securities will include multiple classes of securities (including any subordinated interests, general partner interest or incentive distribution rights) in the IPO Issuer or an IPO GP, then the IPO Exchange shall be structured in a manner such that each holder of Partnership interests receives substantially the same proportionate share of the Publicly Offered Securities and of each such other class of securities, or otherwise shares proportionately the economic benefits of such class of securities, as each other holder of Partnership interests (taking into account the amount that would be received by each such holder in the hypothetical distribution described in the immediately preceding sentence); and
(iii) if the hypothetical distribution described in the immediately preceding sentence would result in the holders of Class G Units receiving no amount upon such a hypothetical liquidation event, then such Class G Units shall be automatically canceled for no consideration.
(c) If, in connection with the IPO Exchange, the Managing General Partner reasonably determines that it is advisable to have the holders of the Partnership interests contribute all of the Partnership interests to the IPO Issuer and/or an IPO GP in one or a series of transactions pursuant to an agreement that provides for the exchange of Partnership interests into IPO Securities of such Person or Persons (with the amount of IPO Securities to be received by each such holder being reasonably determined in accordance with this Section 6.11), each holder of Partnership interests agrees to participate in such an exchange. For the sake of clarity, the Managing General Partner may elect, in connection with a proposed IPO where a Subsidiary of the Partnership or another entity that is not the Partnership or its successor is the IPO Issuer, not to cause an IPO Exchange in connection therewith and, to the extent such an IPO Exchange does not occur, this Agreement may continue in effect after an IPO in accordance with its terms.
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Page 5653 (d) Subject to Section 6.11(b), but notwithstanding anything to the contrary in this Agreement, at any time after the approval of an IPO in accordance with this Agreement, the Managing General Partner shall be entitled to approve the transaction or transactions to effect the IPO Exchange and to take all such other actions as are required or necessary to facilitate an IPO including: (i) determining the terms of the organizational documents of the IPO Issuer and the IPO GP (if applicable); (ii) forming any entities required or necessary in connection with an IPO (including any IPO GP); (iii) transferring or causing to be transferred any assets between or among the Partnership, the IPO Issuer and any of the Partnership’s Subsidiaries; and (iv) subject to Article XII, amending the terms of this Agreement, in each case without the consent or approval of any other Person (including the Board). If the Managing General Partner elects to exercise rights to initiate an IPO under this Section 6.11, the Limited Partners shall (1) take such actions as may be reasonably requested in connection with consummating the IPO Exchange, including (x) such actions as are required to Transfer all of the issued and outstanding Partnership interests or assets of the Partnership to an IPO Issuer or its general partner (including one or more special purpose entities that are classified as corporations for U.S. federal income tax purposes) and (y) such actions as are required in order to merge or consolidate the Partnership into or with an IPO Issuer or IPO GP;
(e) Each Limited Partner shall sell any fractional IPO Securities owned by such party (after taking into account all IPO Securities held by such party) to the IPO Issuer or IPO GP, as applicable, upon the request of the Partnership in connection with or in anticipation of the consummation of an IPO, for cash consideration equal to the Fair Market Value of such fractional securities.
(f) Each Limited Partner will cooperate with the Partnership in connection with an IPO as may be reasonably requested by the Managing General Partner including, without limitation, (i) participation in meetings, drafting sessions and due diligence sessions, (ii) assistance to the Partnership and the advisors to the Partnership in the preparation of a prospectus and customary marketing materials, (iii) cooperating with the marketing efforts of the IPO and (iv) entry into customary lock up arrangements (which in no event shall be longer than the lock up period for the IPO Issuer) and entry into such other documentation as may be reasonably requested by the Managing General Partner to effect an IPO in accordance with this Section 6.11.
(g) At the election of the Managing General Partner, the Limited Partners and the IPO Issuer shall, at or prior to the consummation of an IPO, enter into a registration rights agreement in customary form providing for the registration rights for certain of the Limited Partners, including customary pro rata piggyback rights.
Article VII Meetings of Voting Unitholders
7.1 Call. Meetings of Voting Unitholders shall be held in accordance with this Article VII. Meetings of the Voting Unitholders may be called by either the Managing General Partner or by Voting Unitholders holding 51% or, more of the Units then held by Unitholders, for the
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Page 5654 purpose of addressing any matter upon which the Voting Unitholders may vote under this Agreement. Voting Unitholders may call a meeting by delivering to the Managing General Partner one or more written requests stating that the signing Voting Unitholders wish to call a meeting and indicating the speck purpose for which the meeting is to be held. Action at the meeting shall be limited to these matters specified in the call of the meeting.
7.2 Notice. Within fifteen (15) days after receipt of a properly made written call request from the Voting Unitholders, unless extended without notice to Voting Unitholders for a period of up to sixty (60) additional days as the Managing General Partner may deem necessary for the Partnership to comply with any federal or state securities statutes, rules, regulations, or similar requirements governing the holding of a meeting or the solicitation of proxies or preparation of such other documents for use at such a meeting to all Unitholders, the Managing General Partner shall deposit in the United States mails written notice of the meeting, as provided in Section 13.1 an affidavit or certificate of mailing of any notice in accordance with this Section, executed by the Managing General Partner or any transfer agent or registrar that the Managing General Partner may appoint, shall be prima facie evidence of the giving of notice. If any notice addressed to Unitholder at the address of the Unitholder appearing on the records of the Partnership is returned to the Partnership by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver it, that notice and any subsequent notices or reports regarding that meeting shall be deemed to have been duly given without further mailing if they are available for the Unitholder at the principal executive office of the Partnership for a period of one (1) year from the date of the giving of the notice so returned.
7.3 Record Date. For purposes of determining the Unitholders entitled to notice of or to vote at a meeting of the Voting Unitholders, the Managing General Partner may set a Record Date which shall not be less than five (5) days nor more than sixty (60) days before the date of the meeting. Only Voting Unitholders who are record holders of Voting Units on the Record Date set pursuant hereto shall be entitled to vote at such meeting; all Unitholders shall be entitled to notice of and attendance at such meeting.
7.4 Time and Place. A meeting shall be held at a reasonable time and in a convenient place as determined in the sole discretion of the Managing General Partner on a date not less than ten (10) nor more than sixty (60) days after the mailing of notice of the meeting; provided that the Managing General Partner may schedule a meeting on five (5) days’ notice if it reasonably believes that circumstances constituting in its reasonable opinion an emergency warrant a meeting of the Partners on shorter notice than ten (10) days’ notice.
7.5 Adjournment. When a meeting of the Voting Unitholders is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed if the time and place thereof were announced at the meeting at which the adjournment was taken, unless such adjournment shall be for a period of more than four (4) days. At the adjourned meeting, the Voting Unitholders may transact any business that might have been transacted at the actual meeting. If the adjournment is for a period of more than forty-five (45) days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with the provisions of Section 7.2.
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Page 5655 7.6 Waiver of Notice by Attendance. Attendance of a Voting Unitholder at a meeting slid constitute a waiver of notice of the meeting, except when the Voting Unitholder objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required to be included in the notice of the meeting but not so included, if the objection is expressly made at the meeting.
7.7 Quorum. Voting Unitholders holding more than 80% of the Voting Units then held by Voting Unitholders shall constitute a quorum at any meeting of the Voting Unitholders. The Voting Unitholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Voting Unitholders so as to result in the presence of less than a quorum, if any action taken other than adjournment is approved by the holders of the percentage of Voting Units then held by Voting Unitholders required to approve such action under this Agreement. In the absence of a quorum, a meeting of Voting Unitholders may be adjourned from time to time by the affirmative vote of the holders of a majority of the Voting Units represented either in person or by proxy at the meeting, but no other business may be transacted.
7.8 Voting. Voting Unitholders may vote either in person or by proxy at any meeting. Voting Unitholders shall vote on all matters in respect of which they are entitled to vote as a single class (except that if a specific class of Voting Units is required by this Agreement to vote on any matter, such class shall vote separately on such matter). The vote required to approve any proposed action shall be determined as follows:
(a) If the proposed action is required by this Agreement to be approved by Voting Unitholders (or a specific class of Voting Unitholders) holding a specified percentage of Voting Units then held by Voting Unitholders, or class of Voting Unitholders, then the action must be approved by Voting Unitholders (or a specific class of Voting Unitholders) holding that percentage of all issued and outstanding Voting Units (or specified class of Voting Units).
(b) Any proposed action not subject to Section 7.8(a) above must be approved by the Managing General Partner.
7.9 Conduct of Meeting. The Managing General Partner shall have full power and authority concerning the manner of conducting any meeting of the Voting Unitholders, including, without limitation, the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of this Article VII, the conduct of voting, the validity and effectiveness of any proxies, and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The Managing General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take minutes of any meeting. The Managing General Partner may designate its own directors, officers, employees or agents to serve in either or both of such positions. All minutes shall be kept with the records of the Partnership maintained by the Managing General Partner. The Managing General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Voting Unitholders, including regulations with regard to the appointment of proxies, the
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Page 5656 appointment and duties of inspectors of votes, and the submission and examination of proxies and other evidences of the right to vote.
7.10 Action Without Meeting.
(a) Subject to the provisions of Section 7.10(b), any action(s) that may be taken at a meeting of the Voting Unitholders may be taken without a meeting if one or more consents in writing setting forth the action(s) to be taken, shall be signed by Voting Unitholders holding not less than the percentage of Units then held by Voting Unitholders required to approve such action(s) under this Agreement. Such consent(s) shall have the same force and effect as a vote of the signing Voting Unitholders at a meeting duly called and held pursuant to this Article VII. No prior notice from the signing Voting Unitholders to the Managing General Partner or other Voting Unitholders shall be required in connection with the use of a written consent pursuant to this Section 7.10. Written notice of any action taken by means of a written consent of Voting Unitholders shall, however, be sent within a reasonable time after the date of the consent by the Managing General Partner to all Unitholders who did not sign the written consent. A written consent may also be circulated by the Managing General Partner in its sole discretion or will be circulated upon the call of Voting Unitholders holding 51% or more of the Units then held by Voting Unitholders.
(b) Unless the TBOC expressly requires that any consent of a Voting Unitholder to any specific action for which the consent of the Voting Unitholders is required under this Agreement be in writing, such consent shall be deemed duly and validly given for all purposes of this Agreement by such Voting Unitholder if (i) such Voting Unitholder’s consent is solicited in a communication given in accordance with the provisions of Section 13.1, which consent sets forth the action(s) to be taken or requested (the “Request”), and (ii) such Voting Unitholder does not respond in writing to the Request within fifteen (15) days after receipt of the Request.
Article VIII Indemnification of Managing General Partner
8.1 Limitation of Liability of the Managing General Partner and Its Affiliates. Neither the Managing General Partner nor any of its Affiliates shall be liable to the Partnership or any of the Unitholders for any act or omission performed or omitted by it or him in good faith and reasonably believes to be in the best interests of the Partnership pursuant to the authority granted to it or him by this Agreement, other than an act constituting gross negligence willful misconduct or material breach of this Agreement.
8.2 Indemnification. To the full extent of Chapter 8 of the TBOC (but subject to the terms and conditions thereof), the Partnership shall and hereby does indemnify and hold harmless the Managing General Partner and its Affiliates from any loss, damage, claim or liability, including, but not limited to, reasonable attorneys’ fees and disbursements, incurred by it by reason of being a general partner of the Partnership (or an Affiliate thereof) or by reason of any act performed by the Managing General Partner or such Affiliate on behalf of the Partnership or in furtherance of the Partnership’s interests other than an act constituting gross negligence, willful misconduct or material breach of this Agreement. The Partnership shall
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Page 5657 advance funds to the Managing General Partner or its Affiliates for legal expenses and other costs incurred as a result of any legal action taken for which indemnification is being sought subject to compliance with Sections 8.104 or 8.105, as applicable, of the TBOC.
Article IX Accounts, Records and Reports
9.1 Books of Account; Fiscal Year. The Managing General Partner, at the expense of the Partnership, shall maintain for the Partnership adequate books and records of account that shall be maintained on the accrual method. The Partnership shall adopt the calendar year as its Fiscal Year. When an audit is required by Section 9.6 hereof, the books of the Partnership, at Partnership expense, shall be audited by an accounting film designated by the Managing General Partner. All costs and expenses incurred in connection with such audit shall be borne by the Partnership.
9.2 Capital Accounts. Capital Accounts shall be established and maintained for the Partners consistent with generally accepted accounting principles for the accrual method of accounting, provided, however, that for federal income tax reporting purposes it shall maintain its books consistent with Section 1.704-1(b)(2)(iv) of the Treasury Regulations and shall make all final distributions upon liquidation of the Partnership in a manner which reconciles the federal income tax Capital Accounts with the financial Capital Accounts.
(a) For purposes of determining Capital Account balances and, consequently, the Partners’ sharing in Partnership assets, if distributions are made of Partnership assets which have inherent unrecognized gain or loss which is not recognized to the Partnership, the assets shall be deemed to have been sold for their respective fair market values, causing such unrecognized gain or loss to be deemed to have been recognized upon distribution and such gain or loss deemed to have been recognized shall be posted in the proper sharing ratios to the Capital Accounts of the Partners.
(b) Notwithstanding any provisions to the contrary, allocations of depletion with respect to each oil and gas property and gain and losses therefrom shall be governed by the following:
(i) For purposes of such computations, the federal income tax basis of each oil and gas property shall be allocated to each Partner in accordance with such Partner’s Percentage Interest in Partnership Capital as of the time such oil and gas property is acquired by the Partnership, and shall be reallocated among the Partners in accordance with the Partners’ Percentage Interests in Partnership Capital as determined immediately following the occurrence of an event giving rise a revaluation in accordance with Treasury Reg. §1.704-1(b)(2)(iv)(f) of the Partnership’s oil and gas properties pursuant to the terms of this Agreement (or at the time of any material additions to the federal income tax basis of such oil and gas property). Such allocations are intended to be applied in accordance with the “partners’ interests in partnership capital” under Section 613A(c)(7)(D) of the Code; provided that the Partners understand and agree that the Managing General Partner may authorize special allocations of tax basis, income, gain, deduction or loss, as computed for federal income tax purposes, in order to
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Page 5658 eliminate differences between Simulated Basis and adjusted federal income tax basis with respect to any oil and gas properties, in such manner as determined consistent with the principles of Section 704(c) of the Code and Section 4.9(e) hereof.
(ii) For purposes of the separate computation of gain or loss by each Partner on the taxable sale or other disposition of an oil and gas property, the amount realized from such sale or disposition shall be allocated (i) first, to the Partners in an amount equal to the Simulated Basis in such oil and gas property and in the same proportion as their shares thereof were allocated, and (ii) second, any remaining amount realized shall be allocated consistent with the allocation of Simulated Gains; provided, however, that the Partners understand and agree that the Managing General Partner may authorize special allocations of tax basis, income, gain, deduction or loss, as computed for federal income tax purposes, in order to eliminate differences between Simulated Basis and adjusted federal income tax basis with respect to any oil and gas properties, in such manner as determined consistent with the principles of Section 704(c) of the Code and Section 4.9(e) hereof.
(iii) Each Partner shall separately keep records of its share of the adjusted tax basis in each oil and gas property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its gain or loss on the disposition of such property by the Partnership. Upon the request of the Managing General Partner, each Partner shall advise the Partnership of its adjusted tax basis in each oil and gas property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection. The Partnership may rely on such information and, if it is not provided by the Partner, may make such reasonable assumptions as it shall determine with respect thereto.
(c) Except as provided in Section 9.2(d) and in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f), the Capital Account of each Partner and the book value of each Partnership Property shall be adjusted upward or downward immediately prior to any event specified under Treasury Regulations Section 1.704-1(b)(2)(iv)(f)(5) to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership Property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property for an amount equal to its fair market value immediately prior the event giving rise to such adjustment and had been allocated to the Partners at such time pursuant to Section 4.3. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including cash or Cash Equivalents) immediately prior to the event giving rise to such adjustment shall be determined by the Managing General Partner using such method of valuation as it may adopt; provided, however, that the Managing General Partner, in arriving at such valuation, must take fully into account the fair market value of the Partnership interests of all Partners at such time and the Managing General Partner shall make such adjustments to such valuation as required by Treasury Regulations Section 1.704- 1(b)(2)(iv)(h)(2). The Managing General Partner shall allocate such aggregate value, as so adjusted, among the assets of the Partnership (in such manner as it determines) to arrive at a fair market value, for individual properties.
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Page 5659 (d) In accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(s), immediately after the conversion of the Series A Preferred Units, the Capital Account of each Partner and the book value of each Partnership Property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership Property, as if (A) such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property for an amount equal to its fair market value immediately after such exercise, and (B) (1) first, all Unrealized Gain and Unrealized Loss had been allocated pro rata to the Partners holding Class A-1 Units until the Capital Account of each of the Converting Unitholders with respect to each such Class A-1 Unit equals the amount that would be distributed with respect to such Class A-1 Unit pursuant to Section 4.7, and (2) second, any remaining Unrealized Gain or Unrealized Loss had been allocated to the Partners at such time pursuant to Section 4.3. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including cash or Cash Equivalents) immediately after the conversion of any Series A Preferred Unit shall be determined by the Managing General Partner using such method of valuation as it may adopt; provided, however, that the Managing General Partner, in arriving at such valuation, must take fully into account the fair market value of the Partnership interests of all Partners at such time and the Managing General Partner shall make such adjustments to such valuation as required by Treasury Regulations Section 1.704-1(b)(2)(iv)(h)(2). The Managing General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines) to arrive at a fair market value, as so adjusted, for individual properties. If, after making the allocations of Unrealized Gain and Unrealized Loss as set forth above in this Section 9.2(d), the Capital Account of each Partner with respect to each Class A-1 Unit received upon the conversion of any Series A Preferred Unit does not equal the amount that would be distributed with respect to such Class A-1 Unit pursuant to Section 4.7, then, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(s)(3), Capital Account balances shall be reallocated between the Partners holding Common Units (other than such Class G Units and Class D Units) and Converting Unitholders holding such Class A-1 Units so as to cause the Capital Account of each Partner holding such Class A-1 Units to equal, on a per unit basis with respect to each such Class A-1 Unit, the amount that would be distributed with respect to such Class A-1 Unit pursuant to Section 4.7. In accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(s)(4), if Capital Account balances are reallocated pursuant to the immediately preceding sentence, the Partnership shall make corrective allocations so as to take into account the reallocation of Capital Account balances as provided in Treasury Regulations Section 1.704- 1(b)(4)(x).
(e) The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Managing General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities that are secured by contributed or distributed property or that are assumed by the Partnership or the Partners), are computed or allocated in order to comply with such Treasury Regulations, the Managing General Partner may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Partner pursuant to Section 11.4 hereof upon the dissolution of the Partnership. The Managing General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and
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Page 5660 the amount of Partnership capital reflected on the Partnership’s balance sheet, as computed for book purposes in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulations Section 1.704-1(b).
(f) The Series A Preferred Units will be treated as a partnership interest in the Partnership which is “convertible equity” within the meaning of the Treasury Regulation §1.721- 2(g)(3), and therefore each holder of a Series A Preferred Unit will be treated as a partner in the Partnership other than with respect to the conversion feature of the Series A Preferred Unit. The initial Capital Account balance in respect of each Series A Preferred Unit shall be the Series A Issue Price. The Capital Account balance of each holder of Series A Preferred Units in respect of its Series A Preferred Units shall not be increased or decreased except as otherwise provided in this Agreement.
9.3 Unitholder List. A list of Unitholders in the Partnership shall be maintained, and Unitholders shall have access to such list at all times (subject to reasonable confidentiality restrictions as may be imposed by the Managing General Partner).
9.4 Records Required by TBOC. During the term of the Partnership and for a period of four years thereafter (but in no event for a period of less than seven years), the Managing General Partner, at the expense of the Partnership, shall maintain in the Partnership’s principal place of business specified in Section 2.3 hereof all records required to be kept pursuant to the TBOC. A Unitholder or an assignee of a Unitholder’s Units, on written request, may examine and copy, in Person or by the Unitholder’s or assignee’s representative, at any reasonable time, and at the Unitholder’s or assignee’s expense, records required to be maintained under the TBOC and such other information regarding the business, affairs and financial condition of the Partnership as is reasonable for the Unitholder or assignee to examine and copy; provided, however, that (i) any information obtained by a Limited Partner from such examination shall be subject to the provisions of Section 6.8, and (ii) well reports, logs and similar records may be kept confidential by the Managing General Partner for limited periods for limited periods of time, not to exceed six months unless the Managing General Partner contemplates the acquisition of additional mineral properties in the vicinity of the operations to which such records pertain in which event such period may be extended for a reasonable period; provided that the Managing General Partner shall permit a Limited Partner to examine all records referred to in this clause (ii) if such Limited Partner executes and delivers to the Partnership an instrument in form and substance reasonably satisfactory to the Managing General Partner in which such Limited Partner agrees not to utilize the information contained in such records or derived from such examination to make an investment in an oil and gas property in which the Partnership has an investment or proposes to make an investment.
9.5 Bank Accounts and Investment of Funds.
(a) All funds of the Partnership shall be deposited in its name in such bank account or accounts as may be designated by the Managing General Partner. The Managing General Partner and any Persons authorized in writing by it to do so shall be authorized to draw checks on the bank accounts of the Partnership. Each bank in which a Partnership account is maintained shall be relieved of any responsibility to inquire into the authority of the Managing
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Page 5661 General Partner to deal with such funds and shall be absolved of all liability with respect to withdrawals from such Partnership account by any Person duly authorized by the Managing General Partner.
(b) The Managing General Partner shall endeavor to invest the Capital Contributions of the Class A Unitholders and Series A Preferred Unitholders as well as other available funds of the Partnership in Cash Equivalents unless and until utilized by the Managing General Partner in the Partnership’s business.
9.6 Information Furnished Annually to Unitholders. Within 120 days after the end of each Fiscal Year, each Unitholder is to be furnished the following information:
(a) Audited financial statements, including a balance sheet and statements of operations, partners’ equity and cash flows prepared in accordance with generally accepted accounting principles; and
(b) A statement of Unit Value, prepared in the manner set forth in the definition of “Unit Value” contained in this Agreement.
9.7 Other Reports. From time to time, at the discretion of the Managing General Partner, the Managing General Partner may prepare such other reports as may be necessary to reflect the financial and economic results of the operations of the Partnership. Such reports may include such information as Capital Contributions received, expenditures, estimated and/or actual income to the Partnership and Distributions to the Partners, together with reports on any other matters deemed significant by the Managing General Partner.
Article X Preparation of Returns; Elections
10.1 Tax Reporting Information. The Managing General Partner shall arrange for the preparation and filing of all necessary information returns for the Partnership and, in addition, all necessary income tax reporting information will be furnished annually by the Managing General Partner to the Unitholders and the Managing General Partner shall provide such annual tax reporting information to Unitholders within three and one-half months after the close of the year to which such tax reporting information relates.
10.2 Elections. The Managing General Partner shall, on the first federal income tax information return filed on behalf of the Partnership formed hereunder, if applicable, make a proper election to deduct intangible drilling and development costs in accordance with the option granted by Section 263(c) of the Code. No election shall be made by the Partnership, the Managing General Partner or any Unitholder to exclude the Partnership or any of the Partners thereof in respect thereto from the application of the provisions of Subchapter K of the Code, or from any similar provisions of state tax laws.
10.3 Basis Adjustments. In the event of the transfer of an interest in the Partnership or in the event of the distribution of Partnership Property to any Partner, the Partnership has elected under Section 754 of the Code to cause the basis of Partnership Property to be adjusted for federal income tax purposes as provided for by Sections 734 and 743 of the Code. To the extent
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Page 5662 an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or Section 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704- 1(b)(2)(iv)(m)(2) or 1.704-4(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Partner in complete liquidation of the Partnership interest in the Partnership, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in accordance with their interests in the Partnership in the event Treasury Regulation Section 1.704- 1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such distribution was made in the event Treasury Regulation Section 1.704- 1(b)(2)(iv)(m)(4) applies.
10.4 Tax Matters Partner; Partnership Representative.
(a) The Managing General Partner is hereby designated the “Tax Matters Partner” (as defined in section 6231(a)(7) of the Code, to the extent applicable for taxable years beginning before January 1, 2018) and as the Partnership Representative of the Partnership for purposes of the Partnership Tax Audit Rules.
(b) For tax periods prior to the time the Partnership Tax Audit Rules become effective with respect to the Partnership:
(i) The Tax Matters Partner shall inform each other Partner of all significant matters that may come to its attention in its capacity as Tax Matters Partner and shall forward to each other Partner copies of all significant written communications it may receive in that capacity within seven (7) Business Days of receiving the same. The Tax Matters Partner shall take such commercially reasonable steps as necessary to ensure that each Partner qualifying as “notice partner” (within the meaning of Section 6231(a)(8) of the Code) is treated as such.
(ii) Any cost or expense incurred by the Tax Matters Partner in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Partnership.
(iii) The Tax Matters Partner shall not enter into any extension of the period of limitations for making assessments on behalf of any of the Partners without first obtaining the consent of the affected Partners. The Tax Matters Partner shall not bind any Partner to a settlement agreement without obtaining the consent of such Partner. Any Partner that enters into a settlement agreement with respect to any “partnership item” (within the meaning of Section 6231(a)(3) of the Code) shall notify the other Partners of such settlement agreement and its terms within ninety (90) days from the date of the settlement.
(iv) No Partner shall file a request pursuant to Section 6227 of the Code for an administrative adjustment of partnership items for any taxable year without first notifying the other Partners and obtaining the consent of the Tax Matters Partner. If the Tax Matters Partner consents to the requested adjustment, the Tax Matters Partner shall file the request for the administrative adjustment on behalf of the Partners. If such
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Page 5663 consent is not obtained within thirty (30) days from such notice, or within the period required to timely file the request for administrative adjustment, if shorter, any Partner, including the Tax Matters Partner, may file a request for administrative adjustment on its own behalf. Any Partner intending to file a petition under Sections 6226 or 6228 of the Code with respect to any item involving the Partnership shall notify the other Partners of such intention and the nature of the contemplated proceeding. In the case where the Tax Matters Partner is the Partner intending to file such petition on behalf of the Partnership, such notice shall be given within a reasonable period of time to allow the other Partners to participate in selecting the forum in which such petition will be filed.
(v) No Partner shall file a notice of inconsistent treatment under Section 6222(b) of the Code with respect to any partnership items for any taxable year without first notifying the Tax Matters Partner.
(vi) The provisions of this Section 10.4(b) shall survive the termination of any Partner’s interest in the Partnership and shall remain binding on the Partnership and the Partners for so long as necessary to resolve with the Service any and all matters regarding the federal income taxation of the Partners with respect to partnership items.
(c) No Person, including the Tax Matters Partner or the Partnership Representative, shall make (or cause the Partnership to make) the election contemplated by Section 1101(g)(4) of the Bipartisan Budget Act of 2015.
(d) For tax periods for which the Partnership Tax Audit Rules become effective with respect to the Partnership, to the maximum extent possible under the Partnership Tax Audit Rules, the Partners intend to preserve and maintain the relative and analogous rights, duties, responsibilities, indemnities, and obligations of the Partners as those provided under Section 10.4(b). Without limiting the foregoing, the Partners intend that:
(i) Rules similar to those described above in Section 10.4(b)(i), 10.4(b)(ii), 10.4(b)(iii), 10.4(b)(iv), and 10.1(b)(v) shall continue to apply, substituting “Partnership Representative” for “Tax Matters Partner,” where applicable.
(ii) If the Service, in connection with an audit governed by the Partnership Tax Audit Rules, proposes an adjustment in the amount of any item of income, gain, loss, deduction, or credit of the Partner, or any Partner’s distributive share thereof, and such adjustment results in an “imputed underpayment” as described in Section 6225(b) of the Partnership Tax Audit Rules (a “Covered Audit Adjustment”), the Partnership Representative shall elect, to the extent that such election is available under the Partnership Tax Audit Rules (taking into account whether the Partnership Representative has received any needed information on a timely basis from the Partners), to apply the alternative method provided by Section 6226 of the Partnership Tax Audit Rules (the “Alternative Method”). To the extent the Alternative Method is not elected with respect to a Covered Audit Adjustment, the Partnership Representative shall use commercially reasonable efforts to (i) make any modifications available under Section 6225(c)(3), (4), and (5) of the Partnership Tax Audit Rules to the extent that
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Page 5664 such modifications are available (taking into account whether the Partnership Representative has received any needed information on a timely basis from the Partners) and would reduce any Partnership Level Taxes payable by the Partnership with respect to the Covered Audit Adjustment, and (ii) if requested by a Partner, provide to such Partner information allowing such Partner to file an amended U.S. federal income tax return, as described in Section 6225(c)(2) of the Partnership Tax Audit Rules, to the extent such amended return and payment of any related federal income taxes would reduce any Partnership Level Taxes payable by the Partnership with respect to the Covered Audit Adjustment (after taking into account any modifications described in clause (i) of this Section 10.4(d)(ii). Similar procedures shall be followed in connection with any state or local income tax audit that incorporates rules similar to the Partnership Tax Audit Rules.
(iii) Notwithstanding any provision of this Agreement to the contrary, any taxes, penalties, and interest payable under the Partnership Tax Audit Rules by the Partnership (“Partnership Level Taxes”) shall be treated as attributable to the Partners (or former Partners, as applicable), and the Managing General Partner shall allocate the burden of any such Partnership Level Taxes to those Partners (or former Partners, as applicable) to whom such amounts are reasonably attributable (whether as a result of their status, actions, inactions, or otherwise), taking into account the effect of any modifications described in Section 10.4(d)(ii) that reduce the amount of Partnership Level Taxes. All Partnership Level Taxes allocated to a Partner (or former Partner), at the option of the Managing General Partner, shall (i) be promptly paid to the Partnership by such Partner (or former Partner) (“Option A”) or (ii) be paid by reducing the amount of the current or next succeeding distribution or distributions which would otherwise have been made to such Partner pursuant to Section 4.7, and, if such distributions are not sufficient for that purpose, by reducing the proceeds of liquidation otherwise payable to such Partner pursuant to Section 11.4 (“Option B”). If the Managing General Partner selects Option A, the Partnership’s payment of the Partnership Level Taxes allocated to the applicable Partner (or former Partner, as applicable) shall be characterized in a manner as if the payment by the Partnership were a distribution to such Partner (or former Partner, as applicable) and as if the payment by such Partner (or former Partner, as applicable) to the Partnership were a Capital Contribution for federal income tax purposes; provided, however, that such payments shall not affect the Capital Accounts of, any other contributions to be made by, or the distributions and allocations to be made to the applicable Partners (or former Partners, as applicable) under this Agreement. If the Managing General Partner selects Option B, the applicable Partner shall for all purposes of this Agreement be treated as having received a distribution of the amount of its allocable share of the Partnership Level Taxes at the time such Partnership Level Taxes are paid by the Partnership. To the fullest extent permitted by Law, each Partner (whether or not such Partner becomes a former Partner after the date of this Agreement) hereby agrees to indemnify and hold harmless the Partnership and the other Partners (including other former Partners, as applicable) from and against any liability for Partnership Level Taxes allocated to such Partner (including, without limitation, with respect to any former Partner, any Partnership Level Taxes allocated to such former Partner that are attributable to taxable periods (or portions thereof) during which such former Partner held a Partnership
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Page 5665 interest). For the avoidance of doubt, notwithstanding anything to the contrary in this Agreement, the liabilities and obligations of each Partner under this Section 10.4(d)(iii) shall survive any transfer of Partnership interests by such Partner or such Partner ceasing to be a Partner under this Agreement.
10.5 Other Elections. All other elections authorized under the Code or regulations may be made by the Managing General Partner, but only to the extent such elections are not inconsistent with Sections 10.2 and 10.3 of this Agreement or the economic sharing arrangement of the Partners as set forth in Article IV and Section 11.4 hereof.
Article XI Duration and Termination
11.1 Death, Insanity or Bankruptcy of Unitholder. The Partnership shall not terminate by reason of the death of a Unitholder, but the executor or administrator of such Unitholder shall have all the rights of a Unitholder for the purpose of settling his estate and such power as such Unitholder had to constitute his assignee a substituted Unitholder. The estate of a deceased Unitholder shall be liable for his obligations as a Unitholder. Neither the judicially declared insanity or bankruptcy of any Unitholder nor the transfer of a Unitholder’s Units shall work a dissolution or termination of the Partnership.
11.2 Events of Dissolution. The Partnership shall be dissolved by:
(a) The affirmative vote of Unitholders holding more than 80% of the Units then held by Unitholders to dissolve and wind up the affairs of the Partnership at a meeting called and held as set forth in Article VI; or
(b) Except as otherwise provided herein, the occurrence of any other event that, under the TBOC, causes the dissolution of a limited partnership.
11.3 Reconstitution Following Dissolution. Upon the dissolution of the Partnership under Section 11.2 above as a result of an event of withdrawal by the Managing General Partner, the Partnership may be reconstituted and its business continued without winding up of the Partnership and liquidation of its assets if following such event of withdrawal there remains a Managing General Partner and such Managing General Partner carries on the business of the Partnership.
11.4 Winding Up and Liquidation.
(a) If the Partnership is dissolved and is not reconstituted under Section 11.3 above, it shall be wound up and the assets shall be sold and proceeds distributed in the order provided herein. The Managing General Partner shall be appointed as the liquidating agent for the winding up of Partnership affairs and the liquidation and distribution of the assets of the Partnership, whether or not it shall have withdrawn or been removed as Managing General Partner in connection with such dissolution, unless (i) it shall have supplied to the Partnership a suitable substitute liquidating agent, (ii) a court of competent jurisdiction has ordered that the Managing General Partner not serve as liquidating agent or has appointed another liquidating agent for the Partnership, or (iii) applicable law prohibits the Managing General Partner from
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Page 5666 acting as liquidating agent. Until a certificate of cancellation is filed for the Partnership under Texas law, the Managing General Partner or other liquidating agent shall have authority in the name and on behalf of the Partnership to prosecute and defend civil, criminal or administrative suits, to settle and close the Partnership’s business, and to sell or dispose of Partnership Property at a price deemed reasonable by the Managing General Partner or other liquidating agent, whether in cash, securities, other property or any other form, or any combination thereof, and the proceeds thereof as well as all other cash and properties of the Partnership shall be distributed as follows:
(i) To the payment and discharge or the establishment of reserves to discharge all of the Partnership’s debts and liabilities to Persons other than the Partners;
(ii) To the setting up of any reserves which the Managing General Partner may deem necessary for contingent or unforeseen liabilities or obligations of the Partnership;
(iii) To the satisfaction of all debts, including obligations of the Partnership to the Partners; and if the proceeds are insufficient to pay in full all such obligations, then pro rata to each Partner as the amount of the Partnership’s obligation to such Partner bears to the obligations due all Partners;
(iv) As promptly as practicable after dissolution, the Managing General Partner or other liquidating agent shall (i) determine the Fair Market Value (the “Liquidation FMV”) of the Partnership’s remaining assets (the “Liquidation Assets”), (ii) sell the remaining properties and other assets of the Partnership for cash as promptly as is practical while using reasonable best efforts to obtain the best price therefore; provided, however, the liquidator may retain properties for distribution in kind, and (iii) deliver to each Partner a statement (the “Liquidation Statement”) setting forth the Liquidation FMV and each Partner’s Capital Account balance (determined in accordance with this Section 11.4(a)(iv)), which Liquidation Statement shall be final and binding on all Partners. Notwithstanding anything to the contrary in this Agreement, in the year in which the Partnership dissolves and winds up pursuant to Article XI and all subsequent years up to and including the year in which the Partnership’s existence terminates, all items of income, gain, loss and deduction of the Company, including Simulated Gain, Simulated Loss and Simulated Depletion, shall be allocated among the Partners in a manner reasonably determined by the Managing General Partner as shall cause to the nearest extent possible the Capital Account of each Partner (after taking into account such Partner’s share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, if any) to equal the amount that would be distributed to such Partner pursuant to Section 4.7); and
(v) After satisfying all the Partnership’s liabilities and obligations pursuant to Section 11.4(a)(i) through (iii), the Managing General Partner or other liquidating agent shall promptly distribute the Partnership’s Liquidation Assets to the Partners in accordance with, and to the extent of, the positive balances in the Partners’ Capital Accounts, as determined after taking all Capital Account adjustments (other than those made by reason of distributions pursuant to this Section 11.4(a)(v)) for the taxable
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Page 5667 period of the Partnership during which the liquidation of the Partnership occurs (with such date of occurrence being determined pursuant to Treasury Regulation Section 1.704- 1(b)(2)(ii)(g)), and such distribution shall be made by the end of such taxable period (or, if later, within 90 days after said date of such occurrence). If property is distributed in kind, the Partner receiving the property shall be deemed for purposes of this Section 11.4(a) to have received cash equal to the Fair Market Value of such property. The Distribution of cash and/or property to a Partner in accordance with the provisions of this Section 11.4 constitutes a complete return to the Partner of its Capital Contributions and a complete Distribution to the Partner of its interest in the Partnership and all the Partnership’s property and constitutes a compromise to which all Partners have consented within the meaning of the TBOC. To the extent that a Partner returns funds to the Partnership, it has no claim against any other Partner for those funds.
11.5 No Recourse if Assets Insufficient. A Unitholder shall look solely to the assets of the Partnership for the return of his Capital Contribution, and if the Partnership Property remaining after the payment or discharge of the debts and liabilities of the Partnership to third- party creditors and to Partners is insufficient to return his Capital Contributions, he shall have no recourse against any Partner. If any Unitholder has a deficit balance in his Capital Account (after giving effect to all contributions, distributions and allocations for all Fiscal Years, including the Fiscal Year during which such liquidation occurs), such Partner shall have no obligation to make any contribution to the capital of the Partnership with respect to such deficit, and such deficit shall not be considered a debt owed to the Partnership or to any other person for any purpose whatsoever.
Article XII Amendment
12.1 Amendment by Managing General Partner. The Managing General Partner may, without prior notice to or consent of any Unitholder, amend this Agreement for: (i) amendments changing the name of the Partnership and/or location of its principal place of business, as may be required by any jurisdiction in which the Partnership owns property or transacts business, (ii) amendments reflecting the admission of additional Partners (and the rights, powers and duties afforded to such Partners) admitted in accordance this Agreement, and (iii) any change that is necessary or advisable in the opinion of the Managing General Partner to qualify the Partnership as a limited partnership or a partnership in which the Unitholders have limited liability under the laws of any state or to insure that the Partnership will not be treated as an association taxable as a corporation or as a publicly traded partnership for federal income tax purposes. Written notice of any amendment to this Agreement effected pursuant to this Section 12.1 shall be sent to all Unitholders by the Managing General Partner within a reasonable period of time.
12.2 Amendment Procedures. Except as provided in Sections 3.6(f), 5.2 and 12.1, all amendments to this Agreement must be in writing, signed by the Managing General Partner, and be approved by Unanimous Consent of the Board and the holders of a majority of the Voting Units; provided, that any such amendment of this Agreement that materially and disproportionately adversely affects a Unitholder or group of Unitholders as compared to the
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Page 5668 impact of such amendment on the other Unitholders shall not be effective against such Unitholders without their consent.
Article XIII Miscellaneous
13.1 Communications. Except as otherwise expressly provided in this Agreement, any election, approval, consent, objection, certification, request, waiver, notice or related document required or permitted to be made or given pursuant to any provisions of this Agreement (collectively, “Communications”), shall be deemed duly made or given, as the case may be, in writing, signed by or on behalf of the Person making or giving the same, and shall be deemed given, received and dated when either personally delivered (with receipt acknowledged by the recipient), three (3) Business Days after being deposited in the U.S. mail, first class, postage prepaid, one (1) day after being sent by facsimile (which shall be confirmed by a writing deposited in the U.S. Mail, first class, postage prepaid, or recognized overnight courier for next day delivery) or by recognized overnight courier for next day delivery, addressed to the Person or Persons to whom such Communications are to be made or given at their respective addresses, in the case of any Unitholder, as reflected in the Partnership’s records and, in the case of the Managing General Partner or the Partnership at the office of the Partnership specified in Section 2.3 of this Agreement, or, in any case, at such other address as shall have been set forth in a Communication sent pursuant to the provisions of this Section 13.1, provided, however, that each Communication of change of address shall be effective only upon actual receipt, or refusal of delivery, by or on behalf of the addressee thereof.
13.2 Entire Agreement; Applicable Law; Effect. This Agreement contains the entire agreement by and among the parties and supersedes any prior understandings and agreements among them respecting the subject hereof, shall be construed, enforced and governed in conformity with the laws of the State of Texas, without giving effect to principles of conflicts of law, and shall be binding upon the parties hereto, their successors, heirs, devisees, permitted assigns, legal representatives, executors and administrators, but shall not be deemed for the benefit of creditors or any other Persons.
13.3 Modification; Waiver or Termination. Except as otherwise expressly provided in this Agreement, no modification, waiver, or termination of this Agreement, or any part hereof, shall be effective unless made in writing signed by the party or parties sought to be bound thereby and no failure to pursue or elect any remedy shall constitute a waiver of any default under or breach of any provision of this Agreement nor shall any waiver of any default under or breach of any provision of this Agreement be deemed to be a waiver of any other subsequent similar or different default under or breach of such or any other provision or of any election of remedies available in connection therewith. Receipt by any party of any money or other consideration due under this Agreement, with or without knowledge of any breach or default, shall not constitute a waiver of such breach or default or of any provision of this Agreement.
13.4 Counterparts. This Agreement may be executed in any number of counterparts and each duplicate counterpart shall constitute an original, any one of which may be introduced in evidence or used for any other purposes without the production of its duplicate counterpart. Moreover, notwithstanding that any of the parties did not execute the same counterpart, each of
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Page 5669 the counterparts shall, for all purposes, be deemed an original, and all such counterparts shall constitute one and the same instrument binding on all of the parties hereto.
13.5 Severability. In case any one or more of the provisions contained in this Agreement shall be invalid or unenforceable in any respect the validity and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute for such invalid or unenforceable provision in light of the tenor of this Agreement, and, upon so agreeing, shall incorporate such substitute provision in this Agreement.
13.6 Section Headings. Section titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference, and shall not be construed in any way to define, limit, extend or describe the scope of any of the provisions hereof.
13.7 Word Meanings. The words such as “herein”, “hereinafter”, “hereof”, and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. The singular shall include the plural and the masculine gender shall include the feminine and neuter, and the disjunctive shall include the conjunctive and vice versa, unless the context otherwise requires.
13.8 Further Actions. Each of the Partners shall hereafter execute and deliver such further instruments and do such further acts and things as may be reasonably required or useful to carry out the intent and purpose of this Agreement and as are not inconsistent with the provisions hereof.
13.9 No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement or any document, agreement, or instrument delivered contemporaneously herewith, and notwithstanding the fact that any Partner may be a partnership or limited partnership, each Partner hereto, by its acceptance of the benefits of this Agreement, covenants, agrees and acknowledges that no Persons other than the Partners shall have any obligation hereunder and that it has no rights of recovery hereunder against, and no recourse hereunder or under any documents, agreements, or instruments delivered contemporaneously herewith or in respect of any oral representations made or alleged to be made in connection herewith or therewith shall be had against, any former, current or future director, officer, agent, Affiliate, manager, assignee, incorporator, controlling Person, fiduciary, representative or employee of any Partner (or any of their successor or permitted assignees), against any former, current, or future general or limited partner, manager, stockholder or member of any Partner (or any of their successors or permitted assignees) or any Affiliate thereof or against any former, current or future director, officer, agent, employee, Affiliate, manager, assignee, incorporator, controlling Person, fiduciary, representative, general or limited partner, stockholder, manager or member of any of the foregoing, but in each case not including the Partners (each, but excluding for the avoidance of doubt, the Partners, a “Partner Affiliate”), whether by or through attempted piercing of the corporate veil, by or through a claim (whether in tort, contract or otherwise) by or on behalf of such party against the Partner Affiliates, by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, or otherwise; it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on, or otherwise be incurred by any Partner Affiliate, as such, for any obligations of
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Page 5670 the applicable party under this Agreement or the transactions contemplated hereby, under any documents or instruments delivered contemporaneously herewith, in respect of any oral representations made or alleged to be made in connection herewith or therewith, or for any claim (whether in tort, contract or otherwise) based on, in respect of, or by reason of, such obligations or their creation.
13.10 Royalties Vehicle. The Partnership and Blackstone shall use commercially reasonable efforts to negotiate and execute on a “royalties vehicle” on substantially similar terms as those set forth on Annex B and such other mutually agreeable terms within a commercially reasonable period of time after the Effective Date.
Article XIV Disputes
14.1 Consent to Jurisdiction and Service of Process; Appointment of Agent for Service of Process. EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY UNITED STATES DISTRICT COURT LOCATED IN DALLAS, TEXAS AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER SUCH ACTIONS OR PROCEEDINGS ARE BASED IN STATUTE, TORT, CONTRACT OR OTHERWISE), SHALL BE LITIGATED IN SUCH COURT. EACH PARTY (i) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF SUCH COURT FOR SUCH ACTIONS OR PROCEEDINGS, (ii) AGREES THAT IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM SUCH COURT, AND (iii) AGREES THAT IT WILL NOT BRING ANY SUCH ACTION OR PROCEEDING IN ANY COURT OTHER THAN SUCH COURT. EACH PARTY ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE AND IRREVOCABLE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY NON- APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTIONS OR PROCEEDINGS. A COPY OF ANY SERVICE OF PROCESS SERVED UPON THE PARTIES SHALL BE MAILED BY REGISTERED MAIL TO THE RESPECTIVE PARTY EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY A PARTY REFUSES TO ACCEPT SERVICE, EACH PARTY AGREES THAT SERVICE UPON THE APPROPRIATE PARTY BY REGISTERED MAIL SHALL CONSTITUTE SUFFICIENT SERVICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
14.2 Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
65 EXH. 1 - PAGE 71 5673
Page 5671 DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. EACH PARTY ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL- ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAYBE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
66 EXH. 1 - PAGE 72 5674
Page 5672 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first written above.
Series A Preferred Unitholders:
PRIMEXX ENERGY OPPORTUNITY FUND, LP
By: Wena CF LULL General P er
By: Name: Its: Nisa.
LAS ROSAS CAPITAL LLC
By: Name Its:
Managing General Partner: PRIMEXX ENERGY CORPORATION
By Name Its:
Class A Unitholders:
B.F. Partners, LP.
By: Name: Its:
HOWARD M. COHEN
MARIJORY H. COHEN
GARY EDIDIN
[Signature Page to the Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 73 5675
Page 5673 IN WITNESS WHEREOPF, the undersigned have executed this Agreement effective as of the day of July, 2016.
Series A Preferred Unitholder:
PRIMEXX ENERGY OPPORTUNITY FUND, L.P.
By: General Partner
By: Name: Its:
Managing General Partner: PRIMEXX ENERGY CORPORATION
By: Name: Thomas Fagau() Its: President
Class A Unitholders:
B.F. Partners, L.P.
By: Name: Its:
HOWARD M. COHEN
MARJORY H. COHEN
GARY EDIDIN
[Signature Page to the Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 74 5676
Page 5674 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first written above.
Series A Preferred Unitholders:
PRIMEXX ENERGY OPPORTUNITY FUND, LP
By: General Partner
By: Name: Its:
LAS ROSAS CAPITAL LLC
By: Name : Its:
Managing General Partner: PRIMEXX ENERGY CORPORATION
By: Name Its :
Class A Unitholders:
B-F. Partners, L.P.
By: Name: Its: Davas a BAtt Mgnt,Bayér, Vise' Pres. Ine., General Partner
HOWARD M. COHEN
MARJORY H. COHEN
GARY EDIDIN
[Signature Page to the Third Amended and Restated Limited Parmership Agreement]
EXH. 1 - PAGE 75 5677
Page 5675 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first written above.
Series A Preferred Unitholders:
PRIMEXX ENERGY OPPORTUNITY FUND, LP
By: General Partner
By: Name: Its:
LAS ROSAS CAPITAL LLC
By: Name: Its:
Managing General Partner:
PRIMEXX ENERGY CORPORATION
By: Name: Its:
Class A Unitholders:
B.F, Partners, L.P.
By: Name: Its:
HOWARD M. COHEN
MARIO RY C EN CTL +
GARY EDIDIN
[Signature Page to the Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 76 5678
Page 5676 we
GARY EXEMPY /RRUST
By: Name: MARE Its: Trustee
GARY ER DIN FAM BY-TRUST
By: Name: Its: Trustee
WM. A. FRIEDLANDER REV. TRUST DATED 2/20/98
By: Name: Its: Trustee
DIANE GILBERT
GROH FAMILY TRUST
By: Name: Its: Trustee
GUILLERMO G, MARMOL
SPERSIBS, LP.
By: Name: Its:
HELEN SCHLESINGER HELEN SCHLESINGER TRUST
By: Name: Its: Trustee
[Signature Page to the Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 77 5679
Page 5677 GARY EDIDIN EXEMPT TRUST
By: Na ne: Its: Trustee
GA RY EDIDIN FAMILY TRUST
By: Name: Its: Trustee
WM. A. FR EDLANDER REV. TRUST DATED 2/20/98
By: Name: Its: Trustee
DIANE GILBERT
GROH FAMILY TRUST
By: Name: Its: Trustee
GUILLERMO G. MARMOL
SPERSIBS, L.P.
By: Name: Its:
HELEN SCHLESINGER HELEN SCHLESINGER TRUST
By: Name: Its: Trustee
[Signature Page to the Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 78 5680
Page 5678 GARY EDIDIN EXEMPT TRUST
By: Name: Its: Trustee
GARY EDIDIN FAMILY TRUST
By: Name: Its: Trustee
WM. A. FRIEDLANDER REV. TRUST DATED 2/20/98
By: Name: Its: mustee
DIANE GILBERT
GROH FAMILY TRUST
By: Name: Its: Trustee
GUILLERMO G. MARMOL
SPERSIBS, L.P.
By: Name: Its:
HELEN SCHLESINGER HELEN SCHLESINGER TRUST
By: Name: Its: Trustee
[Signature Page to the Third Amended and Restated Limited Parmership Agreement]
EXH. 1 - PAGE 79 5681
Page 5679 GARY EDIDIN EXEMPT TRUST
By: Name: Its: Trustee
GARY EDIDIN FAMILY TRUST
By: Name: Its: Trustee
WM. A. FRIEDLANDER REV. TRUST DATED 2/20/98
By: Name: Its: Trustee
DIANE GILBERT
GROH FAMILY TRUST
By: Name: Trustee
RMO G. MARMOL
SPERSIBS, L.P
By: Name: Its:
HELEN SCHLESINGER
HELEN SCHLESINGER TRUST
By: Name: Its: Trustee
[Signature Page to the Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 80 5682
Page 5680 Series B Preferred Unitholder:
BPP HOLDCO LLC
By: Name: Angelo Acconcia Title: President
Class B Unitholders:
IN AUL
SANTOM, INC.
By: Name: Its:
WYNNE FAMILY TRUST
By: Name: Its: Trustee
BOBBY JABAGGETT GOLD PRIME 2011 TRUST
By: Name: Its: Trustee
Class D Unitholders:
ROBERT B. HOLLAND III
JAMES A. JEFFS
{Signature Page to the Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 81 5683
Page 5681 Series B Preferred Unitholder:
BPP HOLDCO LLC
By: Name: Angelo Acconcia Title: President
Class B Unitholders:
KEVIN T. AUL
SANTOM, INC.
By: Name: Its:
FAMILY TRUST
By: Name: Its: Trustee
BOBBY J. BAGGETT GOLD PRIME 2011 TRUST
By: Name: Its: Trustee
Class D Unitholders:
ROBERT B. HOLLAND
JAMES A. JEFFS
Amended and Restated Limited Partnership Agreement] [Signature Page to the Third
EXH. 1 - PAGE 82 5684
Page 5682 Series B Preferred Unitholder:
BPP HOLDCO LLC
By: Name: Angelo/Acconcia Its: UPresjdgnt
[Signature Page to Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 83 5685
Page 5683 Class D Unitholder:
ME ROBERT B. HOLLAND III
[Signature Page to Third Amended and Restated Limited Partnership Agreement] EXH. 1 - PAGE 84 5686
Page 5684 Class G Unitholder:
4 - THOMAS H. FAGADAU
[Signature Page to the Third Amended and Restated Limited Partnership Agreement]
EXH. 1 - PAGE 85 5687
Page 5685 Exhibit A
Schedule of Partners
Series A Series B Class A Class B Class C Class D Class E Class F Class G Member Preferred Preferred Units Units Units Units Units Units Units Units Units BPP HoldCo LLC
c/o The Blackstone Group 345 Park Avenue, 31st Floor New York, NY 10154 Attention: Angelo Acconcia Telecopy: 212-201-2874 Email: acconcia@blackstone.com - 186,006 - - - - - 186,006 - and with a copy to:
Kirkland & Ellis LLP 600 Travis Street, Suite 3300 Houston, Texas 77002 Attention: Rhett Van Syoc Telecopy: 713-835-3601 Email: rhett.vansyoc@kirkland.com - Primexx Energy Opportunity Fund, LP 64,214.35 - - - - - - - - BF Partners, L.P. - - 1,746.92 - - - - - - Howard M. Cohen 4.50 - 42.53 - - - - - - Marjory H. Cohen 4.50 - 42.53 - - - - - - Gary Edidin - - 1,191.77 - - - - - - Gary Edidin Exempt Trust - - 339.99 - - - - - - Gary Edidin Family Trust - - 850.88 - - - - -
Exhibit A to the Third Amended and Restated Limited Liability EXH. 1 - Company PAGE 86 Agreement of Primexx Energy Partners, Ltd. 5688
Page 5686 Series A Series B Class A Class B Class C Class D Class E Class F Class G Member Preferred Preferred Units Units Units Units Units Units Units Units Units - WM. A. Friedlander Rev. Tr. Dtd 2/20/98 - - 1,564.94 - - - - - - Diane Gilbert 12.89 - 31.29 - - - - - - Groh Family Trust 11.00 - 55.62 - - - - - - Guillermo G. Marmol - - 489.87 - - - - - - Spersibs, LP - - 219.54 - - - - - - Helen Schlensinger - - 45.74 - - - - - - Helen Schlensinger Trust - - 45.74 - - - - - - Las Rosas Capital LLC 1,751.46 - - - - - - - - Kevin T. Aul - - - 6,169.76 - - - - - Santom Inc. - - - 81,799.08 - - - - - Wynne Family Trust - - - 18,363.06 - - - - - Bobby J. Baggett - - - 1,762.14 - - - - - Gold Prime 2011 Trust - - - 834.69 - - - - - - - - - - - - Robert Holland 1,285 - - - - - - - - Jim Jeffs 1,285 - - - - - - - - 30,000 Thomas H. Fagadau Totals 65,998.70 186,006 6,667.36 108,928.73 - 2,570 - 186,006 30,000
Exhibit A to the Third Amended and Restated Limited Liability EXH. 1 - Company PAGE 87 Agreement of Primexx Energy Partners, Ltd. 5689
Page 5687 Exhibit B Definitions
“Acceptance Notice” has the meaning set forth in Section 6.5(a).
“Additional Capital Requirement” has the meaning set forth in Section 3.7.
“Additional Partnership Interests” has the meaning set forth in Section 5.2(b).
“Adjusted Capital Account” means the Capital Account maintained for a Partner at the close of any Fiscal Year, determined by (i) crediting to such Capital Account the amount of such Partner’s Deficit Restoration Obligation at that time; and (ii) charging to such Capital Account (x) any adjustments described in Section 1.704-1(b)(2)(ii)(d)(4) of the Treasury Regulations that, at such time, are reasonably expected to be made to such Capital Account, (y) any allocations described in Section 1.704-1(b)(2)(ii)( d)(5) of the Treasury Regulations that, at such time, are reasonably expected to be made to such Partner, and (z) any distributions described in Section 1.704- 1(b)(2)(ii)(d)(6) of the Treasury Regulations that, at such time, are reasonably expected to be made to such Partner.
“Affiliate” means any Person directly or indirectly controlling, controlled by, or under common control with, such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and under “common control with”) when used with respect to any specified Person shall mean the power to direct or cause the direction of the actions, management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and whether or not such power is actually exercised. The spouse of a Person shall not be deemed an Affiliate of that Person merely by reason of being his or her spouse. Any Person who is a director of the Managing General Partner shall be an Affiliate of the Managing General Partner.
“Aggregate Contributions Amount” means, with respect to a Partner as of a given time of determination, the aggregate amount of Capital Contributions (excluding, with respect to this definition, deemed contributions as described in Section 3.6(c)(ii)(E) in connection with the issuance of Series B Units issued as a Payment in Kind pursuant to Section 3.6(c)(ii)(C)) made to the Partnership by such Partner from the Effective Date through such time of determination.
“Aggregate Vested Management Interests Percentage” means the quotient (expressed as a percentage) obtained by dividing (x) the number of Vested Management Interest by (y) the total number of Management Interests authorized at the time of determination.
“Agreed Duties” has the meaning set forth in Section 5.9(a).
“Agreement” means this Third Amended and Restated Limited Partnership Agreement, as originally executed and as subsequently amended from time to time.
“Alternative Method” has the meaning set forth in Section 10.4(d).
“AMI Area” means the geographic area outlined on Exhibit E.
Exh. B-1 EXH. 1 - PAGE 88 5690
Page 5688 “Appraisal” means a written appraisal of all Partnership Properties by an Independent Expert in accordance with generally accepted industry practices, which Appraisal shall set forth the then Unit Value of the Partnership. The Appraisal shall set forth all material assumptions underlying the Appraisal.
“Available Cash” means as of any date of determination with respect to a quarterly cash distribution to be made to the Unitholders the following (as reasonably determined by the Board), without duplication:
(a) all revenue and other cash or Cash Equivalent amounts collected or received by the Partnership from any and all sources (other than Partner Capital Contributions) as of the end of the Fiscal Quarter preceding the Fiscal Quarter in which the distribution is to be made, less
(b) as of the end of the Fiscal Quarter preceding the Fiscal Quarter in which the distribution is to be made, the costs and expenses paid by the Partnership and amounts reserved for payment of costs, and expenses paid by the Partnership and amounts reserved for payment of costs, including capital costs and operating costs and expenses (including cost and administrative expenses, product taxes and other applicable taxes and similar amounts, debt service, including, but not limited to reserves required to comply with covenants or limitations imposed by the Partnership’s commercial banks, or other reasonable reserves determined in good faith by the Managing General Partner).
“Award Agreement” has the meaning set forth in Section 5.3(a).
“Bankrupt Partner” means any Partner:
(a) that (i) makes a general assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceeding; (iv) files a petition or answer in a court of competent jurisdiction seeking for such Partner a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any applicable law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Partner in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents, or acquiesces to the appointment of a trustee, receiver, or liquidator of such Partner or of all or any substantial part of such Partner’s assets or properties; or
(b) against which a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any law has been commenced and ninety (90) days have expired without dismissal thereof or with respect to which, without such Partner’s consent or acquiescence, a trustee, receiver, or liquidator of such Partner or of all or any substantial part of such Partner’s properties has been appointed and sixty (60) days have expired without such appointments having been vacated or stayed, or sixty (60) days have expired after the date of expiration of a stay, if the appointment has not previously been vacated.
“BCP/BEP Funds” has the meaning set forth in Section 5.11(b).
“Blackstone” has the meaning set forth in the recitals.
Exh. B-2 EXH. 1 - PAGE 89 5691
Page 5689 “Blackstone Commitment” has the meaning set forth in the recitals.
“Blackstone Directors” has the meaning set forth in the Managing General Partner’s Bylaws.
“Blackstone Investors” has the meaning set forth in the recitals.
“Board” means, if the Managing General Partner is managed by a board of managers or directors, such board of managers or directors of the Managing General Partner.
“Budget” has the meaning set forth in Section 5.22.
“Business Day” means Monday through Friday of each week except that a legal holiday recognized as such by the government of the United States of America or the State of Texas shall not be regarded as a Business Day.
“Call Amount” means the amount of requested additional capital pursuant to and in accordance with Section 3.7.
“Capital Account” means the Capital Account maintained for each Partner on the books of the Partnership pursuant to Section 9.2 of this Agreement.
“Capital Contributions” means, with respect to each Partner, the amount of money and the fair market value of any property actually contributed to the Partnership by such Partner as a capital contribution pursuant to the provisions of this Agreement.
“Cash Equivalents” means:
(i) marketable obligations maturing one year or less from the date of acquisition thereof and issued, fully guaranteed or insured, by the United States Government or any agency or instrumentality thereof;
(ii) negotiable certificates of deposit issued by any domestic bank or trust company or national banking association which is a member of the Federal Reserve System and has a capital and surplus of at least fifty million dollars;
(iii) money market accounts of investment companies registered under the Investment Companies Act of 1940 with assets in excess of two billion dollars;
(iv) commercial paper maturing one year or less from the date of issuance which, at the time of acquisition by the Partnership, is accorded one of the two highest ratings by Standard & Poor’s Corporation, Moody’s Investors Services, Inc. or other nationally recognized credit rating agencies of similar standing; and
(v) repurchase agreements fully collateralized by obligations specified in (i) above.
“Cause” has the meaning set forth in the Class G Incentive Plan.
Exh. B-3 EXH. 1 - PAGE 90 5692
Page 5690 “Class A Unit” means a Unit held by a Class A Limited Partner which has the rights, preferences and privileges set forth in this Agreement. The initial value of a Class A Unit was $500.00.
“Class A Unitholder” means a Limited Partner holding Class A Units, in the number set forth on Exhibit A hereto (as the same may be amended from time to time) and a transferee of a Class A Unit who has not been admitted into the Partnership as a “Partner” pursuant to Section 6.2(f). References to Class A Unitholders shall not include Class A-1 Unitholders.
“Class A-1 Unit” means a Unit held by a Class A-1 Limited Partner which has the rights, preferences and privileges set forth in this Agreement. Series A Preferred Units are convertible into Class A-1 Units.
“Class A-1 Unitholder” means a Limited Partner holding Class A-1 Units, in the number set forth on Exhibit A hereto (as the same may be amended from time to time) and a transferee of a Class A-1 Unit who has not been admitted into the Partnership as a “Partner” pursuant to Section 6.2(f). References to Class A-1 Unitholder shall not include Class A Unitholders.
“Class B Unit” means a Unit held by a Class B Limited Partner which has the rights, preferences and privileges set forth in this Agreement.
“Class B Unitholder” means a Limited Partner holding Class B Units, in the number set forth on Exhibit A hereto (as the same may be amended from time to time) and a transferee of a Class B Unit who has not been admitted into the Partnership as a “Partner” pursuant to Section 6.2(f).
“Class C Unit” means a Unit held by a Class C Limited Partner which has the rights, preferences and privileges set forth in this Agreement.
“Class C Unitholder” means a Limited Partner holding Class C Units in the number set forth on Exhibit A hereto (as the same may be amended from time to time) and a transferee of a Class C Unit who has not been admitted into this Partnership as a “Partner” pursuant to Section 6.2(f).
“Class D Unit” means a non-voting Unit held by a Class D Limited Partner which has the rights, preferences and privileges set forth in this Agreement.
“Class D Unitholder” means a Limited Partner holding Class D Units in the number set forth on Exhibit A hereto (as the same may be amended from time to time) and a transferee of a Class D Unit who has not been admitted into this Partnership as a “Partner” pursuant to Section 6.2(f).
“Class E Unit” means a Unit held by a Class E Limited Partner which has the rights, preferences and privileges set forth in this Agreement.
“Class E Unitholder” means a Limited Partner holding Class E Units in the number set forth on Exhibit A hereto (as the same may be amended from time to time) and a transferee of a Class E Unit who has not been admitted into this Partnership as a “Partner” pursuant to Section 6.2(f).
“Class F Unit” means a Unit held by a Class F Limited Partner which has the rights, preferences and privileges set forth in this Agreement.
Exh. B-4 EXH. 1 - PAGE 91 5693
Page 5691 “Class F Unitholder” means a Limited Partner holding Class F Units, in the number set forth on Exhibit A hereto (as the same may be amended from time to time) and a transferee of a Class F Unit who has not been admitted into the Partnership as a “Partner” pursuant to Section 6.2(f).
“Class G Incentive Plan” means the plan set forth on Exhibit F and referred to in Section 5.24.
“Class G Unit” means a Unit held by a Class G Limited Partner which has the rights, preferences and privileges set forth in this Agreement.
“Class G Unitholder” means a Limited Partner holding Class G Units in the number set forth on Exhibit A hereto (as the same may be amended from time to time) and a transferee of a Class G Unit who has not been admitted into this Partnership as a “Partner” pursuant to Section 6.2(f).
“Code” means the Internal Revenue Code of 1986, as it may be amended (26 U.S.C.). Section references to the Code are to the section of the Code as of the date of this Agreement. All such references to the Code and sections thereof are deemed to include appropriate portions of any subsequently enacted internal revenue law, code, act or similar legislation dealing with the same subject matter as is contained in the Code.
“Common Unit” means, a Partnership interest representing a fractional part of the Partnership interests of all Limited Partners, and having the rights and obligations specified with respect to Common Units in this Agreement including Class A, Class A-1, Class B, Class C, Class D, Class E, Class F and Class G Units. The term “Common Unit” does not refer to, or include, any Series A Preferred Unit prior to the conversion of such Series A Preferred Unit into a Common Unit pursuant to the terms hereon or any Series B Preferred Unit.
“Common Unitholders” means, holders of a Class A Units, Class A-1 Units, Class B Units, Class C Units, Class D Units, Class E Units and Class F Units.
“Communications” has the meaning set forth in Section 13.1.
“Control” means, with respect to any relevant Person on the date such determination is being made, possessing, directly or indirectly, the power to direct or cause the direction of the management and policies of such relevant Person by ownership of voting interest, by contract or otherwise.
“Converting Unitholder” means, a Person entitled to receive Common Units upon conversion of any Series A Preferred Units.
“Covered Audit Adjustment” has the meaning set forth in Section 10.4(d)(ii).
“Deficit Restoration Obligation” means, with respect to any Partner at the end of any Fiscal Year, the amount such Partner is obligated to restore under applicable law or pursuant to any provision of this Agreement on account of a deficit balance in such Partner’s Capital Account or is deemed obligated to restore under Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations (determined after taking into account any changes in the Minimum Gain and the Partner Minimum Gain during such Fiscal Year).
Exh. B-5 EXH. 1 - PAGE 92 5694
Page 5692 “Distribution Date” has the meaning set forth in Section 3.6(c)(ii)(B).
“Distributions” means distributions from the Partnership to one or more Partners pursuant to Article IV or Article X hereof.
“Drag-Along Transaction” has the meaning set forth in Section 6.7(a).
“Economic Percentage” means a Partner’s percentage economic interest in the Partnership disregarding the Series B Preferred Units and the Management Interests.
“Effective Date” has the meaning set forth in the preamble.
“Estimated Tax Payment Date” has the meaning set forth in Section 4.7(b)(i).
“Estimated Tax Period” has the meaning set forth in Section 4.7(b)(i).
“Excess Nonrecourse Liabilities” means those Nonrecourse Liabilities not allocated under Sections 1.752-3(a)(1) or (2) of the Treasury Regulations.
“Existing Limited Partner Director” has the meaning set forth in the Managing General Partner’s Bylaws.
“Exit Event” means any of (i) the consummation of a sale of the Partnership substantially as a whole in one transaction or a series of closely related transactions or a sale of all or substantially all of the assets of the Partnership, (ii) the consummation of an initial public offering of the Partnership (or a successor), subsidiary of the Partnership, or of a subsidiary that is a holding company of the Partnership (or its successor) or (iii) dissolution or liquidation of the Partnership.
“Fair Market Value” means the value of any specified interest or property, which shall not in any event be less than zero, that would be obtained in an arm’s length transaction for cash between an informed and willing buyer and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, and without regard to the particular circumstances of the buyer or seller, going concern value, control provisions, minority discounts or marketability discounts.
“Farmout” means an agreement whereby the owner of an operating interest assigns his interest in certain specific acreage to another operator as a means of financing the costs of developing and operating the property. The owner typically retains some interest such as an overriding royalty interest, net profits interest, oil and gas payment, offset acreage or other type of interest.
“Financing Facilities” means the First Lien Credit Agreement and the Second Lien Credit Agreement (in each case as defined in the Partnership Interest Purchase Agreement) and any future agreement of the Partnership or any of its Subsidiaries providing for indebtedness for borrowed money.
“First Incentive Distribution” has the meaning set forth in Section 4.7(a)(iii).
Exh. B-6 EXH. 1 - PAGE 93 5695
Page 5693 “Fiscal Quarter” means each quarterly period in each year ending on March 31, June 30, September 30 and December 31.
“Fiscal Year” means (i) the period commencing on the Effective Date and ending on the earliest of the following December 31, the date on which the Partnership completely liquidates, or the date on which the Partnership accepts an additional Capital Contribution, and (ii) any subsequent period commencing with the end of the last preceding Fiscal Year and ending on the earliest of the following December 31, the date on which the Partnership completely liquidates, or the date on which the Partnership accepts an additional Capital Contribution.
“Good Reason” has the meaning set forth in the Class G Incentive Plan.
“Hydrocarbon Interests” means (a) all oil, gas and/or mineral leases, oil, gas or mineral properties, mineral servitudes and/or mineral rights of any kind (including fee mineral interests, lease interests, Farmout interests, overriding royalty and royalty interests, net profits interests, oil payment interests, production payment interests and other types of mineral interests), including any rights to acquire any of the foregoing, and (b) all oil and gas gathering, treating, compression, storage, processing and handling assets of any kind, including all pipelines, wells, wellhead equipment, pumping units, flowlines, tanks, buildings, injection facilities, saltwater disposal facilities, compression facilities, gathering systems, processing plants, and other related equipment of any kind.
“Incremental Applicable Vested Participation Percentage” has the meaning set forth in Section 4.7(c).
“Independent Expert” means a Person who is independent of the Managing General Partner and its Affiliates who is in the business of rendering opinions regarding the value of oil and gas properties based upon the evaluation of all pertinent economic, financial, geologic and engineering information available to the Managing General Partner or its Affiliates.
“Internal Rate of Return” means the interest rate at which the holder’s cash flow in respect of a Unit, both positive and negative, (that is, the aggregate Capital Contributions made by the holder and his predecessors in interest in respect of such Unit and the aggregate amount of Distributions made with respect to such Unit) must be discounted on an annual basis (to account for the time value of money concept) so that the aggregate of such discounted amount equals zero.
“IPO” means any underwritten initial public offering by the IPO Issuer of equity securities pursuant to an effective registration statement under the Securities Act.
“IPO Issuer” means: (a) the Partnership; or (b) an Affiliate of the Partnership or a Subsidiary of the Partnership which will be the issuer in an IPO, in each case as determined by the Managing General Partner.
“Legacy Common Units” means Class A Units, Class A-1 Units, Class B Units, Class C Units, Class D Units and Class E Units.
“Legacy Common Unitholders (Ex. Class A-1)” means holders of Class A Units, Class B Units, Class C Units, Class D Units and Class E Units.
Exh. B-7 EXH. 1 - PAGE 94 5696
Page 5694 “Legacy Common Unit Purchase Rights” has the meaning set forth in Section 3.6(b)(iii)(D).
“Legacy Unitholders” means holders of Legacy Units.
“Legacy Units” means Series A Preferred Units, Class A Units, Class A-1 Units, Class B Units, Class C Units, Class D Units and Class E Units.
“Legacy Waterfall” has the meaning set forth on Exhibit G.
“Limited Partner” means each Person who adopts this Agreement as a Limited Partner and is accepted by the Managing General Partner as such, and any Person who becomes a substituted Limited Partner in accordance with the terms of this Agreement.
“Liquidation Assets” has the meaning set forth in Section 11.4(a)(iv).
“Liquidation FMV” has the meaning set forth in Section 11.4(a)(iv).
“Liquidation Preference” means, as of any time of determination, with respect to each Series B Preferred Unit, the sum of (i) the Series B Issue Price plus (ii) the aggregate amount of all Series B Unit Distributions (expressed in dollars) that have accrued but have not been paid prior to the date of liquidation.
“Liquidation Statement” has the meaning set forth in Section 11.4(a)(iv).
“Loss” means, for any Fiscal Year, an amount equal to the loss of the Partnership for such period (as computed under Section 4.1).
“Management Interest” means any Class G Units issued to Persons providing services to the Partnership.
“Management Partner” means the holder of a Management Interest.
“Managing General Partner” means PRIMEXX ENERGY CORPORATION, a Texas corporation, or any substituted Managing General Partner admitted in accordance with the terms of this Agreement.
“Managing General Partner’s Bylaws” shall mean the Second Amended and Restated Bylaws of the Managing General Partner, dated as of the date hereof, as may be amended from time to time.
“Mandatory Call Notice” means a written notice of required additional capital pursuant to and in accordance with Section 3.7.
“Minimum Gain” means, at the close of any Fiscal Year, the minimum gain of the Partnership (determined in accordance with Section 1.704-2(b)(2) of the Treasury Regulations).
“Net Gain From an Exit Event” means, for any taxable period, the sum, if positive, of all items of income, gain loss or deduction recognized by the Partnership from an Exit Event.
Exh. B-8 EXH. 1 - PAGE 95 5697
Page 5695 “Net Loss From an Exit Event” means, for any taxable period, the sum, if negative, of all items of income, gain loss or deduction recognized by the Partnership from an Exit Event.
“Nonrecourse Deductions” means, for any period, the nonrecourse deductions of the Partnership for such period (determined under Section 1.704-2(b)(1) of the Treasury Regulations).
“Nonrecourse Liability” means, a liability of the Partnership that is a nonrecourse liability (as that term is defined in Section 1.704-2(b)(3) of the Treasury Regulations).
“Offered Interest” has the meaning set forth in Section 6.5(a).
“Operator” means any Person, engaged in the business of exercising direct supervision over the drilling or completion of or production from a well.
“Option A” has the meaning set forth in Section 10.4(d).
“Option B” has the meaning set forth in Section 10.4(d).
“Original Partnership Agreement” has the meaning set forth in Section 2.1.
“Participation Threshold” means, with respect to any Class G Unit, the amount that would, in the reasonable and good faith determination of the Board, be distributed pursuant to Section 11.4 if, immediately prior to the issuance of such Class G Unit, the assets of the Partnership were sold for their Fair Market Values, and the proceeds were used to satisfy all liabilities of the Partnership in accordance with their terms and any excess proceeds were distributed pursuant to Section 11.4; provided that the provisions of Section 11.4, shall be applied and taken into account in determining the Participation Threshold.
“Partner Affiliate” has the meaning set forth in Section 13.9.
“Partner Minimum Gain” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Minimum Gain that would result if such debt were treated as a Nonrecourse Liability (determined in accordance with Section 1.704-2(i)(3) of the Treasury Regulations).
“Partner Nonrecourse Debt” means any liability of the Partnership that is a partner nonrecourse debt (as that term is defined by Section 1.704-2(b)(4) of the Treasury Regulations).
“Partner Nonrecourse Deductions” means, for any period, the partner nonrecourse deductions of the Partnership for such period (determined in accordance with Section 1.704-2(i)(2) of the Treasury Regulations).
“Partner Nonrecourse Liability” means any liability of the Partnership that is a partner nonrecourse liability (as that term is defined in Section 1.704-2(b)(4) of the Treasury Regulations).
“Partners” means the Managing General Partner and the Limited Partners, and any Person having certain economic rights to the extent and as provided in Section 6.3.
Exh. B-9 EXH. 1 - PAGE 96 5698
Page 5696 “Partnership” means PRIMEXX ENERGY PARTNERS, LTD., a Texas limited partnership.
“Partnership Interest Purchase Agreement” has the meaning set forth in the recitals.
“Partnership Level Taxes” has the meaning set forth in Section 10.4(d).
“Partnership Minimum Gain” means an amount, with respect to each Partner Nonrecourse Debt, equal to the Minimum Gain that would result if such debt were treated as a Nonrecourse Liability (determined in accordance with Section 1.704-2(i)(3) of the Treasury Regulations).
“Partnership Property or Properties” means all interests, properties, Capital Contributions and rights of any type owned by the Partnership.
“Partnership Representative” means the “partnership representative” as defined in section 6223 of the Code.
“Partnership Tax Audit Rules” means sections 6221 through 6241 of the Code, as amended by the Bipartisan Budget Act of 2015 and the Protecting Americans from Tax Hikes Act of 2015, together with any guidance issued thereunder or successor provisions and any similar provision of state or local tax laws.
“Partnership Well” means any well in which the Partnership has an interest.
“Payment in Kind” has the meaning set forth in Section 3.6(c)(ii).
“Percentage Interest” means (A) in relation to any single class of Units, the ratio that (a) the number of the Units in that class held of record by the relevant Unitholder bears to (b) the total number of Units outstanding in that class, and (B) in relation to multiple classes of Units (excluding the Series B Preferred Units), the ratio that (a) the Partners’ aggregate Capital Accounts attributable to the applicable class of Units (excluding the Series B Preferred Units) bears to (b) the aggregate Capital Accounts of all Partners with respect to all Units (excluding the Series B Preferred Units). For the avoidance of doubt, each Series B Preferred Unit shall have a Percentage Interest equal to zero.
“Percentage Interest in Partnership Capital” means, with respect to a Partner, the proportionate share of such Partner’s Capital Account in relation to all Partners’ Capital Accounts as computed in a manner consistent with Section 9.2 including all applicable allocations and adjustments as set forth in the Agreement in determining Capital Accounts for federal income tax purposes. Notwithstanding the foregoing, each Series B Preferred Unit shall have a Percentage Interest in Partnership capital equal to zero.
“Permitted Affiliate” means, when used with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls, or is Controlled by, or is under common Control with, such Person.
“Permitted Transfer” has the meaning set forth in Section 6.8.
Exh. B-10 EXH. 1 - PAGE 97 5699
Page 5697 “Person” means an individual, partnership, tenancy-in-common, joint tenancy-in-common, joint tenancy, joint venture, firm, corporation, trust, charitable institution or other business or legal entity.
“Prime Rate” means the prime rate of interest per annum announced, from time to time by major money center banks and published daily in the Wall Street Journal under “Market Rates” (or elsewhere if not under Market Rates); provided that if the Wall Street Journal should ever cease, for any reason to publish such rate on a daily basis, then the Prime Rate shall be the rate of interest designated, and in effect from time to time, by the Partnership’s primary lender of working capital as its “Prime Rate.”
“Prior Distribution” has the meaning set forth in Section 4.7(c).
“Profit” means, for any Fiscal Year, an amount equal to the profit of the Partnership for such period (as computed for pursuant to Section 4.1).
“Proposed Sale” has the meaning set forth in Section 6.6(a).
“Proposed Transferee” has the meaning set forth in Section 6.6(a)(i).
“Prospect” means an area covering lands which, in the opinion of the Managing General Partner, contains structural or stratigraphic conditions making it susceptible to the accumulation of oil or gas in commercially productive quantities, and which area shall have been designated by the Managing General Partner in writing on the basis of the geological and engineering data considered by the Managing General Partner. Prospects may be limited to certain stated depths and may include areas in which leases may or may not have been acquired. The Managing General Partner shall maintain records showing the Prospects (and depths if limited by depth) so designated. In the case of certain Prospects, the designation of Prospects may conform generally to the geographic limits of individual leases. In some cases, where known reservoirs cover large geographic areas and subsequent drilling does not depend directly on results obtained by the Partnership Wells, Prospects may be directly adjacent or in close proximity to other Prospects. Leases on lands which are contiguous or in the vicinity of each other may constitute more than one Prospect, and a zone or horizon under an area may constitute a Prospect separate and apart from another zone or horizon which lies in whole or in part under the same area. With respect to any Prospect that is not limited to a particular zone or horizon and which is within any large continuous known stratigraphic trend which could be defined as a continuous reservoir, the Managing General Partner may reduce the area included in such Prospect to that area which covers the spacing unit or proration unit prescribed by the appropriate regulatory authority on such Prospect or permitted by local practice, whichever is applicable, and such additional area, if any, as the Managing General Partner determines reasonable. A Prospect that is limited to a particular zone or horizon may be limited to that area which covers the spacing unit or proration unit prescribed by the appropriate regulatory authority on such Prospect or permitted by local practice, whichever is applicable, to protect against drainage from adjacent wells if the well to be drilled by the Partnership is to a horizon containing Proved Reserves. The area of a Prospect may be enlarged or contracted from time to time by the Managing General Partner in the reasonable exercise of its judgment.
Exh. B-11 EXH. 1 - PAGE 98 5700
Page 5698 “Proved Reserves” means those quantities of crude oil, natural gas, and natural gas liquids which, upon analysis of geologic and engineering data, appear with reasonable certainty to be recoverable in the future from known oil and gas reservoirs under existing economic and operating conditions. Proved Reserves are limited to those quantities of oil and gas which can be reasonably expected to be recoverable commercially at current prices and costs, under existing regulatory practices and with existing conventional equipment and operating methods.
“Record Date” means the date established by the Managing General Partner or otherwise in accordance with this Agreement for determining (a) the identity of the record holders entitled to notice of or to vote at, any meeting of Limited Partners or entitled to vote by ballot or give approval of Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Limited Partners, (b) the identify of record holders entitled to receive any report or distribution or to participate in any offer or (c) the identity of the record holders of Series A Preferred Units entitled to convert such Units.
“Redemption Date” has the meaning set forth in Section 3.6(c)(iii).
“Redemption Election” has the meaning set forth in Section 3.6(c)(v).
“Redemption Event” has the meaning set forth in Section 3.6(c)(vi).
“Remaining Unitholders’ Acceptance Notice” has the meaning set forth in Section 6.5(b).
“Respective Payout Percentages” means (i) with respect to Series A Preferred Unitholders and Class A-1 Unitholders, pro rata in proportion to their respective holdings of Series A Preferred Units and Class A-1 Units (together as a single class) and (ii) with respect to the Legacy Common Unitholders (Ex. Class A-1), pro rata in proportion to their respective Class A Pre- Payout Percentages, Class A Post-Payout Percentages or Class A-1 Post-Payout Percentages (as such terms are defined in Exhibit G), as applicable per the then applicable portion of the Legacy Waterfall.
“Request” has the meaning set forth in Section 7.10(b).
“Revenues” means gross receipts of the Partnership derived from its interests in oil and gas properties (or related to other permitted operations), including any proceeds from the sale or exchange of capital items including Partnership Properties, plus any interest earned- upon investment of Partnership funds. Proceeds of any Partnership borrowings and Capital Contributions are excluded from Revenues.
“Sales Notice” has the meaning set forth in Section 6.5(a).
“Second A&R Partnership Agreement” has the meaning set forth in the recitals.
“Second Incentive Distribution” has the meaning set forth in Section 4.7(a)(iv).
“Second Sales Notice” has the meaning set forth in Section 6.5(a).
“Second Series B Preferred Units Issuance” has the meaning set forth in Section 3.6(c).
Exh. B-12 EXH. 1 - PAGE 99 5701
Page 5699 “Section 705(a)(2)(B) Expenditure” means any expenditure by the Partnership of a type that is described in Section 705(a)(2)(B) of the Code (relating to expenditures that are neither deductible nor properly chargeable to capital).
“Securities Act” means the Securities Act of 1933.
“Security Interest” means any security interest, lien, mortgage, deed of trust, encumbrance, hypothecation, pledge, purchase option or other similar adverse claim or obligation, whether created by operation of law or otherwise, created by any Person in any of its property or rights.
“Series A Conversion Date” means, the meaning assigned to such term in Section 3.6(b)(iii)(B).
“Series A Conversion Notice” means, the meaning assigned to such term in Section 3.6(b)(iii)(B).
“Series A Conversion Rate” means, the number of Common Units issuable upon the conversion of each Series A Preferred Unit, which shall be 1.0 until such rate is adjusted as set forth in Section 3.6(b)(iii).
“Series A Issuance Date” has the meaning set forth in Exhibit G.
“Series A Issue Price” means $2,340.91 per Series A Preferred Unit.
“Series A Liquidation Value” has the meaning set forth in Exhibit G.
“Series A Preferred Unitholder” means, a record holder of Series A Preferred Units.
“Series A Preferred Units” means a Unit held by a Series A Limited Partner which has the rights, preferences and privileges set forth in this Agreement.
“Series B Distribution Rate” means, the amount per Series B Preferred Unit equal to the product of the Series B Issue Price, multiplied by a rate of 13.50% per annum, cumulative compounding quarterly, subject to increase by an additional 200 basis points pursuant to Section 3.6(c)(v).
“Series B Issue Price” means $1,000.00 per Series B Preferred Unit.
“Series B Preferred Units” means a Unit held by a Series B Preferred Unitholder which has the rights, preferences and privileges set forth in this Agreement.
“Series B Preferred Unitholder” means a record holder of Series B Preferred Units.
“Series B Unit Distribution” means with respect to each Series B Preferred Unit, the product of the Series B Distribution Rate multiplied by the Series B Issue Price at the applicable time.
“Service” means the Internal Revenue Service.
Exh. B-13 EXH. 1 - PAGE 100 5702
Page 5700 “Simulated Basis” means, at any time with respect to any Partnership Property, the book value of such property at such time (determined by decreasing the original book value of such property by the amount of Simulated Depletion computed with respect thereto).
“Simulated Depletion” means the simulated depletion allowance computed (pursuant to Section 1.704-1(b)(2)(i)(k) of the Treasury Regulations, using the cost depletion method) by the Partnership with respect to Partnership assets.
“Simulated Gains and Simulated Losses” means, respectively, the simulated gains or simulated losses computed under Section 1.704-1(b)(2)(iv)(k) of the Treasury Regulations) by the Partnership with respect to Partnership assets.
“Subject Interests” has the meaning set forth in Section 3.8(a).
“Subject Interest Valuator” has the meaning set forth in Section 3.8(d).
“Subsidiary” means, with respect to any relevant Person as of the date the determination is being made, any other Person that (a) is Controlled (directly or indirectly) by such relevant Person and (b) the equity entitled to vote to elect the board of directors, board of managers or other governing authority of which is more than fifty percent (50%) owned (directly or indirectly) by such relevant Person.
“Tag Along Notice” has the meaning set forth in Section 6.6(a).
“Tag Along Offer” has the meaning set forth in Section 6.6(a)(iii).
“Tag Along Sale Percentage” has the meaning set forth in Section 6.6(a)(i).
“Tax Advances” has the meaning set forth in Section 4.8.
“Tax Rate” has the meaning set forth in Section 4.7(b)(i).
“TBOC” means the Texas Business Organizations Code as adopted and from time to time amended by the State of Texas.
“Termination” has the meaning set forth in the Class G Incentive Plan.
“Third Incentive Distribution” has the meaning set forth in Section 4.7(a)(v) hereof.
“Third Party” means any Person other than a Partner, its Affiliates and the Partnership.
“Third Sales Notice” has the meaning set forth in Section 6.5(b) hereof.
“Transfer” or “Transferred” means, with respect to a Unit, (a) a voluntary or involuntary sale, assignment, transfer, conveyance, exchange, bequest, devise, gift or any other alienation, including any pledge or grant of a security interest, (in each case, with or without consideration and whether by operation of law or otherwise, including, without limitation, by merger or consolidation) of any rights, interests or obligations with respect to all or any portion of such Unit, or (b) a grant or sufferance of a Security Interest on all or any portion of such Unit.
Exh. B-14 EXH. 1 - PAGE 101 5703
Page 5701 “Transferee” means a Person who receives all or part of a Partner’s Partnership interest through a Transfer.
“Treasury Regulations or Regulations” means the official Treasury Department interpretation of the Code found in Title 26 of the Code of federal Regulations.
“Unanimous Consent” has the meaning set forth in the Managing General Partner’s Bylaws.
“Unit” means that increment of ownership interest in the Partnership owned by a Unitholder in return for its Capital Contributions, as set forth on Exhibit A hereto (as the same may be amended from time to time). The ownership interest of the Managing General Partner, in its capacity as such, may but need not, be represented by Units.
“Unit Value” means an amount determined on a per Unit basis equal to the sum of (i) (A) 70% of the estimated future net cash flows from the Proved Reserves of the Partnership (discounted to present value at 10% above the average Prime Rate for the 90-day period preceding the date as of which the reserves are evaluated, provided that the interest rate used shall not be less than 10%, and using unescalated pricing criteria prescribed by the Securities and Exchange Commission), such valuation to be prepared by an Independent Expert, using those prices, operating costs, and other assumptions provided by the Managing General Partner that are reasonable and consistent with generally accepted industry standards, (B) cash on hand, (C) prepaid expenses, (D) accounts receivable (after adjustment for any allowance necessary for doubtful collections) and (E) all other properties owned by the Partnership not otherwise separately valued, at their net book value; provided, however, that if the Managing General Partner has reason to believe that the aggregate fair market value of such assets valued at book value is materially higher, the value attributed to such assets will be the fair market value thereof as determined by the Independent Expert or the accountants for the Partnership), less the sum of (ii) (A) an amount equal to all debts, obligations, and other liabilities of the Partnership, and (B) the amount of any Distributions made to or credited to the account of the Unitholders after the date of such valuation and before the actual purchase of Units at Unit Value as herein defined, except that, if any cash distributed was derived from the sale, subsequent to the appraisal date, of oil or gas production from the Partnership’s Prospects, or from the sale of the Partnership’s Prospects, for purposes of determining the reduction of the Unit Value, such distribution shall be discounted at the same rate used to value the Proved Reserves of the Partnership, as set forth above.
“Unitholder” means any Persons or entities who hold Series A Preferred Units, Series B Preferred Units, Class A Units, Class B Units, Class C Units, Class D Units, Class E Units, Class F Units or Class G Units, or any other Units that may be issued by the Partnership as provided in this Agreement, and any transferee of a Unit who has not been admitted into the Partnership as a “Partner” pursuant to Section 6.2(f).
“Unrealized Gain” attributable to any item of Partnership Property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section 9.2(c) over (b) the book value of such property as of such date (prior to any adjustment to be made pursuant to Section 9.2(c) as of such date).
Exh. B-15 EXH. 1 - PAGE 102 5704
Page 5702 “Unrealized Loss” attributable to any item of Partnership Property means, as of any date of determination, the excess, if any, of (a) the book value of such property as of such date (prior to any adjustment to be made pursuant to Section 9.2(c) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 9.2(c)).
“Unreturned Capital” means, with respect to each Series B Preferred Unit, as applicable, as of the time of determination, the Capital Contributions made in respect of such Series B Preferred Unit (it being agreed that with respect to any Series B Unit issued as Payment in Kind, a Capital Contribution equal to the Series B Issue Price shall be deemed to have been made in respect of such Series B Unit issued as Payment in Kind for purposes of determining Unreturned Capital for such Series B Unit) less the cumulative amount of all prior distributions (excluding, for the avoidance of doubt, any Series B Units issued as Payment in Kind) made in respect of such Series B Preferred Unit pursuant to Section 4.7(a).
“Vested Class G Units” means any Class G Units that have vested and remain vested as of the date of determination pursuant to the terms of the Class G Incentive Plan.
“Vested Management Interests” means outstanding Management Interests that have vested pursuant to the terms of this Agreement and any applicable Award Agreement.
“Vesting Catch Up Distribution” has the meaning set forth in Section 4.7(c).
“Voting Unitholder” means a holder of Voting Units.
“Voting Units” means Class A, Class A-1, Class B, Class C, Class E and Class F Units.
Exh. B-16 EXH. 1 - PAGE 103 5705
Page 5703 EXHIBIT C
PRIMEXX ENERGY PARTNERS, LTD. SERIES A CONVERSION NOTICE
The undersigned hereby irrevocably elects to convert all of the 8% Series A Convertible Preferred Limited Partnership Units (the “Preferred Units”) in Primexx Energy Partners, Ltd. (“Primexx”), represented by book entry in the name of the undersigned holder, into Class A-1 Units of Primexx. Notice of this optional conversion is being made in accordance with the terms and conditions of Primexx’s Third Amended and Restated Limited Partnership Agreement (“Third Amended Partnership Agreement”) and the undersigned hereby elects to convert all Preferred Units represented by book entry held in the name of undersigned.
The undersigned agrees that Primexx is not required to issue the Class A-1 Units to holder until the holder has delivered an assignment to Primexx in the form required by the Third Amended Partnership Agreement.
Name of the registered holder of Preferred Units to be converted: _________________________
Authorized Signature: ____________________________________________________________
Name: ________________________________________________________________________
Title: _________________________________________________________________________
Address: ______________________________________________________________________
E-mail or Fax Number: ___________________________________________________________
Number of Preferred Units to be converted (must be all Preferred Units represented by book Entry, held in holder’s name): _____________________________________________________
Dated: ________________________________________________________________________
Exh. C-1 EXH. 1 - PAGE 104 5706
Page 5704 EXHIBIT D
PRIMEXX ENERGY PARTNERS, LTD. FORM OF ASSIGNMENT OF PREFERRED UNITS
For Value Received, the undersigned holder hereby sells, assigns, and transfers unto Primexx Energy Partners, Ltd. (“Primexx”), all of the undersigned’s right, title and interest in the 8% Series A Convertible Preferred Limited Partnership Units (“Preferred Units”) standing in the holder’s name on the books of Primexx, and the undersigned does hereby irrevocably constitute and appoint Primexx Energy Corporation, as Managing General Partner of Primexx, as agent and attorney-in-fact to transfer the said Preferred Units on the books of Primexx with full power of substitution in the premises. All of the undersigned’s Preferred Units are being transferred by the holder to Primexx for cancellation in exchange for issuance to the holder of Class A-1 Units of Primexx as provided by the terms of the Third Amended and Restated Limited Partnership Agreement.
Name of the registered holder of Preferred Units assigned: ______________________________
Number of Class A-1 Units to be issued: _____________________________________________
Authorized Signature: ___________________________________________________________
Name: ________________________________________________________________________
Title: _________________________________________________________________________
Address: ______________________________________________________________________
E-mail or Fax Number: ___________________________________________________________
Dated: _______________________________________________________________________
Exh. D-1 EXH. 1 - PAGE 105 5707
Page 5705 EXHIBIT E
AMI AREA
: :
i Davis
Exh. E-1 EXH. 1 - PAGE 106 5708
Page 5706 EXHIBIT F
CLASS G EQUITY PLAN
(Attached)
Exh. F-1 EXH. 1 - PAGE 107 5709
Page 5707 [Execution Version] PRIMEXX ENERGY PARTNERS, LTD. CLASS G INCENTIVE PLAN
1. Purpose. The purpose of the Plan is to provide economic incentives to selected employees and other service providers of the Company Group, in order to align their interests with equity holders of the Company and to exert maximum efforts for the success of the Company Group.
2. Definitions. Capitalized terms used in this Plan but not expressly defined in this Plan shall have the respective meanings ascribed to such terms in the LP Agreement (as defined below). As used in this Plan, the following terms shall have the meanings set forth below:
(a) “Award” means a Class G Unit awarded pursuant to the Plan, as evidenced by an Award Agreement.
(b) “Award Agreement” means a written agreement signed by the Company evidencing an award of Class G Units pursuant to the Plan.
(c) “Cause” means with respect to any Participant, in the absence of an employment or other service agreement between a Participant and the Employer otherwise defining Cause, (i) the continued failure to substantially perform such Participant's Duties (other than due to physical or mental incapacity); (ii) any damage of a material nature to the business or property of any member of the Company Group caused by such Participant's willful or grossly negligent conduct; (iii) deliberate misconduct which is reasonably likely to be materially damaging to any member of the Company Group; (iv) the indictment for, conviction of or plea of guilty or nolo contendre to any felony or a misdemeanor involving an act of dishonesty, moral turpitude, deceit, or fraud by such Participant; (v) a material breach of any non- competition, non-solicitation, confidentiality, non-disparagement or other restrictive covenant provisions relating to any member of the Company Group by which such Participant may be bound, including, without limitation, any such covenants contained in an Award Agreement; or (vi) such Participant's material breach of the LP Agreement, provided, that none of the foregoing events (with the exception of clauses (ii) – (iv)) shall constitute Cause unless the Participant fails to cure (to the extent curable) such event within thirty (30) days after receipt from the Employer of written notice of the event which constitutes Cause, which written notice shall give reasonable specificity in the nature of the circumstances determined by the Employer in good faith to constitute Cause, provided further that breaches of clauses (v) and (vi) may only be cured to the extent such breach is not willful. In the event that there is an employment or other service agreement between such Participant and the Employer defining Cause, “Cause” shall have the meaning provided in such agreement, and a Termination by the Employer for Cause hereunder shall not be deemed to have occurred unless all applicable notice and cure periods in such agreement are complied with.
(d) “Change of Control” means the occurrence of any of the following: (i) the consummation of any transaction (including any merger or consolidation) the result of which is that one or more Third Parties (other than a Subsidiary of the Partnership) become the beneficial owner, directly or indirectly, of more than fifty percent (50%) of the voting interests of the Company and the Managing General Partner; (ii) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the Company’s assets and the assets of its Subsidiaries, taken as a whole, to one or more Third Parties; provided, however, that none of the circumstances in this clause (ii) shall be a Change of Control if the Persons that beneficially own the Company’s Common Units immediately prior to the transaction own, directly or indirectly, equity interests with a majority of the total voting power of all of the outstanding equity interests of the surviving or transferee Person immediately after the transaction; and (iii) the Company consolidates with, or merges with or into, any Third Party or any such Third Party consolidates with, or merges with or into, the Partnership, in either case, pursuant to a transaction in which any of the Company’s outstanding
KE 42233084 EXH. 1 - PAGE 108 5710
Page 5708 equity interests or the equity interests of such other Third Party is converted into or exchanged for cash, securities or other property, other than pursuant to a transaction in which the Partnership’s Partnership Interests outstanding immediately prior to the transaction constitute, or are converted into or exchanged for, a majority of the equity securities of the surviving Person immediately after giving effect to such transaction; provided, that for the avoidance of doubt neither an initial public offering of the Company or any of its Subsidiaries or Affiliates, nor any reorganization of the Company in connection with an initial public offering, shall constitute a Change of Control.
(e) “Committee” means a committee appointed to administer the Plan in accordance with Section 10(d), if any.
(f) “Company” means Primexx Energy Partners, Ltd., a Texas limited partnership.
(g) “Company Group” means, collectively, the Company, together with its Affiliates.
(h) “Duties” means the duties, responsibilities and obligations of a Participant in connection with such Participant's employment or service with the Employer.
(i) “Effective Date” means July 12, 2016.
(j) “Employer” means, with respect to any Participant, the member of the Company Group that such Participant is principally employed by (or, if such Participant is a non-employee service provider, principally providing services to).
(k) “Exit Event” means a Change of Control other than as a result of a public offering of the Company.
(l) “Good Reason” means, with respect to any Participant, in the absence of an employment or other service agreement between a Participant and the Employer otherwise defining Good Reason, without such Participant's consent, (i) a material and ongoing reduction by the Employer of such Participant's base salary or bonus opportunity; (ii) a material diminution in such Participant's title, position or Duties; or (iii) the relocation of such Participant's primary office location to a location that is more than fifty (50) miles from the Participant's then-current primary office location; provided, that none of the foregoing events shall constitute Good Reason unless the Employer fails to cure such event within thirty (30) days after receipt from the Participant of written notice of the event which constitutes Good Reason, which written notice shall give reasonable specificity in the nature of the circumstances determined by the Participant in good faith to constitute Good Reason; provided, further, that “Good Reason” shall cease to exist for an event on the sixtieth (60th) day following the occurrence of such event, unless Participant has given the Employer and the Company written notice thereof prior to such date. In the event that there is an employment or other service agreement between such Participant and the Employer defining Good Reason, “Good Reason” shall have the meaning provided in such agreement, and a Termination by the Participant with Good Reason hereunder shall not be deemed to have occurred unless all applicable notice and cure periods in such agreement are complied with.
(m) “LP Agreement” means the Third Amended and Restated Limited Partnership Agreement of the Company, dated as of July 1, 2016, as the same may be modified, amended, restated or amended and restated from time to time.
(n) “Participant” means an employee or non-employee service provider of the Employer to whom Class G Units are granted pursuant to the Plan.
(o) “Permanent Disability” means, with respect to any Participant, in the absence of an employment or other service agreement between a Participant and the Employer otherwise defining
2 EXH. 1 - PAGE 109 5711
Page 5709 Permanent Disability or Disability, the good faith, reasonable determination by the Company that a Participant is unable to substantially perform the duties of such Participant's employment with the Employer for a period of one-hundred and twenty (120) consecutive days because of (i) a bodily loss or harm or (ii) an illness or disease whether or not incurred prior to or after the date of the LP Agreement.
(p) “Plan” means this Class G Incentive Plan of the Company, as it may be amended or supplemented from time to time.
(q) “Termination” means, as to any Participant, the termination of such Participant's employment or service, as applicable, with the Employer.
(r) “Vesting Commencement Date” means, as to any Participant and with respect to any Class G Unit, the first (1st) anniversary of the date of the award of such Class G Unit.
3. Class G Units Available Under the Plan. The total number of Class G Units that may be granted pursuant to Awards under this Plan is 100,000. If, after the Effective Date, any Class G Unit or other class of equity granted hereunder is forfeited, or if any Class G Unit or other class of equity granted hereunder has expired, terminated or been cancelled for any reason whatsoever, and, in either such case, a Participant has received no benefits of ownership with respect to such forfeited, expired, terminated or cancelled Class G Unit or other class of equity, then such Class G Unit or other class of equity shall again be available for Awards and shall again be available to be awarded hereunder.
4. Vesting. Except as otherwise provided in an Award Agreement, Class G Units granted under the Plan shall vest as follows:
(a) Provided that a Participant has not undergone a Termination prior to the applicable vesting date, with respect to any group of Class G Units awarded to such Participant, (i) 20% percent (20%) of such Class G Units granted shall become Vested Class G Units on the Vesting Commencement Date for such Class G Units, (ii) 20 percent (20%) of such Class G Units granted shall become Vested Class G Units on each of the first four (4) anniversaries of the Vesting Commencement Date for such Class G Units, and (iii) any Class G Units granted under such Participant's Award Agreement that remain unvested as of the occurrence of an Exit Event shall fully vest and become Vested Class G Units upon the occurrence of such Exit Event.
(b) Subject to the last sentence of Section 4(a), any Class G Units that have not become Vested Class G Units prior to a Participant's Termination for any reason shall be forfeited upon such Termination, and such terminated Participant shall have no further rights with respect thereto.
(c) Following any Termination, Vested Class G Units not otherwise forfeited pursuant to subsection (b) above shall continue to be subject to the terms of the LP Agreement.
5. Treatment of Class G Units; Tax Election. It is intended that all Class G Units granted in accordance with this Plan are to be treated as “profits interests” for Interested States federal income tax purposes. Each Participant must agree, in connection with the grant of any Class G Units, to file a timely election (and provide the Company with a copy of such election) in accordance with the provisions of Code Section 83(b) with respect to such Class G Units.
6. Class G Unit Award Provisions. Subject to the provisions of this Plan and the LP Agreement, the Board shall have the sole and complete authority to determine the Participants to whom Class G Units shall be granted, the number and class of Class G Units to be covered by each Award and the conditions and restrictions applicable to the Award. Subject to the foregoing, the terms and conditions of Award Agreements may change from time to time and the terms and conditions of separate Award Agreements need not be identical.
3 EXH. 1 - PAGE 110 5712
Page 5710 7. No Employment Rights. Neither this Plan, nor any Award Agreement, nor any Award shall confer upon any Participant any right with respect to continuing the Participant's employment with the Employer, nor shall it interfere in any way with the right to terminate such relationship at any time, with or without Cause, and with or without notice.
8. No Rights to Awards. No Person shall have any claim to receive any Award under the Plan. There is no obligation for uniformity of treatment of Participants regarding the number of Class G Units awarded or the manner in which Awards are made. The terms and conditions of Awards made under the Plan need not be the same with respect to each Participant.
9. Withholding Obligations. Payments made under the Plan shall be conditional upon the satisfaction by the Participant of any federal, state or local withholding or other taxes required to be paid by the Employer on account of such payments and in this regard, the Company may (i) require that a Participant pay to the Employer an amount sufficient to satisfy such withholding or other taxes, (ii) withhold such amount from any remuneration, distributions or other amounts payable to the Participant or (iii) enter into any arrangements suitable to the Employer, for the receipt of such amount.
10. Administration of the Plan.
(a) Authority of the Board. The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in Section 10(d).
(b) Powers of the Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of this Plan and the LP Agreement:
(i) To determine from time to time which of the employees of the Company Group shall be granted Class G Units; when and how each Class G Unit shall be granted, as applicable; the vesting conditions and other provisions of each Class G Unit granted (which need not be identical), including the time or times when a person shall be permitted to purchase or receive, as applicable, Class G Units pursuant to a Class G Unit Award; and the number of Class G Units with respect to which a Class G Unit Award shall be granted to each such person.
(ii) To designate those members of the Company Group whose officers, directors, employees or consultants may participate in the Plan.
(iii) To construe and interpret the Plan and Awards granted under the Plan, and to establish, amend and revoke rules and regulations for its administration.
(iv) To establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan in accordance with its terms or waive any vesting or forfeiture conditions applicable to any Award.
(v) The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
(vi) Generally, to exercise such powers and to perform any acts as the Board deems necessary or expedient to promote the best interests of the Company Group, which are not in conflict with the provisions of the Plan or the LP Agreement.
(c) No Liability. Neither the Board nor any officer, director or employee of any member of the Company Group shall be liable for any action or determination made in good faith with respect to the Plan or any Award made under the Plan.
4 EXH. 1 - PAGE 111 5713
Page 5711 (d) Delegation to Committee. The Board may delegate administration of the Plan to a Committee or Committees of one or more individuals or entities designated by the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated by the Board. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, to the extent delegated to the Committee by the Board, all powers theretofore possessed by the Board hereunder, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and re-vest in the Board the administration of the Plan.
(e) Effect of the Board's Decision. The Plan and all determinations, interpretations and constructions of the Plan made by the Board in its reasonable good faith determination or discretion shall not, absent manifest error, be subject to review by any Person and shall be final, binding and conclusive on all Persons, including all successors and assigns of the Company and a Participant, including without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant's creditors.
11. Amendment or Termination of the Plan. Subject to the provisions of this Plan and the LP Agreement, the Board may amend, suspend or terminate the Plan at any time. No Class G Units may be granted under the Plan after it is terminated. The amendment, suspension or termination of the Plan shall not materially impair the rights and obligations under any Class G Unit Award granted while the Plan is in effect without the consent of either the affected Participant or the consent of Participants holding a majority of the Class G Units then outstanding under the Plan.
12. Conflict Between or Among the Plan, the LP Agreement and/or the Related Award Agreements. The Plan is subject to the LP Agreement, the terms and provisions of which are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and therein, the LP Agreement shall govern and prevail. In the event of a conflict between any term or provision contained herein and in any Award Agreement, this Plan shall govern and prevail.
13. Miscellaneous.
(a) Legal Compliance. Class G Units granted hereunder shall not be issued unless the issuance and delivery of such Class G Units shall comply with applicable laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company to be necessary to the lawful issuance and sale of any Class G Units hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Class G Units as to which such requisite authority shall not have been obtained.
(b) Investment Representations. As a condition to the receipt of a Class G Unit, the Company may require the Participant (or any Permitted Affiliate) to represent and warrant at the time of any such exercise that the Class G Units are being acquired only for investment and without any present intention to sell or distribute such Class G Units if, on the advice of counsel for the Company, such a representation is required.
(c) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent any member of the Company Group from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the award of Class G Units, securities and other types of awards, and such arrangements may be either generally applicable or applicable only in specific cases.
5 EXH. 1 - PAGE 112 5714
Page 5712 (d) Severability. If any provision of this Plan is deemed invalid, illegal, or unenforceable, such provision shall be deemed amended to the minimum extent necessary to conform to applicable law so as to be valid, legal and enforceable; if such provision cannot be amended as provided above, it shall be stricken and the remainder of this Plan shall remain in full force and effect.
(e) Notice. Any notice must be in writing and provided in accordance with the Award Agreement. Any notice or communication required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given or made when (a) delivered personally to the recipient, (b) faxed or emailed to the recipient or (c) one (1) Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid), in each case to the applicable address set forth in the Award Agreement.
14. Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be construed, enforced and governed in conformity with the laws of the State of Texas, without giving effect to principles of conflicts of law, and shall be binding upon the parties hereto, their successors, heirs, devisees, permitted assigns, legal representatives, executors and administrators, but shall not be deemed for the benefit of creditors or any other Persons.
15. Effectiveness of the Plan. The Plan shall be effective as of the Effective Date.
16. LP Agreement. As a condition of the grant of any Class G Units to any Participant under the Plan, to the extent that such Participant is not already a party to the LP Agreement, such Participant shall be required to execute a joinder to, and become a party to, the LP Agreement.
* * * * *
6 EXH. 1 - PAGE 113 5715
Page 5713 EXHIBIT G
LEGACY WATERFALL
(Attached)
Exh. G-1 EXH. 1 - PAGE 114 5716
Page 5714 EXHIBIT G
LEGACY WATERFALL
All capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in the Agreement. Section references herein are to Sections of this Exhibit G unless otherwise specified. For the sake of clarity, notwithstanding anything herein to the contrary, the making of Distributions is subject to the provisions and requirements of Section 4.7 of the Agreement.
(A) Legacy Waterfall. For purposes of the Agreement, “Legacy Waterfall” shall mean the allocation of Distributions pursuant to Section 4.7(a) of the Agreement among the Legacy Unitholders as set forth below:
(1) Distributions Other Than Capital Proceeds. All Distributions in accordance with the Legacy Waterfall, except Distributions of Capital Proceeds, shall be distributed as follows:
(a) First, to the Series A Preferred Unitholders until any Series A Unpaid Cash Distributions are paid in full;
(b) Second, to the Class A Unitholders in proportion to and to the extent of the excess, if any, of (x) the Class A Preferred Return (from the Closing Date to the close of the immediately preceding Fiscal Year) in respect of the Units held by each, over (y) the sum of all prior distributions to such Partner (and such Partner’s predecessors in interest) made pursuant Section (A)(2)(b) and to this Section (A)(1)(b) (or previously pursuant to Sections 4.10.1(ii) and 4.10.2(ii) of the Second A&R Partnership Agreement); and
(c) Third, the balance to the Legacy Common Unitholders other than Class D Unitholders, in accordance with Section (A)(3).
(2) Distribution of Capital Proceeds. All Distributions of Capital Proceeds in accordance with the Legacy Waterfall, including Distributions made pursuant to dissolution of the Partnership, shall be made as follows:
(a) First, to the Series A Preferred Unitholders until any Series A Unpaid Cash Distributions are paid in full and, if in connection with an Exit Event, the Series A Liquidation Value is paid in full;
(b) Second, to the Class A Unitholders in proportion to and to the extent of the excess, if any, of (x) the Class A Preferred Return (from the Closing Date to the close of the immediately preceding Fiscal Year) in respect of the Units held by each, over (y) the sum of all prior distributions to such Partner (and such Partner’s predecessors in interest) made pursuant to this Section (A)(2)(b), plus all distributions pursuant to Section (A)(1)(b) (or previously pursuant to Sections 4.10.2(ii) and 4.10.1(ii) of the Second A&R Partnership Agreement);
(c) Third, to the Class A Unitholders, Class A-1 Unitholders and Class B Unitholders, pro rata and pari passu, until the cumulative amount distributed to the Class A Unitholders,
Exhibit G, Page 1 KE 42365509.2 EXH. 1 - PAGE 115 5717
Page 5715 Class A-1 Unitholders and Class B Unitholders under Section (A)(1) and Section (A)(2) (or previously pursuant to Sections 4.10.1 and 4.10.2 of the Second A&R Partnership Agreement) after the date of grant of Class C Units equals the Threshold Value;
(d) Fourth, to the Class C Unitholders in proportion to their respective Percentage Interests until the cumulative amount distributed to the Class C Unitholders under this Section (A)(2)(d) equals the product of (a) the Threshold Value, multiplied by (b) the Class C Unitholders’ respective Percentage Interests; and
(e) Fifth, the balance to the Legacy Common Unitholders, in accordance with Section (A)(3).
(3) Allocation Among Legacy Common Unitholders.
(a) Any Distribution allocated to the Legacy Common Unitholders pursuant to Section (A)(1)(c) or Section (A)(2)(e) (or previously pursuant to Sections 4.10.1(iii) and 4.10.2(v) of the Second A&R Partnership Agreement) for any period prior to Class A Payout shall in turn be allocated, to the Legacy Common Unitholders, where applicable, in proportion to respective Class A Pre-Payout Percentages.
(b) Any Distributions allocated to Legacy Common Unitholders pursuant to Section (A)(1)(c) or Section (A)(2)(e) (or previously pursuant to Sections 4.10.1(iii) and 4.10.2(v) of the Second A&R Partnership Agreement) for any period following Class A Payout, and prior to Class A-1 Payout, shall in turn be allocated to the Legacy Common Unitholders, where applicable, in proportion to their respective Class A Post-Payout Percentages.
(c) Any Distributions allocated to Legacy Common Unitholders pursuant to Section (A)(1)(c) or Section (A)(2)(e) (or previously pursuant to Sections 4.10.1(iii) and 4.10.2(v) of the Second A&R Partnership Agreement) for any period following Class A-1 Payout shall in turn be allocated to the Legacy Common Unitholders, where applicable, in proportion to their respective Class A-1 Post-Payout Percentages set forth on Exhibit H of the Agreement.
(d) Class D Unitholders shall only participate in Distributions of Capital Proceeds pursuant to Section (A)(2).
(4) Series A Preferred.
(a) Series A Distributions. Commencing with the Fiscal Year ending on December 31, 2013, the holders of the Series A Preferred Units shall be entitled to receive cumulative distributions (each a “Series A Distribution”), prior to any other distributions made in respect of any other Partnership interests pursuant to Section (A)(1) or Section (A)(2), in the amount set forth in this Section (A)(4)(a) in respect of each outstanding Series A Preferred Unit.
(i) For the Fiscal Year ending December 31, 2013, and for each Fiscal Year thereafter through and including the Fiscal Year ending immediately prior to the Fiscal Year in which the Series A Conversion Date occurs, the Series A Distribution on each outstanding
Exhibit G, Page 2 EXH. 1 - PAGE 116 5718
Page 5716 Series A Preferred Unit shall, to the extent not previously paid, accrue (and not be paid in cash outside the Legacy Waterfall notwithstanding anything in the Agreement or this Exhibit G to the contrary, unless determined otherwise by the Board in its sole discretion) at the Series A Distribution Rate (provided that for the Fiscal Year in which the Series A Issuance Date occurs, the amount accrued and otherwise payable pursuant to this clause (i) shall be an amount equal to the product of (I) the full Fiscal Year Series A Distribution amount times (II) a fraction, of which the numerator is the number of days from and including the Series A Issuance Date to, but excluding the date of such Fiscal Year’s end, and the denominator is 360). Furthermore, for the Fiscal Year in which the Series A Conversion Date occurs, the amount accrued and otherwise payable pursuant to this clause (i) shall be an amount equal to the product of (I) the full Fiscal Year Series A Distribution amount times (II) a fraction, of which the numerator is the number of days from and including the first day of such Fiscal Year to, but excluding, the Series A Conversion Date, and the denominator is 360).
(ii) The record date for a Series A Distribution shall be the last day of the Fiscal Year preceding the date of Distribution (“Series A Distribution Record Date”).
(iii) The Parties acknowledge that certain Series A Distributions since the Series A Issuance Date were previously paid in cash and that other amounts have accrued but been unpaid pursuant to the Second A&R Partnership Agreement as referenced in the definition of “Series A Unpaid Cash Distributions”.
(B) Other Definitions. For purposes of this Exhibit G, any capitalized term used herein shall have the meaning set forth below.
“Capital Proceeds” means proceeds distributed on account of a Capital Transaction.
“Capital Transaction” means any transaction outside the ordinary course of the Partnership business involving the sale, exchange, other disposition, or refinancing of any Partnership asset, including an Exit Event.
“Class A Payout” means, with respect to any Class A Unitholder, the first day of the calendar month next following the date on which the aggregate cumulative Distributions (inclusive of the Class A Preferred Return) made in respect of the Class A Units of such Class A Unitholder, are sufficient so that such Class A Unitholder’s Internal Rate of Return with respect to each of his Class A Units will equal eighteen percent (18%).
“Class A Post-Payout Percentage” means the respective Class A Post-Payout Percentages of the Legacy Common Unitholders as set forth on Exhibit H of the Agreement.
“Class A Preferred Return” means, with respect to any Class A unit, a sum equal to nine percent (9%) per annum (based on a 365 day year) for the actual number of days on the period for which such Class A Preferred Return is being determined (cumulative and compounded annually) of the average daily Unreturned Subscription with respect to such Class A Unit.
Exhibit G, Page 3 EXH. 1 - PAGE 117 5719
Page 5717 “Class A Pre-Payout Percentage” means the respective Class A Pre-Payout Percentages of the Legacy Common Unitholders as set forth on Exhibit H of the Agreement.
“Class A-1 Payout” means with respect to any holder of Class A-1 Units, the first day of the calendar month next following the date on which the aggregate cumulative Distributions made in respect of the Series A Preferred Units (before conversion into Class A-1 Units) and the Class A-1 Units (after conversion) are sufficient so that the aggregate Internal Rate of Return with respect thereto, will equal twenty percent (20%).
“Class A-1 Post-Payout Percentage” means the respective Class A-1 Post-Payout Percentages of the Common Partners as set forth on Exhibit H of the Agreement.
“Legacy Common Unitholders” means, holders of Legacy Common Units.
“Series A Adjusted Issue Price” means, (i) the Series A Issue Price, divided by (ii) the Series A Conversion Rate.
“Series A Distribution” means, the meaning assigned to such term in Section (A)(4)(a).
“Series A Distribution Rate” means, the amount per Series A Preferred Unit equal to the product of the Series A Issue Price, multiplied by a rate of 8.00% per annum, cumulative non-compounding.
“Series A Issuance Date” means, November 1, 2013.
“Series A Issue Price” means, $2,340.91 per Series A Preferred Unit.
“Series A Liquidation Value” means, with respect to each Series A Preferred Unit outstanding as of the date of such determination, an amount equal to the sum of (i) the Series A Adjusted Issue Price, plus (ii) all Series A Unpaid Cash Distributions, plus (iii) all accrued but unpaid distributions on such Series A Preferred Unit with respect to the Fiscal Year in which the liquidation occurs.
“Series A Unpaid Cash Distributions” means, the amount of any accrued Series A Distributions that have not been paid in cash, which includes, for the sake of clarity, any accrued but unpaid Series A Distributions under the Second A&R Partnership Agreement.
“Threshold Value” means the aggregate fair market value of the Capital Accounts of the Managing General Partner and the Class A Unitholders and Class B Unitholders, as adjusted pursuant to Section 9.2 of the Agreement immediately prior to the date of grant of the Class C Units (which, as of June 1, 2013, was agreed to be $250,000,000), less any applicable valuation discount as determined by an independent appraiser.
“Unreturned Subscriptions” means, with respect to any Class A Unit as of any date, the excess, if any, of the (x) the Capital Contribution made with respect to such Unit, over (y) the total Distributions made with respect to such Unit under Section (A)(1)(c) or Section (A)(2)(c) (or previously pursuant to Sections 4.10.1(iii) and 4.10.2(iii) of the Second A&R Partnership Agreement) or upon liquidation of the Partnership.
Exhibit G, Page 4 EXH. 1 - PAGE 118 5720
Page 5718 EXHIBIT H
LEGACY WATERFALL ALLOCATIONS
(Attached)
Exh. H-1 EXH. 1 - PAGE 119 5721
Page 5719 Primexx Energy Partners, Ltd. Legacy Waterfall Allocations
Allocation to Legacy Unitholders - Page 1 # of Common # of Common ALLOCATION OF OPERATING PROFITS & LOSSES (excluding Capital Transactions) Units Units Prior to Series A Preferred Conversion After Series A Preferred Conversion to Class A-1 Prior to Series A After Series A PROFITS LOSSES PROFITS AND LOSSES Conversion to Conversion to Class A Pre-Payout Class A Post-Payout Class A Pre-Payout Class A Post-Payout Class A Pre-Payout Class A Post-Payout Class A-1 Post-Payout Class A-1 Units Class A-1 Units Percentages Percentages Percentages Percentages Percentages Percentages Percentages Class A Common Limited Partners: BF Partners, L.P. 1,746.92 1,746.92 2.01296% 1.50972% 1.06911% 0.80183% 1.06911% 0.80183% 0.80183% Cohen, Howard M. 42.53 42.53 0.04901% 0.03676% 0.02603% 0.01952% 0.02603% 0.01952% 0.01952% Cohen, Marjory H. 42.53 42.53 0.04901% 0.03676% 0.02603% 0.01952% 0.02603% 0.01952% 0.01952% Edidin, Gary 1,191.77 1,191.77 1.37326% 1.02995% 0.72936% 0.54702% 0.72936% 0.54702% 0.54702% Gary Edidin Exempt Trust 339.99 339.99 0.39177% 0.29383% 0.20807% 0.15606% 0.20807% 0.15606% 0.15606% Gary Edidin Family Trust 850.88 850.88 0.98046% 0.73535% 0.52074% 0.39055% 0.52074% 0.39055% 0.39055% WM. A. Friedlander Rev. Tr. Dtd 2/20/98 1,564.94 1,564.94 1.80326% 1.35245% 0.95773% 0.71830% 0.95773% 0.71830% 0.71830% Gilbert, Diane 31.29 31.29 0.03606% 0.02704% 0.01915% 0.01436% 0.01915% 0.01436% 0.01436% Groh Family Trust 55.62 55.62 0.06409% 0.04807% 0.03404% 0.02553% 0.03404% 0.02553% 0.02553% Marmol, Guillermo G. 489.87 489.87 0.56447% 0.42335% 0.29980% 0.22485% 0.29980% 0.22485% 0.22485% Spersibs, LP 219.54 219.54 0.25298% 0.18973% 0.13436% 0.10077% 0.13436% 0.10077% 0.10077% Schlesinger, Helen 45.74 45.74 0.05270% 0.03953% 0.02799% 0.02099% 0.02799% 0.02099% 0.02099% Helen Schlesinger Trust 45.74 45.74 0.05270% 0.03953% 0.02799% 0.02099% 0.02799% 0.02099% 0.02099% Total Class A Common Limited Partners 6,667.36 6,667.36 7.68274% 5.76205% 4.08040% 3.06030% 4.08040% 3.06030% 3.06030% Series A Preferred Partners: Convertible Series A Preferred (8% Coupon + recoup any prior losses) 46.88874% 46.88874% n/a - converted n/a - converted n/a - converted Primexx Opportunity Fund, LP 64,214.35 45.62105% 45.62105% 45.62105% 45.62105% 31.93474% Las Rosas Capital LLC 1,751.46 1.24432% 1.24432% 1.24432% 1.24432% 0.87103% Cohen, Howard M. 4.50 0.00320% 0.00320% 0.00320% 0.00320% 0.00224% Cohen, Marjory H. 4.50 0.00320% 0.00320% 0.00320% 0.00320% 0.00224% Gilbert, Diane 12.89 0.00916% 0.00916% 0.00916% 0.00916% 0.00641% Groh Family Trust 11.00 0.00781% 0.00781% 0.00781% 0.00781% 0.00547% Post conversion Class A-1 Common Total 65,998.70 46.88874% 46.88874% 46.88874% 46.88874% 32.82212% Class B Limited Partners: Kevin T Aul 6,169.76 6,169.76 5.22143% 5.33189% 2.77317% 2.83183% 2.77317% 2.831832% 2.83183% Santom, Inc. 81,799.08 81,799.08 69.32604% 70.79258% 36.81993% 37.59883% 36.81993% 37.598830% 37.59883% Wynne Family Trust 18,363.06 18,363.06 15.54054% 15.86929% 8.25378% 8.42838% 8.25378% 8.428379% 8.42838% Bobby J. Baggett 1,762.14 1,762.14 1.52287% 1.52287% 0.80881% 0.80881% 0.80881% 0.80881% 0.80881% Gold Prime 2011 Trust 834.69 834.69 0.70639% 0.72133% 0.37517% 0.38311% 0.37517% 0.383108% 0.38311% Total Class B Limited Partners 108,928.73 108,928.73 92.31726% 94.23795% 49.03086% 50.05096% 49.03086% 50.05096% 50.05096%
Class C Limited Partners: [reserved] - - Total Class C Limited Partners - -
Class D Limited Partners (profits interest): James Jeffs 1,285.00 1,285.00 Robert Holland 1,285.00 1,285.00 Total Class D Limited Partners 2,570.00 2,570.00 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000%
Class E Limited Partners (profits interest): [reserved] - - Total Class E Limited Partners - - 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 14.06662% Total Limited Partners 118,166.09 184,164.79 100.00000% 100.00000% 100.00000% 100.00000% 100.00000% 100.00000% 100.00000%
General Partner: Primexx Energy Corporation General Partner interest 117.48 117.48 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% Total General Partner 117.48 117.48 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000%
Total Legacy Unitholders and General Partner 118,283.57 184,282.27 100.00000% 100.00000% 100.00000% 100.00000% 100.00000% 100.00000% 100.00000%
Note: EV Value has been reduced to $175 million. All grey highlighted rows indicate a separate class of Units
EXH. 1 - PAGE 120 5722 Exhibit , to the Third Amended and Restated Limited Liability Company Agreement of Primexx Energy Partners, Ltd. (Legacy Waterfall Allocations)
Page 5720 Primexx Energy Partners, Ltd. Legacy Waterfall Allocations
Allocation to Legacy Unitholders - Page 2 # of Common # of Common ALLOCATION OF CAPITAL TRANSACTIONS Units Units Prior to Series A Preferred Conversion After Series A Preferred Conversion to Class A-1 Prior to Series A After Series A PROFITS LOSSES PROFITS AND LOSSES Conversion to Conversion to Class A Pre-Payout Class A Post-Payout Class A Pre-Payout Class A Post-Payout Class A Pre-Payout Class A Post-Payout Class A-1 Post-Payout Class A-1 Units Class A-1 Units Percentages Percentages Percentages Percentages Percentages Percentages Percentages Class A Common Limited Partners: BF Partners, L.P. 1,746.92 1,746.92 2.01296% 1.50972% 2.01296% 1.50972% 0.98859% 0.74144% 0.74144% Cohen, Howard M. 42.53 42.53 0.04901% 0.03676% 0.04901% 0.03676% 0.02407% 0.01805% 0.01805% Cohen, Marjory H. 42.53 42.53 0.04901% 0.03676% 0.04901% 0.03676% 0.02407% 0.01805% 0.01805% Edidin, Gary 1,191.77 1,191.77 1.37326% 1.02995% 1.37326% 1.02995% 0.67443% 0.50582% 0.50582% Gary Edidin Exempt Trust 339.99 339.99 0.39177% 0.29383% 0.39177% 0.29383% 0.19240% 0.14430% 0.14430% Gary Edidin Family Trust 850.88 850.88 0.98046% 0.73535% 0.98046% 0.73535% 0.48152% 0.36114% 0.36114% WM. A. Friedlander Rev. Tr. Dtd 2/20/98 1,564.94 1,564.94 1.80326% 1.35245% 1.80326% 1.35245% 0.88560% 0.66420% 0.66420% Gilbert, Diane 31.29 31.29 0.03606% 0.02704% 0.03606% 0.02704% 0.01771% 0.01328% 0.01328% Groh Family Trust 55.62 55.62 0.06409% 0.04807% 0.06409% 0.04807% 0.03148% 0.02361% 0.02361% Marmol, Guillermo G. 489.87 489.87 0.56447% 0.42335% 0.56447% 0.42335% 0.27722% 0.20791% 0.20791% Spersibs, LP 219.54 219.54 0.25298% 0.18973% 0.25298% 0.18973% 0.12424% 0.09318% 0.09318% Schlesinger, Helen 45.74 45.74 0.05270% 0.03953% 0.05270% 0.03953% 0.02588% 0.01941% 0.01941% Helen Schlesinger Trust 45.74 45.74 0.05270% 0.03953% 0.05270% 0.03953% 0.02588% 0.01941% 0.01941% Total Class A Common Limited Partners 6,667.36 6,667.36 7.68274% 5.76205% 7.68274% 5.76205% 3.77309% 2.82982% 2.82982% Series A Preferred Partners: Convertible Series A Preferred 8% Coupon + recoup any prior losses (See Legacy Waterfall) n/a - converted n/a - converted n/a - converted Primexx Opportunity Fund, LP 64,214.35 45.62105% 45.62105% 31.93473% Las Rosas Capital LLC 1,751.46 1.24432% 1.24432% 0.87103% Cohen, Howard M. 4.50 0.00320% 0.00320% 0.00224% Cohen, Marjory H. 4.50 0.00320% 0.00320% 0.00224% Gilbert, Diane 12.89 0.00916% 0.00916% 0.00641% Groh Family Trust 11.00 0.00781% 0.00781% 0.00547% Post conversion Class A-1 Common Total 65,998.70 46.88874% 46.88874% 32.82212% Class B Limited Partners: Kevin T Aul 6,169.76 6,169.76 5.22143% 5.33189% 5.22143% 5.33189% 2.56431% 2.618556% 2.61856% Santom, Inc. 81,799.08 81,799.08 69.32604% 70.79258% 69.32604% 70.79258% 34.04689% 34.767128% 34.76713% Wynne Family Trust 18,363.06 18,363.06 15.54054% 15.86929% 15.54054% 15.86929% 7.63216% 7.793607% 7.79361% Bobby J. Baggett 1,762.14 1,762.14 1.52287% 1.52287% 1.52287% 1.52287% 0.74790% 0.74790% 0.74790% Gold Prime 2011 Trust 834.69 834.69 0.70639% 0.72133% 0.70639% 0.72133% 0.34692% 0.354255% 0.35426% Total Class B Limited Partners 108,928.73 108,928.73 92.31726% 94.23795% 92.31726% 94.23795% 45.33817% 46.28145% 46.28145%
Class C Limited Partners: [reserved] - - Total Class C Limited Partners - -
Class D Limited Partners (profits interest): James Jeffs 1,285.00 1,285.00 2.00000% 2.00000% 2.00000% Robert Holland 1,285.00 1,285.00 2.00000% 2.00000% 2.00000% Total Class D Limited Partners 2,570.00 2,570.00 0.00000% 0.00000% 0.00000% 0.00000% 4.00000% 4.00000% 4.00000%
Class E Limited Partners (profits interest): [reserved] - - Total Class E Limited Partners - - 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 14.06662% Total Limited Partners 118,166.09 184,164.79 100.00000% 100.00000% 100.00000% 100.00000% 100.00000% 100.00000% 100.00000%
General Partner: Primexx Energy Corporation General Partner interest 117.48 117.48 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% Total General Partner 117.48 117.48 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000% 0.00000%
Total Legacy Unitholders and General Partner 118,283.57 184,282.27 100.00000% 100.00000% 100.00000% 100.00000% 100.00000% 100.00000% 100.00000%
Note: EV Value has been reduced to $175 million. All grey highlighted rows indicate a separate class of Units
EXH. 1 - PAGE 121 5723 Exhibit , to the Third Amended and Restated Limited Liability Company Agreement of Primexx Energy Partners, Ltd. (Legacy Waterfall Allocations)
Page 5721 ANNEX A
EXH. 1 - PAGE 122 5724
Page 5722 PRIMEXX ENERGY PARTNERS, LTD
July 12, 2016
BPP HoldCo LLC c/o The Blackstone Group 345 Park Avenue New York, NY 10154
Dear Sir/Madam:
Reference is made to the Limited Liability Agreement by and among Primexx Energy Partners, LTD (the “Partnership”), BPP HoldCo LLC (the “VCOC Investor”) and the other parties thereto, dated as of July 12, 2016 (the “LP Agreement”).
The Partnership hereby agrees that for so long as the VCOC Investor, directly or through one or more subsidiaries, continues to hold any Series B Preferred Units (or other securities of the Partnership into which such Series B Preferred Units may be converted or for which such Series B Preferred Units may be exchanged), without limitation or prejudice of any the rights provided to the VCOC Investor under the LP Agreement, the Partnership shall:
Provide the VCOC Investor or its designated representative with:
(i) the right to visit and inspect any of the offices and properties of the Partnership and its subsidiaries during normal business hours at the VCOC Investor’s expense (and subject to, in the case of the Partnership’s oil and gas properties, (a) the execution of an access agreement reasonably satisfactory to the Partnership and (b) if the property is not operated by the Partnership or an affiliate, subject to approval of the operator of the property) and inspect and copy the books and records of the Partnership and its subsidiaries, at such times as the VCOC Investor shall reasonably request;
(ii) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Partnership, consolidated balance sheets of the Partnership and its subsidiaries as of the end of such period, and consolidated statements of income and cash flows of the Partnership and its subsidiaries for the period then ended prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis, except as otherwise noted therein, and subject to the absence of footnotes and to year-end adjustments;
(iii) as soon as available and in any event within 120 days after the end of each fiscal year of the Partnership, a consolidated balance sheet of the Partnership and its subsidiaries as of the end of such year, and consolidated statements of income and cash flows of the Partnership and its subsidiaries for the year then ended prepared in conformity with generally accepted accounting principles in the United States
KE 42348597 EXH. 1 - PAGE 123 5725
Page 5723 applied on a consistent basis, except as otherwise noted therein, together with an auditor’s report thereon of a firm of established national reputation;
(iv) to the extent the Partnership is required by law or pursuant to the terms of any outstanding indebtedness of the Partnership to prepare such reports, any annual reports, quarterly reports and other periodic reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, actually prepared by the Partnership as soon as available; and
(v) copies of all materials provided to the Board (as defined in the LP Agreement) at the same time as provided to the directors of the Board and if requested, copies of all materials provided to the board of directors of the Partnership’s subsidiaries.
Make appropriate officers and directors of the Partnership, and its subsidiaries, available periodically and at such times as reasonably requested by the VCOC Investor for consultation with the VCOC Investor or its designated representative with respect to matters relating to the business and affairs of the Partnership and its subsidiaries, including, without limitation, significant changes in management personnel and compensation of employees, introduction of new products or new lines of business, important acquisitions or dispositions of plants and equipment, significant research and development programs, the purchasing or selling of important trademarks, licenses or concessions or the proposed commencement or compromise of significant litigation;
To the extent consistent with applicable law (and with respect to events which require public disclosure, only following the Partnership’s public disclosure thereof through applicable securities law filings or otherwise), inform the VCOC Investor or its designated representative in advance with respect to any significant corporate actions, including, without limitation, extraordinary dividends, mergers, acquisitions or dispositions of assets, issuances of significant amounts of debt or equity and material amendments to the certificate of incorporation or formation or other organizational documents of the Partnership or any of its subsidiaries, and to provide the VCOC Investor or its designated representative with the right to consult with the Partnership and its subsidiaries with respect to such actions; and
Provide the VCOC Investor or its designated representative with such other rights of consultation which the VCOC Investor’s counsel may determine to be reasonably necessary under applicable legal authorities promulgated after the date hereof to qualify its investment in the Partnership as a “venture capital investment” for purposes of the United States Department of Labor Regulation published at 29 C.F.R. Section 2510.3-101(d)(3)(i) (the “Plan Asset Regulation”).
The Partnership agrees to consider, in good faith, the recommendations of the VCOC Investor or its designated representative in connection with the matters on which it is consulted as described above, recognizing that the ultimate discretion with respect to all such matters shall be retained by the Partnership.
The VCOC Investor agrees, and will require each designated representative of the VCOC Investor to agree, to hold in confidence and not use or disclose to any third party (other than its
2 EXH. 1 - PAGE 124 5726
Page 5724 legal counsel and accountants) any confidential information provided to or learned by such party in connection with the VCOC Investor’s rights under this letter agreement except as may otherwise be required by law or legal, judicial or regulatory process, provided that the VCOC Investor takes reasonable steps to minimize the extent of any such required disclosure.
In the event the VCOC Investor or any of the other purchasers transfers all or any portion of their investment in the Partnership to an affiliated entity (or to a direct or indirect wholly- owned conduit subsidiary of any such affiliated entity) that is intended to qualify as a venture capital operating company under the Plan Asset Regulation, such affiliated entity shall be afforded the same rights with respect to the Partnership afforded to the VCOC Investor hereunder and shall be treated, for such purposes, as a third party beneficiary hereunder.
This letter agreement and the rights and the duties of the parties hereto shall be governed by, and construed in accordance with, the laws of the State of New York and may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.
[Signature Pages Follow]
EXH. 1 - PAGE 125 5727
Page 5725 PRIMEXX ENERGY PARTNERS, LTD.
By: Primexx Energy Corporation, its general partner
By:________________________________ Name: Thomas H. Fagadau Title: President
[Signature Page to VCOC Letter] EXH. 1 - PAGE 126 5728
Page 5726 Agreed and acknowledged as of the date first above written:
BPP HOLDCO LLC
By:____________________________ Name: Angelo Acconcia Title: President
[Signature Page to VCOC Letter] EXH. 1 - PAGE 127 5729
Page 5727 ANNEX B PRIVILEGED AND CONFIDENTIAL
[*], 2016
Summary of Proposed Terms
Term Sheet - Royalties Vehicle
Structure: Delaware limited liability company (the “Company”) to be formed by (i) affiliates of Blackstone Energy Partners II L.P. (“Blackstone”), (ii) certain members of the Primexx Energy Partners, Ltd. management team (“Management”), and (iii) the existing equityholders of Primexx Energy Partners, Ltd. (the “Shareholders,” and collectively with Blackstone and Management, the “Members”). Business Purpose: Blackstone will invest in the Company for the purpose of forming a partnership between Blackstone, Management and the Shareholders to enable Management and the Shareholders to participate in, and if desired, invest in, certain royalties, overriding royalties, mineral rights and other interests in hydrocarbon interests (other than working interests) in the Delaware basin. Capitalization & Upon execution of definitive documentation (such date, the “Effective Date”), Securities Issued: Blackstone will make an initial nominal capital contribution to the Company in exchange for membership interests of the Company (the “Membership Interests”). The Company will have two classes of Membership Interests outstanding on the Effective Date, (i) Common Membership Interests (the “Common Units”) and (ii) Class A Profit-Sharing Membership Interests (the “Class A Units” and together with the Common Units, the “Units”). The Common Units will be issued to Blackstone, and as applicable, Management and Shareholders, in accordance with their respective capital commitments as contemplated below. The Class A Units will be issued to certain members of Management and the Shareholders and will be subject to customary straight-line vesting over a period of five (5) years. In addition, the Class A Units will vest on an accelerated basis in connection with certain liquidity events. Ownership on Common Units. 90.909% (Blackstone) / 9.091% (Management / Shareholders) Effective Date: (assumes Shareholder and Management Commitment taken up and funded in full) Class A Units. 65% (Management) / 35% (Shareholders) Equity (A) Blackstone will commit to contribute up to $500 million to the Company and Commitments and (B) Management, Shareholders and certain of their designees (family and friends) Funding: will have the opportunity to commit to contribute up to $50 million (which amount and commitment will be finalized no later than 45 days after the Effective Date) (the “Shareholder and Management Commitment”), in each case for the purpose of funding certain expenditures consistent with the Business Purpose. The Shareholder and Management Commitment will be funded on a pro rata basis alongside Blackstone’s $500 million equity commitment; thereafter, Shareholders and Management will have the right but not the obligation to continue funding their pro-rata share of future capital calls until they elect not to fund any such capital call. The parties will agree on an initial general and administrative budget to cover expenses in connection with pursuing acquisitions and investments consistent with the Business Purpose for the Company. The Board will have the right to call capital from the applicable commitments from time to time on a pro rata basis for the purposes of funding certain expenditures
KE 41890827 EXH. 1 - PAGE 128 5730
Page 5728 consistent with the Business Purpose. Distributions The Company’s distributions will be applied in the following order of priority: Waterfall: x First, pro rata to the Common Units until all capital contributions made by the holders of the Common Units are returned and the holders of the Common Units have achieved an IRR of 13.5% on their Common Unit invested capital. x Second, up to 12.5% to the outstanding vested Class A Units and the remainder pro rata to the Common Units until the holders of the Common Units have achieved both (i) an IRR of 20% and (ii) a 2.05x net return on their Common Unit invested capital. x Third, up to 22.5% to the outstanding vested Class A Units and the remainder pro rata to the Common Units until the holders of the Common Units have achieved both (i) an IRR of 30% and (ii) a 3.05x net return, in each case on their Common Unit invested capital. x Fourth, thereafter, 32.5% to the outstanding vested Class A Units and the remainder pro rata to the Common Units. The Company will make customary tax distributions to the Members that participate ahead of other distributions in the distributions waterfall. All tax distributions to a Member will be viewed as advance payments of a Member’s other distributions. Board and Voting Blackstone will control the board of managers of the Company (the “Board”) and no Rights: holder of Units will have voting rights as a holder of such Units. The Board will be comprised of 9 managers, of which Blackstone will have the right to appoint 5 managers, and of which Management and the Shareholders will collectively have the right to appoint 4 managers.
All Board matters will require majority approval, except for the following matters, which will require the Board’s unanimous consent: x Amendment of or modification to any governance documents of the Company in a manner that would result in a disproportionate, material and adverse effect on any rights, preferences or privileges of the Common Units held by Shareholders or Management or the Class A Units. x Issuance or repurchase of any equity of the Company (other than as provided under the Class A Equity Plan). x Amend or terminate the Class A Equity Plan. The day-to-day business activities of the Company will be conducted pursuant to a customary management services arrangement with Primexx. Liquidity Event: At any time, Blackstone may cause an in-kind distribution of all of the assets of the Company (a “Liquidity Event”) in accordance with the distributions waterfall. The parties agree to work together in good faith to structure the in-kind distribution of the Company’s assets so as to avoid triggering any consent and/or preferential rights of purchase to which such assets may be subject. Transfer Subject to certain customary exceptions (including transfers to a Member’s Restrictions: beneficiaries or estate upon death, or to a trust or other entity controlled by the transferring Member for estate planning purposes), no Member will be permitted to transfer its Units without Blackstone’s consent. Tag-Along Rights: The other Members will have customary tag-along rights on proposed transfers of
2 EXH. 1 - PAGE 129 5731
Page 5729 Units to a third party by Blackstone. Drag-Along Rights: Blackstone will have customary drag-along rights with respect to the other Members in connection with a proposed sale of 100% of the Units. Company Call Upon the death, disability or termination of employment of any of the Management Rights: Members, the Company will have a customary call option on such Management Member’s Units. Additional Rights & Definitive agreement will include additional rights and restrictions customary for a Restrictions: transaction of this nature. Confidentiality: Parties agree to keep the existence and terms of the proposed transactions described in this Summary of Proposed Terms confidential. In addition, the parties agree not to disclose the fact that any discussions, negotiations or interactions between the parties with respect to any of the foregoing have taken place, or any facts with respect to such discussions, negotiations or interactions, including the name of the other party, in each case without the prior written approval of the other party. Binding Effect: This Summary of Proposed Terms constitutes a preliminary, non-binding indication of interest by Blackstone and, together with any discussions or course of conduct, is not intended, and shall not be deemed, to create any binding obligation on the part of Blackstone or any of its respective affiliates to make any investment or to continue its consideration of any such investment; provided, however, notwithstanding the foregoing, the obligations with respect to confidentiality set forth above shall be binding on the parties. Governing Law: Delaware.
3 EXH. 1 - PAGE 130 5732
Page 5730 IN WITNESS WHEREOF, this proposed Summary of Proposed Terms has been executed by the duly authorized representatives of the parties as of the date(s) set forth below.
BLACKSTONE MANAGEMENT PARTNERS L.L.C.
By: Name: Angelo G. Acconcia Title: Member
PRIMEXX ENERGY PARTNERS, LTD.
By: Primexx Energy Corporation, its general partner
By: Name: Title:
[MANAGEMENT]
By: [*]
By: Name: Title:
[SHAREHOLDERS]
By: [*]
By: Name: Title:
[Signature Page to Royalties Term Sheet]
EXH. 1 - PAGE 131 5733
Page 5731 APPENDIX 9 15-25-00120-CV
SUPPLEMENTAL CLERK’S RECORD VOLUME __1__ of __1__ FILED IN 15th COURT OF APPEALS AUSTIN, TEXAS Business Court Cause No. __24-BC01B-0010___ 10/15/2025 2:47:11 PM In the Business Court of Texas CHRISTOPHER A. PRINE Clerk Division ___1B___
Honorable _Bill Whitehill_, Judge Presiding ______________________________________________________________________________ Primexx Energy Opportunity Fund, LP, Primexx Energy Opportunity Fund II, LP, Plaintiff(s) vs.
Primexx Energy Corporation, M. Christopher Doyle, Angelo Acconcia, Blackstone Holdings III LP, Blackstone EMA II LLC, BMA VII, Blackstone Energy Management Associates II, LLC, BCP VII/BEP II Holdinigs Manager LLC, BX Primexx Topco LLC, BPP Holdco LLC, Blackstone Energy Partners II LP, Blackstone Management Associates VI LLC, Blackstone Capital Partners VII LP, Defendant(s) _________________________________________________________________________________
Appealed to the Court of Appeals for the Fifteenth District of Texas, at Austin, Texas. ______________________________________________________________________________ ATTORNEY FOR APPELLANT(S) Name __Stephen Shackelford, Jr.__________________________________________________
Address __1000 Louisiana Street, Suite 5100, Houston, Texas 77002______________________
Telephone no.: ___713-651-9366_________________________
Fax no.: ___713-654-6666_______________________________
E-mail address: _sshackelford@susmangodfrey.com___________________________
SBOT no.: __24062998______________________________
Attorney for: __Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP, Appellant(s) _________________________________________________________________
Delivered by TAMES to the Court of Appeals for the Fifteenth District of Texas at Austin, Texas on the 15th ___day of October _, 2025. BEVERLY CRUMLEY CLERK OF THE BUSINESS COURT
_________________________________
0001 COURT OF APPEAL NO. 15-25-00014-CV Trial Court Cause No. 24-BC01B-0010 In the Business Court 1B of, Texas Honorable Bill Whitehill, Judge Presiding
Primexx Energy Opportunity Fund, LP, Primexx Energy Opportunity Fund II, LP vs. PRIMEXX ENERGY CORPORATION, M. CHRISTOPHER DOYLE, ANGELO ACCONCIA,BLACKSTONE HOLDINGS III LP,BLACKSTONE EMA II LLC,BMA VII LLC,BLACKSTONE ENERGY MANAGEMENT ASSOCIATES II LLC,BCP VII/BEP II HOLDINGS MANAGER LLC,BX PRIMEXX TOPCO LLC,BPP HOLDCO LLC,BLACKSTONE ENERGY PARTNERS II LP,BLACKSTONE MANAGEMENT ASSOCIATES VII LLC,BLACKSTONE CAPITAL PARTNERS VII LP
INDEX
DOCUMENT TITLE FILE DATE PAGES
Cover Page N/A 1-1 Index N/A 2-2 Request for Supplemental Clerk’s Record with Exhibits 1-3 (filed 10/14/2025 3-208 under seal) Court’s Docket Sheet N/A 209 - 209 Bill of Costs 10/15/2025 210 - 210 Clerk’s Certificate 10/15/2025 211 - 211
0002 E-filed in the Office of the Clerk for the Business Court of Texas 10/14/2025 7:34 AM Accepted by: Alexis Jennings Case Number: 24-BC01B-0010 SUSMAN GODFREY L . L . P . A REGISTERED LIMITED LIABILITY PARTNERSHIP ONE MANHATTAN WEST NEW YORK, NEW YORK 10001-8602 (212) 336-8330 FAX (212) 336-8340 www.susmangodfrey.com __________
SUITE 5100 SUITE 1400 SUITE 3000 1000 LOUISIANA STREET 1900 AVENUE OF THE AMERICAS 401 UNION STREET HOUSTON, TX 77002-5096 LOS ANGELES, CALIFORNIA 90067-6029 SEATTLE, WASHINGTON 98101-2683 (713) 651-9366 (310) 789-3100 (206) 516-3880 __________ __________ __________
Stephen Shackelford, Jr. Direct Dial (212) 729-2012 E-Mail sshackelford@susmangodfrey.com
October 14, 2025
Beverly Crumley Clerk of Court Texas Business Court Clerk’s Office William P. Clements Building 300 West 15th Street, Suite 606 Austin, Texas 78701 BCClerk@txcourts.gov
Re: Primexx Energy Opportunity Fund, LP, et al. Primexx Energy Corporation, et al., Cause No. 24-BC01B-0010, in the First Business Court Division
Dear Clerk of Court:
Pursuant to Tex. R. App. P. 34.5(c)(1), Plaintiffs Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP respectfully request that the Clerk file a supplementation to the appellate record in No. 15-25-00120-CV in the Fifteenth Court of Appeals.
On March 7, 2025, Plaintiffs filed an Opposition to the Special Appearance of Blackstone Inc. and a Supplemental Opposition to the Special Appearance of Angelo Acconcia. Plaintiffs filed the briefs and exhibits on the public docket with partial or complete redactions of information that the Blackstone Defendants had designated as Confidential. The Court, through the Court Manager for Division 1B, received the full, unredacted versions of the briefing and the exhibits
0003 Subject: RE: Primexx - Sealed Filings Date: Monday, March 10, 2025 at 12:53:54 PM Eastern Daylight Time From: Susan Fox-Bowen
EXTERNAL Email Received. Thank you.
Susan Fox-Bowen, MBA Court Manager Texas Business Courts—Dallas, Division 1B 8080 Park Lane, Suite 500 Dallas, TX 75231 (945) 495-1718
From: Sarah Hannigan
CAUTION: This email originated from outside of the Texas Judicial Branch email system. DO NOT click links or open attachments unless you expect them from the sender and know the content is safe.
Ms. Fox-Bowen and Counsel,
0004 1 of 2 Please see attached the unredacted briefs for Plaintiffs’ Opposition to Blackstone Inc.’s Special Appearance and Plaintiffs’ Supplemental Opposition to Acconcia’s Special Appearance. The exhibits are in the Dropbox below. Pursuant to the protective order, these were filed with redactions because they contain information designated by Defendants as Confidential or AEO. Thank you.
https://www.dropbox.com/scl/fo/zioboijy3gjw8on7ielru/AJr3iLMHUAagjXR5kBumGGQ? rlkey=bv24zuyidq89zhighwqrlncqd&st=jwhe3g59&dl=0 PW: S%ke7*
Best, Sarah
Sarah Hannigan | Susman Godfrey LLP 212.729.2054 (o), 617.645.7003 (c) One Manhattan West, 50th Floor New York, New York 10001 shannigan@susmangodfrey.com
This e-mail may contain privileged and confidential information. If you received this message in error, please notify the sender and delete it immediately.
0005 2 of 2 NO. 24-BC01B-0010
§ PRIMEXX ENERGY OPPORTUNITY § IN THE BUSINESS COURT FUND, LP and PRIMEXX ENERGY § OPPORTUNITY FUND II, LP, § § Plaintiffs, § v. § FIRST BUSINESS COURT § DIVISION PRIMEXX ENERGY § CORPORATION, M. CHRISTOPHER § DOYLE, ANGELO ACCONCIA, § BLACKSTONE INC., BLACKSTONE § HOLDINGS III LP, BLACKSTONE § EMA II LLC, BMA VII LLC, § BLACKSTONE ENERGY § DALLAS COUNTY, TEXAS MANAGEMENT ASSOCIATES II § LLC, BLACKSTONE ENERGY § PARTNERS II LP, BLACKSTONE § MANAGEMENT ASSOCIATES VII § CONTAINS INFORMATION LLC, BLACKSTONE CAPITAL § DESIGNATED AS PARTNERS VII LP, BCP VII/BEP II § CONFIDENTIAL OR AEO HOLDINGS MANAGER LLC, BX § PRIMEXX TOPCO LLC, and BPP § HOLDCO LLC,
Defendants.
PLAINTIFFS’ OPPOSITION TO BLACKSTONE INC.’S SPECIAL APPEARANCE
0006 Table of Contents
I. Summary of Argument ................................................................. 2
II. Background ..................................................................................... 3
1. Blackstone Inc.’s fire sale of Primexx’s oil assets almost completely wipes out Plaintiffs’ investments worth $200 million. .................................................................. 3
2. Blackstone Inc. directly controlled the Primexx investment. ............................................................................... 6
III. Legal Standard ............................................................................. 14
IV. Argument ....................................................................................... 17
1. The Court has personal jurisdiction over Blackstone, Inc. .......................................................................................... 17
A. Blackstone Inc. has minimum contacts in Texas regarding the subject matter of this dispute. .......................................................................... 18
B. The exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. ........................................................................... 23
2. The Court should disregard Blackstone Inc.’s arguments in support of its Special Appearance. ................. 24
A. Blackstone and its employees performed numerous significant acts in Texas or directed at Texas. ........................................................................ 25
B. Blackstone Inc.’s argument that its receipt of shares cannot support the exercise of jurisdiction has no support in Texas law..................... 29
ii 0007 C. By invoking the Partnership Agreement, Blackstone Inc. has waived its Special Appearance. .................................................................. 32
V. Conclusion ..................................................................................... 34
iii 0008 TABLE OF AUTHORITIES
Page(s)
Cases
BMC Software Belgium, NV. v. Marchand, 83 S.W.3d 789 (Tex. 2002) ................................................................... 16
Carlile Bancshares, Inc. v. Armstrong, No. 02-14-00014-CV, 2014 WL 3891658 (Tex. App.—Fort Worth Aug. 7, 2014, no pet.) ................................................................ 20
Coleman v. Klockner & Co. AG, 180 S.W.3d 577 (Tex. App.—Houston [14th Dist.] 2005, no pet.) ....................................................................................................... 16
Copeland v. Mayers, 657 S.W.3d 599 (Tex. App.—El Paso 2022, pet. denied) .................... 34
Glencoe Cap. Partners II, L.P. v. Gernsbacher, 269 S.W.3d 157 (Tex. App.—Forth Worth 2008, no pet.) .................. 20
Glob. Paragon Dallas, LLC v. SBM Realty, LLC, 448 S.W.3d 607 (Tex. App.—Houston [14th Dist.] 2014, no pet.) ........................................................................................ 34
Google, LLC v. State, No. 13-23-00114-CV, 2025 WL 52611 (Tex. App.—Corpus Christi Jan. 9, 2025, no pet. h.) ........................................................... 28
Henkel v. Emjo Invs., Ltd., 480 S.W.3d 1 (Tex. App.—Houston [1st Dist.] 2015, no pet.) ................................................................................................. 16, 28
Huynh v. Nguyen, 180 S.W.3d 608 (Tex. App.—Houston [14th Dist.] 2005, no pet.) ........................................................................................... 16, 20, 27
iv 0009 Karaa v. Aramoonie, No. 05-17-00571-CV, 2018 WL 1373958 (Tex. App.— Dallas Mar. 19, 2018, no pet.) ............................................................. 31
Kelly v. Gen. Interior Const., Inc., 301 S.W.3d 653 (Tex. 2010) ................................................................. 35
Klingenschmitt v. Weinstein, 342 S.W.3d 131 (Tex. App.—Dallas 2011, no pet.) ............................. 33
M&F Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., Inc., 512 S.W.3d 878,885 (Tex. 2017) ........................................ 14, 15, 17, 18
Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142 (Tex. 2013) ..................................................... 19, 21, 23
Moring v. Inspectorate Am. Corp., 529 S.W.3d 145 (Tex. App—Houston [14th Dist.] 2017, pet. denied) ..................................................................................... 19, 27
Old Republic Nat. Title Ins. Co. v. Bell, 549 S.W.3d 550 (Tex. 2018) ........................................................... 30, 34
Pulmosan Safety Equip. Corp. v. Lamb 273 S.W.3d 829 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) ........................................................................................... 29
Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333 (Tex. 2009) .......................................................... passim
Stocksy United v. Morris, 592 S.W.3d 538 (Tex. App.—Houston [1st Dist.] 2019, no pet.) ....................................................................................................... 16
Touradji v. Beach Cap. P’ship, L.P., 316 S.W.3d 15 (Tex. App.—Houston [1st Dist.] 2010, no pet.) ....................................................................................................... 16
v 0010 Willow Tree Consulting Group, LLC v. South Dakota Trust Company, LLC, No. 05-22-00176-CV, 2023 WL 3749803 (Tex. App.— Dallas June 1, 2023, no pet.) ............................................................... 31
Statutes
Tex. Civ. Prac. & Rem. Code Ann. § 17.042 ............................................ 14
vi 0011 Table of Abbreviations
Abbreviation Definition PEC Primexx Energy Corporation BPP HoldCo BPP HoldCo LLC
Third Amended and Restated Partnership Agreement Limited Partnership Agreement
Petition First Amended Petition
vii 0012 Blackstone Inc. invested hundreds of millions of dollars in a Texas
oil corporation governed by a Partnership Agreement with a Texas forum
selection clause. Blackstone Inc. tasked its Senior Managing Director,
Angelo Acconcia, with a multi-year continuing obligation to oversee that
investment. Blackstone Inc. negotiated with a Texas partnership to
become the majority shareholder in PEC, a Texas corporation that owned
Texas real assets, and then collected the proceeds from Texas after
orchestrating the sale of those Texas assets to a different Texas-based
company. Blackstone Inc. will have every opportunity to introduce
evidence that may ultimately establish it isn’t liable for the wrongful
conduct at issue in this lawsuit, but there’s no legitimate question that
this Court has jurisdiction over Blackstone Inc. to resolve this dispute.
Blackstone Inc. is the parent company of Blackstone Holdings III
LP, Blackstone EMA II LLC, BMA VII LLC, Blackstone Energy
Management Associates II LLC, Blackstone Energy Partners II LP,
Blackstone Management Associates VII LLC, Blackstone Capital
Partners VII LP, BCP VII/BEP II Holdings Manager LLC, BX Primexx
Topco LLC, and BPP HoldCo LLC (the “Blackstone Entities”). With the
exception of BPP HoldCo LLC, each of the Blackstone Entities contested
1 0013 this Court’s jurisdiction by filing Special Appearances. See No. 24-
BC01A-0010, October 30, 2024. On January 17, 2025, the Court denied
those Special Appearances on the basis that the then-Specially
Appearing Entities had waived their challenges to its personal
jurisdiction when they made affirmative appearances in a predecessor
case before a Dallas County court in 2023. See February 10, 2025
Opinion; Ex. 1 (Defendants’ Joint Motion to Dismiss for Improper Venue
in DC-22-17122); Ex. 2 (Defendants’ Special Exceptions and Original
Answer in DC-22-17122).
I. Summary of Argument
Both the First Amended Petition and the facts in evidence
demonstrate that Blackstone Inc. conducted substantial business with
Texas persons and corporations, including direct involvement in the
investment in Primexx Energy Partners (a Texas partnership), PEC (a
Texas oil company), and the sale of the Texas oil assets at issue in this
case to another Texas-based oil company. Blackstone Inc. invested
millions of dollars into the Texas oil assets, and later received hundreds
of millions of dollars and millions of shares resulting from the Callon
Sale, in which Blackstone Inc. sought to profit from another Texas-based
2 0014 business. Each of the Blackstone Entities, over which this Court has
already asserted jurisdiction, sit below Blackstone Inc. in a direct chain
that starts with Blackstone Inc. and ends with BPP HoldCo, the
Blackstone entity that directly entered the Partnership Agreement
giving rise to this dispute. As explained further below, Blackstone Inc.
operates as a “matrix” organization in which employees and groups
affiliated with one Blackstone Entity often act on behalf of and for the
benefit of another. Angelo Acconcia, a Blackstone Inc. Senior Managing
Director, confirmed that he was intimately involved in directing and
managing the Primexx investment on behalf of Blackstone Inc. and for
Blackstone Inc.’s benefit. Blackstone Inc.’s involvement in the
Partnership Agreement, investment in Primexx Energy Partners and
PEC, ongoing governance of PEC, and direction of the Callon Sale—all
involving Texas partnerships, corporations, and employees—gives rise to
specific personal jurisdiction.
II. Background
1. Blackstone Inc.’s fire sale of Primexx’s oil assets almost completely wipes out Plaintiffs’ investments worth $200 million.
Blackstone Inc., one of New York’s largest private equity
companies, rushed through a fire sale of the valuable Texas oil assets of
3 0015 Primexx Energy Partners, Ltd. (“Primexx Energy Partners,” and
collectively with the subsidiaries and assets it controlled, “Primexx”) in
2021, almost completely wiping out Plaintiffs’ minority stakes, which
were independently valued at more than $200 million just before the sale.
As Plaintiffs allege, and as discovery has already begun to confirm,
Blackstone Inc. was directly involved in the Primexx investment, and
senior Blackstone Inc. employees were directly responsible for the fire
sale of Primexx’s Texas oil assets.
In June 2021, Primexx Resource Development LLC was a
successful Delaware Basin energy company that was independently
valued at $1.43 billion. Plaintiffs Primexx Energy Opportunity Funds I
and II were minority investors in Primexx with stakes worth more than
$200 million at that time. Blackstone Inc.’s and Plaintiffs’ investments
in Primexx were structured through a partnership governed by the Third
Amended and Restated Limited Partnership Agreement (“Partnership
Agreement”). Ex. 3. Blackstone Inc., as the majority shareholder and
investor, controlled the majority of the board of directors of Primexx
Energy Corporation (“PEC”), which was the Managing General Partner
of Primexx Energy Partners. Id. As described below, Blackstone Inc. was
4 0016 closely involved in the Primexx investment, including by contributing
capital and having direct responsibility for the fire sale of the Texas oil
assets at issue in this case.
Callon Petroleum Company (“Callon”) made several lowball offers
to purchase Primexx in spring 2021. By late May, Callon’s offer stood at
$425 million in cash and 8.5 million Callon shares. But in June 2021, an
independent third-party valuation firm appraised Primexx Energy
Partners at $1.43 billion. First Amended Petition (“Petition”) at ¶ 2. At
that valuation, Plaintiffs’ investments in Primexx Energy Partners were
collectively worth more than $200 million. Id. On June 3, 2021,
Christopher Doyle, the CEO of PEC, told the PEC board that Callon’s
offer was “not nearly as compelling as” simply continuing to operate as a
“stand alone” entity. Petition at ¶ 69. At the same time, Callon’s share
price declined sharply throughout the summer, and on July 28, 2021, Mr.
Doyle told a PEC board member that the latest Callon offer of $440
million and 9.2 million shares was still far “too low.” Petition at ¶ 75. But
only two days later, Blackstone Inc. told the PEC board that the deal
would close on those same terms. Petition at ¶ 77. Blackstone Inc.
informed the board of the impending sale on Friday July 30, and invoked
5 0017 its drag-along rights under the Partnership Agreement to force the entire
board to approve the sale by Monday August 2. Petition at ¶ 83. Under
the waterfall payment structure laid out in the Partnership Agreement,
Blackstone Inc. was the only investor to receive any significant proceeds
from the sale. Petition at ¶ 96. Plaintiffs, who owned preferred shares
worth at least $200 million, suffered a near total loss on their investment.
Plaintiffs initially filed this lawsuit in Dallas County in December 2022,
stating claims for breach of contract, breach of fiduciary duty, and
knowing participation in and aiding and abetting those breaches of
fiduciary duty. See DC-22-17122.
2. Blackstone Inc. directly controlled the Primexx investment.
On February 21, 2025, Plaintiffs took a jurisdictional deposition of
Angelo Acconcia, Blackstone Inc.’s former Senior Managing Director. Ex.
4. Mr. Acconcia’s testimony demonstrates that this Court has jurisdiction
over Blackstone Inc. for this action.
Mr. Acconcia confirmed that he managed the Primexx investment
on behalf of Blackstone Inc., not BPP HoldCo, throughout the relevant
time period in this case. In fact, Mr. Acconcia did not even recall that he
ever served as the President of BPP HoldCo, Ex. 4 at 26:11–27:21—
6 0018 despite signing the Partnership Agreement on behalf of BPP HoldCo as
its President. However, Mr. Acconcia did confirm that he worked for
Blackstone Inc. from 2004 to 2021 and served as its “Senior Managing
Director” from approximately 2015 through 2021. Ex. 4 at 15:21–16:16.
While managing Blackstone’s massive Primexx investment, Mr. Acconcia
reported directly to Joe Baratta, Blackstone Inc.’s Global Head of Private
Equity and Blackstone Inc. Board Director1, and David Foley, the
Blackstone Inc. Senior Managing Director “responsible for overseeing
Blackstone’s private equity investment activities in the energy sector on
a global basis.” Ex. 4 at 18:21–19:32; 17:18–25; 35:7–19.
While managing Primexx, Mr. Acconcia used a @blackstone.com
email address, the domain used by Blackstone Inc., as confirmed in its
Securities and Exchange Commission filings such as the 10-K that
Blackstone Inc. attached to its Special Appearance. See Ex. B to
Blackstone Inc.’s Special Appearance at Exhibit 10.7, Article III and
Exhibit A. Mr. Acconcia’s email signature that he used while managing
Primexx read “Senior Managing Director, Private Equity, The
1 https://www.blackstone.com/people/joseph-baratta-2/ 2 https://www.blackstone.com/people/david-foley/
7 0019 Blackstone Group,” with the same 345 Park Avenue address that
Blackstone Inc. lists in its Securities and Exchange Commission filings.
Ex. 6. The Blackstone Group informed the Securities and Exchange
Commission that it changed its name to Blackstone Inc. effective August
6, 2021. Ex. 5.
As Mr. Acconcia explained in his deposition, Blackstone Inc. and its
subsidiaries operated as a single “matrix.” Ex. 4 at 18:21–19:9. In fact,
when shown during his deposition the portion of the Blackstone
organizational chart that includes the Blackstone Entities (which of
course included BPP HoldCo, the entity of which he acted as “President”
for the purposes of signing the Partnership Agreement), Mr. Acconcia
recognized only the names “Blackstone,” “Primexx,” and “Blackstone
Energy Partners.” Ex. 4 at 23:2–18. He recalled no specifics of the legal
structures or legal entities with regard to any of the Blackstone Entities.
Ex. 4 at 23:2–18. He could not identify BPP HoldCo as an entity that had
ever employed him. Ex. 4 at 23:20–24:8. His compensation came from
“Blackstone,” and he had no recollection of ever receiving any direct
compensation from BPP HoldCo. Ex. 4 at 24:10–16; 27:22–25. He did not
8 0020 even recall that he was purportedly acting as President of BPP HoldCo
LLC when he signed the Partnership Agreement. Ex. 4 at 26:11–27:21.
Nevertheless, despite being unable to recall any involvement
whatsoever with BPP HoldCo, Mr. Acconcia did recall negotiating the
terms of the Partnership Agreement governing the Primexx investment
on behalf of Blackstone. Ex. 4 at 30:10–31:15. His was one of several
Blackstone Inc. groups involved in discussions around the investment in
Primexx. Ex. 4 at 31:16–20. As a member of Blackstone Inc.’s investment
team, Mr. Acconcia played a role in Blackstone Inc.’s decision to make its
substantial investment in Primexx and enter into the Partnership
Agreement. Ex. 4 at 31:16–23. His Blackstone Inc. investment team
made the recommendation to Blackstone Inc.’s investment committee
that Blackstone Inc. invest in Primexx, and Mr. Acconcia was serving on
that Blackstone Inc. committee when it decided to approve the
Blackstone Inc. deal team’s recommendation. Ex. 4 at 33:14–34:2.
In addition to his regular compensation from Blackstone, Mr.
Acconcia stood to benefit personally from the Primexx transaction. Ex. 4
at 39:5–8. He held a carried interest in the two Blackstone Inc.
investment funds that were associated with Primexx: Blackstone Capital
9 0021 Partners VII, L.P. and Blackstone Energy Partners II L.P., which were
defined in the Partnership Agreement as the “Blackstone Investors.” Ex.
4 at 38:23–40:12.
Mr. Acconcia’s responsibilities to Blackstone Inc. regarding the
Primexx investment included “general involvement over a period of
time.” Ex. 4 at 42:10–17. His involvement did not end when he signed the
Partnership Agreement. Ex. 4 at 42:18–21. In fact, he recalled
participating in meetings regarding Blackstone Inc.’s investment in
Primexx from 2016 all the way through 2021. Ex. 4 at 42:22–43:1. During
his work on the Primexx investment on behalf of Blackstone Inc. Mr.
Acconcia reported to multiple Blackstone Inc. employees throughout the
Blackstone Inc. organization. Ex. 4 at 18:21–19:3. For example, Mr.
Acconcia worked with a deal team in his energy group made up entirely
of Blackstone Inc. employees that worked on the Primexx transaction and
reported to David Foley, and Mr. Acconcia also reported to Joe Baratta
as part of the “matrix.” Ex. 4 at 18:16–19:23; 35:18–19; 36:18–37:11.
Though discovery is in its early stages, the limited evidence
produced by Defendants already illustrates that Blackstone Inc. had
numerous significant Texas contacts arising directly out of the Primexx
10 0022 investment. In many cases, these contacts involved Mr. Acconcia’s
physical presence in Texas in his capacity as an employee of Blackstone
Inc. managing and controlling the Primexx investment for Blackstone.
For example, on June 29, 2021, Mr. Acconcia emailed Chris Doyle,
a member of the executive team at Primexx located in Texas, that Mr.
Acconcia was “[o]n a fight [sic] this morning to Houston. Will call you
when I land.” Ex. 7. On May 25, 2021, in an email entitled “Schedule next
Tuesday,” Mr. Acconcia’s assistant Patricia Li advised Mr. Acconcia that
he would be “in Dallas,” to which Mr. Acconcia proposed meeting with the
full PEC team when there. Ex. 8. On June 30, 2021, in response to an
email from Primexx employee Chase White to the “BX” team suggesting
a call about the “Rosehill proposal/strategy” regarding Primexx, Mr.
Acconcia emailed numerous members of the Blackstone Inc. and Primexx
teams that he was “back to back in Houston today.” Ex. 9.
Moreover, while managing the Blackstone Inc.’s Primexx
investment, Mr. Acconcia also initiated multiple email and phone
communications with people in Texas:
• Mr. Acconcia sent out a calendar invite for a team meeting titled “Primexx/Blackstone – Strategic Next Steps” that included members of the Blackstone Inc. deal team and at least four Texas-
11 0023 based Primexx employees—Chris Doyle, Sam Blatt, Chase White, and Phil Cook—held on January 6, 2021. Ex. 4 at 61:4–10; Ex. 10.
• Mr. Acconcia generally remembered that RBC was involved with a potential transaction involving Primexx in 2021. Ex. 4 at 61:17–23. And in fact, on April 20, 2021, Jeffrey Spence at RBC Capital Markets in Houston, Texas sent Mr. Acconcia materials entitled “Primexx Process Update” for the purposes of a “Primexx/RBC/BX re: general status and next steps discussion.” Ex. 11.
• On June 23, 2021, Mr. Acconcia agreed with Megan Davis, the General Counsel and Secretary of Primexx Energy Partners, based in Dallas, to reschedule “the Bi-weekly board meeting” regarding “a material update on Capitan.” Ex. 12. That meeting also involved Blackstone Inc. employees Erik Belz and Mark Henle. Id.
• On June 9, 2021, Mr. Acconcia actively participated in a “joint regular meeting” of the Primexx Board of Directors and the BPP Energy Partners LLC Board, which was held “in person in Dallas, Texas” and by phone. Ex. 13.
• In February and March 2021, Mr. Acconcia and Blackstone Inc. employee Erik Belz discussed a meeting with David Habachy of Warburg Pincus LLC, based in Texas, regarding Primexx and a potential opportunity involving an oil and gas company based in Midland, Texas. Ex. 4 at 78:4–80:5; Ex. 14.
• On February 1, 2021, Mr. Acconcia emailed Richard Punches II, Managing Director at EIG Global Energy Partners, located in Houston, Texas, and copying Primexx’s Chris Doyle and Blackstone Inc. employee Erik Belz, offering to share a “one-pager on Primexx” and asking whether Mr. Punches might have “the same on Rosehill,” another Texas oil company, for the purposes of a call with Mr. Doyle. Ex. 15.
• On June 13, 2021, Mr. Acconcia emailed Stephen Trauber, Vice Chairman and Global Co-Head of Natural Resources & Clean Energy Transition of Citibank, based in Houston, and copied
12 0024 Blackstone Inc. executive David Foley, suggesting a call with Mr. Doyle and the “senior members of the Capitan Citi team.” Ex. 16.
• On August 22, 2021, after the Callon sale had been announced, Mr. Acconcia received “talking points” from Blackstone Inc. employee Mark Henle for discussion with Joe Gatto, the CEO of Callon Petroleum based in Houston. Ex. 4 at 91:2–21; Ex. 17.
Mr. Acconcia admitted at his deposition that all the work he did
while serving as Senior Managing Director of Blackstone Inc., including
managing and controlling the Primexx investment, was on behalf of
“Blackstone.” Ex. 4 at 15:1–20. He was compensated by Blackstone. Ex.
4 at 24:3–16. While Mr. Acconcia signed the Partnership Agreement on
behalf of BPP HoldCo as its President, Mr. Acconcia had no recollection
of any role he may have played for BPP HoldCo. Ex. 4 at 26:5–27:21.
Instead, one of the few topics on which Mr. Acconcia was clear at his
deposition was that at all times he acted on behalf of “Blackstone,”
whether with respect to Blackstone Inc.’s investment in Primexx or
otherwise. See, e.g., Ex. 4 at 15:1–20. In its Securities and Exchange
Commission filings, Blackstone Inc. refers to itself as “Blackstone.” Ex. 5
(“In this report, references to ‘Blackstone,’ the ‘Company,’ ‘we,’ ‘us’ or ‘our’
refer to Blackstone Inc. and its consolidated subsidiaries.”).
13 0025 The evidence above comes from a single jurisdictional deposition
taken of Mr. Acconcia. Plaintiffs expect that further jurisdictional
depositions of the other Blackstone Inc. employees involved in the
Primexx investment, including Erik Belz, David Foley, and others, will
reveal additional specific examples of Texas contacts on behalf of
Blackstone Inc. that are inextricably related to the Primexx investment
and the Callon Sale.
III. Legal Standard
To determine whether a party is subject to personal jurisdiction,
the Court begins with the Texas long-arm statute. The broad long-arm
statute encompasses any “acts that may constitute doing business” in
Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042. It is black-letter law
that “Texas’s long-arm statute ‘extends Texas courts’ personal
jurisdiction as far as the federal constitutional requirements of due
process will permit.’” M&F Worldwide Corp. v. Pepsi-Cola Metro. Bottling
Co., Inc., 512 S.W.3d 878,885 (Tex. 2017) (quoting BMC Software, 83
S.W.3d at 795). Because the “broad doing-business language” reaches the
limits of the constitutional requirements, the Texas Supreme Court
concluded that courts need “only analyze whether [the defendant]’s acts
14 0026 would bring [the defendant] within Texas’ jurisdiction consistent with
constitutional due process requirements.” Retamco Operating, Inc. v.
Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009).
The personal jurisdiction inquiry thus turns on the federal
constitutional requirements. “A state’s exercise of jurisdiction comports
with federal due process if the nonresident defendant has ‘minimum
contacts’ with the state and the exercise of jurisdiction ‘does not offend
traditional notions of fair play and substantial justice.’” M&F Worldwide
Corp, 512 S.W.3d at 88 (quoting Walden v. Fiore, 571 U.S. 277, 283
(2014)). For specific personal jurisdiction, which Plaintiffs allege here,
minimum contacts requires only that “(1) the defendant purposefully
avails itself of conducting activities in the forum state, and (2) the cause
of action arises from or is related to those contacts or activities.” Retamco,
278 S.W.3d at 338. If the minimum contacts requirements are satisfied,
it is “rare” for the exercise of personal jurisdiction to fail to comply with
the requirement of fair play and substantial justice. See id. at 341.
In the face of allegations sufficient “to bring a nonresident
defendant within the provisions of the long-arm statute,” the specially
appearing defendant “carries the burden of negating all bases of personal
15 0027 jurisdiction.” BMC Software Belgium, NV. v. Marchand, 83 S.W.3d 789,
793 (Tex. 2002). “The plaintiff’s original pleadings as well as its response
to the defendant’s special appearance can be considered in determining
whether the plaintiff satisfied its burden.” Touradji v. Beach Cap. P’ship,
L.P., 316 S.W.3d 15, 23 (Tex. App.—Houston [1st Dist.] 2010, no pet.);
Henkel v. Emjo Invs., Ltd., 480 S.W.3d 1, 7 (Tex. App.—Houston [1st
Dist.] 2015, no pet.) (“[W]e consider both the plaintiff’s original pleadings
and its response to the defendant’s special appearance in determining
whether the plaintiff satisfied its burden to allege jurisdictional facts.”).
In the specific personal jurisdiction analysis, an employee or agent’s
contacts with Texas are deemed contacts of the employer or principal. See
Huynh v. Nguyen, 180 S.W.3d 608, 620 (Tex. App.—Houston [14th Dist.]
2005, no pet.) (“The Texas contacts of agents or employees are
attributable to their nonresident principals.”); Coleman v. Klockner & Co.
AG, 180 S.W.3d 577, 588 (Tex. App.—Houston [14th Dist.] 2005, no pet.)
(“An agent’s contacts can be imputed to the principal for purposes of the
jurisdictional inquiry.”); Stocksy United v. Morris, 592 S.W.3d 538, 547
(Tex. App.—Houston [1st Dist.] 2019, no pet.) (“Under Texas law, an
16 0028 agency-based theory of imputed contacts may serve as the basis for the
exercise of personal jurisdiction over a foreign defendant.”).
IV. Argument
1. The Court has personal jurisdiction over Blackstone, Inc.
Plaintiffs’ allegations establish specific personal jurisdiction over
Blackstone Inc. “Texas’s long-arm statute ‘extends Texas courts’ personal
jurisdiction as far as the federal constitutional requirements of due
process will permit.”‘ M&F Worldwide, 512 S.W.3d at885 (quoting BMC
Software, 83 S.W.3d at 795). Plaintiffs allege that Blackstone Inc. raised
capital to invest in a Texas partnership governing the assets of a Texas
oil company, exercised control over the subsidiary operating the Texas oil
company, were responsible for directing the fire sale of the Texas oil
assets to another Texas-based company, and received hundreds of
millions of dollars from the sale of the Texas oil assets. Given this
conduct, Blackstone Inc. falls squarely within the reach of the Texas long-
arm statute. Once Plaintiffs have alleged conduct that falls under the
long-arm statute, the exercise of personal jurisdiction complies with due
process “if the nonresident defendant has ‘minimum contacts’ with the
state and the exercise of jurisdiction ‘does not offend traditional notions
17 0029 of fair play and substantial justice.’” Id. (quoting Walden v. Fiore, 571
U.S. 277, 283 (2014)).
A. Blackstone Inc. has minimum contacts in Texas regarding the subject matter of this dispute.
By purposefully investing in, exercising majority control over, and
selling a Texas oil company and its Texas oil assets to a different Texas-
based company, Blackstone Inc. had the required minimum contacts in
Texas to confer this Court with personal jurisdiction. The minimum
contacts analysis considers whether “(1) the defendant purposefully
avails itself of conducting activities in the forum state, and (2) the cause
of action arises from or is related to those contacts or activities.” Retamco,
278 S.W.3d at 338. Here, Blackstone Inc. purposefully availed itself of
the privilege of conducting business within Texas, and Plaintiffs bring
claims directed specifically at that Texas business.
i) Blackstone Inc. purposely availed itself of the privilege of doing business in Texas.
Blackstone Inc. raised capital for a majority stake in a Texas oil
company; took on a multi-year continuing obligation for its executive
employees to oversee that investment, including by having numerous
employees sit on the Board of Directors of a Texas corporation to manage
18 0030 the Texas business; directed the fire sale of the Texas oil assets; and
received proceeds from the sale of the Texas oil assets that it directed. “In
the context of specific jurisdiction, the following principles guide a
purposeful availment inquiry: (1) the relevant contacts are those of the
defendant, and the unilateral activity of another person or a third party
is not pertinent; (2) the contacts that establish purposeful availment
must be purposeful rather than random, fortuitous, isolated, or
attenuated; and (3) the defendant must seek some benefit, advantage, or
profit by availing himself of the jurisdiction.” Moring v. Inspectorate Am.
Corp., 529 S.W.3d 145, 153 (Tex. App.—Houston [14th Dist.] 2017, pet.
denied). Whether an individual purposefully availed themselves of the
forum depends on “the quality and nature of the contacts, not the
quantity.” Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 151
(Tex. 2013). The main purpose of the inquiry is determining “whether a
nonresident’s conduct and connection to a forum are such that it could
reasonably anticipate being haled into court there.” Id. at 152.
Mr. Acconcia’s testimony confirms that Blackstone Inc. itself
directly managed BPP HoldCo and that numerous Blackstone Inc.
employees, directly managed Blackstone Inc.’s investment in Texas for
19 0031 Blackstone Inc.’s benefit, including while physically located in Texas.
Blackstone Inc. participated in the transaction by directing the sale of
Texas oil assets, held by a Texas corporation, to another Texas-based oil
company. Blackstone Inc. also invested in Primexx and received millions
of dollars of proceeds from the Callon Sale.
The actions of Blackstone Inc’s employees and agents are attributed
to Blackstone Inc. See Huynh v. Nguyen, 180 S.W.3d 608, 620 (Tex.
App.—Houston [14th Dist.] 2005, no pet.) (“The Texas contacts of agents
or employees are attributable to their nonresident principals.”). Texas
courts routinely find that direct involvement in similar Texas-based
corporate disputes is sufficient to confer specific jurisdiction. See, e.g.,
Glencoe Cap. Partners II, L.P. v. Gernsbacher, 269 S.W.3d 157, 167 (Tex.
App.—Fort Worth 2008, no pet.) (holding that non-resident directors
making misrepresentations on remote board meetings involving Texas
residents was sufficient to confer jurisdiction); Carlile Bancshares, Inc. v.
Armstrong, No. 02-14-00014-CV, 2014 WL 3891658 (Tex. App.—Fort
Worth Aug. 7, 2014, no pet.) (holding that the court had personal
jurisdiction over two directors of a Colorado-based company due to those
20 0032 directors’ involvement in a merger transaction between the Colorado
company and a Texas company).
Blackstone Inc.’s intentional investment in a Texas partnership
and corporation and receipt of proceeds from the sale of Texas oil assets
to a different Texas-based company (that it orchestrated) constitute a
purposeful availment of the state of Texas. As the Texas Supreme Court
found was dispositive in Moncrief Oil Intern. Inc. v. OAO Gazprom, the
relevant entities “were not unilaterally haled into forming contacts with
Texas.” Moncrief Oil Int’l Inc. v. OAO Gazprom, 414 S.W.3d 142, 153
(Tex. 2013). Rather, similarly to the defendants in Moncrief Oil and
Retamco, Blackstone Inc. was a “willing participant[s] in a transaction
with an affiliated Texas company.” Id. (quoting Retamco, 278 S.W.3d at
340). As the Texas Supreme Court described in Moncrief Oil, “the United
States Supreme Court concluded that forming an enterprise in one state
to send payments to a corporation in the forum state was sufficient to
confer specific jurisdiction.” Id. (citing Burger King, 471 U.S. at 468, 478).
That is precisely what happened here: Blackstone Inc. joined an
enterprise in Texas, sent money to Texas for that enterprise, directed its
executive employees to manage that investment in Texas for many years,
21 0033 orchestrated the sale of the Texas-based real property of that Texas
company to another Texas-based company, and accepted the proceeds of
that transaction from Texas. The undisputed evidence leaves no doubt
that Blackstone Inc. could “reasonably anticipate being haled into court”
in Texas.
ii) Plaintiffs’ claims arise directly from Blackstone Inc.’s Texas activities.
The causes of action here “arise from” Blackstone Inc.’s Texas
contacts because they center on the Partnership Agreement (which was
signed by Mr. Acconcia, a Blackstone Inc. employee acting on behalf of
Blackstone Inc.); Primexx’s oil assets, real property, and equipment, all
located in Texas; and the ultimate decision to sell Primexx rather than
continue operating as a profitable company in Texas, which resulted in
negotiating and executing the Callon Sale in Texas. The fundamental
dispute at issue is over the meaning of the Partnership Agreement, the
conduct of parties directed at Texas-based companies and individuals,
and the sale of Texas oil assets, which include real property interests in
oil. See Ex. 18 (noting that the sale of Primexx to Callon includes
leasehold interests); Retamco, 278 S.W.3d at 341 (“Oil and gas interests
22 0034 are real property interests,” which “will always be in Texas, which leaves
no doubt of the continuing relationship that this ownership creates.”).
B. The exercise of jurisdiction does not offend traditional notions of fair play and substantial justice.
The exercise of jurisdiction over Blackstone Inc., which voluntarily
chose to invest millions of dollars into a Texas partnership and business
with a goal of profiting from that Texas business, and did in fact receive
hundreds of millions of dollars from conducting business in Texas, does
not offend traditional notions of fair play and substantial justice. Once
the minimum contacts requirements are satisfied, it is “rare” for the
exercise of personal jurisdiction to fail to comply with the requirement of
fair play and substantial justice. Retamco, 278 S.W.3d at 341. Texas
courts consider “(1) the burden on the defendant; (2) the interests of the
forum in adjudicating the dispute; (3) the plaintiff’s interest in obtaining
convenient and effective relief; (4) the international judicial system’s
interest in obtaining the most efficient resolution of controversies; and
(5) the shared interest of the several nations in furthering fundamental
substantive social policies.” Moncrief Oil Int’l Inc. v. OAO Gazprom, 414
S.W.3d 142, 155 (Tex. 2013).
23 0035 The interests of Texas, the plaintiffs, and judicial efficiency are all
served by exercising jurisdiction over Blackstone Inc. Texas has an
interest in adjudicating alleged breaches of fiduciary duty that occurred
with respect to an investment in a Texas corporation and the sale of
valuable Texas oil assets to another Texas-based company. With respect
to judicial efficiency, it is undisputed that this Court has jurisdiction over
the formerly Specially Appearing Blackstone Entities, BPP HoldCo, PEC,
and M. Christopher Doyle. Blackstone Inc. is represented by the same
counsel as BPP HoldCo, is part of the same corporate family, and has
numerous employees that performed work in or directed at Texas for the
Primexx investment. Ex. 4 at 18:8–19:20; 36:18–37:11. While Blackstone
Inc. is incorporated in Delaware, being subjected to suit in Texas
“imposes a burden on . . . all nonresidents,” and “[d]istance alone cannot
ordinarily defeat jurisdiction.” Id. The exercise of jurisdiction over
Blackstone Inc. comports with the notions of fair play and substantial
justice.
2. The Court should disregard Blackstone Inc.’s arguments in support of its Special Appearance.
Blackstone Inc. argues that it is not subject to personal jurisdiction
in this Court because (1) Plaintiffs fail to allege that Blackstone Inc. or
24 0036 its employees performed any acts in Texas, and (2) Blackstone Inc.’s
receipt of Callon shares after the transaction at issue is not an operative
fact in this litigation. As explained below, both arguments fail.
A. Blackstone and its employees performed numerous significant acts in Texas or directed at Texas.
Blackstone Inc. protests that it is “eight entities removed” from BPP
HoldCo, Blackstone Inc. Special Appearance (“Special Appearance”) at 4,
but each of those entities, including Blackstone Inc. and BPP HoldCo
themselves, form a part of the Blackstone Inc. “matrix.” Further,
Blackstone Inc.’s position that it committed no acts in Texas related to
the Primexx investment and Callon Sale was totally rejected by Mr.
Acconcia. In his role as a Senior Managing Director at Blackstone, Inc.,
controlling and managing the Primexx investment for Blackstone, Mr.
Acconcia repeatedly travelled to Texas, met with Texas-based investment
bankers and Primexx executives, and directed communications to Texas
residents to manage a Texas business and ultimately sell that Texas
business and its Texas assets to a different Texas business. All of these
contacts on behalf of Blackstone Inc. were directly related to the
management of the Primexx investment and sale of Primexx to Callon.
25 0037 Blackstone Inc. complains further that Plaintiffs fail to distinguish
between acts performed by Blackstone, Inc. employees in that capacity
as opposed to their capacity as officers and directors of BPP HoldCo. But
Blackstone Inc.’s operation as a “matrix” organization renders such
distinctions meaningless. Mr. Acconcia confirmed under oath that he did
not even recall performing any work on behalf of BPP HoldCo and that
his actions with respect to the Primexx investment were instead
performed on behalf of “Blackstone.” Ex. 4 at 22:11–24:16. In its
Securities and Exchange Commission filings, Blackstone Inc. refers to
itself as “Blackstone.” Ex. 5 (“In this report, references to ‘Blackstone,’
the ‘Company,’ ‘we,’ ‘us’ or ‘our’ refer to Blackstone Inc. and its
consolidated subsidiaries.”). Mr. Acconcia himself—the purported
“President” of BPP HoldCo LLC and signatory to the Partnership
Agreement on its behalf—was not compensated by BPP HoldCo and has
no recollection of serving as its President or performing any work for that
shell entity. Ex. 4 at 26:5–27:25.
Blackstone Inc. does not—and cannot—dispute that Mr. Acconcia
was employed by Blackstone Inc. at all relevant times, and it is black-
letter law that an employee’s actions within the scope of his employment
26 0038 are imputed to his employer. See Huynh v. Nguyen, 180 S.W.3d 608, 620
(Tex. App.—Houston [14th Dist.] 2005, no pet.) (“The Texas contacts of
agents or employees are attributable to their nonresident principals.”).
Mr. Acconcia’s direct contacts with Texas, on behalf of and for the benefit
of Blackstone Inc., were not “random, fortuitous, isolated, or attenuated.”
See Moring v. Inspectorate Am. Corp., 529 S.W.3d 145, 153 (Tex. App.—
Houston [14th Dist.] 2017, pet. denied). To the contrary, they were clearly
aimed at purposeful availment of the benefit of doing business in Texas.
See Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 338
(Tex. 2009).
Blackstone Inc. also argues that even if Plaintiffs were able to
allege acts attributable to Blackstone Inc., they fail to allege “operative
conduct” performed in Texas. Special Appearance at 11. This is simply
wrong. Plaintiffs allege, for example, that “employees and agents of
Blackstone Inc., acting on behalf of Blackstone Inc.,” including Mr.
Acconcia and Mr. Belz, “were responsible for managing Blackstone’s
investment in Primexx,” and that “employees and agents of Blackstone
Inc. orchestrated the Callon Sale even though they knew that the sale
price was too low and would provide limited or no return to the limited
27 0039 partners while generating a substantial recovery for Blackstone.”
Petition at ¶¶ 65, 84. And as discussed in this Opposition, Mr. Acconcia
traveled to Texas multiple times, made myriad phone calls to Texas
residents, and sent countless email communications to Texas residents
all in furtherance of his management of Blackstone Inc.’s Primexx
investment. See Henkel v. Emjo Invs., Ltd., 480 S.W.3d 1, 7 (Tex. App.—
Houston [1st Dist.] 2015, no pet.) (“[W]e consider both the plaintiff’s
original pleadings and its response to the defendant’s special appearance
in determining whether the plaintiff satisfied its burden to allege
jurisdictional facts.”).
The Google case Blackstone finds “instructive,” Special Appearance
at 11, involved allegedly misleading terms and disclosures made by
Google “from afar.” Google, LLC v. State, No. 13-23-00114-CV, 2025 WL
52611, at *7 (Tex. App.—Corpus Christi Jan. 9, 2025, no pet. h.).
Concluding that “events that took place outside of Texas” would
“consume most if not all the litigation’s attention,” the Google court found
that the exercise of jurisdiction was not appropriate. Id. at *7-8. The focus
of litigation in this case, by contrast, will be squarely on Texas-based
events, Texas-based real property, and Texas-based individuals.
28 0040 B. Blackstone Inc.’s argument that its receipt of shares cannot support the exercise of jurisdiction has no support in Texas law.
Blackstone Inc. erroneously contends it is a mere holding company
with no material assets and that its receipt of Callon shares stemming
from the Primexx transaction does not support the exercise of
jurisdiction. Special Appearance at 14–15. It further argues that because
the manner of distribution of shares to Blackstone Inc. has not been
challenged by Plaintiffs and may not be a focus at trial, the fact that the
Blackstone Inc. “matrix” received hundreds of millions of dollars’ worth
of Callon shares in exchange for its Primexx investment does not support
personal jurisdiction. Special Appearance at 15. Blackstone Inc. provides
no legitimate support for that wrong position.
For example, Blackstone Inc. first relies on Pulmosan Safety Equip.
Corp. v. Lamb for the general proposition that “to identify the operative
facts, courts look to ‘those facts that would be the focus of the trial.’”
Special Appearance at 15. But in Pulmosan, the court found that the
exercise of personal jurisdiction was appropriate despite the fact that it
was not at all clear whether the Plaintiff had even used a sandblasting
hood manufactured by the defendant in Texas. 273 S.W.3d 829 (Tex.
29 0041 App.—Houston [14th Dist.] 2008, pet. denied). Pulmosan does nothing to
narrow the realm of “operative facts” so as to exclude the receipt of funds
associated with a challenged transaction.
Blackstone Inc. then wrongly argues that Old Republic Nat. Title
Ins. Co. v. Bell, 549 S.W.3d 550 (Tex. 2018), supports a finding that this
Court lacks jurisdiction. Not so. In Old Republic, the Texas Supreme
Court declined to find specific jurisdiction based on “phone calls with a
friend who happens to be in Texas,” id. at 561—a far cry from the
situation here. The court also found that money transfers between those
same friends could not support jurisdiction, but noted that if, for example,
the defendant had been “a corporate lender distributing funds . . .with
the expectation of collecting interest,” id. at 562, its analysis would
change. Id. The important question in Old Republic was whether—as
here—the defendant intended to “use the Texas forum to make money.”
Id. (quoting Searcy v. Parex Res., Inc., 496 S.W.3d 58, 77 (Tex. 2016)).
There is no legitimate dispute that Blackstone Inc. intended to do
precisely that with its multi-hundred-million-dollar investment into
Primexx that it tasked numerous Blackstone Inc. executives with
managing over a period of many years.
30 0042 Blackstone Inc. also cites Willow Tree Consulting Group, LLC v.
South Dakota Trust Company, LLC, No. 05-22-00176-CV, 2023 WL
3749803 (Tex. App.—Dallas June 1, 2023, no pet.), which involved a non-
resident company that agreed to serve as Trustee of trusts with Texas
trustors and Texas beneficiaries. Id. at *5. In Willow Tree, unlike this
case, the non-resident party “did not seek out any Texas contacts.” Id. at
*7. The court declined to exercise jurisdiction over the non-resident party
“simply because it accepted the position of trustee of a South Dakota trust
after being contacted by Texas residents requesting it to do so.” Id.
Finally, Blackstone Inc. cites Karaa v. Aramoonie, No. 05-17-00571-CV,
2018 WL 1373958 (Tex. App.—Dallas Mar. 19, 2018, no pet.). The Karaa
court declined to find specific personal jurisdiction because there was “no
evidence that any act . . . occurred . . . in Texas” and there were “no
written communications with [Plaintiff] while she was in Texas.” Id. at
*3. Here, however, Blackstone Inc. invested directly into a Texas
partnership and corporation, employed a deal team to manage that Texas
investment for years, sent its Senior Managing Director to Texas multiple
times, and tasked that Senior Managing Director and Blackstone Inc.
deal team with selling Primexx to another Texas-based oil company in
31 0043 order for Blackstone Inc. to gain hundreds of millions of dollars.
Blackstone Inc.’s arguments fall flat in the face of the undisputed
evidence here.
C. By invoking the Partnership Agreement, Blackstone Inc. has waived its Special Appearance.
Because this Court has personal jurisdiction over Blackstone, Inc.
based on Blackstone Inc.’s own actions and the actions of its employees,
Plaintiffs do not need to rely on “alter ego” as a basis for personal
jurisdiction over Blackstone Inc. Nevertheless, Blackstone Inc.’s
argument against alter-ego jurisdiction is notable in that it completely
forecloses its right to even make a Special Appearance. Blackstone Inc.
argues that because Section 13.9 of the Partnership Agreement purports
to foreclose liability based on an alter ego or veil-piercing theory,
Plaintiffs may not rely on an alter ego theory of personal jurisdiction in
this case. Special Appearance at 2–3, 14. But Blackstone offers no
authority for its position that parties can alter Texas’ minimum contacts
analysis by contract, potentially depriving Texas courts of jurisdiction
over a party that has purposely availed itself of the privilege of doing
business in Texas and obtained the benefit thereof.
32 0044 More importantly, Blackstone Inc.’s argument that Section 13.9 of
the Partnership Agreement forecloses alter-ego liability is a merits-based
argument as to why Plaintiffs’ ultimate claims against Blackstone Inc.
fail—not a jurisdictional argument. By attempting to rely on substantive
provisions of the Partnership Agreement for the purposes of its Special
Appearance—invoking a merits-based argument to obtain protections
from the very instrument it claims not to be bound by—Blackstone Inc.
has stepped beyond the strict subject-matter boundaries of a permissible
special appearance to argue the substantive merits of the case. See
Klingenschmitt v. Weinstein, 342 S.W.3d 131, 134 (Tex. App.—Dallas
2011, no pet.) (“A party enters a general appearance and waives a special
appearance ‘when it (1) invokes the judgment of the court on any question
other than the court's jurisdiction, (2) recognizes by its acts that an action
is properly pending, or (3) seeks affirmative action from the court.’”)
(quoting Exito Elecs. Co., Ltd. v. Trejo, 142 S.W.3d 302, 304 (Tex. 2004)).
Blackstone Inc. asserts in its Section 13.9 argument that “[t]his Court
should reject Plaintiffs’ attempt to cherry-pick certain TAPA provisions
and ignore others.” Special Appearance at 14. As such, its Special
Appearance has been waived, and should be denied on that basis. See
33 0045 Glob. Paragon Dallas, LLC v. SBM Realty, LLC, 448 S.W.3d 607, 613
(Tex. App.—Houston [14th Dist.] 2014, no pet.) (holding that a defendant
waived a special appearance when its “supplemental motion for new trial
addresses the merits of the default judgment’s award . . . This challenge
to the trial court’s award seeks affirmative relief that the court could
grant only if it had jurisdiction.”).
Even if Blackstone Inc. has not waived its special appearance by
making a merits argument, at a minimum, the Court must disregard the
merits-based argument in considering Blackstone Inc.’s special
appearance. See Old Republic Nat’l Title Ins. Co. v. Bell, 549 S.W.3d 550,
562 (Tex. 2018) (“[W]e may not determine the underlying merits in order
to answer the jurisdictional question . . . [W]e limit our inquiry to
[defendant]’s contacts with the state of Texas.”); Copeland v. Mayers, 657
S.W.3d 599, 622 (Tex. App.—El Paso 2022, pet. denied) (“We do not
resolve merits-based questions in reviewing a special appearance.”)
(quoting Michelin N. Am., Inc. v. De Santiago, 584 S.W.3d 114, 134 (Tex.
App.—El Paso 2018, pet. dism’d)).
V. Conclusion
Blackstone utterly fails to negate each of Plaintiffs’ alleged bases
34 0046 for personal jurisdiction. Kelly v. Gen. Interior Const., Inc., 301 S.W.3d
653, 658 (Tex. 2010) (“Once the plaintiff has pleaded sufficient
jurisdictional allegations, the defendant filing a special appearance bears
the burden to negate all bases of personal jurisdiction alleged by the
plaintiff.”). Blackstone Inc. invested directly into a Texas partnership
and corporation, employed a deal team to manage that Texas investment
for years, sent its Senior Managing Director to Texas multiple times, and
tasked that Senior Managing Director and Blackstone Inc. deal team
with selling Primexx to another Texas-based oil company for a massive
profit. Blackstone Inc. has no legitimate basis to avoid personal
jurisdiction based on the undisputed facts confirming that it purposely
availed itself of the benefits of doing business in Texas. This Court should
deny Blackstone Inc.’s baseless Special Appearance and permit Plaintiffs
to continue litigating their legitimate claims.
Dated: March 7, 2025 Respectfully submitted,
SUSMAN GODFREY L.L.P.
35 0047 By: /s/ Stephen Shackelford, Jr. Stephen Shackelford, Jr. State Bar No. 24062998 (TX) sshackelford@susmangodfrey.com SUSMAN GODFREY L.L.P. 1000 Louisiana Street, Suite 5100 Houston, Texas 77002 Telephone: (713) 651-9366 Facsimile: (713) 654-6666
Marc M. Seltzer (pro hac vice forthcoming) State Bar No. 54534 (CA) mseltzer@susmangodfrey.com Bryan Caforio (pro hac vice) State Bar No. 261265 (CA) bcaforio@susmangodfrey.com SUSMAN GODFREY L.L.P. 1900 Avenue of the Stars, Suite 1400 Los Angeles, CA 90067 Telephone: (310) 789-3100 Facsimile: (310) 789-3150
Lindsey Godfrey Eccles (pro hac vice) State Bar No. 33566 (WA) leccles@susmangodfrey.com SUSMAN GODFREY L.L.P. 401 Union Street, Suite 3000 Seattle, WA 98101 Telephone: (206) 516-3880 Facsimile: (206) 516-3883
Sarah Hannigan (pro hac vice) State Bar No. 5961248 (NY) shannigan@susmangodfrey.com SUSMAN GODFREY L.L.P.
36 0048 One Manhattan West New York, NY 10001 Telephone: (212) 336-8330 Facsimile: (212) 336-8340
Attorneys for Plaintiffs Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP
37 0049 Certificate of Service
This is to certify that on March 7, 2025, a true and correct copy of
the above and foregoing instrument was properly forwarded to counsel of
record in accordance with Rule 21 of the Texas Rules of Civil Procedure.
/s/ Stephen Shackelford, Jr. Stephen Shackelford, Jr.
38 0050 EXHIBIT 4
FILED UNDER SEAL
0051 In the Matter Of:
PRIMEXX ENERGY OPPORTUNITY FUND vs PRIMEXX ENERGY
ANGELO ACCONCIA February 21, 2025
XITAS TM
the
0052 1 ·1· · · · · · · · · · ·NO. 24-BC01B-0010
·2 · · ·PRIMEXX ENERGY· · · · · ·: IN THE BUSINESS COURT ·3· ·OPPORTUNITY FUND, LP AND : · · ·PRIMEXX ENERGY· · · · · ·: ·4· ·OPPORTUNITY FUND II, LP, : · · · · · · · · · · · · · · · : ·5· · · · · · · Plaintiff,· · : · · · · · · · · · · · · · · · : FIRST BUSINESS COURT ·6· · · · vs.· · · · · · · · ·: DIVISION · · · · · · · · · · · · · · · : ·7· ·PRIMEXX ENERGY· · · · · ·: · · ·CORPORATION, M.· · · · · : ·8· ·CHRISTOPHER DOYLE,· · · ·: · · ·ANGELO ACCONCIA,· · · · ·: ·9· ·BLACKSTONE INC.,· · · · ·: · · ·BLACKSTONE HOLDINGS III : 10· ·LP, BLACKSTONE EMA II· · : · · ·LLC, BMA VII LLC,· · · · : DALLAS COUNTY, TEXAS 11· ·BLACKSTONE ENERGY· · · · : · · ·MANAGEMENT ASSOCIATES· · : 12· ·II LLC, BLACKSTONE· · · ·: · · ·ENERGY PARTNERS II LP,· ·: 13· ·BLACKSTONE MANAGEMENT· · : · · ·ASSOCIATES VII LLC,· · · : 14· ·BLACKSTONE CAPITAL· · · ·: · · ·PARTNERS VII LP, BCP· · ·: 15· ·VII/BEP II HOLDINGS· · · : · · ·MANAGER LLC, BX PRIMEXX : 16· ·TOPCO LLC, AND BPP· · · ·: · · ·HOLDCO LLC,· · · · · · · : 17· · · · · · · · · · · · · · : · · · · · · · · Defendants.· ·: 18
19· · · · · · · · · · · · CONFIDENTIAL
20· · · · · ·VIDEOTAPED STENOGRAPHIC DEPOSITION OF · · · · · · · · · · · · ANGELO ACCONCIA 21· · · · · · · · · · ·NEW YORK, NEW YORK · · · · · · · · · ·FRIDAY, FEBRUARY 21, 2025 22
23· · · · · · · · · · (Reported Remotely)
24· ·REPORTED BY:· TANYA L. VERHOVEN-PAGE, · · · · · · · · · ·CCR-B-1790 25· ·FILE NO.· 2025-972806
0053 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 2 Page 4 ·1· · · · · · · ·February 21, 2025 ·1· · · · · · · · · ·APPEARANCES OF COUNSEL
·2· · · · · · · · · ·9:05 a.m. ·2 ·3· ·On behalf of Defendant Primexx Energy Corporation: ·3 ·4· · · · ·KIRKLAND & ELLIS, LLP ·4· · · · · ·Videotaped stenographic deposition · · · · · ·401 Congress Avenue ·5· ·of ANGELO ACCONCIA, held in New York, New York ·5· · · · ·Austin, Texas 78701 · · · · · ·(512) 678-9100 ·6· ·before Tanya L. Verhoven-Page, Certified ·6· · · · ·BY:· ZACK C. EWING, ESQ. ·7· ·Court Reporter (GA), Licensed Court · · · · · · · · e-mail: zack.ewing@kirkland.com ·8· ·Reporter (TN) and Certified Shorthand ·7· · · · · · · (Via Zoom) ·9· ·Reporter (TX). ·8 ·9 10 10 11 11 12 12· ·On behalf of Defendant M. Christopher Doyle: 13· · · · ·TROUTMAN PEPPER LOCKE, LLP 13 · · · · · ·2200 Ross Avenue 14 14· · · · ·Suite 2800 15 · · · · · ·Dallas, Texas 75201 16 15· · · · ·(214) 740-8000 · · · · · ·BY:· TAYLOR LEVESQUE, ESQ. 17 16· · · · · · · e-mail: taylor.levesque@troutman.com 18 · · · · · · · · (Via Zoom) 19 17
20 18 19 21 20 22 21 23 22· ·ALSO PRESENT: 23· · · · Kenneth Inoa, Videographer 24 24 25 25· · · · · · · · · · · · -· · -· · -
Page 3 Page 5 ·1· · · · · · · · ·APPEARANCES OF COUNSEL ·1· · · · · · · · · · · · ·I N D E X ·2 ·2 · · ·On behalf of the Plaintiffs: ·3 ·3· · · · · · · · WITNESS: ANGELO ACCONCIA · · · · · ·SUSMAN GODFREY, LLP ·4· · · · ·1900 Avenue of the Stars ·4 · · · · · ·Suite 1400 ·5· · ·Examination· · · · · · · · · · · · · · · · Page ·5· · · · ·Los Angeles, California 90067 · · · · · ·(310) 789-3100 ·6· ·BY MR. CAFORIO· · · · · · · · · · · · · · · · 10 ·6· · · · ·BY:· BRYAN CAFORIO, ESQ. ·7 · · · · · · · · e-mail: bcaforio@susmangodfrey.com ·7· · · · · · · (Via Zoom) ·8 ·8· · · · ·SUSMAN GODFREY, LLP ·9 · · · · · ·One Manhattan West ·9· · · · ·New York, New York 10001-8602 10 · · · · · ·(212) 336-8330 11 10· · · · ·BY:· SARAH HANNIGAN, ESQ. · · · · · · · · e-mail: shannigan@susmangodfrey.com 12 11· · · · · · · (Via Zoom) 12 13 13 14 14 15 15 16· ·On behalf of Defendant Blackstone and Angelo 16 · · ·Acconcia: 17 17 · · · · · ·LYNN, PINKER, HURST & SCHWEGMANN 18 18· · · · ·2100 Ross Avenue · · · · · ·Suite 2700 19 19· · · · ·Dallas, Texas 75201 20 · · · · · ·(214) 981-3800 20· · · · ·BY:· YAMAN DESAI, ESQ. 21 · · · · · · · · e-mail: ydesai@lynnllp.com 22 21· · · · ·BY:· KYLE GARDNER, ESQ. · · · · · · · · e-mail: kgardner@lynnllp.com 23 22· · · · · · · (Via Zoom) 23 24 24 25 25
www.LexitasLegal.com/Premier Lexitas 888-267-1200 Pages 2–5 0054 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 6 Page 8 ·1· · · · · · · · · · · EXHIBITS INDEX: ·1· ·NEW YORK, NEW YORK; FRIDAY, FEBRUARY 21, 2025 ·2 · · · Deposition ·2· · · · · · · · · · ·9:05 A.M. ·3· · (Acconcia) · · · ·Exhibit· · · · · ·Description· · · · · · · Page ·3 ·4 ·4· · · · · · · ·P R O C E E D I N G S ·5· ·Exhibit 1· · · · Plaintiffs' First · · · · · · · · · · · Amended Petition· · · · · · ·21 ·5 ·6 · · ·Exhibit 2· · · · Document bearing Bates ·6· · · · · ·THE VIDEOGRAPHER:· The time is ·7· · · · · · · · · · numbers BPP_0018525 ·7· · ·9:05 a.m. Eastern Time on February 21st, · · · · · · · · · · · through BPP_0018527· · · · · 46 ·8 ·8· · ·2025, and we're going on the record for · · ·Exhibit 3· · · · Document bearing Bates ·9· · · · · · · · · · number BPP_0017994· · · · · ·53 ·9· · ·the remote video deposition of Angelo 10· ·Exhibit 4· · · · Document bearing Bates 10· · ·Acconcia in the matter of Primexx Energy · · · · · · · · · · · numbers BPP_005953 11· · · · · · · · · · through BPP_005954· · · · · ·55 11· · ·Opportunity Fund, et al. versus 12· ·Exhibit 5· · · · Document bearing Bates 12· · ·Blackstone, et al. · · · · · · · · · · · numbers BPP_0016545 13· · · · · · · · · · through BPP_0016546· · · · · 60 13· · · · · ·My name is Kenneth Inoa, and I'm 14· ·Exhibit 6· · · · Document bearing Bates · · · · · · · · · · · numbers BPP_0017552 14· · ·the legal videographer on behalf of 15· · · · · · · · · · through BPP_0017553· · · · · 62 15· · ·LEXITAS. 16· ·Exhibit 7· · · · Document bearing Bates · · · · · · · · · · · number BPP_0018469· · · · · ·65 16· · · · · ·Will counsel please introduce 17 · · ·Exhibit 8· · · · Document bearing Bates 17· · ·themselves and state their firm and who 18· · · · · · · · · · numbers PRIMEXX029462 18· · ·they represent, beginning with the party · · · · · · · · · · · through PRIMEXX029468· · · · 70 19 19· · ·noticing this proceeding. · · ·Exhibit 9· · · · Document bearing Bates 20· · · · · ·MR. CAFORIO:· Bryan Caforio from 20· · · · · · · · · · numbers BPP_0017182 · · · · · · · · · · · through BPP_0017187· · · · · 77 21· · ·Susman Godfrey on behalf of Plaintiffs. 21 · · ·Exhibit 10· · · ·Document bearing Bates 22· · · · · ·MR. DESAI:· Yaman Desai.· I'm here 22· · · · · · · · · · number BPP_0016597· · · · · ·80 23· · ·with Kyle Gardner, from Lynn, Pinker, 23· ·Exhibit 11· · · ·Document bearing Bates · · · · · · · · · · · numbers BPP_0018234 24· · ·Hurst & Schwegmann, on behalf of 24· · · · · · · · · · through BPP_0018235· · · · · 84 25 25· · ·Mr. Acconcia, and we also represent the
Page 7 Page 9 ·1· · · · · · · · · · · EXHIBITS INDEX: ·1· · · various Blackstone Defendants. ·2 ·2· · · · · · MR. EWING:· Good morning.· This is · · · Deposition ·3· · (Acconcia) ·3· · · Zack Ewing, from Kirkland & Ellis, on · · · ·Exhibit· · · · · ·Description· · · · · · · Page ·4· · · behalf of Primexx Energy Corporation. ·4 ·5· · · · · · MR. LEVESQUE:· This is Taylor ·5· ·Exhibit 12· · · ·Document bearing Bates ·6· · · Levesque, at Troutman Pepper Locke, on · · · · · · · · · · · numbers BPP_0006569 ·7· · · behalf of Defendant Christopher Doyle. ·6· · · · · · · · · · through BPP_0006570· · · · · 88 ·8· · · · · · MS. HANNIGAN:· And Sarah Hannigan, ·7· ·Exhibit 13· · · ·Document bearing Bates ·9· · · from Susman Godfrey, on behalf of · · · · · · · · · · · numbers BPP_0019155 ·8· · · · · · · · · · through BPP_0019157· · · · · 91 10· · · Plaintiffs. ·9 11· · · · · · MR. DESAI:· And, Sarah and Bryan, 10 12· · · before we get started, I haven't gotten 11 13· · · the exhibits yet. 12 14· · · · · · Oh, actually, I take that back. 13 15· · · They just went through.· I'm fine. 14 15 16· · · · · · THE VIDEOGRAPHER:· All right.· If 16 17· · · that concludes our introductions, will 17 18· · · the court reporter please swear or affirm 18 19· · · in the witness. 19 20 20 21· ·Thereupon -- 21 22 22· · · · · · · · · ·ANGELO ACCONCIA, 23 23· ·called as a witness, having been first duly sworn, 24 24· ·was examined and testified as follows: 25 25
www.LexitasLegal.com/Premier Lexitas 888-267-1200 Pages 6–9 0055 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 10 Page 12 ·1· · · · · · · · · · · · EXAMINATION ·1· ·question, if you can't see an exhibit, just let us ·2· ·BY MR. CAFORIO: ·2· ·know, and we can work that out so everything goes ·3· · · · ·Q· · ·All right.· Good morning, Mr. Acconcia. ·3· ·smoothly. ·4· ·My name is Bryan Caforio, and I represent the ·4· · · · · · · ·Okay? ·5· ·Plaintiffs, Primexx Opportunity Fund and Primexx ·5· · · · ·A· · ·Thank you. ·6· ·Opportunity Fund II, in this litigation. ·6· · · · ·Q· · ·And you're free to take -- I generally ·7· · · · · · · ·I'll be asking you questions on behalf of ·7· ·aim to take a break at least every hour.· You're free ·8· ·those entities today. ·8· ·to ask for a break, go to the bathroom, get a drink, ·9· · · · · · · ·You understand that, even though we're ·9· ·whatever you want more frequently than that.· The 10· ·doing this remotely, you are under oath for this 10· ·only thing I ask is that you don't take a break while 11· ·deposition? 11· ·a question is pending but instead answer the question 12· · · · ·A· · ·I do. 12· ·and then ask to take a break. 13· · · · ·Q· · ·And you understand that your answers are 13· · · · · · · ·Okay? 14· ·being transcribed by a court reporter throughout the 14· · · · ·A· · ·I appreciate it. 15· ·deposition? 15· · · · ·Q· · ·Okay.· Is there anything that you would 16· · · · ·A· · ·I do. 16· ·like to discuss before we begin the deposition today? 17· · · · ·Q· · ·And you understand that you are being 17· · · · ·A· · ·No. 18· ·video-recorded today, as well? 18· · · · ·Q· · ·Okay.· Are you taking any medication 19· · · · ·A· · ·I do. 19· ·today that affects your ability to answer questions 20· · · · ·Q· · ·And you understand that this deposition 20· ·truthfully and completely? 21· ·is taken in a case pending in the Texas Business 21· · · · ·A· · ·No. 22· ·Court in Dallas, right? 22· · · · ·Q· · ·Are you feeling sick today? 23· · · · ·A· · ·I assume that that's the case.· I don't 23· · · · ·A· · ·No. 24· ·have specific knowledge as to exactly where this case 24· · · · ·Q· · ·Is there any other reason you're not able 25· ·is pending. 25· ·to testify truthfully and completely today?
Page 11 Page 13 ·1· · · · ·Q· · ·Okay.· And we'll show you the petition in ·1· · · · ·A· · ·No. ·2· ·a minute and you can see that, but do you understand ·2· · · · ·Q· · ·Where are you located geographically for ·3· ·that your deposition testimony may be used in this ·3· ·this deposition? ·4· ·proceeding and shown to the judge in this case? ·4· · · · ·A· · ·I'm located in New York. ·5· · · · ·A· · ·I do. ·5· · · · ·Q· · ·You're in New York.· Okay. ·6· · · · ·Q· · ·Have you ever been deposed before? ·6· · · · · · · ·In the city or elsewhere? ·7· · · · ·A· · ·I have. ·7· · · · ·A· · ·I'm located in Manhattan. ·8· · · · ·Q· · ·How many times? ·8· · · · ·Q· · ·How did you prepare for today's ·9· · · · ·A· · ·I don't recall specifically, but a few, a ·9· ·deposition? 10· ·small -- a small number. 10· · · · ·A· · ·I had a series of calls with my counsel. 11· · · · ·Q· · ·More or less five would you say? 11· · · · ·Q· · ·Did you review any documents to prepare 12· · · · ·A· · ·Less. 12· ·for the deposition? 13· · · · ·Q· · ·Okay.· When was the last time you were 13· · · · ·A· · ·No. 14· ·deposed? 14· · · · ·Q· · ·Is there anybody in the room with you 15· · · · ·A· · ·I don't recall specifically.· I could 15· ·right now where you're testifying from? 16· ·generally estimate more than -- call it -- five years 16· · · · ·A· · ·No.· There are people downstairs.· So 17· ·ago. 17· ·there may be some background noise, but nobody in the 18· · · · ·Q· · ·Okay.· So that was probably an in-person 18· ·room specifically. 19· ·deposition then, or was it remote, as well? 19· · · · ·Q· · ·Okay.· Do you have any access to any 20· · · · ·A· · ·I don't recall. 20· ·messaging platforms where a person could communicate 21· · · · ·Q· · ·Okay.· Well, since it is remote, it's a 21· ·with you during this deposition? 22· ·slightly unusual format doing it this way, and I'll 22· · · · ·A· · ·I do not have anything visible. 23· ·try to put the exhibits up so you can see them 23· · · · ·Q· · ·Okay.· What's your current occupation? 24· ·clearly, but at any time, as we're going, if you have 24· · · · ·A· · ·I am an investor. 25· ·any technical difficulties, if you can't hear my 25· · · · ·Q· · ·Are you employed by a company, or are you
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0056 Pages 10–13 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 14 Page 16 ·1· ·self-employed? ·1· ·periods of times that I was promoted, but through the ·2· · · · ·A· · ·I am not employed by a company. ·2· ·course of my time at Blackstone, I was promoted a ·3· · · · ·Q· · ·And what company is that? ·3· ·number of times to the ultimate title of Senior ·4· · · · ·A· · ·ArcLight Capital Partners. ·4· ·Managing Director. ·5· · · · ·Q· · ·How long have you been at ArcLight? ·5· · · · ·Q· · ·And Senior Managing Director was the ·6· · · · ·A· · ·I believe I'm going on my fourth year. ·6· ·final job title you had when you left Blackstone? ·7· · · · ·Q· · ·So that takes you back to some time in, ·7· · · · ·A· · ·That is accurate. ·8· ·say, early 2022?· Is that about accurate, or is that ·8· · · · ·Q· · ·Do you recall, in general, when you ·9· ·timing off? ·9· ·started with that title? 10· · · · ·A· · ·That's about accurate. 10· · · · ·A· · ·I don't recall specifically. 11· · · · ·Q· · ·Okay.· Where were you employed before you 11· · · · ·Q· · ·Do you recall generally? 12· ·started at ArcLight? 12· · · · ·A· · ·Generally in the mid teens. 13· · · · ·A· · ·I was employed at Blackstone. 13· · · · ·Q· · ·So you reached that position in the mid 14· · · · ·Q· · ·How long -- when did you start working at 14· ·teens, and you basically had that job title for the 15· ·Blackstone? 15· ·remainder of your time at Blackstone? 16· · · · ·A· · ·I believe it was in 2004. 16· · · · ·A· · ·That is correct. 17· · · · ·Q· · ·Were you at Blackstone all the way from 17· · · · ·Q· · ·What were your general job 18· ·2004 right up until you started working at ArcLight 18· ·responsibilities at Blackstone between 2016 and 2021? 19· ·in 2021 or 2022? 19· · · · ·A· · ·I was a member of the investment team, 20· · · · ·A· · ·There was a short period of time between 20· ·and I was a member of the investment committee. 21· ·Blackstone and ArcLight where I was on garden leave, 21· · · · ·Q· · ·For the whole of Blackstone or a specific 22· ·but there were no employers in between. 22· ·sector at Blackstone? 23· · · · ·Q· · ·What's garden leave? 23· · · · ·A· · ·My responsibilities were specific to 24· · · · ·A· · ·A period of time where you are between 24· ·Blackstone Energy Partners. 25· ·jobs. 25· · · · ·Q· · ·And what is Blackstone Energy Partners?
Page 15 Page 17 ·1· · · · ·Q· · ·So essentially at Blackstone from 2004 to ·1· · · · ·A· · ·Blackstone Energy Partners was a group ·2· ·the end of 2021, give or take; is that fair? ·2· ·within the private equity group that invested in ·3· · · · ·A· · ·That is accurate. ·3· ·energy. ·4· · · · ·Q· · ·And I've seen documents that reference at ·4· · · · ·Q· · ·And how large was that group? ·5· ·different times Blackstone Group and Blackstone, Inc. ·5· · · · ·A· · ·I'm sorry.· Can you be more specific? ·6· · · · · · · ·Do you have an understanding if that's ·6· · · · ·Q· · ·Well, we can talk about it in multiple ·7· ·the same company or a different company? ·7· ·different ways, but how much assets under management ·8· · · · ·A· · ·I do not have specific knowledge. ·8· ·did you have in that general time period? ·9· · · · ·Q· · ·Do you know who was your actual employer? ·9· · · · ·A· · ·I don't recall. 10· · · · ·A· · ·I do not. 10· · · · ·Q· · ·Ballpark, 1 billion, 100 billion? 11· · · · ·Q· · ·Do you know who actually paid your 11· · · · ·A· · ·More than 1 billion. 12· ·compensation? 12· · · · ·Q· · ·Okay.· How many people did you work with 13· · · · ·A· · ·I do not know the specific legal entity 13· ·in your role in that group? 14· ·that paid my compensation. 14· · · · ·A· · ·I worked with a large part of that group. 15· · · · ·Q· · ·Okay.· You just referred to having worked 15· · · · ·Q· · ·And about how many people was that? 16· ·for Blackstone is how you talked about it? 16· · · · ·A· · ·The group overall was -- I don't recall 17· · · · ·A· · ·Correct. 17· ·specifics -- generally speaking, 30 people. 18· · · · ·Q· · ·Okay.· Whether that was Blackstone, Inc. 18· · · · ·Q· · ·And were you the head of that group, or 19· ·or Blackstone Group, just you worked for Blackstone? 19· ·was there somebody senior to you? 20· · · · ·A· · ·That is accurate. 20· · · · ·A· · ·There was somebody senior to me. 21· · · · ·Q· · ·Okay.· Can you take me through your job 21· · · · ·Q· · ·Who was that? 22· ·history at Blackstone from 2004 to 2021 if your 22· · · · ·A· · ·A gentleman named David Foley. 23· ·titles changed at any point? 23· · · · ·Q· · ·Do you know what his job title was? 24· · · · ·A· · ·I started in 2004 as an analyst in the 24· · · · ·A· · ·I believe it was Senior Managing Director 25· ·private equity group.· I don't recall the specific 25· ·and CEO of Blackstone Energy Partners.
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0057 Pages 14–17 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 18 Page 20 ·1· · · · ·Q· · ·Was he the only person in the group ·1· · · · ·A· · ·He was in the private equity group. ·2· ·senior to you, or was there anybody else senior to ·2· · · · ·Q· · ·He was in Blackstone's private equity ·3· ·you? ·3· ·group, and then Blackstone Energy Partners fell ·4· · · · ·A· · ·Blackstone Energy Partners was part of ·4· ·within that? ·5· ·the private equity group and interacted with the ·5· · · · ·A· · ·That is fair. ·6· ·private equity group.· So in that context, there were ·6· · · · ·Q· · ·Do you know what his title was in that ·7· ·other people that were more senior to me. ·7· ·time period? ·8· · · · ·Q· · ·So Blackstone Energy Partners is within ·8· · · · ·A· · ·I believe it was Senior Managing Director ·9· ·the overall private equity group.· Within Blackstone ·9· ·and Head of Global Private Equity, but I do not 10· ·Energy Partners, Mr. Foley was senior to you, but 10· ·recall specifically. 11· ·then, going up the chain to the broader private 11· · · · ·Q· · ·Okay.· I'm going to put a document into 12· ·equity group, there were other people also senior to 12· ·the chat.· I'm going to put it up on the screen, 13· ·you? 13· ·also, and go through the specific parts I'm going to 14· · · · · · · ·Is that a fair summary? 14· ·look at, but it's in the chat for you.· If you want 15· · · · ·A· · ·That is a fair summary. 15· ·to download it, take a look at it. 16· · · · ·Q· · ·Did you report to any of those people in 16· · · · · · · ·For any exhibit that I put up, I'm going 17· ·the private equity group directly, or did everything 17· ·to go through it.· I'll share my screen, and there 18· ·go through Mr. Foley on the way up? 18· ·will be specific points that I'll direct you to, but 19· · · · ·A· · ·I reported to Mr. Foley but also other 19· ·take all the time you want to look at any other 20· ·people. 20· ·portion, or if you can't see some of it on the 21· · · · ·Q· · ·Who else did you report to in that 2016 21· ·screen, you need it to -- you know, a different page 22· ·to 2021 time period besides Mr. Foley? 22· ·or whatnot, just let me know. 23· · · · ·A· · ·Blackstone is a matrix organization.· So 23· · · · · · · ·Okay.· Since we're in different rooms, I 24· ·there were a number of people that I interacted with 24· ·can't tell exactly what you're doing, and I want to 25· ·and reported to in one fashion, you know, across the 25· ·make sure you're able to see it appropriately.
Page 19 Page 21 ·1· ·firm. ·1· · · · · · · ·Okay? ·2· · · · · · · ·The person that I directly reported to ·2· · · · ·A· · ·Thank you. ·3· ·was named Joe Baratta. ·3· · · · · · · ·MR. CAFORIO:· So if the court ·4· · · · ·Q· · ·Okay.· A couple things:· What does it ·4· · · · ·reporter can mark the document I just ·5· ·mean to be -- what do you mean when you say ·5· · · · ·shared in the chat as Deposition Exhibit ·6· ·Blackstone is a matrix organization? ·6· · · · ·1. ·7· · · · ·A· · ·Well, there are a lot of different groups ·7· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·8· ·that are involved in -- in the business of ·8· · · · ·1 was marked for the record.) ·9· ·Blackstone. ·9· ·BY MR. CAFORIO: 10· · · · ·Q· · ·And so you would work with people -- are 10· · · · ·Q· · ·Can you see in front of you a -- a 11· ·you saying you would work with people in other groups 11· ·document titled Plaintiffs' First Amended Petition? 12· ·that might not be senior to you?· You weren't 12· · · · · · · ·Do you see that? 13· ·reporting to them because you were just kind of 13· · · · ·A· · ·I do. 14· ·equals in different branches who worked together on 14· · · · ·Q· · ·Okay. and so this is the -- I can 15· ·particular investments? 15· ·represent to you this is the current operative 16· · · · · · · ·Is that what you mean? 16· ·version of the petition that was filed -- you see up 17· · · · ·A· · ·I meant more so that there are different 17· ·in the top corner -- on January 24th, 2025, and at 18· ·functional groups within Blackstone that are involved 18· ·the top middle of this first page, it says in the 19· ·in the business of Blackstone where there are 19· ·Business Court, First Business Court Division, Dallas 20· ·reporting relationships or communications. 20· ·County. 21· · · · ·Q· · ·And the person you said you interacted 21· · · · · · · ·Do you see that? 22· ·with regularly was Joe Baratta; is that right? 22· · · · ·A· · ·I see that on the page. 23· · · · ·A· · ·Joe Baratta was one of my direct reports. 23· · · · ·Q· · ·And that's what I was referencing earlier 24· · · · ·Q· · ·And where was he -- where was he at 24· ·when I mentioned this was court -- a case pending in 25· ·Blackstone?· Was he in a particular group or -- 25· ·the Business Court in Dallas, and here's the actual
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0058 Pages 18–21 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 22 Page 24 ·1· ·petition that says that. ·1· · · · ·Blackstone. ·2· · · · · · · ·Have you ever seen the complaint in this ·2· ·BY MR. CAFORIO: ·3· ·case before? ·3· · · · ·Q· · ·Other than Blackstone, Inc., do you ·4· · · · ·A· · ·I have. ·4· ·believe you've ever performed work for any of the ·5· · · · ·Q· · ·Okay.· Do you recall when you first saw ·5· ·entities on this org chart? ·6· ·the complaint in this case? ·6· · · · · · · ·MR. DESAI:· Objection.· Form. ·7· · · · ·A· · ·I do not recall specifically. ·7· · · · · · · ·THE WITNESS:· I worked -- I believe ·8· · · · ·Q· · ·I'm going to go to Page 14 of this ·8· · · · ·I worked on behalf of Blackstone. ·9· ·document, and are you looking at an org chart now? ·9· ·BY MR. CAFORIO: 10· · · · ·A· · ·I see Page 14. 10· · · · ·Q· · ·Are you aware of whether you ever 11· · · · ·Q· · ·Okay.· And it appears to be an org chart, 11· ·received compensation from any of the entities listed 12· ·and it has Blackstone, Inc. at the top, and then it 12· ·on this org chart other than Blackstone? 13· ·works its way down through a bunch of entities with 13· · · · · · · ·MR. DESAI:· Objection. 14· ·BPP HoldCo, LLC at the bottom. 14· · · · · · · ·THE WITNESS:· My general 15· · · · · · · ·Do you see all that? 15· · · · ·understanding was that I received 16· · · · ·A· · ·I see the org chart. 16· · · · ·compensation from Blackstone. 17· · · · ·Q· · ·Are you familiar with this org chart? 17· ·BY MR. CAFORIO: 18· · · · · · · ·MR. DESAI:· Objection.· Form. 18· · · · ·Q· · ·Okay.· We can go to Page 69 of this 19· ·BY MR. CAFORIO: 19· ·document, which -- actually, go to 68 just to show 20· · · · ·Q· · ·I just want to know if you've seen it 20· ·you.· This is Exhibit 1 that's just attached at the 21· ·before, if this looks familiar to you or not.· It's 21· ·back of the petition, and do you see on your screen 22· ·just foundational. 22· ·here what's titled the Third Amended and Restated 23· · · · ·A· · ·I do not recall. 23· ·Limited Partnership Agreement of Primexx Energy 24· · · · ·Q· · ·Okay.· Are you familiar with any of the 24· ·Partners Limited? 25· ·entities that are listed in this org chart? 25· · · · ·A· · ·I can see that it says Third Amended and
Page 23 Page 25 ·1· · · · ·A· · ·I'm sorry.· Can you be more specific? ·1· ·Restated Limited Partnership Agreement of Primexx ·2· · · · ·Q· · ·Well, do you -- as you read the names of ·2· ·Energy Partners Limited. ·3· ·the different entities on this org chart, are you ·3· · · · ·Q· · ·Are you familiar with the entity Primexx ·4· ·familiar with those entities? ·4· ·Energy Partners Limited? ·5· · · · · · · ·Do you recognize those names, or are you ·5· · · · ·A· · ·I do not recall that entity specifically. ·6· ·unfamiliar with these entities, and you don't ·6· · · · ·Q· · ·Okay.· Well, let's go ahead and skip ·7· ·recognize those names? ·7· ·ahead a little bit to Page 150 of this document. ·8· · · · ·A· · ·I do not recall specific legal names or ·8· · · · · · · ·Can you see that this document appears to ·9· ·legal entities. ·9· ·be signed by you on behalf of BPP HoldCo, LLC? 10· · · · ·Q· · ·Okay.· Other than Blackstone, Inc. at the 10· · · · · · · ·Do you see that? 11· ·top? 11· · · · ·A· · ·I see the legal entity BPP HoldCo, LLC, 12· · · · · · · ·MR. DESAI:· Objection.· Form. 12· ·and I see my signature. 13· · · · · · · ·THE WITNESS:· I recognize the name 13· · · · ·Q· · ·Okay.· And if we go forward a few pages 14· · · · ·Blackstone.· I recognize the name 14· ·to Page 153, this is Exhibit A to this document, and 15· · · · ·Primexx, and I recognize the name 15· ·it has a schedule of partners, and you see the first 16· · · · ·Blackstone Energy Partners, but I do not 16· ·partner listed there is BPP HoldCo, LLC? 17· · · · ·recall specifics around the legal 17· · · · · · · ·Do you see that? 18· · · · ·structure or legal entities. 18· · · · ·A· · ·I see Exhibit A.· I see a list of 19· ·BY MR. CAFORIO: 19· ·members, and I see the first member is BPP HoldCo, 20· · · · ·Q· · ·Other than Blackstone, Inc., do you 20· ·LLC. 21· ·believe you've ever been employed by any of the 21· · · · ·Q· · ·And the -- for BPP HoldCo, LLC, it says 22· ·entities on this org chart? 22· ·in care of the Blackstone Group, right? 23· · · · · · · ·MR. DESAI:· Objection.· Form. 23· · · · ·A· · ·It does. 24· · · · · · · ·THE WITNESS:· My general 24· · · · ·Q· · ·And then with attention to you, Angelo 25· · · · ·understanding was that I was employed by 25· ·Acconcia, right?
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0059 Pages 22–25 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 26 Page 28 ·1· · · · ·A· · ·It does. ·1· · · · ·Q· · ·Let's go back to Page 74 of this ·2· · · · ·Q· · ·And that's your e-mail address listed ·2· ·document.· It's the first page of the -- you can see ·3· ·there? ·3· ·it's the table of contents and then the first actual ·4· · · · ·A· · ·That was my e-mail. ·4· ·page of the Third Amended and Restated Limited ·5· · · · ·Q· · ·And so going back to Page 150, you signed ·5· ·Partnership Agreement. ·6· ·this partnership agreement with the title President ·6· · · · · · · ·Do you see that? ·7· ·of BPP HoldCo, LLC? ·7· · · · ·A· · ·I apologize.· Do you mind repeating that. ·8· · · · · · · ·Do you see that? ·8· · · · ·Q· · ·So I'm just setting the stage.· This is ·9· · · · ·A· · ·I see that it states my name and then ·9· ·the Third Amended Restated Limited Partnership 10· ·reads Its, colon, President. 10· ·Agreement of Primexx Energy Partners that we looked 11· · · · ·Q· · ·And you would agree you signed this 11· ·at earlier, and I'm just going to the first page -- 12· ·document as the President of BPP HoldCo; is that 12· ·substantive page of that document. 13· ·correct? 13· · · · · · · ·Do you see that? 14· · · · ·A· · ·I see that is what the document says. I 14· · · · ·A· · ·I see the top of the page reads Third 15· ·don't recall specifically my role. 15· ·Amended and Restated Limited Partnership Agreement. 16· · · · ·Q· · ·Okay.· You're not sure if you were 16· ·Although, at the top of the PDF, it reads Page 74, 17· ·President of BPP HoldCo. 17· ·and at the bottom, it reads Page 7. 18· · · · ·A· · ·I do not recall specifically. 18· · · · ·Q· · ·And in the first paragraph of this page, 19· · · · ·Q· · ·If you were President of BPP HoldCo, do 19· ·it says that the Third Amended and Restated Limited 20· ·you know how long you were President of BPP HoldCo? 20· ·Partnership Agreement (the "Agreement"), dated as of 21· · · · · · · ·MR. DESAI:· Objection.· Form. 21· ·July 12th, 2016 (the "Effective Date") is made and 22· · · · · · · ·THE WITNESS:· I do not recall. 22· ·entered into by and among Primexx Energy Corporation, 23· ·BY MR. CAFORIO: 23· ·a Texas Corporation. 24· · · · ·Q· · ·Do you have any recollection of somebody 24· · · · · · · ·Do you see that? 25· ·else being president of BPP HoldCo other than you? 25· · · · ·A· · ·I see that on the page.
Page 27 Page 29 ·1· · · · · · · ·MR. DESAI:· Objection.· Form. ·1· · · · ·Q· · ·Okay.· And then it lists a series of the ·2· · · · · · · ·THE WITNESS:· I do not recall. ·2· ·other counter-parties were various classes of ·3· ·BY MR. CAFORIO: ·3· ·unitholders, correct? ·4· · · · ·Q· · ·Do you have any reason to believe that ·4· · · · ·A· · ·I see a number of different groups named ·5· ·when you signed this document, Angela Acconcia, ·5· ·here. ·6· ·President of BPP HoldCo, that you weren't the ·6· · · · ·Q· · ·And BPP HoldCo was a Series B preferred ·7· ·President of BPP HoldCo when you signed that ·7· ·unitholder, right? ·8· ·document? ·8· · · · ·A· · ·I do not recall. ·9· · · · · · · ·MR. DESAI:· Objection.· Form. ·9· · · · ·Q· · ·Well, we can go back to your signature on 10· · · · · · · ·THE WITNESS:· I do not recall 10· ·Page 150.· Do you see where it says right there, 11· · · · ·specifics. 11· ·Series B Preferred Unitholder BPP HoldCo, and then 12· ·BY MR. CAFORIO: 12· ·you signed it? 13· · · · ·Q· · ·Would you have signed a document that 13· · · · ·A· · ·I now see at the top Series B Preferred 14· ·says Angelo Acconcia was BPP HoldCo's President if 14· ·Unitholder. 15· ·you were not BPP HoldCo's President? 15· · · · ·Q· · ·Does that refresh your recollection that 16· · · · · · · ·MR. DESAI:· Objection.· Form. 16· ·BPP HoldCo was a Series B Preferred Unitholder? 17· · · · · · · ·THE WITNESS:· I'm sorry.· I don't 17· · · · ·A· · ·That is what I see on the page. 18· · · · ·understand the question. 18· · · · ·Q· · ·Does it refresh your recollection that 19· ·BY MR. CAFORIO: 19· ·BPP HoldCo was a Series B Preferred Unitholder? 20· · · · ·Q· · ·That is your signature, right? 20· · · · ·A· · ·I don't recall the specifics. 21· · · · ·A· · ·I believe it is. 21· · · · ·Q· · ·Okay.· And if we look at Page 153, this 22· · · · ·Q· · ·Do you recall if you ever received any 22· ·Exhibit A we already looked at, you see it says that 23· ·compensation from BPP HoldCo? 23· ·BPP HoldCo owned 186,006 Series B Preferred Units. 24· · · · ·A· · ·I do not believe I received any direct 24· · · · · · · ·Do you see that? 25· ·compensation. 25· · · · ·A· · ·I see that on the table.
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0060 Pages 26–29 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 30 Page 32 ·1· · · · ·Q· · ·Does that refresh your recollection that ·1· · · · ·A· · ·I don't recall specifically. ·2· ·BPP HoldCo was a Series B Preferred Unitholder? ·2· · · · ·Q· · ·More or less than five people? ·3· · · · ·A· · ·That is what it says on the page. I ·3· · · · ·A· · ·Inclusive of the other groups at ·4· ·don't recall specifics. ·4· ·Blackstone that were involved, more than five people. ·5· · · · ·Q· · ·Now -- I'm going to stop sharing this. ·5· · · · ·Q· · ·Did you have primary responsibility for ·6· · · · · · · ·You signed, as we saw, that Third Amended ·6· ·recommending Blackstone's investment into Primexx, or ·7· ·Partnership Agreement on behalf of BPP HoldCo, ·7· ·did somebody else have primary responsibility? ·8· ·correct? ·8· · · · · · · ·MR. DESAI:· Objection.· Form. ·9· · · · ·A· · ·I saw my signature on the page. ·9· · · · · · · ·THE WITNESS:· I don't understand 10· · · · ·Q· · ·Did you play any role in negotiating the 10· · · · ·what you mean by primary. 11· ·terms of the partnership agreement prior to you 11· ·BY MR. CAFORIO: 12· ·signing it? 12· · · · ·Q· · ·And I'm just trying to understand.· This 13· · · · ·A· · ·I recall general involvement. 13· ·is foundational for later questions, and so I could 14· · · · ·Q· · ·And what was your general involvement? 14· ·be totally -- misunderstand how the investment 15· · · · · · · ·MR. DESAI:· I am going to object to 15· ·process works at Blackstone.· So please correct me, 16· · · · ·form.· Object to the extent that the 16· ·but presumably at some point someone made this 17· · · · ·questions relate to matters that are 17· ·recommendation that Blackstone should look into this 18· · · · ·outside of jurisdictional discovery and 18· ·and make an investment into Primexx, and I just want 19· · · · ·just keep that as a warning objection so 19· ·to know, if that person was you, then we can go into 20· · · · ·I don't need to interrupt every 20· ·questions on that, or if that person was somebody 21· · · · ·time, but -- 21· ·else, in which case, I can ask you for a name, and I 22· · · · · · · ·MR. CAFORIO:· Understood. 22· ·don't need to ask those questions because it wasn't 23· ·BY MR. CAFORIO: 23· ·you. 24· · · · ·Q· · ·You can answer. 24· · · · · · · ·So my question is simply:· Who had 25· · · · ·A· · ·I apologize.· Do you mind repeating the 25· ·primary responsibility for recommending that
Page 31 Page 33 ·1· ·question? ·1· ·Blackstone make its investment into Primexx? ·2· · · · ·Q· · ·Yeah.· I -- you said, if I heard you ·2· · · · ·A· · ·The investment team makes recommendations ·3· ·correctly, that you recall a general involvement in ·3· ·to the investment committee, and the investment ·4· ·the negotiation of the partnership agreement, and so ·4· ·committee makes decisions.· So I'm struggling with ·5· ·I was just asking for clarification. ·5· ·the specifics of the word primary. ·6· · · · · · · ·What do you mean when you say you had a ·6· · · · · · · ·This gets back to kind of the matrix ·7· ·general involvement in negotiating the terms of the ·7· ·nature of Blackstone, and groups are involved in ·8· ·partnership agreement? ·8· ·decisions. ·9· · · · ·A· · ·I was one of several groups that were ·9· · · · ·Q· · ·And to clarify, were you on the 10· ·involved in the discussions around that -- the 10· ·investment team and the investment committee or only 11· ·partnership with -- with Primexx. 11· ·one of those? 12· · · · ·Q· · ·Did you receive drafts of the partnership 12· · · · ·A· · ·I was both on the investment team and on 13· ·agreement prior to signing it? 13· ·the investment committee. 14· · · · ·A· · ·I don't recall specifically, but I 14· · · · ·Q· · ·Okay.· So -- please correct me if I'm 15· ·believe I would have. 15· ·wrong.· I'm just trying to understand it.· It's 16· · · · ·Q· · ·Did you play any role in making the 16· ·foundational to ask later questions.· If I'm wrong, I 17· ·decision for Blackstone to make its substantial 17· ·want to know. 18· ·investment into Primexx and enter into the 18· · · · · · · ·So you were part of the investment team 19· ·partnership agreement? 19· ·that made the recommendation to the investment 20· · · · ·A· · ·I did. 20· ·committee to invest in Primexx; is that correct? 21· · · · ·Q· · ·What role did you play in Blackstone 21· · · · ·A· · ·I believe that's a fair characterization. 22· ·making the decision to invest in Primexx? 22· · · · ·Q· · ·And you were also on the investment 23· · · · ·A· · ·I was a member of the investment team. 23· ·committee that decided whether to approve the 24· · · · ·Q· · ·How many people were on that investment 24· ·recommendation from the investment team to invest in 25· ·team? 25· ·Primexx; is that correct?
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0061 Pages 30–33 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 34 Page 36 ·1· · · · ·A· · ·I was one of the many members of the ·1· ·lines.· There was general group involvement. ·2· ·investment committee. ·2· · · · ·Q· · ·And were there Blackstone employees ·3· · · · ·Q· · ·Okay.· Was there anybody else on the ·3· ·junior to you in the group who worked on Blackstone's ·4· ·investment committee who was also on the investment ·4· ·investment in Primexx that reported to you, or were ·5· ·team that recommended that Blackstone make its ·5· ·you the juniormost Blackstone employee working on the ·6· ·investment in Primexx? ·6· ·Primexx investment? ·7· · · · ·A· · ·Sorry.· Would you mind repeating the ·7· · · · ·A· · ·There were other people that -- that ·8· ·question? ·8· ·worked with me.· I do not recall there being specific ·9· · · · ·Q· · ·Was there anybody else besides you that ·9· ·legal reporting lines. 10· ·you recall being on both the investment team that 10· · · · ·Q· · ·And who were the people at Blackstone who 11· ·made the recommendation to invest in Primexx and on 11· ·worked with you on the Primexx investment? 12· ·the investment committee, or were you the only person 12· · · · ·A· · ·Sorry.· It's taking me a second to try to 13· ·who was on both the investment team and the 13· ·recall specifically because there were a number of 14· ·investment committee? 14· ·people.· The person who comes to mind -- one of the 15· · · · ·A· · ·Generally speaking, the way it worked was 15· ·people that come to mind is Erik Belz. 16· ·the investment team would discuss within Blackstone 16· · · · ·Q· · ·Anybody else? 17· ·Energy Partners and Blackstone Energy -- Blackstone 17· · · · ·A· · ·I don't recall specifically. 18· ·Energy Partners would make -- generally speaking, 18· · · · ·Q· · ·Now, was there at Blackstone some sort of 19· ·investments that were taken to investment committee, 19· ·deal team that worked on Blackstone's Primexx 20· ·because that investment committee was broader than 20· ·investment? 21· ·Blackstone Energy Partners, it had the support of the 21· · · · ·A· · ·Generally speaking, there were deal 22· ·other partners within Blackstone Energy Partners, 22· ·teams. 23· ·which is why I'm trying to think through the specific 23· · · · ·Q· · ·And I've seen references in documents -- 24· ·aspects of your question. 24· ·and we might look at some later but that referred to 25· · · · ·Q· · ·And how many -- you said it had the 25· ·the Primexx deal team as including you, Anika Gautam,
Page 35 Page 37 ·1· ·support of the other partners at Blackstone Energy ·1· ·Mark Henle, Erik Belz and David Foley. ·2· ·Partners. ·2· · · · · · · ·Does that sound accurate for who was part ·3· · · · · · · ·How many partners were there within the ·3· ·of the Blackstone/Primexx deal team? ·4· ·Blackstone Energy Partners group? ·4· · · · ·A· · ·Those names are familiar to me.· I do not ·5· · · · ·A· · ·I don't recall specifically at the time ·5· ·recall specific roles. ·6· ·but -- I don't recall specifically at the time. ·6· · · · ·Q· · ·Okay.· Do you recall whether that group ·7· · · · ·Q· · ·With regards to Blackstone's investment ·7· ·of people at Blackstone worked on the Primexx ·8· ·in Primexx, did you report to Mr. Foley with regards ·8· ·investment? ·9· ·to that investment? ·9· · · · ·A· · ·I recall some of their involvement. 10· · · · · · · ·You mentioned earlier just in general 10· · · · ·Q· · ·Whose involvement do you recall? 11· ·Mr. Foley was your senior that you would report to at 11· · · · ·A· · ·David Foley and Erik Belz. 12· ·Blackstone Energy Partners, and so I'm just wondering 12· · · · ·Q· · ·But you don't have a recollection right 13· ·specifically, for the Primexx investment, was it 13· ·now of work that Anika Gautam performed? 14· ·still the case that you reported to Mr. Foley? 14· · · · ·A· · ·I do not recall. 15· · · · ·A· · ·This gets back to the fact that 15· · · · ·Q· · ·Or Mark Henle? 16· ·Blackstone is a matrix organization.· So there were a 16· · · · ·A· · ·I do not recall. 17· ·number of people that I reported to. 17· · · · ·Q· · ·Are you familiar with Ms. Gautam and 18· · · · ·Q· · ·Was Mr. Foley one of them? 18· ·Mr. Henley, in general, and you just don't recall 19· · · · ·A· · ·I believe that's a fair characterization. 19· ·that they worked on the Primexx investment, or are 20· · · · ·Q· · ·Were there any Blackstone employees who 20· ·you unfamiliar with those names? 21· ·reported to you with regards to Blackstone's 21· · · · ·A· · ·The names are familiar to me.· I just 22· ·investment in Primexx? 22· ·don't recall their involvement. 23· · · · ·A· · ·This, again, gets back to more of the 23· · · · ·Q· · ·In the Primexx investment? 24· ·matrix nature of Blackstone where, to my recollection 24· · · · ·A· · ·Correct. 25· ·and knowledge, there weren't specific legal reporting 25· · · · ·Q· · ·One way or the other?
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0062 Pages 34–37 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 38 Page 40 ·1· · · · ·A· · ·I do not recall their specific ·1· ·those entities in your understanding? ·2· ·involvement in the Primexx investment. ·2· · · · ·A· · ·I believe they were investment funds. ·3· · · · ·Q· · ·Okay.· And what was Mr. Belz -- is that ·3· · · · ·Q· · ·Are those the funds that you referenced ·4· ·B-E-L-Z; is that right? ·4· ·earlier that you had a carried interest in that would ·5· · · · ·A· · ·I believe that's correct. ·5· ·make your personal compensation higher or lower ·6· · · · ·Q· · ·Okay.· What was Mr. Belz's involvement in ·6· ·depending upon the profitability of Blackstone's ·7· ·the Primexx investment for Blackstone? ·7· ·Primexx investment? ·8· · · · ·A· · ·Erik Belz was a member of the investment ·8· · · · ·A· · ·I believe that's a fair characterization. ·9· ·team. ·9· ·Although, I would say it could relative to what -- 10· · · · ·Q· · ·Was he junior or senior to you or same 10· ·because there are a number of factors and 11· ·level as you? 11· ·considerations that went into the calculation of the 12· · · · ·A· · ·Erik Belz was junior. to me. 12· ·carried interest for the funds. 13· · · · ·Q· · ·Okay.· So for the people you remember 13· · · · · · · ·THE WITNESS:· And I apologize.· Do 14· ·working as part of the Primexx deal team, Mr. Belz 14· · · · ·you mind if we take -- we're coming up on 15· ·was junior to you and you were junior to Mr. Foley; 15· · · · ·the hour.· Do you mind if we take a 16· ·is that accurate? 16· · · · ·nature break? 17· · · · ·A· · ·I believe so. 17· · · · · · · ·MR. CAFORIO:· Yeah, yeah.· Do you 18· · · · ·Q· · ·As part of your compensation from 18· · · · ·need five minutes, ten minutes?· What do 19· ·Blackstone, did you personally have any carried 19· · · · ·you need? 20· ·interest in Blackstone's investment in Primexx? 20· · · · · · · ·THE WITNESS:· Five minutes would be 21· · · · ·A· · ·I apologize.· Do you mind repeating the 21· · · · ·great. 22· ·question, Bryan? 22· · · · · · · ·MR. CAFORIO:· Okay. 23· · · · ·Q· · ·Yeah.· As part of your compensation 23· · · · · · · ·THE VIDEOGRAPHER:· The time is 24· ·package at Blackstone, did you personally have any 24· · · · ·10:07 a.m., and we're going off the 25· ·carried interest in Blackstone's investment in 25· · · · ·record.
Page 39 Page 41 ·1· ·Primexx? ·1· · · · · · · · · · · (Brief pause.) ·2· · · · ·A· · ·I had a carried interest in our ·2· · · · · · · ·THE VIDEOGRAPHER:· The time is ·3· ·investment fund, which was indirectly associated with ·3· · · · ·10:12 a.m.· We're going back on the ·4· ·Primexx. ·4· · · · ·record. ·5· · · · ·Q· · ·So did you expect that your personal ·5· ·BY MR. CAFORIO: ·6· ·earnings could be higher or lower depending on the ·6· · · · ·Q· · ·All right.· Welcome back, Mr. Acconcia. ·7· ·profitability of Blackstone's investment in Primexx? ·7· ·You understand you're still under oath, correct? ·8· · · · ·A· · ·Generally speaking, yes. ·8· · · · ·A· · ·I do. ·9· · · · ·Q· · ·Let's go back to Exhibit 1 that we ·9· · · · ·Q· · ·Okay.· Can you please describe, in 10· ·already looked at.· I'll put something on the screen 10· ·general terms, what were your responsibilities at 11· ·for you. 11· ·Blackstone as a member of the Primexx deal team? 12· · · · · · · ·Do you see, again, this page we already 12· · · · · · · ·MR. DESAI:· Objection.· Form. 13· ·looked at of the Third Amended and Restated Limited 13· · · · · · · ·THE WITNESS:· I apologize.· Could 14· ·Partnership Agreement of Primexx Energy Partners? 14· · · · ·you be more specific? 15· · · · ·A· · ·I see the page you put up on the screen. 15· ·BY MR. CAFORIO: 16· · · · ·Q· · ·And if you go to the fifth whereas clause 16· · · · ·Q· · ·Well, I wanted to start general and get 17· ·under the recitals on that first page, there's a 17· ·more specific, but just, in general, we discussed the 18· ·reference to Blackstone Capital Partners VII, L.P. 18· ·Primexx deal team at Blackstone, right, which 19· ·and Blackstone Energy Partners II L.P. (the 19· ·included at least you, Mr. Belz and Mr. Foley, right? 20· ·"Blackstone Investors"). 20· · · · ·A· · ·I recall that discussion. 21· · · · · · · ·Do you see that? 21· · · · ·Q· · ·Okay.· And I'm just asking, in general 22· · · · ·A· · ·I do. 22· ·terms, before we get into specifics, how would you 23· · · · ·Q· · ·Do you recognize those two entities? 23· ·describe your responsibilities being on the Primexx 24· · · · ·A· · ·Generally speaking, yes. 24· ·deal team overseeing Blackstone's investment in 25· · · · ·Q· · ·And just generally, what -- what are 25· ·Primexx?
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0063 Pages 38–41 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 42 Page 44 ·1· · · · ·A· · ·I recall general involvement inclusive of ·1· · · · ·A· · ·I was generally involved in Blackstone's ·2· ·being on the Board of Directors. ·2· ·investment in Primexx during that time. ·3· · · · ·Q· · ·The Board of Directors of Primexx?· Is ·3· · · · ·Q· · ·And that includes Blackstone exiting its ·4· ·that what you're referring to? ·4· ·investment in Primexx at the end of 2021; is that ·5· · · · ·A· · ·Yes. ·5· ·fair? ·6· · · · ·Q· · ·I just want to make -- not the Board of ·6· · · · · · · ·MR. DESAI:· Objection.· Form. ·7· ·Directors of Blackstone?· The Board of Directors of ·7· · · · · · · ·THE WITNESS:· I was generally ·8· ·Primexx? ·8· · · · ·involved in the activities related to ·9· · · · ·A· · ·That is correct. ·9· · · · ·Primexx during -- during that time. 10· · · · ·Q· · ·Okay.· Would you describe your 10· ·BY MR. CAFORIO: 11· ·responsibilities from Blackstone regarding the 11· · · · ·Q· · ·Including its ultimate sale to Callon 12· ·Primexx investment to be a one-time event that was 12· ·Petroleum; is that correct or not correct? 13· ·completed when you signed that partnership agreement, 13· · · · ·A· · ·The reason why it's taking me a moment to 14· ·or did you have a continuing obligation over a series 14· ·think about this is your specific use of the word 15· ·of years regarding that investment? 15· ·sale or exit.· I don't recall the specifics of the 16· · · · ·A· · ·I would say general involvement over a 16· ·transaction, but, generally speaking, I recall it to 17· ·period of time. 17· ·be more of a merger, and, thus, my comment of my 18· · · · ·Q· · ·Your responsibilities didn't end the 18· ·general involvement in the -- in the transaction. 19· ·moment you signed the partnership agreement? 19· · · · ·Q· · ·Okay.· So you were -- whether a merger or 20· · · · ·A· · ·My involvement did not end when I signed 20· ·a sale, there was a transaction that -- between 21· ·the partnership agreement. 21· ·Primexx and Callon Petroleum at the end of 2021, 22· · · · ·Q· · ·In fact, you continued participating in 22· ·correct? 23· ·meetings regarding Blackstone's investment in Primexx 23· · · · ·A· · ·I recall the transaction.· Specific dates 24· ·from 2016 all the way through 2021; is that fair? 24· ·I don't recall. 25· · · · ·A· · ·I recall meetings during that time.· The 25· · · · ·Q· · ·Okay.· And you did play a role in
Page 43 Page 45 ·1· ·specific dates I don't have specific recollection of. ·1· ·effectuating that transaction with Callon Petroleum ·2· · · · ·Q· · ·And in your role on the Blackstone's ·2· ·in 2021 on behalf of Blackstone, is that fair? ·3· ·Primexx deal team, did you play any role on behalf of ·3· · · · · · · ·MR. DESAI:· Objection.· Form. ·4· ·Blackstone in attempting to sell Primexx in the 2021 ·4· · · · · · · ·THE WITNESS:· I was one of many ·5· ·time period? ·5· · · · ·people at Blackstone involved in our ·6· · · · · · · ·MR. DESAI:· Objection.· Form. ·6· · · · ·investment in Primexx. ·7· · · · · · · ·THE WITNESS:· Apologies.· Could you ·7· ·BY MR. CAFORIO: ·8· · · · ·rephrase the question? ·8· · · · ·Q· · ·And Callon Petroleum is a Texas-based ·9· ·BY MR. CAFORIO: ·9· ·corporation; is that right? 10· · · · ·Q· · ·Well, I'm just wondering, in your role on 10· · · · ·A· · ·I do not recall. 11· ·the Primexx deal team at Blackstone, did you perform 11· · · · ·Q· · ·You don't recall that it's headquartered 12· ·any work or play any role in the process of 12· ·in Houston? 13· ·Blackstone ultimately working to sell Primexx in the 13· · · · ·A· · ·I -- I do not. 14· ·2020-2021 time period? 14· · · · ·Q· · ·Did you ever participate in any meetings 15· · · · · · · ·MR. DESAI:· Objection.· Form. 15· ·in Houston where you discussed the potential sale 16· · · · · · · ·THE WITNESS:· I was generally 16· ·of -- or the potential transaction with Callon? 17· · · · ·involved in the activities related to 17· · · · ·A· · ·I do not recall. 18· · · · ·Primexx. 18· · · · ·Q· · ·One way or the other? 19· ·BY MR. CAFORIO: 19· · · · ·A· · ·I do not believe so, but I don't -- I do 20· · · · ·Q· · ·And do you recall that ultimately Primexx 20· ·not recall specifics. 21· ·was sold to Callon Petroleum in the end of 2021? 21· · · · ·Q· · ·Did you have any direct communications 22· · · · ·A· · ·I generally recall that. 22· ·with anyone at Callon Petroleum regarding the 23· · · · ·Q· · ·And did you personally play any role in 23· ·potential transaction involving Primexx? 24· ·the process that resulted in Primexx being sold to 24· · · · ·A· · ·I do not recall. 25· ·Callon Petroleum at the end of 2021? 25· · · · ·Q· · ·One way or the other?
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0064 Pages 42–45 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 46 Page 48 ·1· · · · ·A· · ·I do not recall. ·1· · · · ·A· · ·I see that now.· Thank you. ·2· · · · ·Q· · ·Okay.· In 2021, in your role at ·2· · · · ·Q· · ·And you wrote in this e-mail to ·3· ·Blackstone, did you travel to Texas for work? ·3· ·Mr. Doyle:· On a fight [sic.] this morning to ·4· · · · ·A· · ·I do not recall. ·4· ·Houston.· Will call you when I land. ·5· · · · ·Q· · ·Let's put up the next exhibit.· I'm ·5· · · · · · · ·Do you see that? ·6· ·putting it in the chat right now, and I'll share my ·6· · · · ·A· · ·I do. ·7· ·screen, as well. ·7· · · · ·Q· · ·Do you have any reason to believe that ·8· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·8· ·when you sent this e-mail to Mr. Doyle and told him ·9· · · · ·2 was marked for the record.) ·9· ·that you were on a flight to Houston and that you 10· ·BY MR. CAFORIO: 10· ·would call him when you landed that that was not an 11· · · · · · · ·So Deposition Exhibit 2 is a document, 11· ·accurate statement? 12· ·and do you see there's a -- at the bottom right of 12· · · · ·A· · ·I do not recall this e-mail. 13· ·the document, there's a numeric code.· It says 13· · · · ·Q· · ·Okay.· Do you recall whether you did, in 14· ·BPP_0018525. 14· ·fact, call Mr. Doyle when you landed in Houston on 15· · · · · · · ·Do you see that? 15· ·June 29th, 2021? 16· · · · ·A· · ·I see that. 16· · · · ·A· · ·I do not recall. 17· · · · ·Q· · ·And this document is three pages long. 17· · · · ·Q· · ·Do you have any reason to believe that 18· ·It goes to ending in 27. 18· ·you wouldn't have called Mr. Doyle when you landed in 19· · · · · · · ·Do you see that? 19· ·Houston as you told him you would? 20· · · · ·A· · ·I see that. 20· · · · ·A· · ·I'm sorry.· I don't recall the specifics 21· · · · ·Q· · ·And this is a document -- this is an 21· ·of this. 22· ·e-mail chain that starts on June 24th, 2021 with an 22· · · · ·Q· · ·Who is Chris Doyle? 23· ·e-mail from Phil Cook at Primexx. 23· · · · ·A· · ·Sorry.· Do you mind being a little more 24· · · · · · · ·Do you see that? 24· ·specific? 25· · · · ·A· · ·I see, on the third page, it lists Phil 25· · · · ·Q· · ·Well, I don't know.· You sent an e-mail
Page 47 Page 49 ·1· ·Cook, an e-mail from Phil Cook. ·1· ·dated June 29th, 2021 to Chris Doyle at Primexx. ·2· · · · ·Q· · ·And it says, in his signature block, that ·2· · · · · · · ·So I'm just asking you who is Chris Doyle ·3· ·he was the Executive Vice President and Chief ·3· ·that you sent this e-mail to? ·4· ·Financial Officer of Primexx Energy Partners located ·4· · · · ·A· · ·I understand your question now.· Chris ·5· ·in Dallas, Texas. ·5· ·was a member of the executive team at Primexx. ·6· · · · · · · ·Do you see that? ·6· · · · ·Q· · ·Was he located in Texas? ·7· · · · ·A· · ·I do. ·7· · · · ·A· · ·I believe he was. ·8· · · · ·Q· · ·Okay.· And if you go up this chain to the ·8· · · · ·Q· · ·I'm going to give you -- I'm sorry.· You ·9· ·first page, at the very top e-mail, do you see that's ·9· ·said he was on the executive team?· Is that what you 10· ·an e-mail that you sent dated June 29th, 2021 to 10· ·described his role at Primexx? 11· ·Chris Doyle at Primexx with a CC to Erik Belz and 11· · · · ·A· · ·I believe that's what I said. 12· ·Mark Henle, both at Blackstone? 12· · · · ·Q· · ·Okay.· Did he report to you in that role? 13· · · · · · · ·Do you see that? 13· · · · ·A· · ·I believe it would be fair to 14· · · · ·A· · ·Sorry.· I'm just trying to familiarize 14· ·characterize that he reported to the board. 15· ·myself with the document. 15· · · · ·Q· · ·And you were on the board? 16· · · · ·Q· · ·Yeah.· Take your time.· Take your time. 16· · · · ·A· · ·I was one of the members of the board. 17· · · · ·A· · ·Okay.· Thank you.· Do you mind repeating 17· · · · ·Q· · ·How often did you communicate with 18· ·the question? 18· ·Mr. Doyle in the 2021 time period? 19· · · · ·Q· · ·Well, I think I was just clarifying if 19· · · · ·A· · ·I do not recall. 20· ·you saw this. 20· · · · ·Q· · ·Do you recall, in general, that you did 21· · · · · · · ·Do you see that the top e-mail is an 21· ·communicate with Mr. Doyle at Primexx in 2021? 22· ·e-mail from you dated June 29th, 2021 sent to Chris 22· · · · ·A· · ·I see the e-mail on screen that you 23· ·Doyle at Primexx with a CC to Erik Belz and Mark 23· ·noted.· I do not recall communications with 24· ·Henle, both at Blackstone. 24· ·Mr. Doyle. 25· · · · · · · ·Do you see that? 25· · · · ·Q· · ·You don't recall any other
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0065 Pages 46–49 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 50 Page 52 ·1· ·communications. ·1· ·team at Primexx. ·2· · · · ·A· · ·No, I do not. ·2· · · · ·Q· · ·Do you recall whether you ever met ·3· · · · ·Q· · ·Okay.· If you look at the -- I guess it's ·3· ·in-person in Texas with Mr. Doyle, Mr. White, ·4· ·the fourth e-mail down, there's a line kind of in the ·4· ·Ms. Davis, or Mr. Cook regarding Blackstone's ·5· ·middle of the page, and there's an e-mail from Chris ·5· ·investment in Primexx? ·6· ·Doyle dated June 28th, 2021. ·6· · · · ·A· · ·I do not recall specifics.· I do not ·7· · · · · · · ·Do you see that? ·7· ·recall specifics. ·8· · · · ·A· · ·I see an e-mail in the middle of the page ·8· · · · ·Q· · ·I'll take that document down and put the ·9· ·from Chris Doyle. ·9· ·next document into the chat. 10· · · · ·Q· · ·Okay.· And I just -- looking at all the 10· · · · · · · ·MR. DESAI:· Bryan, while you're 11· ·people who were CC'd here, there are -- do you have 11· · · · ·doing that, I want to mention -- I know 12· ·an understanding of who these people are?· Do you 12· · · · ·I've said this before, but Mr. Acconcia 13· ·recognize the names that were part of this e-mail 13· · · · ·has a noon eastern hard cut. 14· ·chain or no, just in general, and then we'll get into 14· · · · · · · ·MR. CAFORIO:· Yeah.· I'm very 15· ·specifics? 15· · · · ·hopeful we'll be finished well before 16· · · · ·A· · ·I generally recognize some of these 16· · · · ·noon, but we'll see how quickly we can 17· ·names. 17· · · · ·move through things. 18· · · · ·Q· · ·Okay.· So I just want to look at some of 18· · · · · · · ·MR. DESAI:· Yeah, I do, too, and I 19· ·the names that have an @Primexx.com e-mail address. 19· · · · ·know we still have a ways to go before 20· ·So I see a Sam Blatt at Primexx. 20· · · · ·then, but I just wanted to flag it. 21· · · · · · · ·Do you see that name? 21· · · · · · · ·MR. CAFORIO:· Yeah.· Thank you. 22· · · · ·A· · ·I see that. 22· · · · · · · ·THE WITNESS:· Thank you, Bryan. 23· · · · ·Q· · ·Do you know who Sam Blatt at Primexx was? 23· · · · · · · ·MR. CAFORIO:· Let me share the 24· · · · ·A· · ·Sam Blatt was a member of the executive 24· · · · ·screen here, and for the court reporter, 25· ·team at Primexx. 25· · · · ·it is now marked Deposition Exhibit 3.
Page 51 Page 53 ·1· · · · ·Q· · ·The next name is Chase White at Primexx. ·1· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·2· ·Do you see that? ·2· · · · ·3 was marked for the record.) ·3· · · · ·A· · ·I see that. ·3· ·BY MR. CAFORIO: ·4· · · · ·Q· · ·Do you know who Chase White was? ·4· · · · ·Q· · ·Can you see this is a document with a ·5· · · · ·A· · ·I recall his general involvement.· I do ·5· ·Bates number down at the bottom BPP_0017994. ·6· ·not recall his specific role or title. ·6· · · · · · · ·Do you see that? ·7· · · · ·Q· · ·What was his general involvement? ·7· · · · ·A· · ·I see that. ·8· · · · ·A· · ·He was involved in the finance team at ·8· · · · ·Q· · ·And this is an e-mail chain between ·9· ·Primexx. ·9· ·you -- it's various e-mails involving you, Patricia 10· · · · ·Q· · ·Skipping one name that doesn't have a 10· ·Lee and Mr. Doyle at Primexx. 11· ·Primexx e-mail, the next name is Megan Davis at 11· · · · · · · ·Do you see that? 12· ·Primexx. 12· · · · ·A· · ·I see an e-mail from Patricia to myself. 13· · · · · · · ·Do you see that? 13· · · · ·Q· · ·Who is Patricia Lee? 14· · · · ·A· · ·I do. 14· · · · ·A· · ·Patricia was my executive assistant. 15· · · · ·Q· · ·Do you know who Megan Davis at Primexx 15· · · · ·Q· · ·Okay.· And so the first e-mail on this 16· ·was? 16· ·chain at the bottom is from Mr. Doyle to Ms. Lee, 17· · · · ·A· · ·I do not recall. 17· ·dated May 25th, 2021; subject:· Schedule next 18· · · · ·Q· · ·And then the last name listed here is 18· ·Tuesday, and it says:· Angelo mentioned having 19· ·Phil Cook at Primexx. 19· ·drinks, dinner next week.· I think it makes sense for 20· · · · · · · ·Do you see that? 20· ·Angelo and I to have pre dinner drinks and then have 21· · · · ·A· · ·I do. 21· ·a team dinner Wednesday evening.· Does that work? I 22· · · · ·Q· · ·And we saw his signature block on the 22· ·would invite Phil, Megan, Chase and Sam. 23· ·third page, but do you -- do you know who Phil Cook 23· · · · · · · ·Do you see that? 24· ·at Primexx was? 24· · · · ·A· · ·I see that's what it says. 25· · · · ·A· · ·Phil Cook was a member of the executive 25· · · · ·Q· · ·And then Ms. Lee forwarded that e-mail to
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0066 Pages 50–53 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 54 Page 56 ·1· ·you eight minutes later on May 25th, 2021, and wrote: ·1· · · · ·A· · ·Okay.· Thank you. ·2· ·Angelo, please advise on the below, as you will be in ·2· · · · ·Q· · ·So do you see that that's what this chain ·3· ·Dallas. ·3· ·started with? ·4· · · · · · · ·Do you see that? ·4· · · · ·A· · ·Sorry.· Would you mind repeating the ·5· · · · ·A· · ·I do. ·5· ·question? ·6· · · · ·Q· · ·And then you responded to your executive ·6· · · · ·Q· · ·Yeah.· This is an e-mail chain -- this ·7· ·assistant later that same day, May 25th, 2021: ·7· ·document -- this exhibit -- is an e-mail chain that ·8· ·Thanks.· Let's do drinks with Chris Doyle at ·8· ·starts with an e-mail from Chase White at Primexx, ·9· ·5:30 p.m. and then dinner at 6:30 p.m. with the team. ·9· ·dated June 30, 2021, to the Blackstone team and the 10· · · · · · · ·Do you see that? 10· ·Primexx team. 11· · · · ·A· · ·I do. 11· · · · · · · ·Do you see that? 12· · · · ·Q· · ·And the team, as Mr. Doyle wrote it in 12· · · · ·A· · ·I see that. 13· ·that first e-mail, is Phil, Megan, Chase and Sam, the 13· · · · ·Q· · ·And we've discussed most of these names, 14· ·people we looked at on the last e-mail, right? 14· ·but there is one name I think we haven't discussed. 15· · · · ·A· · ·I believe that that is what it's 15· ·There's a jeffkelly@blackstone.com at the bottom of 16· ·referring to based on the e-mail here. 16· ·this e-mail. 17· · · · ·Q· · ·And Ms. Lee, as your executive assistant, 17· · · · · · · ·Do you see that? 18· ·was familiar with your schedule; is that fair? 18· · · · ·A· · ·I see that. 19· · · · ·A· · ·That is fair. 19· · · · ·Q· · ·Who is Mr. Kelly at Blackstone? 20· · · · ·Q· · ·And she wrote on this e-mail on May 25th, 20· · · · ·A· · ·Mr. Kelly was a member of -- and this 21· ·that you would be in Dallas, correct? 21· ·e-mail is refreshing my memory -- a member of the 22· · · · ·A· · ·I see that she wrote in her e-mail dated 22· ·portfolio operations team at Blackstone. 23· ·May 25th that I would be in Dallas. 23· · · · ·Q· · ·Did he play any role on the Primexx deal 24· · · · ·Q· · ·And then you did, in fact, go to Dallas 24· ·team? 25· ·the next week where you met with Mr. Doyle and the 25· · · · ·A· · ·This gets back to the matrix like nature
Page 55 Page 57 ·1· ·rest of the Primexx team while you were there, ·1· ·of Blackstone.· So there were various groups and ·2· ·correct? ·2· ·people that were involved, some of which were within ·3· · · · · · · ·MR. DESAI:· Objection.· Form. ·3· ·Blackstone Energy Partners and the private equity ·4· · · · · · · ·THE WITNESS:· I don't recall. ·4· ·group, some of who were in other groups were ·5· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·5· ·generally involved, and Jeff was a member of one of ·6· · · · ·4 was marked for the record.) ·6· ·those other groups who was generally involved. ·7· ·BY MR. CAFORIO: ·7· · · · ·Q· · ·And about in the middle of this page, ·8· · · · ·Q· · ·I'll put the next e-mail into the chat or ·8· ·just the third e-mail up from the bottom, is an ·9· ·document into the chat I should say. ·9· ·e-mail you sent dated June 30, 2021. 10· · · · · · · ·MR. CAFORIO:· If the court reporter 10· · · · · · · ·Do you see that? 11· · · · ·would mark this as the next exhibit. 11· · · · ·A· · ·I see an e-mail from me in the middle of 12· ·BY MR. CAFORIO: 12· ·the page. 13· · · · ·Q· · ·Do you see this is a document with the 13· · · · ·Q· · ·And you wrote in this e-mail:· I am 14· ·Bates number BPP_0005953 through 5954? 14· ·back -- I am back-to-back in Houston today. 15· · · · · · · ·Do you see that? 15· · · · · · · ·Do you see that? 16· · · · ·A· · ·I see the first page says BPP_0005953. 16· · · · ·A· · ·I see -- I see that. 17· ·Thank you.· I now see the second page.· It says 17· · · · ·Q· · ·And when you wrote that, did you mean you 18· ·0005954. 18· ·had back-to-back meetings in Houston on June 30th, 19· · · · ·Q· · ·Okay.· And this is an e-mail chain 19· ·2021? 20· ·started by Chase White at Primexx dated June 30, 20· · · · ·A· · ·I don't recall the specifics of the trip. 21· ·2021? 21· · · · ·Q· · ·But looking at the e-mail you wrote, do 22· · · · · · · ·Do you see that? 22· ·you know what you meant when you said I am 23· · · · ·A· · ·Would you mind going to the second page, 23· ·back-to-back in Houston today with regards to 24· ·please? 24· ·scheduling a call? 25· · · · ·Q· · ·Yeah. 25· · · · ·A· · ·Generally speaking, I'd state that's a
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0067 Pages 54–57 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 58 Page 60 ·1· ·term or phrase that I believe refers to not having ·1· · · · · · · ·MR. CAFORIO:· Would the court ·2· ·available time.· I do not -- I do not recall specific ·2· · · · ·reporter mark this as the next exhibit. ·3· ·activities or meetings or what was taking up my time ·3· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·4· ·during that period. ·4· · · · ·5 was marked for the record.) ·5· · · · ·Q· · ·But you were in Houston when you sent ·5· ·BY MR. CAFORIO: ·6· ·this e-mail? ·6· · · · ·Q· · ·Do you see this is a document with a ·7· · · · ·A· · ·I do not recall. ·7· ·Bates number BPP_0016545, and it's a two-page ·8· · · · ·Q· · ·You said you were in Houston when you ·8· ·document ending 546. ·9· ·sent this e-mail, right? ·9· · · · · · · ·Do you see that? 10· · · · ·A· · ·That is what the first line of the e-mail 10· · · · ·A· · ·I do. 11· ·says.· I do not recall any of the specifics. 11· · · · ·Q· · ·And this is -- it appears to be a 12· · · · ·Q· · ·Do you believe you were lying to the rest 12· ·calendar invite from you dated November 3rd, 2020. 13· ·of the Primexx team when you told them you were in 13· · · · · · · ·Do you see that? 14· ·Houston when you sent that e-mail? 14· · · · ·A· · ·Sorry.· I'm just trying to familiarize 15· · · · · · · ·MR. DESAI:· Objection.· Form. 15· ·myself with the document. 16· · · · · · · ·THE WITNESS:· I see what the e-mail 16· · · · ·Q· · ·Yep. 17· · · · ·says.· I just do not recall anything 17· · · · ·A· · ·This looks like a calendar invite, and 18· · · · ·further. 18· ·while it says from me, typically my assistant was 19· ·BY MR. CAFORIO: 19· ·asked to coordinate meetings and would send calendar 20· · · · ·Q· · ·And this is an e-mail that you sent to 20· ·invites on behalf of myself or -- or the deal team. 21· ·Mr. Doyle, Mr. Blatt, Mr. Cook, Ms. Davis in Texas 21· · · · · · · ·So I -- I don't recall whether I sent 22· ·where you told them that you were in Houston, 22· ·this or whether my assistant sent it specifically. 23· ·correct? 23· · · · ·Q· · ·But you see that it is a calendar invite 24· · · · ·A· · ·This -- reading this e-mail, this is an 24· ·sent by your e-mail address dated November 3rd, 2020 25· ·e-mail that I sent to mostly members of the 25· ·with the subject call Primexx/Blackstone Strategic
Page 59 Page 61 ·1· ·Blackstone team in the to line.· There were five ·1· ·Next Steps. ·2· ·people noted in the to line.· Only one of which was ·2· · · · · · · ·Do you see that? ·3· ·with Primexx. ·3· · · · ·A· · ·I do. ·4· · · · ·Q· · ·Right, and you sent that e-mail to the ·4· · · · ·Q· · ·And this was a calendar invite that your ·5· ·Primexx deal team and the five Primexx employees and ·5· ·e-mail address sent to members of the Blackstone deal ·6· ·told them you were in Houston that day, correct? ·6· ·team, as well as at least four Primexx employees in ·7· · · · ·A· · ·I do not recall the specifics.· What I'm ·7· ·Texas, Chris Doyle, Sam Blatt, Chase White and Phil ·8· ·reading here is I sent an e-mail to four people at ·8· ·Cook? ·9· ·Blackstone and one person at Primexx, and what it ·9· · · · · · · ·Do you see that? 10· ·says is I am back-to-back in Houston today.· Why 10· · · · ·A· · ·I see them listed here on the to line. 11· ·don't you set the time that works best for you all, 11· · · · ·Q· · ·And either you or your executive 12· ·and if I can't make it, I will follow-up with the 12· ·assistant, Ms. Lee, initiated and scheduled this 13· ·team to discuss.· I'm on a flight early a.m. but free 13· ·call, correct? 14· ·for most of the afternoon tomorrow. 14· · · · ·A· · ·I do not recall the specifics; although, 15· · · · ·Q· · ·And the subject of this e-mail is a 15· ·this document would lead me to believe that that was 16· ·Rosehill Plan B Proposal. 16· ·the case. 17· · · · · · · ·Do you see that? 17· · · · ·Q· · ·Okay.· Do you recall at some point 18· · · · ·A· · ·I see at the bottom of the page the 18· ·Primexx and Blackstone engaged with RBC in Texas to 19· ·original e-mail that Chase White sent and the subject 19· ·explore a potential transaction involving Primexx in 20· ·line as you noted. 20· ·2021? 21· · · · ·Q· · ·And do you have a recollection right now 21· · · · · · · ·Do you recall that in general terms? 22· ·what the Rosehill Plan B Proposal was? 22· · · · ·A· · ·I generally recall RBC's involvement. I 23· · · · ·A· · ·I do not recall. 23· ·don't understand what you mean by in Texas. 24· · · · ·Q· · ·Okay.· I'm putting the next document in 24· · · · ·Q· · ·Sure.· Let's go to the next document, and 25· ·the chat. 25· ·I'm putting into the chat.
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0068 Pages 58–61 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 62 Page 64 ·1· · · · · · · ·MR. CAFORIO:· So if the court ·1· · · · ·knowledge, across North America.· I do ·2· · · · ·reporter will mark this as the next ·2· · · · ·not recall specifically where people were ·3· · · · ·exhibit. ·3· · · · ·located. ·4· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·4· ·BY MR. CAFORIO: ·5· · · · ·6 was marked for the record.) ·5· · · · ·Q· · ·But you received this e-mail from ·6· ·BY MR. CAFORIO: ·6· ·Mr. Spence with the materials for the discussion on ·7· · · · ·Q· · ·Do you see this is a document with Bates ·7· ·the call that you had sent out a calendar invite for, ·8· ·number BPP_0017552 ending at 553? ·8· ·correct? ·9· · · · · · · ·Do you see that? ·9· · · · ·A· · ·This e-mail shows that I received -- this 10· · · · ·A· · ·I do. 10· ·document shows that I received an e-mail from 11· · · · ·Q· · ·And the first e-mail on the chain -- I'll 11· ·Jeffrey. 12· ·just look at the second page, and you'll see there's 12· · · · ·Q· · ·And Mr. Spence's signature line indicates 13· ·no other e-mail. 13· ·that he's located in Houston, Texas, correct? 14· · · · · · · ·So the bottom on the first page is the 14· · · · ·A· · ·His signature line states a Houston 15· ·first e-mail on the page.· It is a calendar invite 15· ·address. 16· ·from you dated, Thursday, April 15th, 2021. 16· · · · ·Q· · ·In 2021 -- and that document we just 17· · · · · · · ·Do you see that? 17· ·looked at was April 2021, but in 2021, you personally 18· · · · ·A· · ·I see there's a calendar invite noted 18· ·conducted due diligence regarding potential Primexx 19· ·from me with that date. 19· ·transactions involving Texas counter-parties; is that 20· · · · ·Q· · ·And it has a subject:· Call Primexx 20· ·fair? 21· ·RBC/BX re:· General status and next steps discussion. 21· · · · · · · ·MR. DESAI:· Objection.· Form. 22· · · · · · · ·Do you see that? 22· · · · · · · ·THE WITNESS:· I'm sorry.· I don't 23· · · · ·A· · ·I see that in the subject line. 23· · · · ·understand the question. 24· · · · ·Q· · ·And this was a call that you initiated, 24· ·BY MR. CAFORIO: 25· ·correct? 25· · · · ·Q· · ·Did you personally conduct any due
Page 63 Page 65 ·1· · · · ·A· · ·I do not -- I do not recall. ·1· ·diligence in the 2021 time period with regards to ·2· · · · ·Q· · ·It's a calendar invite sent from your ·2· ·potential Primexx transactions? ·3· ·e-mail address, correct? ·3· · · · ·A· · ·My role at Blackstone at the time, I ·4· · · · ·A· · ·That's what this e-mail -- that's what ·4· ·believe, was as a member of the general investment ·5· ·this document shows.· Again, I don't recall the ·5· ·team and on the board of Primexx.· The management ·6· ·specifics, and typically my assistant would send ·6· ·team at Primexx had day-to-day oversight on the ·7· ·calendar invites on behalf of people at Blackstone to ·7· ·operations, activities and diligence of the company. ·8· ·schedule calls that would come from my e-mail. ·8· · · · ·Q· · ·I'll put the next document in the chat, ·9· · · · ·Q· · ·And in the top e-mail -- so the last ·9· ·and we'll look at that. 10· ·e-mail in the chain -- is an e-mail from a Jeffrey 10· · · · · · · ·MR. CAFORIO:· And if the court 11· ·Spence at RBC Capital Markets. 11· · · · ·reporter could mark this as the next 12· · · · · · · ·Do you see this? 12· · · · ·exhibit. 13· · · · ·A· · ·I see that at the top. 13· · · · · · · ·(Deposition (Acconcia) Exhibit No. 14· · · · ·Q· · ·And Mr. Spence has a signature line that 14· · · · ·7 was marked for the record.) 15· ·says he's located at 609 Main Street, Suite 3700, 15· ·BY MR. CAFORIO: 16· ·Houston, Texas. 16· · · · ·Q· · ·It is a one-page document with Bates 17· · · · · · · ·Do you see that? 17· ·number BPP_0018469. 18· · · · ·A· · ·I do. 18· · · · · · · ·Do you see that? 19· · · · ·Q· · ·That's what I meant earlier when I said 19· · · · ·A· · ·I see that at the bottom right-hand of 20· ·RBC in Texas.· The people at RBC that you 20· ·the page. 21· ·communicated regarding a potential Primexx 21· · · · ·Q· · ·And this starts with an e-mail from Megan 22· ·transaction were located in Texas, right? 22· ·Davis at Primexx to you, Mr. Belz, and Mr. Henley. 23· · · · · · · ·MR. DESAI:· Objection.· Form. 23· · · · · · · ·Do you see that? 24· · · · · · · ·THE WITNESS:· RBC is a Canadian 24· · · · ·A· · ·I see the e-mail from Megan. 25· · · · ·investment bank that has offices, to my 25· · · · ·Q· · ·And she says in this e-mail:· Angelo,
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0069 Pages 62–65 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 66 Page 68 ·1· ·Erik, Mark, I'm looking at potentially rescheduling ·1· · · · ·referenced that it included the full ·2· ·the bi-weekly board meeting again from tomorrow ·2· · · · ·board. ·3· ·afternoon to Friday with the idea that we are more ·3· · · · · · · ·So as a board member and one of ·4· ·likely to have a material update on Capitan by Friday ·4· · · · ·many board members, we listen to updates ·5· ·morning. ·5· · · · ·from the management team and their ·6· · · · · · · ·Do you see that? ·6· · · · ·recommendations. ·7· · · · ·A· · ·I see that it says:· I'm looking to ·7· ·BY MR. CAFORIO: ·8· ·potentially rescheduling the bi-weekly board meeting ·8· · · · ·Q· · ·And when you said you -- you would ·9· ·again from tomorrow afternoon to Friday morning with ·9· ·receive updates from and listen to the management 10· ·the idea that we are more likely to have a material 10· ·team, you're referring to the Primexx management 11· ·update on Capitan by Friday morning.· Would you guys 11· ·team? 12· ·like to move the meeting to Friday morning?· If so, 12· · · · ·A· · ·I believe, in this specific instance, the 13· ·please let me know your availability, and I will 13· ·board heard updates from the management team and then 14· ·check general board availability based on the window 14· ·also from RBC, who the board had retained on its 15· ·you provided. 15· ·behalf to evaluate strategical turn of events more 16· · · · ·Q· · ·She references a material update on -- 16· ·broadly. 17· ·and I don't know if that's Captain or Capitan. 17· · · · ·Q· · ·And I just want to clarify, when you were 18· · · · · · · ·Do you see that? 18· ·saying management team, are you referring to the 19· · · · ·A· · ·I see -- I see it spelled C-A-P-I-T-A-N. 19· ·Primexx management team? 20· · · · ·Q· · ·And do you know -- do you understand what 20· · · · ·A· · ·Yes. 21· ·that's a reference to? 21· · · · ·Q· · ·Okay.· That group of people we looked at, 22· · · · ·A· · ·I do not recall. 22· ·Megan Davis, Sam Blatt, Chris Doyle, Chase White 23· · · · ·Q· · ·Okay.· You don't recall that Capitan was 23· ·located in Texas working for Primexx? 24· ·the code name that Blackstone and Primexx used to 24· · · · · · · ·Is that who you're referring to as the 25· ·discuss the upcoming Callon transaction? 25· ·management team?
Page 67 Page 69 ·1· · · · ·A· · ·I do not recall. ·1· · · · ·A· · ·I believe those were some of -- I believe ·2· · · · ·Q· · ·One way or the other? ·2· ·those were some of the individuals of the executive ·3· · · · ·A· · ·I do not recall. ·3· ·team that were involved at Primexx. ·4· · · · ·Q· · ·And you responded to Ms. Davis that -- ·4· · · · · · · ·THE WITNESS:· Bryan, do you mind? ·5· ·you wrote:· Yes, thanks, and then provided the window ·5· · · · ·We're on the hour again, and I had a fair ·6· ·that you were free for the call, correct? ·6· · · · ·amount of coffee this morning.· Do you ·7· · · · ·A· · ·I wrote back:· Yes, thanks.· I can free ·7· · · · ·mind if I take a nature break? ·8· ·up 11:30 to 3:00 p.m. Eastern on Friday, parentheses, ·8· · · · · · · ·MR. CAFORIO:· Five minutes. ·9· ·or other times if those don't work. ·9· · · · · · · ·THE WITNESS:· Okay.· Thank you so 10· · · · ·Q· · ·Do you recall if bi-weekly meetings did 10· · · · ·much. 11· ·start occurring in the June 2021 time period as 11· · · · · · · ·THE VIDEOGRAPHER:· Stand by.· The 12· ·Primexx and Blackstone started closing in on the 12· · · · ·time is 11:05 a.m.· We're going off the 13· ·Callon transaction? 13· · · · ·record. 14· · · · · · · ·MR. DESAI:· Objection.· Form. 14· · · · · · · · · · · (Brief pause.) 15· · · · · · · ·THE WITNESS:· I do not recall. 15· · · · · · · ·THE VIDEOGRAPHER:· The time is 16· ·BY MR. CAFORIO: 16· · · · ·11:10 a.m.· We're going back on the 17· · · · ·Q· · ·And do you recall if -- do you recall 17· · · · ·record. 18· ·what role you played on these calls with the Primexx 18· ·BY MR. CAFORIO: 19· ·team discussing the potential Callon transaction, and 19· · · · ·Q· · ·All right.· Welcome back, Mr. Acconcia. 20· ·I just mean in general? 20· ·You understand you're still under oath? 21· · · · · · · ·Were you an active participant, or would 21· · · · ·A· · ·I do.· Thank you. 22· ·you mainly just sit silently on the calls? 22· · · · ·Q· · ·Okay.· I -- you mentioned just a few 23· · · · · · · ·MR. DESAI:· Objection.· Form. 23· ·minutes ago before the break that, throughout 2021, 24· · · · · · · ·THE WITNESS:· I believe the call 24· ·you would participate in board meetings for Primexx 25· · · · ·that was referenced in the e-mail 25· ·Energy Corporation and BPP Energy Partners; is that
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0070 Pages 66–69 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 70 Page 72 ·1· ·correct? ·1· ·which are listed in the management column, that they ·2· · · · ·A· · ·I believe I mentioned a general ·2· ·were located in Texas where Primexx was located, ·3· ·recollection as to attending board meetings. ·3· ·right? ·4· · · · ·Q· · ·We can look at one of those.· I put it ·4· · · · ·A· · ·I do not recall where the management team ·5· ·into the chat. ·5· ·specifically and personally was located.· I know a ·6· · · · · · · ·MR. CAFORIO:· If the court reporter ·6· ·number of them had different homes or would call in ·7· · · · ·would mark this as the next exhibit. ·7· ·from different locations.· So I can't comment on ·8· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·8· ·specifically where that team was located. ·9· · · · ·8 was marked for the record.) ·9· · · · ·Q· · ·Okay.· You do remember and we saw the 10· ·BY MR. CAFORIO: 10· ·document earlier where you met with Mr. Cook, 11· · · · ·Q· · ·You see it's a document with the Bates 11· ·Mr. Blatt, Mr. White and Ms. Davis in Dallas that 12· ·number at the bottom PRIMEXX029462, and it's a 12· ·same month, June 2021, right? 13· ·seven-page document going to 468. 13· · · · · · · ·MR. DESAI:· Objection.· Form. 14· · · · · · · ·Do you see that? 14· · · · · · · ·THE WITNESS:· I recall earlier in 15· · · · ·A· · ·I do. 15· · · · ·our discussion you referenced an e-mail 16· · · · ·Q· · ·And the title of this document is Minutes 16· · · · ·discussing logistics. 17· ·of a Joint Regular Meeting of the Board of Directors 17· ·BY MR. CAFORIO: 18· ·of Primexx Energy Corporation and the Board of 18· · · · ·Q· · ·Of meeting with those four Primexx 19· ·Managers of BPP Energy Partners, LLC, dated June 9th, 19· ·management members in Dallas, right? 20· ·2021. 20· · · · ·A· · ·Based on what I recall of that e-mail, 21· · · · · · · ·Do you see that? 21· ·that was an e-mail discussing logistics for a 22· · · · ·A· · ·I see the title at the top of the page. 22· ·potential meeting with those members of management. 23· · · · ·Q· · ·And are you familiar with the board 23· · · · ·Q· · ·In Dallas? 24· ·meeting minutes from Primexx Energy Corporation and 24· · · · ·A· · ·I believe that that is what the e-mail 25· ·BPP Energy Partners from your time serving on those 25· ·said.
Page 71 Page 73 ·1· ·boards? ·1· · · · ·Q· · ·And your executive assistant said you ·2· · · · ·A· · ·I do not recall specifics. ·2· ·will be in Dallas that day, right? ·3· · · · ·Q· · ·This document it lists, for attendance, ·3· · · · ·A· · ·That is what the e-mail said. ·4· ·it has Primexx directors, BPP managers, management ·4· · · · ·Q· · ·Looking at these minutes from this ·5· ·and other attendees. ·5· ·June 9th, 2021 meeting that you attended, would you ·6· · · · · · · ·Do you see that? ·6· ·say you were an active participant at these board ·7· · · · ·A· · ·I see at the top there are different ·7· ·meetings or you generally left it to others? ·8· ·groups that are -- are mentioned. ·8· · · · · · · ·MR. DESAI:· Objection.· Form. ·9· · · · ·Q· · ·And you're the first one listed as a ·9· · · · · · · ·THE WITNESS:· If you don't mind, 10· ·Primexx Energy Corporation Director, correct? 10· · · · ·this is a seven-page document.· I'd like 11· · · · ·A· · ·I see my name within the Primexx director 11· · · · ·a moment to review it, please. 12· ·list. 12· · · · · · · ·MR. CAFORIO:· Yeah. 13· · · · ·Q· · ·And you're also the first name listed for 13· · · · · · · ·THE WITNESS:· Thank you.· Do you 14· ·the BPP manager list, correct? 14· · · · ·mind repeating the question, please? 15· · · · ·A· · ·I see myself as listed as one of ten 15· ·BY MR. CAFORIO: 16· ·people on that list. 16· · · · ·Q· · ·I don't know what the question was.· Now 17· · · · ·Q· · ·And this joint regular meeting of the 17· ·that you're familiar, we can go on. 18· ·Board of Directors of Primexx Energy Corporation and 18· · · · · · · ·So at this June 9th, 2021 board meeting 19· ·the Board of Managers for BPP Energy Partners was 19· ·that the minutes indicate was held in-person in 20· ·held on June 9th, 2021 in-person in Dallas, Texas and 20· ·Dallas and via teleconference, you actively 21· ·via teleconference, correct? 21· ·participated, would you agree? 22· · · · ·A· · ·That is what this document says. 22· · · · ·A· · ·I do not recall the specifics.· I'm noted 23· ·Although, I do not recall the specifics. 23· ·as one of the participants here amongst, you know, 24· · · · ·Q· · ·Okay.· And you understood that the 24· ·ten board of directors, six members of management and 25· ·management team that we discussed earlier, many of 25· ·three other attendees.
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0071 Pages 70–73 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 74 Page 76 ·1· · · · ·Q· · ·Sure.· For example, on the second page, ·1· ·achieved, continuing with a one-rig program would be ·2· ·in the third paragraph, the minutes note:· Angelo ·2· ·acceptable. ·3· ·Acconcia then expressed support for Doyle's ·3· · · · · · · ·Do you see that? ·4· ·indication that the biggest decision to be made by ·4· · · · ·A· · ·I see that paragraph as one of, you know, ·5· ·the board was to find a way to facilitate the ·5· ·ten paragraphs on the page. ·6· ·internal combination of Primexx and BPP. ·6· · · · ·Q· · ·And you don't have any reason to believe, ·7· · · · · · · ·Do you see that? ·7· ·as you sit here today, that you didn't state all of ·8· · · · ·A· · ·I see my name listed at the top of the ·8· ·that at the June 9th, 2021 board meeting that you ·9· ·page. ·9· ·attended, do you? 10· · · · ·Q· · ·Do you have any reason to believe that 10· · · · ·A· · ·I do not recall the specifics of this 11· ·what the minutes here indicate that you said is not 11· ·meeting. 12· ·accurate? 12· · · · ·Q· · ·But it was your general practice to 13· · · · ·A· · ·I do not recall the specifics of this 13· ·review board meetings for accuracy, correct? 14· ·meeting. 14· · · · ·A· · ·I or others from Blackstone would 15· · · · ·Q· · ·Was it your regular practice to review 15· ·typically review board meetings minutes. 16· ·minutes of board meetings that you attended after 16· · · · ·Q· · ·And it was generally your practice to 17· ·they came out? 17· ·correct any inaccuracies you saw in draft board 18· · · · ·A· · ·Generally speaking, yes.· I don't recall 18· ·meeting minutes, particularly if it misstated 19· ·specifically here. 19· ·something that you had said, right? 20· · · · ·Q· · ·And was it your general practice to make 20· · · · · · · ·MR. DESAI:· Objection.· Form. 21· ·sure any inaccurate minutes were corrected before 21· · · · · · · ·THE WITNESS:· I generally recall 22· ·they became the official record if you noticed any 22· · · · ·reviewing board meeting minutes. 23· ·inaccuracies? 23· ·BY MR. CAFORIO: 24· · · · ·A· · ·Generally speaking, I think that's a fair 24· · · · ·Q· · ·Now, in your role on the Blackstone deal 25· ·characterization. 25· ·team overseeing the Primexx investment, you
Page 75 Page 77 ·1· · · · ·Q· · ·If we go to the fifth page, the last ·1· ·personally had communications with numerous ·2· ·paragraph here on Page 5 states:· Acconcia confirmed ·2· ·investment bankers in Texas regarding potential ·3· ·that Blackstone would not make additional investment ·3· ·Primexx transactions; is that fair? ·4· ·in the companies under the current capital structure. ·4· · · · · · · ·MR. DESAI:· Objection.· Form. ·5· · · · · · · ·Do you see that? ·5· · · · · · · ·THE WITNESS:· I do not recall. ·6· · · · ·A· · ·I see that sentence at the bottom of the ·6· ·BY MR. CAFORIO: ·7· ·page after a series of discussions from management ·7· · · · ·Q· · ·Do you recall communicating with David ·8· ·and other board directors' commentary. ·8· ·Habachy at Warburg Pincus regarding a potential ·9· · · · ·Q· · ·And then on the next page, in the third ·9· ·Primexx transaction in 2021? 10· ·full paragraph, it says:· Angelo Acconcia noted that 10· · · · ·A· · ·I do not recall. 11· ·the company's current position was significantly 11· · · · ·Q· · ·I'll put the next document in the chat. 12· ·different as compared to a year ago during the height 12· · · · · · · ·MR. CAFORIO:· If the court reporter 13· ·of the COVID pandemic and when oil prices were lower. 13· · · · ·could mark this as the next exhibit. 14· ·Acconcia noted that, given the change in position, a 14· · · · · · · ·(Deposition (Acconcia) Exhibit No. 15· ·one rig program could be acceptable, though it would 15· · · · ·9 was marked for the record.) 16· ·not be optimal to take advantage of current oil 16· ·BY MR. CAFORIO: 17· ·prices and the strong capabilities of the operating 17· · · · ·Q· · ·It's an e-mail chain starting with Bates 18· ·team.· He indicated that liquidity issues arise in 18· ·number BPP_0017182 and going through 187. 19· ·association with accelerating to optimize value, but 19· · · · · · · ·Do you see that? 20· ·that, if the liquidity issues could not be resolved, 20· · · · ·A· · ·Do you mind turning to the first page 21· ·the companies could simply run one rig eliminating 21· ·again. 22· ·the liquidity issues.· He stated his belief that the 22· · · · · · · ·I see that.· Thank you. 23· ·ability to lower liquidity risk and simultaneously 23· · · · ·Q· · ·And so going to the first -- there's a 24· ·optimize values were both available if the companies 24· ·whole lot of disclaimers for the last couple pages, 25· ·combined, but if that combination could not be 25· ·but the first actual e-mail is on Page 4, and you see
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0072 Pages 74–77 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 78 Page 80 ·1· ·it's an e-mail from a David Habachy. ·1· · · · ·A· · ·I do not recall. ·2· · · · · · · ·Do you know how to pronounce that name? ·2· · · · ·Q· · ·You were discussing that possible ·3· · · · ·A· · ·Reading it, I believe it's Habachy. ·3· ·combination, but you don't know? ·4· · · · ·Q· · ·It's an e-mail from David Habachy to you, ·4· · · · ·A· · ·I see the subject line here.· I do not ·5· ·dated February 3rd, 2021, with the subject Tall ·5· ·recall specifics. ·6· ·City/Primexx. ·6· · · · ·Q· · ·You also had calls and initiated ·7· · · · · · · ·Do you see that? ·7· ·communications with Richard Punches at EIG Global ·8· · · · ·A· · ·I see the e-mail from David with the ·8· ·Energy Partners in 2021 regarding a potential Primexx ·9· ·subject line you noted. ·9· ·transaction, correct? 10· · · · ·Q· · ·And Mr. Habachy wrote to you on 10· · · · ·A· · ·I do not recall. 11· ·February 3rd, 2021:· Angelo, hope you're well and off 11· · · · ·Q· · ·I put the next e-mail in the chat. 12· ·to a good start for 2021.· Here's to a better year 12· · · · · · · ·MR. CAFORIO:· Will the court 13· ·this year.· I thought it made sense to touch base on 13· · · · ·reporter mark this as the next exhibit. 14· ·a Warburg/Blackstone phone call on where things 14· · · · · · · ·(Deposition (Acconcia) Exhibit No. 15· ·settled out with Tall City and Primexx.· Both teams 15· · · · ·10 was marked for the record.) 16· ·data shared and had a number of discussions around a 16· ·BY MR. CAFORIO: 17· ·potential combination.· We've got enough to put 17· · · · ·Q· · ·Do you see this is a one-page e-mail 18· ·numbers on paper and wanted to share that high level 18· ·chain with Bates number BPP_0016597. 19· ·view with you and your team. 19· · · · · · · ·Do you see that? 20· · · · · · · ·Do you see that? 20· · · · ·A· · ·I see that noted at the bottom right-hand 21· · · · ·A· · ·I see that in the second paragraph, and 21· ·of the page. 22· ·it continues:· What works for a call next week to 22· · · · ·Q· · ·And this chain starts with an e-mail from 23· ·catch up on this?· Looking -- look forward to 23· ·you at Blackstone, dated February 1st, 2021, to 24· ·catching up.· I also think Peter separately reached 24· ·Richard Punches, II, at EIGpartners.com with the 25· ·out to David on the same topic. 25· ·subject Primexx Rosehill.
Page 79 Page 81 ·1· · · · ·Q· · ·And Mr. Habachy is an investment banker ·1· · · · · · · ·Do you see that? ·2· ·in Houston, Texas for Warburg Pincus; is that ·2· · · · ·A· · ·I see an e-mail from me to Richard ·3· ·correct? ·3· ·Punches at the bottom of this document. ·4· · · · · · · ·MR. DESAI:· Objection.· Form. ·4· · · · ·Q· · ·And Mr. Punches was a Managing Director ·5· · · · · · · ·THE WITNESS:· I believe Warburg ·5· ·at EIG Global Energy Partners located in Houston, ·6· · · · ·Pincus is an investment firm that is ·6· ·Texas, correct? ·7· · · · ·based in New York City.· Where Peter, who ·7· · · · ·A· · ·I see, in the e-mail above, it lists his ·8· · · · ·is the head -- at the time, if I recall ·8· ·name and his address. ·9· · · · ·correctly, was the head of their energy ·9· · · · ·Q· · ·In Houston, Texas? 10· · · · ·team was based in New York City, along 10· · · · ·A· · ·That is what his signature block notes. 11· · · · ·with what I recall generally being at the 11· · · · ·Q· · ·And you sent the first e-mail in this 12· · · · ·time the majority of the investment team. 12· ·chain to Mr. Punches, right? 13· ·BY MR. CAFORIO: 13· · · · ·A· · ·Based on the document you pulled up, I 14· · · · ·Q· · ·I appreciate all that.· I'm just asking 14· ·don't see an e-mail from myself to Richard Punches 15· ·about David Habachy.· He's an investment banker 15· ·that -- 16· ·located in Houston, Texas, right? 16· · · · ·Q· · ·And you wrote in this e-mail:· Richard, 17· · · · · · · ·MR. DESAI:· Objection.· Form. 17· ·hope all is well.· Enjoyed catching up last week.· We 18· · · · · · · ·THE WITNESS:· I believe David was a 18· ·have a one-pager on Primexx we could share with you. 19· · · · ·member of the Warburg Pincus 19· ·Wanted to see if you have the same on Rosehill, in 20· · · · ·organization. 20· ·which case, we could exchange one-pagers and could 21· ·BY MR. CAFORIO: 21· ·set up a call for you to connect with Chris Doyle, 22· · · · ·Q· · ·In Houston? 22· ·Primexx's CEO, to discuss further. 23· · · · ·A· · ·I do not recall where he was located. 23· · · · · · · ·Do you see that? 24· · · · ·Q· · ·And Tall City Exploration is an oil and 24· · · · ·A· · ·I see that's what the e-mail says. 25· ·gas company headquartered in Midland, Texas, right? 25· · · · ·Q· · ·So you had actually caught up with
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0073 Pages 78–81 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 82 Page 84 ·1· ·Mr. Punches the week before you sent this e-mail to ·1· ·in-person in Houston discussing the Primexx deal? ·2· ·him, right? ·2· · · · ·A· · ·I do not recall. ·3· · · · · · · ·MR. DESAI:· Objection.· Form. ·3· · · · ·Q· · ·One way or the other? ·4· · · · · · · ·THE WITNESS:· Generally speaking, ·4· · · · ·A· · ·I do not recall. ·5· · · · ·investment firms had general dialogues ·5· · · · ·Q· · ·I put the next document in the chat. ·6· · · · ·more broadly to compare notes on ·6· · · · · · · ·MR. CAFORIO:· Would the court ·7· · · · ·industries or ideas, and so I recall ·7· · · · ·reporter mark this as the next exhibit. ·8· · · · ·general communications, you know, with ·8· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·9· · · · ·Richard across a number of things; much ·9· · · · ·11 was marked for the record.) 10· · · · ·similar to, you know, with David Habachy, 10· ·BY MR. CAFORIO: 11· · · · ·across a number of topics or Peter at 11· · · · ·Q· · ·It's an e-mail chain starting with Bates 12· · · · ·Warburg in New York across a number of 12· ·number BPP_0018234 going to 235. 13· · · · ·topics from time to time. 13· · · · · · · ·Do you see that? 14· ·BY MR. CAFORIO: 14· · · · ·A· · ·I do. 15· · · · ·Q· · ·And the topic here was a potential 15· · · · ·Q· · ·And the first e-mail on this chain starts 16· ·transaction between Primexx and Rosehill Exploration, 16· ·at the very bottom of the first page and goes to the 17· ·correct? 17· ·second page, but you see it's an e-mail from you, 18· · · · · · · ·MR. DESAI:· Objection.· Form. 18· ·Angelo Acconcia, dated June 13th, 2021, to Stephen 19· · · · · · · ·THE WITNESS:· This document shows 19· ·Trauber, subject Primexx. 20· · · · ·an e-mail that I sent Richard Punches 20· · · · · · · ·Do you see that? 21· · · · ·regarding setting up a call for him and 21· · · · ·A· · ·I see that at the bottom of the page. 22· · · · ·Chris Doyle. 22· · · · ·Q· · ·And you wrote the substance of your 23· ·BY MR. CAFORIO: 23· ·e-mail -- you'll see there's no substance on the 24· · · · ·Q· · ·For a potential transaction between 24· ·bottom of the first page.· It's on the second page, 25· ·Primexx and Rosehill, correct? 25· ·and you say:· Could you and the senior members of the
Page 83 Page 85 ·1· · · · · · · ·MR. DESAI:· Objection.· Form. ·1· ·Capitan Citi team do a call tonight at 8:15 p.m. ·2· ·BY MR. CAFORIO: ·2· ·Eastern?· Chris will join, as well. ·3· · · · ·Q· · ·That's the subject of your e-mail, right, ·3· · · · · · · ·Do you see that? ·4· ·Primexx/Rosehill? ·4· · · · ·A· · ·I do. ·5· · · · ·A· · ·The e-mail says subject: ·5· · · · ·Q· · ·And you sent the first e-mail in this ·6· ·Primexx/Rosehill.· I do not recall specifics. ·6· ·chain to Mr. Trauber, right? ·7· · · · ·Q· · ·Okay.· And Rosehill Exploration is an oil ·7· · · · ·A· · ·Based on this document, it looks like I ·8· ·and gas company in Houston, Texas, right? ·8· ·sent the first e-mail. ·9· · · · ·A· · ·I do not recall where Rosehill was ·9· · · · ·Q· · ·And Mr. Trauber responded to you just 12 10· ·located. 10· ·minutes later that same day, June 13th, 2021, at 11· · · · ·Q· · ·Okay.· You also initiated calls with 11· ·11:00. 12· ·Stephen Trauber at Citi in 2021 about a transaction 12· · · · · · · ·Do you see that? 13· ·between Primexx and Callon Petroleum, correct? 13· · · · ·A· · ·Mr. Trauber responded to me with a copy 14· · · · ·A· · ·Stephen Trauber was an investment banker. 14· ·to two others at Blackstone. 15· ·So there were general conversations from time to 15· · · · ·Q· · ·And those were the people that you had 16· ·time.· I do not recall specific conversations. 16· ·put on your first e-mail, right?· Mr. Foley and 17· · · · ·Q· · ·And Mr. Trauber is an investment banker 17· ·Mr. Belz?· It looks like he just did a reply. 18· ·in Houston, Texas, correct? 18· · · · ·A· · ·It looks like those are the people that I 19· · · · ·A· · ·Mr. Trauber, I believe, was an investment 19· ·copied on the e-mail. 20· ·banker that worked for CitiGroup that had offices 20· · · · ·Q· · ·And you see Mr. Trauber's signature line; 21· ·across kind of the United States.· I believe he, at 21· ·he is the Vice Chairman and Global Co-Head of Natural 22· ·one time, worked out of a New York office, a Houston 22· ·Resources and Clean Energy Transition at Citi located 23· ·office or other parts of country where he had a 23· ·at 811 Main Street, Suite 3900, Houston, Texas, 24· ·number of homes, based on my general recollection. 24· ·right? 25· · · · ·Q· · ·And did you ever meet with Mr. Trauber 25· · · · ·A· · ·That's what it says in his signature
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0074 Pages 82–85 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 86 Page 88 ·1· ·block in the e-mail. ·1· ·with Trauber, much like other investment bankers, ·2· · · · ·Q· · ·And actually his signature block shows up ·2· ·over the course of years. ·3· ·in all of his e-mails, and it doesn't disappear after ·3· · · · ·Q· · ·I put the next document in the chat. ·4· ·one?· It's there later in the page, as well, right? ·4· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·5· · · · ·A· · ·Based on this document, it looks like it ·5· · · · ·12 was marked for the record.) ·6· ·appears twice. ·6· ·BY MR. CAFORIO: ·7· · · · ·Q· · ·And he doesn't list any address in New ·7· · · · ·Q· · ·This is a document with Bates number ·8· ·York, does he? ·8· ·BPP_0006569 through 6570. ·9· · · · ·A· · ·I see what's here on the page, which is ·9· · · · · · · ·Do you see that? 10· ·his signature page. 10· · · · ·A· · ·Do you mind turning to the second page, 11· · · · ·Q· · ·And it doesn't list an address in New 11· ·please.· I see that. 12· ·York, does it? 12· · · · ·Q· · ·And this document is an e-mail chain that 13· · · · ·A· · ·I don't see -- I don't see any -- other 13· ·starts with an e-mail from you dated August 1st, 14· ·addresses. 14· ·2021. 15· · · · ·Q· · ·It doesn't list any of the homes around 15· · · · · · · ·Do you see that? 16· ·the country that you referenced earlier, did you -- 16· · · · ·A· · ·I see an e-mail at the bottom of this 17· ·does it? 17· ·document from me to other members at Blackstone. 18· · · · ·A· · ·Not from what I can read in this 18· · · · ·Q· · ·To Erik Belz, Mark Henle, Anika Gautam, 19· ·document. 19· ·with the subject Primexx merger workstreams, right? 20· · · · ·Q· · ·It just lists his address in Houston, 20· · · · ·A· · ·I believe that's what it says.· That's 21· ·Texas, right? 21· ·what the heading says. 22· · · · ·A· · ·Under this signature block in his e-mail, 22· · · · ·Q· · ·And you said:· Team, thanks for your 23· ·lists that address. 23· ·efforts relates to the Capitan transaction. I 24· · · · ·Q· · ·And Citi is the investment bank that 24· ·thought it might be helpful and efficient to 25· ·Callon Petroleum used to effectuate the ultimate 25· ·summarize my thoughts on workstreams over the next 48
Page 87 Page 89 ·1· ·transaction with Primexx, correct? ·1· ·hours to get this to signing.· Please add/amend as ·2· · · · ·A· · ·I believe that that is the case. ·2· ·you see fit and reply to the group.· We can discuss ·3· · · · ·Q· · ·And Mr. Trauber was the primary person at ·3· ·if you like later today, but I think we are all ·4· ·Citi that you interacted with regarding the ·4· ·up-to-speed on these, given our call this morning, ·5· ·Primexx/Callon transaction, correct? ·5· ·and then you listed one through 13 different items ·6· · · · ·A· · ·My primary interactions were with the ·6· ·for the signing workstream for the Primexx merger, ·7· ·Board of Directors, and the management team at ·7· ·right? ·8· ·Primexx was the primary group that had interactions ·8· · · · ·A· · ·What this document shows is -- or it's an ·9· ·with RBC, and I believe RBC was the primary group ·9· ·e-mail from me to members of -- some of the members 10· ·that interacted with Citi. 10· ·of the Blackstone team that lists a number of items 11· · · · ·Q· · ·I appreciate all that.· I'm just asking 11· ·at the bottom of it. 12· ·for you personally.· When you communicated, when you 12· · · · ·Q· · ·And those are the items that you wrote 13· ·personally, Mr. Acconcia, communicated with somebody 13· ·were the workstreams over the next 48 hours to get 14· ·at Citi regarding the Primexx/Callon transaction, 14· ·the transaction to signing, right? 15· ·Mr. Trauber was your primary contact, right? 15· · · · ·A· · ·Based on this e-mail, it looks like I'm 16· · · · ·A· · ·I do not recall specifics. 16· ·referring to my thoughts on some of -- of the 17· · · · ·Q· · ·But you were familiar enough with 17· ·workstreams. 18· ·Mr. Trauber to know about his multiple homes across 18· · · · ·Q· · ·And then you forwarded your e-mail to 19· ·the country? 19· ·David Foley later that day, right? 20· · · · ·A· · ·Mr. Trauber, as the Global Co-Head of 20· · · · ·A· · ·Based on this, that's what it looks like. 21· ·Natural Resources and Clean Energy Transition, was 21· · · · ·Q· · ·And you wrote:· FYI only.· So you 22· ·involved across Citi's activities, and there were a 22· ·understand key workstreams, right? 23· ·number of dialogues, from time to time, across 23· · · · ·A· · ·That's -- that's what this document 24· ·various investments and various opportunities or 24· ·reads. 25· ·financings that created a dialogue and relationship 25· · · · ·Q· · ·And Mr. Foley responded to you:
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0075 Pages 86–89 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 90 Page 92 ·1· ·Regarding the press release, the less mention of ·1· · · · ·13 was marked for the record.) ·2· ·Blackstone the better.· Clearly Callon needs to do a ·2· ·BY MR. CAFORIO: ·3· ·press release as a public company, but I don't think ·3· · · · ·Q· · ·It's BPP_0019155 through 157. ·4· ·Primexx should do its own press release, too. I ·4· · · · · · · ·Do you see that? ·5· ·don't think we should have any BX people quoted in ·5· · · · ·A· · ·Do you mind turning to the second page, ·6· ·this.· At announcement, the valuation of Primexx is ·6· ·please.· Okay, and then the third page.· Thank you. ·7· ·only going to be 70 cents on our dollar of cost.· So ·7· · · · · · · ·I see that at the bottom right-hand of ·8· ·let's just keep a low profile, right? ·8· ·the page. ·9· · · · ·A· · ·That is, I believe, what his -- that is ·9· · · · ·Q· · ·And this is an e-mail from Mark Henle to 10· ·what his response says. 10· ·you, copying Erik Belz and Anika Gautam on August 11· · · · ·Q· · ·And then you responded to him later that 11· ·22nd, 2020 with the subject:· Talking points for 12· ·day:· Completely agree on the low profile.· That is 12· ·discussion with Joe, right? 13· ·our intent, right? 13· · · · ·A· · ·That is what that first statement -- 14· · · · ·A· · ·I believe that's what it says at the top, 14· ·first sentence says. 15· ·or that is what it says at the top. 15· · · · ·Q· · ·Yeah, and it says:· Angelo, ahead of our 16· · · · ·Q· · ·This wasn't a transaction that you or the 16· ·team catch-up on Monday, please see attached talking 17· ·Blackstone team were particularly proud of, was it? 17· ·points for the discussion with Joe.· FYI we had been 18· · · · · · · ·MR. DESAI:· Objection.· Form. 18· ·waiting to circulate these pending a few bullets from 19· · · · · · · ·THE WITNESS:· I do not recall the 19· ·Chris regarding the productivity of Primexx's wells 20· · · · ·specifics. 20· ·and preferred development approach, which we received 21· ·BY MR. CAFORIO: 21· ·this weekend, right? 22· · · · ·Q· · ·Just that you wanted to keep a low 22· · · · ·A· · ·That's what the e-mail says. 23· ·profile and keep Blackstone's name out of it? 23· · · · ·Q· · ·And attached to the e-mail are the actual 24· · · · · · · ·MR. DESAI:· Objection.· Form. 24· ·talking points for discussion with Joe Gatto, right? 25· · · · · · · ·THE WITNESS:· I do not recall. 25· · · · ·A· · ·I don't recall the specifics of this
Page 91 Page 93 ·1· ·BY MR. CAFORIO: ·1· ·document.· It looks like there are a number of bullet ·2· · · · ·Q· · ·Now, after the transaction was ·2· ·points that cover a number of topics. ·3· ·announced -- the Callon/Primexx transaction was ·3· · · · ·Q· · ·And you and Mr. Henley ultimately ·4· ·announced, you participated in a meeting with Joe ·4· ·participated in the call with Joe Gatto on the Callon ·5· ·Gatto, right? ·5· ·executive team in August of 2021, right? ·6· · · · ·A· · ·I do not recall. ·6· · · · · · · ·MR. DESAI:· Objection.· Form. ·7· · · · ·Q· · ·Do you know who Joe Gatto is? ·7· · · · · · · ·THE WITNESS:· I do not recall. ·8· · · · ·A· · ·I believe he was a member of the ·8· ·BY MR. CAFORIO: ·9· ·executive team at -- at Callon, if I recall ·9· · · · ·Q· · ·You don't recall one way or the other if 10· ·correctly. 10· ·you had that meeting with the CEO of Callon while 11· · · · ·Q· · ·He was the CEO of Callon Petroleum when 11· ·closing the merger between Primexx and Callon? 12· ·you effectuated the Primexx/Callon transaction, 12· · · · ·A· · ·I do not recall specifics. 13· ·right? 13· · · · · · · ·MR. CAFORIO:· Well, I think, with 14· · · · ·A· · ·I don't recall his specific title.· I do 14· · · · ·the five minutes to spare before your 15· ·recall his general involvement. 15· · · · ·hard stop, we can stop right there on our 16· · · · ·Q· · ·He was the CEO located in Houston, Texas 16· · · · ·end. 17· ·at Callon's headquarters in Houston, Texas? 17· · · · · · · ·MR. DESAI:· We'll reserve our 18· · · · · · · ·You don't recall that? 18· · · · ·questions. 19· · · · ·A· · ·Sometimes CEOs go by different titles. 19· · · · · · · ·THE VIDEOGRAPHER:· Stand by.· The 20· ·So I don't recall his specific title, and I don't 20· · · · ·time is 11:56 a.m.· We're going off the 21· ·recall where he was located. 21· · · · ·record. 22· · · · · · · ·MR. CAFORIO:· And if the court 22 23· · · · ·reporter would mark this as the next 23· · · · · · · ·(Thereupon, the deposition was 24· · · · ·exhibit. 24· · · · ·concluded at approximately 11:56 a.m.) 25· · · · · · · ·(Deposition (Acconcia) Exhibit No. 25
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0076 Pages 90–93 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 94 Page 96 ·1· · · · · · ERRATA SHEET FOR THE TRANSCRIPT OF: ·1· · · · · · · · · · ·NO. 24-BC01B-0010 ·2 ·2· ·Case Name:· · · · · · Primexx v. Blackstone · · ·PRIMEXX ENERGY· · · · · ·: IN THE BUSINESS COURT ·3· ·OPPORTUNITY FUND, LP AND : ·3· ·Dep. Date:· · · · · · February 21, 2025 · · ·PRIMEXX ENERGY· · · · · ·: ·4· ·Deponent:· · · · · · ·Angelo Acconcia ·4· ·OPPORTUNITY FUND II, LP, : · · · · · · · · · · · · · · · : ·5· · · · · · · · · · · · CORRECTIONS ·5· · · · · · · Plaintiff,· · : · · · · · · · · · · · · · · · : FIRST BUSINESS COURT ·6· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason ·6· · · · vs.· · · · · · · · ·: DIVISION ·7· ·_____ _____ _______________ ______________ __________ · · · · · · · · · · · · · · · : ·7· ·PRIMEXX ENERGY· · · · · ·: ·8· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason · · ·CORPORATION, M.· · · · · : ·8· ·CHRISTOPHER DOYLE,· · · ·: ·9· ·_____ _____ _______________ ______________ __________ · · ·ANGELO ACCONCIA,· · · · ·: 10· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason ·9· ·BLACKSTONE INC.,· · · · ·: · · ·BLACKSTONE HOLDINGS III : 11· ·_____ _____ _______________ ______________ __________ 10· ·LP, BLACKSTONE EMA II· · : 12· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason · · ·LLC, BMA VII LLC,· · · · : DALLAS COUNTY, TEXAS 11· ·BLACKSTONE ENERGY· · · · : 13· ·_____ _____ _______________ ______________ __________ · · ·MANAGEMENT ASSOCIATES· · : 12· ·II LLC, BLACKSTONE· · · ·: 14· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason · · ·ENERGY PARTNERS II LP,· ·: 15· ·_____ _____ _______________ ______________ __________ 13· ·BLACKSTONE MANAGEMENT· · : · · ·ASSOCIATES VII LLC,· · · : 16· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason 14· ·BLACKSTONE CAPITAL· · · ·: · · ·PARTNERS VII LP, BCP· · ·: 17· ·_____ _____ _______________ ______________ __________ 15· ·VII/BEP II HOLDINGS· · · : 18· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason · · ·MANAGER LLC, BX PRIMEXX : 16· ·TOPCO LLC, AND BPP· · · ·: 19· ·_____ _____ _______________ ______________ __________ · · ·HOLDCO LLC,· · · · · · · : 20· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason 17· · · · · · · · · · · · · · : · · · · · · · · Defendants.· ·: 21· ·_____ _____ _______________ ______________ __________ 18· ·_____________________________________________________ 19· · · · · · · · · REPORTER'S CERTIFICATION 22· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason 20· · · · · VIDEOTAPED DEPOSITION OF ANGELO ACCONCIA 23· ·_____ _____ _______________ ______________ __________ 21· · · · · · · · · · ·February 21, 2025 22· ·_____________________________________________________ 24· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason 23· · · · · · ·I, Tanya L. Verhoven-Page, CSR-TX, CSR-GA, 24· ·LCR-TN, certified Shorthand Reporter in and for the 25· ·_____ _____ _______________ ______________ __________ 25· ·State of Texas, hereby certify to the following:
Page 95 Page 97 ·1· · · · · · ·I, ANGELO ACCONCIA, have read the foregoing ·1· · · · · · ·That the witness, ANGELO ACCONCIA, was duly ·2· ·sworn by the officer, and that the transcript of the ·2· ·deposition and hereby affix my signature that same is ·3· ·oral deposition is a true record of the testimony ·3· ·true and correct, except as noted above. ·4· ·given by the witness; ·4 ·5· · · · · · ·That the deposition transcript was ·5· · · · · · · · · · · · · · ___________________________ ·6· ·submitted on February 25th, 2025 to the witness or to · · · · · · · · · · · · · · · ANGELO ACCONCIA ·7· ·the attorney for the witness for examination, ·6 ·8· ·signature, and return to me by ____________________; ·7· ·THE STATE OF________________) ·9· · · · · · ·That the amount of examination time used by ·8· ·COUNTY OF___________________) 10· ·each party at the deposition is as follows: ·9 11· · · · · · ·BY MR. CAFORIO:· · · · · 02:49:10 10· · · · · · ·Before me,___________________________, on 12· · · · · · ·BY MR. DESAI:· · · · · · 00:00:00 11· ·this day personally appeared ANGELO ACCONCIA, known 13· · · · · · ·BY MR. EWING:· · · · · · 00:00:00
12· ·to me (or proved to me under oath or 14· · · · · · ·BY MR. LEVESQUE:· · · · ·00:00:00
13· ·through______________________) (description of 15· · · · · · ·That pursuant to information given to the 16· ·deposition officer at the time said testimony was 14· ·identity card or other document)) to be the person 17· ·taken, the following includes counsel for all parties 15· ·whose name is subscribed to the foregoing instrument 18· ·of record: 16· ·and acknowledged to me that they executed the same 19 17· ·for the purposes and consideration therein expressed. · · · · · · ·ON BEHALF OF THE PLAINTIFFS: 18· · · · · · ·Given under my hand and seal of office this 20 19· ·____________day of______________________,_________. · · · · · · · SUSMAN GODFREY, LLP 20 21· · · · · · 1900 Avenue of the Stars 21 · · · · · · · Suite 1400 22· · · · · · · · · · · · ·____________________________ 22· · · · · · Los Angeles, California 90067 · · · · · · · · · · · · · ·NOTARY PUBLIC IN AND FOR · · · · · · · BRYAN CAFORIO, ESQ. 23· · · · · · · · · · · · ·THE STATE OF_________________ 23
24 24
25· ·COMMISSION EXPIRES:_________________ 25
www.LexitasLegal.com/Premier Lexitas 888-267-1200 0077 Pages 94–97 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 98 Page 100 ·1· · · · · ·ON BEHALF OF DEFENDANT BLACKSTONE AND ANGELO ·1· · · · ·FURTHER CERTIFICATION UNDER RULE 203, TRCP · · · · · · ·ACCONCIA: ·2· · · · The original deposition/errata sheet was / was ·2 ·3· ·not returned to the deposition officer on · · · · · · · LYNN, PINKER, HURST & SCHWEGMANN ·4· ·_________________; ·3· · · · · · 2100 Ross Avenue · · · · · · · Suite 2700 ·5· · · · If returned, the attached Changes and Signature
·4· · · · · · Dallas, Texas 75201 ·6· ·page contains any changes and the reasons therefor; · · · · · · · YAMAN DESAI, ESQ. ·7· · · · If returned, the original deposition was ·5 ·8· ·delivered to Custodial Attorney; ·6 ·9· · · · That $___________ is the deposition officer's ·7· · · · · ·ON BEHALF OF DEFENDANT PRIMEXX ENERGY 10· ·charges to the Plaintiff for preparing the original · · · · · · ·CORPORATION: ·8 11· ·deposition transcript and copies of exhibits, if any;
· · · · · · · KIRKLAND & ELLIS, LLP 12· · · · That the deposition was delivered in accordance ·9· · · · · · 401 Congress Avenue 13· ·with Rule 203.3, and that a copy of this certificate · · · · · · · Austin, Texas 78701 14· ·was served on all parties shown herein on 10· · · · · · ZACK C. EWING, ESQ. 15· ·__________________ and filed with the Clerk. 11 16· · · · Certified to by me on _______________________. 12 13· · · · · ·ON BEHALF OF DEFENDANT M. CHRISTOPHER DOYLE: 17 14· · · · · · TROUTMAN PEPPER LOCKE, LLP 18 · · · · · · · 2200 Ross Avenue 19 15· · · · · · Suite 2800 20· · · · · · · · ______________________________________ · · · · · · · Dallas, Texas 75201 · · · · · · · · · Tanya L. Verhoven-Page 16· · · · · · TAYLOR LEVESQUE, ESQ. 21· · · · · · · · Texas CSR No. 12254, Exp. 12/25 17 18 · · · · · · · · · Lexitas-NG Reporting 19· · · · · · ·I further certify that I am neither counsel 22· · · · · · · · Firm Registration #736 20· ·for, related to, nor employed by any of the parties · · · · · · · · · 999 Old Eagle Road, Suite 118 21· ·or attorneys in the action in which this proceeding 23· · · · · · · · Wayne, Pennsylvania 19087 22· ·was taken, and further that I am not financially or · · · · · · · · · 215-494-7650 23· ·otherwise interested in the outcome of the action. 24 24· · · · · · ·Further certification requirements pursuant 25· ·to Rule 203 of TRCP will be certified to after they 25
Page 99 ·1· ·have occurred. ·2· · · · · · ·Certified to by me this day, the ____ day ·3· ·of ________________________ ·4 ·5 ·6 ·7 ·8 ·9 10 11 12 13· · · · · · · · · · ___________________________________ · · · · · · · · · · · Tanya L. Verhoven-Page 14· · · · · · · · · · Texas CSR No. 12254, Exp. 12/25 · · · · · · · · · · · Lexitas-NG Reporting 15· · · · · · · · · · Firm Registration #736 · · · · · · · · · · · 999 Old Eagle Road, Suite 118 16· · · · · · · · · · Wayne, Pennsylvania 19087 · · · · · · · · · · · 215-494-7650 17 18 19 20 21 22 23 24 25
www.LexitasLegal.com/Premier Lexitas 888-267-1200 Pages 0078 98–100 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
69:23 70:20 71:20 72:12 73:5,18 76:8 6570 88:8 0 77:9 78:5,11,12 80:8,23 83:12 84:18 68 24:19 85:10 88:14 93:5 0005954 55:18 69 24:18 2022 14:8,19 6:30 54:9 2025 8:1,8 21:17 94:3 1 21 8:1 94:3 7 1 17:10,11 21:6,8 24:20 39:9 21st 8:7 10 80:15 22nd 92:11 7 28:17 65:14 100 17:10 235 84:12 70 90:7 10:07 40:24 24th 21:17 46:22 74 28:1,16 10:12 41:3 25th 53:17 54:1,7,20,23 8 11 84:9 27 46:18 11:00 85:11 28th 50:6 8 70:9 11:05 69:12 29th 47:10,22 48:15 49:1 811 85:23 11:10 69:16 8:15 85:1 3 11:30 67:8 9 11:56 93:20,24 3 52:25 53:2 12 85:9 88:5 30 17:17 55:20 56:9 57:9 9 77:15 12th 28:21 30th 57:18 9:05 8:2,7 13 89:5 92:1 3700 63:15 9th 70:19 71:20 73:5,18 76:8 13th 84:18 85:10 3900 85:23 14 22:8,10 @ 3:00 67:8 150 25:7 26:5 29:10 3rd 60:12,24 78:5,11 @primexx.com 50:19 153 25:14 29:21 157 92:3 4 A 15th 62:16 4 55:6 77:25 a.m. 8:2,7 40:24 41:3 59:13 69:12,16 186,006 29:23 93:20,24 468 70:13 187 77:18 ability 12:19 75:23 48 88:25 89:13 1st 80:23 88:13 accelerating 75:19 5 acceptable 75:15 76:2 2 access 13:19 5 60:4 75:2 2 46:9,11 Acconcia 8:10,25 9:22 10:3 21:7 546 60:8 25:25 27:5,14 41:6 46:8 52:12 53:1 2004 14:16,18 15:1,22,24 55:5 60:3 62:4 65:13 69:19 70:8 74:3 553 62:8 2016 16:18 18:21 28:21 42:24 75:2,10,14 77:14 80:14 84:8,18 87:13 5954 55:14 88:4 91:25 94:4 95:1,5,11 2020 60:12,24 92:11 5:30 54:9 accuracy 76:13 2020-2021 43:14 accurate 14:8,10 15:3,20 16:7 37:2 2021 14:19 15:2,22 16:18 18:22 6 38:16 48:11 74:12 42:24 43:4,21,25 44:4,21 45:2 46:2, 22 47:10,22 48:15 49:1,18,21 50:6 6 62:5 achieved 76:1 53:17 54:1,7 55:21 56:9 57:9,19 acknowledged 95:16 61:20 62:16 64:16,17 65:1 67:11 609 63:15
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: 0005954–acknowledged 0079 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
active 67:21 73:6 approve 33:23 bathroom 12:8 actively 73:20 approximately 93:24 begin 12:16 activities 43:17 44:8 58:3 65:7 87:22 April 62:16 64:17 beginning 8:18 actual 15:9 21:25 28:3 77:25 92:23 Arclight 14:4,5,12,18,21 behalf 8:14,21,24 9:4,7,9 10:7 24:8 25:9 30:7 43:3 45:2 60:20 63:7 68:15 add/amend 89:1 arise 75:18 belief 75:22 additional 75:3 aspects 34:24 Belz 36:15 37:1,11 38:3,8,12,14 address 26:2 50:19 60:24 61:5 63:3 assets 17:7 41:19 47:11,23 65:22 85:17 88:18 64:15 81:8 86:7,11,20,23 assistant 53:14 54:7,17 60:18,22 92:10 addresses 86:14 61:12 63:6 73:1 Belz's 38:6 advantage 75:16 association 75:19 bi-weekly 66:2,8 67:10 advise 54:2 assume 10:23 biggest 74:4 affects 12:19 attached 24:20 92:16,23 billion 17:10,11 affirm 9:18 attempting 43:4 bit 25:7 affix 95:2 attendance 71:3 Blackstone 8:12 9:1 14:13,15,17,21 afternoon 59:14 66:3,9 attended 73:5 74:16 76:9 15:1,5,16,18,19,22 16:2,6,15,18,21, 22,24,25 17:1,25 18:4,8,9,23 19:6,9, agree 26:11 73:21 90:12 attendees 71:5 73:25 18,19,25 20:3 22:12 23:10,14,16,20 agreement 24:23 25:1 26:6 28:5,10, attending 70:3 24:1,3,8,12,16 25:22 31:17,21 32:4, 15,20 30:7,11 31:4,8,13,19 39:14 15,17 33:1,7 34:5,16,17,21,22 35:1,4, attention 25:24 12,16,20,24 36:2,5,10,18 37:7 38:7, 42:13,19,21 August 88:13 92:10 93:5 19,24 39:18,19,20 41:11,18 42:7,11 ahead 25:6,7 92:15 43:4,11,13 44:3 45:2,5 46:3 47:12,24 availability 66:13,14 56:9,19,22 57:1,3 59:1,9 61:5,18 63:7 aim 12:7 aware 24:10 65:3 66:24 67:12 75:3 76:14,24 80:23 Amended 21:11 24:22,25 28:4,9,15, 85:14 88:17 89:10 90:2,17 94:2 19 30:6 39:13 B Blackstone's 20:2 32:6 35:7,21 America 64:1 36:3,19 38:20,25 39:7 40:6 41:24 amount 69:6 42:23 43:2 44:1 52:4 90:23 B-E-L-Z 38:4 analyst 15:24 back 9:14 14:7 24:21 26:5 28:1 29:9 Blackstone/primexx 37:3 Angela 27:5 33:6 35:15,23 39:9 41:3,6 56:25 Blatt 50:20,23,24 58:21 61:7 68:22 57:14 67:7 69:16,19 72:11 Angelo 8:9 9:22 25:24 27:14 53:18, 20 54:2 65:25 74:2 75:10 78:11 84:18 back-to-back 57:14,18,23 59:10 block 47:2 51:22 81:10 86:1,2,22 92:15 94:4 95:1,5,11 background 13:17 board 42:2,3,6,7 49:14,15,16 65:5 Anika 36:25 37:13 88:18 92:10 66:2,8,14 68:2,3,4,13,14 69:24 70:3, Ballpark 17:10 17,18,23 71:18,19 73:6,18,24 74:5,16 announced 91:3,4 bank 63:25 86:24 75:8 76:8,13,15,17,22 87:7 announcement 90:6 banker 79:1,15 83:14,17,20 boards 71:1 answers 10:13 bankers 77:2 88:1 bottom 22:14 28:17 46:12 53:5,16 Apologies 43:7 56:15 57:8 59:18 62:14 65:19 70:12 Baratta 19:3,22,23 75:6 80:20 81:3 84:16,21,24 88:16 apologize 28:7 30:25 38:21 40:13 base 78:13 89:11 92:7 41:13 based 54:16 66:14 72:20 79:7,10 BPP 22:14 25:9,11,16,19,21 26:7,12, appeared 95:11 81:13 83:24 85:7 86:5 89:15,20 17,19,20,25 27:6,7,14,15,23 29:6,11, appears 22:11 25:8 60:11 86:6 16,19,23 30:2,7 69:25 70:19,25 71:4, basically 16:14 14,19 74:6 approach 92:20 Bates 53:5 55:14 60:7 62:7 65:16 BPP_0005953 55:14,16 appropriately 20:25 70:11 77:17 80:18 84:11 88:7
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: active–BPP_0005953 0080 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
BPP_0006569 88:8 Callon's 91:17 Christopher 9:7 BPP_0016545 60:7 Callon/primexx 91:3 circulate 92:18 BPP_0016597 80:18 calls 13:10 63:8 67:18,22 80:6 83:11 Citi 83:12 85:1,22 86:24 87:4,10,14 BPP_0017182 77:18 Canadian 63:24 Citi's 87:22 BPP_0017552 62:8 capabilities 75:17 Citigroup 83:20 BPP_0017994 53:5 capital 14:4 39:18 63:11 75:4 city 13:6 78:15 79:7,10,24 BPP_0018234 84:12 Capitan 66:4,11,17,23 85:1 88:23 City/primexx 78:6 BPP_0018469 65:17 Captain 66:17 clarification 31:5 BPP_0018525 46:14 card 95:14 clarify 33:9 68:17 BPP_0019155 92:3 care 25:22 clarifying 47:19 branches 19:14 carried 38:19,25 39:2 40:4,12 classes 29:2 break 12:7,8,10,12 40:16 69:7,23 case 10:21,23,24 11:4 21:24 22:3,6 clause 39:16 32:21 35:14 61:16 81:20 87:2 94:2 broader 18:11 34:20 Clean 85:22 87:21 catch 78:23 broadly 68:16 82:6 closing 67:12 93:11 catch-up 92:16 Bryan 8:20 9:11 10:4 38:22 52:10,22 Co-head 85:21 87:20 69:4 catching 78:24 81:17 code 46:13 66:24 bullet 93:1 caught 81:25 coffee 69:6 bullets 92:18 CC'D 50:11 colon 26:10 bunch 22:13 cents 90:7 column 72:1 business 10:21 19:8,19 21:19,25 CEO 17:25 81:22 91:11,16 93:10 combination 74:6 75:25 78:17 80:3 BX 90:5 CEOS 91:19 combined 75:25 chain 18:11 46:22 47:8 50:14 53:8,16 comment 44:17 72:7 C 55:19 56:2,6,7 62:11 63:10 77:17 80:18,22 81:12 84:11,15 85:6 88:12 commentary 75:8 C-A-P-I-T-A-N 66:19 Chairman 85:21 COMMISSION 95:25 Caforio 8:20 10:2,4 21:3,9 22:19 change 75:14 committee 16:20 33:3,4,10,13,20,23 23:19 24:2,9,17 26:23 27:3,12,19 34:2,4,12,14,19,20 30:22,23 32:11 40:17,22 41:5,15 changed 15:23 43:9,19 44:10 45:7 46:10 52:14,21,23 communicate 13:20 49:17,21 characterization 33:21 35:19 40:8 53:3 55:7,10,12 58:19 60:1,5 62:1,6 74:25 communicated 63:21 87:12,13 64:4,24 65:10,15 67:16 68:7 69:8,18 70:6,10 72:17 73:12,15 76:23 77:6, characterize 49:14 communicating 77:7 12,16 79:13,21 80:12,16 82:14,23 chart 22:9,11,16,17,25 23:3,22 24:5, communications 19:20 45:21 83:2 84:6,10 88:6 90:21 91:1,22 92:2 12 49:23 50:1 77:1 80:7 82:8 93:8,13 Chase 51:1,4 53:22 54:13 55:20 56:8 companies 75:4,21,24 calculation 40:11 59:19 61:7 68:22 company 13:25 14:2,3 15:7 65:7 calendar 60:12,17,19,23 61:4 62:15, chat 20:12,14 21:5 46:6 52:9 55:8,9 79:25 83:8 90:3 18 63:2,7 64:7 59:25 61:25 65:8 70:5 77:11 80:11 84:5 88:3 company's 75:11 call 11:16 48:4,10,14 57:24 60:25 61:13 62:20,24 64:7 67:6,24 72:6 check 66:14 compare 82:6 78:14,22 81:21 82:21 85:1 89:4 93:4 Chief 47:3 compared 75:12 called 9:23 48:18 Chris 47:11,22 48:22 49:1,2,4 50:5,9 compensation 15:12,14 24:11,16 Callon 43:21,25 44:11,21 45:1,8,16, 54:8 61:7 68:22 81:21 82:22 85:2 27:23,25 38:18,23 40:5 22 66:25 67:13,19 83:13 86:25 90:2 92:19 complaint 22:2,6 91:9,11 93:4,10,11
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: BPP_0006569–complaint 0081 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
completed 42:13 court 9:18 10:14,22 21:3,19,24,25 43:6,15 44:6 45:3 52:10,18 55:3 52:24 55:10 60:1 62:1 65:10 70:6 58:15 63:23 64:21 67:14,23 72:13 completely 12:20,25 90:12 77:12 80:12 84:6 91:22 73:8 76:20 77:4 79:4,17 82:3,18 83:1 concluded 93:24 90:18,24 93:6,17 cover 93:2 concludes 9:17 describe 41:9,23 42:10 COVID 75:13 conduct 64:25 description 95:13 created 87:25 conducted 64:18 development 92:20 current 13:23 21:15 75:4,11,16 confirmed 75:2 dialogue 87:25 cut 52:13 connect 81:21 dialogues 82:5 87:23 consideration 95:17 D difficulties 11:25 considerations 40:11 diligence 64:18 65:1,7 Dallas 10:22 21:19,25 47:5 54:3,21, contact 87:15 23,24 71:20 72:11,19,23 73:2,20 dinner 53:19,20,21 54:9 contents 28:3 data 78:16 direct 19:23 20:18 27:24 45:21 context 18:6 date 28:21 62:19 94:3 directly 18:17 19:2 continued 42:22 dated 28:20 47:10,22 49:1 50:6 director 16:4,5 17:24 20:8 71:10,11 53:17 54:22 55:20 56:9 57:9 60:12,24 81:4 continues 78:22 62:16 70:19 78:5 80:23 84:18 88:13 directors 42:2,3,7 70:17 71:4,18 continuing 42:14 76:1 73:24 87:7 dates 43:1 44:23 conversations 83:15,16 directors' 75:8 David 17:22 37:1,11 77:7 78:1,4,8,25 Cook 46:23 47:1 51:19,23,25 52:4 79:15,18 82:10 89:19 disappear 86:3 58:21 61:8 72:10 Davis 51:11,15 52:4 58:21 65:22 disclaimers 77:24 coordinate 60:19 67:4 68:22 72:11 discovery 30:18 copied 85:19 day 54:7 59:6 73:2 85:10 89:19 90:12 95:11,19 discuss 12:16 34:16 59:13 66:25 copy 85:13 81:22 89:2 day-to-day 65:6 copying 92:10 discussed 41:17 45:15 56:13,14 corner 21:17 deal 36:19,21,25 37:3 38:14 41:11, 71:25 18,24 43:3,11 56:23 59:5 60:20 61:5 corporation 9:4 28:22,23 45:9 69:25 76:24 84:1 discussing 67:19 72:16,21 80:2 70:18,24 71:10,18 84:1 decided 33:23 correct 15:17 16:16 26:13 29:3 30:8 discussion 41:20 62:21 64:6 72:15 32:15 33:14,20,25 37:24 38:5 41:7 decision 31:17,22 74:4 92:12,17,24 42:9 44:12,22 54:21 55:2 58:23 59:6 decisions 33:4,8 discussions 31:10 75:7 78:16 61:13 62:25 63:3 64:8,13 67:6 70:1 71:10,14,21 76:13,17 79:3 80:9 81:6 Defendant 9:7 Division 21:19 82:17,25 83:13,18 87:1,5 95:3 Defendants 9:1 document 20:11 21:4,11 22:9 24:19 corrected 74:21 Dep 94:3 25:7,8,14 26:12,14 27:5,8,13 28:2,12 46:11,13,17,21 47:15 52:8,9 53:4 CORRECTIONS 94:5 depending 39:6 40:6 55:9,13 56:7 59:24 60:6,8,15 61:15, correctly 31:3 79:9 91:10 Deponent 94:4 24 62:7 63:5 64:10,16 65:8,16 70:11, 13,16 71:3,22 72:10 73:10 77:11 cost 90:7 deposed 11:6,14 81:3,13 82:19 84:5 85:7 86:5,19 88:3, counsel 8:16 13:10 deposition 8:9 10:11,15,20 11:3,19 7,12,17 89:8,23 93:1 95:14
counter-parties 29:2 64:19 12:16 13:3,9,12,21 21:5,7 46:8,11 documents 13:11 15:4 36:23 52:25 53:1 55:5 60:3 62:4 65:13 70:8 country 83:23 86:16 87:19 77:14 80:14 84:8 88:4 91:25 93:23 dollar 90:7 95:2 download 20:15 County 21:20 95:8 Desai 8:22 9:11 22:18 23:12,23 24:6, downstairs 13:16 couple 19:4 77:24 13 26:21 27:1,9,16 30:15 32:8 41:12
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: completed–downstairs 0082 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
Doyle 9:7 47:11,23 48:3,8,14,18,22 employees 35:20 36:2 59:5 61:6 84:7,8 88:4 91:24,25 49:1,2,18,21,24 50:6,9 52:3 53:10,16 employer 15:9 exhibits 9:13 11:23 54:8,12,25 58:21 61:7 68:22 81:21 82:22 employers 14:22 exit 44:15 Doyle's 74:3 end 15:2 42:18,20 43:21,25 44:4,21 exiting 44:3 93:16 draft 76:17 expect 39:5 ending 46:18 60:8 62:8 drafts 31:12 EXPIRES 95:25 energy 8:10 9:4 16:24,25 17:1,3,25 drink 12:8 Exploration 79:24 82:16 83:7 18:4,8,10 20:3 23:16 24:23 25:2,4 drinks 53:19,20 54:8 28:10,22 34:17,18,21,22 35:1,4,12 explore 61:19 39:14,19 47:4 57:3 69:25 70:18,19, due 64:18,25 expressed 74:3 95:17 24,25 71:10,18,19 79:9 80:8 81:5 duly 9:23 85:22 87:21 extent 30:16 engaged 61:18 E F Enjoyed 81:17
e-mail 26:2,4 46:22,23 47:1,9,10,21, enter 31:18 facilitate 74:5 22 48:2,8,12,25 49:3,22 50:4,5,8,13, entered 28:22 19 51:11 53:8,12,15,25 54:13,14,16, fact 35:15 42:22 48:14 54:24 20,22 55:8,19 56:6,7,8,16,21 57:8,9, entities 10:8 22:13,25 23:3,4,6,9,18, factors 40:10 11,13,21 58:6,9,10,14,16,20,24,25 22 24:5,11 39:23 40:1 59:4,8,15,19 60:24 61:5 62:11,13,15 fair 15:2 18:14,15 20:5 33:21 35:19 entity 15:13 25:3,5,11 40:8 42:24 44:5 45:2 49:13 54:18,19 63:3,4,8,9,10 64:5,9,10 65:21,24,25 67:25 72:15,20,21,24 73:3 77:17,25 equals 19:14 64:20 69:5 74:24 77:3 78:1,4,8 80:11,17,22 81:2,7,11,14,16, equity 15:25 17:2 18:5,6,9,12,17 familiar 22:17,21,24 23:4 25:3 37:4, 24 82:1,20 83:3,5 84:11,15,17,23 20:1,2,9 57:3 17,21 54:18 70:23 73:17 87:17 85:5,8,16,19 86:1,22 88:12,13,16 89:9,15,18 92:9,22,23 Erik 36:15 37:1,11 38:8,12 47:11,23 familiarize 47:14 60:14 66:1 88:18 92:10 fashion 18:25 e-mails 53:9 86:3 ERRATA 94:1 February 8:1,7 78:5,11 80:23 94:3 earlier 21:23 28:11 35:10 40:4 63:19 71:25 72:10,14 86:16 essentially 15:1 feeling 12:22 early 14:8 59:13 estimate 11:16 fell 20:3 earnings 39:6 et al 8:11,12 fight 48:3 eastern 8:7 52:13 67:8 85:2 evaluate 68:15 filed 21:16 Effective 28:21 evening 53:21 final 16:6 effectuate 86:25 event 42:12 finance 51:8 effectuated 91:12 events 68:15 Financial 47:4 effectuating 45:1 Ewing 9:2,3 financings 87:25 efficient 88:24 EXAMINATION 10:1 find 74:5 efforts 88:23 examined 9:24 fine 9:15 EIG 80:7 81:5 exchange 81:20 finished 52:15 EIGPARTNERS.COM 80:24 executed 95:16 firm 8:17 19:1 79:6 eliminating 75:21 executive 47:3 49:5,9 50:24 51:25 firms 82:5 53:14 54:6,17 61:11 69:2 73:1 91:9 Ellis 9:3 93:5 fit 89:2 employed 13:25 14:2,11,13 23:21, exhibit 12:1 20:16 21:5,7 24:20 flag 52:20 25 25:14,18 29:22 39:9 46:5,8,11 52:25 flight 48:9 59:13 employee 36:5 53:1 55:5,11 56:7 60:2,3 62:3,4 65:12,13 70:7,8 77:13,14 80:13,14
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: Doyle–flight 0083 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
Foley 17:22 18:10,18,19,22 35:8,11, give 15:2 49:8 hour 12:7 40:15 69:5 14,18 37:1,11 38:15 41:19 85:16 Global 20:9 80:7 81:5 85:21 87:20 hours 89:1,13 89:19,25 Godfrey 8:21 9:9 Houston 45:12,15 48:4,9,14,19 follow-up 59:12 57:14,18,23 58:5,8,14,22 59:6,10 good 9:2 10:3 78:12 foregoing 95:1,15 63:16 64:13,14 79:2,16,22 81:5,9 great 40:21 83:8,18,22 84:1 85:23 86:20 91:16,17 form 22:18 23:12,23 24:6 26:21 27:1, 9,16 30:16 32:8 41:12 43:6,15 44:6 group 15:5,19,25 17:1,2,4,13,14,16, Hurst 8:24 45:3 55:3 58:15 63:23 64:21 67:14,23 18 18:1,5,6,9,12,17 19:25 20:1,3 72:13 73:8 76:20 77:4 79:4,17 82:3, 25:22 35:4 36:1,3 37:6 57:4 68:21 I 18 83:1 90:18,24 93:6 87:8,9 89:2 format 11:22 groups 19:7,11,18 29:4 31:9 32:3 idea 66:3,10 33:7 57:1,4,6 71:8 forward 25:13 78:23 ideas 82:7 guess 50:3 forwarded 53:25 89:18 identity 95:14 guys 66:11 foundational 22:22 32:13 33:16 II 10:6 39:19 80:24 fourth 14:6 50:4 in-person 11:18 52:3 71:20 73:19 H free 12:6,7 59:13 67:6,7 84:1
frequently 12:9 Habachy 77:8 78:1,3,4,10 79:1,15 inaccuracies 74:23 76:17 82:10 Friday 8:1 66:3,4,9,11,12 67:8 inaccurate 74:21 hand 95:18 front 21:10 included 41:19 68:1 Hannigan 9:8 full 68:1 75:10 includes 44:3 hard 52:13 93:15 functional 19:18 including 36:25 44:11 head 17:18 20:9 79:8,9 fund 8:11 10:5,6 39:3 inclusive 32:3 42:1 heading 88:21 funds 40:2,3,12 indication 74:4 headquartered 45:11 79:25 FYI 89:21 92:17 indirectly 39:3 headquarters 91:17 individuals 69:2 G hear 11:25 industries 82:7 heard 31:2 68:13 initiated 61:12 62:24 80:6 83:11 garden 14:21,23 height 75:12 Inoa 8:13 Gardner 8:23 held 71:20 73:19 instance 68:12 gas 79:25 83:8 helpful 88:24 instrument 95:15 Gatto 91:5,7 92:24 93:4 Henle 37:1,15 47:12,24 88:18 92:9 intent 90:13 Gautam 36:25 37:13,17 88:18 92:10 Henley 37:18 65:22 93:3 interacted 18:5,24 19:21 87:4,10 general 16:8,17 17:8 23:24 24:14 high 78:18 30:13,14 31:3,7 35:10 36:1 37:18 interactions 87:6,8 41:10,16,17,21 42:1,16 44:18 49:20 higher 39:6 40:5 interest 38:20,25 39:2 40:4,12 50:14 51:5,7 61:21 62:21 65:4 66:14 67:20 70:2 74:20 76:12 82:5,8 83:15, history 15:22 internal 74:6 24 91:15 Holdco 22:14 25:9,11,16,19,21 26:7, interrupt 30:20 12,17,19,20,25 27:6,7,23 29:6,11,16, generally 11:16 12:6 16:11,12 17:17 34:15,18 36:21 39:8,24,25 43:16,22 19,23 30:2,7 introduce 8:16 44:1,7,16 50:16 57:5,6,25 61:22 73:7 Holdco's 27:14,15 introductions 9:17 74:18,24 76:16,21 79:11 82:4 homes 72:6 83:24 86:15 87:18 invest 31:22 33:20,24 34:11 gentleman 17:22 hope 78:11 81:17 invested 17:2 geographically 13:2 hopeful 52:15 investment 16:19,20 31:18,23,24
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: Foley–investment 0084 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
32:6,14,18 33:1,2,3,10,12,13,18,19, locations 72:7 22,24 34:2,4,6,10,12,13,14,16,19,20 K Locke 9:6 35:7,9,13,22 36:4,6,11,20 37:8,19,23 38:2,7,8,20,25 39:3,7 40:2,7 41:24 Kelly 56:19,20 logistics 72:16,21 42:12,15,23 44:2,4 45:6 52:5 63:25 Kenneth 8:13 long 14:5,14 26:20 46:17 65:4 75:3 76:25 77:2 79:1,6,12,15 82:5 83:14,17,19 86:24 88:1 key 89:22 looked 28:10 29:22 39:10,13 54:14 64:17 68:21 investments 19:15 34:19 87:24 kind 19:13 33:6 50:4 83:21 investor 13:24 lot 19:7 77:24 Kirkland 9:3 low 90:8,12,22 Investors" 39:20 knowledge 10:24 15:8 35:25 64:1 invite 53:22 60:12,17,23 61:4 62:15, lower 39:6 40:5 75:13,23 Kyle 8:23 18 63:2 64:7 lying 58:12 invites 60:20 63:7 L Lynn 8:23 involved 19:8,18 31:10 32:4 33:7 43:17 44:1,8 45:5 51:8 57:2,5,6 69:3 L.P. 39:18,19 M 87:22 land 48:4 involvement 30:13,14 31:3,7 36:1 made 28:21 32:16 33:19 34:11 74:4 landed 48:10,14,18 78:13 37:9,10,22 38:2,6 42:1,16,20 44:18 51:5,7 61:22 91:15 large 17:4,14 Main 63:15 85:23 involving 45:23 53:9 61:19 64:19 lead 61:15 majority 79:12 issues 75:18,20,22 leave 14:21,23 make 20:25 31:17 32:18 33:1 34:5,18 items 89:5,10,12 Lee 53:10,13,16,25 54:17 61:12 40:5 42:6 59:12 74:20 75:3
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www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: investments–meant 0085 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
medication 12:18 offices 63:25 83:20 N meet 83:25 official 74:22 meeting 66:2,8,12 70:17,24 71:17 named 17:22 19:3 29:4 oil 75:13,16 79:24 83:7 72:18,22 73:5,18 74:14 76:8,11,18,22 names 23:2,5,7,8 37:4,20,21 50:13, one-page 65:16 80:17 91:4 93:10 17,19 56:13 one-pager 81:18 meetings 42:23,25 45:14 57:18 58:3 60:19 67:10 69:24 70:3 73:7 74:16 Natural 85:21 87:21 one-pagers 81:20 76:13,15 nature 33:7 35:24 40:16 56:25 69:7 one-rig 76:1 Megan 51:11,15 53:22 54:13 65:21, negotiating 30:10 31:7 one-time 42:12 24 68:22 negotiation 31:4 operating 75:17 member 16:19,20 25:19 31:23 38:8 41:11 49:5 50:24 51:25 56:20,21 57:5 noise 13:17 operations 56:22 65:7 65:4 68:3 79:19 91:8 noon 52:13,16 operative 21:15 members 25:19 34:1 49:16 58:25 North 64:1 61:5 68:4 72:19,22 73:24 84:25 88:17 opportunities 87:24 89:9 NOTARY 95:22 Opportunity 8:11 10:5,6 memory 56:21 note 74:2 optimal 75:16 mention 52:11 90:1 noted 49:23 59:2,20 62:18 73:22 optimize 75:19,24 75:10,14 78:9 80:20 95:3 mentioned 21:24 35:10 53:18 69:22 org 22:9,11,16,17,25 23:3,22 24:5,12 70:2 71:8 notes 81:10 82:6 organization 18:23 19:6 35:16 merger 44:17,19 88:19 89:6 93:11 noticed 74:22 79:20 messaging 13:20 noticing 8:19 original 59:19 met 52:2 54:25 72:10 November 60:12,24 overseeing 41:24 76:25 mid 16:12,13 number 11:10 16:3 18:24 29:4 35:17 oversight 65:6 36:13 40:10 53:5 55:14 60:7 62:8 middle 21:18 50:5,8 57:7,11 65:17 70:12 72:6 77:18 78:16 80:18 owned 29:23 Midland 79:25 82:9,11,12 83:24 84:12 87:23 88:7 89:10 93:1,2 P mind 28:7 30:25 34:7 36:14,15 38:21 40:14,15 47:17 48:23 55:23 56:4 numbers 78:18 69:4,7 73:9,14 77:20 88:10 92:5 numeric 46:13 p.m. 54:9 67:8 85:1 minute 11:2 numerous 77:1 package 38:24 minutes 40:18,20 54:1 69:8,23 pages 25:13 46:17 77:24 70:16,24 73:4,19 74:2,11,16,21 O paid 15:11,14 76:15,18,22 85:10 93:14 pandemic 75:13 misstated 76:18 oath 10:10 41:7 69:20 95:12 paper 78:18 misunderstand 32:14 object 30:15,16 paragraph 28:18 74:2 75:2,10 76:4 moment 42:19 44:13 73:11 objection 22:18 23:12,23 24:6,13 78:21 26:21 27:1,9,16 30:19 32:8 41:12 Monday 92:16 paragraphs 76:5 43:6,15 44:6 45:3 55:3 58:15 63:23 month 72:12 64:21 67:14,23 72:13 73:8 76:20 77:4 parentheses 67:8 79:4,17 82:3,18 83:1 90:18,24 93:6 morning 9:2 10:3 48:3 66:5,9,11,12 part 17:14 18:4 33:18 37:2 38:14,18, 69:6 89:4 obligation 42:14 23 50:13 move 52:17 66:12 occupation 13:23 participant 67:21 73:6 multiple 17:6 87:18 occurring 67:11 participants 73:23 office 83:22,23 95:18 participate 45:14 69:24 Officer 47:4
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: medication–participate 0086 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
participated 73:21 91:4 93:4 Plaintiffs 8:21 9:10 10:5 Primexx/rosehill 83:4,6 participating 42:22 Plaintiffs' 21:11 PRIMEXX029462 70:12 partner 25:16 Plan 59:16,22 prior 30:11 31:13 partners 14:4 16:24,25 17:1,25 18:4, platforms 13:20 private 15:25 17:2 18:5,6,9,11,17 8,10 20:3 23:16 24:24 25:2,4,15 20:1,2,9 57:3 play 30:10 31:16,21 43:3,12,23 44:25 28:10 34:17,18,21,22 35:1,2,3,4,12 56:23 proceeding 8:19 11:4 39:14,18,19 47:4 57:3 69:25 70:19,25 71:19 80:8 81:5 played 67:18 process 32:15 43:12,24 partnership 24:23 25:1 26:6 28:5,9, point 15:23 32:16 61:17 productivity 92:19 15,20 30:7,11 31:4,8,11,12,19 39:14 42:13,19,21 points 20:18 92:11,17,24 93:2 profile 90:8,12,23 portfolio 56:22 profitability 39:7 40:6 parts 20:13 83:23 party 8:18 portion 20:20 program 75:15 76:1 position 16:13 75:11,14 promoted 16:1,2 Patricia 53:9,12,13,14 pause 41:1 69:14 potential 45:15,16,23 61:19 63:21 pronounce 78:2 64:18 65:2 67:19 72:22 77:2,8 78:17 Proposal 59:16,22 PDF 28:16 80:8 82:15,24 pending 10:21,25 12:11 21:24 92:18 proud 90:17 potentially 66:1,8 proved 95:12 people 13:16 17:12,15,17 18:7,12, practice 74:15,20 76:12,16 16,20,24 19:10,11 31:24 32:2,4 35:17 provided 66:15 67:5 pre 53:20 36:7,10,14,15 37:7 38:13 45:5 50:11, 12 54:14 57:2 59:2,8 63:7,20 64:2 public 90:3 95:22 preferred 29:6,11,13,16,19,23 30:2 68:21 71:16 85:15,18 90:5 92:20 pulled 81:13 Pepper 9:6 prepare 13:8,11 Punches 80:7,24 81:3,4,12,14 82:1, perform 43:11 20 president 26:6,10,12,17,19,20,25 performed 24:4 37:13 27:6,7,14,15 47:3 purposes 95:17 press 90:1,3,4 put 11:23 20:11,12,16 39:10,15 46:5 period 14:20,24 17:8 18:22 20:7 42:17 43:5,14 49:18 58:4 65:1 67:11 52:8 55:8 65:8 70:4 77:11 78:17 prices 75:13,17 80:11 84:5 85:16 88:3 periods 16:1 primary 32:5,7,10,25 33:5 87:3,6,8, putting 46:6 59:24 61:25 9,15 person 13:20 18:1 19:2,21 32:19,20 34:12 36:14 59:9 87:3 95:14 Primexx 8:10 9:4 10:5 23:15 24:23 Q 25:1,3 28:10,22 31:11,18,22 32:6,18 personal 39:5 40:5 33:1,20,25 34:6,11 35:8,13,22 36:4,6, personally 38:19,24 43:23 64:17,25 11,19,25 37:7,19,23 38:2,7,14,20 question 12:1,11 27:18 31:1 32:24 72:5 77:1 87:12,13 95:11 39:1,4,7,14 40:7 41:11,18,23,25 42:3, 34:8,24 38:22 43:8 47:18 49:4 56:5 8,12,23 43:3,4,11,13,18,20,24 44:2,4, 64:23 73:14,16 Peter 78:24 79:7 82:11 9,21 45:6,23 46:23 47:4,11,23 49:1,5, questions 10:7 12:19 30:17 32:13, petition 11:1 21:11,16 22:1 24:21 10,21 50:20,23,25 51:1,9,11,12,15, 20,22 33:16 93:18 19,24 52:1,5 53:10 55:1,20 56:8,10, Petroleum 43:21,25 44:12,21 45:1, quickly 52:16 23 58:13 59:3,5,9 61:6,18,19 62:20 8,22 83:13 86:25 91:11 63:21 64:18 65:2,5,6,22 66:24 67:12, quoted 90:5 Pg 94:6,8,10,12,14,16,18,20,22,24 18 68:10,19,23 69:3,24 70:18,24 71:4,10,11,18 72:2,18 74:6 76:25 Phil 46:23,25 47:1 51:19,23,25 53:22 77:3,9 78:15 80:8,25 81:18 82:16,25 R 54:13 61:7 83:13 84:1,19 87:1,8 88:19 89:6 90:4, phone 78:14 6 93:11 94:2 RBC 61:18 63:11,20,24 68:14 87:9 phrase 58:1 Primexx's 81:22 92:19 RBC's 61:22 Pincus 77:8 79:2,6,19 Primexx/blackstone 60:25 RBC/BX 62:21 Pinker 8:23 Primexx/callon 87:5,14 91:12 reached 16:13 78:24
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: participated–reached 0087 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
read 23:2 86:18 94:6,8,10,12,14,16, 89:16 Restated 24:22 25:1 28:4,9,15,19 18,20,22,24 95:1 39:13 refers 58:1 reading 58:24 59:8 78:3 resulted 43:24 refresh 29:15,18 30:1 reads 26:10 28:14,16,17 89:24 94:6, retained 68:14 refreshing 56:21 8,10,12,14,16,18,20,22,24 review 13:11 73:11 74:15 76:13,15 regular 70:17 71:17 74:15 reason 12:24 27:4 44:13 48:7,17 reviewing 76:22 74:10 76:6 94:6,8,10,12,14,16,18,20, regularly 19:22 22,24 Richard 80:7,24 81:2,14,16 82:9,20 relate 30:17 recall 11:9,15,20 15:25 16:8,10,11 rig 75:15,21 related 43:17 44:8 17:9,16 20:10 22:5,7,23 23:8,17 25:5 26:15,18,22 27:2,10,22 29:8,20 30:4, right-hand 65:19 80:20 92:7 relates 88:23 13 31:3,14 32:1 34:10 35:5,6 36:8,13, risk 75:23 17 37:5,6,9,10,14,16,18,22 38:1 relationship 87:25 41:20 42:1,25 43:20,22 44:15,16,23, role 17:13 26:15 30:10 31:16,21 43:2, relationships 19:20 24 45:10,11,17,20,24 46:1,4 48:12, 3,10,12,23 44:25 46:2 49:10,12 51:6 13,16,20 49:19,20,23,25 51:5,6,17 relative 40:9 56:23 65:3 67:18 76:24 52:2,6,7 55:4 57:20 58:2,7,11,17 release 90:1,3,4 roles 37:5 59:7,23 60:21 61:14,17,21,22 63:1,5 64:2 66:22,23 67:1,3,10,15,17 71:2, remainder 16:15 room 13:14,18 23 72:4,14,20 73:22 74:13,18 76:10, remember 38:13 72:9 rooms 20:23 21 77:5,7,10 79:8,11,23 80:1,5,10 82:7 83:6,9,16 84:2,4 87:16 90:19,25 remote 8:9 11:19,21 Rosehill 59:16,22 80:25 81:19 91:6,9,14,15,18,20,21 92:25 93:7,9, 82:16,25 83:7,9 remotely 10:10 12 run 75:21 repeating 28:7 30:25 34:7 38:21 receive 31:12 68:9 47:17 56:4 73:14 received 24:11,15 27:22,24 64:5,9, S rephrase 43:8 10 92:20 reply 85:17 89:2 sale 44:11,15,20 45:15 recitals 39:17 report 18:16,21 35:8,11 49:12 Sam 50:20,23,24 53:22 54:13 61:7 recognize 23:5,7,13,14,15 39:23 68:22 50:13,16 reported 18:19,25 19:2 35:14,17,21 36:4 49:14 Sarah 9:8,11 recollection 26:24 29:15,18 30:1 35:24 37:12 43:1 59:21 70:3 83:24 reporter 9:18 10:14 21:4 52:24 55:10 schedule 25:15 53:17 54:18 63:8 60:2 62:2 65:11 70:6 77:12 80:13 recommendation 32:17 33:19,24 84:7 91:23 scheduled 61:12 34:11 reporting 19:13,20 35:25 36:9 scheduling 57:24 recommendations 33:2 68:6 reports 19:23 Schwegmann 8:24 recommended 34:5 represent 8:18,25 10:4 21:15 screen 20:12,17,21 24:21 39:10,15 recommending 32:6,25 46:7 49:22 52:24 rescheduling 66:1,8 record 8:8 21:8 40:25 41:4 46:9 53:2 seal 95:18 55:6 60:4 62:5 65:14 69:13,17 70:9 reserve 93:17 sector 16:22 74:22 77:15 80:15 84:9 88:5 92:1 resolved 75:20 93:21 self-employed 14:1 Resources 85:22 87:21 reference 15:4 39:18 66:21 sell 43:4,13 responded 54:6 67:4 85:9,13 89:25 referenced 40:3 67:25 68:1 72:15 90:11 send 60:19 63:6 86:16 response 90:10 senior 16:3,5 17:19,20,24 18:2,7,10, references 36:23 66:16 12 19:12 20:8 35:11 38:10 84:25 responsibilities 16:18,23 41:10,23 referencing 21:23 42:11,18 sense 53:19 78:13 referred 15:15 36:24 responsibility 32:5,7,25 sentence 75:6 92:14 referring 42:4 54:16 68:10,18,24 rest 55:1 58:12 separately 78:24
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: read–separately 0088 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
series 13:10 29:1,6,11,13,16,19,23 specific 10:24 15:8,13,25 16:21,23 substantial 31:17 30:2 42:14 75:7 17:5 20:13,18 23:1,8 34:23 35:25 substantive 28:12 36:8 37:5 38:1 41:14,17 43:1 44:14, serving 70:25 23 48:24 51:6 58:2 68:12 83:16 Suite 63:15 85:23 set 59:11 81:21 91:14,20 summarize 88:25 setting 28:8 82:21 specifically 11:9,15 13:18 16:10 20:10 22:7 25:5 26:15,18 31:14 32:1 summary 18:14,15 settled 78:15 35:5,6,13 36:13,17 60:22 64:2 72:5,8 support 34:21 35:1 74:3 seven-page 70:13 73:10 74:19 Susman 8:21 9:9 share 20:17 46:6 52:23 78:18 81:18 specifics 17:17 23:17 27:11 29:20 30:4 33:5 41:22 44:15 45:20 48:20 swear 9:18 shared 21:5 78:16 50:15 52:6,7 57:20 58:11 59:7 61:14 sworn 9:23 sharing 30:5 63:6 71:2,23 73:22 74:13 76:10 80:5 83:6 87:16 90:20 92:25 93:12 SHEET 94:1 T spelled 66:19 short 14:20 Spence 63:11,14 64:6 table 28:3 29:25 show 11:1 24:19 Spence's 64:12 takes 14:7 shown 11:4 stage 28:8 taking 12:18 36:12 44:13 58:3 shows 63:5 64:9,10 82:19 86:2 89:8 Stand 69:11 93:19 talk 17:6 sic 48:3 start 14:14 41:16 67:11 78:12 talked 15:16 sick 12:22 started 9:12 14:12,18 15:24 16:9 talking 92:11,16,24 signature 25:12 27:20 29:9 30:9 55:20 56:3 67:12 47:2 51:22 63:14 64:12,14 81:10 Tall 78:5,15 79:24 85:20,25 86:2,10,22 95:2 starting 77:17 84:11 Taylor 9:5 signed 25:9 26:5,11 27:5,7,13 29:12 starts 46:22 56:8 65:21 80:22 84:15 team 16:19 31:23,25 33:2,10,12,18, 30:6 42:13,19,20 88:13 24 34:5,10,13,16 36:19,25 37:3 38:9, significantly 75:11 state 8:17 57:25 76:7 95:7,23 14 41:11,18,24 43:3,11 49:5,9 50:25 51:8 52:1 53:21 54:9,12 55:1 56:9,10, signing 30:12 31:13 89:1,6,14 stated 75:22 22,24 58:13 59:1,5,13 60:20 61:6 silently 67:22 statement 48:11 92:13 65:5,6 67:19 68:5,10,11,13,18,19,25 69:3 71:25 72:4,8 75:18 76:25 78:19 similar 82:10 states 26:9 64:14 75:2 83:21 79:10,12 85:1 87:7 88:22 89:10 90:17 simply 32:24 75:21 status 62:21 91:9 92:16 93:5
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www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index:0089 series–Texas PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
16,25 81:6,9 83:8,18 85:23 86:21 Trauber's 85:20 video-recorded 10:18 91:16,17 travel 46:3 view 78:19 Texas-based 45:8 trip 57:20 VII 39:18 thing 12:10 Troutman 9:6 visible 13:22 things 19:4 52:17 78:14 82:9 true 95:3 thought 78:13 88:24 W truthfully 12:20,25 thoughts 88:25 89:16 Tuesday 53:18 waiting 92:18 Thursday 62:16 turn 68:15 wanted 41:16 52:20 78:18 81:19 time 8:6,7 11:13,24 14:7,20,24 16:2, 90:22 turning 77:20 88:10 92:5 15 17:8 18:22 20:7,19 30:21 35:5,6 40:23 41:2 42:17,25 43:5,14 44:2,9 two-page 60:7 Warburg 77:8 79:2,5,19 82:12 47:16 49:18 58:2,3 59:11 65:1,3 Warburg/blackstone 78:14 67:11 69:12,15 70:25 79:8,12 82:13 typically 60:18 63:6 76:15 83:15,16,22 87:23 93:20 warning 30:19 U ways 17:7 52:19 times 11:8 15:5 16:1,3 67:9 timing 14:9 Wednesday 53:21 ultimate 16:3 44:11 86:25 title 16:3,6,9,14 17:23 20:6 26:6 51:6 week 53:19 54:25 78:22 81:17 82:1 ultimately 43:13,20 93:3 70:16,22 91:14,20 weekend 92:21 understand 10:9,13,17,20 11:2 titled 21:11 24:22 27:18 32:9,12 33:15 41:7 49:4 61:23 wells 92:19 titles 15:23 91:19 64:23 66:20 69:20 89:22 whatnot 20:22 today 10:8,18 12:16,19,22,25 57:14, understanding 15:6 23:25 24:15 White 51:1,4 52:3 55:20 56:8 59:19 23 59:10 76:7 89:3 40:1 50:12 61:7 68:22 72:11 today's 13:8 understood 30:22 71:24 window 66:14 67:5 told 48:8,19 58:13,22 59:6 unfamiliar 23:6 37:20 wondering 35:12 43:10 tomorrow 59:14 66:2,9 United 83:21 word 33:5 44:14 tonight 85:1 unitholder 29:7,11,14,16,19 30:2 work 12:2 17:12 19:10,11 24:4 37:13 top 21:17,18 22:12 23:11 28:14,16 unitholders 29:3 43:12 46:3 53:21 67:9 29:13 47:9,21 63:9,13 70:22 71:7 Units 29:23 worked 15:15,19 17:14 19:14 24:7,8 74:8 90:14,15 34:15 36:3,8,11,19 37:7,19 83:20,22 unusual 11:22 topic 78:25 82:15 working 14:14,18 36:5 38:14 43:13 up-to-speed 89:4 topics 82:11,13 93:2 68:23 upcoming 66:25 totally 32:14 works 22:13 32:15 59:11 78:22 update 66:4,11,16 touch 78:13 workstream 89:6 updates 68:4,9,13 transaction 44:16,18,20,23 45:1,16, workstreams 88:19,25 89:13,17,22 23 61:19 63:22 66:25 67:13,19 77:9 wrong 33:15,16 80:9 82:16,24 83:12 87:1,5,14 88:23 V 89:14 90:16 91:2,3,12 wrote 48:2 54:1,12,20,22 57:13,17, valuation 90:6 21 67:5,7 78:10 81:16 84:22 89:12,21 transactions 64:19 65:2 77:3 values 75:24 transcribed 10:14 Y version 21:16 TRANSCRIPT 94:1 versus 8:11 Yaman 8:22 Transition 85:22 87:21 Vice 47:3 85:21 year 14:6 75:12 78:12,13 Trauber 83:12,14,17,19,25 84:19 85:6,9,13 87:3,15,18,20 88:1 video 8:9 years 11:16 42:15 88:2
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: Texas-based–years 0090 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025
York 8:1 13:4,5 79:7,10 82:12 83:22 86:8,12
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Zack 9:3
www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: 0091York–Zack EXHIBIT 6
FILED UNDER SEAL
0092 To: Chris Doyle[chris.doyle@primexx.com] Ce; Belz, Erik[Erik.Belz@Blackstone.com]; Hamilton, JonathanJonathan. Hamilton@Blackstone.com]; Kelly, Jeff[jeff-kelly@blackstone.com]; Gautam, Anika [Anika.Gautam@Blackstone.com] From: Acconcia, Angelo[acconcia@Blackstone.com] Sent: Tue 1/12/2021 4:31:51 PM Eastem Standard Time Subject: RE: Colgate [External]
Yes. Thank you.
From: Chris Doyle
Apparently they're working remotely. He did ask if we could have a call, which will have. You comfortable with me saying something to the effect that my |
understanding was Warburg was supposed to get back to BX on potential valuation metrics?
From: Acconcia, Angelo
Good idea.
From: Chris Doyle
BTW -CC is in the same building in Midland as Primexx. think it would make sense to give Oestmann a heads up that I'm out there and see how he responds. |
From: Chris Doyle Sent: Tuesday, January 12, 2021 11:55 AM To: Acconcia, Angelo
No additional developments. Based on James's note, they will be responding to our questions by mid-week and want to grab a drink while am in Midland. -
|was waiting until today or tomorrow to see if they actually respond to our questions or under the guise of trying to lock down my Midland schedule. was|
going to propose a quick discussion to review our questions (to read the room) followed by a drink. My thought would be Jeff, Sam, and me.
| discussed the TC idea with Chase, and he thinks their behavior is consistent with previous deals with Colgate. He indicated a general lack of maturity in previous negotiations and believes that could be what's going on here. don't see Tall City moving the needle for them outside of more production and it |
would seem to be a strange move this far advanced in talks with us. could reach out to Oestmann to meet up with him in Midland to gauge what's going on. TC went quiet around the same time we decided to hold back from an entire download of technical information (thinking they may just be interested in learning from us not discussing a combination). You could also call Warburg and see why they dropped the ball. -
Happy to jump on a call (outside of 5:30 and 7:00 EST) to discuss best next steps.
Chris
From: Acconcia, Angelo
Chris,
Just wanted to check-in to see if there were any developments on Colgate. Agree with your tactic to wait for them to come back to you.
CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP_0014024 Relatedly, am concerned they are doing something with Tall City. They are in the midst of "making a couple of acquisitions", likely using the diligence on 1
Primexx to do so and in advance of a relative value discussion as they probably see the 50/50 writing on the wall. This would also explain why Tall City has not come back to us.
Wanted to debate what we should do about this, if anything.
Angelo
Angelo G. Acconcia Senior Managing Director Private Equity The Blackstone Group 345 Park Avenue, 43rd Floor New York, NY 10154 T: 212.583.5211 F: 212.201.2874 M: 917.747.0987
This e-mail co: munication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, «confidential or otherwise protec! ted from disclosure. Please refer to www.blackstone convemail-di sclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication.
This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.black CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP_0014025 EXHIBIT 7 FILED UNDER SEAL 0095 To: Chris Doyle[chris.doyle@primexx.com] Ce: Belz, Erik[Erik.Belz@Blackstone.com]; Henle, Mark[Mark.Henle@Blackstone.com] From: Acconcia, Angelo[acconcia@Blackstone.com] Sent: Tue 6/29/2021 11:17:53 AM Coordinated Universal Time Subject: Re: [External]RE: biweekly materials [Extemal] Ona fight this moming to Houston. Will call you when I land. From: Chris Doyle We will make Thursday afternoon work according to your schedule. Chris Sent from my iPhone On Jun 28, 2021, at 11:12 PM, Steven Pully Chris, think that is good suggestion. am in trial prep and testimony though late Wednesday...can we do something on Thursday afternoon? | a Happy for anyone to be invited. Also, recognize that my questions relate to BPP equity and am certainly not a BPP director...that being said, if | | the second rig is dropped, Primexx shareholders suffer too, which is why am so keenly interested. | Regards, Steve Steven J. Pully, CFA 214 587-6133 From: Chris Doyle Thank you, Steve. would suggest the team have a call with you and/or a BPP Board member to discuss exactly what question you are trying to answer. We believe the analysis provided this weekend is directly responsive to your question of equity returns on incremental capital as are the multiple models run for the Special Committee. Speak soon, Chris Sent from my iPhone On Jun 28, 2021, at 8:05 PM, sjpull ahoo.com wrote: Chris, was appointed to my agth board today...recommended, by the way, by one of the large energy lenders that we are talking to. Never in all of the boards that I've been on has it been so difficult to get the management team to run a model! Can't you guys just run the model that am asking for and we can debate what it says/means later? feel like have a duty to see this information. | Steve Steven J. Pully, CFA 214587-6133 CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP_0018525 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential, proprietary, and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. you received this in error, please contact the sender and delete the material from all computers. From: Chris Doyle Thanks for following up, Steve. Everyone may have different assumptions, but here is how the team thought about your questions/comments: 1. While "new equity always wants a discount" may be true, wanting and receiving are two different things. Since the largest current equity owner has indicated that they were not supportive of making a complicated capital structure more complicated with the addition of outside capital, the team believes that assuming a no-discount entry is the appropriate assumption (if not aggressive). Since BPP always has the opportunity to run two rigs in the future, we assume current equity owners would be unlikely to offer a discounted entry as you suggest. 2.1 agree with your methodology assuming all current equity owners would consider funding their pro rata share. Since the largest equity owner has indicated they don't currently have the support to infuse more capital into this business as currently configured, your approach falls apart and is not viable. Given the guidance the Board has given us, the best shot would be an aggressive bid from external capital, and that has not materialized after months of pursuing. Discussions with potential equity providers indicated previous investments were based on valuations of PDP PV15. That level of value is not compelling. 3.1 won't assume to know all of the questions you may have about liquidity, but assume one question would be the actual quantum of liquidity as minimum. We assume more aggressive (lower) liquidity limits than the Board has currently a approved. While more aggressive than current Board guidance, minimum assumed liquidity at BPP of $40 million and $80 million at the combined PRD/BPP are appropriate assumptions. One might consider an even more aggressive minimum threshold (and have run active operations much tighter), but because this is new equity coming into the business, the | appropriate assumption is to maintain a reasonable/conservative cushion to ensure the infusion of equity is sufficient to fund the business and absorb additional business risks. Chris From: sjpully@yahoo.com Chris, do have some questions/comments regarding the BPP equity infusion: « New equity is not likely to pay 5x EBITDA; new equity always wants a discount.The returns would be higher if the new money was coming in at a more compelling valuation. © The better way to run the analysis (as an example only) is to have the three equity holders fund their prorata analysis and then look what their returns are on all the equity that they have invested with two rigs; compare that to the current one rig investment scenario and what the returns would be from that also have some questions about the exact liquidity need Thanks. Steve Steven J. Pully, CFA 214587-6133 CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP_0018526 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential, proprietary, and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. you received this in error, please contact the sender and delete the material from all computers. From: Chris Doyle Please see attached materials as follow up to Friday's biweekly call. Let us know if you have any questions or would like for us to go through the materials 1:1. Thanks, Chris From: Phil Cook Directors, Please see materials for tomorrow's call. Phil Philip W. Cook Executive Vice President and Chief Financial Officer Primexx Energy Partners Two Energy Square 4849 Greenville Ave Dallas TX, 75206 O-214.635.2613 M-918.606.4204 CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP_0018527 EXHIBIT 8 FILED UNDER SEAL 0099 To: Li, Patricia[Patricia.i@Blackstone.com] From: Acconcia, Angelo[acconcia@Blackstone.com] Sent: Tue 5/25/2021 5:48:40 PM Coordinated Universal Time Subject: RE: Schedule next Tuesday [External] Thanks. Lets do drinks with Chris at 5:30pm and then dinner at 6:30pm with the team. Could be fearings if that works for both. Could we do 12pm EST on Tues for the board call? From: Li, Patricia Angelo, Please advise on the below as you will be in Dallas. Thanks Patricia Li From: Chris Doyle Patricia - can you quickly tell me what windows work for Tuesday afternoon next week for a Primexx Board call? We would need an hour. Also -Angelo mentioned having drinks/dinner next week. think it makes sense for Angelo and to have pre-dinner drinks and then have a team dinner | Wednesday evening. Does that work? would invite Phil, Megan, Chase, and Sam. Thanks, Chris Primexx Operating Corporation Two Energy Square 4849 Greenville Ave, Suite 1600 Dallas, TX 75206 Office: 214-369-5909 Direct: 214.635.2632 chris.doyle@ pimexx.com CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP_0017994 EXHIBIT 9 FILED UNDER SEAL 0101 To: Angelo Acconcia[acconcia@Blackstone.com] From: Chris Doyle[chris.doyle@primexx.com] Sent: Fri 7/2/2021 12:49:58PM Eastern Standard Time Subject: FW: Rosehill Plan B Proposal [External] Attachment: Rosehill Overview Materials06.30.21.pdf Slide 3 From: Chase White Draft materials we can run through here at 330 ET. Chase From: Belz, Erik Sounds good. Chase -would 3:30pm ET work? think we can keep this call relatively short, as the objective with this bid should be to get into the next round, | and so we are really bidding the book at this point. Based on the sell side info, what is PDP PV 10, 12 and 15 (at current strip)? If you take a 10% discount te the seller's PDP volumes, what is the PDP PV 10, 12 and 15? From: Acconcia, Angelo lam back to back in Houston today. Why don't you set the time that works best for you all and if can't make it will follow-up with the team to discuss. | | tam ona a flight early am but free for most of the afternoon tomorrow. From: Belz, Erik | cannot do 5:30pm ET. Would 3:30pm or 4pm ET work? Could also try to do something late morning today. If not, could do later tonight after 8:30pm ET. | From: Chase White BX Team We are wanting to hop on the phone this afternoon to run through Rosehill proposal/strategy. RBC has worked our PDP / opex assumptions as well - as prepared a high level contribution analysis for us to consider. Does 5:30pm ET work? Trying to kick out into afternoon post RRR/JP closings this morning. Thanks. Chase Chase A. White Primexx Operating Corporation Office: 214-691-3114 Cell: 214-536-6089 chase.white@primexx.com HIGHLY CONFIDENTIAL: ATTORNEY'S EYES ONLY BPP_0005953 This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended rcipient ent ofthis c omun ication. HIGHLY CONFIDENTIAL: ATTORNEY'S EYES ONLY BPP_0005954 EXHIBIT 10 FILED UNDER SEAL 0104 To: Angelo Acconcia[acconcia@Blackstone.com]; Jeff Kelly[jeff.kelly@blackstone.com]; ErikBelz[Erik.Beiz@Blackstone.com]; Elamilton. Jonathan [Jonathan.EIamilton@Blackstone.com]; Gautam. Anika[Anika.Gautam@>Blackstone.com]; Chris Doyle[chris.doyle@jprimexx.com]; Sam Blatt[sam.blatt@jprimexx.com]; Phil Cook [phil.cook@jprimexx.com] Cc: Gilman. Rachael[Rachael.Gilman@jBlackstone.com]; Oglesby. Amanda[Amanda.Oglesby@jBlackstone.com]; Li. Patricia[Patricia.Li@;Blackstone.com] From: Chase White[chase.white@jprimexx.com] Sent: Wed 1/6/2021 2:56:17 PM Coordinated Universal Time Subject: RE: Call: Primexx/Blackstone- Strategic Next Steps [External] Attachment: Conversation Tracker_01.05.21.pdf Tracking materials ahead of this call. -----Original Appointment----- From: Acconcia, Angelo Dial: +1(646)558-8656// Meeting ID: 991 1629 0179 //Smartphone: +1(646)558-8656,99116290179#// No Participant Code Required TO JOIN FROM A PC, MAC, IOS OR ANDROID: https://blackstone.zoom. us/j/99116290179 Meeting ID: 9911629 0179 TO USE MOBILE ONE-TAP: +l6465588656„99ll6290l79# US Toll +I3i26266799„99ii6290i79# US Toll TO JOIN FROM A TELEPHONE: Dial(for higher quality, dial a number based on your current location): US: +1 646 558 8656 or +1 312 626 6799 or +1 301 715 8592 or +1 253 215 8782 or +1 346 248 7799 or +1 669 900 6833 or 888 788 0099 (Toll Free) or 877 853 5247 (Toll Free) United Kingdom: +44 203 901 7895 or +44 208 080 6591 or +44 208 080 6592 or +44 330 088 5830 or +44 131 460 1196 or +44 203 481 5237 or +44 203 481 5240 or o 800 031 5717 (Toll Free) Singapore: +65 3165 1065 or +65 3158 7288 or 800 852 6054 (Toll Free) Hong Kong SAR: +852 5803 3730 or +852 5803 3731 or +852 5808 6088 or +852 3008 3297 or +852 3012 6283 or 800 906 780 (Toll Free) or 800 931189 (Toll Free) or 800 931 645 (Toll Free) Australia: +61 3 7018 2005 or +61 7 3185 3730 or +61 8 6119 3900 or +61 8 7150 1149 or +61 2 8015 6011 or 1800 893 423 (Toll Free) China: +86 10 8783 3177 or +86 10 5387 6330 Costa Rica: +506 4000 3843 or +506 4100 7699 India: +91 224 879 8012 or +91 22 71 279 525 or +91 80 71 279 440 or +91 22 48 798 004 Philippines: +63 92 3099 0478 or 1800 1110 2219 (Toll Free) Taiwan: +886 (2) 7741 7473 United Arab Emirates: 800 035 704 555 (Toll Free) or 800 035 704 239 (Toll Free) Viet Nam: +84 28 4458 2373 or +84 869 402 526 International numbers available: https://blackstone.zoom.us/u/aexhoBRZyb Meeting ID: 9911629 0179 TO JOIN FROM SKYPE FOR BUSINESS (LYNC): https://blackstone.zoom.us/skvpe/99116290179 ORAN H.323/SIP ROOM SYSTEM: H.323: 162.255.37.11 (US West) 162.255.36.11 (US East) 221.122.88.195 (China) 115.114.131.7 (India Mumbai) 115.114.115.7 (India Hyderabad) 213.19.144.110 (Amsterdam Netherlands) 213.244.140.110 (Germany) 103.122.166.55 (Australia) 209.9.211.110 (Hong Kong SAR) 64.211.144.160 (Brazil) 69.174.57.160 (Canada) 207.226.132.110 (Japan) Meeting ID: 9911629 0179 SIP: 99116290179@zoomcrc.com HIGHLY CONFIDENTIAL: ATTORNEY'S EYES ONLY BPP 0016545 This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone. com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. HIGHLY CONFIDENTIAL: ATTORNEY'S EYES ONLY BPP 0016546 EXHIBIT 11 FILED UNDER SEAL 0107 To: Acconcia. Angelo[acconcia@Blackstone.com]; Cain. Matt[matt.cain@rbccm.com]; Chris Doyle[chris.doyle@primeXx.com]; Chase White[chase.white@primexx.com]; Richardson. Scott[Scott.Richardson@rbccm.com]; Numelin. Tye[tye.numelin@rbccm.com]; Belz. Erik[Erik.Belz@Blackstone.com]; Hamilton. Jonathan[Jonathan.Hamilton@lBlackstone.com]; Kelly. Jeffljeff.kelly@blackstone.com]; Gautam. Anika[Anika.Gautam@Blackstone.com]; Foley. David[foley@blackstone.com] Cc: Oglesby. Amanda[Amanda.Oglesby@Blackstone.com]; Rozon. Onoria[Onoria.Rozon@Blackstone.com]; Gilman. Rachael[Rachael.Gilman@Blackstone.com]; Sow. Maty [Maty.Sow@Blackstone.com]; Li. Patricia[Patricia.Li@Blackstone.com]; Sam Blatt[sam.blatt@primexx.com]; Megan Davis[megan.davis@primexs.com]; Phil Cook[phil.cook@primexs.com] From: Spence. Jeffrey[jeffrey.spence@rbccm.com] Sent: Tue 4/20/2021 2:07:58 PM Coordinated Universal Time Subject: RE: Call: Primexs/ RBC/ BX re: general status and next steps discussion [External] Attachment: Primexs Process Update_20210420.pdf All, Please see the attached materials for discussion on the call this morning. Thank you, Jeffrey Spence RBC Capital Markets | RBC Richardson Barr 609 Main St, Suite 3700, Houston, TX 77002 O: 713.585.3344 | C: 832.628.6604 i effrev. six'nce/Trbccmxom ------Original Appointment------ From: Acconcia, Angelo [mailto:acconcia@Blackstone.com] Sent: Monday,April 19, 202111:54 AM To: Acconcia, Angelo; Cain, Matt; Spence, Jeffrey; Chris Doyle; Chase White; Richardson, Scott; Numelin, Tye; Belz, Erik; Hamilton, Jonathan; Kelly, Jeff; Gautam, Anika; Foley, David Cc: Oglesby, Amanda; Rozon, Onoria; Gilman, Rachael; Sow, Maty; Li, Patricia; Sam Blatt; Megan Davis; Phil Cook Subject: FW: Call: Primexx/ RBC/ BX re: general status and next steps discussion When: Tuesday,April 20, 202110:30 AM-11:30 AM (UTC-05:00) Eastern Time (US & Canada). Where: Dial: +1(646)558-8656 // Meeting ID: 212 583 5211 //Smartphone: +1(646)558-8656,2125835211#// No Participant Code Required ------Original Appointment------ From: Acconcia, Angelo [mailto:aeconciaf2iBhckstone.com] Sent: Thursday,April 15, 2021 9:40 AM To: Acconcia, Angelo; Chris Doyle; Chase White; Richardson, Scott; Numelin, Tye; Belz, Erik; Hamilton, Jonathan; Kelly, Jeff; Gautam, Anika; Foley, David Cc: Oglesby, Amanda; Rozon, Onoria; Gilman, Rachael; Sow, Maty; Li, Patricia; Sam Blatt; Megan Davis; Phil Cook Subject: Call: Primexx/ RBC/ BX re: general status and next steps discussion When: Tuesday,April 20, 202110:30 AM-11:30 AM (UTC-05:00) Eastern Time (US & Canada). 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Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including infonnation ifyou are not die intended recipient of diis communication. ________________________________________ This E-Mail (including any attachments) may contain privileged or confidential infonnation. It is intended only for die addressee(s) indicated above. Hie sender does not waive any of its rights, privileges or otiier protections respecting tiiis infonnation. Any distribution, copying or otiier use of tiiis E-Mail or die infonnation it contains, by otiier tiian an intended recipient, is not sanctioned and is prohibited. If you received tiiis E- Mail in enor, please delete it and advise die sender (by return E-Mail or otherwise) immediately. This E-Mail (including any attachments) has been scanned for viruses. It is believed to be free of any virus or otiier defect that might affect any computer system into which it is received and opened. However, it is the responsibility of the recipient to ensure that it is virus free. Hie sender accepts no responsibility for any loss or damage arising in any way from its use. E-Mail received by or sent from RBC Capital Markets is subject to review by Supervisory personnel. Such communications are retained and may be produced to regulatory authorities or others with legal rights to the infonnation. IRS CIRCULAR 230 NOTICE: TO COMPLY WITH U.S. TREASURY REGULATIONS, WE ADVISE YOU THAT ANY U.S. FEDERAL TAX ADVICE INCLUDED IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, TO AVOID ANY U.S. FEDERAL TAX PENALTIES OR TO PROMOTE, MARKET, OR RECOMMEND TO ANOTHER PARTY ANY TRANSACTION OR MATTER. Please see link for RBCCM disclosures, https://www.rbccm.com/rbccm/policies-disclaimers.page CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017553 EXHIBIT 12 FILED UNDER SEAL 0110 To: Belz. Erik[Erik.Belz@Blackstone.com]; Acconcia. Angelo[acconcia@Blackstone.com]; Megan Davis[megan.davis@primexs.com] From: Elenle. \iai k| Mark. Hen lcv7 lilack5tonc.com Sent: Wed 6/23/2021 2:20:05 PM Coordinated Universal Time Subject: RE: Bi-Weekly Meeting-Reschedule Again? [External] Works for me as well. From: Belz, Erik That window works for me. From: Acconcia, Angelo Yes, thanks. I can free up ll:30-3pm EST on Friday (or other times if those don't work). From: Megan Davis Angelo, Erik, Mark: I am looking at potentially rescheduling the Bi-weekly board meeting again from tomorrow afternoon to Friday morning, with the idea that we are more likely to have a material update on Capitan by Friday morning. Would you guys like to move the meeting to Friday morning? If so, please let me know your availability, and I will check general board availability based on the window you provide. Megan Davis General Counsel and Secretary Primexx Energy Partners Two Energy Sguare 4849 Greenville Ave Dallas DC 75206 0-469.547.2078 M-214.218.1639 i PRIMEXX CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018469 EXHIBIT 14 FILED UNDER SEAL 0112 To: Acconcia. Angeio[acconcia@Blackstone.com] Cc: Belz. Erik[Erik.Belz@Blackstone.com]; Li. Patricia[Patricia.Li@Blackstone.com] Fi'om: Elabachy. David[david.habachy@warburgpincus.com] Sent: Tue 3/9/2021 4:24:58 PM Coordinated Universal Time Subject: RE: Tall Uity Primexx [External] Erik, I caught up with Mike Oestmann at Tall City and they are good with the plan forward. Also, just to confirm, each company will be presenting their view of their own asset as well as the other's asset to each of us. Just wanted to make sure that both teams were prepared to speak to both assets. Thanks, and let's set things in motion with RBC. David From: Acconcia, Angelo [**EXTERNAL EMAIL**] Great. Thanks. Lets connect then. Including Erik on our end as well (Erik let us know if this doesn't work). Angelo From: Elabachy, David 5 p.m. CT/ 6 p.m. ET tomorrow would work for a call. Good weekend, hope you had the same Angelo. David From: Acconcia, Angelo [**EXTERNAL EMAIL**] Thanks. Friday was back to back. Flow does your tomorrow night look (or any windows earlier in the day). Hope your weekend is going well. Angelo From: Habachy, David No worries Angelo, I understand. How does a catch-up call tomorrow in the 4-6 p.m. ET window work for you? David From: Acconcia, Angelo [**EXTERNAL EMAIL**] Apologies for the delay. We have been tied up on a number of fronts. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017182 Think Peter reached out to David to connect here and discuss. Lets connect after their next conversation if that works. Angelo From: Habachy, David I think we can accomplish both simultaneously. What about having an agreed-upon investment bank participating on both calls? Elappy to discuss tomorrow, as well. We managed through the week. Pretty crazy week, no power and water for a few days. We were walking around in ski gear trying to stay warm! We've got some busted pipes outside with the pool and the water hose spigots, but all things considering we managed pretty well given no issues inside the house. So, a lot to deal with in the aftermath, but all manageable. We're not tough like you guys up north! David From: Acconcia, Angelo [“EXTERNAL EMAIL**] Thanks David. I hope you and your family have been well amidst the challenging conditions. I would suggest we setup a call with each mgnt team for early next week and then go from there to see if it makes sense to engage a bank. Our team is willing to put together a short presentation for you / Warburg to review as part of this. Let me know if you would like to further discuss. Angelo From: Habachy, David Angelo, Just coming up for air from snow, ice, no water, and no power...been fun down here in Texas this week! rd Thought I'd check in and see how your conversation with Chris went and what your thoughts are on engaging a 3 party investment bank? Thanks, and have a good weekend man. David From: Acconcia, Angelo [**EXTERNAL EMAIL**] Thanks. What is the best number to reach you at? From: Habachy, David No worries at all Angelo. I'm free until 11 a.m. ET, if anything before then works. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017183 David From: Acconcia, Angelo [“EXTERNAL EMAIL**] Apologies - my call is running late. You free later this morning? From: Elabachy, David 9:20 ET? Sure Get Outlook for IQS From: Acconcia, Angelo [**EXTERNAL EMAIL**] I have a 9am but could end earlier. Can I try you around 9:20am if it does? If not, happy to connect later today. From: Habachy, David Angelo, good catching up today man. Wanted to run something by you if you have a moment in the a.m. How does 8:15 a.m. CT /9:15 a.m. ET work for a call tomorrow? Thanks, David Get Outlook for iOS From: Habachy, David Sent: Wednesday, February 10, 2021 11:07:37 AM To: Acconcia, Angelo Angelo, Here's the slide that we'll talk from on our call later this afternoon. Thanks, and talk then. David From: Acconcia, Angelo CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017184 [**EXTERNAL EMAIL**] Great. Looking forward to it. Have a good weekend. Angelo From: Habachy, David Angelo, more for us on the Blackstone and Warburg sides. We'll have our deal team on our side for the call. Look forward to catching up. Have a good weekend. David Get Outlook for IPS From: Acconcia, Angelo [**EXTERNAL EMAIL**] Thanks for reaching out. Would suggest a call on Tues/ Wed. Would you prefer principals only or mgnt. Copying my assistant here who can help coordinate a call. Best, Angelo From: Habachy, David Angelo, Hope you're well and off to a good start for 2021. Here's to a better year this year! Thought it made sense to touch base on a Warburg/Blackstone phone call on where things settled out with Tall City and Primexx. Both teams data shared and had a number of discussions around a potential combination. We've got enough to put numbers on paper and wanted to share that high-level view with you and your team. What works for a call next week to catch up on this? Look forward to catching up. I also think Peter separately reached out to David on the same topic. David ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. 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CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017185 This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. 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This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. 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This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017186 ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ...............Notice: This message is the property of Warburg Pincus LLC and contains infonnation that may be confidential and/or privileged. If you are not die intended recipient, you should not use, disclose or take any action based on diis message. If you have received diis transmission in error, please immediately contact die sender by return e-mail and delete diis e-mail, and any attachments, from any computer. Hie infonnation contained in diis e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or invesdnent product. In connection widi our business activities, we may collect and process your personal data. Infonnation on how we use personal data is outlined in Warbing Pincus Privacy Notice, CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017187 EXHIBIT 15 FILED UNDER SEAL 0119 To: Punches II, Richard[richard.punchesf|eigpartners.com] Cc: Belz. Erik[Erik.Belz@Blackstone.com]; Chris Doyle[chris.doyle(ri>primesx.com] Fi'om: Acconcia. Angelo[acconcia@Blackstone.com] Sent: Wed 2/3/2021 4:55:58 PM Coordinated Universal Time Subject: RE: [EXT] Primexx / Rosehill [External] Ok. From: Punches II, Richard Angelo, Thanks for the email and follow up from our conversation. I've thought further on this and think we should hold off for now. We just got a new CEO in the Company late last year. If ok with you guys perhaps we could circle back on the topic in a couple months... Richard A'' %+? GLOBAL ENERGY PARTNERS EIG Richard K. Punches > Managing Director > richard.punchesigleKpartners.com Three Allen Center > 333 Clay Street > Suite 3500 > Houston, TX 77002 > (o) 713.615.7415 > (m) 713.828.0482 > (f) 713.615.7456 The information contained in this email is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, use, distribution or disclosure by others is strictly prohibited. If you are not the intended recipient of this email, please promptly notify the sender that you have received it and delete all copies of this email along with all attachments. From: Acconcia, Angelo Richard, Elope all is well. Enjoyed catching-up last week. We have a one-pager on Primexx we could share with you. Wanted to see if you had the same on Rosehill in which case we could exchange one-pagers and could setup a call for you to connect with Chris Doyle (Primexx's CEO) to discuss further. Best, Angelo Angelo G. Acconcia Senior Managing Director Private Equity The Blackstone Group 345 Park Avenue, 43rd Floor New York, NY 10154 T: 212.583.5211 F: 212.201.2874 M: 917.747.0987 This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0016597 EXHIBIT 16 FILED UNDER SEAL 0121 To: 'Trauber. Stephen '[stephen.trauber@citi.com]; Acconcia. Angelo]acconcia.'o lilackstone.com Cc: Belz, Erikpsrik.Belz@Blackstone.com]; Schlopy. Fritz[fritz.schlopy@ipiti.com]; Tismen. Serge[serge.tismen@jciti.com]; Fernandez. T[t.femandez@iciti.com] From: Foley. David[foley@iblackstone.com] Sent: Sun 6/13/2021 3:19:48 PM Coordinated Universal Time Subject: RE: Primexx [External] I can do it at the 8:15pm Eastern time proposed. Can do it anytime later this evening too, but can not join a call between 5:30 and 7:30pm. From: Trauber, Stephen Let’s assume we can do it. Waiting to hear from our team. Cc’d our team here Stephen M. Trauber Vice Chairman & Global Co-Head of Natural Resources & Clean Energy Transition Citi 811 Main St., Suite 3900 Houston, TX 77002 (0)713-821-4800 (C) 713-306-3325 Please excuse all typos Sent with BlackBerry Work www.blackberry.coml From: [Blackstone.com] Acconcia, Angelo Just citi. From: Trauber, Stephen With client or just Citi? Stephen M. Trauber Vice Chairman & Global Co-Head of Natural Resources & Clean Energy Transition Citi 811 Main St., Suite 3900 Houston, TX 77002 (O) 713-821-4800 (C) 713-306-3325 Please excuse all typos Sent with BlackBerry Work www.blackberry.com- From: [Blackstone.com] Acconcia, Angelo CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018234 Could you and the senior members of the Capitan Citi team do a call tonight at 8:15pm est? Chris will join as well. Angelo This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018235 NO. 24-BC01B-0010 § PRIMEXX ENERGY OPPORTUNITY § IN THE BUSINESS COURT FUND, LP and PRIMEXX ENERGY § OPPORTUNITY FUND II, LP, § § Plaintiffs, § v. § FIRST BUSINESS COURT § DIVISION PRIMEXX ENERGY § CORPORATION, M. CHRISTOPHER § DOYLE, ANGELO ACCONCIA, § BLACKSTONE INC., BLACKSTONE § HOLDINGS III LP, BLACKSTONE § EMA II LLC, BMA VII LLC, § BLACKSTONE ENERGY § DALLAS COUNTY, TEXAS MANAGEMENT ASSOCIATES II § LLC, BLACKSTONE ENERGY § PARTNERS II LP, BLACKSTONE § MANAGEMENT ASSOCIATES VII § CONTAINS INFORMATION LLC, BLACKSTONE CAPITAL § DESIGNATED AS PARTNERS VII LP, BCP VII/BEP II § CONFIDENTIAL OR AEO HOLDINGS MANAGER LLC, BX § PRIMEXX TOPCO LLC, and BPP § HOLDCO LLC, Defendants. PLAINTIFFS’ SUPPLEMENTAL OPPOSITION TO THE SPECIAL APPEARANCE OF ANGELO ACCONCIA 0124 Table of Contents I. New Evidence Confirms Mr. Acconcia’s Robust Purposeful Contacts in Texas .................................................................................... 2 II. This Court Has Specific Jurisdiction Over Mr. Acconcia ....... 4 III. Conclusion........................................................................................ 9 ii 0125 Table of Abbreviations Abbreviation Definition PEC Primexx Energy Corporation BPP HoldCo BPP HoldCo LLC Third Amended and Restated Partnership Agreement Limited Partnership Agreement iii 0126 Now that Plaintiffs have completed the Court-ordered jurisdictional deposition of Angelo Acconcia, Plaintiffs submit the following Supplemental Opposition in further support of Plaintiffs’ November 13, 2024 Opposition to the Special Appearance of Angelo Acconcia.1 Plaintiffs deposed Mr. Acconcia on February 21, 2025. Ex. 1. The deposition revealed that: • Mr. Acconcia physically traveled to Texas to meet in-person with the PEC executive team in June 2021 when Mr. Acconcia, Blackstone, and PEC were actively working to execute the Callon Sale. • Mr. Acconcia repeatedly initiated both email and telephone communications with PEC’s Texas-based executives and Texas- based third-party investment bankers about the Callon Sale while either he or those individuals were located in Texas. • Mr. Acconcia had a carried interest in Blackstone’s Primexx investment that gave him a personal financial stake in the performance of Primexx. Mr. Acconcia’s deposition and the limited documents produced by Blackstone thus far leave no remaining doubt that this Court has specific personal jurisdiction over Mr. Acconcia. 1 Plaintiffs incorporate in full their November 13, 2024, Opposition to the Special Appearance of Angelo Acconcia, which describes the background and legal standard in further detail. 1 0127 I. New Evidence Confirms Mr. Acconcia’s Robust Purposeful Contacts in Texas In addition to the evidence previously submitted, Mr. Acconcia’s jurisdictional deposition and accompanying documents reveal the following additional information: Mr. Acconcia routinely conducted business related to Primexx while he was physically located in Texas, including meeting with the PEC executive team in Dallas: • Mr. Acconcia traveled to Dallas in early June 2021 to meet with the PEC leadership team. Ex. 1 at 53:4-55:4; Ex. 2. • In late June 2021, Mr. Acconcia flew to Houston for meetings and called Mr. Doyle, who was located in Texas, while in Houston. Ex. 3; Ex. 1 at 48:2–49:16. • Mr. Acconcia had “back to back” meetings in Houston on June 30, 2021. Ex. 4; Ex. 1 at 57:13–59:14. Mr. Acconcia’s work on the Primexx investment, as head of Blackstone’s deal team managing Blackstone’s multi-hundred million dollar Primexx investment, involved repeatedly meeting and corresponding with PEC executives while they were located in Texas: • Mr. Acconcia played a role in Blackstone’s decision to enter into the Partnership Agreement, and he served as a member of both the investment team and the investment committee at Blackstone that decided to invest in Primexx in Texas. Ex. 1 at 31:16–23; 33:9–34:2. 2 0128 • Mr. Acconcia’s role on Blackstone’s deal team for Primexx included his role as a Director of Primexx Energy Corporation and involved working on the Primexx investment in the 2016-2021 time period, including during the Callon Sale. Ex. 1 at 41:21– 43:18. • After signing the Partnership Agreement, Mr. Acconcia took on a set of “continuing obligations” over a series of years that required his “general involvement over a period of time” during which he was “generally involved in the activities related to Primexx” over that time. Ex. 1 at 42:10–43:18. • Mr. Acconcia participated in “bi-weekly meetings” with the Texas- based PEC executive team and board. Ex. 6; Ex. 1 at 67:10–69:3. • A PEC board meeting on June 9, 2021, was held “in person in Dallas, Texas and via teleconference.” Ex. 5. Mr. Acconcia actively participated in the meeting and discussed Primexx’s strong operational position while the Board evaluated next steps. Ex. 5; Ex. 1 at 71:17–76:22. Mr. Acconcia organized and participated in meetings with finance executives and investment bankers located in Texas to discuss the Callon Sale or Primexx’s potential collaboration with other Texas oil companies: • In June 2021, Mr. Acconcia organized and initiated a call with Citibank investment bankers based in Houston regarding the Callon Sale. Ex. 7; Ex. 1 at 83:11–87:2. Citibank represented Callon in the Callon Sale. Ex. 1 at 86:24–87:2. • In April 2021, Mr. Acconcia organized and initiated a call with the PEC executive team and RBC bankers based in Houston titled “Primexx/ RBC/ BX re: general status and next steps discussion.” Ex. 8; Ex. 1 at 62:11–64:15. 3 0129 • Mr. Acconcia arranged a call and discussed a potential Primexx collaboration with an oil and gas company based in Midland, Texas with an investor from Warburg Pincus while that investor was located in Texas. Ex. 9 (investor writing to Mr. Acconcia that it has “been fun down here in Texas this week”); Ex. 1 at 79:14– 80:5. • Mr. Acconcia reached out to an investment banker based in Houston’s office of Global Energy Partners regarding a potential Primexx collaboration with an oil and gas company in the Permian Basin. Ex. 10; Ex. 1 at 80:22–83:10. Mr. Acconcia had a personal financial interest in the Primexx investment: • As part of his compensation from Blackstone Inc., Mr. Acconcia had a carried interest in Blackstone’s Primexx investment. Ex. 1 at 38:23–39:8 (“Q. So did you expect that your personal earnings could be higher or lower depending on the profitability of Blackstone’s investment in Primexx? A. Generally speaking, yes.”). II. This Court Has Specific Jurisdiction Over Mr. Acconcia When evaluating whether a court has specific jurisdiction over a particular defendant, the “plaintiff bears the initial burden of pleading allegations sufficient to bring a nonresident defendant within the terms of the Texas long-arm statute.” Vak v. Net Matrix Sols., Inc., 442 S.W.3d 553, 558 (Tex. App.—Houston [1st Dist.] 2014, no pet.). The court can “consider both a plaintiff’s pleadings and its response to the defendant’s special appearance in determining whether the plaintiff satisfied its 4 0130 burden.” Id. (emphasis added). When a plaintiff makes allegations sufficient “to bring a nonresident defendant within the provisions of the long-arm statute,” the specially appearing defendant “carries the burden of negating all bases of personal jurisdiction.” BMC Software, 83 S.W.3d at 793. Here, the Plaintiffs’ allegations and the record evidence establish specific jurisdiction over Mr. Acconcia. The record confirms that Mr. Acconcia has substantially more than the required “minimum contacts” with Texas such that the exercise of specific jurisdiction “does not offend traditional notions of fair play and substantial justice.”2 M&F Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., Inc., 512 S.W.3d 878, 885 (Tex. 2017). First, with respect to minimum contacts, Mr. Acconcia “purposefully avail[ed]” himself of conducting business in Texas. Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009). Mr. Acconcia traveled to Dallas in early June 2021 to meet with the PEC leadership team. Ex. 2. Mr. Acconcia 2 Texas has a broad long-arm statute that encompasses any “acts that may constitute doing business” in Texas. Tex. Civ. Prac. & Rem. Code Ann. § 17.042. The Texas Supreme Court has thus established that “Texas’s long-arm statute ‘extends Texas courts’ personal jurisdiction as far as the federal constitutional requirements of due process will permit.’” M&F Worldwide Corp. v. Pepsi-Cola Metro. Bottling Co., Inc., 512 S.W.3d 878, 885 (Tex. 2017) (quoting BMC Software Belgium, NV. v. Marchand, 83 S.W.3d 789, 795 (Tex. 2002)). 5 0131 communicated with Mr. Doyle regarding Primexx while Mr. Acconcia was conducting meetings in Texas. Ex. 3. Mr. Acconcia actively contributed to PEC board meetings regarding Primexx operations in the lead-up to the Callon Sale while participants were located in Texas. Ex. 5. Mr. Acconcia conducted outreach and arranged calls regarding Primexx, including the Callon Sale, with bankers located in Texas. Exs. 7–9. Taken together, Mr. Acconcia purposefully availed himself of the resources of Texas in order to take on “continuing obligations” over a multi-year period to conduct business in Texas on behalf of Blackstone and for his own financial benefit.3 3 The fact that Mr. Acconcia seemingly conducted his activities in Texas on behalf of or in connection with his Blackstone Inc. employment does not defeat either personal jurisdiction or the merits of the claims against Mr. Acconcia. The Texas Supreme Court recently reiterated that “independent of the ‘vicarious’ liability that may be imposed on corporate shareholders and officers based on veil-piercing theories, we have also long held that corporate agents are ‘personally liable for [their] own fraudulent or tortious acts’ ‘even though they were acting on behalf of the corporation.’” Keyes v. Weller, 692 S.W.3d 274, 279 (Tex. 2024) (quoting Miller v. Keyser, 90 S.W.3d 712, 717 (Tex. 2002)). It follows that the fiduciary shield doctrine does not apply to the exercise of specific jurisdiction over an individual acting in a corporate capacity. See, e.g., Tabacinic v. Frazier, 372 S.W.3d 658, 669 (Tex. App.—Dallas 2012, no pet.) (“Because this specific jurisdiction case includes allegations sounding in tort for which [individual defendants] may be held individually liable, the fiduciary shield doctrine does not apply.”); Cagle v. Clark, 401 S.W.3d 379, 392 (Tex. App.—Texarkana 2013, no pet.) (finding specific jurisdiction over corporate officer because the “fiduciary shield doctrine does not apply because general jurisdiction is not at issue”). 6 0132 Mr. Acconcia’s established contacts far exceed what Texas courts have deemed sufficient to establish specific jurisdiction.4 See, e.g., Yujie Ren v. ANU Res., LLC, 502 S.W.3d 840, 848 (Tex. App.—Houston [14th Dist.] 2016, no pet.) (“[A] single contact may be sufficient to establish specific jurisdiction.”); Glencoe Capital Partners II, L.P. v. Gernsbacher, 269 S.W.3d 157, 163 (Tex. App.—Fort Worth 2008, no pet.) (finding specific jurisdiction based on remote participation in telephonic board meetings with shareholders based in Texas); Fjell Tech. Group v. Unitech Int’l, Inc., No. 14-14-00255-CV, 2015 WL 457805, at *6 (Tex. App.— Houston [14th Dist.] Feb. 3, 2015, pet. denied) (finding specific jurisdiction when foreign company sought to profit from mails sent into Texas). As to the second part of the minimum contacts analysis, Plaintiffs’ claims against Mr. Acconcia “arise[] from or [are] related to” his Texas “contacts or activities.” See Retamco, 278 S.W.3d at 337. Plaintiffs allege that Mr. Acconcia knowingly participated in, and aided and abetted, the 4 For example, there could still be specific jurisdiction over Acconcia even if he never entered the state of Texas in connection with Primexx. See Retamco Operating, Inc. v. Republic Drilling Co., 278 S.W.3d 333, 339 (Tex. 2009) (“[J]urisdiction . . . may not be avoided merely because the defendant did not physically enter the forum state.”) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985)). 7 0133 Blackstone Defendants’ and PEC’s breaches of fiduciary duty. Those alleged beaches began “in the months leading up to the Callon Sale,” when Acconcia “actively participated in, and facilitated, Blackstone’s and PEC’s failure to evaluate Primexx’s viable options” and their “failures to conduct a proper due diligence, sale, or marketing process.” First Amended Petition at ¶¶ 71–72. Mr. Acconcia ultimately “played a central role in forcing the Board to approve” the Callon Sale. First Amended Petition at ¶¶ 83. Mr. Acconcia’s intentional contacts with Texas, as discussed above, relate to Mr. Acconcia’s ongoing management of Primexx throughout 2021 in the lead-up to the Callon Sale and his involvement in the Callon Sale itself. For the reasons discussed in Plaintiffs’ November 13, 2024, Opposition to the Special Appearance of Angelo Acconcia, the exercise of specific jurisdiction over Mr. Acconcia “does not offend traditional notions of fair play and substantial justice.” See M&F Worldwide Corp., 512 S.W.3d at 88. Mr. Acconcia is not unduly burdened by appearing in Texas, especially considering his travel to Texas in connection with his role as a director of PEC, a Texas corporation, in which Mr. Acconcia represented the majority shareholder. See Moncrief Oil, 414 S.W.3d at 155. Texas has 8 0134 a compelling interest in adjudicating the claims against Mr. Acconcia, which involve Mr. Acconcia’s active leadership of a Texas corporation’s sale of oil assets physically located in Texas to another oil company based in Texas—including Mr. Acconcia’s physical travel to Texas and repeated communication with executives and investors located in Texas, all while seeking to personally profit thanks to his carried interest in the Primexx investment. This Court should deny Mr. Acconcia’s Special Appearance on the basis of Plaintiffs’ November 13, 2024, Opposition to the Special Appearance of Angelo Acconcia and this Supplemental Opposition, including the evidence revealed at the jurisdictional deposition of Mr. Acconcia and the accompanying documents. Dated: March 7, 2025 Respectfully submitted, SUSMAN GODFREY L.L.P. By: /s/ Stephen Shackelford, Jr. Stephen Shackelford, Jr. State Bar No. 24062998 (TX) sshackelford@susmangodfrey.com SUSMAN GODFREY L.L.P. 9 0135 1000 Louisiana Street, Suite 5100 Houston, Texas 77002 Telephone: (713) 651-9366 Facsimile: (713) 654-6666 Marc M. Seltzer (pro hac vice forthcoming) State Bar No. 54534 (CA) mseltzer@susmangodfrey.com Bryan Caforio (pro hac vice) State Bar No. 261265 (CA) bcaforio@susmangodfrey.com SUSMAN GODFREY L.L.P. 1900 Avenue of the Stars, Suite 1400 Los Angeles, CA 90067 Telephone: (310) 789-3100 Facsimile: (310) 789-3150 Lindsey Godfrey Eccles (pro hac vice) State Bar No. 33566 (WA) leccles@susmangodfrey.com SUSMAN GODFREY L.L.P. 401 Union Street, Suite 3000 Seattle, WA 98101 Telephone: (206) 516-3880 Facsimile: (206) 516-3883 Sarah Hannigan (pro hac vice) State Bar No. 5961248 (NY) shannigan@susmangodfrey.com SUSMAN GODFREY L.L.P. One Manhattan West New York, NY 10001 Telephone: (212) 336-8330 Facsimile: (212) 336-8340 10 0136 Attorneys for Plaintiffs Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP 11 0137 Certificate of Service This is to certify that on March 7, 2025, a true and correct copy of the above and foregoing instrument was properly forwarded to counsel of record in accordance with Rule 21 of the Texas Rules of Civil Procedure. /s/ Stephen Shackelford, Jr. Stephen Shackelford, Jr. 12 0138 EXHIBIT 1 FILED UNDER SEAL 0139 In the Matter Of: PRIMEXX ENERGY OPPORTUNITY FUND vs PRIMEXX ENERGY ANGELO ACCONCIA February 21, 2025 XITAS TM the 0140 1 ·1· · · · · · · · · · ·NO. 24-BC01B-0010 ·2 · · ·PRIMEXX ENERGY· · · · · ·: IN THE BUSINESS COURT ·3· ·OPPORTUNITY FUND, LP AND : · · ·PRIMEXX ENERGY· · · · · ·: ·4· ·OPPORTUNITY FUND II, LP, : · · · · · · · · · · · · · · · : ·5· · · · · · · Plaintiff,· · : · · · · · · · · · · · · · · · : FIRST BUSINESS COURT ·6· · · · vs.· · · · · · · · ·: DIVISION · · · · · · · · · · · · · · · : ·7· ·PRIMEXX ENERGY· · · · · ·: · · ·CORPORATION, M.· · · · · : ·8· ·CHRISTOPHER DOYLE,· · · ·: · · ·ANGELO ACCONCIA,· · · · ·: ·9· ·BLACKSTONE INC.,· · · · ·: · · ·BLACKSTONE HOLDINGS III : 10· ·LP, BLACKSTONE EMA II· · : · · ·LLC, BMA VII LLC,· · · · : DALLAS COUNTY, TEXAS 11· ·BLACKSTONE ENERGY· · · · : · · ·MANAGEMENT ASSOCIATES· · : 12· ·II LLC, BLACKSTONE· · · ·: · · ·ENERGY PARTNERS II LP,· ·: 13· ·BLACKSTONE MANAGEMENT· · : · · ·ASSOCIATES VII LLC,· · · : 14· ·BLACKSTONE CAPITAL· · · ·: · · ·PARTNERS VII LP, BCP· · ·: 15· ·VII/BEP II HOLDINGS· · · : · · ·MANAGER LLC, BX PRIMEXX : 16· ·TOPCO LLC, AND BPP· · · ·: · · ·HOLDCO LLC,· · · · · · · : 17· · · · · · · · · · · · · · : · · · · · · · · Defendants.· ·: 18 19· · · · · · · · · · · · CONFIDENTIAL 20· · · · · ·VIDEOTAPED STENOGRAPHIC DEPOSITION OF · · · · · · · · · · · · ANGELO ACCONCIA 21· · · · · · · · · · ·NEW YORK, NEW YORK · · · · · · · · · ·FRIDAY, FEBRUARY 21, 2025 22 23· · · · · · · · · · (Reported Remotely) 24· ·REPORTED BY:· TANYA L. VERHOVEN-PAGE, · · · · · · · · · ·CCR-B-1790 25· ·FILE NO.· 2025-972806 0141 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 2 Page 4 ·1· · · · · · · ·February 21, 2025 ·1· · · · · · · · · ·APPEARANCES OF COUNSEL ·2· · · · · · · · · ·9:05 a.m. ·2 ·3· ·On behalf of Defendant Primexx Energy Corporation: ·3 ·4· · · · ·KIRKLAND & ELLIS, LLP ·4· · · · · ·Videotaped stenographic deposition · · · · · ·401 Congress Avenue ·5· ·of ANGELO ACCONCIA, held in New York, New York ·5· · · · ·Austin, Texas 78701 · · · · · ·(512) 678-9100 ·6· ·before Tanya L. Verhoven-Page, Certified ·6· · · · ·BY:· ZACK C. EWING, ESQ. ·7· ·Court Reporter (GA), Licensed Court · · · · · · · · e-mail: zack.ewing@kirkland.com ·8· ·Reporter (TN) and Certified Shorthand ·7· · · · · · · (Via Zoom) ·9· ·Reporter (TX). ·8 ·9 10 10 11 11 12 12· ·On behalf of Defendant M. Christopher Doyle: 13· · · · ·TROUTMAN PEPPER LOCKE, LLP 13 · · · · · ·2200 Ross Avenue 14 14· · · · ·Suite 2800 15 · · · · · ·Dallas, Texas 75201 16 15· · · · ·(214) 740-8000 · · · · · ·BY:· TAYLOR LEVESQUE, ESQ. 17 16· · · · · · · e-mail: taylor.levesque@troutman.com 18 · · · · · · · · (Via Zoom) 19 17 20 18 19 21 20 22 21 23 22· ·ALSO PRESENT: 23· · · · Kenneth Inoa, Videographer 24 24 25 25· · · · · · · · · · · · -· · -· · - Page 3 Page 5 ·1· · · · · · · · ·APPEARANCES OF COUNSEL ·1· · · · · · · · · · · · ·I N D E X ·2 ·2 · · ·On behalf of the Plaintiffs: ·3 ·3· · · · · · · · WITNESS: ANGELO ACCONCIA · · · · · ·SUSMAN GODFREY, LLP ·4· · · · ·1900 Avenue of the Stars ·4 · · · · · ·Suite 1400 ·5· · ·Examination· · · · · · · · · · · · · · · · Page ·5· · · · ·Los Angeles, California 90067 · · · · · ·(310) 789-3100 ·6· ·BY MR. CAFORIO· · · · · · · · · · · · · · · · 10 ·6· · · · ·BY:· BRYAN CAFORIO, ESQ. ·7 · · · · · · · · e-mail: bcaforio@susmangodfrey.com ·7· · · · · · · (Via Zoom) ·8 ·8· · · · ·SUSMAN GODFREY, LLP ·9 · · · · · ·One Manhattan West ·9· · · · ·New York, New York 10001-8602 10 · · · · · ·(212) 336-8330 11 10· · · · ·BY:· SARAH HANNIGAN, ESQ. · · · · · · · · e-mail: shannigan@susmangodfrey.com 12 11· · · · · · · (Via Zoom) 12 13 13 14 14 15 15 16· ·On behalf of Defendant Blackstone and Angelo 16 · · ·Acconcia: 17 17 · · · · · ·LYNN, PINKER, HURST & SCHWEGMANN 18 18· · · · ·2100 Ross Avenue · · · · · ·Suite 2700 19 19· · · · ·Dallas, Texas 75201 20 · · · · · ·(214) 981-3800 20· · · · ·BY:· YAMAN DESAI, ESQ. 21 · · · · · · · · e-mail: ydesai@lynnllp.com 22 21· · · · ·BY:· KYLE GARDNER, ESQ. · · · · · · · · e-mail: kgardner@lynnllp.com 23 22· · · · · · · (Via Zoom) 23 24 24 25 25 www.LexitasLegal.com/Premier Lexitas 888-267-1200 Pages 2–5 0142 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 6 Page 8 ·1· · · · · · · · · · · EXHIBITS INDEX: ·1· ·NEW YORK, NEW YORK; FRIDAY, FEBRUARY 21, 2025 ·2 · · · Deposition ·2· · · · · · · · · · ·9:05 A.M. ·3· · (Acconcia) · · · ·Exhibit· · · · · ·Description· · · · · · · Page ·3 ·4 ·4· · · · · · · ·P R O C E E D I N G S ·5· ·Exhibit 1· · · · Plaintiffs' First · · · · · · · · · · · Amended Petition· · · · · · ·21 ·5 ·6 · · ·Exhibit 2· · · · Document bearing Bates ·6· · · · · ·THE VIDEOGRAPHER:· The time is ·7· · · · · · · · · · numbers BPP_0018525 ·7· · ·9:05 a.m. Eastern Time on February 21st, · · · · · · · · · · · through BPP_0018527· · · · · 46 ·8 ·8· · ·2025, and we're going on the record for · · ·Exhibit 3· · · · Document bearing Bates ·9· · · · · · · · · · number BPP_0017994· · · · · ·53 ·9· · ·the remote video deposition of Angelo 10· ·Exhibit 4· · · · Document bearing Bates 10· · ·Acconcia in the matter of Primexx Energy · · · · · · · · · · · numbers BPP_005953 11· · · · · · · · · · through BPP_005954· · · · · ·55 11· · ·Opportunity Fund, et al. versus 12· ·Exhibit 5· · · · Document bearing Bates 12· · ·Blackstone, et al. · · · · · · · · · · · numbers BPP_0016545 13· · · · · · · · · · through BPP_0016546· · · · · 60 13· · · · · ·My name is Kenneth Inoa, and I'm 14· ·Exhibit 6· · · · Document bearing Bates · · · · · · · · · · · numbers BPP_0017552 14· · ·the legal videographer on behalf of 15· · · · · · · · · · through BPP_0017553· · · · · 62 15· · ·LEXITAS. 16· ·Exhibit 7· · · · Document bearing Bates · · · · · · · · · · · number BPP_0018469· · · · · ·65 16· · · · · ·Will counsel please introduce 17 · · ·Exhibit 8· · · · Document bearing Bates 17· · ·themselves and state their firm and who 18· · · · · · · · · · numbers PRIMEXX029462 18· · ·they represent, beginning with the party · · · · · · · · · · · through PRIMEXX029468· · · · 70 19 19· · ·noticing this proceeding. · · ·Exhibit 9· · · · Document bearing Bates 20· · · · · ·MR. CAFORIO:· Bryan Caforio from 20· · · · · · · · · · numbers BPP_0017182 · · · · · · · · · · · through BPP_0017187· · · · · 77 21· · ·Susman Godfrey on behalf of Plaintiffs. 21 · · ·Exhibit 10· · · ·Document bearing Bates 22· · · · · ·MR. DESAI:· Yaman Desai.· I'm here 22· · · · · · · · · · number BPP_0016597· · · · · ·80 23· · ·with Kyle Gardner, from Lynn, Pinker, 23· ·Exhibit 11· · · ·Document bearing Bates · · · · · · · · · · · numbers BPP_0018234 24· · ·Hurst & Schwegmann, on behalf of 24· · · · · · · · · · through BPP_0018235· · · · · 84 25 25· · ·Mr. Acconcia, and we also represent the Page 7 Page 9 ·1· · · · · · · · · · · EXHIBITS INDEX: ·1· · · various Blackstone Defendants. ·2 ·2· · · · · · MR. EWING:· Good morning.· This is · · · Deposition ·3· · (Acconcia) ·3· · · Zack Ewing, from Kirkland & Ellis, on · · · ·Exhibit· · · · · ·Description· · · · · · · Page ·4· · · behalf of Primexx Energy Corporation. ·4 ·5· · · · · · MR. LEVESQUE:· This is Taylor ·5· ·Exhibit 12· · · ·Document bearing Bates ·6· · · Levesque, at Troutman Pepper Locke, on · · · · · · · · · · · numbers BPP_0006569 ·7· · · behalf of Defendant Christopher Doyle. ·6· · · · · · · · · · through BPP_0006570· · · · · 88 ·8· · · · · · MS. HANNIGAN:· And Sarah Hannigan, ·7· ·Exhibit 13· · · ·Document bearing Bates ·9· · · from Susman Godfrey, on behalf of · · · · · · · · · · · numbers BPP_0019155 ·8· · · · · · · · · · through BPP_0019157· · · · · 91 10· · · Plaintiffs. ·9 11· · · · · · MR. DESAI:· And, Sarah and Bryan, 10 12· · · before we get started, I haven't gotten 11 13· · · the exhibits yet. 12 14· · · · · · Oh, actually, I take that back. 13 15· · · They just went through.· I'm fine. 14 15 16· · · · · · THE VIDEOGRAPHER:· All right.· If 16 17· · · that concludes our introductions, will 17 18· · · the court reporter please swear or affirm 18 19· · · in the witness. 19 20 20 21· ·Thereupon -- 21 22 22· · · · · · · · · ·ANGELO ACCONCIA, 23 23· ·called as a witness, having been first duly sworn, 24 24· ·was examined and testified as follows: 25 25 www.LexitasLegal.com/Premier Lexitas 888-267-1200 Pages 6–9 0143 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 10 Page 12 ·1· · · · · · · · · · · · EXAMINATION ·1· ·question, if you can't see an exhibit, just let us ·2· ·BY MR. CAFORIO: ·2· ·know, and we can work that out so everything goes ·3· · · · ·Q· · ·All right.· Good morning, Mr. Acconcia. ·3· ·smoothly. ·4· ·My name is Bryan Caforio, and I represent the ·4· · · · · · · ·Okay? ·5· ·Plaintiffs, Primexx Opportunity Fund and Primexx ·5· · · · ·A· · ·Thank you. ·6· ·Opportunity Fund II, in this litigation. ·6· · · · ·Q· · ·And you're free to take -- I generally ·7· · · · · · · ·I'll be asking you questions on behalf of ·7· ·aim to take a break at least every hour.· You're free ·8· ·those entities today. ·8· ·to ask for a break, go to the bathroom, get a drink, ·9· · · · · · · ·You understand that, even though we're ·9· ·whatever you want more frequently than that.· The 10· ·doing this remotely, you are under oath for this 10· ·only thing I ask is that you don't take a break while 11· ·deposition? 11· ·a question is pending but instead answer the question 12· · · · ·A· · ·I do. 12· ·and then ask to take a break. 13· · · · ·Q· · ·And you understand that your answers are 13· · · · · · · ·Okay? 14· ·being transcribed by a court reporter throughout the 14· · · · ·A· · ·I appreciate it. 15· ·deposition? 15· · · · ·Q· · ·Okay.· Is there anything that you would 16· · · · ·A· · ·I do. 16· ·like to discuss before we begin the deposition today? 17· · · · ·Q· · ·And you understand that you are being 17· · · · ·A· · ·No. 18· ·video-recorded today, as well? 18· · · · ·Q· · ·Okay.· Are you taking any medication 19· · · · ·A· · ·I do. 19· ·today that affects your ability to answer questions 20· · · · ·Q· · ·And you understand that this deposition 20· ·truthfully and completely? 21· ·is taken in a case pending in the Texas Business 21· · · · ·A· · ·No. 22· ·Court in Dallas, right? 22· · · · ·Q· · ·Are you feeling sick today? 23· · · · ·A· · ·I assume that that's the case.· I don't 23· · · · ·A· · ·No. 24· ·have specific knowledge as to exactly where this case 24· · · · ·Q· · ·Is there any other reason you're not able 25· ·is pending. 25· ·to testify truthfully and completely today? Page 11 Page 13 ·1· · · · ·Q· · ·Okay.· And we'll show you the petition in ·1· · · · ·A· · ·No. ·2· ·a minute and you can see that, but do you understand ·2· · · · ·Q· · ·Where are you located geographically for ·3· ·that your deposition testimony may be used in this ·3· ·this deposition? ·4· ·proceeding and shown to the judge in this case? ·4· · · · ·A· · ·I'm located in New York. ·5· · · · ·A· · ·I do. ·5· · · · ·Q· · ·You're in New York.· Okay. ·6· · · · ·Q· · ·Have you ever been deposed before? ·6· · · · · · · ·In the city or elsewhere? ·7· · · · ·A· · ·I have. ·7· · · · ·A· · ·I'm located in Manhattan. ·8· · · · ·Q· · ·How many times? ·8· · · · ·Q· · ·How did you prepare for today's ·9· · · · ·A· · ·I don't recall specifically, but a few, a ·9· ·deposition? 10· ·small -- a small number. 10· · · · ·A· · ·I had a series of calls with my counsel. 11· · · · ·Q· · ·More or less five would you say? 11· · · · ·Q· · ·Did you review any documents to prepare 12· · · · ·A· · ·Less. 12· ·for the deposition? 13· · · · ·Q· · ·Okay.· When was the last time you were 13· · · · ·A· · ·No. 14· ·deposed? 14· · · · ·Q· · ·Is there anybody in the room with you 15· · · · ·A· · ·I don't recall specifically.· I could 15· ·right now where you're testifying from? 16· ·generally estimate more than -- call it -- five years 16· · · · ·A· · ·No.· There are people downstairs.· So 17· ·ago. 17· ·there may be some background noise, but nobody in the 18· · · · ·Q· · ·Okay.· So that was probably an in-person 18· ·room specifically. 19· ·deposition then, or was it remote, as well? 19· · · · ·Q· · ·Okay.· Do you have any access to any 20· · · · ·A· · ·I don't recall. 20· ·messaging platforms where a person could communicate 21· · · · ·Q· · ·Okay.· Well, since it is remote, it's a 21· ·with you during this deposition? 22· ·slightly unusual format doing it this way, and I'll 22· · · · ·A· · ·I do not have anything visible. 23· ·try to put the exhibits up so you can see them 23· · · · ·Q· · ·Okay.· What's your current occupation? 24· ·clearly, but at any time, as we're going, if you have 24· · · · ·A· · ·I am an investor. 25· ·any technical difficulties, if you can't hear my 25· · · · ·Q· · ·Are you employed by a company, or are you www.LexitasLegal.com/Premier Lexitas 888-267-1200 0144 Pages 10–13 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 14 Page 16 ·1· ·self-employed? ·1· ·periods of times that I was promoted, but through the ·2· · · · ·A· · ·I am not employed by a company. ·2· ·course of my time at Blackstone, I was promoted a ·3· · · · ·Q· · ·And what company is that? ·3· ·number of times to the ultimate title of Senior ·4· · · · ·A· · ·ArcLight Capital Partners. ·4· ·Managing Director. ·5· · · · ·Q· · ·How long have you been at ArcLight? ·5· · · · ·Q· · ·And Senior Managing Director was the ·6· · · · ·A· · ·I believe I'm going on my fourth year. ·6· ·final job title you had when you left Blackstone? ·7· · · · ·Q· · ·So that takes you back to some time in, ·7· · · · ·A· · ·That is accurate. ·8· ·say, early 2022?· Is that about accurate, or is that ·8· · · · ·Q· · ·Do you recall, in general, when you ·9· ·timing off? ·9· ·started with that title? 10· · · · ·A· · ·That's about accurate. 10· · · · ·A· · ·I don't recall specifically. 11· · · · ·Q· · ·Okay.· Where were you employed before you 11· · · · ·Q· · ·Do you recall generally? 12· ·started at ArcLight? 12· · · · ·A· · ·Generally in the mid teens. 13· · · · ·A· · ·I was employed at Blackstone. 13· · · · ·Q· · ·So you reached that position in the mid 14· · · · ·Q· · ·How long -- when did you start working at 14· ·teens, and you basically had that job title for the 15· ·Blackstone? 15· ·remainder of your time at Blackstone? 16· · · · ·A· · ·I believe it was in 2004. 16· · · · ·A· · ·That is correct. 17· · · · ·Q· · ·Were you at Blackstone all the way from 17· · · · ·Q· · ·What were your general job 18· ·2004 right up until you started working at ArcLight 18· ·responsibilities at Blackstone between 2016 and 2021? 19· ·in 2021 or 2022? 19· · · · ·A· · ·I was a member of the investment team, 20· · · · ·A· · ·There was a short period of time between 20· ·and I was a member of the investment committee. 21· ·Blackstone and ArcLight where I was on garden leave, 21· · · · ·Q· · ·For the whole of Blackstone or a specific 22· ·but there were no employers in between. 22· ·sector at Blackstone? 23· · · · ·Q· · ·What's garden leave? 23· · · · ·A· · ·My responsibilities were specific to 24· · · · ·A· · ·A period of time where you are between 24· ·Blackstone Energy Partners. 25· ·jobs. 25· · · · ·Q· · ·And what is Blackstone Energy Partners? Page 15 Page 17 ·1· · · · ·Q· · ·So essentially at Blackstone from 2004 to ·1· · · · ·A· · ·Blackstone Energy Partners was a group ·2· ·the end of 2021, give or take; is that fair? ·2· ·within the private equity group that invested in ·3· · · · ·A· · ·That is accurate. ·3· ·energy. ·4· · · · ·Q· · ·And I've seen documents that reference at ·4· · · · ·Q· · ·And how large was that group? ·5· ·different times Blackstone Group and Blackstone, Inc. ·5· · · · ·A· · ·I'm sorry.· Can you be more specific? ·6· · · · · · · ·Do you have an understanding if that's ·6· · · · ·Q· · ·Well, we can talk about it in multiple ·7· ·the same company or a different company? ·7· ·different ways, but how much assets under management ·8· · · · ·A· · ·I do not have specific knowledge. ·8· ·did you have in that general time period? ·9· · · · ·Q· · ·Do you know who was your actual employer? ·9· · · · ·A· · ·I don't recall. 10· · · · ·A· · ·I do not. 10· · · · ·Q· · ·Ballpark, 1 billion, 100 billion? 11· · · · ·Q· · ·Do you know who actually paid your 11· · · · ·A· · ·More than 1 billion. 12· ·compensation? 12· · · · ·Q· · ·Okay.· How many people did you work with 13· · · · ·A· · ·I do not know the specific legal entity 13· ·in your role in that group? 14· ·that paid my compensation. 14· · · · ·A· · ·I worked with a large part of that group. 15· · · · ·Q· · ·Okay.· You just referred to having worked 15· · · · ·Q· · ·And about how many people was that? 16· ·for Blackstone is how you talked about it? 16· · · · ·A· · ·The group overall was -- I don't recall 17· · · · ·A· · ·Correct. 17· ·specifics -- generally speaking, 30 people. 18· · · · ·Q· · ·Okay.· Whether that was Blackstone, Inc. 18· · · · ·Q· · ·And were you the head of that group, or 19· ·or Blackstone Group, just you worked for Blackstone? 19· ·was there somebody senior to you? 20· · · · ·A· · ·That is accurate. 20· · · · ·A· · ·There was somebody senior to me. 21· · · · ·Q· · ·Okay.· Can you take me through your job 21· · · · ·Q· · ·Who was that? 22· ·history at Blackstone from 2004 to 2021 if your 22· · · · ·A· · ·A gentleman named David Foley. 23· ·titles changed at any point? 23· · · · ·Q· · ·Do you know what his job title was? 24· · · · ·A· · ·I started in 2004 as an analyst in the 24· · · · ·A· · ·I believe it was Senior Managing Director 25· ·private equity group.· I don't recall the specific 25· ·and CEO of Blackstone Energy Partners. www.LexitasLegal.com/Premier Lexitas 888-267-1200 0145 Pages 14–17 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 18 Page 20 ·1· · · · ·Q· · ·Was he the only person in the group ·1· · · · ·A· · ·He was in the private equity group. ·2· ·senior to you, or was there anybody else senior to ·2· · · · ·Q· · ·He was in Blackstone's private equity ·3· ·you? ·3· ·group, and then Blackstone Energy Partners fell ·4· · · · ·A· · ·Blackstone Energy Partners was part of ·4· ·within that? ·5· ·the private equity group and interacted with the ·5· · · · ·A· · ·That is fair. ·6· ·private equity group.· So in that context, there were ·6· · · · ·Q· · ·Do you know what his title was in that ·7· ·other people that were more senior to me. ·7· ·time period? ·8· · · · ·Q· · ·So Blackstone Energy Partners is within ·8· · · · ·A· · ·I believe it was Senior Managing Director ·9· ·the overall private equity group.· Within Blackstone ·9· ·and Head of Global Private Equity, but I do not 10· ·Energy Partners, Mr. Foley was senior to you, but 10· ·recall specifically. 11· ·then, going up the chain to the broader private 11· · · · ·Q· · ·Okay.· I'm going to put a document into 12· ·equity group, there were other people also senior to 12· ·the chat.· I'm going to put it up on the screen, 13· ·you? 13· ·also, and go through the specific parts I'm going to 14· · · · · · · ·Is that a fair summary? 14· ·look at, but it's in the chat for you.· If you want 15· · · · ·A· · ·That is a fair summary. 15· ·to download it, take a look at it. 16· · · · ·Q· · ·Did you report to any of those people in 16· · · · · · · ·For any exhibit that I put up, I'm going 17· ·the private equity group directly, or did everything 17· ·to go through it.· I'll share my screen, and there 18· ·go through Mr. Foley on the way up? 18· ·will be specific points that I'll direct you to, but 19· · · · ·A· · ·I reported to Mr. Foley but also other 19· ·take all the time you want to look at any other 20· ·people. 20· ·portion, or if you can't see some of it on the 21· · · · ·Q· · ·Who else did you report to in that 2016 21· ·screen, you need it to -- you know, a different page 22· ·to 2021 time period besides Mr. Foley? 22· ·or whatnot, just let me know. 23· · · · ·A· · ·Blackstone is a matrix organization.· So 23· · · · · · · ·Okay.· Since we're in different rooms, I 24· ·there were a number of people that I interacted with 24· ·can't tell exactly what you're doing, and I want to 25· ·and reported to in one fashion, you know, across the 25· ·make sure you're able to see it appropriately. Page 19 Page 21 ·1· ·firm. ·1· · · · · · · ·Okay? ·2· · · · · · · ·The person that I directly reported to ·2· · · · ·A· · ·Thank you. ·3· ·was named Joe Baratta. ·3· · · · · · · ·MR. CAFORIO:· So if the court ·4· · · · ·Q· · ·Okay.· A couple things:· What does it ·4· · · · ·reporter can mark the document I just ·5· ·mean to be -- what do you mean when you say ·5· · · · ·shared in the chat as Deposition Exhibit ·6· ·Blackstone is a matrix organization? ·6· · · · ·1. ·7· · · · ·A· · ·Well, there are a lot of different groups ·7· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·8· ·that are involved in -- in the business of ·8· · · · ·1 was marked for the record.) ·9· ·Blackstone. ·9· ·BY MR. CAFORIO: 10· · · · ·Q· · ·And so you would work with people -- are 10· · · · ·Q· · ·Can you see in front of you a -- a 11· ·you saying you would work with people in other groups 11· ·document titled Plaintiffs' First Amended Petition? 12· ·that might not be senior to you?· You weren't 12· · · · · · · ·Do you see that? 13· ·reporting to them because you were just kind of 13· · · · ·A· · ·I do. 14· ·equals in different branches who worked together on 14· · · · ·Q· · ·Okay. and so this is the -- I can 15· ·particular investments? 15· ·represent to you this is the current operative 16· · · · · · · ·Is that what you mean? 16· ·version of the petition that was filed -- you see up 17· · · · ·A· · ·I meant more so that there are different 17· ·in the top corner -- on January 24th, 2025, and at 18· ·functional groups within Blackstone that are involved 18· ·the top middle of this first page, it says in the 19· ·in the business of Blackstone where there are 19· ·Business Court, First Business Court Division, Dallas 20· ·reporting relationships or communications. 20· ·County. 21· · · · ·Q· · ·And the person you said you interacted 21· · · · · · · ·Do you see that? 22· ·with regularly was Joe Baratta; is that right? 22· · · · ·A· · ·I see that on the page. 23· · · · ·A· · ·Joe Baratta was one of my direct reports. 23· · · · ·Q· · ·And that's what I was referencing earlier 24· · · · ·Q· · ·And where was he -- where was he at 24· ·when I mentioned this was court -- a case pending in 25· ·Blackstone?· Was he in a particular group or -- 25· ·the Business Court in Dallas, and here's the actual www.LexitasLegal.com/Premier Lexitas 888-267-1200 0146 Pages 18–21 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 22 Page 24 ·1· ·petition that says that. ·1· · · · ·Blackstone. ·2· · · · · · · ·Have you ever seen the complaint in this ·2· ·BY MR. CAFORIO: ·3· ·case before? ·3· · · · ·Q· · ·Other than Blackstone, Inc., do you ·4· · · · ·A· · ·I have. ·4· ·believe you've ever performed work for any of the ·5· · · · ·Q· · ·Okay.· Do you recall when you first saw ·5· ·entities on this org chart? ·6· ·the complaint in this case? ·6· · · · · · · ·MR. DESAI:· Objection.· Form. ·7· · · · ·A· · ·I do not recall specifically. ·7· · · · · · · ·THE WITNESS:· I worked -- I believe ·8· · · · ·Q· · ·I'm going to go to Page 14 of this ·8· · · · ·I worked on behalf of Blackstone. ·9· ·document, and are you looking at an org chart now? ·9· ·BY MR. CAFORIO: 10· · · · ·A· · ·I see Page 14. 10· · · · ·Q· · ·Are you aware of whether you ever 11· · · · ·Q· · ·Okay.· And it appears to be an org chart, 11· ·received compensation from any of the entities listed 12· ·and it has Blackstone, Inc. at the top, and then it 12· ·on this org chart other than Blackstone? 13· ·works its way down through a bunch of entities with 13· · · · · · · ·MR. DESAI:· Objection. 14· ·BPP HoldCo, LLC at the bottom. 14· · · · · · · ·THE WITNESS:· My general 15· · · · · · · ·Do you see all that? 15· · · · ·understanding was that I received 16· · · · ·A· · ·I see the org chart. 16· · · · ·compensation from Blackstone. 17· · · · ·Q· · ·Are you familiar with this org chart? 17· ·BY MR. CAFORIO: 18· · · · · · · ·MR. DESAI:· Objection.· Form. 18· · · · ·Q· · ·Okay.· We can go to Page 69 of this 19· ·BY MR. CAFORIO: 19· ·document, which -- actually, go to 68 just to show 20· · · · ·Q· · ·I just want to know if you've seen it 20· ·you.· This is Exhibit 1 that's just attached at the 21· ·before, if this looks familiar to you or not.· It's 21· ·back of the petition, and do you see on your screen 22· ·just foundational. 22· ·here what's titled the Third Amended and Restated 23· · · · ·A· · ·I do not recall. 23· ·Limited Partnership Agreement of Primexx Energy 24· · · · ·Q· · ·Okay.· Are you familiar with any of the 24· ·Partners Limited? 25· ·entities that are listed in this org chart? 25· · · · ·A· · ·I can see that it says Third Amended and Page 23 Page 25 ·1· · · · ·A· · ·I'm sorry.· Can you be more specific? ·1· ·Restated Limited Partnership Agreement of Primexx ·2· · · · ·Q· · ·Well, do you -- as you read the names of ·2· ·Energy Partners Limited. ·3· ·the different entities on this org chart, are you ·3· · · · ·Q· · ·Are you familiar with the entity Primexx ·4· ·familiar with those entities? ·4· ·Energy Partners Limited? ·5· · · · · · · ·Do you recognize those names, or are you ·5· · · · ·A· · ·I do not recall that entity specifically. ·6· ·unfamiliar with these entities, and you don't ·6· · · · ·Q· · ·Okay.· Well, let's go ahead and skip ·7· ·recognize those names? ·7· ·ahead a little bit to Page 150 of this document. ·8· · · · ·A· · ·I do not recall specific legal names or ·8· · · · · · · ·Can you see that this document appears to ·9· ·legal entities. ·9· ·be signed by you on behalf of BPP HoldCo, LLC? 10· · · · ·Q· · ·Okay.· Other than Blackstone, Inc. at the 10· · · · · · · ·Do you see that? 11· ·top? 11· · · · ·A· · ·I see the legal entity BPP HoldCo, LLC, 12· · · · · · · ·MR. DESAI:· Objection.· Form. 12· ·and I see my signature. 13· · · · · · · ·THE WITNESS:· I recognize the name 13· · · · ·Q· · ·Okay.· And if we go forward a few pages 14· · · · ·Blackstone.· I recognize the name 14· ·to Page 153, this is Exhibit A to this document, and 15· · · · ·Primexx, and I recognize the name 15· ·it has a schedule of partners, and you see the first 16· · · · ·Blackstone Energy Partners, but I do not 16· ·partner listed there is BPP HoldCo, LLC? 17· · · · ·recall specifics around the legal 17· · · · · · · ·Do you see that? 18· · · · ·structure or legal entities. 18· · · · ·A· · ·I see Exhibit A.· I see a list of 19· ·BY MR. CAFORIO: 19· ·members, and I see the first member is BPP HoldCo, 20· · · · ·Q· · ·Other than Blackstone, Inc., do you 20· ·LLC. 21· ·believe you've ever been employed by any of the 21· · · · ·Q· · ·And the -- for BPP HoldCo, LLC, it says 22· ·entities on this org chart? 22· ·in care of the Blackstone Group, right? 23· · · · · · · ·MR. DESAI:· Objection.· Form. 23· · · · ·A· · ·It does. 24· · · · · · · ·THE WITNESS:· My general 24· · · · ·Q· · ·And then with attention to you, Angelo 25· · · · ·understanding was that I was employed by 25· ·Acconcia, right? www.LexitasLegal.com/Premier Lexitas 888-267-1200 0147 Pages 22–25 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 26 Page 28 ·1· · · · ·A· · ·It does. ·1· · · · ·Q· · ·Let's go back to Page 74 of this ·2· · · · ·Q· · ·And that's your e-mail address listed ·2· ·document.· It's the first page of the -- you can see ·3· ·there? ·3· ·it's the table of contents and then the first actual ·4· · · · ·A· · ·That was my e-mail. ·4· ·page of the Third Amended and Restated Limited ·5· · · · ·Q· · ·And so going back to Page 150, you signed ·5· ·Partnership Agreement. ·6· ·this partnership agreement with the title President ·6· · · · · · · ·Do you see that? ·7· ·of BPP HoldCo, LLC? ·7· · · · ·A· · ·I apologize.· Do you mind repeating that. ·8· · · · · · · ·Do you see that? ·8· · · · ·Q· · ·So I'm just setting the stage.· This is ·9· · · · ·A· · ·I see that it states my name and then ·9· ·the Third Amended Restated Limited Partnership 10· ·reads Its, colon, President. 10· ·Agreement of Primexx Energy Partners that we looked 11· · · · ·Q· · ·And you would agree you signed this 11· ·at earlier, and I'm just going to the first page -- 12· ·document as the President of BPP HoldCo; is that 12· ·substantive page of that document. 13· ·correct? 13· · · · · · · ·Do you see that? 14· · · · ·A· · ·I see that is what the document says. I 14· · · · ·A· · ·I see the top of the page reads Third 15· ·don't recall specifically my role. 15· ·Amended and Restated Limited Partnership Agreement. 16· · · · ·Q· · ·Okay.· You're not sure if you were 16· ·Although, at the top of the PDF, it reads Page 74, 17· ·President of BPP HoldCo. 17· ·and at the bottom, it reads Page 7. 18· · · · ·A· · ·I do not recall specifically. 18· · · · ·Q· · ·And in the first paragraph of this page, 19· · · · ·Q· · ·If you were President of BPP HoldCo, do 19· ·it says that the Third Amended and Restated Limited 20· ·you know how long you were President of BPP HoldCo? 20· ·Partnership Agreement (the "Agreement"), dated as of 21· · · · · · · ·MR. DESAI:· Objection.· Form. 21· ·July 12th, 2016 (the "Effective Date") is made and 22· · · · · · · ·THE WITNESS:· I do not recall. 22· ·entered into by and among Primexx Energy Corporation, 23· ·BY MR. CAFORIO: 23· ·a Texas Corporation. 24· · · · ·Q· · ·Do you have any recollection of somebody 24· · · · · · · ·Do you see that? 25· ·else being president of BPP HoldCo other than you? 25· · · · ·A· · ·I see that on the page. Page 27 Page 29 ·1· · · · · · · ·MR. DESAI:· Objection.· Form. ·1· · · · ·Q· · ·Okay.· And then it lists a series of the ·2· · · · · · · ·THE WITNESS:· I do not recall. ·2· ·other counter-parties were various classes of ·3· ·BY MR. CAFORIO: ·3· ·unitholders, correct? ·4· · · · ·Q· · ·Do you have any reason to believe that ·4· · · · ·A· · ·I see a number of different groups named ·5· ·when you signed this document, Angela Acconcia, ·5· ·here. ·6· ·President of BPP HoldCo, that you weren't the ·6· · · · ·Q· · ·And BPP HoldCo was a Series B preferred ·7· ·President of BPP HoldCo when you signed that ·7· ·unitholder, right? ·8· ·document? ·8· · · · ·A· · ·I do not recall. ·9· · · · · · · ·MR. DESAI:· Objection.· Form. ·9· · · · ·Q· · ·Well, we can go back to your signature on 10· · · · · · · ·THE WITNESS:· I do not recall 10· ·Page 150.· Do you see where it says right there, 11· · · · ·specifics. 11· ·Series B Preferred Unitholder BPP HoldCo, and then 12· ·BY MR. CAFORIO: 12· ·you signed it? 13· · · · ·Q· · ·Would you have signed a document that 13· · · · ·A· · ·I now see at the top Series B Preferred 14· ·says Angelo Acconcia was BPP HoldCo's President if 14· ·Unitholder. 15· ·you were not BPP HoldCo's President? 15· · · · ·Q· · ·Does that refresh your recollection that 16· · · · · · · ·MR. DESAI:· Objection.· Form. 16· ·BPP HoldCo was a Series B Preferred Unitholder? 17· · · · · · · ·THE WITNESS:· I'm sorry.· I don't 17· · · · ·A· · ·That is what I see on the page. 18· · · · ·understand the question. 18· · · · ·Q· · ·Does it refresh your recollection that 19· ·BY MR. CAFORIO: 19· ·BPP HoldCo was a Series B Preferred Unitholder? 20· · · · ·Q· · ·That is your signature, right? 20· · · · ·A· · ·I don't recall the specifics. 21· · · · ·A· · ·I believe it is. 21· · · · ·Q· · ·Okay.· And if we look at Page 153, this 22· · · · ·Q· · ·Do you recall if you ever received any 22· ·Exhibit A we already looked at, you see it says that 23· ·compensation from BPP HoldCo? 23· ·BPP HoldCo owned 186,006 Series B Preferred Units. 24· · · · ·A· · ·I do not believe I received any direct 24· · · · · · · ·Do you see that? 25· ·compensation. 25· · · · ·A· · ·I see that on the table. www.LexitasLegal.com/Premier Lexitas 888-267-1200 0148 Pages 26–29 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 30 Page 32 ·1· · · · ·Q· · ·Does that refresh your recollection that ·1· · · · ·A· · ·I don't recall specifically. ·2· ·BPP HoldCo was a Series B Preferred Unitholder? ·2· · · · ·Q· · ·More or less than five people? ·3· · · · ·A· · ·That is what it says on the page. I ·3· · · · ·A· · ·Inclusive of the other groups at ·4· ·don't recall specifics. ·4· ·Blackstone that were involved, more than five people. ·5· · · · ·Q· · ·Now -- I'm going to stop sharing this. ·5· · · · ·Q· · ·Did you have primary responsibility for ·6· · · · · · · ·You signed, as we saw, that Third Amended ·6· ·recommending Blackstone's investment into Primexx, or ·7· ·Partnership Agreement on behalf of BPP HoldCo, ·7· ·did somebody else have primary responsibility? ·8· ·correct? ·8· · · · · · · ·MR. DESAI:· Objection.· Form. ·9· · · · ·A· · ·I saw my signature on the page. ·9· · · · · · · ·THE WITNESS:· I don't understand 10· · · · ·Q· · ·Did you play any role in negotiating the 10· · · · ·what you mean by primary. 11· ·terms of the partnership agreement prior to you 11· ·BY MR. CAFORIO: 12· ·signing it? 12· · · · ·Q· · ·And I'm just trying to understand.· This 13· · · · ·A· · ·I recall general involvement. 13· ·is foundational for later questions, and so I could 14· · · · ·Q· · ·And what was your general involvement? 14· ·be totally -- misunderstand how the investment 15· · · · · · · ·MR. DESAI:· I am going to object to 15· ·process works at Blackstone.· So please correct me, 16· · · · ·form.· Object to the extent that the 16· ·but presumably at some point someone made this 17· · · · ·questions relate to matters that are 17· ·recommendation that Blackstone should look into this 18· · · · ·outside of jurisdictional discovery and 18· ·and make an investment into Primexx, and I just want 19· · · · ·just keep that as a warning objection so 19· ·to know, if that person was you, then we can go into 20· · · · ·I don't need to interrupt every 20· ·questions on that, or if that person was somebody 21· · · · ·time, but -- 21· ·else, in which case, I can ask you for a name, and I 22· · · · · · · ·MR. CAFORIO:· Understood. 22· ·don't need to ask those questions because it wasn't 23· ·BY MR. CAFORIO: 23· ·you. 24· · · · ·Q· · ·You can answer. 24· · · · · · · ·So my question is simply:· Who had 25· · · · ·A· · ·I apologize.· Do you mind repeating the 25· ·primary responsibility for recommending that Page 31 Page 33 ·1· ·question? ·1· ·Blackstone make its investment into Primexx? ·2· · · · ·Q· · ·Yeah.· I -- you said, if I heard you ·2· · · · ·A· · ·The investment team makes recommendations ·3· ·correctly, that you recall a general involvement in ·3· ·to the investment committee, and the investment ·4· ·the negotiation of the partnership agreement, and so ·4· ·committee makes decisions.· So I'm struggling with ·5· ·I was just asking for clarification. ·5· ·the specifics of the word primary. ·6· · · · · · · ·What do you mean when you say you had a ·6· · · · · · · ·This gets back to kind of the matrix ·7· ·general involvement in negotiating the terms of the ·7· ·nature of Blackstone, and groups are involved in ·8· ·partnership agreement? ·8· ·decisions. ·9· · · · ·A· · ·I was one of several groups that were ·9· · · · ·Q· · ·And to clarify, were you on the 10· ·involved in the discussions around that -- the 10· ·investment team and the investment committee or only 11· ·partnership with -- with Primexx. 11· ·one of those? 12· · · · ·Q· · ·Did you receive drafts of the partnership 12· · · · ·A· · ·I was both on the investment team and on 13· ·agreement prior to signing it? 13· ·the investment committee. 14· · · · ·A· · ·I don't recall specifically, but I 14· · · · ·Q· · ·Okay.· So -- please correct me if I'm 15· ·believe I would have. 15· ·wrong.· I'm just trying to understand it.· It's 16· · · · ·Q· · ·Did you play any role in making the 16· ·foundational to ask later questions.· If I'm wrong, I 17· ·decision for Blackstone to make its substantial 17· ·want to know. 18· ·investment into Primexx and enter into the 18· · · · · · · ·So you were part of the investment team 19· ·partnership agreement? 19· ·that made the recommendation to the investment 20· · · · ·A· · ·I did. 20· ·committee to invest in Primexx; is that correct? 21· · · · ·Q· · ·What role did you play in Blackstone 21· · · · ·A· · ·I believe that's a fair characterization. 22· ·making the decision to invest in Primexx? 22· · · · ·Q· · ·And you were also on the investment 23· · · · ·A· · ·I was a member of the investment team. 23· ·committee that decided whether to approve the 24· · · · ·Q· · ·How many people were on that investment 24· ·recommendation from the investment team to invest in 25· ·team? 25· ·Primexx; is that correct? www.LexitasLegal.com/Premier Lexitas 888-267-1200 0149 Pages 30–33 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 34 Page 36 ·1· · · · ·A· · ·I was one of the many members of the ·1· ·lines.· There was general group involvement. ·2· ·investment committee. ·2· · · · ·Q· · ·And were there Blackstone employees ·3· · · · ·Q· · ·Okay.· Was there anybody else on the ·3· ·junior to you in the group who worked on Blackstone's ·4· ·investment committee who was also on the investment ·4· ·investment in Primexx that reported to you, or were ·5· ·team that recommended that Blackstone make its ·5· ·you the juniormost Blackstone employee working on the ·6· ·investment in Primexx? ·6· ·Primexx investment? ·7· · · · ·A· · ·Sorry.· Would you mind repeating the ·7· · · · ·A· · ·There were other people that -- that ·8· ·question? ·8· ·worked with me.· I do not recall there being specific ·9· · · · ·Q· · ·Was there anybody else besides you that ·9· ·legal reporting lines. 10· ·you recall being on both the investment team that 10· · · · ·Q· · ·And who were the people at Blackstone who 11· ·made the recommendation to invest in Primexx and on 11· ·worked with you on the Primexx investment? 12· ·the investment committee, or were you the only person 12· · · · ·A· · ·Sorry.· It's taking me a second to try to 13· ·who was on both the investment team and the 13· ·recall specifically because there were a number of 14· ·investment committee? 14· ·people.· The person who comes to mind -- one of the 15· · · · ·A· · ·Generally speaking, the way it worked was 15· ·people that come to mind is Erik Belz. 16· ·the investment team would discuss within Blackstone 16· · · · ·Q· · ·Anybody else? 17· ·Energy Partners and Blackstone Energy -- Blackstone 17· · · · ·A· · ·I don't recall specifically. 18· ·Energy Partners would make -- generally speaking, 18· · · · ·Q· · ·Now, was there at Blackstone some sort of 19· ·investments that were taken to investment committee, 19· ·deal team that worked on Blackstone's Primexx 20· ·because that investment committee was broader than 20· ·investment? 21· ·Blackstone Energy Partners, it had the support of the 21· · · · ·A· · ·Generally speaking, there were deal 22· ·other partners within Blackstone Energy Partners, 22· ·teams. 23· ·which is why I'm trying to think through the specific 23· · · · ·Q· · ·And I've seen references in documents -- 24· ·aspects of your question. 24· ·and we might look at some later but that referred to 25· · · · ·Q· · ·And how many -- you said it had the 25· ·the Primexx deal team as including you, Anika Gautam, Page 35 Page 37 ·1· ·support of the other partners at Blackstone Energy ·1· ·Mark Henle, Erik Belz and David Foley. ·2· ·Partners. ·2· · · · · · · ·Does that sound accurate for who was part ·3· · · · · · · ·How many partners were there within the ·3· ·of the Blackstone/Primexx deal team? ·4· ·Blackstone Energy Partners group? ·4· · · · ·A· · ·Those names are familiar to me.· I do not ·5· · · · ·A· · ·I don't recall specifically at the time ·5· ·recall specific roles. ·6· ·but -- I don't recall specifically at the time. ·6· · · · ·Q· · ·Okay.· Do you recall whether that group ·7· · · · ·Q· · ·With regards to Blackstone's investment ·7· ·of people at Blackstone worked on the Primexx ·8· ·in Primexx, did you report to Mr. Foley with regards ·8· ·investment? ·9· ·to that investment? ·9· · · · ·A· · ·I recall some of their involvement. 10· · · · · · · ·You mentioned earlier just in general 10· · · · ·Q· · ·Whose involvement do you recall? 11· ·Mr. Foley was your senior that you would report to at 11· · · · ·A· · ·David Foley and Erik Belz. 12· ·Blackstone Energy Partners, and so I'm just wondering 12· · · · ·Q· · ·But you don't have a recollection right 13· ·specifically, for the Primexx investment, was it 13· ·now of work that Anika Gautam performed? 14· ·still the case that you reported to Mr. Foley? 14· · · · ·A· · ·I do not recall. 15· · · · ·A· · ·This gets back to the fact that 15· · · · ·Q· · ·Or Mark Henle? 16· ·Blackstone is a matrix organization.· So there were a 16· · · · ·A· · ·I do not recall. 17· ·number of people that I reported to. 17· · · · ·Q· · ·Are you familiar with Ms. Gautam and 18· · · · ·Q· · ·Was Mr. Foley one of them? 18· ·Mr. Henley, in general, and you just don't recall 19· · · · ·A· · ·I believe that's a fair characterization. 19· ·that they worked on the Primexx investment, or are 20· · · · ·Q· · ·Were there any Blackstone employees who 20· ·you unfamiliar with those names? 21· ·reported to you with regards to Blackstone's 21· · · · ·A· · ·The names are familiar to me.· I just 22· ·investment in Primexx? 22· ·don't recall their involvement. 23· · · · ·A· · ·This, again, gets back to more of the 23· · · · ·Q· · ·In the Primexx investment? 24· ·matrix nature of Blackstone where, to my recollection 24· · · · ·A· · ·Correct. 25· ·and knowledge, there weren't specific legal reporting 25· · · · ·Q· · ·One way or the other? www.LexitasLegal.com/Premier Lexitas 888-267-1200 0150 Pages 34–37 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 38 Page 40 ·1· · · · ·A· · ·I do not recall their specific ·1· ·those entities in your understanding? ·2· ·involvement in the Primexx investment. ·2· · · · ·A· · ·I believe they were investment funds. ·3· · · · ·Q· · ·Okay.· And what was Mr. Belz -- is that ·3· · · · ·Q· · ·Are those the funds that you referenced ·4· ·B-E-L-Z; is that right? ·4· ·earlier that you had a carried interest in that would ·5· · · · ·A· · ·I believe that's correct. ·5· ·make your personal compensation higher or lower ·6· · · · ·Q· · ·Okay.· What was Mr. Belz's involvement in ·6· ·depending upon the profitability of Blackstone's ·7· ·the Primexx investment for Blackstone? ·7· ·Primexx investment? ·8· · · · ·A· · ·Erik Belz was a member of the investment ·8· · · · ·A· · ·I believe that's a fair characterization. ·9· ·team. ·9· ·Although, I would say it could relative to what -- 10· · · · ·Q· · ·Was he junior or senior to you or same 10· ·because there are a number of factors and 11· ·level as you? 11· ·considerations that went into the calculation of the 12· · · · ·A· · ·Erik Belz was junior. to me. 12· ·carried interest for the funds. 13· · · · ·Q· · ·Okay.· So for the people you remember 13· · · · · · · ·THE WITNESS:· And I apologize.· Do 14· ·working as part of the Primexx deal team, Mr. Belz 14· · · · ·you mind if we take -- we're coming up on 15· ·was junior to you and you were junior to Mr. Foley; 15· · · · ·the hour.· Do you mind if we take a 16· ·is that accurate? 16· · · · ·nature break? 17· · · · ·A· · ·I believe so. 17· · · · · · · ·MR. CAFORIO:· Yeah, yeah.· Do you 18· · · · ·Q· · ·As part of your compensation from 18· · · · ·need five minutes, ten minutes?· What do 19· ·Blackstone, did you personally have any carried 19· · · · ·you need? 20· ·interest in Blackstone's investment in Primexx? 20· · · · · · · ·THE WITNESS:· Five minutes would be 21· · · · ·A· · ·I apologize.· Do you mind repeating the 21· · · · ·great. 22· ·question, Bryan? 22· · · · · · · ·MR. CAFORIO:· Okay. 23· · · · ·Q· · ·Yeah.· As part of your compensation 23· · · · · · · ·THE VIDEOGRAPHER:· The time is 24· ·package at Blackstone, did you personally have any 24· · · · ·10:07 a.m., and we're going off the 25· ·carried interest in Blackstone's investment in 25· · · · ·record. Page 39 Page 41 ·1· ·Primexx? ·1· · · · · · · · · · · (Brief pause.) ·2· · · · ·A· · ·I had a carried interest in our ·2· · · · · · · ·THE VIDEOGRAPHER:· The time is ·3· ·investment fund, which was indirectly associated with ·3· · · · ·10:12 a.m.· We're going back on the ·4· ·Primexx. ·4· · · · ·record. ·5· · · · ·Q· · ·So did you expect that your personal ·5· ·BY MR. CAFORIO: ·6· ·earnings could be higher or lower depending on the ·6· · · · ·Q· · ·All right.· Welcome back, Mr. Acconcia. ·7· ·profitability of Blackstone's investment in Primexx? ·7· ·You understand you're still under oath, correct? ·8· · · · ·A· · ·Generally speaking, yes. ·8· · · · ·A· · ·I do. ·9· · · · ·Q· · ·Let's go back to Exhibit 1 that we ·9· · · · ·Q· · ·Okay.· Can you please describe, in 10· ·already looked at.· I'll put something on the screen 10· ·general terms, what were your responsibilities at 11· ·for you. 11· ·Blackstone as a member of the Primexx deal team? 12· · · · · · · ·Do you see, again, this page we already 12· · · · · · · ·MR. DESAI:· Objection.· Form. 13· ·looked at of the Third Amended and Restated Limited 13· · · · · · · ·THE WITNESS:· I apologize.· Could 14· ·Partnership Agreement of Primexx Energy Partners? 14· · · · ·you be more specific? 15· · · · ·A· · ·I see the page you put up on the screen. 15· ·BY MR. CAFORIO: 16· · · · ·Q· · ·And if you go to the fifth whereas clause 16· · · · ·Q· · ·Well, I wanted to start general and get 17· ·under the recitals on that first page, there's a 17· ·more specific, but just, in general, we discussed the 18· ·reference to Blackstone Capital Partners VII, L.P. 18· ·Primexx deal team at Blackstone, right, which 19· ·and Blackstone Energy Partners II L.P. (the 19· ·included at least you, Mr. Belz and Mr. Foley, right? 20· ·"Blackstone Investors"). 20· · · · ·A· · ·I recall that discussion. 21· · · · · · · ·Do you see that? 21· · · · ·Q· · ·Okay.· And I'm just asking, in general 22· · · · ·A· · ·I do. 22· ·terms, before we get into specifics, how would you 23· · · · ·Q· · ·Do you recognize those two entities? 23· ·describe your responsibilities being on the Primexx 24· · · · ·A· · ·Generally speaking, yes. 24· ·deal team overseeing Blackstone's investment in 25· · · · ·Q· · ·And just generally, what -- what are 25· ·Primexx? www.LexitasLegal.com/Premier Lexitas 888-267-1200 0151 Pages 38–41 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 42 Page 44 ·1· · · · ·A· · ·I recall general involvement inclusive of ·1· · · · ·A· · ·I was generally involved in Blackstone's ·2· ·being on the Board of Directors. ·2· ·investment in Primexx during that time. ·3· · · · ·Q· · ·The Board of Directors of Primexx?· Is ·3· · · · ·Q· · ·And that includes Blackstone exiting its ·4· ·that what you're referring to? ·4· ·investment in Primexx at the end of 2021; is that ·5· · · · ·A· · ·Yes. ·5· ·fair? ·6· · · · ·Q· · ·I just want to make -- not the Board of ·6· · · · · · · ·MR. DESAI:· Objection.· Form. ·7· ·Directors of Blackstone?· The Board of Directors of ·7· · · · · · · ·THE WITNESS:· I was generally ·8· ·Primexx? ·8· · · · ·involved in the activities related to ·9· · · · ·A· · ·That is correct. ·9· · · · ·Primexx during -- during that time. 10· · · · ·Q· · ·Okay.· Would you describe your 10· ·BY MR. CAFORIO: 11· ·responsibilities from Blackstone regarding the 11· · · · ·Q· · ·Including its ultimate sale to Callon 12· ·Primexx investment to be a one-time event that was 12· ·Petroleum; is that correct or not correct? 13· ·completed when you signed that partnership agreement, 13· · · · ·A· · ·The reason why it's taking me a moment to 14· ·or did you have a continuing obligation over a series 14· ·think about this is your specific use of the word 15· ·of years regarding that investment? 15· ·sale or exit.· I don't recall the specifics of the 16· · · · ·A· · ·I would say general involvement over a 16· ·transaction, but, generally speaking, I recall it to 17· ·period of time. 17· ·be more of a merger, and, thus, my comment of my 18· · · · ·Q· · ·Your responsibilities didn't end the 18· ·general involvement in the -- in the transaction. 19· ·moment you signed the partnership agreement? 19· · · · ·Q· · ·Okay.· So you were -- whether a merger or 20· · · · ·A· · ·My involvement did not end when I signed 20· ·a sale, there was a transaction that -- between 21· ·the partnership agreement. 21· ·Primexx and Callon Petroleum at the end of 2021, 22· · · · ·Q· · ·In fact, you continued participating in 22· ·correct? 23· ·meetings regarding Blackstone's investment in Primexx 23· · · · ·A· · ·I recall the transaction.· Specific dates 24· ·from 2016 all the way through 2021; is that fair? 24· ·I don't recall. 25· · · · ·A· · ·I recall meetings during that time.· The 25· · · · ·Q· · ·Okay.· And you did play a role in Page 43 Page 45 ·1· ·specific dates I don't have specific recollection of. ·1· ·effectuating that transaction with Callon Petroleum ·2· · · · ·Q· · ·And in your role on the Blackstone's ·2· ·in 2021 on behalf of Blackstone, is that fair? ·3· ·Primexx deal team, did you play any role on behalf of ·3· · · · · · · ·MR. DESAI:· Objection.· Form. ·4· ·Blackstone in attempting to sell Primexx in the 2021 ·4· · · · · · · ·THE WITNESS:· I was one of many ·5· ·time period? ·5· · · · ·people at Blackstone involved in our ·6· · · · · · · ·MR. DESAI:· Objection.· Form. ·6· · · · ·investment in Primexx. ·7· · · · · · · ·THE WITNESS:· Apologies.· Could you ·7· ·BY MR. CAFORIO: ·8· · · · ·rephrase the question? ·8· · · · ·Q· · ·And Callon Petroleum is a Texas-based ·9· ·BY MR. CAFORIO: ·9· ·corporation; is that right? 10· · · · ·Q· · ·Well, I'm just wondering, in your role on 10· · · · ·A· · ·I do not recall. 11· ·the Primexx deal team at Blackstone, did you perform 11· · · · ·Q· · ·You don't recall that it's headquartered 12· ·any work or play any role in the process of 12· ·in Houston? 13· ·Blackstone ultimately working to sell Primexx in the 13· · · · ·A· · ·I -- I do not. 14· ·2020-2021 time period? 14· · · · ·Q· · ·Did you ever participate in any meetings 15· · · · · · · ·MR. DESAI:· Objection.· Form. 15· ·in Houston where you discussed the potential sale 16· · · · · · · ·THE WITNESS:· I was generally 16· ·of -- or the potential transaction with Callon? 17· · · · ·involved in the activities related to 17· · · · ·A· · ·I do not recall. 18· · · · ·Primexx. 18· · · · ·Q· · ·One way or the other? 19· ·BY MR. CAFORIO: 19· · · · ·A· · ·I do not believe so, but I don't -- I do 20· · · · ·Q· · ·And do you recall that ultimately Primexx 20· ·not recall specifics. 21· ·was sold to Callon Petroleum in the end of 2021? 21· · · · ·Q· · ·Did you have any direct communications 22· · · · ·A· · ·I generally recall that. 22· ·with anyone at Callon Petroleum regarding the 23· · · · ·Q· · ·And did you personally play any role in 23· ·potential transaction involving Primexx? 24· ·the process that resulted in Primexx being sold to 24· · · · ·A· · ·I do not recall. 25· ·Callon Petroleum at the end of 2021? 25· · · · ·Q· · ·One way or the other? www.LexitasLegal.com/Premier Lexitas 888-267-1200 0152 Pages 42–45 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 46 Page 48 ·1· · · · ·A· · ·I do not recall. ·1· · · · ·A· · ·I see that now.· Thank you. ·2· · · · ·Q· · ·Okay.· In 2021, in your role at ·2· · · · ·Q· · ·And you wrote in this e-mail to ·3· ·Blackstone, did you travel to Texas for work? ·3· ·Mr. Doyle:· On a fight [sic.] this morning to ·4· · · · ·A· · ·I do not recall. ·4· ·Houston.· Will call you when I land. ·5· · · · ·Q· · ·Let's put up the next exhibit.· I'm ·5· · · · · · · ·Do you see that? ·6· ·putting it in the chat right now, and I'll share my ·6· · · · ·A· · ·I do. ·7· ·screen, as well. ·7· · · · ·Q· · ·Do you have any reason to believe that ·8· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·8· ·when you sent this e-mail to Mr. Doyle and told him ·9· · · · ·2 was marked for the record.) ·9· ·that you were on a flight to Houston and that you 10· ·BY MR. CAFORIO: 10· ·would call him when you landed that that was not an 11· · · · · · · ·So Deposition Exhibit 2 is a document, 11· ·accurate statement? 12· ·and do you see there's a -- at the bottom right of 12· · · · ·A· · ·I do not recall this e-mail. 13· ·the document, there's a numeric code.· It says 13· · · · ·Q· · ·Okay.· Do you recall whether you did, in 14· ·BPP_0018525. 14· ·fact, call Mr. Doyle when you landed in Houston on 15· · · · · · · ·Do you see that? 15· ·June 29th, 2021? 16· · · · ·A· · ·I see that. 16· · · · ·A· · ·I do not recall. 17· · · · ·Q· · ·And this document is three pages long. 17· · · · ·Q· · ·Do you have any reason to believe that 18· ·It goes to ending in 27. 18· ·you wouldn't have called Mr. Doyle when you landed in 19· · · · · · · ·Do you see that? 19· ·Houston as you told him you would? 20· · · · ·A· · ·I see that. 20· · · · ·A· · ·I'm sorry.· I don't recall the specifics 21· · · · ·Q· · ·And this is a document -- this is an 21· ·of this. 22· ·e-mail chain that starts on June 24th, 2021 with an 22· · · · ·Q· · ·Who is Chris Doyle? 23· ·e-mail from Phil Cook at Primexx. 23· · · · ·A· · ·Sorry.· Do you mind being a little more 24· · · · · · · ·Do you see that? 24· ·specific? 25· · · · ·A· · ·I see, on the third page, it lists Phil 25· · · · ·Q· · ·Well, I don't know.· You sent an e-mail Page 47 Page 49 ·1· ·Cook, an e-mail from Phil Cook. ·1· ·dated June 29th, 2021 to Chris Doyle at Primexx. ·2· · · · ·Q· · ·And it says, in his signature block, that ·2· · · · · · · ·So I'm just asking you who is Chris Doyle ·3· ·he was the Executive Vice President and Chief ·3· ·that you sent this e-mail to? ·4· ·Financial Officer of Primexx Energy Partners located ·4· · · · ·A· · ·I understand your question now.· Chris ·5· ·in Dallas, Texas. ·5· ·was a member of the executive team at Primexx. ·6· · · · · · · ·Do you see that? ·6· · · · ·Q· · ·Was he located in Texas? ·7· · · · ·A· · ·I do. ·7· · · · ·A· · ·I believe he was. ·8· · · · ·Q· · ·Okay.· And if you go up this chain to the ·8· · · · ·Q· · ·I'm going to give you -- I'm sorry.· You ·9· ·first page, at the very top e-mail, do you see that's ·9· ·said he was on the executive team?· Is that what you 10· ·an e-mail that you sent dated June 29th, 2021 to 10· ·described his role at Primexx? 11· ·Chris Doyle at Primexx with a CC to Erik Belz and 11· · · · ·A· · ·I believe that's what I said. 12· ·Mark Henle, both at Blackstone? 12· · · · ·Q· · ·Okay.· Did he report to you in that role? 13· · · · · · · ·Do you see that? 13· · · · ·A· · ·I believe it would be fair to 14· · · · ·A· · ·Sorry.· I'm just trying to familiarize 14· ·characterize that he reported to the board. 15· ·myself with the document. 15· · · · ·Q· · ·And you were on the board? 16· · · · ·Q· · ·Yeah.· Take your time.· Take your time. 16· · · · ·A· · ·I was one of the members of the board. 17· · · · ·A· · ·Okay.· Thank you.· Do you mind repeating 17· · · · ·Q· · ·How often did you communicate with 18· ·the question? 18· ·Mr. Doyle in the 2021 time period? 19· · · · ·Q· · ·Well, I think I was just clarifying if 19· · · · ·A· · ·I do not recall. 20· ·you saw this. 20· · · · ·Q· · ·Do you recall, in general, that you did 21· · · · · · · ·Do you see that the top e-mail is an 21· ·communicate with Mr. Doyle at Primexx in 2021? 22· ·e-mail from you dated June 29th, 2021 sent to Chris 22· · · · ·A· · ·I see the e-mail on screen that you 23· ·Doyle at Primexx with a CC to Erik Belz and Mark 23· ·noted.· I do not recall communications with 24· ·Henle, both at Blackstone. 24· ·Mr. Doyle. 25· · · · · · · ·Do you see that? 25· · · · ·Q· · ·You don't recall any other www.LexitasLegal.com/Premier Lexitas 888-267-1200 0153 Pages 46–49 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 50 Page 52 ·1· ·communications. ·1· ·team at Primexx. ·2· · · · ·A· · ·No, I do not. ·2· · · · ·Q· · ·Do you recall whether you ever met ·3· · · · ·Q· · ·Okay.· If you look at the -- I guess it's ·3· ·in-person in Texas with Mr. Doyle, Mr. White, ·4· ·the fourth e-mail down, there's a line kind of in the ·4· ·Ms. Davis, or Mr. Cook regarding Blackstone's ·5· ·middle of the page, and there's an e-mail from Chris ·5· ·investment in Primexx? ·6· ·Doyle dated June 28th, 2021. ·6· · · · ·A· · ·I do not recall specifics.· I do not ·7· · · · · · · ·Do you see that? ·7· ·recall specifics. ·8· · · · ·A· · ·I see an e-mail in the middle of the page ·8· · · · ·Q· · ·I'll take that document down and put the ·9· ·from Chris Doyle. ·9· ·next document into the chat. 10· · · · ·Q· · ·Okay.· And I just -- looking at all the 10· · · · · · · ·MR. DESAI:· Bryan, while you're 11· ·people who were CC'd here, there are -- do you have 11· · · · ·doing that, I want to mention -- I know 12· ·an understanding of who these people are?· Do you 12· · · · ·I've said this before, but Mr. Acconcia 13· ·recognize the names that were part of this e-mail 13· · · · ·has a noon eastern hard cut. 14· ·chain or no, just in general, and then we'll get into 14· · · · · · · ·MR. CAFORIO:· Yeah.· I'm very 15· ·specifics? 15· · · · ·hopeful we'll be finished well before 16· · · · ·A· · ·I generally recognize some of these 16· · · · ·noon, but we'll see how quickly we can 17· ·names. 17· · · · ·move through things. 18· · · · ·Q· · ·Okay.· So I just want to look at some of 18· · · · · · · ·MR. DESAI:· Yeah, I do, too, and I 19· ·the names that have an @Primexx.com e-mail address. 19· · · · ·know we still have a ways to go before 20· ·So I see a Sam Blatt at Primexx. 20· · · · ·then, but I just wanted to flag it. 21· · · · · · · ·Do you see that name? 21· · · · · · · ·MR. CAFORIO:· Yeah.· Thank you. 22· · · · ·A· · ·I see that. 22· · · · · · · ·THE WITNESS:· Thank you, Bryan. 23· · · · ·Q· · ·Do you know who Sam Blatt at Primexx was? 23· · · · · · · ·MR. CAFORIO:· Let me share the 24· · · · ·A· · ·Sam Blatt was a member of the executive 24· · · · ·screen here, and for the court reporter, 25· ·team at Primexx. 25· · · · ·it is now marked Deposition Exhibit 3. Page 51 Page 53 ·1· · · · ·Q· · ·The next name is Chase White at Primexx. ·1· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·2· ·Do you see that? ·2· · · · ·3 was marked for the record.) ·3· · · · ·A· · ·I see that. ·3· ·BY MR. CAFORIO: ·4· · · · ·Q· · ·Do you know who Chase White was? ·4· · · · ·Q· · ·Can you see this is a document with a ·5· · · · ·A· · ·I recall his general involvement.· I do ·5· ·Bates number down at the bottom BPP_0017994. ·6· ·not recall his specific role or title. ·6· · · · · · · ·Do you see that? ·7· · · · ·Q· · ·What was his general involvement? ·7· · · · ·A· · ·I see that. ·8· · · · ·A· · ·He was involved in the finance team at ·8· · · · ·Q· · ·And this is an e-mail chain between ·9· ·Primexx. ·9· ·you -- it's various e-mails involving you, Patricia 10· · · · ·Q· · ·Skipping one name that doesn't have a 10· ·Lee and Mr. Doyle at Primexx. 11· ·Primexx e-mail, the next name is Megan Davis at 11· · · · · · · ·Do you see that? 12· ·Primexx. 12· · · · ·A· · ·I see an e-mail from Patricia to myself. 13· · · · · · · ·Do you see that? 13· · · · ·Q· · ·Who is Patricia Lee? 14· · · · ·A· · ·I do. 14· · · · ·A· · ·Patricia was my executive assistant. 15· · · · ·Q· · ·Do you know who Megan Davis at Primexx 15· · · · ·Q· · ·Okay.· And so the first e-mail on this 16· ·was? 16· ·chain at the bottom is from Mr. Doyle to Ms. Lee, 17· · · · ·A· · ·I do not recall. 17· ·dated May 25th, 2021; subject:· Schedule next 18· · · · ·Q· · ·And then the last name listed here is 18· ·Tuesday, and it says:· Angelo mentioned having 19· ·Phil Cook at Primexx. 19· ·drinks, dinner next week.· I think it makes sense for 20· · · · · · · ·Do you see that? 20· ·Angelo and I to have pre dinner drinks and then have 21· · · · ·A· · ·I do. 21· ·a team dinner Wednesday evening.· Does that work? I 22· · · · ·Q· · ·And we saw his signature block on the 22· ·would invite Phil, Megan, Chase and Sam. 23· ·third page, but do you -- do you know who Phil Cook 23· · · · · · · ·Do you see that? 24· ·at Primexx was? 24· · · · ·A· · ·I see that's what it says. 25· · · · ·A· · ·Phil Cook was a member of the executive 25· · · · ·Q· · ·And then Ms. Lee forwarded that e-mail to www.LexitasLegal.com/Premier Lexitas 888-267-1200 0154 Pages 50–53 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 54 Page 56 ·1· ·you eight minutes later on May 25th, 2021, and wrote: ·1· · · · ·A· · ·Okay.· Thank you. ·2· ·Angelo, please advise on the below, as you will be in ·2· · · · ·Q· · ·So do you see that that's what this chain ·3· ·Dallas. ·3· ·started with? ·4· · · · · · · ·Do you see that? ·4· · · · ·A· · ·Sorry.· Would you mind repeating the ·5· · · · ·A· · ·I do. ·5· ·question? ·6· · · · ·Q· · ·And then you responded to your executive ·6· · · · ·Q· · ·Yeah.· This is an e-mail chain -- this ·7· ·assistant later that same day, May 25th, 2021: ·7· ·document -- this exhibit -- is an e-mail chain that ·8· ·Thanks.· Let's do drinks with Chris Doyle at ·8· ·starts with an e-mail from Chase White at Primexx, ·9· ·5:30 p.m. and then dinner at 6:30 p.m. with the team. ·9· ·dated June 30, 2021, to the Blackstone team and the 10· · · · · · · ·Do you see that? 10· ·Primexx team. 11· · · · ·A· · ·I do. 11· · · · · · · ·Do you see that? 12· · · · ·Q· · ·And the team, as Mr. Doyle wrote it in 12· · · · ·A· · ·I see that. 13· ·that first e-mail, is Phil, Megan, Chase and Sam, the 13· · · · ·Q· · ·And we've discussed most of these names, 14· ·people we looked at on the last e-mail, right? 14· ·but there is one name I think we haven't discussed. 15· · · · ·A· · ·I believe that that is what it's 15· ·There's a jeffkelly@blackstone.com at the bottom of 16· ·referring to based on the e-mail here. 16· ·this e-mail. 17· · · · ·Q· · ·And Ms. Lee, as your executive assistant, 17· · · · · · · ·Do you see that? 18· ·was familiar with your schedule; is that fair? 18· · · · ·A· · ·I see that. 19· · · · ·A· · ·That is fair. 19· · · · ·Q· · ·Who is Mr. Kelly at Blackstone? 20· · · · ·Q· · ·And she wrote on this e-mail on May 25th, 20· · · · ·A· · ·Mr. Kelly was a member of -- and this 21· ·that you would be in Dallas, correct? 21· ·e-mail is refreshing my memory -- a member of the 22· · · · ·A· · ·I see that she wrote in her e-mail dated 22· ·portfolio operations team at Blackstone. 23· ·May 25th that I would be in Dallas. 23· · · · ·Q· · ·Did he play any role on the Primexx deal 24· · · · ·Q· · ·And then you did, in fact, go to Dallas 24· ·team? 25· ·the next week where you met with Mr. Doyle and the 25· · · · ·A· · ·This gets back to the matrix like nature Page 55 Page 57 ·1· ·rest of the Primexx team while you were there, ·1· ·of Blackstone.· So there were various groups and ·2· ·correct? ·2· ·people that were involved, some of which were within ·3· · · · · · · ·MR. DESAI:· Objection.· Form. ·3· ·Blackstone Energy Partners and the private equity ·4· · · · · · · ·THE WITNESS:· I don't recall. ·4· ·group, some of who were in other groups were ·5· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·5· ·generally involved, and Jeff was a member of one of ·6· · · · ·4 was marked for the record.) ·6· ·those other groups who was generally involved. ·7· ·BY MR. CAFORIO: ·7· · · · ·Q· · ·And about in the middle of this page, ·8· · · · ·Q· · ·I'll put the next e-mail into the chat or ·8· ·just the third e-mail up from the bottom, is an ·9· ·document into the chat I should say. ·9· ·e-mail you sent dated June 30, 2021. 10· · · · · · · ·MR. CAFORIO:· If the court reporter 10· · · · · · · ·Do you see that? 11· · · · ·would mark this as the next exhibit. 11· · · · ·A· · ·I see an e-mail from me in the middle of 12· ·BY MR. CAFORIO: 12· ·the page. 13· · · · ·Q· · ·Do you see this is a document with the 13· · · · ·Q· · ·And you wrote in this e-mail:· I am 14· ·Bates number BPP_0005953 through 5954? 14· ·back -- I am back-to-back in Houston today. 15· · · · · · · ·Do you see that? 15· · · · · · · ·Do you see that? 16· · · · ·A· · ·I see the first page says BPP_0005953. 16· · · · ·A· · ·I see -- I see that. 17· ·Thank you.· I now see the second page.· It says 17· · · · ·Q· · ·And when you wrote that, did you mean you 18· ·0005954. 18· ·had back-to-back meetings in Houston on June 30th, 19· · · · ·Q· · ·Okay.· And this is an e-mail chain 19· ·2021? 20· ·started by Chase White at Primexx dated June 30, 20· · · · ·A· · ·I don't recall the specifics of the trip. 21· ·2021? 21· · · · ·Q· · ·But looking at the e-mail you wrote, do 22· · · · · · · ·Do you see that? 22· ·you know what you meant when you said I am 23· · · · ·A· · ·Would you mind going to the second page, 23· ·back-to-back in Houston today with regards to 24· ·please? 24· ·scheduling a call? 25· · · · ·Q· · ·Yeah. 25· · · · ·A· · ·Generally speaking, I'd state that's a www.LexitasLegal.com/Premier Lexitas 888-267-1200 0155 Pages 54–57 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 58 Page 60 ·1· ·term or phrase that I believe refers to not having ·1· · · · · · · ·MR. CAFORIO:· Would the court ·2· ·available time.· I do not -- I do not recall specific ·2· · · · ·reporter mark this as the next exhibit. ·3· ·activities or meetings or what was taking up my time ·3· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·4· ·during that period. ·4· · · · ·5 was marked for the record.) ·5· · · · ·Q· · ·But you were in Houston when you sent ·5· ·BY MR. CAFORIO: ·6· ·this e-mail? ·6· · · · ·Q· · ·Do you see this is a document with a ·7· · · · ·A· · ·I do not recall. ·7· ·Bates number BPP_0016545, and it's a two-page ·8· · · · ·Q· · ·You said you were in Houston when you ·8· ·document ending 546. ·9· ·sent this e-mail, right? ·9· · · · · · · ·Do you see that? 10· · · · ·A· · ·That is what the first line of the e-mail 10· · · · ·A· · ·I do. 11· ·says.· I do not recall any of the specifics. 11· · · · ·Q· · ·And this is -- it appears to be a 12· · · · ·Q· · ·Do you believe you were lying to the rest 12· ·calendar invite from you dated November 3rd, 2020. 13· ·of the Primexx team when you told them you were in 13· · · · · · · ·Do you see that? 14· ·Houston when you sent that e-mail? 14· · · · ·A· · ·Sorry.· I'm just trying to familiarize 15· · · · · · · ·MR. DESAI:· Objection.· Form. 15· ·myself with the document. 16· · · · · · · ·THE WITNESS:· I see what the e-mail 16· · · · ·Q· · ·Yep. 17· · · · ·says.· I just do not recall anything 17· · · · ·A· · ·This looks like a calendar invite, and 18· · · · ·further. 18· ·while it says from me, typically my assistant was 19· ·BY MR. CAFORIO: 19· ·asked to coordinate meetings and would send calendar 20· · · · ·Q· · ·And this is an e-mail that you sent to 20· ·invites on behalf of myself or -- or the deal team. 21· ·Mr. Doyle, Mr. Blatt, Mr. Cook, Ms. Davis in Texas 21· · · · · · · ·So I -- I don't recall whether I sent 22· ·where you told them that you were in Houston, 22· ·this or whether my assistant sent it specifically. 23· ·correct? 23· · · · ·Q· · ·But you see that it is a calendar invite 24· · · · ·A· · ·This -- reading this e-mail, this is an 24· ·sent by your e-mail address dated November 3rd, 2020 25· ·e-mail that I sent to mostly members of the 25· ·with the subject call Primexx/Blackstone Strategic Page 59 Page 61 ·1· ·Blackstone team in the to line.· There were five ·1· ·Next Steps. ·2· ·people noted in the to line.· Only one of which was ·2· · · · · · · ·Do you see that? ·3· ·with Primexx. ·3· · · · ·A· · ·I do. ·4· · · · ·Q· · ·Right, and you sent that e-mail to the ·4· · · · ·Q· · ·And this was a calendar invite that your ·5· ·Primexx deal team and the five Primexx employees and ·5· ·e-mail address sent to members of the Blackstone deal ·6· ·told them you were in Houston that day, correct? ·6· ·team, as well as at least four Primexx employees in ·7· · · · ·A· · ·I do not recall the specifics.· What I'm ·7· ·Texas, Chris Doyle, Sam Blatt, Chase White and Phil ·8· ·reading here is I sent an e-mail to four people at ·8· ·Cook? ·9· ·Blackstone and one person at Primexx, and what it ·9· · · · · · · ·Do you see that? 10· ·says is I am back-to-back in Houston today.· Why 10· · · · ·A· · ·I see them listed here on the to line. 11· ·don't you set the time that works best for you all, 11· · · · ·Q· · ·And either you or your executive 12· ·and if I can't make it, I will follow-up with the 12· ·assistant, Ms. Lee, initiated and scheduled this 13· ·team to discuss.· I'm on a flight early a.m. but free 13· ·call, correct? 14· ·for most of the afternoon tomorrow. 14· · · · ·A· · ·I do not recall the specifics; although, 15· · · · ·Q· · ·And the subject of this e-mail is a 15· ·this document would lead me to believe that that was 16· ·Rosehill Plan B Proposal. 16· ·the case. 17· · · · · · · ·Do you see that? 17· · · · ·Q· · ·Okay.· Do you recall at some point 18· · · · ·A· · ·I see at the bottom of the page the 18· ·Primexx and Blackstone engaged with RBC in Texas to 19· ·original e-mail that Chase White sent and the subject 19· ·explore a potential transaction involving Primexx in 20· ·line as you noted. 20· ·2021? 21· · · · ·Q· · ·And do you have a recollection right now 21· · · · · · · ·Do you recall that in general terms? 22· ·what the Rosehill Plan B Proposal was? 22· · · · ·A· · ·I generally recall RBC's involvement. I 23· · · · ·A· · ·I do not recall. 23· ·don't understand what you mean by in Texas. 24· · · · ·Q· · ·Okay.· I'm putting the next document in 24· · · · ·Q· · ·Sure.· Let's go to the next document, and 25· ·the chat. 25· ·I'm putting into the chat. www.LexitasLegal.com/Premier Lexitas 888-267-1200 0156 Pages 58–61 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 62 Page 64 ·1· · · · · · · ·MR. CAFORIO:· So if the court ·1· · · · ·knowledge, across North America.· I do ·2· · · · ·reporter will mark this as the next ·2· · · · ·not recall specifically where people were ·3· · · · ·exhibit. ·3· · · · ·located. ·4· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·4· ·BY MR. CAFORIO: ·5· · · · ·6 was marked for the record.) ·5· · · · ·Q· · ·But you received this e-mail from ·6· ·BY MR. CAFORIO: ·6· ·Mr. Spence with the materials for the discussion on ·7· · · · ·Q· · ·Do you see this is a document with Bates ·7· ·the call that you had sent out a calendar invite for, ·8· ·number BPP_0017552 ending at 553? ·8· ·correct? ·9· · · · · · · ·Do you see that? ·9· · · · ·A· · ·This e-mail shows that I received -- this 10· · · · ·A· · ·I do. 10· ·document shows that I received an e-mail from 11· · · · ·Q· · ·And the first e-mail on the chain -- I'll 11· ·Jeffrey. 12· ·just look at the second page, and you'll see there's 12· · · · ·Q· · ·And Mr. Spence's signature line indicates 13· ·no other e-mail. 13· ·that he's located in Houston, Texas, correct? 14· · · · · · · ·So the bottom on the first page is the 14· · · · ·A· · ·His signature line states a Houston 15· ·first e-mail on the page.· It is a calendar invite 15· ·address. 16· ·from you dated, Thursday, April 15th, 2021. 16· · · · ·Q· · ·In 2021 -- and that document we just 17· · · · · · · ·Do you see that? 17· ·looked at was April 2021, but in 2021, you personally 18· · · · ·A· · ·I see there's a calendar invite noted 18· ·conducted due diligence regarding potential Primexx 19· ·from me with that date. 19· ·transactions involving Texas counter-parties; is that 20· · · · ·Q· · ·And it has a subject:· Call Primexx 20· ·fair? 21· ·RBC/BX re:· General status and next steps discussion. 21· · · · · · · ·MR. DESAI:· Objection.· Form. 22· · · · · · · ·Do you see that? 22· · · · · · · ·THE WITNESS:· I'm sorry.· I don't 23· · · · ·A· · ·I see that in the subject line. 23· · · · ·understand the question. 24· · · · ·Q· · ·And this was a call that you initiated, 24· ·BY MR. CAFORIO: 25· ·correct? 25· · · · ·Q· · ·Did you personally conduct any due Page 63 Page 65 ·1· · · · ·A· · ·I do not -- I do not recall. ·1· ·diligence in the 2021 time period with regards to ·2· · · · ·Q· · ·It's a calendar invite sent from your ·2· ·potential Primexx transactions? ·3· ·e-mail address, correct? ·3· · · · ·A· · ·My role at Blackstone at the time, I ·4· · · · ·A· · ·That's what this e-mail -- that's what ·4· ·believe, was as a member of the general investment ·5· ·this document shows.· Again, I don't recall the ·5· ·team and on the board of Primexx.· The management ·6· ·specifics, and typically my assistant would send ·6· ·team at Primexx had day-to-day oversight on the ·7· ·calendar invites on behalf of people at Blackstone to ·7· ·operations, activities and diligence of the company. ·8· ·schedule calls that would come from my e-mail. ·8· · · · ·Q· · ·I'll put the next document in the chat, ·9· · · · ·Q· · ·And in the top e-mail -- so the last ·9· ·and we'll look at that. 10· ·e-mail in the chain -- is an e-mail from a Jeffrey 10· · · · · · · ·MR. CAFORIO:· And if the court 11· ·Spence at RBC Capital Markets. 11· · · · ·reporter could mark this as the next 12· · · · · · · ·Do you see this? 12· · · · ·exhibit. 13· · · · ·A· · ·I see that at the top. 13· · · · · · · ·(Deposition (Acconcia) Exhibit No. 14· · · · ·Q· · ·And Mr. Spence has a signature line that 14· · · · ·7 was marked for the record.) 15· ·says he's located at 609 Main Street, Suite 3700, 15· ·BY MR. CAFORIO: 16· ·Houston, Texas. 16· · · · ·Q· · ·It is a one-page document with Bates 17· · · · · · · ·Do you see that? 17· ·number BPP_0018469. 18· · · · ·A· · ·I do. 18· · · · · · · ·Do you see that? 19· · · · ·Q· · ·That's what I meant earlier when I said 19· · · · ·A· · ·I see that at the bottom right-hand of 20· ·RBC in Texas.· The people at RBC that you 20· ·the page. 21· ·communicated regarding a potential Primexx 21· · · · ·Q· · ·And this starts with an e-mail from Megan 22· ·transaction were located in Texas, right? 22· ·Davis at Primexx to you, Mr. Belz, and Mr. Henley. 23· · · · · · · ·MR. DESAI:· Objection.· Form. 23· · · · · · · ·Do you see that? 24· · · · · · · ·THE WITNESS:· RBC is a Canadian 24· · · · ·A· · ·I see the e-mail from Megan. 25· · · · ·investment bank that has offices, to my 25· · · · ·Q· · ·And she says in this e-mail:· Angelo, www.LexitasLegal.com/Premier Lexitas 888-267-1200 0157 Pages 62–65 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 66 Page 68 ·1· ·Erik, Mark, I'm looking at potentially rescheduling ·1· · · · ·referenced that it included the full ·2· ·the bi-weekly board meeting again from tomorrow ·2· · · · ·board. ·3· ·afternoon to Friday with the idea that we are more ·3· · · · · · · ·So as a board member and one of ·4· ·likely to have a material update on Capitan by Friday ·4· · · · ·many board members, we listen to updates ·5· ·morning. ·5· · · · ·from the management team and their ·6· · · · · · · ·Do you see that? ·6· · · · ·recommendations. ·7· · · · ·A· · ·I see that it says:· I'm looking to ·7· ·BY MR. CAFORIO: ·8· ·potentially rescheduling the bi-weekly board meeting ·8· · · · ·Q· · ·And when you said you -- you would ·9· ·again from tomorrow afternoon to Friday morning with ·9· ·receive updates from and listen to the management 10· ·the idea that we are more likely to have a material 10· ·team, you're referring to the Primexx management 11· ·update on Capitan by Friday morning.· Would you guys 11· ·team? 12· ·like to move the meeting to Friday morning?· If so, 12· · · · ·A· · ·I believe, in this specific instance, the 13· ·please let me know your availability, and I will 13· ·board heard updates from the management team and then 14· ·check general board availability based on the window 14· ·also from RBC, who the board had retained on its 15· ·you provided. 15· ·behalf to evaluate strategical turn of events more 16· · · · ·Q· · ·She references a material update on -- 16· ·broadly. 17· ·and I don't know if that's Captain or Capitan. 17· · · · ·Q· · ·And I just want to clarify, when you were 18· · · · · · · ·Do you see that? 18· ·saying management team, are you referring to the 19· · · · ·A· · ·I see -- I see it spelled C-A-P-I-T-A-N. 19· ·Primexx management team? 20· · · · ·Q· · ·And do you know -- do you understand what 20· · · · ·A· · ·Yes. 21· ·that's a reference to? 21· · · · ·Q· · ·Okay.· That group of people we looked at, 22· · · · ·A· · ·I do not recall. 22· ·Megan Davis, Sam Blatt, Chris Doyle, Chase White 23· · · · ·Q· · ·Okay.· You don't recall that Capitan was 23· ·located in Texas working for Primexx? 24· ·the code name that Blackstone and Primexx used to 24· · · · · · · ·Is that who you're referring to as the 25· ·discuss the upcoming Callon transaction? 25· ·management team? Page 67 Page 69 ·1· · · · ·A· · ·I do not recall. ·1· · · · ·A· · ·I believe those were some of -- I believe ·2· · · · ·Q· · ·One way or the other? ·2· ·those were some of the individuals of the executive ·3· · · · ·A· · ·I do not recall. ·3· ·team that were involved at Primexx. ·4· · · · ·Q· · ·And you responded to Ms. Davis that -- ·4· · · · · · · ·THE WITNESS:· Bryan, do you mind? ·5· ·you wrote:· Yes, thanks, and then provided the window ·5· · · · ·We're on the hour again, and I had a fair ·6· ·that you were free for the call, correct? ·6· · · · ·amount of coffee this morning.· Do you ·7· · · · ·A· · ·I wrote back:· Yes, thanks.· I can free ·7· · · · ·mind if I take a nature break? ·8· ·up 11:30 to 3:00 p.m. Eastern on Friday, parentheses, ·8· · · · · · · ·MR. CAFORIO:· Five minutes. ·9· ·or other times if those don't work. ·9· · · · · · · ·THE WITNESS:· Okay.· Thank you so 10· · · · ·Q· · ·Do you recall if bi-weekly meetings did 10· · · · ·much. 11· ·start occurring in the June 2021 time period as 11· · · · · · · ·THE VIDEOGRAPHER:· Stand by.· The 12· ·Primexx and Blackstone started closing in on the 12· · · · ·time is 11:05 a.m.· We're going off the 13· ·Callon transaction? 13· · · · ·record. 14· · · · · · · ·MR. DESAI:· Objection.· Form. 14· · · · · · · · · · · (Brief pause.) 15· · · · · · · ·THE WITNESS:· I do not recall. 15· · · · · · · ·THE VIDEOGRAPHER:· The time is 16· ·BY MR. CAFORIO: 16· · · · ·11:10 a.m.· We're going back on the 17· · · · ·Q· · ·And do you recall if -- do you recall 17· · · · ·record. 18· ·what role you played on these calls with the Primexx 18· ·BY MR. CAFORIO: 19· ·team discussing the potential Callon transaction, and 19· · · · ·Q· · ·All right.· Welcome back, Mr. Acconcia. 20· ·I just mean in general? 20· ·You understand you're still under oath? 21· · · · · · · ·Were you an active participant, or would 21· · · · ·A· · ·I do.· Thank you. 22· ·you mainly just sit silently on the calls? 22· · · · ·Q· · ·Okay.· I -- you mentioned just a few 23· · · · · · · ·MR. DESAI:· Objection.· Form. 23· ·minutes ago before the break that, throughout 2021, 24· · · · · · · ·THE WITNESS:· I believe the call 24· ·you would participate in board meetings for Primexx 25· · · · ·that was referenced in the e-mail 25· ·Energy Corporation and BPP Energy Partners; is that www.LexitasLegal.com/Premier Lexitas 888-267-1200 0158 Pages 66–69 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 70 Page 72 ·1· ·correct? ·1· ·which are listed in the management column, that they ·2· · · · ·A· · ·I believe I mentioned a general ·2· ·were located in Texas where Primexx was located, ·3· ·recollection as to attending board meetings. ·3· ·right? ·4· · · · ·Q· · ·We can look at one of those.· I put it ·4· · · · ·A· · ·I do not recall where the management team ·5· ·into the chat. ·5· ·specifically and personally was located.· I know a ·6· · · · · · · ·MR. CAFORIO:· If the court reporter ·6· ·number of them had different homes or would call in ·7· · · · ·would mark this as the next exhibit. ·7· ·from different locations.· So I can't comment on ·8· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·8· ·specifically where that team was located. ·9· · · · ·8 was marked for the record.) ·9· · · · ·Q· · ·Okay.· You do remember and we saw the 10· ·BY MR. CAFORIO: 10· ·document earlier where you met with Mr. Cook, 11· · · · ·Q· · ·You see it's a document with the Bates 11· ·Mr. Blatt, Mr. White and Ms. Davis in Dallas that 12· ·number at the bottom PRIMEXX029462, and it's a 12· ·same month, June 2021, right? 13· ·seven-page document going to 468. 13· · · · · · · ·MR. DESAI:· Objection.· Form. 14· · · · · · · ·Do you see that? 14· · · · · · · ·THE WITNESS:· I recall earlier in 15· · · · ·A· · ·I do. 15· · · · ·our discussion you referenced an e-mail 16· · · · ·Q· · ·And the title of this document is Minutes 16· · · · ·discussing logistics. 17· ·of a Joint Regular Meeting of the Board of Directors 17· ·BY MR. CAFORIO: 18· ·of Primexx Energy Corporation and the Board of 18· · · · ·Q· · ·Of meeting with those four Primexx 19· ·Managers of BPP Energy Partners, LLC, dated June 9th, 19· ·management members in Dallas, right? 20· ·2021. 20· · · · ·A· · ·Based on what I recall of that e-mail, 21· · · · · · · ·Do you see that? 21· ·that was an e-mail discussing logistics for a 22· · · · ·A· · ·I see the title at the top of the page. 22· ·potential meeting with those members of management. 23· · · · ·Q· · ·And are you familiar with the board 23· · · · ·Q· · ·In Dallas? 24· ·meeting minutes from Primexx Energy Corporation and 24· · · · ·A· · ·I believe that that is what the e-mail 25· ·BPP Energy Partners from your time serving on those 25· ·said. Page 71 Page 73 ·1· ·boards? ·1· · · · ·Q· · ·And your executive assistant said you ·2· · · · ·A· · ·I do not recall specifics. ·2· ·will be in Dallas that day, right? ·3· · · · ·Q· · ·This document it lists, for attendance, ·3· · · · ·A· · ·That is what the e-mail said. ·4· ·it has Primexx directors, BPP managers, management ·4· · · · ·Q· · ·Looking at these minutes from this ·5· ·and other attendees. ·5· ·June 9th, 2021 meeting that you attended, would you ·6· · · · · · · ·Do you see that? ·6· ·say you were an active participant at these board ·7· · · · ·A· · ·I see at the top there are different ·7· ·meetings or you generally left it to others? ·8· ·groups that are -- are mentioned. ·8· · · · · · · ·MR. DESAI:· Objection.· Form. ·9· · · · ·Q· · ·And you're the first one listed as a ·9· · · · · · · ·THE WITNESS:· If you don't mind, 10· ·Primexx Energy Corporation Director, correct? 10· · · · ·this is a seven-page document.· I'd like 11· · · · ·A· · ·I see my name within the Primexx director 11· · · · ·a moment to review it, please. 12· ·list. 12· · · · · · · ·MR. CAFORIO:· Yeah. 13· · · · ·Q· · ·And you're also the first name listed for 13· · · · · · · ·THE WITNESS:· Thank you.· Do you 14· ·the BPP manager list, correct? 14· · · · ·mind repeating the question, please? 15· · · · ·A· · ·I see myself as listed as one of ten 15· ·BY MR. CAFORIO: 16· ·people on that list. 16· · · · ·Q· · ·I don't know what the question was.· Now 17· · · · ·Q· · ·And this joint regular meeting of the 17· ·that you're familiar, we can go on. 18· ·Board of Directors of Primexx Energy Corporation and 18· · · · · · · ·So at this June 9th, 2021 board meeting 19· ·the Board of Managers for BPP Energy Partners was 19· ·that the minutes indicate was held in-person in 20· ·held on June 9th, 2021 in-person in Dallas, Texas and 20· ·Dallas and via teleconference, you actively 21· ·via teleconference, correct? 21· ·participated, would you agree? 22· · · · ·A· · ·That is what this document says. 22· · · · ·A· · ·I do not recall the specifics.· I'm noted 23· ·Although, I do not recall the specifics. 23· ·as one of the participants here amongst, you know, 24· · · · ·Q· · ·Okay.· And you understood that the 24· ·ten board of directors, six members of management and 25· ·management team that we discussed earlier, many of 25· ·three other attendees. www.LexitasLegal.com/Premier Lexitas 888-267-1200 0159 Pages 70–73 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 74 Page 76 ·1· · · · ·Q· · ·Sure.· For example, on the second page, ·1· ·achieved, continuing with a one-rig program would be ·2· ·in the third paragraph, the minutes note:· Angelo ·2· ·acceptable. ·3· ·Acconcia then expressed support for Doyle's ·3· · · · · · · ·Do you see that? ·4· ·indication that the biggest decision to be made by ·4· · · · ·A· · ·I see that paragraph as one of, you know, ·5· ·the board was to find a way to facilitate the ·5· ·ten paragraphs on the page. ·6· ·internal combination of Primexx and BPP. ·6· · · · ·Q· · ·And you don't have any reason to believe, ·7· · · · · · · ·Do you see that? ·7· ·as you sit here today, that you didn't state all of ·8· · · · ·A· · ·I see my name listed at the top of the ·8· ·that at the June 9th, 2021 board meeting that you ·9· ·page. ·9· ·attended, do you? 10· · · · ·Q· · ·Do you have any reason to believe that 10· · · · ·A· · ·I do not recall the specifics of this 11· ·what the minutes here indicate that you said is not 11· ·meeting. 12· ·accurate? 12· · · · ·Q· · ·But it was your general practice to 13· · · · ·A· · ·I do not recall the specifics of this 13· ·review board meetings for accuracy, correct? 14· ·meeting. 14· · · · ·A· · ·I or others from Blackstone would 15· · · · ·Q· · ·Was it your regular practice to review 15· ·typically review board meetings minutes. 16· ·minutes of board meetings that you attended after 16· · · · ·Q· · ·And it was generally your practice to 17· ·they came out? 17· ·correct any inaccuracies you saw in draft board 18· · · · ·A· · ·Generally speaking, yes.· I don't recall 18· ·meeting minutes, particularly if it misstated 19· ·specifically here. 19· ·something that you had said, right? 20· · · · ·Q· · ·And was it your general practice to make 20· · · · · · · ·MR. DESAI:· Objection.· Form. 21· ·sure any inaccurate minutes were corrected before 21· · · · · · · ·THE WITNESS:· I generally recall 22· ·they became the official record if you noticed any 22· · · · ·reviewing board meeting minutes. 23· ·inaccuracies? 23· ·BY MR. CAFORIO: 24· · · · ·A· · ·Generally speaking, I think that's a fair 24· · · · ·Q· · ·Now, in your role on the Blackstone deal 25· ·characterization. 25· ·team overseeing the Primexx investment, you Page 75 Page 77 ·1· · · · ·Q· · ·If we go to the fifth page, the last ·1· ·personally had communications with numerous ·2· ·paragraph here on Page 5 states:· Acconcia confirmed ·2· ·investment bankers in Texas regarding potential ·3· ·that Blackstone would not make additional investment ·3· ·Primexx transactions; is that fair? ·4· ·in the companies under the current capital structure. ·4· · · · · · · ·MR. DESAI:· Objection.· Form. ·5· · · · · · · ·Do you see that? ·5· · · · · · · ·THE WITNESS:· I do not recall. ·6· · · · ·A· · ·I see that sentence at the bottom of the ·6· ·BY MR. CAFORIO: ·7· ·page after a series of discussions from management ·7· · · · ·Q· · ·Do you recall communicating with David ·8· ·and other board directors' commentary. ·8· ·Habachy at Warburg Pincus regarding a potential ·9· · · · ·Q· · ·And then on the next page, in the third ·9· ·Primexx transaction in 2021? 10· ·full paragraph, it says:· Angelo Acconcia noted that 10· · · · ·A· · ·I do not recall. 11· ·the company's current position was significantly 11· · · · ·Q· · ·I'll put the next document in the chat. 12· ·different as compared to a year ago during the height 12· · · · · · · ·MR. CAFORIO:· If the court reporter 13· ·of the COVID pandemic and when oil prices were lower. 13· · · · ·could mark this as the next exhibit. 14· ·Acconcia noted that, given the change in position, a 14· · · · · · · ·(Deposition (Acconcia) Exhibit No. 15· ·one rig program could be acceptable, though it would 15· · · · ·9 was marked for the record.) 16· ·not be optimal to take advantage of current oil 16· ·BY MR. CAFORIO: 17· ·prices and the strong capabilities of the operating 17· · · · ·Q· · ·It's an e-mail chain starting with Bates 18· ·team.· He indicated that liquidity issues arise in 18· ·number BPP_0017182 and going through 187. 19· ·association with accelerating to optimize value, but 19· · · · · · · ·Do you see that? 20· ·that, if the liquidity issues could not be resolved, 20· · · · ·A· · ·Do you mind turning to the first page 21· ·the companies could simply run one rig eliminating 21· ·again. 22· ·the liquidity issues.· He stated his belief that the 22· · · · · · · ·I see that.· Thank you. 23· ·ability to lower liquidity risk and simultaneously 23· · · · ·Q· · ·And so going to the first -- there's a 24· ·optimize values were both available if the companies 24· ·whole lot of disclaimers for the last couple pages, 25· ·combined, but if that combination could not be 25· ·but the first actual e-mail is on Page 4, and you see www.LexitasLegal.com/Premier Lexitas 888-267-1200 0160 Pages 74–77 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 78 Page 80 ·1· ·it's an e-mail from a David Habachy. ·1· · · · ·A· · ·I do not recall. ·2· · · · · · · ·Do you know how to pronounce that name? ·2· · · · ·Q· · ·You were discussing that possible ·3· · · · ·A· · ·Reading it, I believe it's Habachy. ·3· ·combination, but you don't know? ·4· · · · ·Q· · ·It's an e-mail from David Habachy to you, ·4· · · · ·A· · ·I see the subject line here.· I do not ·5· ·dated February 3rd, 2021, with the subject Tall ·5· ·recall specifics. ·6· ·City/Primexx. ·6· · · · ·Q· · ·You also had calls and initiated ·7· · · · · · · ·Do you see that? ·7· ·communications with Richard Punches at EIG Global ·8· · · · ·A· · ·I see the e-mail from David with the ·8· ·Energy Partners in 2021 regarding a potential Primexx ·9· ·subject line you noted. ·9· ·transaction, correct? 10· · · · ·Q· · ·And Mr. Habachy wrote to you on 10· · · · ·A· · ·I do not recall. 11· ·February 3rd, 2021:· Angelo, hope you're well and off 11· · · · ·Q· · ·I put the next e-mail in the chat. 12· ·to a good start for 2021.· Here's to a better year 12· · · · · · · ·MR. CAFORIO:· Will the court 13· ·this year.· I thought it made sense to touch base on 13· · · · ·reporter mark this as the next exhibit. 14· ·a Warburg/Blackstone phone call on where things 14· · · · · · · ·(Deposition (Acconcia) Exhibit No. 15· ·settled out with Tall City and Primexx.· Both teams 15· · · · ·10 was marked for the record.) 16· ·data shared and had a number of discussions around a 16· ·BY MR. CAFORIO: 17· ·potential combination.· We've got enough to put 17· · · · ·Q· · ·Do you see this is a one-page e-mail 18· ·numbers on paper and wanted to share that high level 18· ·chain with Bates number BPP_0016597. 19· ·view with you and your team. 19· · · · · · · ·Do you see that? 20· · · · · · · ·Do you see that? 20· · · · ·A· · ·I see that noted at the bottom right-hand 21· · · · ·A· · ·I see that in the second paragraph, and 21· ·of the page. 22· ·it continues:· What works for a call next week to 22· · · · ·Q· · ·And this chain starts with an e-mail from 23· ·catch up on this?· Looking -- look forward to 23· ·you at Blackstone, dated February 1st, 2021, to 24· ·catching up.· I also think Peter separately reached 24· ·Richard Punches, II, at EIGpartners.com with the 25· ·out to David on the same topic. 25· ·subject Primexx Rosehill. Page 79 Page 81 ·1· · · · ·Q· · ·And Mr. Habachy is an investment banker ·1· · · · · · · ·Do you see that? ·2· ·in Houston, Texas for Warburg Pincus; is that ·2· · · · ·A· · ·I see an e-mail from me to Richard ·3· ·correct? ·3· ·Punches at the bottom of this document. ·4· · · · · · · ·MR. DESAI:· Objection.· Form. ·4· · · · ·Q· · ·And Mr. Punches was a Managing Director ·5· · · · · · · ·THE WITNESS:· I believe Warburg ·5· ·at EIG Global Energy Partners located in Houston, ·6· · · · ·Pincus is an investment firm that is ·6· ·Texas, correct? ·7· · · · ·based in New York City.· Where Peter, who ·7· · · · ·A· · ·I see, in the e-mail above, it lists his ·8· · · · ·is the head -- at the time, if I recall ·8· ·name and his address. ·9· · · · ·correctly, was the head of their energy ·9· · · · ·Q· · ·In Houston, Texas? 10· · · · ·team was based in New York City, along 10· · · · ·A· · ·That is what his signature block notes. 11· · · · ·with what I recall generally being at the 11· · · · ·Q· · ·And you sent the first e-mail in this 12· · · · ·time the majority of the investment team. 12· ·chain to Mr. Punches, right? 13· ·BY MR. CAFORIO: 13· · · · ·A· · ·Based on the document you pulled up, I 14· · · · ·Q· · ·I appreciate all that.· I'm just asking 14· ·don't see an e-mail from myself to Richard Punches 15· ·about David Habachy.· He's an investment banker 15· ·that -- 16· ·located in Houston, Texas, right? 16· · · · ·Q· · ·And you wrote in this e-mail:· Richard, 17· · · · · · · ·MR. DESAI:· Objection.· Form. 17· ·hope all is well.· Enjoyed catching up last week.· We 18· · · · · · · ·THE WITNESS:· I believe David was a 18· ·have a one-pager on Primexx we could share with you. 19· · · · ·member of the Warburg Pincus 19· ·Wanted to see if you have the same on Rosehill, in 20· · · · ·organization. 20· ·which case, we could exchange one-pagers and could 21· ·BY MR. CAFORIO: 21· ·set up a call for you to connect with Chris Doyle, 22· · · · ·Q· · ·In Houston? 22· ·Primexx's CEO, to discuss further. 23· · · · ·A· · ·I do not recall where he was located. 23· · · · · · · ·Do you see that? 24· · · · ·Q· · ·And Tall City Exploration is an oil and 24· · · · ·A· · ·I see that's what the e-mail says. 25· ·gas company headquartered in Midland, Texas, right? 25· · · · ·Q· · ·So you had actually caught up with www.LexitasLegal.com/Premier Lexitas 888-267-1200 0161 Pages 78–81 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 82 Page 84 ·1· ·Mr. Punches the week before you sent this e-mail to ·1· ·in-person in Houston discussing the Primexx deal? ·2· ·him, right? ·2· · · · ·A· · ·I do not recall. ·3· · · · · · · ·MR. DESAI:· Objection.· Form. ·3· · · · ·Q· · ·One way or the other? ·4· · · · · · · ·THE WITNESS:· Generally speaking, ·4· · · · ·A· · ·I do not recall. ·5· · · · ·investment firms had general dialogues ·5· · · · ·Q· · ·I put the next document in the chat. ·6· · · · ·more broadly to compare notes on ·6· · · · · · · ·MR. CAFORIO:· Would the court ·7· · · · ·industries or ideas, and so I recall ·7· · · · ·reporter mark this as the next exhibit. ·8· · · · ·general communications, you know, with ·8· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·9· · · · ·Richard across a number of things; much ·9· · · · ·11 was marked for the record.) 10· · · · ·similar to, you know, with David Habachy, 10· ·BY MR. CAFORIO: 11· · · · ·across a number of topics or Peter at 11· · · · ·Q· · ·It's an e-mail chain starting with Bates 12· · · · ·Warburg in New York across a number of 12· ·number BPP_0018234 going to 235. 13· · · · ·topics from time to time. 13· · · · · · · ·Do you see that? 14· ·BY MR. CAFORIO: 14· · · · ·A· · ·I do. 15· · · · ·Q· · ·And the topic here was a potential 15· · · · ·Q· · ·And the first e-mail on this chain starts 16· ·transaction between Primexx and Rosehill Exploration, 16· ·at the very bottom of the first page and goes to the 17· ·correct? 17· ·second page, but you see it's an e-mail from you, 18· · · · · · · ·MR. DESAI:· Objection.· Form. 18· ·Angelo Acconcia, dated June 13th, 2021, to Stephen 19· · · · · · · ·THE WITNESS:· This document shows 19· ·Trauber, subject Primexx. 20· · · · ·an e-mail that I sent Richard Punches 20· · · · · · · ·Do you see that? 21· · · · ·regarding setting up a call for him and 21· · · · ·A· · ·I see that at the bottom of the page. 22· · · · ·Chris Doyle. 22· · · · ·Q· · ·And you wrote the substance of your 23· ·BY MR. CAFORIO: 23· ·e-mail -- you'll see there's no substance on the 24· · · · ·Q· · ·For a potential transaction between 24· ·bottom of the first page.· It's on the second page, 25· ·Primexx and Rosehill, correct? 25· ·and you say:· Could you and the senior members of the Page 83 Page 85 ·1· · · · · · · ·MR. DESAI:· Objection.· Form. ·1· ·Capitan Citi team do a call tonight at 8:15 p.m. ·2· ·BY MR. CAFORIO: ·2· ·Eastern?· Chris will join, as well. ·3· · · · ·Q· · ·That's the subject of your e-mail, right, ·3· · · · · · · ·Do you see that? ·4· ·Primexx/Rosehill? ·4· · · · ·A· · ·I do. ·5· · · · ·A· · ·The e-mail says subject: ·5· · · · ·Q· · ·And you sent the first e-mail in this ·6· ·Primexx/Rosehill.· I do not recall specifics. ·6· ·chain to Mr. Trauber, right? ·7· · · · ·Q· · ·Okay.· And Rosehill Exploration is an oil ·7· · · · ·A· · ·Based on this document, it looks like I ·8· ·and gas company in Houston, Texas, right? ·8· ·sent the first e-mail. ·9· · · · ·A· · ·I do not recall where Rosehill was ·9· · · · ·Q· · ·And Mr. Trauber responded to you just 12 10· ·located. 10· ·minutes later that same day, June 13th, 2021, at 11· · · · ·Q· · ·Okay.· You also initiated calls with 11· ·11:00. 12· ·Stephen Trauber at Citi in 2021 about a transaction 12· · · · · · · ·Do you see that? 13· ·between Primexx and Callon Petroleum, correct? 13· · · · ·A· · ·Mr. Trauber responded to me with a copy 14· · · · ·A· · ·Stephen Trauber was an investment banker. 14· ·to two others at Blackstone. 15· ·So there were general conversations from time to 15· · · · ·Q· · ·And those were the people that you had 16· ·time.· I do not recall specific conversations. 16· ·put on your first e-mail, right?· Mr. Foley and 17· · · · ·Q· · ·And Mr. Trauber is an investment banker 17· ·Mr. Belz?· It looks like he just did a reply. 18· ·in Houston, Texas, correct? 18· · · · ·A· · ·It looks like those are the people that I 19· · · · ·A· · ·Mr. Trauber, I believe, was an investment 19· ·copied on the e-mail. 20· ·banker that worked for CitiGroup that had offices 20· · · · ·Q· · ·And you see Mr. Trauber's signature line; 21· ·across kind of the United States.· I believe he, at 21· ·he is the Vice Chairman and Global Co-Head of Natural 22· ·one time, worked out of a New York office, a Houston 22· ·Resources and Clean Energy Transition at Citi located 23· ·office or other parts of country where he had a 23· ·at 811 Main Street, Suite 3900, Houston, Texas, 24· ·number of homes, based on my general recollection. 24· ·right? 25· · · · ·Q· · ·And did you ever meet with Mr. Trauber 25· · · · ·A· · ·That's what it says in his signature www.LexitasLegal.com/Premier Lexitas 888-267-1200 0162 Pages 82–85 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 86 Page 88 ·1· ·block in the e-mail. ·1· ·with Trauber, much like other investment bankers, ·2· · · · ·Q· · ·And actually his signature block shows up ·2· ·over the course of years. ·3· ·in all of his e-mails, and it doesn't disappear after ·3· · · · ·Q· · ·I put the next document in the chat. ·4· ·one?· It's there later in the page, as well, right? ·4· · · · · · · ·(Deposition (Acconcia) Exhibit No. ·5· · · · ·A· · ·Based on this document, it looks like it ·5· · · · ·12 was marked for the record.) ·6· ·appears twice. ·6· ·BY MR. CAFORIO: ·7· · · · ·Q· · ·And he doesn't list any address in New ·7· · · · ·Q· · ·This is a document with Bates number ·8· ·York, does he? ·8· ·BPP_0006569 through 6570. ·9· · · · ·A· · ·I see what's here on the page, which is ·9· · · · · · · ·Do you see that? 10· ·his signature page. 10· · · · ·A· · ·Do you mind turning to the second page, 11· · · · ·Q· · ·And it doesn't list an address in New 11· ·please.· I see that. 12· ·York, does it? 12· · · · ·Q· · ·And this document is an e-mail chain that 13· · · · ·A· · ·I don't see -- I don't see any -- other 13· ·starts with an e-mail from you dated August 1st, 14· ·addresses. 14· ·2021. 15· · · · ·Q· · ·It doesn't list any of the homes around 15· · · · · · · ·Do you see that? 16· ·the country that you referenced earlier, did you -- 16· · · · ·A· · ·I see an e-mail at the bottom of this 17· ·does it? 17· ·document from me to other members at Blackstone. 18· · · · ·A· · ·Not from what I can read in this 18· · · · ·Q· · ·To Erik Belz, Mark Henle, Anika Gautam, 19· ·document. 19· ·with the subject Primexx merger workstreams, right? 20· · · · ·Q· · ·It just lists his address in Houston, 20· · · · ·A· · ·I believe that's what it says.· That's 21· ·Texas, right? 21· ·what the heading says. 22· · · · ·A· · ·Under this signature block in his e-mail, 22· · · · ·Q· · ·And you said:· Team, thanks for your 23· ·lists that address. 23· ·efforts relates to the Capitan transaction. I 24· · · · ·Q· · ·And Citi is the investment bank that 24· ·thought it might be helpful and efficient to 25· ·Callon Petroleum used to effectuate the ultimate 25· ·summarize my thoughts on workstreams over the next 48 Page 87 Page 89 ·1· ·transaction with Primexx, correct? ·1· ·hours to get this to signing.· Please add/amend as ·2· · · · ·A· · ·I believe that that is the case. ·2· ·you see fit and reply to the group.· We can discuss ·3· · · · ·Q· · ·And Mr. Trauber was the primary person at ·3· ·if you like later today, but I think we are all ·4· ·Citi that you interacted with regarding the ·4· ·up-to-speed on these, given our call this morning, ·5· ·Primexx/Callon transaction, correct? ·5· ·and then you listed one through 13 different items ·6· · · · ·A· · ·My primary interactions were with the ·6· ·for the signing workstream for the Primexx merger, ·7· ·Board of Directors, and the management team at ·7· ·right? ·8· ·Primexx was the primary group that had interactions ·8· · · · ·A· · ·What this document shows is -- or it's an ·9· ·with RBC, and I believe RBC was the primary group ·9· ·e-mail from me to members of -- some of the members 10· ·that interacted with Citi. 10· ·of the Blackstone team that lists a number of items 11· · · · ·Q· · ·I appreciate all that.· I'm just asking 11· ·at the bottom of it. 12· ·for you personally.· When you communicated, when you 12· · · · ·Q· · ·And those are the items that you wrote 13· ·personally, Mr. Acconcia, communicated with somebody 13· ·were the workstreams over the next 48 hours to get 14· ·at Citi regarding the Primexx/Callon transaction, 14· ·the transaction to signing, right? 15· ·Mr. Trauber was your primary contact, right? 15· · · · ·A· · ·Based on this e-mail, it looks like I'm 16· · · · ·A· · ·I do not recall specifics. 16· ·referring to my thoughts on some of -- of the 17· · · · ·Q· · ·But you were familiar enough with 17· ·workstreams. 18· ·Mr. Trauber to know about his multiple homes across 18· · · · ·Q· · ·And then you forwarded your e-mail to 19· ·the country? 19· ·David Foley later that day, right? 20· · · · ·A· · ·Mr. Trauber, as the Global Co-Head of 20· · · · ·A· · ·Based on this, that's what it looks like. 21· ·Natural Resources and Clean Energy Transition, was 21· · · · ·Q· · ·And you wrote:· FYI only.· So you 22· ·involved across Citi's activities, and there were a 22· ·understand key workstreams, right? 23· ·number of dialogues, from time to time, across 23· · · · ·A· · ·That's -- that's what this document 24· ·various investments and various opportunities or 24· ·reads. 25· ·financings that created a dialogue and relationship 25· · · · ·Q· · ·And Mr. Foley responded to you: www.LexitasLegal.com/Premier Lexitas 888-267-1200 0163 Pages 86–89 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 90 Page 92 ·1· ·Regarding the press release, the less mention of ·1· · · · ·13 was marked for the record.) ·2· ·Blackstone the better.· Clearly Callon needs to do a ·2· ·BY MR. CAFORIO: ·3· ·press release as a public company, but I don't think ·3· · · · ·Q· · ·It's BPP_0019155 through 157. ·4· ·Primexx should do its own press release, too. I ·4· · · · · · · ·Do you see that? ·5· ·don't think we should have any BX people quoted in ·5· · · · ·A· · ·Do you mind turning to the second page, ·6· ·this.· At announcement, the valuation of Primexx is ·6· ·please.· Okay, and then the third page.· Thank you. ·7· ·only going to be 70 cents on our dollar of cost.· So ·7· · · · · · · ·I see that at the bottom right-hand of ·8· ·let's just keep a low profile, right? ·8· ·the page. ·9· · · · ·A· · ·That is, I believe, what his -- that is ·9· · · · ·Q· · ·And this is an e-mail from Mark Henle to 10· ·what his response says. 10· ·you, copying Erik Belz and Anika Gautam on August 11· · · · ·Q· · ·And then you responded to him later that 11· ·22nd, 2020 with the subject:· Talking points for 12· ·day:· Completely agree on the low profile.· That is 12· ·discussion with Joe, right? 13· ·our intent, right? 13· · · · ·A· · ·That is what that first statement -- 14· · · · ·A· · ·I believe that's what it says at the top, 14· ·first sentence says. 15· ·or that is what it says at the top. 15· · · · ·Q· · ·Yeah, and it says:· Angelo, ahead of our 16· · · · ·Q· · ·This wasn't a transaction that you or the 16· ·team catch-up on Monday, please see attached talking 17· ·Blackstone team were particularly proud of, was it? 17· ·points for the discussion with Joe.· FYI we had been 18· · · · · · · ·MR. DESAI:· Objection.· Form. 18· ·waiting to circulate these pending a few bullets from 19· · · · · · · ·THE WITNESS:· I do not recall the 19· ·Chris regarding the productivity of Primexx's wells 20· · · · ·specifics. 20· ·and preferred development approach, which we received 21· ·BY MR. CAFORIO: 21· ·this weekend, right? 22· · · · ·Q· · ·Just that you wanted to keep a low 22· · · · ·A· · ·That's what the e-mail says. 23· ·profile and keep Blackstone's name out of it? 23· · · · ·Q· · ·And attached to the e-mail are the actual 24· · · · · · · ·MR. DESAI:· Objection.· Form. 24· ·talking points for discussion with Joe Gatto, right? 25· · · · · · · ·THE WITNESS:· I do not recall. 25· · · · ·A· · ·I don't recall the specifics of this Page 91 Page 93 ·1· ·BY MR. CAFORIO: ·1· ·document.· It looks like there are a number of bullet ·2· · · · ·Q· · ·Now, after the transaction was ·2· ·points that cover a number of topics. ·3· ·announced -- the Callon/Primexx transaction was ·3· · · · ·Q· · ·And you and Mr. Henley ultimately ·4· ·announced, you participated in a meeting with Joe ·4· ·participated in the call with Joe Gatto on the Callon ·5· ·Gatto, right? ·5· ·executive team in August of 2021, right? ·6· · · · ·A· · ·I do not recall. ·6· · · · · · · ·MR. DESAI:· Objection.· Form. ·7· · · · ·Q· · ·Do you know who Joe Gatto is? ·7· · · · · · · ·THE WITNESS:· I do not recall. ·8· · · · ·A· · ·I believe he was a member of the ·8· ·BY MR. CAFORIO: ·9· ·executive team at -- at Callon, if I recall ·9· · · · ·Q· · ·You don't recall one way or the other if 10· ·correctly. 10· ·you had that meeting with the CEO of Callon while 11· · · · ·Q· · ·He was the CEO of Callon Petroleum when 11· ·closing the merger between Primexx and Callon? 12· ·you effectuated the Primexx/Callon transaction, 12· · · · ·A· · ·I do not recall specifics. 13· ·right? 13· · · · · · · ·MR. CAFORIO:· Well, I think, with 14· · · · ·A· · ·I don't recall his specific title.· I do 14· · · · ·the five minutes to spare before your 15· ·recall his general involvement. 15· · · · ·hard stop, we can stop right there on our 16· · · · ·Q· · ·He was the CEO located in Houston, Texas 16· · · · ·end. 17· ·at Callon's headquarters in Houston, Texas? 17· · · · · · · ·MR. DESAI:· We'll reserve our 18· · · · · · · ·You don't recall that? 18· · · · ·questions. 19· · · · ·A· · ·Sometimes CEOs go by different titles. 19· · · · · · · ·THE VIDEOGRAPHER:· Stand by.· The 20· ·So I don't recall his specific title, and I don't 20· · · · ·time is 11:56 a.m.· We're going off the 21· ·recall where he was located. 21· · · · ·record. 22· · · · · · · ·MR. CAFORIO:· And if the court 22 23· · · · ·reporter would mark this as the next 23· · · · · · · ·(Thereupon, the deposition was 24· · · · ·exhibit. 24· · · · ·concluded at approximately 11:56 a.m.) 25· · · · · · · ·(Deposition (Acconcia) Exhibit No. 25 www.LexitasLegal.com/Premier Lexitas 888-267-1200 0164 Pages 90–93 YVer1f PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 94 Page 96 ·1· · · · · · ERRATA SHEET FOR THE TRANSCRIPT OF: ·1· · · · · · · · · · ·NO. 24-BC01B-0010 ·2 ·2· ·Case Name:· · · · · · Primexx v. Blackstone · · ·PRIMEXX ENERGY· · · · · ·: IN THE BUSINESS COURT ·3· ·OPPORTUNITY FUND, LP AND : ·3· ·Dep. Date:· · · · · · February 21, 2025 · · ·PRIMEXX ENERGY· · · · · ·: ·4· ·Deponent:· · · · · · ·Angelo Acconcia ·4· ·OPPORTUNITY FUND II, LP, : · · · · · · · · · · · · · · · : ·5· · · · · · · · · · · · CORRECTIONS ·5· · · · · · · Plaintiff,· · : · · · · · · · · · · · · · · · : FIRST BUSINESS COURT ·6· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason ·6· · · · vs.· · · · · · · · ·: DIVISION ·7· ·_____ _____ _______________ ______________ __________ · · · · · · · · · · · · · · · : ·7· ·PRIMEXX ENERGY· · · · · ·: ·8· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason · · ·CORPORATION, M.· · · · · : ·8· ·CHRISTOPHER DOYLE,· · · ·: ·9· ·_____ _____ _______________ ______________ __________ · · ·ANGELO ACCONCIA,· · · · ·: 10· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason ·9· ·BLACKSTONE INC.,· · · · ·: · · ·BLACKSTONE HOLDINGS III : 11· ·_____ _____ _______________ ______________ __________ 10· ·LP, BLACKSTONE EMA II· · : 12· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason · · ·LLC, BMA VII LLC,· · · · : DALLAS COUNTY, TEXAS 11· ·BLACKSTONE ENERGY· · · · : 13· ·_____ _____ _______________ ______________ __________ · · ·MANAGEMENT ASSOCIATES· · : 12· ·II LLC, BLACKSTONE· · · ·: 14· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason · · ·ENERGY PARTNERS II LP,· ·: 15· ·_____ _____ _______________ ______________ __________ 13· ·BLACKSTONE MANAGEMENT· · : · · ·ASSOCIATES VII LLC,· · · : 16· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason 14· ·BLACKSTONE CAPITAL· · · ·: · · ·PARTNERS VII LP, BCP· · ·: 17· ·_____ _____ _______________ ______________ __________ 15· ·VII/BEP II HOLDINGS· · · : 18· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason · · ·MANAGER LLC, BX PRIMEXX : 16· ·TOPCO LLC, AND BPP· · · ·: 19· ·_____ _____ _______________ ______________ __________ · · ·HOLDCO LLC,· · · · · · · : 20· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason 17· · · · · · · · · · · · · · : · · · · · · · · Defendants.· ·: 21· ·_____ _____ _______________ ______________ __________ 18· ·_____________________________________________________ 19· · · · · · · · · REPORTER'S CERTIFICATION 22· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason 20· · · · · VIDEOTAPED DEPOSITION OF ANGELO ACCONCIA 23· ·_____ _____ _______________ ______________ __________ 21· · · · · · · · · · ·February 21, 2025 22· ·_____________________________________________________ 24· ·Pg.· ·Ln.· ·Now Reads· · · ·Should Read· · Reason 23· · · · · · ·I, Tanya L. Verhoven-Page, CSR-TX, CSR-GA, 24· ·LCR-TN, certified Shorthand Reporter in and for the 25· ·_____ _____ _______________ ______________ __________ 25· ·State of Texas, hereby certify to the following: Page 95 Page 97 ·1· · · · · · ·I, ANGELO ACCONCIA, have read the foregoing ·1· · · · · · ·That the witness, ANGELO ACCONCIA, was duly ·2· ·sworn by the officer, and that the transcript of the ·2· ·deposition and hereby affix my signature that same is ·3· ·oral deposition is a true record of the testimony ·3· ·true and correct, except as noted above. ·4· ·given by the witness; ·4 ·5· · · · · · ·That the deposition transcript was ·5· · · · · · · · · · · · · · ___________________________ ·6· ·submitted on February 25th, 2025 to the witness or to · · · · · · · · · · · · · · · ANGELO ACCONCIA ·7· ·the attorney for the witness for examination, ·6 ·8· ·signature, and return to me by ____________________; ·7· ·THE STATE OF________________) ·9· · · · · · ·That the amount of examination time used by ·8· ·COUNTY OF___________________) 10· ·each party at the deposition is as follows: ·9 11· · · · · · ·BY MR. CAFORIO:· · · · · 02:49:10 10· · · · · · ·Before me,___________________________, on 12· · · · · · ·BY MR. DESAI:· · · · · · 00:00:00 11· ·this day personally appeared ANGELO ACCONCIA, known 13· · · · · · ·BY MR. EWING:· · · · · · 00:00:00 12· ·to me (or proved to me under oath or 14· · · · · · ·BY MR. LEVESQUE:· · · · ·00:00:00 13· ·through______________________) (description of 15· · · · · · ·That pursuant to information given to the 16· ·deposition officer at the time said testimony was 14· ·identity card or other document)) to be the person 17· ·taken, the following includes counsel for all parties 15· ·whose name is subscribed to the foregoing instrument 18· ·of record: 16· ·and acknowledged to me that they executed the same 19 17· ·for the purposes and consideration therein expressed. · · · · · · ·ON BEHALF OF THE PLAINTIFFS: 18· · · · · · ·Given under my hand and seal of office this 20 19· ·____________day of______________________,_________. · · · · · · · SUSMAN GODFREY, LLP 20 21· · · · · · 1900 Avenue of the Stars 21 · · · · · · · Suite 1400 22· · · · · · · · · · · · ·____________________________ 22· · · · · · Los Angeles, California 90067 · · · · · · · · · · · · · ·NOTARY PUBLIC IN AND FOR · · · · · · · BRYAN CAFORIO, ESQ. 23· · · · · · · · · · · · ·THE STATE OF_________________ 23 24 24 25· ·COMMISSION EXPIRES:_________________ 25 www.LexitasLegal.com/Premier Lexitas 888-267-1200 0165 Pages 94–97 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Page 98 Page 100 ·1· · · · · ·ON BEHALF OF DEFENDANT BLACKSTONE AND ANGELO ·1· · · · ·FURTHER CERTIFICATION UNDER RULE 203, TRCP · · · · · · ·ACCONCIA: ·2· · · · The original deposition/errata sheet was / was ·2 ·3· ·not returned to the deposition officer on · · · · · · · LYNN, PINKER, HURST & SCHWEGMANN ·4· ·_________________; ·3· · · · · · 2100 Ross Avenue · · · · · · · Suite 2700 ·5· · · · If returned, the attached Changes and Signature ·4· · · · · · Dallas, Texas 75201 ·6· ·page contains any changes and the reasons therefor; · · · · · · · YAMAN DESAI, ESQ. ·7· · · · If returned, the original deposition was ·5 ·8· ·delivered to Custodial Attorney; ·6 ·9· · · · That $___________ is the deposition officer's ·7· · · · · ·ON BEHALF OF DEFENDANT PRIMEXX ENERGY 10· ·charges to the Plaintiff for preparing the original · · · · · · ·CORPORATION: ·8 11· ·deposition transcript and copies of exhibits, if any; · · · · · · · KIRKLAND & ELLIS, LLP 12· · · · That the deposition was delivered in accordance ·9· · · · · · 401 Congress Avenue 13· ·with Rule 203.3, and that a copy of this certificate · · · · · · · Austin, Texas 78701 14· ·was served on all parties shown herein on 10· · · · · · ZACK C. EWING, ESQ. 15· ·__________________ and filed with the Clerk. 11 16· · · · Certified to by me on _______________________. 12 13· · · · · ·ON BEHALF OF DEFENDANT M. CHRISTOPHER DOYLE: 17 14· · · · · · TROUTMAN PEPPER LOCKE, LLP 18 · · · · · · · 2200 Ross Avenue 19 15· · · · · · Suite 2800 20· · · · · · · · ______________________________________ · · · · · · · Dallas, Texas 75201 · · · · · · · · · Tanya L. Verhoven-Page 16· · · · · · TAYLOR LEVESQUE, ESQ. 21· · · · · · · · Texas CSR No. 12254, Exp. 12/25 17 18 · · · · · · · · · Lexitas-NG Reporting 19· · · · · · ·I further certify that I am neither counsel 22· · · · · · · · Firm Registration #736 20· ·for, related to, nor employed by any of the parties · · · · · · · · · 999 Old Eagle Road, Suite 118 21· ·or attorneys in the action in which this proceeding 23· · · · · · · · Wayne, Pennsylvania 19087 22· ·was taken, and further that I am not financially or · · · · · · · · · 215-494-7650 23· ·otherwise interested in the outcome of the action. 24 24· · · · · · ·Further certification requirements pursuant 25· ·to Rule 203 of TRCP will be certified to after they 25 Page 99 ·1· ·have occurred. ·2· · · · · · ·Certified to by me this day, the ____ day ·3· ·of ________________________ ·4 ·5 ·6 ·7 ·8 ·9 10 11 12 13· · · · · · · · · · ___________________________________ · · · · · · · · · · · Tanya L. Verhoven-Page 14· · · · · · · · · · Texas CSR No. 12254, Exp. 12/25 · · · · · · · · · · · Lexitas-NG Reporting 15· · · · · · · · · · Firm Registration #736 · · · · · · · · · · · 999 Old Eagle Road, Suite 118 16· · · · · · · · · · Wayne, Pennsylvania 19087 · · · · · · · · · · · 215-494-7650 17 18 19 20 21 22 23 24 25 www.LexitasLegal.com/Premier Lexitas 888-267-1200 Pages 0166 98–100 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 69:23 70:20 71:20 72:12 73:5,18 76:8 6570 88:8 0 77:9 78:5,11,12 80:8,23 83:12 84:18 68 24:19 85:10 88:14 93:5 0005954 55:18 69 24:18 2022 14:8,19 6:30 54:9 2025 8:1,8 21:17 94:3 1 21 8:1 94:3 7 1 17:10,11 21:6,8 24:20 39:9 21st 8:7 10 80:15 22nd 92:11 7 28:17 65:14 100 17:10 235 84:12 70 90:7 10:07 40:24 24th 21:17 46:22 74 28:1,16 10:12 41:3 25th 53:17 54:1,7,20,23 8 11 84:9 27 46:18 11:00 85:11 28th 50:6 8 70:9 11:05 69:12 29th 47:10,22 48:15 49:1 811 85:23 11:10 69:16 8:15 85:1 3 11:30 67:8 9 11:56 93:20,24 3 52:25 53:2 12 85:9 88:5 30 17:17 55:20 56:9 57:9 9 77:15 12th 28:21 30th 57:18 9:05 8:2,7 13 89:5 92:1 3700 63:15 9th 70:19 71:20 73:5,18 76:8 13th 84:18 85:10 3900 85:23 14 22:8,10 @ 3:00 67:8 150 25:7 26:5 29:10 3rd 60:12,24 78:5,11 @primexx.com 50:19 153 25:14 29:21 157 92:3 4 A 15th 62:16 4 55:6 77:25 a.m. 8:2,7 40:24 41:3 59:13 69:12,16 186,006 29:23 93:20,24 468 70:13 187 77:18 ability 12:19 75:23 48 88:25 89:13 1st 80:23 88:13 accelerating 75:19 5 acceptable 75:15 76:2 2 access 13:19 5 60:4 75:2 2 46:9,11 Acconcia 8:10,25 9:22 10:3 21:7 546 60:8 25:25 27:5,14 41:6 46:8 52:12 53:1 2004 14:16,18 15:1,22,24 55:5 60:3 62:4 65:13 69:19 70:8 74:3 553 62:8 2016 16:18 18:21 28:21 42:24 75:2,10,14 77:14 80:14 84:8,18 87:13 5954 55:14 88:4 91:25 94:4 95:1,5,11 2020 60:12,24 92:11 5:30 54:9 accuracy 76:13 2020-2021 43:14 accurate 14:8,10 15:3,20 16:7 37:2 2021 14:19 15:2,22 16:18 18:22 6 38:16 48:11 74:12 42:24 43:4,21,25 44:4,21 45:2 46:2, 22 47:10,22 48:15 49:1,18,21 50:6 6 62:5 achieved 76:1 53:17 54:1,7 55:21 56:9 57:9,19 acknowledged 95:16 61:20 62:16 64:16,17 65:1 67:11 609 63:15 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: 0005954–acknowledged 0167 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 active 67:21 73:6 approve 33:23 bathroom 12:8 actively 73:20 approximately 93:24 begin 12:16 activities 43:17 44:8 58:3 65:7 87:22 April 62:16 64:17 beginning 8:18 actual 15:9 21:25 28:3 77:25 92:23 Arclight 14:4,5,12,18,21 behalf 8:14,21,24 9:4,7,9 10:7 24:8 25:9 30:7 43:3 45:2 60:20 63:7 68:15 add/amend 89:1 arise 75:18 belief 75:22 additional 75:3 aspects 34:24 Belz 36:15 37:1,11 38:3,8,12,14 address 26:2 50:19 60:24 61:5 63:3 assets 17:7 41:19 47:11,23 65:22 85:17 88:18 64:15 81:8 86:7,11,20,23 assistant 53:14 54:7,17 60:18,22 92:10 addresses 86:14 61:12 63:6 73:1 Belz's 38:6 advantage 75:16 association 75:19 bi-weekly 66:2,8 67:10 advise 54:2 assume 10:23 biggest 74:4 affects 12:19 attached 24:20 92:16,23 billion 17:10,11 affirm 9:18 attempting 43:4 bit 25:7 affix 95:2 attendance 71:3 Blackstone 8:12 9:1 14:13,15,17,21 afternoon 59:14 66:3,9 attended 73:5 74:16 76:9 15:1,5,16,18,19,22 16:2,6,15,18,21, 22,24,25 17:1,25 18:4,8,9,23 19:6,9, agree 26:11 73:21 90:12 attendees 71:5 73:25 18,19,25 20:3 22:12 23:10,14,16,20 agreement 24:23 25:1 26:6 28:5,10, attending 70:3 24:1,3,8,12,16 25:22 31:17,21 32:4, 15,20 30:7,11 31:4,8,13,19 39:14 15,17 33:1,7 34:5,16,17,21,22 35:1,4, attention 25:24 12,16,20,24 36:2,5,10,18 37:7 38:7, 42:13,19,21 August 88:13 92:10 93:5 19,24 39:18,19,20 41:11,18 42:7,11 ahead 25:6,7 92:15 43:4,11,13 44:3 45:2,5 46:3 47:12,24 availability 66:13,14 56:9,19,22 57:1,3 59:1,9 61:5,18 63:7 aim 12:7 aware 24:10 65:3 66:24 67:12 75:3 76:14,24 80:23 Amended 21:11 24:22,25 28:4,9,15, 85:14 88:17 89:10 90:2,17 94:2 19 30:6 39:13 B Blackstone's 20:2 32:6 35:7,21 America 64:1 36:3,19 38:20,25 39:7 40:6 41:24 amount 69:6 42:23 43:2 44:1 52:4 90:23 B-E-L-Z 38:4 analyst 15:24 back 9:14 14:7 24:21 26:5 28:1 29:9 Blackstone/primexx 37:3 Angela 27:5 33:6 35:15,23 39:9 41:3,6 56:25 Blatt 50:20,23,24 58:21 61:7 68:22 57:14 67:7 69:16,19 72:11 Angelo 8:9 9:22 25:24 27:14 53:18, 20 54:2 65:25 74:2 75:10 78:11 84:18 back-to-back 57:14,18,23 59:10 block 47:2 51:22 81:10 86:1,2,22 92:15 94:4 95:1,5,11 background 13:17 board 42:2,3,6,7 49:14,15,16 65:5 Anika 36:25 37:13 88:18 92:10 66:2,8,14 68:2,3,4,13,14 69:24 70:3, Ballpark 17:10 17,18,23 71:18,19 73:6,18,24 74:5,16 announced 91:3,4 bank 63:25 86:24 75:8 76:8,13,15,17,22 87:7 announcement 90:6 banker 79:1,15 83:14,17,20 boards 71:1 answers 10:13 bankers 77:2 88:1 bottom 22:14 28:17 46:12 53:5,16 Apologies 43:7 56:15 57:8 59:18 62:14 65:19 70:12 Baratta 19:3,22,23 75:6 80:20 81:3 84:16,21,24 88:16 apologize 28:7 30:25 38:21 40:13 base 78:13 89:11 92:7 41:13 based 54:16 66:14 72:20 79:7,10 BPP 22:14 25:9,11,16,19,21 26:7,12, appeared 95:11 81:13 83:24 85:7 86:5 89:15,20 17,19,20,25 27:6,7,14,15,23 29:6,11, appears 22:11 25:8 60:11 86:6 16,19,23 30:2,7 69:25 70:19,25 71:4, basically 16:14 14,19 74:6 approach 92:20 Bates 53:5 55:14 60:7 62:7 65:16 BPP_0005953 55:14,16 appropriately 20:25 70:11 77:17 80:18 84:11 88:7 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: active–BPP_0005953 0168 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 BPP_0006569 88:8 Callon's 91:17 Christopher 9:7 BPP_0016545 60:7 Callon/primexx 91:3 circulate 92:18 BPP_0016597 80:18 calls 13:10 63:8 67:18,22 80:6 83:11 Citi 83:12 85:1,22 86:24 87:4,10,14 BPP_0017182 77:18 Canadian 63:24 Citi's 87:22 BPP_0017552 62:8 capabilities 75:17 Citigroup 83:20 BPP_0017994 53:5 capital 14:4 39:18 63:11 75:4 city 13:6 78:15 79:7,10,24 BPP_0018234 84:12 Capitan 66:4,11,17,23 85:1 88:23 City/primexx 78:6 BPP_0018469 65:17 Captain 66:17 clarification 31:5 BPP_0018525 46:14 card 95:14 clarify 33:9 68:17 BPP_0019155 92:3 care 25:22 clarifying 47:19 branches 19:14 carried 38:19,25 39:2 40:4,12 classes 29:2 break 12:7,8,10,12 40:16 69:7,23 case 10:21,23,24 11:4 21:24 22:3,6 clause 39:16 32:21 35:14 61:16 81:20 87:2 94:2 broader 18:11 34:20 Clean 85:22 87:21 catch 78:23 broadly 68:16 82:6 closing 67:12 93:11 catch-up 92:16 Bryan 8:20 9:11 10:4 38:22 52:10,22 Co-head 85:21 87:20 69:4 catching 78:24 81:17 code 46:13 66:24 bullet 93:1 caught 81:25 coffee 69:6 bullets 92:18 CC'D 50:11 colon 26:10 bunch 22:13 cents 90:7 column 72:1 business 10:21 19:8,19 21:19,25 CEO 17:25 81:22 91:11,16 93:10 combination 74:6 75:25 78:17 80:3 BX 90:5 CEOS 91:19 combined 75:25 chain 18:11 46:22 47:8 50:14 53:8,16 comment 44:17 72:7 C 55:19 56:2,6,7 62:11 63:10 77:17 80:18,22 81:12 84:11,15 85:6 88:12 commentary 75:8 C-A-P-I-T-A-N 66:19 Chairman 85:21 COMMISSION 95:25 Caforio 8:20 10:2,4 21:3,9 22:19 change 75:14 committee 16:20 33:3,4,10,13,20,23 23:19 24:2,9,17 26:23 27:3,12,19 34:2,4,12,14,19,20 30:22,23 32:11 40:17,22 41:5,15 changed 15:23 43:9,19 44:10 45:7 46:10 52:14,21,23 communicate 13:20 49:17,21 characterization 33:21 35:19 40:8 53:3 55:7,10,12 58:19 60:1,5 62:1,6 74:25 communicated 63:21 87:12,13 64:4,24 65:10,15 67:16 68:7 69:8,18 70:6,10 72:17 73:12,15 76:23 77:6, characterize 49:14 communicating 77:7 12,16 79:13,21 80:12,16 82:14,23 chart 22:9,11,16,17,25 23:3,22 24:5, communications 19:20 45:21 83:2 84:6,10 88:6 90:21 91:1,22 92:2 12 49:23 50:1 77:1 80:7 82:8 93:8,13 Chase 51:1,4 53:22 54:13 55:20 56:8 companies 75:4,21,24 calculation 40:11 59:19 61:7 68:22 company 13:25 14:2,3 15:7 65:7 calendar 60:12,17,19,23 61:4 62:15, chat 20:12,14 21:5 46:6 52:9 55:8,9 79:25 83:8 90:3 18 63:2,7 64:7 59:25 61:25 65:8 70:5 77:11 80:11 84:5 88:3 company's 75:11 call 11:16 48:4,10,14 57:24 60:25 61:13 62:20,24 64:7 67:6,24 72:6 check 66:14 compare 82:6 78:14,22 81:21 82:21 85:1 89:4 93:4 Chief 47:3 compared 75:12 called 9:23 48:18 Chris 47:11,22 48:22 49:1,2,4 50:5,9 compensation 15:12,14 24:11,16 Callon 43:21,25 44:11,21 45:1,8,16, 54:8 61:7 68:22 81:21 82:22 85:2 27:23,25 38:18,23 40:5 22 66:25 67:13,19 83:13 86:25 90:2 92:19 complaint 22:2,6 91:9,11 93:4,10,11 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: BPP_0006569–complaint 0169 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 completed 42:13 court 9:18 10:14,22 21:3,19,24,25 43:6,15 44:6 45:3 52:10,18 55:3 52:24 55:10 60:1 62:1 65:10 70:6 58:15 63:23 64:21 67:14,23 72:13 completely 12:20,25 90:12 77:12 80:12 84:6 91:22 73:8 76:20 77:4 79:4,17 82:3,18 83:1 concluded 93:24 90:18,24 93:6,17 cover 93:2 concludes 9:17 describe 41:9,23 42:10 COVID 75:13 conduct 64:25 description 95:13 created 87:25 conducted 64:18 development 92:20 current 13:23 21:15 75:4,11,16 confirmed 75:2 dialogue 87:25 cut 52:13 connect 81:21 dialogues 82:5 87:23 consideration 95:17 D difficulties 11:25 considerations 40:11 diligence 64:18 65:1,7 Dallas 10:22 21:19,25 47:5 54:3,21, contact 87:15 23,24 71:20 72:11,19,23 73:2,20 dinner 53:19,20,21 54:9 contents 28:3 data 78:16 direct 19:23 20:18 27:24 45:21 context 18:6 date 28:21 62:19 94:3 directly 18:17 19:2 continued 42:22 dated 28:20 47:10,22 49:1 50:6 director 16:4,5 17:24 20:8 71:10,11 53:17 54:22 55:20 56:9 57:9 60:12,24 81:4 continues 78:22 62:16 70:19 78:5 80:23 84:18 88:13 directors 42:2,3,7 70:17 71:4,18 continuing 42:14 76:1 73:24 87:7 dates 43:1 44:23 conversations 83:15,16 directors' 75:8 David 17:22 37:1,11 77:7 78:1,4,8,25 Cook 46:23 47:1 51:19,23,25 52:4 79:15,18 82:10 89:19 disappear 86:3 58:21 61:8 72:10 Davis 51:11,15 52:4 58:21 65:22 disclaimers 77:24 coordinate 60:19 67:4 68:22 72:11 discovery 30:18 copied 85:19 day 54:7 59:6 73:2 85:10 89:19 90:12 95:11,19 discuss 12:16 34:16 59:13 66:25 copy 85:13 81:22 89:2 day-to-day 65:6 copying 92:10 discussed 41:17 45:15 56:13,14 corner 21:17 deal 36:19,21,25 37:3 38:14 41:11, 71:25 18,24 43:3,11 56:23 59:5 60:20 61:5 corporation 9:4 28:22,23 45:9 69:25 76:24 84:1 discussing 67:19 72:16,21 80:2 70:18,24 71:10,18 84:1 decided 33:23 correct 15:17 16:16 26:13 29:3 30:8 discussion 41:20 62:21 64:6 72:15 32:15 33:14,20,25 37:24 38:5 41:7 decision 31:17,22 74:4 92:12,17,24 42:9 44:12,22 54:21 55:2 58:23 59:6 decisions 33:4,8 discussions 31:10 75:7 78:16 61:13 62:25 63:3 64:8,13 67:6 70:1 71:10,14,21 76:13,17 79:3 80:9 81:6 Defendant 9:7 Division 21:19 82:17,25 83:13,18 87:1,5 95:3 Defendants 9:1 document 20:11 21:4,11 22:9 24:19 corrected 74:21 Dep 94:3 25:7,8,14 26:12,14 27:5,8,13 28:2,12 46:11,13,17,21 47:15 52:8,9 53:4 CORRECTIONS 94:5 depending 39:6 40:6 55:9,13 56:7 59:24 60:6,8,15 61:15, correctly 31:3 79:9 91:10 Deponent 94:4 24 62:7 63:5 64:10,16 65:8,16 70:11, 13,16 71:3,22 72:10 73:10 77:11 cost 90:7 deposed 11:6,14 81:3,13 82:19 84:5 85:7 86:5,19 88:3, counsel 8:16 13:10 deposition 8:9 10:11,15,20 11:3,19 7,12,17 89:8,23 93:1 95:14 counter-parties 29:2 64:19 12:16 13:3,9,12,21 21:5,7 46:8,11 documents 13:11 15:4 36:23 52:25 53:1 55:5 60:3 62:4 65:13 70:8 country 83:23 86:16 87:19 77:14 80:14 84:8 88:4 91:25 93:23 dollar 90:7 95:2 download 20:15 County 21:20 95:8 Desai 8:22 9:11 22:18 23:12,23 24:6, downstairs 13:16 couple 19:4 77:24 13 26:21 27:1,9,16 30:15 32:8 41:12 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: completed–downstairs 0170 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Doyle 9:7 47:11,23 48:3,8,14,18,22 employees 35:20 36:2 59:5 61:6 84:7,8 88:4 91:24,25 49:1,2,18,21,24 50:6,9 52:3 53:10,16 employer 15:9 exhibits 9:13 11:23 54:8,12,25 58:21 61:7 68:22 81:21 82:22 employers 14:22 exit 44:15 Doyle's 74:3 end 15:2 42:18,20 43:21,25 44:4,21 exiting 44:3 93:16 draft 76:17 expect 39:5 ending 46:18 60:8 62:8 drafts 31:12 EXPIRES 95:25 energy 8:10 9:4 16:24,25 17:1,3,25 drink 12:8 Exploration 79:24 82:16 83:7 18:4,8,10 20:3 23:16 24:23 25:2,4 drinks 53:19,20 54:8 28:10,22 34:17,18,21,22 35:1,4,12 explore 61:19 39:14,19 47:4 57:3 69:25 70:18,19, due 64:18,25 expressed 74:3 95:17 24,25 71:10,18,19 79:9 80:8 81:5 duly 9:23 85:22 87:21 extent 30:16 engaged 61:18 E F Enjoyed 81:17 e-mail 26:2,4 46:22,23 47:1,9,10,21, enter 31:18 facilitate 74:5 22 48:2,8,12,25 49:3,22 50:4,5,8,13, entered 28:22 19 51:11 53:8,12,15,25 54:13,14,16, fact 35:15 42:22 48:14 54:24 20,22 55:8,19 56:6,7,8,16,21 57:8,9, entities 10:8 22:13,25 23:3,4,6,9,18, factors 40:10 11,13,21 58:6,9,10,14,16,20,24,25 22 24:5,11 39:23 40:1 59:4,8,15,19 60:24 61:5 62:11,13,15 fair 15:2 18:14,15 20:5 33:21 35:19 entity 15:13 25:3,5,11 40:8 42:24 44:5 45:2 49:13 54:18,19 63:3,4,8,9,10 64:5,9,10 65:21,24,25 67:25 72:15,20,21,24 73:3 77:17,25 equals 19:14 64:20 69:5 74:24 77:3 78:1,4,8 80:11,17,22 81:2,7,11,14,16, equity 15:25 17:2 18:5,6,9,12,17 familiar 22:17,21,24 23:4 25:3 37:4, 24 82:1,20 83:3,5 84:11,15,17,23 20:1,2,9 57:3 17,21 54:18 70:23 73:17 87:17 85:5,8,16,19 86:1,22 88:12,13,16 89:9,15,18 92:9,22,23 Erik 36:15 37:1,11 38:8,12 47:11,23 familiarize 47:14 60:14 66:1 88:18 92:10 fashion 18:25 e-mails 53:9 86:3 ERRATA 94:1 February 8:1,7 78:5,11 80:23 94:3 earlier 21:23 28:11 35:10 40:4 63:19 71:25 72:10,14 86:16 essentially 15:1 feeling 12:22 early 14:8 59:13 estimate 11:16 fell 20:3 earnings 39:6 et al 8:11,12 fight 48:3 eastern 8:7 52:13 67:8 85:2 evaluate 68:15 filed 21:16 Effective 28:21 evening 53:21 final 16:6 effectuate 86:25 event 42:12 finance 51:8 effectuated 91:12 events 68:15 Financial 47:4 effectuating 45:1 Ewing 9:2,3 financings 87:25 efficient 88:24 EXAMINATION 10:1 find 74:5 efforts 88:23 examined 9:24 fine 9:15 EIG 80:7 81:5 exchange 81:20 finished 52:15 EIGPARTNERS.COM 80:24 executed 95:16 firm 8:17 19:1 79:6 eliminating 75:21 executive 47:3 49:5,9 50:24 51:25 firms 82:5 53:14 54:6,17 61:11 69:2 73:1 91:9 Ellis 9:3 93:5 fit 89:2 employed 13:25 14:2,11,13 23:21, exhibit 12:1 20:16 21:5,7 24:20 flag 52:20 25 25:14,18 29:22 39:9 46:5,8,11 52:25 flight 48:9 59:13 employee 36:5 53:1 55:5,11 56:7 60:2,3 62:3,4 65:12,13 70:7,8 77:13,14 80:13,14 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: Doyle–flight 0171 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 Foley 17:22 18:10,18,19,22 35:8,11, give 15:2 49:8 hour 12:7 40:15 69:5 14,18 37:1,11 38:15 41:19 85:16 Global 20:9 80:7 81:5 85:21 87:20 hours 89:1,13 89:19,25 Godfrey 8:21 9:9 Houston 45:12,15 48:4,9,14,19 follow-up 59:12 57:14,18,23 58:5,8,14,22 59:6,10 good 9:2 10:3 78:12 foregoing 95:1,15 63:16 64:13,14 79:2,16,22 81:5,9 great 40:21 83:8,18,22 84:1 85:23 86:20 91:16,17 form 22:18 23:12,23 24:6 26:21 27:1, 9,16 30:16 32:8 41:12 43:6,15 44:6 group 15:5,19,25 17:1,2,4,13,14,16, Hurst 8:24 45:3 55:3 58:15 63:23 64:21 67:14,23 18 18:1,5,6,9,12,17 19:25 20:1,3 72:13 73:8 76:20 77:4 79:4,17 82:3, 25:22 35:4 36:1,3 37:6 57:4 68:21 I 18 83:1 90:18,24 93:6 87:8,9 89:2 format 11:22 groups 19:7,11,18 29:4 31:9 32:3 idea 66:3,10 33:7 57:1,4,6 71:8 forward 25:13 78:23 ideas 82:7 guess 50:3 forwarded 53:25 89:18 identity 95:14 guys 66:11 foundational 22:22 32:13 33:16 II 10:6 39:19 80:24 fourth 14:6 50:4 in-person 11:18 52:3 71:20 73:19 H free 12:6,7 59:13 67:6,7 84:1 frequently 12:9 Habachy 77:8 78:1,3,4,10 79:1,15 inaccuracies 74:23 76:17 82:10 Friday 8:1 66:3,4,9,11,12 67:8 inaccurate 74:21 hand 95:18 front 21:10 included 41:19 68:1 Hannigan 9:8 full 68:1 75:10 includes 44:3 hard 52:13 93:15 functional 19:18 including 36:25 44:11 head 17:18 20:9 79:8,9 fund 8:11 10:5,6 39:3 inclusive 32:3 42:1 heading 88:21 funds 40:2,3,12 indication 74:4 headquartered 45:11 79:25 FYI 89:21 92:17 indirectly 39:3 headquarters 91:17 individuals 69:2 G hear 11:25 industries 82:7 heard 31:2 68:13 initiated 61:12 62:24 80:6 83:11 garden 14:21,23 height 75:12 Inoa 8:13 Gardner 8:23 held 71:20 73:19 instance 68:12 gas 79:25 83:8 helpful 88:24 instrument 95:15 Gatto 91:5,7 92:24 93:4 Henle 37:1,15 47:12,24 88:18 92:9 intent 90:13 Gautam 36:25 37:13,17 88:18 92:10 Henley 37:18 65:22 93:3 interacted 18:5,24 19:21 87:4,10 general 16:8,17 17:8 23:24 24:14 high 78:18 30:13,14 31:3,7 35:10 36:1 37:18 interactions 87:6,8 41:10,16,17,21 42:1,16 44:18 49:20 higher 39:6 40:5 interest 38:20,25 39:2 40:4,12 50:14 51:5,7 61:21 62:21 65:4 66:14 67:20 70:2 74:20 76:12 82:5,8 83:15, history 15:22 internal 74:6 24 91:15 Holdco 22:14 25:9,11,16,19,21 26:7, interrupt 30:20 12,17,19,20,25 27:6,7,23 29:6,11,16, generally 11:16 12:6 16:11,12 17:17 34:15,18 36:21 39:8,24,25 43:16,22 19,23 30:2,7 introduce 8:16 44:1,7,16 50:16 57:5,6,25 61:22 73:7 Holdco's 27:14,15 introductions 9:17 74:18,24 76:16,21 79:11 82:4 homes 72:6 83:24 86:15 87:18 invest 31:22 33:20,24 34:11 gentleman 17:22 hope 78:11 81:17 invested 17:2 geographically 13:2 hopeful 52:15 investment 16:19,20 31:18,23,24 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: Foley–investment 0172 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 32:6,14,18 33:1,2,3,10,12,13,18,19, locations 72:7 22,24 34:2,4,6,10,12,13,14,16,19,20 K Locke 9:6 35:7,9,13,22 36:4,6,11,20 37:8,19,23 38:2,7,8,20,25 39:3,7 40:2,7 41:24 Kelly 56:19,20 logistics 72:16,21 42:12,15,23 44:2,4 45:6 52:5 63:25 Kenneth 8:13 long 14:5,14 26:20 46:17 65:4 75:3 76:25 77:2 79:1,6,12,15 82:5 83:14,17,19 86:24 88:1 key 89:22 looked 28:10 29:22 39:10,13 54:14 64:17 68:21 investments 19:15 34:19 87:24 kind 19:13 33:6 50:4 83:21 investor 13:24 lot 19:7 77:24 Kirkland 9:3 low 90:8,12,22 Investors" 39:20 knowledge 10:24 15:8 35:25 64:1 invite 53:22 60:12,17,23 61:4 62:15, lower 39:6 40:5 75:13,23 Kyle 8:23 18 63:2 64:7 lying 58:12 invites 60:20 63:7 L Lynn 8:23 involved 19:8,18 31:10 32:4 33:7 43:17 44:1,8 45:5 51:8 57:2,5,6 69:3 L.P. 39:18,19 M 87:22 land 48:4 involvement 30:13,14 31:3,7 36:1 made 28:21 32:16 33:19 34:11 74:4 landed 48:10,14,18 78:13 37:9,10,22 38:2,6 42:1,16,20 44:18 51:5,7 61:22 91:15 large 17:4,14 Main 63:15 85:23 involving 45:23 53:9 61:19 64:19 lead 61:15 majority 79:12 issues 75:18,20,22 leave 14:21,23 make 20:25 31:17 32:18 33:1 34:5,18 items 89:5,10,12 Lee 53:10,13,16,25 54:17 61:12 40:5 42:6 59:12 74:20 75:3 left 16:6 73:7 makes 33:2,4 53:19 J making 31:16,22 legal 8:14 15:13 23:8,9,17,18 25:11 35:25 36:9 management 17:7 65:5 68:5,9,10, January 21:17 level 38:11 78:18 13,18,19,25 71:4,25 72:1,4,19,22 Jeff 57:5 73:24 75:7 87:7 Levesque 9:5,6 jeffkelly@blackstone.com 56:15 manager 71:14 LEXITAS 8:15 Jeffrey 63:10 64:11 managers 70:19 71:4,19 Limited 24:23,24 25:1,2,4 28:4,9,15, job 15:21 16:6,14,17 17:23 19 39:13 Managing 16:4,5 17:24 20:8 81:4 jobs 14:25 lines 36:1,9 Manhattan 13:7 Joe 19:3,22,23 91:4,7 92:12,17,24 liquidity 75:18,20,22,23 mark 21:4 37:1,15 47:12,23 55:11 93:4 60:2 62:2 65:11 66:1 70:7 77:13 list 25:18 71:12,14,16 86:7,11,15 80:13 84:7 88:18 91:23 92:9 join 85:2 listed 22:25 24:11 25:16 26:2 51:18 marked 21:8 46:9 52:25 53:2 55:6 joint 70:17 71:17 61:10 71:9,13,15 72:1 74:8 89:5 60:4 62:5 65:14 70:9 77:15 80:15 judge 11:4 listen 68:4,9 84:9 88:5 92:1 July 28:21 lists 29:1 46:25 71:3 81:7 86:20,23 Markets 63:11 June 46:22 47:10,22 48:15 49:1 50:6 89:10 material 66:4,10,16 55:20 56:9 57:9,18 67:11 70:19 71:20 litigation 10:6 72:12 73:5,18 76:8 84:18 85:10 materials 64:6 LLC 22:14 25:9,11,16,20,21 26:7 matrix 18:23 19:6 33:6 35:16,24 junior 36:3 38:10,12,15 70:19 56:25 juniormost 36:5 Ln 94:6,8,10,12,14,16,18,20,22,24 matter 8:10 jurisdictional 30:18 located 13:2,4,7 47:4 49:6 63:15,22 matters 30:17 64:3,13 68:23 72:2,5,8 79:16,23 81:5 83:10 85:22 91:16,21 meant 19:17 57:22 63:19 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: investments–meant 0173 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 medication 12:18 offices 63:25 83:20 N meet 83:25 official 74:22 meeting 66:2,8,12 70:17,24 71:17 named 17:22 19:3 29:4 oil 75:13,16 79:24 83:7 72:18,22 73:5,18 74:14 76:8,11,18,22 names 23:2,5,7,8 37:4,20,21 50:13, one-page 65:16 80:17 91:4 93:10 17,19 56:13 one-pager 81:18 meetings 42:23,25 45:14 57:18 58:3 60:19 67:10 69:24 70:3 73:7 74:16 Natural 85:21 87:21 one-pagers 81:20 76:13,15 nature 33:7 35:24 40:16 56:25 69:7 one-rig 76:1 Megan 51:11,15 53:22 54:13 65:21, negotiating 30:10 31:7 one-time 42:12 24 68:22 negotiation 31:4 operating 75:17 member 16:19,20 25:19 31:23 38:8 41:11 49:5 50:24 51:25 56:20,21 57:5 noise 13:17 operations 56:22 65:7 65:4 68:3 79:19 91:8 noon 52:13,16 operative 21:15 members 25:19 34:1 49:16 58:25 North 64:1 61:5 68:4 72:19,22 73:24 84:25 88:17 opportunities 87:24 89:9 NOTARY 95:22 Opportunity 8:11 10:5,6 memory 56:21 note 74:2 optimal 75:16 mention 52:11 90:1 noted 49:23 59:2,20 62:18 73:22 optimize 75:19,24 75:10,14 78:9 80:20 95:3 mentioned 21:24 35:10 53:18 69:22 org 22:9,11,16,17,25 23:3,22 24:5,12 70:2 71:8 notes 81:10 82:6 organization 18:23 19:6 35:16 merger 44:17,19 88:19 89:6 93:11 noticed 74:22 79:20 messaging 13:20 noticing 8:19 original 59:19 met 52:2 54:25 72:10 November 60:12,24 overseeing 41:24 76:25 mid 16:12,13 number 11:10 16:3 18:24 29:4 35:17 oversight 65:6 36:13 40:10 53:5 55:14 60:7 62:8 middle 21:18 50:5,8 57:7,11 65:17 70:12 72:6 77:18 78:16 80:18 owned 29:23 Midland 79:25 82:9,11,12 83:24 84:12 87:23 88:7 89:10 93:1,2 P mind 28:7 30:25 34:7 36:14,15 38:21 40:14,15 47:17 48:23 55:23 56:4 numbers 78:18 69:4,7 73:9,14 77:20 88:10 92:5 numeric 46:13 p.m. 54:9 67:8 85:1 minute 11:2 numerous 77:1 package 38:24 minutes 40:18,20 54:1 69:8,23 pages 25:13 46:17 77:24 70:16,24 73:4,19 74:2,11,16,21 O paid 15:11,14 76:15,18,22 85:10 93:14 pandemic 75:13 misstated 76:18 oath 10:10 41:7 69:20 95:12 paper 78:18 misunderstand 32:14 object 30:15,16 paragraph 28:18 74:2 75:2,10 76:4 moment 42:19 44:13 73:11 objection 22:18 23:12,23 24:6,13 78:21 26:21 27:1,9,16 30:19 32:8 41:12 Monday 92:16 paragraphs 76:5 43:6,15 44:6 45:3 55:3 58:15 63:23 month 72:12 64:21 67:14,23 72:13 73:8 76:20 77:4 parentheses 67:8 79:4,17 82:3,18 83:1 90:18,24 93:6 morning 9:2 10:3 48:3 66:5,9,11,12 part 17:14 18:4 33:18 37:2 38:14,18, 69:6 89:4 obligation 42:14 23 50:13 move 52:17 66:12 occupation 13:23 participant 67:21 73:6 multiple 17:6 87:18 occurring 67:11 participants 73:23 office 83:22,23 95:18 participate 45:14 69:24 Officer 47:4 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: medication–participate 0174 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 participated 73:21 91:4 93:4 Plaintiffs 8:21 9:10 10:5 Primexx/rosehill 83:4,6 participating 42:22 Plaintiffs' 21:11 PRIMEXX029462 70:12 partner 25:16 Plan 59:16,22 prior 30:11 31:13 partners 14:4 16:24,25 17:1,25 18:4, platforms 13:20 private 15:25 17:2 18:5,6,9,11,17 8,10 20:3 23:16 24:24 25:2,4,15 20:1,2,9 57:3 play 30:10 31:16,21 43:3,12,23 44:25 28:10 34:17,18,21,22 35:1,2,3,4,12 56:23 proceeding 8:19 11:4 39:14,18,19 47:4 57:3 69:25 70:19,25 71:19 80:8 81:5 played 67:18 process 32:15 43:12,24 partnership 24:23 25:1 26:6 28:5,9, point 15:23 32:16 61:17 productivity 92:19 15,20 30:7,11 31:4,8,11,12,19 39:14 42:13,19,21 points 20:18 92:11,17,24 93:2 profile 90:8,12,23 portfolio 56:22 profitability 39:7 40:6 parts 20:13 83:23 party 8:18 portion 20:20 program 75:15 76:1 position 16:13 75:11,14 promoted 16:1,2 Patricia 53:9,12,13,14 pause 41:1 69:14 potential 45:15,16,23 61:19 63:21 pronounce 78:2 64:18 65:2 67:19 72:22 77:2,8 78:17 Proposal 59:16,22 PDF 28:16 80:8 82:15,24 pending 10:21,25 12:11 21:24 92:18 proud 90:17 potentially 66:1,8 proved 95:12 people 13:16 17:12,15,17 18:7,12, practice 74:15,20 76:12,16 16,20,24 19:10,11 31:24 32:2,4 35:17 provided 66:15 67:5 pre 53:20 36:7,10,14,15 37:7 38:13 45:5 50:11, 12 54:14 57:2 59:2,8 63:7,20 64:2 public 90:3 95:22 preferred 29:6,11,13,16,19,23 30:2 68:21 71:16 85:15,18 90:5 92:20 pulled 81:13 Pepper 9:6 prepare 13:8,11 Punches 80:7,24 81:3,4,12,14 82:1, perform 43:11 20 president 26:6,10,12,17,19,20,25 performed 24:4 37:13 27:6,7,14,15 47:3 purposes 95:17 press 90:1,3,4 put 11:23 20:11,12,16 39:10,15 46:5 period 14:20,24 17:8 18:22 20:7 42:17 43:5,14 49:18 58:4 65:1 67:11 52:8 55:8 65:8 70:4 77:11 78:17 prices 75:13,17 80:11 84:5 85:16 88:3 periods 16:1 primary 32:5,7,10,25 33:5 87:3,6,8, putting 46:6 59:24 61:25 9,15 person 13:20 18:1 19:2,21 32:19,20 34:12 36:14 59:9 87:3 95:14 Primexx 8:10 9:4 10:5 23:15 24:23 Q 25:1,3 28:10,22 31:11,18,22 32:6,18 personal 39:5 40:5 33:1,20,25 34:6,11 35:8,13,22 36:4,6, personally 38:19,24 43:23 64:17,25 11,19,25 37:7,19,23 38:2,7,14,20 question 12:1,11 27:18 31:1 32:24 72:5 77:1 87:12,13 95:11 39:1,4,7,14 40:7 41:11,18,23,25 42:3, 34:8,24 38:22 43:8 47:18 49:4 56:5 8,12,23 43:3,4,11,13,18,20,24 44:2,4, 64:23 73:14,16 Peter 78:24 79:7 82:11 9,21 45:6,23 46:23 47:4,11,23 49:1,5, questions 10:7 12:19 30:17 32:13, petition 11:1 21:11,16 22:1 24:21 10,21 50:20,23,25 51:1,9,11,12,15, 20,22 33:16 93:18 19,24 52:1,5 53:10 55:1,20 56:8,10, Petroleum 43:21,25 44:12,21 45:1, quickly 52:16 23 58:13 59:3,5,9 61:6,18,19 62:20 8,22 83:13 86:25 91:11 63:21 64:18 65:2,5,6,22 66:24 67:12, quoted 90:5 Pg 94:6,8,10,12,14,16,18,20,22,24 18 68:10,19,23 69:3,24 70:18,24 71:4,10,11,18 72:2,18 74:6 76:25 Phil 46:23,25 47:1 51:19,23,25 53:22 77:3,9 78:15 80:8,25 81:18 82:16,25 R 54:13 61:7 83:13 84:1,19 87:1,8 88:19 89:6 90:4, phone 78:14 6 93:11 94:2 RBC 61:18 63:11,20,24 68:14 87:9 phrase 58:1 Primexx's 81:22 92:19 RBC's 61:22 Pincus 77:8 79:2,6,19 Primexx/blackstone 60:25 RBC/BX 62:21 Pinker 8:23 Primexx/callon 87:5,14 91:12 reached 16:13 78:24 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: participated–reached 0175 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 read 23:2 86:18 94:6,8,10,12,14,16, 89:16 Restated 24:22 25:1 28:4,9,15,19 18,20,22,24 95:1 39:13 refers 58:1 reading 58:24 59:8 78:3 resulted 43:24 refresh 29:15,18 30:1 reads 26:10 28:14,16,17 89:24 94:6, retained 68:14 refreshing 56:21 8,10,12,14,16,18,20,22,24 review 13:11 73:11 74:15 76:13,15 regular 70:17 71:17 74:15 reason 12:24 27:4 44:13 48:7,17 reviewing 76:22 74:10 76:6 94:6,8,10,12,14,16,18,20, regularly 19:22 22,24 Richard 80:7,24 81:2,14,16 82:9,20 relate 30:17 recall 11:9,15,20 15:25 16:8,10,11 rig 75:15,21 related 43:17 44:8 17:9,16 20:10 22:5,7,23 23:8,17 25:5 26:15,18,22 27:2,10,22 29:8,20 30:4, right-hand 65:19 80:20 92:7 relates 88:23 13 31:3,14 32:1 34:10 35:5,6 36:8,13, risk 75:23 17 37:5,6,9,10,14,16,18,22 38:1 relationship 87:25 41:20 42:1,25 43:20,22 44:15,16,23, role 17:13 26:15 30:10 31:16,21 43:2, relationships 19:20 24 45:10,11,17,20,24 46:1,4 48:12, 3,10,12,23 44:25 46:2 49:10,12 51:6 13,16,20 49:19,20,23,25 51:5,6,17 relative 40:9 56:23 65:3 67:18 76:24 52:2,6,7 55:4 57:20 58:2,7,11,17 release 90:1,3,4 roles 37:5 59:7,23 60:21 61:14,17,21,22 63:1,5 64:2 66:22,23 67:1,3,10,15,17 71:2, remainder 16:15 room 13:14,18 23 72:4,14,20 73:22 74:13,18 76:10, remember 38:13 72:9 rooms 20:23 21 77:5,7,10 79:8,11,23 80:1,5,10 82:7 83:6,9,16 84:2,4 87:16 90:19,25 remote 8:9 11:19,21 Rosehill 59:16,22 80:25 81:19 91:6,9,14,15,18,20,21 92:25 93:7,9, 82:16,25 83:7,9 remotely 10:10 12 run 75:21 repeating 28:7 30:25 34:7 38:21 receive 31:12 68:9 47:17 56:4 73:14 received 24:11,15 27:22,24 64:5,9, S rephrase 43:8 10 92:20 reply 85:17 89:2 sale 44:11,15,20 45:15 recitals 39:17 report 18:16,21 35:8,11 49:12 Sam 50:20,23,24 53:22 54:13 61:7 recognize 23:5,7,13,14,15 39:23 68:22 50:13,16 reported 18:19,25 19:2 35:14,17,21 36:4 49:14 Sarah 9:8,11 recollection 26:24 29:15,18 30:1 35:24 37:12 43:1 59:21 70:3 83:24 reporter 9:18 10:14 21:4 52:24 55:10 schedule 25:15 53:17 54:18 63:8 60:2 62:2 65:11 70:6 77:12 80:13 recommendation 32:17 33:19,24 84:7 91:23 scheduled 61:12 34:11 reporting 19:13,20 35:25 36:9 scheduling 57:24 recommendations 33:2 68:6 reports 19:23 Schwegmann 8:24 recommended 34:5 represent 8:18,25 10:4 21:15 screen 20:12,17,21 24:21 39:10,15 recommending 32:6,25 46:7 49:22 52:24 rescheduling 66:1,8 record 8:8 21:8 40:25 41:4 46:9 53:2 seal 95:18 55:6 60:4 62:5 65:14 69:13,17 70:9 reserve 93:17 sector 16:22 74:22 77:15 80:15 84:9 88:5 92:1 resolved 75:20 93:21 self-employed 14:1 Resources 85:22 87:21 reference 15:4 39:18 66:21 sell 43:4,13 responded 54:6 67:4 85:9,13 89:25 referenced 40:3 67:25 68:1 72:15 90:11 send 60:19 63:6 86:16 response 90:10 senior 16:3,5 17:19,20,24 18:2,7,10, references 36:23 66:16 12 19:12 20:8 35:11 38:10 84:25 responsibilities 16:18,23 41:10,23 referencing 21:23 42:11,18 sense 53:19 78:13 referred 15:15 36:24 responsibility 32:5,7,25 sentence 75:6 92:14 referring 42:4 54:16 68:10,18,24 rest 55:1 58:12 separately 78:24 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: read–separately 0176 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 series 13:10 29:1,6,11,13,16,19,23 specific 10:24 15:8,13,25 16:21,23 substantial 31:17 30:2 42:14 75:7 17:5 20:13,18 23:1,8 34:23 35:25 substantive 28:12 36:8 37:5 38:1 41:14,17 43:1 44:14, serving 70:25 23 48:24 51:6 58:2 68:12 83:16 Suite 63:15 85:23 set 59:11 81:21 91:14,20 summarize 88:25 setting 28:8 82:21 specifically 11:9,15 13:18 16:10 20:10 22:7 25:5 26:15,18 31:14 32:1 summary 18:14,15 settled 78:15 35:5,6,13 36:13,17 60:22 64:2 72:5,8 support 34:21 35:1 74:3 seven-page 70:13 73:10 74:19 Susman 8:21 9:9 share 20:17 46:6 52:23 78:18 81:18 specifics 17:17 23:17 27:11 29:20 30:4 33:5 41:22 44:15 45:20 48:20 swear 9:18 shared 21:5 78:16 50:15 52:6,7 57:20 58:11 59:7 61:14 sworn 9:23 sharing 30:5 63:6 71:2,23 73:22 74:13 76:10 80:5 83:6 87:16 90:20 92:25 93:12 SHEET 94:1 T spelled 66:19 short 14:20 Spence 63:11,14 64:6 table 28:3 29:25 show 11:1 24:19 Spence's 64:12 takes 14:7 shown 11:4 stage 28:8 taking 12:18 36:12 44:13 58:3 shows 63:5 64:9,10 82:19 86:2 89:8 Stand 69:11 93:19 talk 17:6 sic 48:3 start 14:14 41:16 67:11 78:12 talked 15:16 sick 12:22 started 9:12 14:12,18 15:24 16:9 talking 92:11,16,24 signature 25:12 27:20 29:9 30:9 55:20 56:3 67:12 47:2 51:22 63:14 64:12,14 81:10 Tall 78:5,15 79:24 85:20,25 86:2,10,22 95:2 starting 77:17 84:11 Taylor 9:5 signed 25:9 26:5,11 27:5,7,13 29:12 starts 46:22 56:8 65:21 80:22 84:15 team 16:19 31:23,25 33:2,10,12,18, 30:6 42:13,19,20 88:13 24 34:5,10,13,16 36:19,25 37:3 38:9, significantly 75:11 state 8:17 57:25 76:7 95:7,23 14 41:11,18,24 43:3,11 49:5,9 50:25 51:8 52:1 53:21 54:9,12 55:1 56:9,10, signing 30:12 31:13 89:1,6,14 stated 75:22 22,24 58:13 59:1,5,13 60:20 61:6 silently 67:22 statement 48:11 92:13 65:5,6 67:19 68:5,10,11,13,18,19,25 69:3 71:25 72:4,8 75:18 76:25 78:19 similar 82:10 states 26:9 64:14 75:2 83:21 79:10,12 85:1 87:7 88:22 89:10 90:17 simply 32:24 75:21 status 62:21 91:9 92:16 93:5 simultaneously 75:23 Stephen 83:12,14 84:18 teams 36:22 78:15 sit 67:22 76:7 steps 61:1 62:21 technical 11:25 skip 25:6 stop 30:5 93:15 teens 16:12,14 Skipping 51:10 Strategic 60:25 teleconference 71:21 73:20 slightly 11:22 strategical 68:15 ten 40:18 71:15 73:24 76:5 small 11:10 Street 63:15 85:23 term 58:1 smoothly 12:3 strong 75:17 terms 30:11 31:7 41:10,22 61:21 sold 43:21,24 structure 23:18 75:4 testified 9:24 sort 36:18 struggling 33:4 testify 12:25 sound 37:2 subject 53:17 59:15,19 60:25 62:20, testifying 13:15 23 78:5,9 80:4,25 83:3,5 84:19 88:19 testimony 11:3 spare 93:14 92:11 speaking 17:17 34:15,18 36:21 39:8, Texas 10:21 28:23 46:3 47:5 49:6 subscribed 95:15 52:3 58:21 61:7,18,23 63:16,20,22 24 44:16 57:25 74:18,24 82:4 substance 84:22,23 64:13,19 68:23 71:20 72:2 77:2 79:2, www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index:0177 series–Texas PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 16,25 81:6,9 83:8,18 85:23 86:21 Trauber's 85:20 video-recorded 10:18 91:16,17 travel 46:3 view 78:19 Texas-based 45:8 trip 57:20 VII 39:18 thing 12:10 Troutman 9:6 visible 13:22 things 19:4 52:17 78:14 82:9 true 95:3 thought 78:13 88:24 W truthfully 12:20,25 thoughts 88:25 89:16 Tuesday 53:18 waiting 92:18 Thursday 62:16 turn 68:15 wanted 41:16 52:20 78:18 81:19 time 8:6,7 11:13,24 14:7,20,24 16:2, 90:22 turning 77:20 88:10 92:5 15 17:8 18:22 20:7,19 30:21 35:5,6 40:23 41:2 42:17,25 43:5,14 44:2,9 two-page 60:7 Warburg 77:8 79:2,5,19 82:12 47:16 49:18 58:2,3 59:11 65:1,3 Warburg/blackstone 78:14 67:11 69:12,15 70:25 79:8,12 82:13 typically 60:18 63:6 76:15 83:15,16,22 87:23 93:20 warning 30:19 U ways 17:7 52:19 times 11:8 15:5 16:1,3 67:9 timing 14:9 Wednesday 53:21 ultimate 16:3 44:11 86:25 title 16:3,6,9,14 17:23 20:6 26:6 51:6 week 53:19 54:25 78:22 81:17 82:1 ultimately 43:13,20 93:3 70:16,22 91:14,20 weekend 92:21 understand 10:9,13,17,20 11:2 titled 21:11 24:22 27:18 32:9,12 33:15 41:7 49:4 61:23 wells 92:19 titles 15:23 91:19 64:23 66:20 69:20 89:22 whatnot 20:22 today 10:8,18 12:16,19,22,25 57:14, understanding 15:6 23:25 24:15 White 51:1,4 52:3 55:20 56:8 59:19 23 59:10 76:7 89:3 40:1 50:12 61:7 68:22 72:11 today's 13:8 understood 30:22 71:24 window 66:14 67:5 told 48:8,19 58:13,22 59:6 unfamiliar 23:6 37:20 wondering 35:12 43:10 tomorrow 59:14 66:2,9 United 83:21 word 33:5 44:14 tonight 85:1 unitholder 29:7,11,14,16,19 30:2 work 12:2 17:12 19:10,11 24:4 37:13 top 21:17,18 22:12 23:11 28:14,16 unitholders 29:3 43:12 46:3 53:21 67:9 29:13 47:9,21 63:9,13 70:22 71:7 Units 29:23 worked 15:15,19 17:14 19:14 24:7,8 74:8 90:14,15 34:15 36:3,8,11,19 37:7,19 83:20,22 unusual 11:22 topic 78:25 82:15 working 14:14,18 36:5 38:14 43:13 up-to-speed 89:4 topics 82:11,13 93:2 68:23 upcoming 66:25 totally 32:14 works 22:13 32:15 59:11 78:22 update 66:4,11,16 touch 78:13 workstream 89:6 updates 68:4,9,13 transaction 44:16,18,20,23 45:1,16, workstreams 88:19,25 89:13,17,22 23 61:19 63:22 66:25 67:13,19 77:9 wrong 33:15,16 80:9 82:16,24 83:12 87:1,5,14 88:23 V 89:14 90:16 91:2,3,12 wrote 48:2 54:1,12,20,22 57:13,17, valuation 90:6 21 67:5,7 78:10 81:16 84:22 89:12,21 transactions 64:19 65:2 77:3 values 75:24 transcribed 10:14 Y version 21:16 TRANSCRIPT 94:1 versus 8:11 Yaman 8:22 Transition 85:22 87:21 Vice 47:3 85:21 year 14:6 75:12 78:12,13 Trauber 83:12,14,17,19,25 84:19 85:6,9,13 87:3,15,18,20 88:1 video 8:9 years 11:16 42:15 88:2 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: Texas-based–years 0178 PRIMEXX ENERGY OPPORTUNITY FUND vs Angelo Acconcia PRIMEXX ENERGY Confidential February 21, 2025 York 8:1 13:4,5 79:7,10 82:12 83:22 86:8,12 Z Zack 9:3 www.LexitasLegal.com/Premier Lexitas 888-267-1200· ·Index: 0179York–Zack EXHIBIT 2 FILED UNDER SEAL 0180 To: Li. Patricia[Patricia.Li@Blackstone.com] From: Acconcia. Angelo[acconcia@Blackstone.com] Sent: Tue 5 25/2021 5:48:40 PM Coordinated Universal Time Subject: RE: Schedule next Tuesday [External] Thanks. Lets do drinks with Chris at 5:30pm and then dinner at 6:30pm with the team. Could be fearings if that works for both. Could we do 12pm ESI on Tues for the board call? From: Li, Patricia Angelo, Please advise on the below as you will be in Dallas. Thanks Patricia Li From: Chris Doyle Patricia - can you quickly tell me what windows work for Tuesday afternoon next week for a Primexx Board call? We would need an hour. Also -Angelo mentioned having drinks/dinner next week. I think it makes sense for Angelo and I to have pre-dinner drinks and then have a team dinner Wednesday evening. Does that work? I would invite Phil, Megan, Chase, and Sam. Thanks, Chris Primexx Operating Corporation Two Energy Square 4849 Greenville Ave, Suite 1600 Dallas, TX 75206 Office: 214-369-5909 Direct: 214.635.2632 chris.dovle@primexx.com CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017994 EXHIBIT 3 FILED UNDER SEAL 0182 To: Chris Doyle[chris.doyle@primexx.com] Cc: Belz, Erik[Erik.Belz@Blackstone.com]; Henle, Mark[Mark.Henle@Blackstone.com] From: Accone ia, Angelo[acconcia@Blackstone.com] Sent: Tue 6/29/2021 11:17:53 AM Coordinated Universal Time Subject: Re: [External]RE: biweekly materials [External] On a fight this morning to Houston. Will call you when I land. From: Chris Doyle We will make Thursday afternoon work according to your schedule. Chris Sent from my iPhone On Jun28, 2021, at 11:12 PM, Steven Pully Chris, I think that is a good suggestion. I am in trial prep and testimony though late Wednesday...can we do something on Thursday afternoon? Happy for anyone to be invited. Also, I recognize that my questions relate to BPP equity and I am certainly not a BPP director...that being said, if the second rig is dropped, Primexx shareholders suffer too, which is why I am so keenly interested. Regards, Steve Steven J. Pully, CFA 214 587-6133 From: Chris Doyle Thank you, Steve. I would suggest the team have a call with you and/or a BPP Board member to discuss exactly what question you are trying to answer. We believe the analysis provided this weekend is directly responsive to your question of equity returns on incremental capital as are the multiple models run for the Special Committee. Speak soon, Chris Sent from my iPhone On Jun 28, 2021, at 8:05 PM, sipully@vahoo.com wrote: th Chris, I was appointed to my 29 board today...recommended, by the way, by one of the large energy lenders that we are talking to. Never in all of the boards that I've been on has it been so difficult to get the management team to run a model! Can't you guys just run the model that I am asking for and we can debate what it says/means later? I feel like I have a duty to see this information. Steve Steven J. Pully, CFA 214587-6133 CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018525 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential, proprietary, and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from all computers. From: Chris Doyle Thanks for following up, Steve. Everyone may have different assumptions, but here is how the team thought about your questions/comments: 1. While "new equity always wants a discount" may be true, wanting and receiving are two different things. Since the largest current equity owner has indicated that they were not supportive of making a complicated capital structure more complicated with the addition of outside capital, the team believes that assuming a no-discount entry is the appropriate assumption (if not aggressive). Since BPP always has the opportunity to run two rigs in the future, we assume current equity owners would be unlikely to offer a discounted entry as you suggest. 2.1 agree with your methodology assuming all current equity owners would consider funding their pro rata share. Since the largest equity owner has indicated they don't currently have the support to infuse more capital into this business as currently configured, your approach falls apart and is not viable. Given the guidance the Board has given us, the best shot would be an aggressive bid from external capital, and that has not materialized after months of pursuing. Discussions with potential equity providers indicated previous investments were based on valuations of PDP PV15. That level of value is not compelling. 3.1 won't assume to know all of the questions you may have about liquidity, but I assume one question would be the actual quantum of liquidity as a minimum. We assume more aggressive (lower) liquidity limits than the Board has currently approved. While more aggressive than current Board guidance, minimum assumed liquidity at BPP of $40 million and $80 million at the combined PRD/BPP are appropriate assumptions. One might consider an even more aggressive minimum threshold (and I have run active operations much tighter), but because this is new equity coming into the business, the appropriate assumption is to maintain a reasonable/conservative cushion to ensure the infusion of equity is sufficient to fund the business and absorb additional business risks. Chris From: sipullv(5)vahoo.com Chris, I do have some questions/comments regarding the BPP equity infusion: • New equity is not likely to pay 5x EBITDA; new equity always wants a discount. The returns would be higher if the new money was coming in at a more compelling valuation. • The better way to run the analysis (as an example only) is to have the three equity holders fund their prorata analysis and then look what their returns are on all the equity that they have invested with two rigs; compare that to the current one rig investment scenario and what the returns would be from that • I also have some questions about the exact liquidity need Thanks. Steve Steven J. Pully, CFA 214587-6133 CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018526 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential, proprietary, and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from all computers. From: Chris Doyle Please see attached materials as follow up to Friday's biweekly call. Let us know if you have any questions or would like for us to go through the materials 1:1. Thanks, Chris From: Phil Cook < ihil.cook@primexx.com> Sent: Thursday, June 24, 2021 8:13 PM To: Angelo Acconcia Directors, Please see materials for tomorrow's call. Phil Philip W. Cook Executive Vice President and Chief Financial Officer Primexx Energy Partners Two Energy Sguare 4849 Greenville Ave Dallas DC 75206 0-214.635.2613 M-918.606.4204 CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018527 EXHIBIT 4 FILED UNDER SEAL 0186 To: Angelo Acconcia[acconcia@Blackstone.com] From: Chris Doyle[chris.doyle(Siprimexx.c6m] Sent: Fri 1012021 12:49:58 PM Eastern Standard Time Subject: FW: Rosehill Plan B Proposal [External] Attachment: Rosehill Overview Materials_06.30.21.pdf Slide 3 From: Chase White Draft materials we can run through here at 330 ET. Chase From: Belz, Erik Sounds good. Chase - would 3:30pm ET work? I think we can keep this call relatively short, as the objective with this bid should be to get into the next round, and so we are really bidding the book at this point. Based on the sell side info, what is PDP PV 10, 12 and 15 (at current strip)? If you take a 10% discount to the seller's PDP volumes, what is the PDP PV 10, 12 and 15? From: Acconcia, Angelo I am back to back in Houston today. Why don't you set the time that works best for you all and if I can't make it I will follow-up with the team to discuss. I am on a flight early am but free for most of the afternoon tomorrow. From: Belz, Erik I cannot do 5:30pm ET. Would 3:30pm or 4pm ET work? Could also try to do something late morning today. If not, I could do later tonight after 8:30pm ET. From: Chase White BXTeam - We are wanting to hop on the phone this afternoon to run through Rosehill proposal/strategy. RBC has worked our PDP / opex assumptions as well as prepared a high level contribution analysis for us to consider. Does 5:30pm ET work? Trying to kick out into afternoon post RRR/JP closings this morning. Thanks. Chase Chase A. White Primexx Operating Corporation Office: 214-691-3114 Cell: 214-536-6089 chase.white@primexx.com HIGHLY CONFIDENTIAL: ATTORNEY'S EYES ONLY BPP 0005953 This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. HIGHLY CONFIDENTIAL: ATTORNEY'S EYES ONLY BPP 0005954 EXHIBIT 6 FILED UNDER SEAL 0189 To: Belz. Erik[Erik.Belz@Blackstone.com]; Acconcia. Angelo[acconcia@Blackstone.com]; Megan Davis[megan.davis@primexs.com] From: Elenle. \iai k| Mark. Hen lcv7 lilack5tonc.com Sent: Wed 6/23/2021 2:20:05 PM Coordinated Universal Time Subject: RE: Bi-Weekly Meeting-Reschedule Again? [External] Works for me as well. From: Belz, Erik That window works for me. From: Acconcia, Angelo Yes, thanks. I can free up ll:30-3pm EST on Friday (or other times if those don't work). From: Megan Davis Angelo, Erik, Mark: I am looking at potentially rescheduling the Bi-weekly board meeting again from tomorrow afternoon to Friday morning, with the idea that we are more likely to have a material update on Capitan by Friday morning. Would you guys like to move the meeting to Friday morning? If so, please let me know your availability, and I will check general board availability based on the window you provide. Megan Davis General Counsel and Secretary Primexx Energy Partners Two Energy Sguare 4849 Greenville Ave Dallas DC 75206 0-469.547.2078 M-214.218.1639 i PRIMEXX CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018469 EXHIBIT 7 FILED UNDER SEAL 0191 To: 'Trauber. Stephen '[stephen.trauber@citi.com]; Acconcia. Angelo]acconcia.'o lilackstone.com Cc: Belz, Erikpsrik.Belz@Blackstone.com]; Schlopy. Fritz[fritz.schlopy@ipiti.com]; Tismen. Serge[serge.tismen@jciti.com]; Fernandez. T[t.femandez@iciti.com] From: Foley. David[foley@iblackstone.com] Sent: Sun 6/13/2021 3:19:48 PM Coordinated Universal Time Subject: RE: Primexx [External] I can do it at the 8:15pm Eastern time proposed. Can do it anytime later this evening too, but can not join a call between 5:30 and 7:30pm. From: Trauber, Stephen Let’s assume we can do it. Waiting to hear from our team. Cc’d our team here Stephen M. Trauber Vice Chairman & Global Co-Head of Natural Resources & Clean Energy Transition Citi 811 Main St., Suite 3900 Houston, TX 77002 (0)713-821-4800 (C) 713-306-3325 Please excuse all typos Sent with BlackBerry Work www.blackberry.coml From: [Blackstone.com] Acconcia, Angelo Just citi. From: Trauber, Stephen With client or just Citi? Stephen M. Trauber Vice Chairman & Global Co-Head of Natural Resources & Clean Energy Transition Citi 811 Main St., Suite 3900 Houston, TX 77002 (O) 713-821-4800 (C) 713-306-3325 Please excuse all typos Sent with BlackBerry Work www.blackberry.com- From: [Blackstone.com] Acconcia, Angelo CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018234 Could you and the senior members of the Capitan Citi team do a call tonight at 8:15pm est? Chris will join as well. Angelo This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0018235 EXHIBIT 8 FILED UNDER SEAL 0194 To: Acconcia. Angelo[acconcia@Blackstone.com]; Cain. Matt[matt.cain@rbccm.com]; Chris Doyle[chris.doyle@primeXx.com]; Chase White[chase.white@primexx.com]; Richardson. Scott[Scott.Richardson@rbccm.com]; Numelin. Tye[tye.numelin@rbccm.com]; Belz. Erik[Erik.Belz@Blackstone.com]; Hamilton. Jonathan[Jonathan.Hamilton@lBlackstone.com]; Kelly. Jeffljeff.kelly@blackstone.com]; Gautam. Anika[Anika.Gautam@Blackstone.com]; Foley. David[foley@blackstone.com] Cc: Oglesby. Amanda[Amanda.Oglesby@Blackstone.com]; Rozon. Onoria[Onoria.Rozon@Blackstone.com]; Gilman. Rachael[Rachael.Gilman@Blackstone.com]; Sow. Maty [Maty.Sow@Blackstone.com]; Li. Patricia[Patricia.Li@Blackstone.com]; Sam Blatt[sam.blatt@primexx.com]; Megan Davis[megan.davis@primexs.com]; Phil Cook[phil.cook@primexs.com] From: Spence. Jeffrey[jeffrey.spence@rbccm.com] Sent: Tue 4/20/2021 2:07:58 PM Coordinated Universal Time Subject: RE: Call: Primexs/ RBC/ BX re: general status and next steps discussion [External] Attachment: Primexs Process Update_20210420.pdf All, Please see the attached materials for discussion on the call this morning. Thank you, Jeffrey Spence RBC Capital Markets | RBC Richardson Barr 609 Main St, Suite 3700, Houston, TX 77002 O: 713.585.3344 | C: 832.628.6604 i effrev. six'nce/Trbccmxom ------Original Appointment------ From: Acconcia, Angelo [mailto:acconcia@Blackstone.com] Sent: Monday,April 19, 202111:54 AM To: Acconcia, Angelo; Cain, Matt; Spence, Jeffrey; Chris Doyle; Chase White; Richardson, Scott; Numelin, Tye; Belz, Erik; Hamilton, Jonathan; Kelly, Jeff; Gautam, Anika; Foley, David Cc: Oglesby, Amanda; Rozon, Onoria; Gilman, Rachael; Sow, Maty; Li, Patricia; Sam Blatt; Megan Davis; Phil Cook Subject: FW: Call: Primexx/ RBC/ BX re: general status and next steps discussion When: Tuesday,April 20, 202110:30 AM-11:30 AM (UTC-05:00) Eastern Time (US & Canada). Where: Dial: +1(646)558-8656 // Meeting ID: 212 583 5211 //Smartphone: +1(646)558-8656,2125835211#// No Participant Code Required ------Original Appointment------ From: Acconcia, Angelo [mailto:aeconciaf2iBhckstone.com] Sent: Thursday,April 15, 2021 9:40 AM To: Acconcia, Angelo; Chris Doyle; Chase White; Richardson, Scott; Numelin, Tye; Belz, Erik; Hamilton, Jonathan; Kelly, Jeff; Gautam, Anika; Foley, David Cc: Oglesby, Amanda; Rozon, Onoria; Gilman, Rachael; Sow, Maty; Li, Patricia; Sam Blatt; Megan Davis; Phil Cook Subject: Call: Primexx/ RBC/ BX re: general status and next steps discussion When: Tuesday,April 20, 202110:30 AM-11:30 AM (UTC-05:00) Eastern Time (US & Canada). Where: Dial: +1(646)558-8656 // Meeting ID: 212 583 5211 //Smartphone: +1(646)558-8656,2125835211#// No Participant Code Required lExternall Dial: +1(646)558-8656// Meeting ID: 212 583 5211 //Smartphone: +1(646)558-8656,2125835211#// No Participant Code Required TO JOIN FROM A PC, MAC, IOS OR ANDROID: https://blackstone.zoom.us/i/2125835211 Meeting ID: 212 583 5211 TO JOIN FROM A BLACKSTONE CONFERENCE ROOM OR OFFICE TELEPHONE: Dial extension x6300: Meeting ID: 212 583 5211 TO USE MOBILE ONE-TAP: +16465588656„2125835211# US Toll +16699006833„2125835211# US Toll TO JOIN FROM A TELEPHONE: US: +1 646 558 8656 or +1 669 900 6833 United Kingdom: +44 203 966 3809 or +44 203 695 0088 Singapore: +65 3165 1065 or+65 3158 7288 Hong Kong, China: +852 5808 6088 Australia: +618 7150 1149 or+61 2 8015 2088 China: +86 10 87833177 or +86 10 53876330 Costa Rica: +506 4000 3843 India: +91 22 62 192 563 or +9122 71 279 525 or +9180 71279 440 or +9122 48 798 004 Philippines: +63 92 3099 0478 Taiwan, China: +886 (2) 7741 7473 United Arab Emirates: 800 035 704 555 (Toll Free) or 800 035 704 239 (Toll Free) TO JOIN FROM SKYPE FOR BUSINESS (LYNC): CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017552 https://blackstone.zoom.us/skype/2125835211 ORAN H.323/SIP ROOM SYSTEM: H.323: 162.255.37.11 (US West) 162.255.36.11 (US East) 221.122.88.195 (China) 115.114.131.7 (India) 213.19.144.110 (EMEA) 202.177.207.158 (Australia) 209.9.211.110 (Hong Kong) 64.211.144.160 (Brazil) 69.174.57.160 (Canada) Meeting ID: 212 583 5211 SIP: 2125835211 (qjzoomcrc.com This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain infonnation drat is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including infonnation ifyou are not die intended recipient of diis communication. ________________________________________ This E-Mail (including any attachments) may contain privileged or confidential infonnation. It is intended only for die addressee(s) indicated above. Hie sender does not waive any of its rights, privileges or otiier protections respecting tiiis infonnation. Any distribution, copying or otiier use of tiiis E-Mail or die infonnation it contains, by otiier tiian an intended recipient, is not sanctioned and is prohibited. If you received tiiis E- Mail in enor, please delete it and advise die sender (by return E-Mail or otherwise) immediately. This E-Mail (including any attachments) has been scanned for viruses. It is believed to be free of any virus or otiier defect that might affect any computer system into which it is received and opened. However, it is the responsibility of the recipient to ensure that it is virus free. Hie sender accepts no responsibility for any loss or damage arising in any way from its use. E-Mail received by or sent from RBC Capital Markets is subject to review by Supervisory personnel. Such communications are retained and may be produced to regulatory authorities or others with legal rights to the infonnation. IRS CIRCULAR 230 NOTICE: TO COMPLY WITH U.S. TREASURY REGULATIONS, WE ADVISE YOU THAT ANY U.S. FEDERAL TAX ADVICE INCLUDED IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, TO AVOID ANY U.S. FEDERAL TAX PENALTIES OR TO PROMOTE, MARKET, OR RECOMMEND TO ANOTHER PARTY ANY TRANSACTION OR MATTER. Please see link for RBCCM disclosures, https://www.rbccm.com/rbccm/policies-disclaimers.page CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017553 EXHIBIT 9 FILED UNDER SEAL 0197 To: Acconcia. Angeio[acconcia@Blackstone.com] Cc: Belz. Erik[Erik.Belz@Blackstone.com]; Li. Patricia[Patricia.Li@Blackstone.com] Fi'om: Elabachy. David[david.habachy@warburgpincus.com] Sent: Tue 3/9/2021 4:24:58 PM Coordinated Universal Time Subject: RE: Tall Uity Primexx [External] Erik, I caught up with Mike Oestmann at Tall City and they are good with the plan forward. Also, just to confirm, each company will be presenting their view of their own asset as well as the other's asset to each of us. Just wanted to make sure that both teams were prepared to speak to both assets. Thanks, and let's set things in motion with RBC. David From: Acconcia, Angelo [**EXTERNAL EMAIL**] Great. Thanks. Lets connect then. Including Erik on our end as well (Erik let us know if this doesn't work). Angelo From: Elabachy, David 5 p.m. CT/ 6 p.m. ET tomorrow would work for a call. Good weekend, hope you had the same Angelo. David From: Acconcia, Angelo [**EXTERNAL EMAIL**] Thanks. Friday was back to back. Flow does your tomorrow night look (or any windows earlier in the day). Hope your weekend is going well. Angelo From: Habachy, David No worries Angelo, I understand. How does a catch-up call tomorrow in the 4-6 p.m. ET window work for you? David From: Acconcia, Angelo [**EXTERNAL EMAIL**] Apologies for the delay. We have been tied up on a number of fronts. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017182 Think Peter reached out to David to connect here and discuss. Lets connect after their next conversation if that works. Angelo From: Habachy, David I think we can accomplish both simultaneously. What about having an agreed-upon investment bank participating on both calls? Elappy to discuss tomorrow, as well. We managed through the week. Pretty crazy week, no power and water for a few days. We were walking around in ski gear trying to stay warm! We've got some busted pipes outside with the pool and the water hose spigots, but all things considering we managed pretty well given no issues inside the house. So, a lot to deal with in the aftermath, but all manageable. We're not tough like you guys up north! David From: Acconcia, Angelo [“EXTERNAL EMAIL**] Thanks David. I hope you and your family have been well amidst the challenging conditions. I would suggest we setup a call with each mgnt team for early next week and then go from there to see if it makes sense to engage a bank. Our team is willing to put together a short presentation for you / Warburg to review as part of this. Let me know if you would like to further discuss. Angelo From: Habachy, David Angelo, Just coming up for air from snow, ice, no water, and no power...been fun down here in Texas this week! rd Thought I'd check in and see how your conversation with Chris went and what your thoughts are on engaging a 3 party investment bank? Thanks, and have a good weekend man. David From: Acconcia, Angelo [**EXTERNAL EMAIL**] Thanks. What is the best number to reach you at? From: Habachy, David No worries at all Angelo. I'm free until 11 a.m. ET, if anything before then works. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017183 David From: Acconcia, Angelo [“EXTERNAL EMAIL**] Apologies - my call is running late. You free later this morning? From: Elabachy, David 9:20 ET? Sure Get Outlook for IQS From: Acconcia, Angelo [**EXTERNAL EMAIL**] I have a 9am but could end earlier. Can I try you around 9:20am if it does? If not, happy to connect later today. From: Habachy, David Angelo, good catching up today man. Wanted to run something by you if you have a moment in the a.m. How does 8:15 a.m. CT /9:15 a.m. ET work for a call tomorrow? Thanks, David Get Outlook for iOS From: Habachy, David Sent: Wednesday, February 10, 2021 11:07:37 AM To: Acconcia, Angelo Angelo, Here's the slide that we'll talk from on our call later this afternoon. Thanks, and talk then. David From: Acconcia, Angelo CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017184 [**EXTERNAL EMAIL**] Great. Looking forward to it. Have a good weekend. Angelo From: Habachy, David Angelo, more for us on the Blackstone and Warburg sides. We'll have our deal team on our side for the call. Look forward to catching up. Have a good weekend. David Get Outlook for IPS From: Acconcia, Angelo [**EXTERNAL EMAIL**] Thanks for reaching out. Would suggest a call on Tues/ Wed. Would you prefer principals only or mgnt. Copying my assistant here who can help coordinate a call. Best, Angelo From: Habachy, David Angelo, Hope you're well and off to a good start for 2021. Here's to a better year this year! Thought it made sense to touch base on a Warburg/Blackstone phone call on where things settled out with Tall City and Primexx. Both teams data shared and had a number of discussions around a potential combination. We've got enough to put numbers on paper and wanted to share that high-level view with you and your team. What works for a call next week to catch up on this? Look forward to catching up. I also think Peter separately reached out to David on the same topic. David ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017185 This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017186 ---------- Notice: This message is the property of Warburg Pincus LLC and contains information that may be confidential and/or privileged. If you are not the intended recipient, you should not use, disclose or take any action based on this message. If you have received this transmission in error, please immediately contact the sender by return e-mail and delete this e-mail, and any attachments, from any computer. The information contained in this e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or investment product. In connection with our business activities, we may collect and process your personal data. Information on how we use personal data is outlined in Warburg Pincus Privacy Notice. This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. ...............Notice: This message is the property of Warburg Pincus LLC and contains infonnation that may be confidential and/or privileged. If you are not die intended recipient, you should not use, disclose or take any action based on diis message. If you have received diis transmission in error, please immediately contact die sender by return e-mail and delete diis e-mail, and any attachments, from any computer. Hie infonnation contained in diis e-mail is not intended as an offer to sell or solicitation of an offer to purchase any security or invesdnent product. In connection widi our business activities, we may collect and process your personal data. Infonnation on how we use personal data is outlined in Warbing Pincus Privacy Notice, CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0017187 EXHIBIT 10 FILED UNDER SEAL 0204 To: Punches II, Richard[richard.punchesf|eigpartners.com] Cc: Belz. Erik[Erik.Belz@Blackstone.com]; Chris Doyle[chris.doyle(ri>primesx.com] Fi'om: Acconcia. Angelo[acconcia@Blackstone.com] Sent: Wed 2/3/2021 4:55:58 PM Coordinated Universal Time Subject: RE: [EXT] Primexx / Rosehill [External] Ok. From: Punches II, Richard Angelo, Thanks for the email and follow up from our conversation. I've thought further on this and think we should hold off for now. We just got a new CEO in the Company late last year. If ok with you guys perhaps we could circle back on the topic in a couple months... Richard A'' %+? GLOBAL ENERGY PARTNERS EIG Richard K. Punches > Managing Director > richard.punchesigleKpartners.com Three Allen Center > 333 Clay Street > Suite 3500 > Houston, TX 77002 > (o) 713.615.7415 > (m) 713.828.0482 > (f) 713.615.7456 The information contained in this email is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, use, distribution or disclosure by others is strictly prohibited. If you are not the intended recipient of this email, please promptly notify the sender that you have received it and delete all copies of this email along with all attachments. From: Acconcia, Angelo Richard, Elope all is well. Enjoyed catching-up last week. We have a one-pager on Primexx we could share with you. Wanted to see if you had the same on Rosehill in which case we could exchange one-pagers and could setup a call for you to connect with Chris Doyle (Primexx's CEO) to discuss further. Best, Angelo Angelo G. Acconcia Senior Managing Director Private Equity The Blackstone Group 345 Park Avenue, 43rd Floor New York, NY 10154 T: 212.583.5211 F: 212.201.2874 M: 917.747.0987 This e-mail communication is intended only for the addressee(s) named above and any others who have been specifically authorized to receive it and may contain information that is privileged, confidential or otherwise protected from disclosure. Please refer to www.blackstone.com/email-disclaimer for important disclosures regarding this electronic communication, including information if you are not the intended recipient of this communication. CONFIDENTIAL: SUBJECT TO PROTECTIVE ORDER BPP 0016597 October 14, 2025 Page 2 (Exhibit 1), which the Court incorporated in its Opinion and Order dated July 16, 2025 (referred to as “in camera” exhibits). Plaintiffs respectfully request that the Clerk of Court supplement the appellate record in No. 15-25-00120-CV in the Fifteenth Court of Appeals to include the following items on the public record, which are filed as attachments to this submission. Defendants consent to the supplementation of the record with these unredacted briefs and exhibits: 1. Plaintiffs’ Unredacted Opposition to the Special Appearance of Blackstone Inc. and Exhibits 4, 6–12, and 14–16 (attached as Exhibit 2).1 2. Plaintiffs’ Unredacted Supplemental Opposition to the Special Appearance of Angelo Acconcia and Exhibits 1–4 and 6–10 (attached as Exhibit 3). Additionally, Plaintiffs request that the Clerk supplement the record with the following exhibits under seal: Exhibits 13 and 17 to the Opposition to the Special Appearance of Blackstone Inc., and Exhibit 5 to the Supplemental Opposition to the Special Appearance of Angelo Acconcia. Defendants maintain that those exhibits contain confidential information. Thank you for your attention to this matter. Sincerely, /s/ Stephen Shackelford, Jr. Stephen Shackelford, Jr. 1 Exhibits 1–3, 5, and 18 were filed on the public docket. 0206 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Stephen Shackelford on behalf of Stephen Shackelford Bar No. 24062998 sshackelford@susmangodfrey.com Envelope ID: 106795813 Filing Code Description: No Fee Documents Filing Description: Request to Clerk for Supplementation of Appellate Record Status as of 10/14/2025 8:49 AM CST Associated Case Party: BLACKSTONE HOLDINGS III LP Name BarNumber Email TimestampSubmitted Status Christopher W.Patton cpatton@lynnllp.com 10/14/2025 7:34:04 AM SENT Scott Smoot ssmoot@lynnllp.com 10/14/2025 7:34:04 AM SENT NATALIE STALLBOHM nstallbohm@lynnllp.com 10/14/2025 7:34:04 AM SENT Kerri Jones kjones@lynnllp.com 10/14/2025 7:34:04 AM SENT Gina Flores gflores@lynnllp.com 10/14/2025 7:34:04 AM SENT Christopher Schwegmann cschwegmann@lynnllp.com 10/14/2025 7:34:04 AM SENT Yaman Desai ydesai@lynnllp.com 10/14/2025 7:34:04 AM SENT Kyle Gardner kgardner@lynnllp.com 10/14/2025 7:34:04 AM SENT Case Contacts Name BarNumber Email TimestampSubmitted Status Stephen Shackelford sshackelford@susmangodfrey.com 10/14/2025 7:34:04 AM SENT Sarah Hannigan shannigan@susmangodfrey.com 10/14/2025 7:34:04 AM SENT Nicholas Perrone nicholas.perrone@kirkland.com 10/14/2025 7:34:04 AM SENT Business Court 1B BCDivision1B@txcourts.gov 10/14/2025 7:34:04 AM SENT Jessica Cox jcox@lynnllp.com 10/14/2025 7:34:04 AM SENT Associated Case Party: M. CHRISTOPHER DOYLE Name BarNumber Email TimestampSubmitted Status Louisa Karam louisa.karam@lockelord.com 10/14/2025 7:34:04 AM SENT 0207 Automated Certificate of eService This automated certificate of service was created by the efiling system. The filer served this document via email generated by the efiling system on the date and to the persons listed below. The rules governing certificates of service have not changed. Filers must still provide a certificate of service that complies with all applicable rules. Stephen Shackelford on behalf of Stephen Shackelford Bar No. 24062998 sshackelford@susmangodfrey.com Envelope ID: 106795813 Filing Code Description: No Fee Documents Filing Description: Request to Clerk for Supplementation of Appellate Record Status as of 10/14/2025 8:49 AM CST Associated Case Party: M. CHRISTOPHER DOYLE Louisa Karam louisa.karam@lockelord.com 10/14/2025 7:34:04 AM SENT Theressa Washington Theressa.Washington@lockelord.com 10/14/2025 7:34:04 AM SENT Roger BCowie Roger.Cowie@troutman.com 10/14/2025 7:34:04 AM SENT Veronica Long Veronica.Long@troutman.com 10/14/2025 7:34:04 AM SENT Associated Case Party: PRIMEXX ENERGY CORPORATION Name BarNumber Email TimestampSubmitted Status Gary Vogt gvogt@kirkland.com 10/14/2025 7:34:04 AM SENT Michael Patton michael.patton@kirkland.com 10/14/2025 7:34:04 AM SENT Laura QuinnBrigham laura.brigham@kirkland.com 10/14/2025 7:34:04 AM SENT Karyn Cooper karyn.cooper@kirkland.com 10/14/2025 7:34:04 AM SENT Jeremy Fielding jeremy.fielding@kirkland.com 10/14/2025 7:34:04 AM SENT Zack Ewing zack.ewing@kirkland.com 10/14/2025 7:34:04 AM SENT Griffin Vail griffin.vail@kirkland.com 10/14/2025 7:34:04 AM SENT Austin Lesch austin.lesch@kirkland.com 10/14/2025 7:34:04 AM SENT Associated Case Party: Primexx Energy Opportunity Fund, LP Name BarNumber Email TimestampSubmitted Status Bryan Caforio bcaforio@susmangodfrey.com 10/14/2025 7:34:04 AM SENT Michelle Williams mwilliams@susmangodfrey.com 10/14/2025 7:34:04 AM SENT Josephine Wang jwang@susmangodfrey.com 10/14/2025 7:34:04 AM SENT Lindsey Godfrey Eccles leccles@susmangodfrey.com 10/14/2025 7:34:04 AM SENT 0208 CIVIL DOCKET 24-BC01B-0010 STYLE ATTORNEYS CASE TYPE DATE OF FILING PRIMEXX ENERGY OPPORTUNITY STEPHEN SHACKELFORD, JR. SECURITIES/STOCK 10/25/2024 FUND, LP (212) 729-2012 vs. JURY FEE DATE: PRIMEXX ENERGY CORPORATION JEREMY FIELDING PAID BY: 214-972-1770 DATE ENTRY 11/12/2024 Hearings tentatively set for 11/21/2024 at 0900 0209 CAUSE NO. 24-BC01B-0010 PRIMEXX ENERGY OPPORTUNITY IN THE FUND, LP VS. BUSINESS COURT OF TEXAS PRIMEXX ENERGY DIVISION 1B CORPORATION BILL OF COSTS Fee Code Fee Description Initial Balance CV-BCMF Business Court - Motion Fee $250.00 $0.00 CV-BCFF Business Court Filing Fee $2,500.00 $0.00 Business Court Subsequent $70.00 Filing Fee 3CC3 State Consolidated - E-file $90.00 $0.00 System 2DC2 State Consolidated - Indigent $40.00 $0.00 Services 2DC4 State Consolidated - Judicial $15.00 $0.00 Court Personnel Training 2DC1 State Consolidated - Judicial $82.00 $0.00 Support Fund ACRF Appeal -Clerk Record $1,085.00 0.00 Preparation Fee ACRF Appeal -Clerk Record $11,930.00 $0.00 Preparation Fee Total $16,062.00 $0.00 You have been ordered by the court to pay the costs of the above suit. Please remit payment by money order, cashier’s check or cash to the Business Court Clerk, 300 W. 15th Street, Suite 606, Austin, Texas 78701 and enclose a copy of this bill with your remittance. I hereby certify the above to be a correct account of the costs now due in the above cause. Given under my hand and seal on this the on this the 1st day of August, 2025. BEVERLY CRUMLEY Clerk of the Business Court of Texas 300 W. 15th Street, Suite 606 Austin, Texas 78701 By: ___________________________________ 0210 CLERK’S CERTIFICATE STATE OF TEXAS § § BUSINESS COURT § I, BEVERLY CRUMLEY, Clerk of the Business Court in and for the State of Texas, do hereby certify that the above and foregoing are true and correct copies of all proceedings to be included in the transcript in Cause No. 24-BC01B-0010 in the case of Primexx Energy Opportunity Fund, LP, Primexx Energy Opportunity Fund II, LP vs. PRIMEXX ENERGY CORPORATION, M. CHRISTOPHER DOYLE, ANGELO ACCONCIA, BLACKSTONE HOLDINGS III LP, BLACKSTONE EMA II LLC, BMA VII LLC, BLACKSTONE ENERGY MANAGEMENT ASSOCIATES II LLC, BCP VII/BEP II HOLDINGS MANAGER LLC, BX PRIMEXX TOPCO LLC, BPP HOLDCO LLC, BLACKSTONE ENERGY PARTNERS II LP, BLACKSTONE MANAGEMENT ASSOCIATES VII LLC, BLACKSTONE CAPITAL PARTNERS VII LP as the same appears from the originals now on file and of record in this office. Given under my hand and seal of office on the 15th day of October, 2025. BEVERLY CRUMLEY, Clerk Business Court of Texas _____________________________ 0211 APPENDIX 10 § 152.002. Effect of Partnership Agreement; Nonwaivable..., TX BUS ORG § 152.002 Vernon's Texas Statutes and Codes Annotated Business Organizations Code (Refs & Annos) Title 4. Partnerships (Refs & Annos) Chapter 152. General Partnerships (Refs & Annos) Subchapter A. General Provisions § 152.002. Effect of Partnership Agreement; Nonwaivable and Variable Provisions Currentness (a) Except as provided by Subsection (b), a partnership agreement governs the relations of the partners and between the partners and the partnership. To the extent that the partnership agreement does not otherwise provide, this chapter and the other partnership provisions govern the relationship of the partners and between the partners and the partnership. (b) A partnership agreement or the partners may not: (1) unreasonably restrict a partner's or former partner's right of access to books and records under Section 152.212; (2) eliminate the duty of loyalty under Section 152.205, except that the partners by agreement may identify specific types of activities or categories of activities that do not violate the duty of loyalty if the types or categories are not manifestly unreasonable; (3) eliminate the duty of care under Section 152.206, except that the partners by agreement may determine the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable; (4) eliminate the obligation of good faith under Section 152.204(b), except that the partners by agreement may determine the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable; (5) vary the power to withdraw as a partner under Section 152.501(b)(1), (7), or (8), except for the requirement that notice be in writing; (6) vary the right to expel a partner by a court in an event specified by Section 152.501(b)(5); (7) restrict rights of a third party under this chapter or the other partnership provisions, except for a limitation on an individual partner's liability in a limited liability partnership as provided by this chapter; (8) select a governing law not permitted under Sections 1.103 and 1.002(43)(C); or © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 § 152.002. Effect of Partnership Agreement; Nonwaivable..., TX BUS ORG § 152.002 (9) except as provided in Subsections (c) and (d), waive or modify the following provisions of Title 1:1 (A) Chapter 1, if the provision is used to interpret a provision or to define a word or phrase contained in a section listed in this subsection; (B) Chapter 2, other than Sections 2.104(c)(2), 2.104(c)(3), and 2.113; (C) Chapter 3, other than Subchapters C and E2 of that chapter; or (D) Chapters 4, 5, 10, 11, and 12, other than Sections 11.057(a), (b), (c)(1), (c)(3), (d), and (f). (c) A provision listed in Subsection (b)(9) may be waived or modified in a partnership agreement if the provision that is waived or modified authorizes the partnership to waive or modify the provision in the partnership's governing documents. (d) A provision listed in Subsection (b)(9) may be waived or modified in a partnership agreement if the provision that is modified specifies: (1) the person or group of persons entitled to approve a modification; or (2) the vote or other method by which a modification is required to be approved. (e) Notwithstanding Subsection (b)(2), (3), or (4), a partnership agreement of a limited partnership may eliminate any or all of the duty of loyalty under Section 152.205, the duty of care under Section 152.206, and the obligation of good faith under Section 152.204(b), to the extent the partnership agreement expressly provides so. Credits Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2007, 80th Leg., ch. 688, § 104, eff. Sept. 1, 2007; Acts 2015, 84th Leg., ch. 23 (S.B. 859), § 3, eff. Sept. 1, 2015; Acts 2023, 88th Leg., ch. 27 (S.B. 1514), § 54, eff. Sept. 1, 2023; Acts 2025, 89th Leg., ch. 21 (S.B. 29), § 21, eff. May 14, 2025. Footnotes 1 V.T.C.A., Business Organizations Code § 1.001 et seq. 2 V.T.C.A., Business Organizations Code § 3.101 and § 3.201. V. T. C. A., Business Organizations Code § 152.002, TX BUS ORG § 152.002 Current through the end of the 2025 Regular and Second Called Sessions of the 89th Legislature. End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 § 152.204. General Standards of Partner's Conduct, TX BUS ORG § 152.204 Vernon's Texas Statutes and Codes Annotated Business Organizations Code (Refs & Annos) Title 4. Partnerships (Refs & Annos) Chapter 152. General Partnerships (Refs & Annos) Subchapter D. Relationship Between Partners and Between Partners and Partnerships (Refs & Annos) § 152.204. General Standards of Partner's Conduct Currentness (a) A partner owes to the partnership, the other partners, and a transferee of a deceased partner's partnership interest as designated in Section 152.406(a)(2): (1) a duty of loyalty; and (2) a duty of care. (b) A partner shall discharge the partner's duties to the partnership and the other partners under this code or under the partnership agreement and exercise any rights and powers in the conduct or winding up of the partnership business: (1) in good faith; and (2) in a manner the partner reasonably believes to be in the best interest of the partnership. (c) A partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner's conduct furthers the partner's own interest. (d) A partner, in the partner's capacity as partner, is not a trustee and is not held to the standards of a trustee. Credits Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2005, 79th Leg., ch. 64, § 77, eff. Jan. 1, 2006. V. T. C. A., Business Organizations Code § 152.204, TX BUS ORG § 152.204 Current through the end of the 2025 Regular and Second Called Sessions of the 89th Legislature. End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 § 152.205. Partner's Duty of Loyalty, TX BUS ORG § 152.205 Vernon's Texas Statutes and Codes Annotated Business Organizations Code (Refs & Annos) Title 4. Partnerships (Refs & Annos) Chapter 152. General Partnerships (Refs & Annos) Subchapter D. Relationship Between Partners and Between Partners and Partnerships (Refs & Annos) § 152.205. Partner's Duty of Loyalty Currentness A partner's duty of loyalty includes: (1) accounting to and holding for the partnership property, profit, or benefit derived by the partner: (A) in the conduct and winding up of the partnership business; or (B) from use by the partner of partnership property; (2) refraining from dealing with the partnership on behalf of a person who has an interest adverse to the partnership; and (3) refraining from competing or dealing with the partnership in a manner adverse to the partnership. Credits Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. V. T. C. A., Business Organizations Code § 152.205, TX BUS ORG § 152.205 Current through the end of the 2025 Regular and Second Called Sessions of the 89th Legislature. End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 § 152.206. Partner's Duty of Care, TX BUS ORG § 152.206 Vernon's Texas Statutes and Codes Annotated Business Organizations Code (Refs & Annos) Title 4. Partnerships (Refs & Annos) Chapter 152. General Partnerships (Refs & Annos) Subchapter D. Relationship Between Partners and Between Partners and Partnerships (Refs & Annos) § 152.206. Partner's Duty of Care Currentness (a) A partner's duty of care to the partnership and the other partners is to act in the conduct and winding up of the partnership business with the care an ordinarily prudent person would exercise in similar circumstances. (b) An error in judgment does not by itself constitute a breach of the duty of care. (c) A partner is presumed to satisfy the duty of care if the partner acts on an informed basis and in compliance with Section 152.204(b). Credits Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. V. T. C. A., Business Organizations Code § 152.206, TX BUS ORG § 152.206 Current through the end of the 2025 Regular and Second Called Sessions of the 89th Legislature. End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 § 21.223. Limitation of Liability for Obligations, TX BUS ORG § 21.223 Vernon's Texas Statutes and Codes Annotated Business Organizations Code (Refs & Annos) Title 2. Corporations (Refs & Annos) Chapter 21. For-Profit Corporations (Refs & Annos) Subchapter E. Shareholder Rights and Restrictions § 21.223. Limitation of Liability for Obligations Currentness (a) A holder of shares, an owner of any beneficial interest in shares, or a subscriber for shares whose subscription has been accepted, or any affiliate of such a holder, owner, or subscriber or of the corporation, may not be held liable to the corporation or its obligees with respect to: (1) the shares, other than the obligation to pay to the corporation the full amount of consideration, fixed in compliance with Sections 21.157-21.162, for which the shares were or are to be issued; (2) any contractual obligation of the corporation or any matter relating to or arising from the obligation on the basis that the holder, beneficial owner, subscriber, or affiliate is or was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory; or (3) any obligation of the corporation on the basis of the failure of the corporation to observe any corporate formality, including the failure to: (A) comply with this code or the certificate of formation or bylaws of the corporation; or (B) observe any requirement prescribed by this code or the certificate of formation or bylaws of the corporation for acts to be taken by the corporation or its directors or shareholders. (b) Subsection (a)(2) does not prevent or limit the liability of a holder, beneficial owner, subscriber, or affiliate if the obligee demonstrates that the holder, beneficial owner, subscriber, or affiliate caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the holder, beneficial owner, subscriber, or affiliate. Credits Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2007, 80th Leg., ch. 688, § 74, eff. Sept. 1, 2007. V. T. C. A., Business Organizations Code § 21.223, TX BUS ORG § 21.223 Current through the end of the 2025 Regular and Second Called Sessions of the 89th Legislature. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 § 21.223. Limitation of Liability for Obligations, TX BUS ORG § 21.223 End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Spethmann v. Anderson, 171 S.W.3d 680 (2005) CFO breached fiduciary duty in connection with unsecured 171 S.W.3d 680 loan of funds to president. Court of Appeals of Texas, Dallas. Reversed and rendered in part, reversed and remanded in part, and affirmed in part. Daniel SPETHMANN, Mark A. Kelley, and Jeffrey Crawford, Appellants, Procedural Posture(s): On Appeal. v. Attorneys and Law Firms Fred R. ANDERSON, Strategic *683 Daniel B. Jones, Plano, James A. McCorquodale, Vial Controls Corporation, and Strategic Hamilton Koch & Knox, Dallas, for Appellants. Gas Services, Inc., Appellees. Ronald G. Wiesenthal, St. Louis, MO, for Appellees. No. 05–04–01139–CV. | Before Justices MORRIS, LANG, and MAZZANT. Aug. 18, 2005. Synopsis OPINION Background: Corporations and shareholder sued other shareholders and officers on various claims of fraud, Opinion by Justice MAZZANT. misrepresentation, breach of fiduciary duty, and conspiracy in Daniel Spethmann, Mark A. Kelley, and Jeffrey Crawford connection with merger and post-merger conduct. Following appeal the trial court's judgment rendered against them in jury trial, the 116th District Court, Dallas County, Robert favor of Fred R. Anderson, Strategic Controls Corporation, Frost, J., rendered judgment for plaintiffs. Defendants and Strategic Gas Services, Inc. Appellants bring seventeen appealed. issues challenging the legal and factual sufficiency of the evidence to support the jury's verdict. After reviewing all the evidence, we affirm in part, reverse and render in part, and Holdings: The Court of Appeals, Mazzant, J., held that: reverse and remand in part. chief financial officer (CFO) did not misrepresent value of business entity with which merger was contemplated; I. BACKGROUND plaintiff shareholder justifiably relied on various other Fred Anderson headed his family's corporation, Gas Services, misrepresentations about valuation; Inc. (GSI). As the company grew, it hired Mark Kelley, CPA, to be the in-house accountant for GSI. Over time, award of damages for fraud and misrepresentation was Anderson came to rely heavily on Kelley's financial expertise. excessive; In 1996, Kelley was the chief financial officer for GSI and was a 10 percent shareholder in the corporation. Under a awards on both fraud and breach of fiduciary claims were stock-purchase agreement with GSI, Kelley could demand the duplicative; company buy his shares for book value. defendants breached duty to corporation by enforcing stock Fred Spethmann owned two corporations, Strategic Controls repurchase agreement; Corporation (SCC) and BMP Software. Spethmann and Anderson met through GSI's use of BMP's software. After damages award for breach of fiduciary duty was not working on a project together, Anderson and Spethmann excessive; and decided in 1996 that their companies complemented one another and that it might be advantageous to merge. They intended for Spethmann and Anderson to be equal © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 Spethmann v. Anderson, 171 S.W.3d 680 (2005) shareholders in the merged corporation and Kelley and Jeff chart showed the reasons Kelley thought he should have a 15 Crawford, an employee of SCC, to be lesser shareholders. percent share of the new company instead of a five percent share. Anderson agreed to give Kelley a 30 percent share in In the spring of 1997, Kelley, on behalf of GSI, and GSI, which would result in his having a 15 percent share of Spethmann began examining each other's companies in their the merged companies. Thus, going into the merger, Anderson “due diligence” analysis. One obstacle to a merger as equals owned 70 percent of GSI and Kelley owned 30 percent. became apparent: GSI had a book value of approximately $1.6 million, but SCC had a book value of only $400,000. The closing on the merger was scheduled for November This situation resulted in a hotly disputed area of evidence. 12, 1997, and the parties met in a pre-closing meeting on Anderson testified Spethmann told him that his software November 5, 1997, to work out any last minute problems. At development company, BMP, would be included in the that meeting, Anderson observed that the GSI–SCC merger merger, that BMP was worth nearly a million dollars, and was unequal because BMP was not included in the merger that BMP and SCC combined would come close to equaling papers. Anderson testified that Spethmann agreed to include the book value of GSI. Anderson also testified Spethmann BMP, which Spethmann said was “just under $1 million.” made these statements in front of Kelley and Crawford and Spethmann made this representation concerning the value they said nothing. Spethmann denied telling Anderson that of BMP in front of Kelley, and Kelley did not contradict BMP was worth nearly one million dollars or that BMP and Spethmann. Spethmann explained that BMP was not included SCC together would almost equal the value of GSI. Kelley in the merger in order for it to realize certain tax advantages. testified he told Anderson that under the accounting principles However, he promised Anderson it would be included in the GSI used, BMP had no book value, and he testified he told new parent company by April 1, 1998. Based on Spethmann's Anderson the merger was a “bad deal.” Anderson testified promise to include BMP in the merger and his representation Kelley never told him these things. of its value, Anderson agreed to go ahead with the merger. The merger closed on November 12, 1997. As Kelley and Spethmann continued the due diligence investigations, Anderson was trying to build business in Part of the merger agreement included a stock-purchase Venezuela and Bolivia. In July 1997, Anderson sent an agreement called the Buy–Sell Agreement. Under that employee, Steve House, to Bolivia. House had to change agreement, the company could demand a shareholder planes in Mexico City, where he was arrested and jailed for surrender his shares for the book value of the company. The having a firearm in his luggage. Anderson's time and energy repurchase of the shares could be paid for with cash or with then became consumed *684 by trying to get House safely an unsecured no-interest promissory note paid in five equal out of Mexico. Anderson's efforts succeeded, and House was installments over four years. released by the Mexican authorities on October 12, 1997. The new company was called Strategic Gas Services, Meanwhile, Kelley had examined his own prospects under Inc. (SGSI), and the shareholders were Anderson (35%, the merger and realized they would be damaged by the 1800 shares), Spethmann (35%, 1800 shares), Kelley (15%, merger. In GSI, he was a 10 percent shareholder in a $1.6 771.4 shares), and Crawford (15%, 771.4 shares). In SGSI, million corporation; after the merger, as then envisioned by Anderson was chairman of the board of directors and business the parties, he would be a five percent shareholder in a $2 development manager. Spethmann was president and a million corporation, which would result in an immediate loss director, Kelley was chief financial officer, and Crawford was of $40,000 equity. On August 13, 1997, Kelley sent Anderson vice president of operations. a letter requesting GSI buy back his stock pursuant to the GSI stock-purchase agreement. Both Kelley and Anderson As business development manager, Anderson continued interpreted the letter as a notice of resignation. Anderson his work in Venezuela and Bolivia. Anderson's expenses, testified the letter was “a huge blow” because Anderson relied including his salary, were about $17,000 each month. The heavily on Kelley's financial expertise, and Anderson had no other shareholders disagreed with Anderson's view of the time to personally handle the merger while he was trying to value of his efforts in South America, and they told Anderson get House out of Mexico. After getting the letter, Anderson they wanted the traveling expenses to stop by April 1 because asked Kelley to explain why he wanted to sell his shares. the *685 company did not have the money to pay for his Kelley prepared a chart styled “Mark's Stock Inequality.” This efforts. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Spethmann v. Anderson, 171 S.W.3d 680 (2005) 1998, Spethmann signed the promissory note, and Kelley In April, the company's note with the bank came up for authorized the wire transfer to Spethmann. That same day, renewal. This note was owed by GSI and was for a million Kelley saw Crawford, and Crawford told Kelley he did not dollar line of credit. Anderson had guaranteed the note. approve of the loan to Spethmann. Kelley tried to stop the When the note came up for renewal in April 1998, the other wire transfer of the money, but it was already too late. shareholders asked Anderson to guarantee the renewed note. Kelley and Crawford confronted Spethmann and demanded Anderson did so. The other shareholders did not sign the he return the money; Spethmann refused. Kelley consulted an guaranty. attorney to learn what could be done. The trial court excluded testimony of what the lawyer told Kelley, but Kelley and In May 1998, appellants decided to remove Anderson from Crawford took no legal action. Between November 1998 and the company. At a meeting on May 22, 1998, Spethmann April 1999, Spethmann did not make the monthly interest said the company would buy back Anderson's shares for payments, and he did not pay the late fees. The minutes “what [he] came in with.” On May 28, 1998, Anderson sent of the April 9, 1999 meeting of the board of directors appellants a memo stating the amount he came in with was stated the loan was unauthorized by SCC because Spethmann $1.8 million, and he also demanded the company relieve him wired the funds to a bank account he controlled without of his personal guaranty to the bank. Negotiations then ensued the knowledge or authorization of the other SCC director, over the details of buying Anderson's shares. Spethmann Crawford. Spethmann refused to approve the minutes. On structured deals under both the Buy–Sell Agreement and April 15, 1999, Kelley and Crawford sent Spethmann a letter under the promise to give Anderson what he came in with. demanding *686 Spethmann return the $300,000 principal All the offers were rejected by Anderson, and he remains and pay the unpaid interest and late fees. a shareholder. Anderson's role as an employee, officer, and director in the company ceased in June 1998. The minutes of the April 22, 1999 SCC board of directors meeting showed the meeting was attended by Crawford and In October 1998, SGSI sold GSI for $2.4 million, of which Kelley. The minutes stated Spethmann had made no interest or $1.7 million was in cash and the remainder paid the balance principal payments on the unauthorized loan, that Spethmann on the line of credit owed to the bank, thus relieving Anderson had taken advances from the corporation for $30,208, and that of his potential liability to the bank on his guaranty of the line Crawford and Kelley had worked diligently to get Spethmann of credit. The money from the sale was put in the bank, where to pay this loan and the advances. The minutes then stated it earned three percent interest. In late October, Spethmann SCC was authorized to make eighteen-month nonrecourse proposed to Kelley that Spethmann borrow $300,000 of loans to Crawford and Kelley in the amount of $222,842 the money at seven percent interest. Spethmann intended to at seven percent interest secured by their stock in SGSI. put the money into a corporation he owned that developed The minutes stated SCC would authorize the $300,000 loan distributorships of vitamins and other nutritional products. to Spethmann if its terms were changed to a nonrecourse Kelley determined that the loan would not hurt the company's loan like those approved for Crawford and Kelley. The ongoing operations. minutes then acknowledged the diligent work of the officers, Spethmann, Crawford, and Kelley, and resolved to give them Kelley prepared a promissory note in which SCC loaned each a bonus of $33,000, less any advances outstanding on the Spethmann $300,000 at seven percent interest rate, requiring date of payment. Spethmann refused to turn the $300,000 note monthly payment of interest, with $100 late fees if the interest into a non-recourse note, and he still failed to pay the interest payments were more than ten days late, but no payment of and accruing late fees. Kelley then began deducting the principal until the due date of the note, April 30, 2000. The interest payments from Spethmann's pay check each month. note was unsecured and lacked an acceleration clause. It appears from the testimony that the bylaws or other rules of Although the minutes authorized Crawford and Kelley SCC required the loan be approved by the other directors, to receive $222,842 loans, those loans were not funded. Crawford and Kelley. The day before Spethmann signed the The $33,000 bonuses, however, were paid. Kelley testified note, Spethmann told Crawford about the loan. Crawford the purpose of the bonuses was to properly account for told Spethmann that $300,000 was a lot of money and Spethmann's unpaid advances, to equalize the compensation that they would have to discuss it later. Spethmann then to Kelley and Crawford due to Spethmann's advances, and told Kelley he “had run it by” Crawford. On November 1, also to reward them for their diligent work. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 3 Spethmann v. Anderson, 171 S.W.3d 680 (2005) At trial, Spethmann testified he did not pay the $300,000 note Spethmann's borrowing of the $300,000 soured Kelley and when it became due and that he has made no interest payments Crawford's relationship with him. At the same time, the other than those deducted from his paycheck by Kelley. company's business declined, and it became apparent that the company could not afford to pay all three of them. Crawford Anderson sued appellants for common-law fraud, fraud in a and Kelley lacked the funds to buy out Spethmann, so in July stock transaction under section 27.01 of the Texas Business 1999, they announced their intention to resign. and Commerce Code, and negligent misrepresentation arising out of Spethmann's misrepresentation that the value of SCC Under the Buy–Sell Agreement, when a shareholder ceases and BMP would almost equal the value of GSI. Anderson his employment with SGSI, his shares become available sued Kelley for breach of fiduciary duty for remaining silent for sale. The first party with an option to purchase the when Spethmann made the misrepresentation. Anderson also shares is the other “Related Shareholder,” that is, the other sued appellants for conspiracy. SGSI sued appellants for shareholder from the same original corporation in the merger. breach of fiduciary duty from Crawford's and Kelley's sale Thus, Spethmann had the first option to purchase Crawford's of their stock to SGSI. SCC sued appellants for breach of shares, and vice-versa, and Anderson had the first option to fiduciary duty for the $300,000 loan to Spethmann. Anderson purchase Kelley's shares. If the Related Shareholder declined also requested exemplary damages based upon appellants' to purchase the shares, then SGSI had the option to purchase. malice and attorney's fees. If SGSI declined to purchase the shares, then the shareholders from the other merging corporation had the option to purchase The jury found appellants liable to Anderson for common- the shares. The price for the shares was to be “book value law and statutory fraud and negligent misrepresentation per Share using generally accepted accounting principles, as concerning the merger, that Anderson suffered damages of determined by the Company's certified public accountant.” $1,680,000, and that Anderson should receive exemplary The purchaser of the shares, whether another shareholder or damages of $250,000 from Crawford, $300,000 from Kelley, SGSI, had the option of paying in cash or giving a no-interest and $1,000,000 from Spethmann. The jury found that Kelley promissory note payable in five annual installments with the breached his fiduciary duty to Anderson in the merger and first installment due within thirty days of the date of the note. that Anderson suffered damages of $318,261. The jury also found appellants conspired against Anderson. In accordance with the Buy–Sell Agreement, notice was sent to the other shareholders, including Anderson, that the shares The jury found appellants breached their fiduciary duty to were for sale for $288.88 per share. Anderson asked for more SGSI concerning the sale of Crawford and Kelley's stock, information about the stock sale, but he did not exercise his that SGSI's damages were $445,684.06, and that SGSI should option to purchase the shares. Spethmann, as a director of receive exemplary damages of $250,000 from Crawford, SGSI, approved SGSI's purchase of Crawford's and Kelley's $300,000 from Kelley, and $2,000,000 from Spethmann. shares. Crawford and Kelley, as directors, approved the The jury found appellants breached their fiduciary duty to purchase of each other's shares, but they did not participate in SCC concerning the “loan” to Spethmann and that SCC's the approval of their own shares. The *687 purchases were damages were $300,000. The trial court entered judgment in in cash, not installments, for $222,842.03 to each of them, accordance with these findings. which was three cents more than the unfunded nonrecourse loans they had approved for themselves in April. II. FRAUD, NEGLIGENT MISREPRESENTATION, The purchase of Kelley's and Crawford's stock depleted about CONSPIRACY, AND BREACH OF FIDUCIARY DUTY 80 percent of SGSI's cash resources. However, Kelley and TO ANDERSON Crawford testified they thought the company was still viable and that they would not have taken the cash if they had thought it would cripple the company. After Kelley and A. Liability Crawford left, Spethmann tried to sell SGSI, but the deal fell In the first, second, third, fifth, and thirteenth issues, through. SGSI then ceased doing business. appellants assert the evidence is legally and factually insufficient to support the jury's findings that they were liable to Anderson for statutory and common-law fraud and © 2025 Thomson Reuters. No claim to original U.S. Government Works. 4 Spethmann v. Anderson, 171 S.W.3d 680 (2005) negligent misrepresentation and that Kelley was liable to We agree there is no evidence of Kelley making an Anderson for breach of fiduciary duty. Anderson's claims affirmative misrepresentation or supplying false information were based on his testimony that before the merger, to Anderson, and we conclude there is no evidence to support Spethmann represented to him that BMP was worth just under the jury's findings on these causes of action *689 against a million dollars, the representation was made in front of Kelley. We sustain the second issue to the extent it concerns Kelley, Kelley knew BMP was worth nothing or much less the causes of action against Kelley for statutory fraud, than a million dollars, Kelley did not contradict Spethmann, common-law fraud through affirmative misrepresentation, and Anderson relied on Spethmann's representation of the and negligent misrepresentation. value of BMP and Kelley's silence in deciding to go ahead with the merger. Spethmann *688 testified he made no 1 To prove statutory fraud in a stock transaction under such representation to Anderson, and Kelley testified he told section 27.01 of the Texas Business and Commerce Anderson that BMP had no value. Code, a plaintiff must show: (1) a false representation of a past or existing material fact, when the false In determining the legal sufficiency of the evidence, we representation is (A) made to a person for the purpose consider all the evidence in the light most favorable to the of inducing the person to enter into a contract; and (B) prevailing party, indulging every reasonable inference in that relied on by that person in entering into that contract; or party's favor. Associated Indem. Corp. v. CAT Contracting, (2) a false promise to do an act, when the false promise is Inc., 964 S.W.2d 276, 285–86 (Tex.1998); see also City of (A) material; (B) made with the intention of not fulfilling it; (C) made to a person for the purpose of inducing Keller v. Wilson, 168 S.W.3d 802, 808–09 (Tex.2005). We that person to enter into a contract; and (D) relied on by will uphold the finding if more than a scintilla of evidence that person in entering into that contract. Tex. Bus. & supports it. Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, Com.Code Ann. § 27.01(a) (Vernon 2002). 499 (Tex.1995); see City of Keller, 168 S.W.3d at 813–14. More than a scintilla of evidence exists where the evidence 2 The elements of common-law fraud through affirmative supporting the finding, as a whole, “rises to a level that misrepresentation are: (1) a material misrepresentation; would enable reasonable and fair-minded people to differ (2) that was false when made; (3) that was known by the in their conclusions.” Burroughs Wellcome Co., 907 S.W.2d speaker to be false when it was made or that was made at 499 (quoting Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, recklessly as a positive assertion without knowledge of its truth; (4) the speaker made it with the intent that it 25 (Tex.1994)); see also City of Keller, 168 S.W.3d at 822 should be acted upon; (5) the party justifiably relied on (“If the evidence at trial would enable reasonable and fair- the representation; and (6) the party was injured as a minded people to differ in their conclusions, then jurors must result. See Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. be allowed to do so.”). In determining the factual sufficiency Co., 51 S.W.3d 573, 577 (Tex.2001). of the evidence, we consider and weigh all the evidence. Ortiz 3 Negligent misrepresentation requires proof that (1) the v. Jones, 917 S.W.2d 770, 772 (Tex.1996). Findings may be overturned only if they are so against the great weight and defendant, in the course of his business or in a transaction preponderance of the evidence as to be clearly wrong and in which he had an interest; (2) supplied false information unjust. Id. for the guidance of others; (3) without exercising reasonable care or competence in communicating the information; (4) the plaintiff justifiably relied on the information; (5) proximately causing the plaintiff's 1. Kelley's Liability for Statutory Fraud, Affirmative injury. See McCamish, Martin, Brown, & Loeffler v. FE Common–Law Fraud, and Negligent Misrepresentation Appling Interests, 991 S.W.2d 787, 791 (Tex.1999). In the second issue, Kelley contends the evidence is legally and factually insufficient to support Anderson's 2. Kelley's Liability to Anderson for Breach of Fiduciary 1 causes of action against him for statutory fraud, common- Duty and Common–Law Fraud Through Non–Disclosure and Spethmann's Liability to Anderson law fraud through affirmative misrepresentation,2 and negligent misrepresentation3 because Anderson did not In the first, second, and thirteenth issues, Kelley argues allege or present any evidence of Kelley making an the evidence is legally and factually insufficient to support affirmative misrepresentation to him concerning the merger. the jury's finding him liable for common-law fraud through © 2025 Thomson Reuters. No claim to original U.S. Government Works. 5 Spethmann v. Anderson, 171 S.W.3d 680 (2005) nondisclosure4 and breach of fiduciary duty5 because, Q. Didn't Mr. Kelley tell you prior to the merger that BMP, in fact, did not have a value of $900,000? Kelley asserts, the evidence shows he tried to persuade A. I don't recall him ever saying that, no, sir. Anderson not to proceed with the merger, making Anderson's Appellants argue, “Anderson's testimony that he ‘cannot reliance on Kelley's silence unjustifiable. In the first recall’ Kelley informing him that BMP was not worth and fifth issues, Spethmann also asserts the evidence is $900,000 is not evidence that Kelley did not do so.” We legally and factually insufficient to support the jury's disagree. Anderson's testimony was not that he could finding him liable for statutory and common-law fraud and not recall whether Kelley had told him; his answer negligent misrepresentation because Anderson could not have consisted of two parts: (1) he did not recall Kelley ever justifiably relied on any representation by him concerning telling him that; and (2) “no, sir.” In context, it is clear BMP's value. that Anderson's answer was intended to be a denial of appellants' counsel's assertion that Kelley had told him 4 that BMP was not worth $900,000. The jury was instructed that “Fraud occurs when— Appellants also cite to Anderson's testimony where he (1) a party fails to disclose a material fact within the admitted testifying as follows in a deposition: knowledge of that party, (2) the party knows that the Question: Okay, do you deny that Mr. Kelley told other party is ignorant of the fact and does not have you that BMP was not worth $900,000? an equal opportunity to discover the truth, (3) the party Answer: I do not recall. intends to induce the other party to take some action Question: He may have told you that, you just didn't by failing to disclose the fact, and (4) the other party remember as you sit here today? suffers injury as a result of acting without knowledge Answer: He was aware of the negotiation and the of the undisclosed fact.” See Formosa Plastics Corp., relative values anticipated and expected the CFO USA v. Presidio Eng'rs & Contractors, Inc., 941 S.W.2d would take exception if there was something 138, 144 (Tex.App.-Corpus Christi 1995), rev'd on other misleading or misstated. grounds, 960 S.W.2d 41 (Tex.1998). When Anderson was asked to affirm that he did not 5 The jury was instructed that Kelley had the burden to remember whether Kelley told him BMP was not worth prove he complied with his fiduciary duty to Anderson. $900,000, Anderson did not do so. Anderson's two The instructions stated that to prove he complied, Kelley answers, read together, show (1) he did not recall Kelley had to show: (a) the transaction in questions was fair and telling him BMP was not worth $900,000, and (2) equitable to Anderson; (b) he made reasonable use of he expected Kelley to tell him if BMP or the other the confidence Anderson placed in him; (c) he acted in companies to be merged did not meet their expected the utmost good faith and exercised the most scrupulous value. Contrary to appellants' assertion, this deposition honesty toward Anderson; (d) he placed Anderson's testimony does not prove Anderson could not recall interests before his own, did not use the advantage of his whether Kelley told him BMP was not worth $900,000. position to gain any benefit for himself at the expense Assuming this deposition testimony tended to impeach of Anderson, and did not place himself in any position Anderson, it did not require the jury to reject his in-court where his self-interest might conflict with his obligations testimony. Jurors are the sole judge of the credibility of as a fiduciary; and (3) he fully and fairly disclosed the witnesses and the weight to be given their testimony. all important information to Anderson concerning the City of Keller, 168 S.W.3d at 819. transaction. *690 Appellants also cite to Kelley's stock inequality chart To support their argument that Anderson could not have that Anderson admitted receiving, which shows that the value justifiably relied on Spethmann's representation of the value of Kelley's stock, and thus also Anderson's, would decline of BMP, appellants cite to Kelley's testimony that he substantially as a result of the merger. However, Anderson repeatedly told Anderson that BMP would not equalize the testified that when Kelley prepared the chart, Kelley was not value Anderson and Spethmann brought into the merger. aware of the plan to include BMP in the merger. Because, However, Anderson testified Kelley did not tell him that.6 according to Anderson, the chart shows the value of the merger without BMP, it does not prove Anderson could not 6 have justifiably relied on Spethmann's representation about Anderson's testimony concerning Kelley's failure to tell the value of BMP. him BMP was not worth just under a million dollars was in response to a question from appellants' attorney: Appellants also argue that Anderson could not have justifiably relied on Spethmann's representation that BMP had a book © 2025 Thomson Reuters. No claim to original U.S. Government Works. 6 Spethmann v. Anderson, 171 S.W.3d 680 (2005) value of just under one million dollars because Defendant's In their fourth and sixth issues, appellants complain that Exhibit 6, the balance sheet for BMP as of July 31, 1996, the damages awarded Anderson for his fraud and negligent showed BMP had a book value of $330,642.42. However, misrepresentation claims are excessive. The jury found no evidence in the record showed Anderson ever saw this Anderson's damages for both fraud causes of action and the document. Also, no evidence showed the value of BMP on negligent misrepresentation cause of action were $1,680,000. July 31, 1996 was the same as it was during the merger. The standard of review for a claim of excessive damages is factual sufficiency of the evidence. Maritime Overseas Corp. Appellants also argue that Anderson could not have justifiably v. Ellis, 971 S.W.2d 402, 406 (Tex.1998). In reviewing the relied on Spethmann's representation that the combined book factual sufficiency of the evidence, our task is to determine values of SCC and BMP would be nearly the same as GSI whether the jury's findings of $1,680,000 damages are so because, appellants assert, the representation was made in contrary to the overwhelming weight of the evidence as to be the adversarial context of business negotiations. Appellants, clearly wrong and unjust. We sustain the third issue. however, cite to no evidence that Spethmann and Anderson were adversaries in the merger. By the last time Spethmann made the misrepresentation, which Anderson testified was 1. Formula for Fraud Damages one week before the closing of the merger, the two companies had worked as partners on projects for over a year, and the In determining the damages for the fraud causes of action, the combining of their corporate offices and functions had been trial court instructed the jury: ongoing for about eight months. Consider the following elements of damages, if any, and We conclude the evidence is legally and factually sufficient none other. to support the jury's finding that Anderson justifiably relied on Spethmann's representation about the value of The difference in the value of Fred Anderson's stock in BMP and Kelley's silence in the face of Spethmann's Strategic Gas Services, Inc. on the day it was issued and the representation. We overrule appellants' first, second, fifth, amount it would have been worth but for the fraud made the and thirteenth issues as to Anderson's causes of action subject of Question No. 1 [statutory fraud] and 3 [common- against Spethmann for common-law and statutory fraud and law fraud]. negligent misrepresentation and as to Anderson's causes of The jury answered $1,680,000.7 We construe the term “value action against Kelley for breach of fiduciary and common- of Fred Anderson's stock in [SGSI] ... but for the fraud” as law fraud through nondisclosure. meaning the value Anderson's stock in SGSI would have had if SCC and BMP had been worth Spethmann's representation of their value. Thus, the instruction required the jury to apply the following equation: Damages equal the Represented 3. Crawford's Liability to Anderson Value of Anderson's 35 percent of SGSI on the day of In the third issue, Crawford asserts the evidence is legally the merger minus the Actual Value of his 35 percent of and factually insufficient to support the fraud findings against SGSI on the day of the merger, or: D = .35 RV − .35 AV. him. We agree the evidence is legally insufficient. The record The Represented Value was Spethmann's representation to contains no evidence of any affirmative representation by Anderson that the combined values of SCC and BMP would Crawford concerning the book value of BMP or the combined nearly equal the value of GSI. Thus, the Represented Value book value of *691 BMP and SCC. The record also contains of SGSI was approximately 2 GSI. The Actual Value was the no evidence that Crawford was aware that Spethmann's combined actual values of GSI, SCC, and BMP. Thus, the representations to Anderson were false. Accordingly, we formula for the damages may be expressed as D = (.35 x 2 conclude there is no evidence to support one or more elements GSI) − .35 (GSI + SCC + BMP), with all values computed on of Anderson's common-law and statutory fraud, his negligent the day of the merger. misrepresentation, and conspiracy causes of action. 7 The question then asked the jury to determine “The amount of earnings lost by Fred Anderson from the date of his discharge by Strategic Gas Services to the date B. Damages for Fraud and Negligent Misrepresentation of trial. Do no include in your answer any amount that © 2025 Thomson Reuters. No claim to original U.S. Government Works. 7 Spethmann v. Anderson, 171 S.W.3d 680 (2005) you find Fred Anderson could have earned by exercising shares of GSI should have equaled the value he received in reasonable diligence in seeking other employment.” The SGSI but for the fraud. jury answered this damages element “$0.00.” Anderson does not appeal that jury finding. 4. Calculations Under the Formula 2. Formula for Negligent Misrepresentation Damages Much of the evidence showed GSI was worth, and that The jury was instructed to determine Anderson's negligent before the merger the parties thought it was worth, about $1.6 misrepresentation damages in the past using the following million. The evidence also showed SCC was worth about formula: $400,000 and BMP was worth nothing, which would make the value of SGSI $2 million. Using these values in the The difference between the value Fred Anderson has damages formula, 70 percent of GSI ($1.12 million) minus 35 received in the transaction and the purchase price or value percent of SGSI ($700,000) yields damages of $420,000, or given. only one-fourth of the $1.68 million in the jury's answers. The jury answered $1,680,000.8 We construe this instruction as requiring the jury *692 to apply the equation of Damages Even if the jurors considered SCC and BMP to be worth equal the Value Given, which was Anderson's 70 percent of nothing, their calculations under the trial court's instructions GSI, minus the Value Received, which was 35 percent of still could not approach $1.68 million. Using those zero SGSI. This formula may be expressed as D = VG − VR, or D values in the damages formula, Anderson's damages would be = .7 GSI − .35 SGSI. Because SGSI was the combined value 70 percent of GSI ($1.12 million) minus 35 percent of SGSI of the companies, the formula becomes D = .7 GSI − .35 (GSI (and if the only company with any value was GSI, it would + SCC + BMP). be $560,000), which would equal $560,000. This is only one- third of the damages found by the jury. 8 Using that same formula, the jury was also asked to determine Anderson's damages that “in reasonable By contrast, Anderson asserts the value that should be probability will be sustained in the future,” and the assigned to GSI should be the amount it sold for after the jury answered “$0.00.” The jury was then asked to merger, $2.4 million, and that SCC should be valued not determine “The pecuniary loss, if any, otherwise suffered at zero, but at −$92,783, as Anderson reported its value as a consequence of Fred Anderson's reliance on to the IRS in his income tax return for 1997.9 Anderson the misrepresentation.” For the damages that “were contends the damages calculation should simply be 70 percent sustained in the past,” the jury answered “0.00”; for of $2.4 million, which is $1.68 million. However, because the damages that “in reasonable probability will be the *693 jury had to use the formula prescribed by the sustained in the future,” the jury answered $261,000. The trial court did not award the $261,000 future damages. trial court, we cannot agree with his calculation. Adding the Anderson does not appeal these jury findings or the trial sale price of GSI, $2.4 million, the negative tax-return value court's failure to render judgment on the $261,000 future for SCC, −$92,783, and zero for BMP gives a value for damages. SGSI $2,307,217. Anderson's 35 percent share of that would equal $807,525.95. When one subtracts $807,525.95 from Anderson's 70 percent of GSI, $1.68 million, according to 3. The Formulas Unified the formula, the balance is damages of $872,474.05. These damages are only about 52 percent of the $1.68 million in Because .7 GSI and .35 x 2 GSI are the same, the two damages damages found by the jury. formulas, even though worded differently, actually are the same: the value of 70 percent of GSI (which is the same as 9 Anderson argues the value of the stock in SGSI was 35 percent of the represented value of SGSI) minus the actual zero based on SCC's negative value. However, the value of 35 percent of SGSI, with all values determined as only way the jury could find Anderson's damages were of the time of the merger. It is logical for the two formulas $1.68 million was by finding the value of SCC and to be identical because, as the merger was to be an exchange BMP equaled −$2.4 million. No evidence supports this of equal values, the value Anderson gave in the form of his assertion. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 8 Spethmann v. Anderson, 171 S.W.3d 680 (2005) Appellants assert the $2.4 million sale price is determined at the time and place the merger occurred.” The inappropriate because the sale was almost a year after jury answered $318,261. Under the evidence before the jury, the merger, and Kelley testified that GSI was improved, “the value ... as agreed to by the parties” and, under the fraud made “more profitable,” and achieved a “very positive instruction, “the amount it would have been worth but for the cash flow” between the merger and the sale. Kelley fraud” were the same, about twice the value of GSI. Like the testified that if they had tried to sell it at the time fraud damages, the values in the computation of the breach- of the merger, “we would not have had the same of-fiduciary-duty damages were determined as of the time of results.” Because we conclude that using the $2.4 million the merger. valuation does not support the damages award, we need not consider this argument. Thus, under trial court's instruction and the evidence, the Anderson also asserts the damages could be calculated formula for determining the damages for breach of fiduciary by starting with the combined value of GSI and SCC duty may be expressed as D = (.35 x 2 GSI) − .35 (GSI at $2 million, subtracting 35 percent of the value of + SCC + BMP), with all values determined at the time SCC, and awarding Anderson 70 percent of the remaining of the merger. This is the same formula as for the fraud figure. However, this calculation does not follow the jury's damages. See supra pp. 691–92. Accordingly, we conclude instructions for calculating damages. the damages for Kelley's breach of fiduciary duty to Anderson were duplicative of the fraud damages. After reviewing the entire record, we conclude the jury's award of $1,680,000 for fraud and negligent Anderson argues the awards are not duplicative because the misrepresentation was so contrary to the overwhelming jury could have computed Anderson's breach-of-fiduciary- weight of the evidence as to be clearly wrong and unjust. We duty damages by computing the value of the 20 percent of sustain appellants' fourth and sixth issues. GSI Anderson gave Kelley. *694 10 However, this figure We cannot reverse only on unliquidated damages when, as is irrelevant to the instructed computation: the difference in this case, liability is contested. Tex.R.App. P. 44.1(b); between the value of SGSI “as agreed to by the parties and Redman Homes, Inc. v. Ivy, 920 S.W.2d 664, 669 (Tex.1996). its actual value.” Under these facts, the jury instructions for Accordingly, we must remand the liability portions of calculating the damages for fraud and breach of fiduciary duty the fraud and negligent misrepresentation causes of action to Anderson involve the same calculation: the difference in as well. Because attorney's fees and exemplary damages value at the moment of the merger between Anderson's SGSI cannot be supported without a finding of liability, we stock as promised/agreed to and its actual value. sustain appellants' fourteenth and sixteenth issues. Tex. Bus. & Com.Code Ann. § 27.01(e) (Vernon 2002); Tex. Civ. 10 In Plaintiff's Exhibit 10, “Mark's Stock Inequality,” Prac. & Rem.Code Ann. § 41.003 (Vernon Supp.2004–05); Kelley stated the value of his 10 percent share of GSI Likewise, because the conspiracy claim cannot stand when was $159,130. Twice that amount, or 20 percent of the underlying tort (in this case fraud) fails, we sustain GSI, is $318,260, just one dollar off the jury's damages calculation for breach of fiduciary duty. appellants' seventeenth issue. Anderson also argues the breach-of-fiduciary-duty damages do not constitute a double recovery with the fraud damages because the breach of fiduciary duty and the fraud involved C. Double Recovery for Fraud and Breach of Fiduciary separate conduct. Anderson asserts that the breach of Duty fiduciary duty arose from Kelley's request for an additional In the twelfth issue, Kelley contends the judgment's award 20 percent of GSI. We disagree. The jury question on Kelley's of damages for both fraud and breach of fiduciary duty to breach of fiduciary duty to Anderson was for “the transaction Anderson gave Anderson a prohibited double recovery. The in question,” which, under the facts of this case, was the damages question for Kelley's breach of his fiduciary duty to merger, not Kelley's pre-merger negotiations for additional Anderson instructed the jury to determine “[t]he difference, shares of GSI. If the trial court intended for the jury question if any, between the value of Fred Anderson's 35% interest on breach of fiduciary duty to concern Kelley's additional in Strategic Gas Services, Inc. as agreed to by the parties 20 percent of GSI, then the damages question for breach of and its actual value. The difference in value, if any, shall be that duty would not have concerned the difference in value of © 2025 Thomson Reuters. No claim to original U.S. Government Works. 9 Spethmann v. Anderson, 171 S.W.3d 680 (2005) Anderson's shares in SGSI “as agreed to by the parties and its Chem. Co., 46 S.W.3d at 241. In reviewing this challenge, actual value ... at the time ... the merger occurred.” we consider all of the evidence in determining whether the finding is so contrary to the great weight and preponderance We conclude the judgment contains a double recovery for of the evidence as to be clearly wrong and manifestly unjust. Anderson. The trial court should have required Anderson to See In re King's Estate, 150 Tex. 662, 665, 244 S.W.2d 660, elect between the awards of damages against Kelley for fraud 661 (1951). We may reverse and remand for a new trial if and for breach of fiduciary duty. Because we are reversing we conclude the jury's failure to find is against the great and remanding the fraud causes of action, we conclude we weight and preponderance of the evidence. See Cropper v. must also reverse and remand Anderson's breach of fiduciary Caterpillar Tractor Co., 754 S.W.2d 646, 651 (Tex.1988). duty cause of action against Kelley because it concerns the same damages. See Willis v. Donnelly, 118 S.W.3d 10, 48 (Tex.App.-Houston [14th Dist.] 2003, pet. filed). We sustain A. Liability Kelley's twelfth issue. Because of our resolution of the twelfth issue, we need not reach the eleventh issue asserting the The jury was instructed that for each defendant to prove he fraud and breach-of-fiduciary-duty damages findings fatally complied with his fiduciary duty he must show: conflict. a. the transaction in question was fair and equitable to Strategic Gas Services, Inc.; III. BREACH OF FIDUCIARY DUTY TO SGSI b. the particular defendant made reasonable use of the confidence that Strategic Gas Services, Inc. placed in The jury found appellants breached their fiduciary duty to him; SGSI and that the breach of fiduciary duty from SGSI's purchase of its stock from Kelley and Crawford proximately c. the particular defendant acted in the utmost good caused damages to SGSI of $445,684.06. In the seventh faith and exercised the most scrupulous honesty toward issue, appellants contend no evidence or factually insufficient Strategic Gas Services, Inc.; evidence shows they breached their fiduciary duty through Kelley and Crawford's sale of their stock to SGSI. In d. the particular defendant placed the interests of Strategic the eighth issue, they contend the jury's findings are not Gas Services, Inc. before his own, did not use the “supported by legally sufficient or alternatively factually advantage of his position to gain any benefit for himself sufficient evidence.” at the expense of Strategic Gas Services, Inc., and did not place himself in any position where his self interest The charge placed the burden of proof on appellants to might conflict with his obligations as a fiduciary; and prove they did not breach their fiduciary duties. An appellant attacking the legal sufficiency of an adverse jury finding on e. the particular defendant fully and fairly disclosed all which he had the burden of proof must demonstrate that the important information to Strategic Gas Services, Inc. evidence establishes, as a matter of law, all vital facts in concerning the transaction. support of the finding. Dow Chem. Co. v. Francis, 46 S.W.3d The jury answered that all three appellants failed to prove they 237, 241 (Tex.2001) (per curiam). In reviewing such a claim, complied with their fiduciary duty to SGSI. we first examine the record for evidence supporting the jury's finding, while ignoring all evidence to the contrary. Sterner Appellants argue the “business judgment rule” bars judgment against them on this claim. To preserve error, a party must v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989). If have brought the complaint to the attention of the trial court there is no evidence to support the fact finder's answer, *695 and obtained a ruling. Tex.R.App. P. 33.1(a). Appellants did only then will we review the entire record to assess whether not plead the business judgment rule, the trial court did not the contrary proposition was established as a matter of law. instruct the jury on the business judgment rule, appellants See Victoria Bank & Trust Co. v. Brady, 811 S.W.2d 931, did not request submission of an instruction on the business 940 (Tex.1991). If an appellant challenges a jury finding judgment rule, and appellants did not raise the business regarding an issue upon which the appellant had the burden of judgment rule in any of their post-verdict motions before the proof, he must demonstrate that the adverse finding is against trial court. Because appellants did not raise this issue before the great weight and preponderance of the evidence. Dow © 2025 Thomson Reuters. No claim to original U.S. Government Works. 10 Spethmann v. Anderson, 171 S.W.3d 680 (2005) the trial court, we conclude they have not preserved any error of $445,684.06, the entire amount SGSI paid Crawford and regarding the applicability of the business judgment rule. Kelley for their shares. The company's collapse within a few months of the stock sale is some evidence that the removal Appellants next argue that they cannot be held liable for of 80 percent of the company's cash resources caused it breach of fiduciary duty because their actions in the sale of damage. Unlike the damages questions on the fraud and their stock were in accordance with the Buy–Sell Agreement. breach of fiduciary causes of action, the jury was not given Appellants cite several cases in support of this argument, but a formula for determining damages. Instead the jury was none of them involved fiduciaries. Tex. Beef Cattle Co. v. simply instructed to determine “[t]he damages, if any, caused Green, 921 S.W.2d 203 (Tex.1996); Sakowitz, Inc. v. Steck, to Strategic Gas Services, Inc. by the purchase of the stock 669 S.W.2d 105 (Tex.1984), overruled on other grounds by in Strategic Gas Services, Inc. owned by Mark Kelley and Sterner v. Marathon Oil Co., 767 S.W.2d 686 (Tex.1989); Jeff Crawford.” Under this broad instruction, the jury could Montgomery v. Phillips Petroleum Co., 49 S.W.2d 967 have concluded the damages SGSI suffered was the loss of (Tex.Civ.App.-Amarillo 1932, writ ref'd); *696 First Fed. the remaining value of the corporation after the purchase Sav. & Loan Ass'n v. Ritenour, 704 S.W.2d 895 (Tex.App.- of Crawford's and Kelley's shares. Kelley and Crawford Corpus Christi 1986, writ ref'd n.r.e.). Accordingly, those received the book value of $288.88 per share. At that time, cases are not applicable. Moreover, the fact the appellants had there were 5142.8 shares outstanding, so the book value the contractual right to sell their stock to the corporation if of the corporation was $1,485,652.06. That amount, minus the corporation agreed to buy it and the corporate authority the value of Crawford's and Kelley's shares, $445,684.06, to cause the corporation to buy the stock does not establish yields damages of $1,039,968. These damages that the jury as a matter of law that they did not breach a fiduciary duty could have rendered are two-and-one-third times the damages to SGSI in doing so. The issue is not whether the parties the jury actually rendered. Accordingly, we conclude the followed the Buy–Sell Agreement but whether the transaction evidence is legally and factually sufficient to support the was fair to SGSI and was performed with the utmost good jury's finding of damages, and the damages awarded are not faith and scrupulous honesty and without taking advantage of excessive. We overrule appellants' eighth issue. their position with SGSI at the expense of SGSI. In the fifteenth issue, appellants contend the trial court erred The jury could have concluded that appellants' use of the in awarding exemplary damages based on the breach of cash option, instead of the five-installment option, constituted fiduciary duty to SGSI. This issue is dependent upon our a breach of their fiduciary duty. Appellants testified that reversing the SGSI's cause of action for breach of fiduciary one of the reasons for Crawford and Kelley's resignation duty. Because we have not reversed it, appellants' arguments was to stop the cash drain of their salaries. Despite this lack merit. We overrule appellants' fifteenth issue. professed intention of preserving SGSI's cash resources, they proceeded to transact the purchase under the cash option instead of the installment option, which depleted 80 percent *697 IV. BREACH OF FIDUCIARY DUTY TO SCC of the company's cash resources. Thus, the jury could have concluded that purchasing the shares for cash was not fair and In the ninth and tenth issues, Kelley and Crawford contend equitable toward SGSI, was not in keeping with appellants' the evidence is legally and factually insufficient to support the duty of utmost good faith and scrupulous honesty toward jury's findings that they breached their fiduciary duty to SCC SGSI, and that appellants' took advantage of their positions in the events surrounding the $300,000 loan to Spethmann. with SGSI at the expense of SGSI. We conclude the evidence Spethmann does not challenge his liability on this cause of is legally and factually sufficient to support the jury's finding action. that appellants' breached their fiduciary duty to SGSI. We overrule appellants' seventh issue. The trial court instructed the jury that for each defendant to prove he complied with his fiduciary duty he must show: a. the transaction in question was fair and equitable to B. Damages Strategic Controls Corporation; In the eighth issue, we consider whether the evidence is legally and factually insufficient to support the jury's award © 2025 Thomson Reuters. No claim to original U.S. Government Works. 11 Spethmann v. Anderson, 171 S.W.3d 680 (2005) do, to make sure all the directors authorized the loan before b. the particular defendant made reasonable use of the approving and funding the $300,000 loan to Spethmann. The confidence that Strategic Controls Corporation placed in evidence that Kelley approved and funded the loan based him; solely on Spethmann's statement that he “had run it by” c. the particular defendant acted in the utmost good Crawford shows Kelley did not make “reasonable use of faith and exercised the most scrupulous honesty toward the confidence that Strategic Controls Corporation placed in Strategic Controls Corporation; him.” It also shows Kelley had not “fully and fairly disclosed all important information to Strategic Controls Corporation d. the particular defendant placed the interests of Strategic concerning the transaction,” namely, that he had not obtained Controls Corporation before his own, did not use the Crawford's authorization for the loan before approving and advantage of his position to gain any benefit for himself funding it. at the expense of Strategic Controls Corporation, and did not place himself in any position where his self interest *698 Because some evidence shows Kelley breached his might conflict with his obligations as a fiduciary; and fiduciary duty to SCC, we conclude Kelley has not shown the evidence is legally insufficient. We also conclude the jury's e. the particular defendant fully and fairly disclosed all finding is not against the great weight and preponderance of important information to Strategic Controls Corporation the evidence. We overrule the tenth issue. concerning the transaction. V. CONCLUSION A. Crawford's Liability We reverse the trial court's judgment in part and render Having reviewed all the evidence, we conclude the record judgment that Anderson and SCC take nothing from conclusively establishes that Crawford did not breach his Crawford. fiduciary duty to SCC concerning the $300,000 loan to Spethmann. The evidence is undisputed that Crawford We render judgment that Anderson take nothing from Kelley opposed the loan initially, did not participate in the creation on his causes of action for common-law fraud through of the loan, refused to give his consent to the loan affirmative misrepresentation, negligent misrepresentation, when Spethmann asked him, and consistently insisted that and statutory fraud and that Anderson take nothing on his Spethmann return the money or, at the least, put up security claims against Kelley for attorney's fees and exemplary for the loan. Crawford received no financial or other gain from damages concerning those causes of action. Spethmann's receipt of the loan. Nothing indicates Crawford acted other than with the utmost good faith and the most We reverse and remand for further proceedings Anderson's scrupulous honesty concerning the unauthorized loan. We causes of action against Spethmann for common-law and conclude no evidence shows Crawford breached his fiduciary statutory fraud, negligent misrepresentation, and conspiracy duty to SCC concerning the $300,000 unauthorized loan, and as well as Anderson's claims for attorney's fees and exemplary Crawford established as a matter of law that he did not breach damages concerning those causes of action. his fiduciary duty to SCC in that transaction. We sustain the ninth issue. We reverse and remand for further proceedings Anderson's causes of action against Kelley for common-law fraud through nondisclosure, conspiracy, and breach of fiduciary B. Kelley's Liability duty as well as Anderson's claim for exemplary damages concerning those causes of action. The evidence shows Kelley, like Crawford, received no financial or other benefit from Spethmann's receipt of the We affirm the trial court's judgment in all other respects. $300,000 and that Kelley worked to get Spethmann to return the money or put up security for the loan. However, the record also shows Spethmann would never have received the money All Citations if Kelley had checked with Crawford, as he was required to 171 S.W.3d 680 © 2025 Thomson Reuters. No claim to original U.S. Government Works. 12 Spethmann v. Anderson, 171 S.W.3d 680 (2005) End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 13 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... 925 S.W.2d 565 Affirmed in part and reversed and rendered in part. Supreme Court of Texas. Phillips, C.J., concurred and dissented and filed opinion in which Gonzalez, Hecht, and Owen, JJ., joined. The LENAPE RESOURCES CORPORATION d/b/a Pomfret Production Company, Inc., and d/b/a Enercorp Resources, Inc., Tesoro *567 Appeal from the San Antonio Court of Appeals, Fourth Judicial District; Shirley W. Butts, Judge. Exploration and Production Company, Gulf Energy Pipeline Company and Attorneys and Law Firms Coastal Oil & Gas Corporation, Petitioners, Jane M.N. Webre, Austin, William T. Armstrong, III, San v. Antonio, Rudy A. England, Houston, Dwight A. Dalrymple, TENNESSEE GAS PIPELINE Houston, Emerson Banack, Jr., San Antonio, Charles R. Roberts, San Antonio, Ernest E. Smith, III, Austin, Frank COMPANY, Respondent. Douglass, Austin, Elizabeth N. Miller, Austin, Steve Selby, Austin, for petitioners. No. 94–0278 | Thomas H. Watkins, Austin, C.A. Davis, Austin, Elizabeth Argued Dec. 13, 1994. G. Bloch, Austin, John R. Hathaway, Austin, Theodore R. | Tetzlaff, Chicago, IL, Donald R. Cassling, Chicago, IL, Decided April 18, 1996. Norman M. Hirsch, Chicago, IL, Ralph H. Duggins, Fort | Worth, Sloan B. Blair, Fort Worth, H. Carter Burdette, Fort Rehearing Overruled Aug. 16, 1996. Worth, for respondent. Synopsis Opinion Natural gas pipeline brought action against gas sellers for declaratory judgment concerning meaning of various ENOCH, Justice, delivered the opinion of the Court on provisions of take-or-pay gas purchase agreement between Motion for Rehearing, in which CORNYN, SPECTOR, pipeline and sellers. The 57th District Court, Bexar County, BAKER, and ABBOTT, Justices, join. Charles W. Barrow, J., entered judgment for sellers in part, We grant Petitioners' motions for rehearing. We withdraw our and appeals were taken. The San Antonio Court of Appeals, opinion and judgment of August 1, 1995 and substitute the Shirley W. Butts, J., 870 S.W.2d 286, affirmed in part, following opinion. reversed in part, and remanded. On application for writ of error, the Supreme Court, Enoch, J., held that: (1) Uniform The principal issue in this case is whether the good faith Commercial Code (UCC) provision governing output, and proportionality restrictions of section 2.306 of the requirements, and exclusive dealings contracts did not apply Uniform Commercial Code, Tex.Bus. & Com.Code § 2.306, to gas purchase agreement so as to impose proportionality apply to the take-or-pay gas purchase agreement between limitation on pipeline's take-or-pay obligation; (2) some Lenape Resources Corporation and Tennessee Gas Pipeline evidence supported finding that agreement included both Company. The court of appeals held that the take-or-pay annual inflation adjustment factor and independent and contract was an output contract subject to section 2.306. 870 additional growth escalation factor in price escalation of S.W.2d 286. We disagree. We reverse in part and affirm in nonregulated gas; (3) agreement required pipeline to purchase part the judgment of the court of appeals. 50% of 85% of sellers' delivery capacity of gas produced from wells anywhere on new units which included acreage Tennessee transports and stores natural gas for distribution to not originally dedicated to agreement; and (4) pipeline was customers who provide natural gas to consumers throughout precluded from contesting continued viability of agreement the southern United States. Tennessee entered into the under agreement release provision based on termination of Gas Purchase Agreement (GPA) in 1979 with Lenape's gas leases between sellers and lessors for failure to produce predecessor in interest. Under the GPA, Tennessee agreed to in paying quantities. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... take, or pay for if not taken, gas produced from gas reserves adjacent property. The unitization formed the Guerra A and committed under the GPA. The committed reserves include B units, each comprised of one-half of the committed acreage the Fantina Yzaguirre Gas Unit and the Jesus Yzaguirre Gas and additional acreage outside the GPA's committed acreage. Unit in Zapata County. After unitization, Lenape entered into a farmout agreement with Tesoro and Coastal Oil & Gas Corporation. As a result In entering into the GPA in August 1979, Tennessee sought to of the farmout, Tesoro and Coastal became “Sellers” under obtain as much gas as could be produced from the committed the GPA. Tesoro drilled three wells, one bottomed on the reserves. The GPA plainly reflects this objective. Specifically, committed acreage and two inside the Guerra A and B units the GPA provides that Lenape is not obligated to deliver to on acreage outside the acreage originally committed to the Tennessee any predetermined quantities of gas or to maintain GPA. The two wells on the Guerra A and B units were highly any predetermined level of deliverability; that Lenape may successful. unitize its leases with other properties in the same field; and that Lenape, in its sole discretion, may drill new wells to all The successful Guerra A and B wells would vastly increase depths and horizons and repair or rework old wells. Tennessee's take-or-pay obligations. Tennessee sued Lenape and the other Sellers in August 1990 seeking a declaration From the beginning of the GPA term in 1979 until 1989, under various theories that it was not obligated to take or pay Lenape produced gas from *568 only two wells on the for any of the increased production resulting from the Guerra committed acreage, one of which was a low-producing A and B wells. Specifically, Tennessee sought a declaration stripper well. Despite this low production, Tennessee that: sought to be released from its obligations under the GPA. In the early 1980s, market conditions for natural gas (1) the GPA is governed by section 2.306 of the UCC changed dramatically. The price and demand for natural and that current and anticipated gas production from the gas plummeted. Roland, Comment, Take-or-Pay Provisions: Guerra A and B wells1 is in bad faith and unreasonably Major Problems for the Natural Gas Industry, 18 St. Mary's disproportionate to prior production in violation of L.J. 251, 262 (1986). In 1983, Tennessee sent its producers, section 2.306; including Lenape, notice that it was instituting an “emergency gas purchase policy,” whereby Tennessee proposed to reduce 1 There is no evidence in the record of the extent of the its purchases and limit its take-or-pay obligations and refused increased production. Tennessee claims that if this cause to recognize any take-or-pay obligations for producers who were remanded, it would show that for the first twelve refused to amend their contracts as Tennessee demanded. years of the GPA, it never paid more than $300,000 for See Mandell v. Hamman Oil & Ref. Co., 822 S.W.2d 153, gas produced in any single year. In 1993, by contrast, 156–57 (Tex.App.—Houston [1st Dist.] 1991, writ denied) Tennessee claims it paid under protest $89 million for gas (Tennessee reduced its take-or-pay obligations with gas produced under the GPA. producer by half under emergency gas purchase policy). Again in 1985 and 1986, Tennessee sought to be released from (2) alternatively, if not governed by section 2.306, the GPA its obligations under the GPA first by seeking to amend the is void and unenforceable for indefiniteness and lack of GPA and next by asserting a force majeure defense based on mutuality; depressed market conditions. (3) alternatively, Tennessee is not obligated to take or pay for quantities of gas tendered in bad faith and In light of these developments, Lenape had little incentive to which do not comport with prior history and course of increase production or develop new wells. Lenape's lessors performance; grew impatient with the low production and sued Lenape for breach of its implied covenant to develop the leases (4) the GPA covers only the Sellers' interest in the reserves underlying the committed acreage, for failure to produce physically located under the leases originally dedicated in paying quantities, and for abandonment of the leases. to the GPA and Tennessee is not obligated to purchase Tesoro Exploration and Production Company obtained lease gas produced from wells outside the original leases; options from the lessors and backed the lessors in their lawsuit against Lenape. Lenape settled the lawsuit with its lessors (5) the GPA does not permit pooling; and agreed to unitize part of the committed acreage with © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... Whether section 2.306 of the UCC applies to this take-or-pay (6) the Fantina Yzaguirre Gas Unit leases terminated for contract is a question of first impression in this jurisdiction. Lenape's failure to produce in paying quantities, failure Section 2.306 applies only if (1) the take-or-pay contract is an to reasonably develop, and abandonment of the leases output contract, and (2) the parties have not otherwise opted and thus are no longer subject to the GPA; and to vary the quantity obligations by agreement. Tex.Bus. & Com.Code § 2.306; Jon–T Chems., Inc. v. Freeport Chem. (7) the parties did not intend for the price of non-regulated Co., 704 F.2d 1412, 1416 (5th Cir.1983). The GPA defines the gas to escalate by the *569 annual inflation adjustment quantity of gas Tennessee must take or pay for as a percentage factor plus a growth factor. of the Sellers' capacity to deliver gas. Specifically, section In addition, Tennessee asserted that Lenape, Tesoro, and 3(a) of the GPA provides: Coastal's conduct, including their “bad faith pooling,” violated the Deceptive Trade Practices and Consumer Protection Act. Tex.Bus. & Com.Code §§ 17.41–.63. 3. Quantity: Lenape counterclaimed, alleging breach of contract, anticipatory repudiation, and that Tennessee's DTPA claims (a) Seller agrees to sell and deliver to Buyer, and Buyer were asserted in bad faith. Tesoro and Coastal asserted similar agrees to purchase and receive, or pay for if available and counterclaims. These counterclaims and the DTPA claims not taken, Seller's pro rata part of the following quantities have been resolved and are not at issue in this appeal. of gas produced from the committed reserves: ... The trial court granted a partial summary judgment for the Sellers, determining: (1) the GPA is not an output contract subject to section 2.306; (2) the GPA permits pooling/ (ii) A quantity of gas well gas equal to eighty-five unitization; and (3) Tennessee could not contest the validity percent (85%) of Seller's delivery capacity. of the leases underlying the GPA. After a bench trial on the Delivery capacity is defined in section 1(f) of the GPA as: remaining issues, the trial court rendered judgment for the Seller's pro rata part of the average amount of gas well Sellers on all of Tennessee's remaining claims. Specifically, gas per day which can be efficiently withdrawn from the the trial court found: (1) the Sellers had not acted in bad faith wells on the lease(s) in the course of a delivery capacity in drilling the new wells or forming the Guerra A and B units; test conducted as provided in section 3(f) hereof under (2) the GPA is not void for indefiniteness or lack of mutuality; applicable rules and regulations and in accordance with (3) the GPA allows for unitization and obligates Tennessee to prudent operating practices, the production from which purchase the Sellers' interest in gas produced anywhere within is covered by this Agreement and which is available for the pooled units; (4) the GPA mandates that the price for non- delivery ... regulated gas escalate in accordance with section 102(b)(2) Tennessee asserts the GPA is an output contract simply of the Natural Gas Policy Act; and (5) escrow monies and because the quantity is defined in terms of Lenape's delivery attorneys' fees should be paid to the Sellers. capacity, i.e., its capacity to produce natural gas from the covered acreage. This construction, while alluring in its The court of appeals reversed the trial court's summary simplicity, ignores the realities of gas production. judgment on the section 2.306 issue, holding that the GPA is an output contract subject to the good faith and An output contract is one in which the buyer agrees to buy proportionality restrictions of section 2.306. 870 S.W.2d at the seller's entire output of production. Under a take-or-pay 291–92. With the exception of Tennessee's DTPA claims, contract, the buyer does not have to buy any production. The which were voluntarily resolved by agreement of the parties, take-or-pay contract provides for alternative performance by the court of appeals affirmed the remainder of the trial the buyer: either *570 purchase a specified quantity of gas court's judgment. All parties sought writ of error in this or pay the producer for the right to purchase that quantity Court. We consider the Sellers' contentions first, then those of gas in the future. Prenalta Corp. v. Colorado Interstate of Tennessee. Gas Co., 944 F.2d 677, 689 (10th Cir.1991). Because of this alternative performance, the pay option under a take-or-pay contract is not a payment for the sale of gas. Id.; Diamond I Shamrock Exploration Co. v. Hodel, 853 F.2d 1159, 1167– © 2025 Thomson Reuters. No claim to original U.S. Government Works. 3 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... 68 (5th Cir.1988); see also Mandell, 822 S.W.2d at 164–65; indefiniteness if the parties intended to make a contract and Killam Oil Co. v. Bruni, 806 S.W.2d 264, 268 (Tex.App.— there is a reasonably certain basis for giving an appropriate San Antonio 1991, writ denied). Rather, it is a payment for remedy. Id. § 2.204(c). Section 2.306 renders output and the exclusive dedication of reserves for a fixed period of time. requirements contracts sufficiently definite as to quantity and International Minerals & Chem. Corp. v. Llano, Inc., 770 enforceable by reading into such contracts a quantity that is F.2d 879, 882 (10th Cir.1985), cert. denied, 475 U.S. 1015, the actual good faith output or requirements of the particular 106 S.Ct. 1196, 89 L.Ed.2d 310 (1986); Medina et al., Take party. Id. § 2.306 cmt. 2. or Litigate: Enforcing the Plain Meaning of the Take-or-Pay Clause in Natural Gas Contracts, 40 Ark.L.Rev. 185, 188 Section 2.306 fills in the quantity term only when a contract (1986). If a buyer opts not to take any gas, the gas remains does not unambiguously specify the quantity of the output of in the well unproduced. Thus, the quantity of gas actually the seller or the requirements of the buyer. Id. § 2.306(a). It produced and purchased by the buyer is determined in large does not apply when the contract either specifies a numeric part by the buyer's nominations. quantity or provides a standard for determining a specific quantity. See Riegel Fiber Corp. v. Anderson Gin Co., 512 Other forces delimit gas production as well. The laws of F.2d 784, 790 (5th Cir.1975) (contract for sale of cotton physics obviously affect a producer's ability to produce sufficiently definite when quantity may be determined from gas. Further, regulatory constraints of the Texas Railroad acreage covered by contract and estimated yield of acreage); Commission limit the amount of gas that may be produced. Fort Hill Lumber Co. v. Georgia–Pacific Corp., 261 Or. 431, To say that the quantity is determined solely by the Sellers' 493 P.2d 1366, 1368 (1972) (contract not indefinite when output or delivery capacity thus oversimplifies the physical contract for purchase of all timber logged provided method realities of gas production and overstates the Sellers' control for determining quantity). over the quantity of gas produced. The GPA requires Tennessee to purchase a set quantity Regardless of whether the take-or-pay contract is an output of gas produced from the committed reserves defined as contract, section 2.306 does not apply to this gas purchase eighty-five percent of Lenape's delivery capacity. Lenape's agreement because the parties agreed to quantity obligations *571 delivery capacity is a readily ascertainable quantity, that differ from those imposed by section 2.306. Section measured as often as once every three months through a 2.306, like many other provisions of Article 2 of the UCC, delivery capacity test. The specific quantity of natural gas for is a gap-filler and may be varied by the parties' agreement. which Tennessee must take or pay is a simple mathematical Tex.Bus. & Com.Code § 1.102(c); Jon–T Chems., 704 F.2d calculation: .85 multiplied by Sellers' delivery capacity. at 1416; White & Summers, Uniform Commercial Code 111– Section 2.306 does not apply to fill in the quantity—good faith 12 (2d ed. 1980); see also Prenalta, 944 F.2d at 687 (gas tender—because the quantity is specified as a determinable purchase contracts are contracts for the sale of goods and are amount, Sellers' delivery capacity. governed by Article 2, but parties can vary the provisions of the UCC by agreement); Colorado Interstate Gas Co. v. Tennessee insists that unless section 2.306 is read into the Chemco, Inc., 854 P.2d 1232, 1236 (Colo.1993) (parties to GPA to vary its terms, the GPA's quantity provisions effect take-or-pay gas contract may vary provisions of the UCC by a waiver of the good faith and reasonableness standards of agreement); Weistart, Requirements and Output Contracts: the UCC, contrary to section 1.102(c) of the UCC. Section Quantity Variations Under the UCC, 1973 Duke L.J. 599, 622 1.102(c) provides: (as an alternative to section 2.306, contracting parties will be mindful of the Code's invitation to modify its basic rules by [T]he obligations of good faith, diligence, reasonableness agreement). and care prescribed by this title may not be disclaimed by agreement but the parties may by agreement determine the As a gap-filler, section 2.306 operates to render output and standards by which the performance of such obligations requirements contracts definite. Under the UCC, a contract is to be measured if such standards are not manifestly for the sale of goods for the price of $500 or more is not unreasonable. enforceable absent some writing evidencing a contract for Tex.Bus. & Com.Code § 1.102(c). We do not agree that the the sale that has been signed and that specifies a quantity. GPA disclaims any good faith or reasonableness standards. Tex.Bus. & Com.Code § 2.201(a). A contract does not fail for © 2025 Thomson Reuters. No claim to original U.S. Government Works. 4 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... The GPA does permit the Sellers to increase delivery capacity would eviscerate the contract the parties bargained for in by drilling new wells and by unitizing the committed reserves. 1979. But nothing in the GPA permits the Sellers to undertake these activities in bad faith. Any increase in delivery capacity is Tennessee bargained for the exclusive right to purchase “all still subject to the good faith obligation of section 1.203 as gas produced from the committed reserves.” Tennessee also defined in sections 1.201(19) (honesty in fact) and 2.103(a)(2) contracted to encourage increased production by Lenape by (for merchants, honesty in fact and observance of reasonable giving Lenape the right to develop new wells and to unitize commercial standards of fair dealing in the trade). The any of its leases. In exchange for the exclusive dedication and UCC limits Tennessee's take-or-pay obligations to good faith access to Lenape's reserves, Tennessee gave Lenape a take- increases in delivery capacity. or-pay clause ensuring Lenape *572 a set market for its gas production and a steady cash flow. International Minerals, Moreover, Tennessee's reading of the GPA would render 770 F.2d at 882; Medina, Take or Litigate, 40 Ark.L.Rev. at the quantity term of the GPA uncertain. Instead of defining 188. Tennessee's take-or-pay obligations in terms of a fixed percentage of Sellers' delivery capacity, Tennessee would Tennessee would have this Court rewrite the parties' contract have us read the GPA as requiring Tennessee to purchase on Tennessee's concession that it no longer will demand the only a portion of gas that may be tendered as reasonably exclusive dedication of the gas reserves. Tennessee concedes proportionate to any normal or otherwise comparable prior that any gas produced in violation of section 2.306 may be output. The quantity of gas which Tennessee must either sold by Lenape to third parties. While a party may concede take or pay for would depend on a number of indeterminate certain facts that have implications under the law, here variables: prior output; normal prior output; comparable prior Tennessee is making a concession of a contractual obligation output; proportionality to either normal or comparable prior (waiving its right to exclusive dedication of reserves) in output; and reasonableness of the proportionality. Reading exchange for a restriction on Lenape's rights under the GPA these factors into Tennessee's take-or-pay obligations, any (application of section 2.306 to limit production). Tennessee's increase in production and delivery capacity would be concession is not really a concession. It is simply another way measured after the fact by these variables, thus injecting of arguing that it should be relieved of its obligation to take uncertainty into the parties' obligations under the GPA. or pay for eighty-five percent of Lenape's delivery capacity. Not only does the contract specify the quantity with Applying section 2.306 to the take-or-pay clause, as sufficient definiteness, but the GPA also expresses the parties' Tennessee urges, would fundamentally alter the risk agreement to provide for production increases subject to allocation of the take-or-pay clause in gas purchase contracts. Tennessee's take-or-pay obligations. The take-or-pay contract We recognized recently that the “central purpose underlying specifically provides that the Sellers are not obligated to take-or-pay contracts” is to “allow the risk of fluctuations deliver to Tennessee any predetermined quantities of gas in market demand to be allocated to the buyer.” Exxon or to maintain any predetermined level of deliverability. Corp. v. West Texas Gathering Co., 868 S.W.2d 299, 302 Additionally, the GPA gives the Sellers the right to increase (Tex.1993). In applying section 2.306 to the take-or-pay production, and thereby increase delivery capacity, through clause, Tennessee retains the benefits of the exclusive unitization. The GPA further provides that the Sellers dedication of Lenape's reserves essentially under a right of may, in their sole discretion, drill new wells. It does not first refusal, but Lenape no longer has a certain market for limit production to existing wells in discovered reservoirs. its natural gas. Any increase in production will be subject Accordingly, the GPA anticipates that the Sellers may drill to an after-the-fact determination of whether the increased new wells in new depths and horizons and increase production amount is “unreasonably disproportionate” to prior normal or and delivery capacity in discovering new reserves. comparable production and, if so, will relieve Tennessee from its minimum take-or-pay obligation. These provisions taken together demonstrate that the parties to the GPA, both sophisticated players in the oil and gas Shifting the market risk back to the producer will inevitably industry, expected that production and delivery capacity chill exploration and production. Pierce, Reconsidering the could increase significantly. To read section 2.306 as limiting Roles of Regulation and Competition in the Natural Gas the quantity obligations under the take-or-pay contract here Industry, 97 Harv.L.Rev. 345, 357 (1983). Why develop new © 2025 Thomson Reuters. No claim to original U.S. Government Works. 5 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... wells if there is no buyer? In the event of a decline in the only rewrites the quantity term of the GPA, but also effects market, producers may well be left with an unmarketable a fundamental shift in the party bearing the market risk and product. Further, producers rely on the steady cash flow of injects uncertainty into the natural gas production industry. take-or-pay contracts to cover operating expenses as well The take-or-pay gas purchase contract is not subject to section as exploration and production costs of new wells. Thus, 2.306. The court of appeals erred in holding otherwise.2 a revision of the take-or-pay relationship that reduces the certainty of cash flow creates financial uncertainty for the gas 2 Because of our disposition on this issue, we need producer that will discourage investment in the natural gas not address and express no opinion on the application industry. Roland, Comment, 18 St. Mary's L.J. at 261 n. 51, of section 2.306 standards to output or requirements n. 57; see also Johnson, Natural Gas Sales Contracts, 34 Inst. contracts governed by that section. on Oil & Gas Terms 83, 111 (1983) (guaranteed income from take-or-pay clause used as collateral). Altering the market risk thus injects into the producer-pipeline relationship instability II that discourages investment in the industry. See Roland, Comment, 18 St. Mary's L.J. at 261 (take-or-pay provision In its application for writ of error, Tennessee first complains adopted to minimize instability). that the court of appeals erred in holding that there was sufficient evidence to support the trial court's finding that the The instability is compounded by compromising the lessor- parties intended to include a double escalation factor in the lessee relationship as well. Texas law places upon lessees an price of the unregulated natural gas subject to the GPA. We implied obligation to reasonably develop the land covered agree with the court of appeals. by the oil and gas lease. Grubb v. McAfee, 109 Tex. 527, 212 S.W. 464, 465 (1919). Thus, to fulfill its obligations When the parties executed the GPA on January 16, 1979, the to its lessors, a gas producer must drill additional wells as price for natural gas was regulated by the Federal Energy would a reasonably prudent operator. Clifton v. Koontz, 160 Regulatory Commission. All of the gas produced from the Tex. 82, 325 S.W.2d 684, 693–94 (1959). Applying section Fantina Yzaguirre and the Jesus Yzaguirre wells has remained 2.306 in these circumstances would dissuade a producer from price-regulated under section 102(b)(2) of the Natural Gas drilling new wells, contrary to the producer's obligations Policy Act of 1978, Pub.L. No. 95–621, 92 Stat. 3350, under an oil and gas lease. As a result, if a producer does 3358 (repealed 1989) (the “NGPA”). Section 8(c) of the not drill additional wells, it may be liable to its lessors GPA requires Tennessee to pay the highest maximum price for breach of the implied covenant to reasonably develop allowed by regulation for gas produced that is subject to the the lease; if a producer does drill additional wells that regulations. The GPA also provides a mechanism to calculate produce in large quantities, it may be unable to market the the price of “new natural gas,” or gas not subject to the increased production. Further, it is questionable whether a regulations, in the event that the production price became reasonably prudent operator would drill additional wells if the deregulated. The price for “new natural gas” was deregulated producer has either no market or an uncertain market for the in 1985. As a result, all the gas produced from the Guerra A increased production. Applying section 2.306 to this take-or- wells No. 1 and No. 4 and the Guerra B well No. 1 is classified pay contract may have profound ramifications not only for as “new natural gas,” and section 8(a) of the GPA governs the producer-pipeline relationship but also for lessor-lessee calculation of its price. relationship and natural gas exploration in general. Section 8(a) provides as follows: In sum, we hold that section 2.306 of the UCC does not apply 8. Prices: to rewrite the parties' *573 bargained-for contract. The GPA requires Tennessee to take or pay for eighty-five percent of (a) The price to be paid by Buyer to Seller from the Lenape's delivery capacity, an amount readily ascertainable effective date hereof for all gas delivered hereunder, or by simple mathematical calculation. It clearly expresses the for the contract quantity if available and not taken by parties' expectations that Tennessee's take-or-pay obligations Buyer, shall be $2.067 per Mcf, escalating on the first would extend to any good faith increases in delivery capacity, day of January, 1979 and the first day of each month even though such increases may be significant. To apply thereafter for the term of this Agreement to the product section 2.306 contrary to the express terms of the GPA not obtained by multiplying the price in effect hereunder for © 2025 Thomson Reuters. No claim to original U.S. Government Works. 6 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... the preceding month by the monthly equivalent of the S.W.2d 391, 393 (Tex.1983). If its meaning is uncertain annual inflation adjustment factor applicable for such and doubtful or it is reasonably susceptible to more than month, as such factor is defined in Section 102(b)(2) of one meaning, taking into consideration circumstances present the Natural Gas Policy Act of 1978, Public Law 95–621. when the particular writing was executed, then it is ambiguous (emphasis added) and its meaning must be resolved by a finder of fact. Id. at 394; see also Sage Street Assocs. v. Northdale Constr. This language is inconsistent because the “annual inflation Co., 863 S.W.2d 438, 445–46 (Tex.1993) (trial court properly adjustment factor” is not defined in section 102(b)(2) of submitted ambiguity to jury when issue was tried by consent). the NGPA. Rather, the annual inflation adjustment factor is defined in section 101(a) of the NGPA.3 Section 102(b) In construing a written contract, our primary concern is to (2), the section specifically referenced in the above quoted ascertain the true intentions of the parties as expressed in paragraph, instead defines an inflation adjustment factor the written instrument. Coker, 650 S.W.2d at 393. If the written instrument is ambiguous, the trier of fact may look to unique to gas that is subject to section 102.4 *574 The parol evidence to determine the parties' intent. R & P Enters. unique inflation adjustment factor of section 102 incorporates v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 519 not only the annual inflation adjustment factor defined in (Tex.1980); see also Paragon Resources Inc. v. National Fuel section 101(a) of the NGPA, but also an independent and Gas Distribution Corp., 695 F.2d 991, 996 (5th Cir.1983). The additional growth escalation factor. court of appeals correctly held that section 8(a) is ambiguous. 3 Section 101(a)(1) provides that the “annual inflation Tennessee employs a number of rules of construction to adjustment factor” shall be the sum of (A) a factor equal support its interpretation that the parties intended section 8(a) to one hundredth of the quarterly percent change in the to escalate the gas price by only the single inflation adjustment GNP implicit price deflator; plus (B) a correction factor factor. Tennessee argues that when there is variance between of 1.002. NGPA § 101(a)(1), 92 Stat. at 3356. unambiguous written words (“annual inflation adjustment 4 Section 102(b)(2) of the NGPA states: factor”) and figures (“§ 102(b)(2)”), the written words The maximum lawful price under this section for any control. See Guthrie v. National Homes Corp., 394 S.W.2d month shall be— 494, 496 (Tex.1965). In addition, it argues that terms stated .... earlier in a contract (“annual inflation adjustment factor”) are (2) in the case of any month [after April 1977], the favored over subsequent terms (“§ 102(b)(2)”). See Coker, maximum lawful price, per million Btu's, prescribed 650 S.W.2d at 393. Moreover, the language used by the parties under this subsection for the preceding month (“factor,” not “factors”, modified by “defined in”) should be multiplied by the monthly equivalent of a factor equal accorded its plain, grammatical meaning unless it definitely to the sum of (A) the annual inflation adjustment factor appears the parties' intent would thereby be defeated. See applicable for such month; plus (B) ... (ii) .04, in the case of any month beginning after April 20, 1981. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex.1985). NGPA § 102(b)(2), 92 Stat. at 3358. Each application of these rules of construction propounded Tennessee contends that the section in question provides by Tennessee leads to the complete negation of the line for the single annual inflation adjustment escalation factor “defined in Section 102(b)(2) of the Natural Gas Policy Act of defined in section 101(a) of the NGPA, even though that 1978.” In construing a contract, we strive to give meaning to section is not referenced in section 8(a) of the GPA. The each provision. Southland Royalty Co. v. Pan Am. Petroleum Sellers, on the other hand, contend that the same section Corp., 378 S.W.2d 50, 53 (Tex.1964). Moreover, we have provides for the application of the double escalation factor stated that a court should construe a contract from a utilitarian defined in section 102(b)(2) of the NGPA as specifically standpoint, bearing in mind the particular business activity referenced in the GPA. sought to be served. Thus, a court need not embrace strained rules of construction that would avoid ambiguity at all costs. Our first task is to determine, as a matter of law, whether Reilly v. Rangers Management, Inc. 727 S.W.2d 527, 530 section 8(a) of the GPA is ambiguous. If a written instrument (Tex.1987). On balance, we conclude that section 8(a) of the is so worded that it can be given a certain or definite legal GPA is ambiguous as a matter of law, so that the trial court's meaning or interpretation, then it is not ambiguous and it consideration of parol evidence was proper. can be construed as a matter of law. Coker v. Coker, 650 © 2025 Thomson Reuters. No claim to original U.S. Government Works. 7 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... The GPA specifically granted to the Sellers the power to Based on that parol evidence, the trial court found that the “unitize its lease(s) with other properties of Seller[s] and of parties intended to include two escalating factors in the price others in the same field.” The district court found that the escalation of the non-regulated gas. Tennessee contends that Sellers' unitization was not done in bad faith, and Tennessee the court of appeals erred in holding that some evidence does not challenge that finding. supported this finding. We disagree. Tennessee argues it is only required to take or pay for The Sellers' expert testified that the term “annual inflation whatever gas is produced from “committed reserves.” adjustment” has a unique meaning in the industry, “Committed reserves” is defined in section 3(e) of the GPA encompassing both growth and escalation adjustment factors. as follows: In addition, the only remaining living person who participated in the negotiations, Charles Faulk, testified that the base (e) The term “committed reserves” shall mean all of the gas price stated in section 8(a) came from *575 section 102 reserves located in and under the lease(s) described in of the NGPA, and that the reference to section 102(b)(2) in Exhibit “B” and outlined in Exhibit “C” hereto which are section 8(a) is intentional. Faulk, a Tennessee employee who attributable to the interest of Seller therein. negotiated on Tennessee's behalf, further testified that the Tennessee claims that because of this definition, it is required reference was discussed with and approved by Tennessee's to take or pay for gas produced only from below the attorneys and that it was a part of the standard agreement used committed acreage and not gas produced from land unitized by Tennessee. into the tract. We disagree. We therefore hold that the court of appeals did not err in Section 5(e) of the Gas Production Agreement provides that holding that the provision was ambiguous and in affirming the production of gas from wells located on any tract included in trial court's finding that the parties intended the price of non- the unit will be considered production under the GPA: regulated new natural gas to escalate by both factors included 5. Reservations of Seller: Seller reserves the following in section 102(b)(2) of the NGPA. prior rights with sufficient gas to satisfy such rights: ... III (e) To unitize its lease(s) with other properties of Tennessee next complains that although the GPA gives the Seller and of others in the same field, in which event Sellers the right to unitize, it did not afford the Sellers the right this Agreement will cover Seller's interest in the unit to force Tennessee to purchase a proportionate share of the attributable to the reserves committed hereunder. gas produced from unitized acreage. (emphasis added) The GPA's committed acreage comprises fifty percent of the new units. Tennessee does not dispute that As we note above, Lenape's lessors sued to terminate the as between the Sellers and the other owners of interests in the leases in the Fantina Yzaguirre gas unit. By a settlement on unit, “Sellers' interest in the unit attributable to the reserves August 17, 1989, however, all parties agreed that the Fantina committed hereunder” is fifty percent. Therefore, the court Yzaguirre leases remained intact and had remained intact at of appeals correctly concluded that Tennessee is obligated all times. Lenape unitized the committed acreage, forming to purchase fifty percent of eight-five percent of the Sellers' the Guerra A and B units, each consisting of one-half of the delivery capacity of gas produced from the wells anywhere committed acreage from the Fantina unit and one-half new on the units. acreage. The trial court found that because half of the land within the units is GPA acreage, Tennessee was obligated to purchase fifty percent of eighty-five percent of the Sellers' IV delivery capacity from the new wells. The court of appeals affirmed the trial court's finding. 870 S.W.2d at 299–300. We The last issue that we must consider is whether Tennessee agree. may properly contest the continued viability of the GPA under section 5 of that contract based on a termination of the underlying leases between the Sellers and the lessors for © 2025 Thomson Reuters. No claim to original U.S. Government Works. 8 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... failure to produce in paying quantities. The trial court granted to surrender any lease when no longer deemed by Sellers summary judgment to the Sellers, holding that Tennessee was to be capable of producing gas in paying quantities. The not entitled to establish *576 that the leases were no longer record is undisputed that Lenape has never surrendered any in force. The court of appeals affirmed. 870 S.W.2d at 294– of the leases, nor has Lenape deemed any lease to be no 95. Again, we agree. longer capable of producing in paying quantities. Section 5(a) provides only that “Should Seller terminate or surrender any Tennessee relies on section 5(a) of the GPA, which expressly lease ... said lease ... shall be released from the terms of this provides: agreement.” (emphasis added). There is no contention that the Sellers have affirmatively terminated or surrendered any 5. Reservation of Seller: Seller reserves the following prior lease. The provision at issue is found in a section entitled rights with sufficient gas to satisfy such rights: “Reservations of Sellers.” Thus, Tennessee is precluded from attempting to prove under section 5(a) of the GPA that the (a) To operate its property free from any control by Buyer contract is no longer in effect due to the termination of in such a manner as Seller, in its sole discretion, may deem the underlying leases. We express no opinion on whether advisable, including without limitation, the right, but never Tennessee could prove that the GPA was no longer in effect the obligation, to drill new wells, to repair and rework old based upon any theory or claim other than one based on wells, and to plug any well or surrender any lease or portion section 5 of the GPA. thereof when no longer deemed by Seller to be capable of producing gas in paying quantities under normal methods *** of operation; provided, however, in the event Seller should terminate or surrender any lease described in Exhibit “B” We hold that section 2.306 does not apply to the take-or-pay and outlined in Exhibit “C” hereto, written notice of same gas purchase agreement at issue here. We reverse those parts shall be given to Buyer within thirty (30) days. Should of the court of appeals' judgment reversing the trial court's Seller terminate or surrender any lease, or a portion thereof, partial summary judgment on section 2.306 of the UCC and covered by this Agreement, said lease or portion shall be the final judgment on escrow funds and attorneys' fees and released from the terms of this Agreement effective as of render judgment on those issues in accordance with the trial the date of such termination or surrender. Upon Seller's court's judgment. We affirm the remainder of the judgment of request, Buyer agrees to amend this agreement to effect the court of appeals. such a release. Under this provision, Tennessee maintains that the GPA is no longer in force for any lands on which it could show that the oil and gas lease had terminated or reverted back to the PHILLIPS, C.J., files a concurring and dissenting opinion, in landowners pursuant to the operation of the lease's terms for which GONZALEZ, HECHT and OWEN, JJ., join. failure to produce in paying quantities. In settling their lawsuit against Lenape, however, Lenape's lessors agreed: PHILLIPS, Chief Justice, delivered a concurring and to confirm and declare that said Fantina Yzaguirre leases dissenting opinion. in all of their terms, conditions and provisions have been I join in parts II, III, and IV of the Court's opinion. Because from the dates of the leases, and currently are, binding upon I believe that the Gas Purchase Agreement (“GPA”) at issue Plaintiffs [lessors] and ... and that the Fantina Yzaguirre here is an output contract which is subject to *577 section leases are valid and subsisting oil, gas and mineral leases ... 2.306 of the Uniform Commercial Code, however, I cannot and have been at all times since the dates of such leases. join in a decision to reinstate the trial court's summary judgment. As I explain below, I would remand the case to the Tennessee was not notified of the lawsuit or the settlement. trial court for further proceedings as to whether the Sellers' It seeks now to prove the occurrence of an event, namely the increased tender of gas either occurred in bad faith or was termination of the underlying leases, that releases it from its unreasonably disproportionate to prior output. duty to purchase gas pursuant to the GPA. The unambiguous language of section 5(a) of the GPA, I however, grants to Sellers, not Buyer, the contractual right © 2025 Thomson Reuters. No claim to original U.S. Government Works. 9 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... Output contracts are open-quantity contracts in which the Ann. § 26–1–2–107; Iowa Code Ann. § 554.2107; quantity is determined by the seller's output or production Kan.Stat.Ann. § 84–2–107; Ky.Rev.Stat.Ann. § 355.2– of a certain commodity. Because of their lack of a quantity 107; Me.Rev.Stat.Ann. tit. 11, § 2–107; Mass.Gen.Laws term, output contracts “have historically had two problems: Ann. ch. 106, § 2–107; Mich.Comp.Laws Ann. § 440.2107; Minn.Stat.Ann. § 336.2–107; Miss.Code Ann. indefiniteness and lack of mutuality.” See Henning & § 75–2–107; Mo.Ann.Stat. § 400.2–107; Mont.Code Wallach, The Law of Sales Under The Uniform Commercial Ann. § 30–2–107; Neb.Rev.Stat. § 2–107; Nev.Rev.Stat. Code ¶ 3.08[2] (Rev. ed. 1992). The “common-law hostility § 104.2107; N.H.Rev.Stat.Ann. § 382–A:2–107; to output and requirements contracts,” 1 Hawkland, Uniform N.J.Stat.Ann. § 12A:2–107; N.M.Stat.Ann. § 55–2–107; Commercial Code Series § 2–306:01 (Art 2) (1995), is N.Y.U.C.C.Law § 2–107; N.C.Gen Stat. § 25–2–107; evidenced by numerous pre-Code cases refusing to enforce N.D.Cent.Code § 41–02–07; Okla.Stat.Ann. tit. 12A, § such contracts due to the lack of a specified quantity. See, 2–107; Or.Rev.Stat. § 72.1070; 13 Pa.Cons.Stat.Ann. § e.g., Crane v. C. Crane & Co., 105 F. 869, 873 (7th 2107; R.I.Gen.Laws Ann. § 6A–1–107; S.C.Code Ann. § Cir.1901); Harrington Bros. v. City of New York, 51 F.2d 503, 36–2–107; S.D.Codified Laws § 57A–2–107; Tenn.Code 505 (S.D.N.Y.1931); Sealtest S. Dairies Div. v. Evans, 103 Ann. § 47–2–107; Utah Code Ann. 70A–2–107; Va.Code Ga.App. 835, 120 S.E.2d 887 (1961); G.H. Baber v. Lay, 305 Ann. § 8.2–107; Wash.Rev.Code Ann. § 62A.2–107; S.W.2d 912 (Ky.1957). See also Annotation, 14 A.L.R. 1300 W.Va.Code § 46–2–107; Wis.Stat.Ann. § 402.107. (1921). The GPA at issue in this case is that type of mineral sales agreement commonly called a “take-or-pay” contract. Section 2.306 of the UCC provides a statutory mechanism for Distilled to its essence, “[a] take-or-pay contract obligates a saving output contracts. It solves what the official comments pipeline to purchase a specified volume of gas at a specified refer to as the “specific problem” of requirement and output price and, if it is unable to do so, to pay for that volume.” contracts by providing that Mobil Oil Exploration & Producing Southeast, Inc. v. United Distrib. Cos., 498 U.S. 211, 229, 111 S.Ct. 615, 627, 112 [a] term which measures the quantity by the output of L.Ed.2d 636 (1991). In many take-or-pay contracts, the the seller or the requirements of the buyer means such “specified volume” is not a fixed quantity of gas, but is instead actual output or requirements as may occur in good faith, a volume of gas equal to a particular measurement specified except that no quantity unreasonably disproportionate to in the contract. The obligation to purchase may be expressed any stated estimate or in the absence of a stated estimated in terms of a percentage of reserves or, as in this case, a to any normal or otherwise comparable prior output or percentage of deliverability. requirements may be tendered or demanded. Tex.Bus. & Com.Code Ann. § 2.306(a) (Vernon 1994). The Whether such a take-or-pay contract for the sale of gas is Texas Legislature has made the UCC applicable to mineral an output contract is an issue of first impression in Texas. sales contracts by declaring that gas is a good if it is to be Indeed, there appear to be only two cases addressing this severed from the land. Id. § 2.107(a) (“A contract for the issue, both of which have concluded that *578 a take-or- sale of minerals or the like (including oil and gas) ... to be pay contract is an output contract. See United States v. Great removed from realty is a contract for the sale of goods within Plains Gasification Assoc., 819 F.2d 831, 834 (8th Cir.1987) this chapter....”)1 (applying Illinois law on the contract issues) (concluding that a take-or-pay contract “unambiguously require[s] the 1 Almost every other state has adopted an identical pipelines to purchase the project's entire output”); American provision stating that a contract for the sale of Exploration Co. v. Columbia Gas Transmission Corp., 779 minerals, including oil and gas to be severed from F.2d 310, 311 (6th Cir.1985) (applying Ohio law) (stating that land, is a contract for the sale of goods under the in a contract nearly identical to the one at issue here, “[t]he UCC. Ala.Code § 7–2–107; Alaska Stat. § 45.02.107; basic structure of the contract is thus that of a fixed-price Ariz.Rev.Stat.Ann. § 47–2107; Ark.Code Ann. § 4– output contract”). 2–107; Cal.Com.Code § 2107; Colo.Rev.Stat.Ann. § 4–2–107; Conn.Gen.Stat.Ann. § 42a–2–107; Del.Code Sellers contend that the GPA is not an output contract, Ann. tit. 6, § 2–107; D.C.Code § 28:2–107; making section 2.306 inapplicable. Their first argument is Fla.Stat.Ann. § 672.107; Ga.Code Ann. § 11–2–107; grounded in the contract's provision that the Buyer may Haw.Rev.Stat.Ann. § 490:2–107; Idaho Code § 28– 2–107; Ill.Ann.Stat. ch. 810, para. 5/2–107; Ind.Code either “take”, that is, cause to be produced and then purchase © 2025 Thomson Reuters. No claim to original U.S. Government Works. 10 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... “nominated” gas, or “pay”, that is, compensate the Sellers Sellers next argue that the GPA is not an output contract for the exclusive dedication of the reserves for the contract because only a finite amount of gas exists under the period. The presence of the “pay” alternative for performance committed acreage, whereas an output contract assumes that means, they claim, that the quantity term is not determined the seller can increase production at will. I find nothing in solely by the Seller's output or delivery capacity. Yet the section 2.306 to indicate that infinite production or purchasing GPA clearly states that the “Buyer agrees to purchase and capability is a requisite for an output contract. While the total receive, or pay for if available and not taken ... a quantity volume of gas under the dedicated acreage does constitute the of gas well gas equal to eighty-five percent (85%) of Seller's outer limit of production that could be subject to the GPA, the delivery capacity.” Thus, whether taking or paying, the Buyer acreage of a farm or a forest or various practical limitations is obligated to compensate the Sellers for a quantity of gas on factory capacity constitute similar limits which do not measured by the delivery capacity of the Sellers' wells.2 render output contracts impossible. Other courts have applied section 2.306 to various non-manufacturing sales contracts in 2 which, as here, output cannot be easily regulated by simply Moreover, the authorities cited by Sellers and the increasing or decreasing component parts. See, e.g., Orange Court in support of the argument that “paying” is not & Rockland Utils., Inc. v. Amerada Hess Corp., 59 A.D.2d purchasing are not convincing. See Prenalta Corp. v. Colorado Interstate Gas Co., 944 F.2d 677, 689 (10th 110, 397 N.Y.S.2d 814 (1977) (utility fuel oil); Shea–Kaiser– Cir.1991); Diamond Shamrock Exploration Co. v. Hodel, Lockheed–Healy v. Dep't of Water & Power, 73 Cal.App.3d 853 F.2d 1159, 1167–68 (5th Cir.1988); Mandell v. 679, 140 Cal.Rptr. 884 (1977) (aggregate for concrete); Hamman Oil and Refining Co., 822 S.W.2d 153, 164– Philadelphia Corp. v. Niagara Mohawk Power Corp., 207 65 (Tex.App.—Houston [1st Dist.] 1991, writ denied) A.D.2d 176, 621 N.Y.S.2d 237 (1995) (hydroelectricity). (“Take or pay is not a payment for production; it is a See also, State Dept. of Fisheries v. J–Z Sales Corp., 25 payment for non-production.”); Killam Oil Co. v. Bruni, Wash.App. 671, 610 P.2d 390, 393–94 (1980) (discussing 806 S.W.2d 264, 267–68 (Tex.App.—San Antonio 1991, potential application of 2.306 to *579 contract for surplus writ denied). The latter three authorities involve only an salmon eggs and carcasses). interpretation of the royalty clause in a contract. Here, however, we must decide whether a particular type of gas purchase agreement is subject to a statute that applies to mineral sales in general. Other courts, including the II Prenalta court, have held that gas purchase and sales agreements containing a take-or-pay clause are subject The Court reaches its decision without ever resolving whether to Article 2 of the UCC. See Prenalta, 944 F.2d at 687– the GPA is an output contract. Instead, it bases its decision on 90. (holding, in case involving take-or-pay contracts, that the conclusion that section 2.306 is a “gap-filler” provision gas purchase contracts are governed by Article 2 of the which is inapplicable here, even if the GPA is an output UCC despite acknowledging that payments made under contract, because the parties, by the provisions of the GPA the contracts pursuant to the “pay” alternative are not itself, “agreed to quantity obligations that differ from those payments for the sale of gas); and Universal Resources imposed by section 2.306.” 925 S.W.2d at 570. Although I Corp. v. Panhandle E. Pipe Line Co., 813 F.2d 77, 78– would decide, rather than merely assume, the threshold issue, 80 (5th Cir.1987) (applying Article 2 of the UCC to a gas I would hold that section 2.306 does apply because the GPA purchase contract containing a take-or-pay clause). has all the “gaps” that normally exist in an output contract. The “take-or-pay” aspect of the GPA simply reflects that, because of the nearly unique nature of the sale and production At the outset, I reject Sellers' argument that the quantity “gap” of natural gas, gas is not actually produced and does not here is filled by the physical attributes of the reservoir, which become the seller's “output” if the buyer does not take limit the volume of gas that can be produced under the GPA, delivery. This is not a valid basis for removing gas purchase much as a tract of land physically limits the quantity of a contracts from the reach of section 2.306. Since the buyer's crop that can be produced on it during a year. See Tennell v. obligation under the contract is dependent upon the seller's Esteve Cotton Co., 546 S.W.2d 346 (Tex.Civ.App.—Amarillo physical capacity to deliver gas at a given point in time, that 1976, writ ref'd n.r.e.) (holding that a contract covering all of is, the seller's potential output, I conclude that the GPA is an the cotton produced from a tract of land during a year was output contract. not governed by section 2.306 because identification of the “entire production” was sufficiently specific). This argument © 2025 Thomson Reuters. No claim to original U.S. Government Works. 11 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... is not convincing. Even if Tennell was correctly decided, this The same conclusion would apply to a contract which case differs from a crop production case in that here the parties purported to measure quantity by output but in fact did not contract for the “entire field of gas,” or anything like specified a fixed numeric quantity for that output, as in it. They contracted for 85% of Sellers' delivery capacity for “I will sell you all my output of widgets, which we agree will total 100 widgets per month.” Note, however, that by twenty years. That could be all of the gas, or only a fraction its very terms, section 2.306 applies to an output contract of it, depending not only on fortune and physics, but also to which specifies an estimate of what output will be. some extent on the Sellers' aggressiveness in exploring and I strongly disagree, however, with the Court's suggestion developing the underlying leases. The physical attributes of that section 2.306 does not apply to a contract which the committed reservoir simply are not such a firm quantity “provides a standard for determining a specific quantity” figure for the parties' take-or-pay obligation as to remove the for output on an ongoing basis over the life of the GPA from the ambit of section 2.306. contract. If that were true, section 2.306 would never apply. All output contracts will provide for some means For similar reasons, I reject Sellers' argument and the Court's of measuring what the specific quantity of output under conclusion that various quantity provisions in the GPA “fill the contract is on an ongoing basis—how else would the the gap.” While it may be true that section 2.306 “does not buyer make the payments due for that quantity of output? apply when the contract either specifies a numeric quantity The Court claims that two cases support its conclusion that 3 the quantity specified in the GPA—delivery capacity—is a or provides a standard for determining a specific quantity,” 925 S.W.2d at 570, I cannot conclude, as the Court does, determinable amount that takes the contract outside the reach that the “GPA requires Tennessee to purchase a set quantity of section 2.306. Neither does so. Riegel Fiber Corp. v. of gas defined as eighty-five percent of Lenape's delivery Anderson Gin Co., 512 F.2d 784, 790 (5th Cir.1975), held that capacity.” 925 S.W.2d at 570 (emphasis added). There is contracts for the sale of cotton grown on a certain number nothing “set” about the quantity here, as the perhaps several of acres which provided a projected yield per acre were not hundredfold increase in production that actually occurred unenforceable for lack of definiteness. The court endorsed the amply demonstrates. Indeed, the rest of the Court's opinion view that “simply by multiplying the number of acres stated in is replete with statements proving that delivery capacity is the contracts times the estimated yield, one derives a quantity anything but a “set quantity.” As the Court points out, the term stated in pounds of cotton.” Id. at 790 n. 14. Similarly, GPA permits the Sellers to increase delivery capacity by Fort Hill Lumber Co. v. Georgia–Pacific Corp., 261 Or. drilling new wells and unitizing, provides that Sellers are not 431, 493 P.2d 1366, 1368 (1972), held that a contract for all obligated to deliver any predetermined quantity or to maintain existing hemlock trees to be logged in a certain area over any predetermined level of deliverability, anticipates that the a period of approximately two years contained the requisite Sellers may increase delivery capacity, and demonstrates by definiteness “because the total area to be logged was known ... virtue of all its provisions taken together that the parties and it is possible, therefore, to determine the volume of the expected that delivery capacity could increase significantly. hemlock in the total area.” In both these cases, the contract 925 S.W.2d at 570–571. Delivery capacity under this GPA, provided a standard for determining a specific total quantity then, is anything but a “set quantity.” Rather, as Tennessee (of corn or logs) subject to the contract. Here, there is no such argues, it is a “moving *580 target” that the parties had standard. Delivery capacity measures only “the Sellers' pro the right to retest at least as often as every three months, or rata part of the average amount of gas well gas per day which even more often under certain circumstances. The delivery can be efficiently withdrawn from the wells on the lease(s)” capacity provisions of the GPA do nothing to negate the at the time the test is taken. Delivery capacity provides no application of section 2.306. standard whatsoever for determining a specific total quantity of gas subject to the GPA. Thus, the GPA contains the same 3 I agree that if a contract “specifies a numeric quantity or quantity “gap” that all output contracts contain, a “gap” that provides a standard for determining a specific quantity” the UCC fills with the dual provisions of good faith and for the total amount of the commodity to be sold under reasonable proportionality contained in section 2.306. that contract, it is manifestly not an output contract subject to section 2.306, but rather an ordinary supply The Sellers argue, however, that there is no quantity gap contract providing for the sale of a fixed quantity of because the GPA clearly communicates the parties' intent as goods. See Cooper v. Fortney, 703 S.W.2d 217, 219 to quantity—to wit, that there be no limits on the amount of (Tex.App.—Houston [14th Dist.] 1985, writ ref'd n.r.e.). gas which Sellers could produce. This allowance for infinite © 2025 Thomson Reuters. No claim to original U.S. Government Works. 12 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... output, in conjunction with the requirement that Tennessee by which compliance with these standards may be measured, purchase 85% of delivery capacity, is specific enough to I reject Sellers' argument that the parties by the terms of the displace any “gap filling” good faith requirements of section GPA have displaced section 2.306.4 2.306 which might otherwise apply. 4 It is not enough to conclude, as the Court does, I agree that the GPA clearly sets out the parties' expectations that the GPA does not disclaim the good faith and and intent that quantity not be limited to any amount. reasonableness standards or that, regardless of section Moreover, trial court finding of fact No. 3, unchallenged by 2.306's applicability, any increase in delivery capacity any party, states: is still subject to the good faith obligation of section 1.203. The issue is whether the dual requirements of good When the parties negotiated the GPA in 1978 and 1979, and faith and reasonableness under section 2.306 apply, or executed it on January 16, 1979, Buyer needed and wanted whether the parties have set their own standard by which to obtain under long term commitment or dedication as compliance with these standards may be measured, much gas as possible, and the parties intended that the GPA thereby displacing section 2.306. Because the GPA's “no not limit, for any reason, the volume of the committed limits” standard is no standard at all, I conclude that reserves or amount of gas to be delivered therefrom to section 2.306 applies. Buyer by Seller(s) over the 20–year term of the GPA. The Sellers and numerous amici have urgently suggested Consistent with this finding, the trial court concluded in part: that such a holding would ineluctably bring the oil and gas industry in Texas to a grinding halt. Their arguments, while The GPA as a whole is unambiguous. If, however, the GPA no doubt sincere, are for several reasons not persuasive. were to be considered ambiguous, the court's construction stated herein expresses the true intentions of the parties at First, I am not convinced that applying section 2.306 would the time of the execution of the GPA in 1979. make the GPA and contracts like it less certain than not ... The GPA does not limit, for any reason, the volume applying it. Having no limit whatsoever on quantity is hardly of committed reserves or amount of gas to be delivered a means of ensuring certainty, except perhaps for Sellers, who therefrom to Buyer by Seller(s) over the 20–year term of want to be certain that the sky's the limit on quantity sold in the GPA. a rising market for their product. I conclude, however, that the “gap” inherent in all output contracts and in this GPA—the lack of a certain quantity term Nor do I believe that applying section 2.306 would —can not be successfully “filled” by a statement of intent that fundamentally alter the risk allocation of the take-or-pay there be no limit on quantity. clause in gas purchase contracts. The Seller still has a certain market for all the natural gas it pumps in good faith and in The Code supports this conclusion. Section 1.102 of the Code a reasonable proportion to estimated or prior output. This provides that “the obligations of good faith, reasonableness should be, in almost all cases, all the gas that a Seller and care prescribed by this title may not be disclaimed produces. As I discuss below, what is “reasonable” will by agreement,” although “the parties may by agreement depend on the parties' expectations, which in almost any oil determine the standards by which the performance of such and gas setting must encompass very wide fluctuations in obligations is to be measured if such standards are not quantity. manifestly unreasonable.” Thus, parties may not by contract waive the application of section 2.306; but they may, by “not Finally, I do not believe that the GPA's exclusive dedication manifestly unreasonable” provisions, set the *581 standard of the reserves suffices to excuse the application of section of performance by which good faith and reasonableness are 2.306. The Court mischaracterizes Tennessee's “concession” measured. that any gas produced in violation of section 2.306 may be sold by Lenape to third parties as a veiled attempt to have this A contract which intentionally sets no limits whatsoever on Court rewrite the parties' contract. However, applying section increases in quantity hardly sets a standard of performance 2.306 to the GPA no more rewrites that contract than applying by which good faith or reasonableness is measured. Since the any section of the UCC to any other freely bargained contract. Code prohibits waiver of the obligations of good faith and Tennessee's “concession,” moreover, is consistent with the reasonableness, and the parties have not set their own standard contract. Section 4 of the GPA states: © 2025 Thomson Reuters. No claim to original U.S. Government Works. 13 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... stated that the primary concern in quantity variation Commitment of Reserves cases is good faith. Courts have been reluctant to define good faith; ... [n]evertheless, ... courts have (a) Seller commits to the performance of this Agreement held that the presence of a valid business reason and/ all gas produced from the committed reserves. or the absence of contract manipulation constitute good faith in open quantity contracts. On the other (b) Seller agrees not to sell to any other party or hand, absence of a business reason and/or presence parties, except contractors conducting drilling or reworking of contract manipulation constitute bad faith in open operations for Seller, any gas produced from the committed quantity contracts. The U.C.C. has codified this good reserves during the term hereof without the written consent faith standard. of Buyer. Silkworth, supra, at 270 (footnotes omitted). ... When faced with increases in quantity under an open-quantity contract, most courts and commentators have recognized (Emphasis added.) a distinction between reasonable proportionality and good faith in applying section 2.306. See, e.g., Shea–Kaiser– Lockheed–Healy, 140 Cal.Rptr. at 890 (demand for aggregate III in excess of 20% over contract estimate held unreasonably disproportionate); Philadelphia Corp., 621 N.Y.S.2d at 240 Having concluded that the GPA is an output contract to which (declaratory judgment that under three output contracts for section 2.306 applies, I next consider how the good faith sale of hydroelectricity which did not contain stated estimates, and unreasonably disproportionate standards of that provision no quantity unreasonably disproportionate to prior output operate in this case. At the outset, I would consider the may be tendered); Orange and Rockland Utilities, Inc., 397 nature of the good faith requirement under section 2.306, with N.Y.S.2d at 818 (demand for more than double the estimated specific focus on whether this good faith standard is further amount of fuel oil held unreasonably disproportionate). defined by the unreasonably disproportionate standard, or See also State Dept. of Fisheries v. J–Z Sales Corp., 610 whether good faith and unreasonably disproportionate are two P.2d at 394 (Wash.App.1980) (opining that, if section 2– separate standards. 306 applied, output of 2/3 more than contract estimate would be unreasonably disproportionate); 1 Alderman, A The good faith standard applicable to output and requirements Transactional Guide to the Uniform Commercial Code, § contracts under section 2.306 of the Code, as under 1.33–12, at 75 (2d ed. 1983) (“In addition to acting in the common law, permits quantity variations for valid good faith, the requirements buyer or output seller must business reasons and disallows quantity variations caused by also keep his demands within an amount not ‘unreasonably speculation or contract manipulation to take advantage of disproportionate’ to any stated estimate or normal output or a favorable differential between market and contract price. requirements.”); 1 White & Summers, Uniform Commercial See generally Stacey Silkworth, *582 Quantity Variation Code § 3–8, at 167 (3d ed. 1988) (“An increase might be in Open Quantity Contracts, 51 U.Pitt.L.Rev. 235, 265–67 in good faith, yet unreasonably disproportionate to prior (1990).5 Thus, the basic test for good faith here is whether requirements.”); John C. Weistart, Requirements and Output and to what extent the Sellers would have increased the Contracts: Quantity Variations Under the UCC, 1973 Duke quantity of gas proffered had the contract price equaled the L.J. 599, 647 (“Properly read, section 2–306 operates as a market price, i.e., was there a valid business reason for the codification of both the good faith standard and an equitable increased quantity independent of price? As Silkworth points limitation on the extent to which quantities can be increased out, “[w]hereas the good faith test considers the conduct of by the quantity-determining party.”).6 the parties, the reasonableness test speaks to the magnitude of the quantity variation itself.” Id. at 275. 6 In cases involving decreases in quantity, most courts 5 applying section 2.306 have held that the quantity- Silkworth's analysis of numerous pre- and post-Code determining party, whether a requirements buyer or quantity variation cases leads her to conclude: output seller, should be held to only a good faith standard. The business reason factor and the contract See, e.g., Atlantic Track & Turnout Co. v. Perini Corp., manipulation factor lend context to the pre-Code good 989 F.2d 541, 544–45 (1st Cir.1993); Empire Gas, faith standard. Many courts and commentators have © 2025 Thomson Reuters. No claim to original U.S. Government Works. 14 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... 840 F.2d at 1337–38; Angelica Uniform Group, Inc. v. was executed, and accordingly we hold that those Ponderosa Sys., Inc., 636 F.2d 232, 232 (8th Cir.1980) “requirements” were unreasonably disproportionate to the (per curiam). While some commentators have criticized contract estimates. the disparate treatment of increases and decreases, see Id. at 822 (citation omitted). See also 1 White & Summers, Silkworth, supra, at 268–70; Owings, Note, Output supra, § 3–8 at 167 (stating that “[t]he word ‘unreasonably’ Contracts and the Unreasonably Disproportionate allows for the interplay of almost any factor a court properly Clause of § 2–306, 59 Mo.L.Rev. 1051, 1059–60 (1994), considers relevant,” and suggesting that anticipation of large there is no need to resolve any inconsistency here, nor increases in requirements might prevent the party resisting do I make any comment on the standards applicable to quantity decreases, since this case involves only an the increase from prevailing under section 2.306). Thus, the increase of quantities tendered by an output seller. parties' expectations should not be considered only in light of past performance under the contract, as urged by Tennessee, The clear statutory language of section 2.306 imposes a but also in light of the original expectations of the parties standard of reasonable proportionality that is separate from as well as the industry context in which their agreement was the requirement of good faith. In recognizing reasonable made. proportionality as a standard distinct from good faith under section 2.306, the court in Orange and Rockland Tennessee argues that the increase in quantity of gas said: “Obviously this language [‘no quantity unreasonably tendered by Sellers from the new wells is unreasonably disproportionate’] is not the equivalent of ‘lack of good disproportionate because it is so great compared to Sellers' faith’ [because] it is an elementary rule of construction that prior output under the GPA. But whether the magnitude of effect must be given, if possible, to every word, clause and the disproportion here is unreasonable under section 2.306 sentence of a statute.” Orange and Rockland, 397 N.Y.S.2d at depends on the expectations of the parties when the contract 818. The court concluded: “Thus, even where one party acts was executed and whether such an increase in output could with complete good faith, the section limits the other party's have been reasonably forecast or anticipated. Orange and risk in accordance with the reasonable expectations of the Rockland, 397 N.Y.S.2d at 822. Objective indicia of the parties.” Id. at 819. parties' reasonable expectations at that time may also be considered, including the size and capabilities of the pipe lines *583 Having recognized that section 2.306 imposes separate and other facilities, the history of the area, the nature of the requirements of reasonable proportionality and good faith for formation, local industry practices, reserve and deliverability quantity increases under an output contract, I would address estimates and so forth. in turn the applicability of each proviso to the GPA. The parties' expectations should also be considered in light of In addressing reasonable proportionality, the first inquiry the general nature of the industry. The possibility of greatly must be whether or to what extent it must be dependant on the increased output, and the awareness of that possibility, is parties' expectations. Orange and Rockland concluded that it an essential characteristic of the oil and gas industry, which could not be expressed by a fixed quantity. Instead, for the provides the context in which the GPA must be considered. reasonable proportionality limitation to take effect, “it is not Texas courts have long recognized that the existence of oil enough that a demand for requirements be disproportionate or gas in a particular tract of land and “the amount of to the stated estimate; it must be unreasonably so in view [a well's] output” is highly speculative. Hatt v. Walker, 33 of the expectation of the parties.” Orange and Rockland, S.W.2d 489, 499 (Tex.Civ.App.—Dallas 1930, writ dism'd 397 N.Y.S.2d at 819 (emphasis added). I agree. Applying w.o.j.), followed in KMI Continental Offshore Prod. Co. v. the unreasonably disproportionate limitation to disallow an ACF Petroleum Co., 746 S.W.2d 238, 244–45 (Tex.App.— increase in fuel oil requirements that was 63% greater than Houston [1st Dist.] 1987, writ denied). the contract estimate, Orange and Rockland held: Defendant had no reasonable basis on which to forecast Moreover, these sophisticated parties obviously were aware or anticipate an increase of this magnitude. Indeed of Lenape's duty as lessee to reasonably develop the leases the contract suggests the parties contemplated that any underlying the GPA, see Sun Exploration and Prod. Co. variations from the estimate would be on the downside.... v. Jackson, 783 S.W.2d 202, 204 (Tex.1989) (discussing [T]he quantities of oil utilized ... were not within the Clifton v. Koontz, 160 Tex. 82, 325 S.W.2d 684 (1959)), reasonable expectations of the parties when the contract and Lenape's duty as an operator to protect the leasehold © 2025 Thomson Reuters. No claim to original U.S. Government Works. 15 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... from drainage, which could give rise to a duty to drill an Sellers counter that section 2.306 does not contain the only offset well under certain circumstances. See Amoco Prod. Co. good-faith requirement in the UCC. The official comments v. Alexander, 622 S.W.2d 563, 568 (Tex.1981). Especially indicate that section 2.306 applies to requirement and output in light of Lenape's duties under the underlying leases, contracts the general good faith requirement of the Code, Tennessee's reasonable expectations had to encompass the codified in section 1.203, and further defined for merchants possibility that at any time during the twenty-year term, new in section 2.103(a)(2).7 Thus, the same obligation of good and productive wells might be drilled. Likewise, the parties' faith applies to an output contract whether it is through the reasonable expectations would have encompassed reasonable general application to all sales contracts of section 1.203, industry *584 practices relating to the production and sale of in conjunction with section 2.103(a)(2), or through the good gas. On remand, the parties would have the opportunity to put faith requirement of section 2.306, applicable to output forward all such relevant evidence concerning the nature of contracts. Based on these observations, the Sellers originally the industry as it impacts the parties' reasonable expectations contended in this Court that Tennessee was not denied its right at the time the GPA was entered into. to prove bad faith, but rather that Tennessee voluntarily gave up that right by its own act of dismissing all section 1.203 Given the nature of the oil and gas industry and the good faith claims in a Motion for Agreed Partial Judgment.8 relationship of unreasonable proportionality to parties' expectations, it should be clear that producers will not face a 7 The official comments state that section 2.306(1) jury trial over the enforceability of a take-or-pay gas purchase contract every time a new well is drilled or a successful strike applies to the “specific problem” [of the absence of a quantity term in output and requirements contracts] is celebrated. Only in extraordinary cases will a fact issue the general approach of the Act which “requires the be raised as to whether a tendered quantity is unreasonably reading of commercial background and intent into the disproportionate to prior output under section 2.306. Even language of any agreement and demands good faith then, of course, “[i]t is fundamental that an issue, which is in the performance of that agreement.” Tex.Bus. & normally a question of fact, can be proved so conclusively by Com.Code § 2.306 cmt. 1. The Code's general good faith the evidence at trial that it becomes a question of law, rather and reasonableness requirement provides that “[e]very than a question of fact.” Dixon v. Southwestern Bell Tel. Co., contract or duty within this title imposes an obligation of 607 S.W.2d 240, 242 (Tex.1980). Whether the complained-of good faith in its performance or enforcement.” Tex.Bus. increased quantity of gas tendered in this case is unreasonably & Com.Code § 1.203. Good faith is further defined for disproportionate under section 2.306 as a matter of law is not merchants as “honesty in fact and the observance of raised in this Court. reasonable commercial standards of fair dealing in the trade.” Tex.Bus. & Com.Code § 2.103(a)(2). Finally, I would also remand to the trial court for 8 The Application for Writ of Error filed jointly by Tesoro, further proceedings regarding whether Sellers caused the Coastal, Lenape and Gulf states that “on the eve of trial, complained-of increase in production to occur in bad faith, Tennessee dismissed with prejudice all claims for bad i.e., for no valid business reason or for the purpose of faith under § 1.203, but retained its claim under § 2.306.” manipulating the contract to take advantage of a price On rehearing, Sellers correctly point out that Tennessee did disparity in their favor. If the increased output did not occur not dismiss its bad faith claims under section 1.203 against in good faith, section 2.306 should apply to prevent Sellers Lenape. The motion for agreed partial judgment states: from forcing Tennessee to pay for the bad faith increase. “Plaintiff Tennessee Gas Pipeline has agreed to dismiss any of its claims for bad faith or lack of good faith that it may Tennessee contends and I agree that it was prevented from have against [Tesoro and Coastal] ... with the exception of, trying the issue of good faith because the trial court ruled and it expressly reserves to itself, any claims that it might have on summary judgment that section 2.306 does not apply to under Section 2.306 of the Uniform Commercial Code.” The the GPA. Since the trial court decided as a matter of law Agreed Partial Judgment signed by the trial judge likewise that section 2.306 did not apply, there was no opportunity to reflects *585 that Tennessee's agreement was with Tesoro present evidence of or arguments about the Sellers' failure to and Coastal, not Lenape. Tennessee thus went to trial against abide by the provisions of that section. Lenape with a live good faith claim under section 1.203, and the trial judge found no bad faith as to the formation of the new units and the drilling of the new wells. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 16 Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565 (1996) 137 Oil & Gas Rep. 630, Util. L. Rep. P 26,527, 29 UCC Rep.Serv.2d 759... that is reversed and sent back for trial on the output question, that whatever bad faith claims or good faith However, the central question of whether the increased claims we might have under solely the output section output complained of by Tennessee occurred for a valid of the Uniform Commercial Code is preserved. business reason or as a result of speculation and/or contract (Emphasis added.) Given the summary judgment rulings manipulation by the Sellers has not been fully litigated. The and this statement to the judge, which went unchallenged record indicates that the case was tried under the assumption by counsel for the Sellers, I believe that the parties and that the court had precluded any argument that the contract the court proceeded to trial under the assumption that the was an output contract.9 As a result, the trial judge could court had effectively ruled that the GPA was not an output not have focused on whether the complained-of increase contract. in quantity tendered under an output contract occurred in 10 The record supports this conclusion. During the opening 10 bad faith, whether under section 2.306 or section 1.203. and closing statements of the trial, none of the parties Therefore, I would remand this action to the trial court for identified bad faith increase in delivery capacity or further proceedings on the issue of the Sellers' good faith with output as an issue to be tried or in any way attempted regard to the increased production of gas subject to the GPA. to link (or not) the increase in output with market price changes for gas. Moreover, the only explicit question about “good faith” posed to a witness during the trial was 9 Tennessee made a partial summary judgment motion in regard to Lenape's duty as a lessee to its lessors to pool seeking a ruling that the GPA was an output contract in good faith. During cross-examination by Tesoro and governed by section 2.306. Tennessee specifically argued Coastal, Mr. Devine, senior vice president for Lenape that the GPA agreement “meets the definition of an Resources, testified that he was aware that an operator output contract as the contract quantity is indefinite and is required to pool in good faith, and that in his opinion is measured by the future output (delivery capacity) the two new units in question were formed in good faith of the seller.” Lenape, in its brief in response, argued “as far as the oil and gas leases are concerned.” But, of that the GPA was not an output contract because it course, any duty owed by Lenape to its lessors is not at requires Tennessee to purchase the entire production of issue in this case. Thus, from this review of the record, gas from specified acreage. Tesoro and Coastal also filed I conclude that the issue of whether the complained-of a summary judgment motion, joined by Lenape, which increase in output occurred in good faith has not been sought a ruling by the court that the GPA was not an tried. output contract subject to 2.306. Their brief contained arguments that the GPA was not an output contract and This is a very unusual, perhaps a unique, case. It involves that, even if it was, it is not governed by section 2.306. wildly fluctuating market conditions uncommon even in the Without specifying the grounds of its decision, the trial volatile gas industry, a type of contract no longer in use, court denied Tennessee's motion and granted Tesoro and and a large discovery seldom replicated. But merely because Coastal's motion. a case is not likely to arise again should not prevent the During opening statements (before the Hon. Charles law from being fairly applied to the situation as it actually W. Barrow, retired Justice of this Court, sitting by occurred. In this instance, I believe the law permits Tennessee designation), counsel for Tennessee, after indicating to attempt to prove that Sellers' increased tender of gas either to the court that various claims had been voluntarily occurred in bad faith or was unreasonably disproportionate to dismissed by the parties, stated: prior output. Therefore, I would affirm the court of appeals' The only thing left in this case is a previous judge judgment in all respects. [the Hon. Carlos C. Cadena, retired Chief Justice of the Fourth Court of Appeals, sitting by designation] in a grant of summary judgment had knocked out All Citations our right to claim that this was [a]n output contract. The output section of the Uniform Commercial Code 925 S.W.2d 565, 137 Oil & Gas Rep. 630, Util. L. Rep. P imposes a good faith obligation upon the parties. We 26,527, 29 UCC Rep.Serv.2d 759, 39 Tex. Sup. Ct. J. 496 have preserved that if on appeal somewhere up the line End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 17 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) there was no evidence of extent to which managing general 601 S.W.3d 904 partner profited from excess rent that limited partnership paid Court of Appeals of Texas, Houston (14th Dist.). to its landlord and thus minority general partner was not entitled to award of profit disgorgement regarding claims of breach of fiduciary duties; SHANNON MEDICAL CENTER, Appellant v. voting deadlock as to managing general partner and minority TRIAD HOLDINGS III, L.L.C., Individually general partner did not exist in limited partnership, and thus and Derivatively on Behalf of Regional judicial dissolution of partnership on ground that it was not reasonably practicable to carry on partnership's business in Cancer Treatment Center, Ltd., Appellee conformity with its governing document was unwarranted; and NO. 14-18-00638-CV | award of appellate attorney fees must conditioned upon a Opinion filed December 5, 2019 successful appeal. Synopsis Background: Managing general partner filed suit for judicial Affirmed in part, vacated in part, and remanded. dissolution of limited partnership on ground that it was not reasonably practicable to carry on partnership's business Procedural Posture(s): On Appeal; Judgment. in conformity with its governing documents. Minority general partner counterclaimed in its individual capacity and *907 On Appeal from the 340th District Court, Tom brought derivative action on behalf of partnership alleging Green County, Texas, Trial Court Cause No. C150381C, that general partner breached common-law and statutory Martin (Brock) Jones, Judge fiduciary duties. Following jury trial, the 340th District Court, Tom Green County, awarded damages to partnership for Attorneys and Law Firms managing partner's breach of duty, ordered managing partner Samuel V. Houston III, William H. Ford, Veronica Wolfe, San to disgorge profits to minority general partner, and ordered Antonio, Guy D. Choate, San Angelo, for Appellant. managing partner to pay partnership and minority general partner's attorney fees and expenses. Managing general Melissa Michelle Davis, Austin, Reed Randel, Michael partner appealed. Warren Stockham, Dallas, Jeffrey S. Lisson, San Angelo, for Appellee. Panel consists of Justices Christopher, Bourliot, and Holdings: The Court of Appeals, Christopher, J., held that: Zimmerer. question submitted to jury about whether managing general partner complied with its duty of care to partnership did not commingle valid and invalid theories of liability; OPINION Tracy Christopher, Justice partnership agreement could not, and did not purport to, disclaim managing general partner's statutory duty of care to Shannon Medical Center and Triad Holdings III, L.L.C. limited partnership; are general partners in Regional Cancer Treatment Center, Ltd. (the Partnership). The Partnership operates its regional evidence in derivative action supported jury's finding that cancer-treatment center (RCTC) on premises leased from managing general partner breached statutory duty of care Shannon's subsidiary, Shannon Real Estate Services, Inc. when it negotiated increase in limited partnership's rent with (SRES). Shannon, the managing general partner, sued for managing partner's wholly owned subsidiary, which was judicial dissolution of the Partnership so that it can take over partnership's landlord; RCTC's operations. Triad, both individually and derivatively on behalf of the Partnership, sued Shannon for breach of © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) common-law and statutory fiduciary duties. In accordance the earliest of (a) December 31, 2038; (b) approval of 75% with the jury's verdict, the trial court rendered judgment of the partnership units; (c) the Partnership's ceasing to denying Shannon's request for judicial dissolution and operate a radiotherapy facility; or (d) the occurrence of any awarding the Partnership actual damages in the amount of other circumstance that, under the Texas Revised Limited excess rent that Shannon bound the Partnership to pay to Partnership Act,2 would require dissolution. Shannon has SRES. The trial court additionally ordered Shannon to pay the attempted to obtain the right to vote 75% of the partnership identical amount to Triad as equitable disgorgement of profits. units in favor of dissolution. Finally, the trial court awarded Triad and the Partnership their attorneys' fees, costs, and expenses. Shannon appeals the 2 The Act expired in 2010; now see Title 4 of the Texas judgment.1 Business Organizations Code, Tex. Bus. Orgs. Code Ann. §§ 151.001–154.204. 1 Pursuant to an order by the Supreme Court of Texas, There originally were three general partners and a varying this case was transferred to us from the Third Court of number of limited partners, but the third general partner left Appeals, and we have applied that court's precedent to the Partnership and sold its partnership units to Shannon and the extent that it is inconsistent with our own. See Tex. Triad. With the addition of those units, Shannon owned about R. App. P. 41.3. 72.32% of the partnership units, Triad owned about 24.35%, We affirm the portions of the judgment denying Shannon's and limited partners Drs. Bolen, Gordon, and Hughes owned, request for judicial dissolution and awarding actual damages respectively, 1.72%, 0.86%, and 0.75%. to the Partnership; however, we reverse the disgorgement award to Triad because there is neither a finding nor evidence of Shannon's profits from the excessive rent charged by, and A. The 2012 Lease Amendment paid to, a different entity. In light of our disposition of these The Partnership's landlord SRES informed the Partnership claims, we reverse the awards of attorney's fees, costs, and that it would not renew the Partnership's five-year lease expenses, and we remand the case solely for relitigation of upon its expiration in 2012. SRES offered to withdraw the this ancillary relief. notice of termination if Triad, as the only other member of the Partnership Committee, would agree to change the Partnership's name to “Shannon Regional Cancer Treatment Center, Ltd.” Triad declined. I. Background Since its formation in 1988, the Partnership has operated Three days before the lease expired, Bryan Horner, who is RCTC from a building *908 constructed by the Trust of both Shannon's chief executive officer and SRES's president, the Margaret Shannon Estate. The Trust then transferred the sent the Partnership and Triad a lease amendment he had building to Shannon, and in 2007 Shannon transferred the executed on behalf of Shannon, as the Partnership's managing building to its wholly owned subsidiary, SRES. Except for partner, and SRES. The lease raised the Partnership's annual this partnership, Shannon and Triad are competitors. rent of about $16.00/sq. ft. to $31.04/sq. ft., of which $11.79/sq. ft. was purportedly to reimburse SRES for Under the terms of the Partnership Agreement, the general specialized tenant improvements it made to the building partners manage and control the Partnership “through and by for the Partnership's use. The building's features that are virtue of their selection of the Partnership Committee and characterized as specialized tenant improvements are two the Managing General Partner.” The Partnership Committee vaults designed to contain radiation from the facility's linear consists of one representative of each general partner. For accelerators. Contrary to these representations, however, several years Shannon and Triad have been the only general Shannon knew that SRES had not modified the building and partners. Shannon serves as the managing general partner, for that the Trust had included the vaults as part of the building's which the Partnership pays Shannon management fees under original construction in 1988. a separate agreement. B. Assignment of Voting Rights For some time now, Shannon has been attempting to dissolve To reach the 75% threshold needed for it to dissolve the the Partnership and take over RCTC. The Partnership Partnership, Shannon *909 proposed voting agreements Agreement provides that the Partnership will dissolve upon © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) with the limited partners, offering a guaranteed floor price for Partnership or to Triad and assessed the Partnership damages a limited partner's units upon dissolution of the Partnership in of $572,725.00, which is equal to the sum of the annual exchange for the limited partner's proxy. Triad blocked this charges of $11.79/sq. ft. of the leased premises over the five- move by entering into a voting agreement with Dr. Bolen. The year lease term. This is the amount that Shannon bound the Triad-Bolen Voting Agreement is binding upon the parties' Partnership to pay SRES, purportedly to reimburse SRES successors and assigns and it cannot be assigned absent the for its costs of constructing the vaults. The trial court also other party's written consent. With this agreement, Triad included an allegedly unpleaded claim, asking the jury if controlled the votes of more than 26% of the Partnership, Shannon committed fraud by non-disclosure against Triad effectively preventing Shannon from forcing the Partnership “in connection with the Lease Amendment.” The jury then to dissolve without Triad's consent. was again asked, “What was the amount of any improperly charged rents,” and again answered, “$572.725.00.” The jury Shannon subsequently bought some of partnership units that answered all of Shannon's affirmative-defense questions in were subject to the Triad-Bolen Voting Agreement before the negative and failed to find any of the statutory grounds for entering into a similar voting agreement with Dr. Hughes. judicial dissolution of the Partnership. Believing that these transactions gave it the right to vote 75% of the partnership units, Shannon unilaterally issued a The trial court awarded the Partnership actual damages of “Written Consent” purporting to dissolve the Partnership and $572,725.00 as found by the jury for breach of duty. Triad transfer the Partnership's assets and liabilities to Shannon. In recovered *910 no damages, but the trial court ordered response, Triad pointed out that its proxy to vote Dr. Bolen's Shannon to pay Triad $572,725.00 as equitable disgorgement partnership units is binding on Dr. Bolen's successors, so that of profits. Finally, Shannon was ordered to pay Triad's and the Triad retains the right to vote those units that Dr. Bolen later Partnership's attorneys' fees and expenses. Shannon appeals sold to Shannon. Shannon concedes this point and agrees that the judgment. the Written Consent was ineffective. By the time of trial, Shannon and Triad had purchased all of II. Issues Presented the limited partners' partnership units, making them the only members of the partnership. Due to the voting agreements, Of Shannon's first two issues, we address only the arguments Shannon has the right to vote slightly less than 74% of the in Shannon's second issue challenging the jury's finding that partnership units, and Triad has the right to vote slightly more Shannon breached its statutory duty of care.3 In its fourth than 26%. issue, Shannon seeks reversal of Triad's disgorgement award, and in its fifth issue, Shannon argues that it conclusively C. The Lawsuit established a basis for judicial dissolution of the Partnership. Unable to cast the votes of 75% of the partnership units In its two remaining issues, Shannon challenges both the as needed to dissolve the Partnership, Shannon filed this unconditional nature of the award of appellate attorneys' fees suit for judicial dissolution on the ground that it is and the amount of fees awarded. not reasonably practicable to carry on the Partnership's business in conformity with its governing documents. Triad 3 Shannon's first two issues challenge the jury's findings counterclaimed in its individual capacity and additionally on three alternative theories of liability: (1) breach of brought a derivative action on behalf of the Partnership. For general, common-law fiduciary duties; (2) breach of the clarity, we refer to the derivative claims as if brought by the statutory duty of loyalty; and (3) breach of the statutory Partnership directly. duty of care. Because we affirm the judgment for the Partnership based on Shannon's breach of the statutory duty of care, it is unnecessary to address the Partnership's The jury charge contained separate questions asking whether alternative liability theories. Shannon complied with common-law fiduciary duties, with the statutory duty of loyalty, and with the statutory duty Given the differences in the claims and the relief awarded of care. Regardless of the theory of liability, the jury was to the Partnership and to Triad individually, we separately told to measure the Partnership's damages, if any, by “[t]he address Shannon's appellate arguments concerning the amount of any improperly charged rents.” The jury found Partnership's claims, Triad's individual claims, and Shannon's that Shannon did not comply with any of these duties to the © 2025 Thomson Reuters. No claim to original U.S. Government Works. 3 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) judicial-dissolution claim, before addressing the incidental (1) in good faith and (2) in a manner that Shannon relief of attorneys' fees, costs, and expenses. reasonably believes to be in the best interest of the Partnership. To prove it complied with its duty of care, Shannon must III. Breach of the Duty of Care to the Partnership show that, in conducting the Partnership's business, it acted with the care of an ordinarily prudent person in In this issue, Shannon maintains that the charge's question similar circumstances. An error in judgment does not by regarding breach of the duty of care does not support the itself constitute a breach of the duty of care. judgment because none of the transactions or conduct relied upon give rise to a legally viable claim.4 A partner is presumed to have satisfied the duty of care if the partner acted on an informed basis, in good faith, 4 Although this question pertains both to the Partnership and in a manner that the partner reasonably believed to and to Triad individually, we dispose of the judgment for be in the best interest of the Partnership. Triad on other grounds. See Section IV, infra. A partner does not violate a duty or obligation merely because the partner's conduct furthers the partner's own A. Question 6: The Charge on the Statutory Duty of Care interests. Shannon first contends the trial court erroneously charged The jury answered “no” as to both Triad and the Partnership. the jury on breach of the statutory duty of care. A trial A “no” answer to Question 6 was one of several alternative court must submit jury questions, instructions, and definitions predicates to Question 7, in which the jury was asked to that “are raised by the written pleadings and the evidence.” determine the amount that would compensate the Partnership Tex. R. Civ. P. 278; United Scaffolding, Inc. v. Levine, 537 for its damages, if any, “that were proximately caused by S.W.3d 463, 469 (Tex. 2017). When reviewing a complaint the non-compliant conduct.” The jury was instructed to of charge error, we consider “the pleadings of the parties and consider only “[t]he amount of any improperly charged rents, the nature of the case, the evidence presented at trial, and determined at the time and place of the payment.” the charge in its entirety.” United Scaffolding, 537 S.W.3d at 469 (quoting Columbia Rio Grande Healthcare, L.P. v. Hawley, 284 S.W.3d 851, 862 (Tex. 2009)). We review the 1. Alleged Casteel Error trial court's ruling on charge objections and charge requests Shannon asserts that trial court reversibly erred in submitting for abuse of discretion. Sw. Energy Prod. Co. v. Berry– Question 6 because it commingles valid and invalid theories Helfand, 491 S.W.3d 699, 727 (Tex. 2016). A trial court of liability. See Crown Life Ins. Co. v. Casteel, 22 S.W.3d abuses its discretion when it acts without reference to guiding 378, 388 (Tex. 2000) (op. on reh'g) (“[W]hen a trial court rules or principles. In re Thetford, 574 S.W.3d 362, 374 (Tex. submits a single broad-form liability question incorporating 2019) (orig. proceeding). Charge error is reversible if, under multiple theories of liability, the error is harmful and a new the totality of these circumstances, the error “amounted to trial is required when the appellate court cannot determine such a denial of the rights of the complaining party as was whether the jury based its verdict on an improperly submitted reasonably calculated and probably did cause the rendition invalid theory.”). Shannon argues that a breach of duty cannot of an improper judgment.” United Scaffolding, 537 S.W.3d be based on its attempt to dissolve the Partnership by Written at 469 (quoting *911 Island Recreational Dev. Corp. v. Consent because “partners have no duty to remain partners.”5 Republic of Tex. Sav. Ass'n, 710 S.W.2d 551, 555 (Tex. 1986) Shannon further contends that a breach of duty cannot be (op. on reh'g)). based on “transactions that never closed, proposals that were rejected, or actions that had no legal effect,” such as Shannon's Question 6 of the charge addressed the duty of care as follows: various offers to purchase partnership units, the proposal Did Shannon comply with its duty of care to [Triad] and to the Partnership to choose between renaming itself after the Partnership? Shannon or vacating the premises, and its attempts to obtain voting agreements from Drs. Hughes and Bolen. Shannon As a partner in the Partnership, Shannon owes [Triad] states in its brief that these theories cannot support a finding and the Partnership a duty of care. Shannon must that it failed to comply with the duty of care it owed to the discharge this duty and conduct the Partnership business © 2025 Thomson Reuters. No claim to original U.S. Government Works. 4 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) Partnership because these uncompleted transactions neither Id. § 152.206(a). A partner additionally must discharge benefited Shannon nor harmed Triad. the partner's duties “in good faith” and “in a manner the partner reasonably believes to be in the best interest of 5 Bohatch v. Butler & Binion, 977 S.W.2d 543, 544 (Tex. the partnership.” Id. § 152.204(b). Although the Partnership 1998). Agreement authorizes contracts between the Partnership and a partner or a partner's affiliate, a partner entering into such We disagree that the jury could have based its answers a contract still must comply with the duty of care by acting on any of these scenarios. The damage question that is in good faith and in a manner the partner reasonably believes predicated on any finding that Shannon failed to *912 to be in the partnership's best interest. The Partnership comply with a common-law or statutory duty required the Agreement could not change this and did not purport to do so. jury to determine the amount of “improperly charged rents” proximately caused by Shannon's “non-compliant conduct.” The instructions accompanying this question tracked the Thus, the non-compliant conduct at issue was Shannon's statute. The instructions additionally clarified that “[a] partner agreement, as the Partnership's managing partner, to pay does not violate a duty or obligation merely because the SRES the “improperly charged rents.” partner's conduct furthers the partner's own interest” and that “a[n] error in judgment does not by itself constitute Some of the scenarios that Shannon alleges were improperly a breach of the duty of care.” Under these instructions, encompassed in Question 6 could not have been included the jury could find that Shannon complied with its duty of for the additional reason that they were excluded by the care by entering into a contract with the Partnership that accompanying instruction. The instruction informed the furthered Shannon's interest, so long as Shannon acted in jury that Shannon owed a duty of care in conducting the good faith and reasonably believed that the contract also Partnership's business, not Shannon's own business, and we was in the Partnership's best interest. Because this charge presume the jury followed the charge instructions. See Barnes correctly reflects both the governing law and the Partnership v. Mathis, 353 S.W.3d 760, 765 (Tex. 2011) (per curiam). Agreement's terms, the trial court did not abuse its discretion In attempting to purchase partnership units, Shannon was in overruling Shannnon's *913 objection. See Tex. Dep't of conducting its own business, not Partnership business, and Human Servs. v. E.B., 802 S.W.2d 647, 649 (Tex. 1990) (op. the renaming ultimatum was made by SRES, not by Shannon. on reh'g) (no abuse of discretion where controlling question As defined in the charge, “Shannon” meant only Shannon was accompanied by instructions tracking statute's language). Medical Center and specifically excluded SRES and the Trust. We conclude that the scenarios Shannon describes as invalid B. The Evidence That Shannon Failed to Comply with Its theories of liability were not submitted to the jury. They Duty of Care instead were merely factual matters that were admitted Shannon further asserts there is no evidence to support into evidence without objection or a request for a limiting the jury's finding that Shannon failed to comply with its instruction, and they were not encompassed in Question 6. statutory duty of care. Because the jury returned an adverse finding on this issue on which Shannon bore the burden of proof, Shannon must demonstrate on appeal that the evidence 2. The Partnership Agreement's Effect on the Duty of conclusively established that it complied with its statutory Care duty of care. See Dow Chem. Co. v. Francis, 46 S.W.3d On appeal, Shannon also reurges its objection that the duty- of-care question “does not adequately address the partnership 237, 241 (Tex. 2001).6 We review the record in the light agreement and the alterations of the statutory duty of care.” most favorable to the challenged finding, crediting favorable See Tex. Bus. Orgs. Code Ann. §§ 152.206, 153.003. Shannon evidence if a reasonable factfinder could and disregarding argues on appeal that the duty of care was contractually contrary evidence unless a reasonable factfinder could not. disclaimed and that Shannon's conduct was authorized. See City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005) (per curiam). After reviewing the record in accordance with As a matter of law, however, the duty of care cannot this standard, we hold that the evidence does not conclusively be disclaimed. See id. § 152.002(b)(3). A partner must show that Shannon complied with its duty of care concerning conduct the partnership's business “with the care an ordinarily the lease amendment. prudent person would exercise in similar circumstances.” © 2025 Thomson Reuters. No claim to original U.S. Government Works. 5 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) 6 In a footnote in its brief, Shannon states that it also objected to the three breach-of-duty questions on the The day after receiving the report, Bryan Horner, both in ground that they improperly shifted the burden to his capacity as Shannon's CEO and as president of SRES, Shannon. Shannon offers no argument or authority executed a lease amendment and sent it to Triad and the in support of that objection; thus, it too is waived. Partnership, enclosing a copy of Scoggins's report. The See Tex. R. App. P. 38.1(i). We note, however, that lease amendment states, “A market rental analysis prepared under the common law, when a fiduciary enters into a for SRES indicates that specialized tenant improvements transaction in which its self-interest might conflict with funded by the landlord, such as the [Partnership] linear the beneficiary's interests, the fiduciary bears the burden accelerator vaults, are typically amortized and reimbursed by to show compliance with the duty of care. Stephens Cty. Museum, Inc. v. Swenson, 517 S.W.2d 257, 260 (Tex. the tenant.”7 The amendment called for annual rent of $31.04/ 1974). The Texas Business Organizations Code makes sq. ft., which is the sum of the highest fair-market rental this burden-shifting rule applicable to alleged violations value found by Scoggins plus an additional $11.79/sq. ft. to of statutory duties as well. See Tex. Bus. Orgs. Code “reimburse” SRES. Ann. § 153.003 (in matters not addressed in Business Organizations Code chapter 153 dealing with limited 7 Emphasis added. partnerships, “the provisions of Chapter 152 governing partnerships that are not limited partnerships and the But Shannon knew that SRES did not fund the improvements rules of law and equity govern”); id. § 152.003 (“The that were made in 1988, because Shannon was the previous principles of law and equity and the other partnership owner and transferred the building—with the vaults already provisions supplement this chapter unless otherwise in place—to SRES in 2007. provided by this chapter or the other partnership provisions.”); see also id. §§ 152.004, 153.002(b) (“The Moreover, there is legally sufficient evidence that the rule that a statute in derogation of the common law is improvements also were not funded by Shannon. According to be strictly construed does not apply” to the statute's to Horner, the building was constructed by the Trust, which partnership and limited-partnership provisions). then transferred ownership to Shannon, who later transferred Before the lease was renewed in 2012, SRES asked appraiser the building to SRES. Dale Scoggins to analyze the fair-market rental value of the leased premises. Scoggins determined that the annual fair- Further still, the original lease indicates that the Partnership market rental range was $18.50 to $19.25/sq. ft. In his report, had no financial responsibility for improvements that were Scoggins stated, part of the original construction. Attached to the Partnership's original 1988 lease is an exhibit cover sheet that appears to The above rental amount does not include consideration give directions to clerical staff, stating, “Attach floor plan of the amortization of the specialized items of tenant of demised premises showing ... all improvements to be improvements (TI) that might be a part of a new lease constructed by Landlord” and directing someone to type on agreement. The subject suite has two vaults that house the floor plan, “All improvements, equipment and furnishings linear accelerator equipment. The estimated costs for shown hereon are to be constructed, furnished and installed at each of these vaults is $450,000 or a total of $900,000. the sole cost and expense of Landlord.” A private placement These improvements were installed at the time of original memorandum seeking investors in the Partnership identifies construction. The building was built in 1988 making the Trust as the landlord. the improvements 24 years old. Typical economic life for medical office buildings is 50 years. The accrued Although the floor plan itself is missing from the lease, the depreciation attributable to the vault improvements would building's 1987 blueprints show that the vaults are part of therefore be (24/50) 48%.... The depreciated value of the the original construction. The 1988 lease did not require the specialized TI is $468,000. Typically specialized TI is Partnership to pay for any part of the original construction amortized over the primary lease term. In this case no but to pay only for those improvements that were added after amortization of this cost has occurred. the lease's “Commencement Date,” which was defined as the From these figures, Scoggins calculated that the post- date the Partnership “delivers written notice to Landlord that depreciation cost of the two vaults, if amortized over a five- the demised premises are complete and fully suitable to [the year term, *914 would increase the annual rent by $11.79/ Partnership] for the purpose for which same are leased.” sq. ft. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 6 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) the property was $19.25/sq. ft., and the record supports the From this evidence, the jury reasonably could conclude finding that in binding the Partnership to pay SRES an that the Trust assumed sole responsibility for the cost of additional $11.79/sq. ft., Shannon did not act “on an informed constructing a building suitable for use as a radiotherapy basis, in good faith, and in a manner [it] reasonably believed center, and this included construction of the vaults shown on to be in the [Partnership's] best interest.” the blueprints. We conclude the jury's assessment of the Partnership's actual The evidence also establishes that Shannon knew there was damages is amply supported by the evidence. We overrule no support for the position taken in the 2012 lease amendment Shannon's second issue, and we affirm the portion of the that “a rate of $31.04 per year per square foot (including judgment awarding the Partnership actual damages as found reimbursement of specialized tenant improvements funded by by the jury. SRES) is within the range of fair market value.” Shannon knew that the vaults were included in the original construction nearly two decades before SRES acquired the building. IV. Triad's Disgorgement Award Moreover, Scoggins asked for documentation of the costs of constructing the vaults, but because the vaults were Shannon argues that Triad's disgorgement award must be included as an integral part of the building's *915 original reversed because, among other reasons, there is no evidence construction, Shannon could find none. To the contrary, of Shannon's profits. We agree, and because this point Shannon's controller informed Horner, “The best I've been is dispositive, we do not address Shannon's remaining able to come up with for the 1988 vaults is a lease agreement challenges to this award.9 that indicates [the] landlord is responsible for all leasehold improvements....” Scoggins additionally explained to Horner, 9 Shannon argues in its third issue that the disgorgement “The TI increment is not included in the market rental amount award cannot be supported by the jury's finding of as it is not an aspect of market rent but an individual fraud by non-disclosure in connection with the lease modification to a building for a particular tenant rather than a amendment, because (a) the claim was not pleaded, (b) feature that would be typical of the market.”8 Thus, Shannon Triad lacks standing to pursue the claim, and (c) there knew that (1) the vaults were not a modification to the is no evidence of one or more elements of fraud by building, and thus, they were not a “tenant improvement”; (2) non-disclosure. In its fourth issue, Shannon contends the Trust, not SRES, paid to construct the building, including that the trial court abused its discretion in ordering the vaults; and (3) the vaults' construction-costs are not part of equitable disgorgement to Triad of Shannon's profits the building's fair-market rental value. There accordingly was because (a) that request for relief was not pleaded, no basis for Shannon, as the Partnership's managing general (b) there is no direct relationship between Triad and the amount to be disgorged, (c) no clear and serious partner, to bind the Partnership to “reimburse” SRES for breach occurred, and (d) there is no basis for the amount construction costs Shannon knew had been paid by the Trust awarded. Under the latter subheading, Shannon argues in accordance with its agreement with the Partnership. that the rent was paid to SRES, not Shannon, and there is no evidence of Shannon's profits from the 2012 lease 8 Emphasis added. amendment. Because this point is dispositive of the judgment in Triad's favor, we do not address Shannon's Although Shannon emphasizes that the Partnership other arguments. Agreement permits the Partnership to contract with a partner's affiliate such as SRES, the agreement specifies that such In determining the amount that equity required Shannon to contracts “must be competitive with the terms that the disgorge to Triad, the *916 trial court relied on the jury's Partnership could obtain from third parties in an arm's length answer to Question 9 of the charge, in which the jury was transaction.” The Partnership was not renting space that asked, “What was the amount of any improperly charged SRES had modified at the landlord's expense to satisfy the rent?” The jury answered, “$572,725.00.” Partnership's requirements; the Partnership was renting a space that already satisfied the Partnership's requirements But Texas law limits profit disgorgement to the amount of without requiring the landlord to modify it. Scoggins's report a fiduciary's profits obtained as a result of the fiduciary's shows that the highest annual fair-market rental value for breach of duty. See Longview Energy Co. v. Huff Energy Fund LP, 533 S.W.3d 866, 877–78 (Tex. 2017) (citing ERI © 2025 Thomson Reuters. No claim to original U.S. Government Works. 7 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) Consulting Eng'rs, Inc. v. Swinnea, 318 S.W.3d 867, 873 (Tex. was the disgorgement award, which cannot stand, we reverse 10 2010)). As Shannon pointed out at the charge conference, this part of the judgment and render judgment that Triad take the Partnership paid the rent to its landlord SRES, and SRES is nothing by its claims in its individual capacity. a corporation distinct from Shannon, SRES's sole shareholder. See Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex. 1997) (“Under Texas law, a corporation is an entity V. Shannon's Claim for Judicial Dissolution of the separate from its shareholders.”). The excess rent was SRES's Partnership profit, not Shannon's, and Triad did not plead or litigate any basis for ignoring the distinction between the two entities. The On application by a partner in a domestic partnership, a extent to which Shannon profited from the excess rent paid to district court may *917 order the winding up and termination SRES was a question of fact11 on which there is no finding of the partnership “if the court determines that it is not and no evidence. reasonably practicable to carry on the entity's business in conformity with its governing documents.”12 The jury 10 We address only the disgorgement of profits, not the was asked, “Is it reasonably practicable to carry on the forfeiture or disgorgement of fees, which are not at issue Partnership's business in conformity with the governing in this appeal. documents, and the jury answered, “Yes.” In its fifth issue, Shannon contends it is entitled to judicial dissolution of the 11 See Longview, 533 S.W.3d at 877–78. Partnership because it conclusively established the contrary. In response, Triad asserts that the damages Shannon now must pay to the Partnership “inure ... primarily to Shannon's benefit 12 Act of May 13, 2003, 78th Leg., R.S., ch. 182, § 1, sec. as the [Partnership's] majority owner.” But this argument 11.314(2), 2003 Tex. Gen. Laws 267, 400–01 (amended misses the mark for several reasons. First, the judgment 2009 & 2017; now codified at Tex. Bus. Orgs. Code Ann. Shannon must pay to the Partnership is not Shannon's profit; § 11.314(3)). it is Shannon's debt. See Tex. Civ. Prac. & Rem. Code Ann. Citing Wiess v. McFaddin, 211 S.W. 337, 342 (Tex. App. § 31.008(h)(2) (party against whom judgment is rendered —Beaumont 1919, no writ), Shannon argues that voting is a “judgment debtor”). Second, when Shannon pays the deadlock is a recognized basis for judicial dissolution of judgment, the money will inure to the Partnership's benefit, a partnership, and now that Shannon and Triad are the not to Shannon's. The extent of Shannon's partnership interest only partners, the two are bound to become deadlocked is irrelevant, because a partnership is “an entity distinct from on important matters. But the evidence before us—and its partners” and “[p]artnership property is not property of the Shannon's own admission—easily distinguish the facts in this partners.” Tex. Bus. Orgs. Code Ann. §§ 152.056, 152.101. case from those in Wiess. In Wiess, all of the property of Third, if Triad intends to imply that some part of the judgment an unincorporated joint stock association was vested in a that Shannon pays to the Partnership will later be repaid to board of three trustees: Wiess, Kyle, and McFaddin. Id. at Shannon in the form of a partnership distribution, this theory 338. Wiess died and was succeeded by one of his children; cannot support the judgment because there is no fact finding however, the joint-stock agreement provided that the election on the subject. And fourth, no evidence was offered that of a new trustee would not be complete unless a certificate would have supported the submission of a question asking of acknowledgment was signed by the two remaining trustees the jury to measure Shannon's profits from the improperly and the new trustee signed an acceptance of the trust. Id. at charged rents by the amount of a partnership distribution. 338–39. Wiess's successor was elected, but McFaddin refused The rent increase became effective in October 2012, and the to sign the necessary certificate. Id. at 339. The court noted evidence showed that the only distribution since that time was that it was decided in an earlier case that McFaddin could not in January 2013. The distribution could not have included any be compelled to sign the certificate, and Kyle refused to act improperly charged rent, because the Partnership paid the rent until the board was complete. See id. at 342 (citing McFaddin to SRES, so the Partnership had no improperly charged rent v. Wiess, 168 S.W. 486, 487 (Tex. App.—Galveston 1914, no to distribute. writ)). Because it was impossible to operate the business in conformity with its governing documents, the court affirmed For each of these reasons, we sustain Shannon's fourth issue in the business's judicial dissolution. See id. part, and we do not reach Shannon's remaining challenges to the judgment in Triad's favor. Because Triad's only recovery © 2025 Thomson Reuters. No claim to original U.S. Government Works. 8 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) trial on attorneys' fees, costs, and expenses. We agree with No such deadlock does, or could, exist here. As Shannon both points. admits, the Partnership Agreement provides that a deadlock may be broken “upon the ‘Approval of the General Partners,’ Awards of appellate fees must be conditioned upon a ” which is defined as the approval by those general partners holding a majority of the partnership units. Shannon concedes successful appeal. See A.G. Edwards & Sons, Inc. v. Beyer, that it can “break the deadlock on its own because it holds the 235 S.W.3d 704, 707 n.1 (Tex. 2007). Triad acknowledges majority” of the partnership units. this and does not oppose reformation of the judgment to expressly condition the award of appellate attorneys' fees Shannon nevertheless speculates that “Triad would inevitably upon Shannon's success on appeal; however, in light of our object to any effort by Shannon to resolve the deadlock on its reversal of Triad's disgorgement award, the case must be own” and “would resort to a lawsuit.” But “speculation is not remanded for a redetermination of the appropriate award of evidence.” Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d fees, costs, and expenses. Cf. Young v. Qualls, 223 S.W.3d 150, 164 (Tex. 2004). Moreover, a partnership can carry on its 312, 314 (Tex. 2007) (per curiam) (“Although attorney's fees business in accordance with its governing documents despite in this case were awarded by the trial court rather than the litigation between partners—and the Partnership has done so. jury, the factors governing their assessment are the same and include consideration of the ‘results obtained.’ ” (quoting Shannon's arguments, and the record, fall far short of Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d conclusively establishing that it is not “reasonably practicable 812, 818 (Tex. 1997))). to carry on the Partnership's business in conformity with its governing documents.” We overrule this issue. We sustain Shannon's sixth and seventh issues, and we remand the case for for a new trial solely on the issues of attorneys' fees, reasonable expenses, and costs, and with instructions to the trial court to condition any award of VI. Attorneys' Fees appellate attorneys' fees on a successful appeal. A trial court has discretion to award the plaintiff reasonable attorneys' fees and expenses if the plaintiff is wholly or partly successful in prosecuting a derivative action. *918 Tex. VII. Conclusion Bus. Orgs. Code Ann. § 153.405. Moreover, the Partnership Agreement provides that in litigation between partners We overrule Shannon's arguments challenging the portion of relating to the Partnership, the prevailing partner “shall be the judgment awarding the Partnership actual damages for entitled to recover, in addition to all damages allowed by law Shannon's breach of the duty of care, and we affirm this and other relief, all court costs and reasonable attorney's fees part of the judgment without reaching Shannon's arguments incurred in connection therewith from the Partner or Partners regarding the Partnership's remaining claims. We likewise not prevailing.” Based on these provisions, the trial court affirm the portion of the judgment denying Shannon's request ordered Shannon to pay Triad's and the Partnership's fees, for judicial dissolution of the Partnership. expenses, and court costs. These amounted to almost $1.19 million in attorney's fees through trial, expenses of nearly Because no evidence supports the trial court's disgorgement- $247,000, and over $12,000 in court costs. The trial court also of-profits award to Triad, we reverse this part of the judgment conditionally awarded attorneys' fees of $75,000 in the event and render judgment that Triad take nothing by its claims in its of an appeal to an intermediate court of appeals; $25,000 in individual capacity. In light of this result, we reverse the trial the event that a petition for review is filed with the Texas court's award of attorneys' fees, expenses, and costs, and we Supreme Court, and $55,000 if the Texas Supreme Court remand the case to the trial court for a new trial only on this requests briefing on the merits. ancillary relief, with any award of appellate attorneys' fees to be conditioned on a successful appeal. In its sixth issue, Shannon contends that the trial court erred in failing to condition the award of appellate attorneys' fees upon All Citations the success of the appeal, and in its seventh issue, Shannon argues that reversal of the judgment requires remand for a new 601 S.W.3d 904 © 2025 Thomson Reuters. No claim to original U.S. Government Works. 9 Shannon Medical Center v. Triad Holdings III, L.L.C., 601 S.W.3d 904 (2019) End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 10 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 good-faith defense is not limited to tort actions. 482 S.W.3d 559 Supreme Court of Texas. Reversed and remanded. RAILROAD COMMISSION Procedural Posture(s): On Appeal. OF TEXAS, Petitioner, *562 On Petition for Review from the Court of Appeals for v. the Thirteenth District of Texas, Valdez, Rogelio, Judge GULF ENERGY EXPLORATION Attorneys and Law Firms CORPORATION, Respondent. Joseph David ‘Jody’ Hughes, Assistant Solicitor General, No. 14–0534 Jonathan F. Mitchell, Solicitor General, J.R. Schneider Jr., | Assistant Attorney General, Gaston M. Broyles Jr., Assistant Argued September 22, 2015 Attorney General, Daniel T. Hodge, First Asst. Attorney | General, Gregory W. Abbott, Attorney General, Charles OPINION DELIVERED: January 29, 2016 Kenneth Eldred, Financial & Tax Litigation Division, Office of the Attorney General, Austin, for Petitioner. Synopsis Background: Oil-and-gas lessee brought negligence and David Roberts, Roberts, Roberts, Odefey & Witte, LLP, Port breach of contract action against Railroad Commission, after Lavaca, Kenneth R. Wynne, David Edwards Wynne, Wynne Commission mistakenly plugged abandoned offshore well & Wynne LLP, Houston, for Respondent. that it had previously agreed with lessee to postpone plugging. The trial court entered judgment on jury verdict in favor of Opinion lessee. Commission appealed. The Corpus Christi - Edinburg Court of Appeals, 2014 WL 3107507, affirmed. Commission Justice Lehrmann delivered the opinion of the Court. filed petition for review, which was granted. After agreeing with an oil-and-gas lessee to postpone plugging several abandoned offshore wells, the Railroad Commission of Texas mistakenly plugged one of those Holdings: The Supreme Court, Lehrmann, J., held that: wells. The lessee sued the Commission with legislative permission and obtained a favorable jury verdict on the legislative resolution granting lessee permission to bring lessee's negligence and breach-of-contract claims. The court action did not preclude Commission from raising good-faith of appeals affirmed the judgment on the verdict. The defense; Commission complains that the trial court erred in failing to submit a jury question on a statutory good-faith defense, good-faith defense was applicable to Commission's which the Commission contends forecloses its liability on mistakenly plugging well; both claims, and in failing to submit a question about whether the Commission and lessee entered into a binding contract whether lessee's damages resulted from acts of Commission before the well was plugged. We hold that the trial court that were conducted in good faith was question of fact for erred in refusing to submit a jury question on the good- jury; faith defense. We also hold that a fact question exists on the contract-formation issue. Accordingly, we reverse the court good faith refers to conduct that is honest in fact, free of of appeals' judgment and remand the case for a new trial. improper motive or wilful ignorance of facts at hand; whether Commission and lessee intended to be legally bound I. Background before Commission plugged well was disputed fact issue that should have been presented to jury; and A. Statutory Framework © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 This case arises out of the Commission's duties with respect Because ACE did not have sufficient assets to carry out the to abandoned oil-and-gas wells, which are governed by Texas orders—the company declared bankruptcy in May 2008—the Natural Resources Code chapter 89. One of the statute's Commission took over that responsibility. On April 24, 2008, express purposes is to protect Texas's water and land from the Commission awarded Superior Energy Services a contract pollution by providing “additional means” for the plugging to plug eight of the ACE wells, including the two at issue in of abandoned wells. Tex. Nat. Res. Code § 89.001. The this case identified as 707S–5 and 708S–5.4 statute and accompanying Commission rules place primary responsibility on an inactive well's1 operator2 to plug the 4 Offshore wells are identified by the tract number in the 3 well. Id. §§ 89.011(a), .042(a); 16 Tex. Admin. Code § State's mapping system. Well 707S–5 is in tract 707, and 3.15(b)(1)(B), (d)(1)(B). Nonoperators, defined as persons well 708S–5 is in tract 708. with a working interest in a well who do not qualify as When the plugging order was issued, Gulf Energy operators, have secondary plugging responsibility. Tex. Nat. Exploration Corporation was the lessee of the offshore area Res. Code §§ 89.002(a)(3), .042(b). If the Commission that included the 708S–5, having acquired the lease from the determines after notice and a hearing that a well has not General Land Office in 2007. Gulf Energy was considering been properly plugged, and the operator and nonoperator (if applying to the Commission to take over as operator of any) either cannot be found or do not have sufficient assets, some of the abandoned ACE wells. On May 19, 2008, the Commission may plug the well. Id. § 89.043(a); 16 Tex. representatives of Gulf Energy, ACE, and the Commission, Admin. Code § 3.14(b)(3)(A). including lawyers from the Attorney General's Office, met to discuss Gulf Energy's proposal. As of that date, Superior 1 An inactive well is “an unplugged well that has had had commenced plugging operations and had already plugged no reported production, disposal, injection, or other one of the eight wells. The representatives reached an oral permitted activity for a period of greater than 12 months.” agreement at the meeting that the Commission would delay Tex. Nat. Res. Code § 89.002(a)(12). plugging four of the remaining wells covered by the plugging 2 order, including the 708S–5. Meanwhile, Gulf Energy would An operator is “a person who assumes responsibility for post a bond and would apply to the Commission to supersede the physical operation and control of a well as shown by a form the person files with the commission and the the plugging order and take over as operator of those four commission approves.” Id. § 89.002(a)(2). wells no later than June 12, 2008. The other three wells, including the 707S–5, would be plugged as planned. 3 In lieu of plugging an inactive well, the operator may restore the well to active status or seek approval from the In the days following the meeting, the participants confirmed Commission for an extension of the plugging deadline. the terms of the agreement in a series of e-mails and 16 Tex. Admin. Code § 3.15(b). reduced it to writing in a formal Settlement and Forbearance Chapter 89 also provides a liability defense to those engaged Agreement.5 The Commission representative signed the in plugging operations *563 in good faith. Specifically, written agreement on June 6, 2008, and ACE's president and “[t]he commission and its employees and agents, the operator, Gulf Energy's CEO signed it on June 9. The bankruptcy and the nonoperator are not liable for any damages that may court approved the settlement, and the Commission does not occur as a result of acts done or omitted to be done by them or dispute that Gulf Energy fulfilled its obligations with respect each of them in a good-faith effort to carry out this chapter.” to the bond and required Commission filings. Tex. Nat. Res. Code § 89.045. The application of this defense is the parties' principal focus in this Court. 5 The Agreement stated that it was between ACE and the Commission and did not describe Gulf Energy as a party in the introductory language. However, representatives B. Facts of ACE, the Commission, and Gulf Energy all signed the Agreement. In January 2008, the Commission issued orders requiring In September 2008, the Commission issued several orders American Coastal Enterprises (ACE) to plug a number of superseding the plugging orders on the wells covered by inactive offshore wells the company operated in the Gulf of the agreement and approving Gulf Energy's application to Mexico. Those plugging orders became final in March 2008. transfer their operation. A few months later, Gulf Energy © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 discovered that the 708S–5 was plugged. As it turned out, the negligence claim against Superior. All claims were submitted Commission had plugged the well on May 25, 2008 under to the jury, but Gulf Energy and Superior settled while the jury the mistaken belief that it was plugging the 707S–5. The was deliberating. circumstances surrounding that error were the subject of the resulting lawsuit. 6 Gulf Energy also sued Fugro Chance for negligence and gross negligence, but the trial court dismissed The mistake originated with an admitted clerical error by those claims with prejudice and severed them from the Commission employee *564 Jimmy Zambrano. Before the underlying suit. Commission contracted with Superior to plug the eight wells, 7 Gulf Energy also initially asserted fraud, negligent- Zambrano took aerial photographs of and prepared a plugging misrepresentation, and gross-negligence claims against procedure sheet for each well. But Zambrano inadvertently the Commission and sought exemplary damages. The transposed the coordinates for several of the wells, resulting Commission filed a plea to the jurisdiction, arguing that in 708S–5's photo and coordinates being labeled as those of the legislative resolution waiving its immunity from suit 707S–5, and vice versa. These mislabeled procedure sheets did not extend to Gulf Energy's tort claims. The trial court were provided to Superior with the plugging contract. denied the plea, and on interlocutory appeal the court of appeals affirmed as to the negligence claim but reversed Gulf Energy's theory at trial was that Superior received as to the fraud and negligent misrepresentation claims as information from Fugro Chance, Inc., the subcontractor well as the request for exemplary damages. R.R. Comm'n Superior hired to perform sonar surveys of the ocean floor of Tex. v. Gulf Energy Exploration Corp., No. 13– around the well sites in advance of the plugging operation, 10–015–CV, 2010 WL 3049083, at *6–*7 (Tex.App.– alerting it that the coordinates on the procedure sheets were Corpus Christi Aug. 5, 2010, no pet.) (mem.op.). On incorrect. Gulf Energy presented evidence that Fugro Chance remand, Gulf Energy amended its petition to assert only breach of contract and negligence. provided this information to Superior employees several days before the 708S–5 was plugged, and that they failed to pass During the charge conference, the Commission objected to it along to the boat crew conducting the operation. Gulf the jury charge's failure to include a question on contract Energy also explored the theory that the crew members, formation, arguing that a fact issue existed on whether the including the Commission representative on board, ignored parties had a meeting of the minds when the contract was obvious indicators that they were at the wrong well when they allegedly breached. The trial court overruled the objection and mistakenly plugged the 708S–5. orally ruled that a contract between the Commission and Gulf Energy was formed as a matter of law before the well was plugged.8 In effect, the trial *565 court held that the parties C. Procedural History had a binding contract when they reached the oral agreement on May 19, 2008—before the well was plugged—not when After discovering that the 708S–5 had been plugged, Gulf they signed the written settlement agreement three weeks Energy sought and obtained legislative consent to sue the later on June 9—after the well was plugged. The trial court Commission. Specifically, the Legislature adopted Senate also overruled the Commission's objection to the absence of Concurrent Resolution No. 72, which authorized Gulf Energy a question on the Commission's good faith under Natural to sue the Commission for no more than $2.5 million in Resources Code section 89.045 and refused the Commission's damages, subject to Texas Civil Practice and Remedies Code requested good-faith question, which asked: chapter 107. Pursuant to chapter 107, the resolution did not waive the Commission's immunity from liability, nor did it Did the Railroad Commission of Texas, and its employees waive any defense of law or fact “except the defense of and agents, act in good faith in carrying out its policy as immunity from suit without legislative permission.” Tex. Civ. stated below: Prac. & Rem. Code § 107.002(a)(7)–(8), (b). Natural Resources Code, Section 89.001. Policy—The conservation and development of all the natural resources Gulf Energy then sued the Commission and Superior for of this state are declared to be a public right and duty. It wrongfully plugging well 708S–5.6 Gulf Energy's live is also declared that the protection of water and land of pleading at trial included breach-of-contract and negligence the state against pollution or the escape of oil or gas is in claims against the Commission and Superior,7 and a gross the public interest. In the exercise of the police power of © 2025 Thomson Reuters. No claim to original U.S. Government Works. 3 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 the state, it is necessary and desirable to provide additional as complaints related to the damages award, but the means so that wells that are drilled for the exploration, Commission does not challenge those rulings here. development, or production of oil or gas, or as injection or salt water disposal wells, and that have been abandoned *566 II. Discussion and are leaking salt water, oil, gas, or other deleterious substances into freshwater formations or on the surface of In this Court, the Commission presents two principal issues. the land, may be plugged, replugged, or repaired by or First, it argues that the evidence conclusively establishes its under the authority and direction of the commission. entitlement to the good-faith defense under section 89.045 and, alternatively, that the trial court erred in failing to submit 8 It appears that the trial court initially made this ruling a jury question on the defense. Second, as an alternative during the informal charge conference, which was not argument in the event the Court concludes that section 89.045 recorded. But the trial court confirmed the ruling on the bars Gulf Energy's tort damages but not its contract damages, record during the formal charge conference. the Commission contends that the trial court erred in ruling as The jury found that the Commission “fail[ed] to comply with a matter of law that a binding contract was in effect when the its agreement to postpone plugging and abandoning the 708S– well was plugged and in refusing to submit that issue to the 5” and that the Commission's negligence proximately caused jury. We address these issues in turn. Gulf Energy's damages.9 On the negligence claim, the jury attributed 65% of the responsibility to Superior and 35% to the Commission. The jury awarded identical damages on A. Good–Faith Defense each claim and awarded attorney's fees on the contract claim. Gulf Energy moved for entry of judgment on the contract claim. Taking into account the settlement credit and the 1. Preliminary Issues damage limit in the resolution authorizing suit, the trial court To reiterate, under section 89.045 “[t]he commission and its rendered judgment in Gulf Energy's favor for $2.5 million, employees and agents, the operator, and the nonoperator are the maximum amount recoverable. not liable for any damages that may occur as a result of acts done or omitted to be done by them or each of them in a good- 9 The jury also found Superior liable for breach of contract, faith effort to carry out this chapter.” Tex. Nat. Res. Code § negligence, and gross negligence, but the settlement 89.045. No findings were made about this defense because rendered those findings moot. the trial court refused to submit it to the jury. The court of appeals affirmed. 480 S.W.3d 570 (Tex.App.– Corpus Christi–Edinburg 2014). The court rejected the As an initial matter, Gulf Energy argues that the legislative Commission's assertion of charge error on the contract resolution granting it permission to sue precludes the question, holding that (1) the Commission waived its Commission from invoking section 89.045. We disagree. As complaint that the question “erroneously assumes that the required by statute, the resolution did not waive any defense Railroad Commission entered into a legally-enforceable of law or fact “except the defense of immunity from suit agreement” to postpone plugging the well, (2) even if without legislative permission.” Tex. Civ. Prac. & Rem. Code preserved, any error was harmless, and (3) the Commission § 107.002(a)(7)–(8). The Commission's immunity from suit did not meet its burden to rebut the presumption that the is a jurisdictional component of its sovereign immunity and contract was supported by consideration. Id. at *3, *8. The exists under common law unless expressly waived by statute. court of appeals also rejected the Commission's complaint Brown & Gay Eng'g, Inc. v. Olivares, 461 S.W.3d 117, 121 of charge error on the negligence question, holding that the (Tex.2015). By contrast, section 89.045 applies to both the Commission waived its arguments that the proper standard Commission and private entities that qualify as operators or was good faith rather than negligence and that the evidence nonoperators and provides a statutory affirmative defense to conclusively established the Commission's good faith.10 Id. liability for those entities' “good-faith effort[s] to carry out at *9. We granted the Commission's petition for review. this chapter.”11 Tex. Nat. Res. Code § 89.045; see Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143, 155–56 (Tex.2015) 10 The court overruled several additional complaints about (defining “affirmative defense” as a “defendant's assertion of the negligence question and related instructions, as well facts and arguments that, if true, will defeat the plaintiff's © 2025 Thomson Reuters. No claim to original U.S. Government Works. 4 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 or prosecution's claim, even if all the allegations in the good-faith jury question. To properly apply the good-faith complaint are true.” (quoting Black's Law Dictionary 509 defense, we must first examine the parties' dispute as to what (10th ed. 2009))). This statutory defense is distinct from “good faith” means. Again, section 89.045 provides a defense and independent of the Commission's common-law immunity to liability “for any damages that may occur as a result of from suit. The resolution, by its terms and by statutory acts done or omitted to be done by [the Commission] in a mandate, did not waive the good-faith defense. good-faith effort to carry out this chapter.” Tex. Nat. Res. Code § 89.045. The statute does not define “good faith” 11 The Commission does not dispute that it had the burden or “good-faith effort.”12 The Commission argues that the to plead and prove section 89.045 as an affirmative term is subjective, reflecting “an honest or genuine effort to defense. accomplish the task at hand, as opposed to a sham effort Gulf Energy next argues section 89.045's good-faith defense or an effort to achieve a different result.” The Commission “applies only to acts that involve discretion,” like policy contends that the evidence conclusively establishes the honest decisions, and does not extend to the ministerial act of and inadvertent nature of its misidentification of well 708S– plugging the wrong well. In making this argument, Gulf 5, foreclosing its liability to Gulf Energy.13 Gulf Energy Energy ignores the statute's language and cites case law responds that good faith under section 89.045 should be regarding an inapplicable doctrine. Section 89.045's language measured by an objective standard and that the Commission is broad, foreclosing liability for “any damages” resulting failed to meet that standard.14 from acts or omissions “in a good-faith effort to carry out” chapter 89. The only limitation on the acts or omissions that 12 The term “good faith claim” is defined in chapter 89 qualify is the “good-faith effort” requirement. Construing the as “a factually supported claim based on a recognized statute to apply only to discretionary acts would require us legal theory to a continuing possessory right in a mineral to impermissibly limit the defense's application in a manner estate.” Tex. Nat. Res. Code § 89.002(a)(11). That term that contravenes the statute's plain language and thus flouts is used only once in the chapter—one of the requirements *567 legislative intent. See Kia Motors Corp. v. Ruiz, 432 for an application to extend the operator's deadline to S.W.3d 865, 872 (Tex.2014) (rejecting a party's interpretation plug an inactive well is the inclusion of “a statement that of a statute that “impermissibly adds language and alters the the operator has, and on request will provide evidence statute's plain meaning”). of a good faith claim to a continuing right to operate the well.” Id. § 89.023(a)(2). To support its argument, Gulf Energy cites case law regarding 13 We disagree with the court of appeals' holding that the affirmative defense of official immunity, which shields the Commission inadequately briefed the issue in that government officials from personal liability for discretionary court by failing to cite the relevant portions of the acts in good faith and within the scope of their authority. E.g., record. 480 S.W.3d at 586. The statement of facts in the Ballantyne v. Champion Builders, Inc., 144 S.W.3d 417, 424 Commission's brief cited Zambrano's testimony about (Tex.2004). Official immunity is a common-law doctrine, a his transposition error and noted the undisputed fact that specific element of which is that the act for which immunity the boat crew members thought they were plugging the is sought be in the performance of a discretionary duty. Id. 707S–5. The Commission was not required to repeat It has no bearing on our interpretation of an independent, those cites in the argument section in order to preserve unrelated statute that places no such limitation on the acts and error. City of Arlington v. State Farm Lloyds, 145 S.W.3d omissions to which it applies. Accordingly, we reject Gulf 165, 167 (Tex.2004) (per curiam). Energy's argument that section 89.045 cannot apply to the 14 Gulf Energy argues that the Commission waived its Commission's erroneous plugging of well 708S–5. argument for a purely subjective definition of good faith by adopting Superior's proposed definition of the term, which included an objective component. However, this argument mischaracterizes the record. At the charge 2. Defining and Applying Good–Faith Defense conference, the Commission objected to the absence On section 89.045's application to the facts at hand, the of a good-faith question and adopted Superior's similar objection. The Commission did not purport to adopt Commission argues that the trial evidence conclusively the question and instruction on good faith that Superior established that the Commission acted in good faith or, at the very least, the trial court erred in failing to submit a © 2025 Thomson Reuters. No claim to original U.S. Government Works. 5 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 submitted. Rather, the Commission submitted its own place an objective limitation on the term in contravention of good-faith question that did not define the term. its ordinary meaning, it could have done so. See, e.g., Tex. *568 An undefined statutory term is given its ordinary Civ. Prac. & Rem. Code § 74.351(l) (requiring trial court to meaning unless “a different or more precise definition is grant a motion challenging the adequacy of an expert report apparent from the term's use in the context of the statute.” under the Texas Medical Liability Act if the report “does not TGS–NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, represent an objective good faith effort to comply” with the 439 (Tex.2011). Webster's defines good faith as “a state of statute). mind indicating honesty and lawfulness of purpose”; “belief in one's legal title or right”; “belief that one's conduct is As the Commission argues, the absence of an “objective not unconscionable or that known circumstances do not reasonableness” component makes sense for two reasons. require further investigation”; and “absence of fraud, deceit, First, if the Commission's actions must simply be objectively collusion, or gross negligence.” Webster's Third New Int'l reasonable to qualify as a good-faith effort to comply with Dictionary 978 (2002). None of these definitions incorporates chapter 89, then the good-faith defense merely duplicates the an objective reasonableness standard. Black's Law Dictionary negligence standard and serves no purpose. See Methodist defines good faith as a “state of mind consisting in (1) Healthcare Sys. of San Antonio, Ltd. v. Rankin, 307 S.W.3d honesty in belief or purpose, (2) faithfulness to one's duty 283, 290 (Tex.2010) (holding that statutes of repose that or obligation, (3) observance of reasonable commercial could be tolled or deferred would serve no purpose and that standards of fair dealing in a given trade or business, or allowing tolling would equate statutes of repose with statutes (4) absence of intent to defraud or to seek unconscionable of limitations); City of Lancaster v. Chambers, 883 S.W.2d advantage.” Black's Law Dictionary 808 (10th ed.2009). Only 650, 655 (Tex.1994) (noting in the official-immunity context one of these four definitions references a reasonableness that good faith serves no purpose if it is equivalent to a standard, and it is essentially identical to one of the Uniform negligence standard). Commercial Code's statutory definitions of the term. See Tex. Bus. & Com. Code § 1.201(b)(20) (defining good faith *569 Second, we disagree with Gulf Energy's suggestion to mean “honesty in fact and the observance of reasonable that we import the good-faith element of the official- immunity defense into section 89.045. As noted, that defense commercial standards of fair dealing”).15 immunizes government employees from claims “arising from the performance of their (1) discretionary duties in (2) good 15 Chapter 5 of the UCC, which governs letters of credit, faith as long as they are (3) acting within the scope of their defines good faith for purposes of that chapter in authority.” Chambers, 883 S.W.2d at 653. An employee acts subjective terms as “honesty in fact in the conduct in good faith for official-immunity purposes if “a reasonably or transaction concerned.” Tex. Bus. & Com. Code § prudent official, under the same or similar circumstances, 5.102(a)(7). could have believed that his conduct was justified based on These definitions focus overwhelmingly on subjective state the information he possessed when the conduct occurred.” of mind and are consistent with our interpretation of the Ballantyne, 144 S.W.3d at 426. This modified objective term in an unrelated context. In Associated Indemnity Corp. standard makes sense in the context of reviewing an official's v. CAT Contracting, Inc., we examined a surety agreement performance of discretionary functions, which “involve[ ] that required indemnity for claims settled by the surety in personal deliberation, decision and judgment.” Chambers, good faith. 964 S.W.2d 276, 282–83 (Tex.1998). We held that 883 S.W.2d at 654. But as discussed above and unlike in the “good faith” in the surety agreement official-immunity context, section 89.045 is not limited to discretionary acts. For example, at oral argument, the parties refers to conduct which is honest in fact, free of improper discussed “all the things that can happen when you're out motive or wilful ignorance of the facts at hand. It does not there trying to plug a well” that do not involve the exercise require proof of a “reasonable” investigation by the surety. of discretion, from a slip and fall to a vehicle collision to an Stating the proposition conversely ..., “bad faith” means accident involving a tool. When that type of conduct causes more than merely negligent or unreasonable conduct; it damage, the question of whether a reasonable official could requires proof of an improper motive or wilful ignorance have believed the conduct was justified simply has no place. of the facts. Id. at 285. We believe the term “good faith” in section 89.045 refers to similar conduct. Had the Legislature intended to © 2025 Thomson Reuters. No claim to original U.S. Government Works. 6 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 Accordingly, we hold that a good-faith effort to carry out chapter 89 requires conduct that is honest in fact and is free By itself, we cannot say that this is willful ignorance of the of both improper motive and willful ignorance of the facts at facts at hand. However, two more red flags emerged before hand. Applying that standard, we cannot say that the evidence the well was plugged calling into question whether the boat conclusively establishes the Commission's good faith. While was at the correct well. First, the procedure sheets described nothing indicates that Zambrano's original transcription error the 707S–5 as having only a single string of tubing, but the was anything more than a negligent oversight, Gulf Energy well that the boat approached had a dual tree, raising the presented trial evidence that Superior's plugging crew and the possibility of a second string.17 The crew ran a slickline down Commission representative aboard the boat ignored obvious the second tree and encountered an obstacle about fifteen feet indicators that they were at the wrong well when the 708S– down. The crew subsequently confirmed that no tubing in 5 was plugged. the second tree required plugging, but only after they had plugged the first string. Accordingly, the decision to plug As noted, when the May 19 meeting took place, Superior the first string was made before the crew knew whether the was already in the process of plugging eight of the offshore well conformed to the procedure sheet's description. Second, wells that were the subject of the Commission's plugging when the crew ran the slickline down the first string, the well order. Zambrano was the Commission representative aboard measured almost 300 feet deeper than the data reflected on Superior's boat and had prepared a binder with the plugging the 707S–5 procedure sheet. procedure sheets arranged in the sequence in which the wells were to be plugged. Sometime after the meeting, 17 The 708S–5 is described in the Commission's records as Zambrano was told not to plug four wells, including the a dual-completion well. 708S–5, and removed the procedure sheets for those wells Zambrano and Reed gave conflicting testimony about the from the binder.16 On or about May 23, Gene Reed replaced Commission's reaction to these discrepancies. Zambrano Zambrano as the Commission representative on the boat, and testified that Reed called him to discuss both matters and that Zambrano explained to Reed that four procedure sheets had neither of them affected his conclusion that the boat was at been removed from the binder due to the instruction not the correct well. When asked whether he had ever seen a to plug those wells. This was Reed's first experience on an single-string well with a dual tree, he responded, “Maybe not offshore-plugging operation. often, but it does happen.” He also testified that he had been involved in plugging operations in which the well ran deeper 16 On May 21, Superior forwarded to Zambrano a than expected. He testified that, in light of this experience, he communication from Fugro Chance indicating some instructed Reed to proceed to plug the well. confusion regarding the location of the 707S–5 and 708S–5 because the coordinates Fugro Chance had been By contrast, Reed testified that he did not speak to Zambrano given did not plot to the proper state tract. Zambrano then about either issue. With respect to the well's having a dual “checked the coordinates [in the plugging procedures] compared to the locations they were at” and “compared tree, Reed testified: the photographs of wells as [the Commission] had them Q So the 707S5, you remember, was the well that you were labeled ... to the pictures Fugro Chance had of the wells.” supposed to plug next and the well data that you had for But the documents Zambrano turned to for clarification were the unknown source of the error. that was a single completion well? On May 24, the boat reached the coordinates listed on the A That's correct. procedure sheet for the 707S–5, and, although several wells were visible from that location, the coordinates had led the Q But when you got up and set up next to the 708S5 you crew to open water. Reed called Zambrano, who told him could see when you got close enough to the tree that it was to look at the photographs Zambrano had taken in order a dual completion tree, couldn't you? to confirm which well to approach. *570 Unfortunately, A That's correct. those were the same photographs Zambrano had previously mislabeled along with the procedure sheets. Based on those Q But that didn't stop anybody from embarking on the photographs, Reed and the crew approached the 708S–5 plugging procedure for that well, did it? believing that it was the 707S–5. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 7 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 A No, sir. 3. Waiver and Harm Q And you have no memory of ever talking to [Zambrano] about that disparity from the well data for the well that you Because a fact issue exists on the Commission's good faith, meant to be on because you'd already decided, based on the we may not render judgment in its favor. However, the picture, to plug that well; right? Commission requested and was entitled to a jury question on this defense, and the trial court erred in failing to submit it. A Yes, sir. Tex. R. Civ. P. 278 (“The court shall submit the questions, Reed also testified about the well's unexpected depth: instructions and definitions ... which are raised by the written pleadings and the evidence.”). Q You went deeper by almost 300 feet from what the well data for the 707S5 indicated was the bottom of that well, Gulf Energy argues the Commission waived any error didn't you? relating to the trial court's refusal of its proposed good- faith question by failing to request a definition of good A Right. faith in conjunction with the question. We disagree. The Q Okay. And you didn't call [Zambrano] about that. You procedural rules governing jury charges state in pertinent part had already decided, because of the picture, you had had that “[f]ailure to submit a question may not be deemed a enough conversation, that's the well you were going to ground for reversal of the judgment, unless its submission, in plug; right? substantially correct wording, has been requested in writing and tendered by the party complaining of the judgment.” Tex. A I don't remember calling him, no, sir. R. Civ. P. 278.19 Generally, a question on a statutory cause of action or defense “should track the language of the provision Based on this evidence, we cannot say as a matter of law as closely as possible.” Borneman v. Steak & Ale of Tex., that the Commission acted in good faith. On the one hand, Inc., 22 S.W.3d 411, 413 (Tex.2000) (citations and internal the jury *571 could reasonably infer that the Commission's quotation marks omitted). representatives considered the facts and decided that the boat was at the correct well. On the other hand, the jury could 19 Although not pertinent here, the rule continues that an also reasonably infer that, once Reed determined that the objection is sufficient to preserve error “if the question well visually matched the picture, he willfully ignored the is one relied upon by the opposing party.” Tex. R. Civ. discrepancies between the well data and the well itself in P. 278. addition to the potential consequence of those discrepancies. Accordingly, we hold that a fact issue exists as to whether Gulf Energy does not dispute that the Commission's proposed Gulf Energy's damages resulted from acts of the Commission good-faith question generally tracked the pertinent statutory that were conducted in a good-faith effort to carry out chapter language. The Commission complied with Rule 278 and did not waive the trial court's error in refusing to submit 89.18 Tex. Nat. Res. Code § 89.045. that question by failing to request an accompanying extra- statutory definition. We are particularly loath to find waiver 18 At oral argument, Gulf Energy contended that, in for failing to propose a definition of a statutory term when postponing plugging the 708S–5, the Commission was no case law provided explicit guidance on what the proper attempting to conserve the cleanup fund established definition of that term should be. under Natural Resources Code chapter 81 and that the Commission thus was not carrying out chapter 89 (in Because the trial court's error was not waived, we must good faith or otherwise) when it erroneously plugged consider whether it is reversible. Tex. R. App. P. 61.1 (trial that well. We disagree. When it plugged the 708S– 5, the Commission was doing exactly what chapter court's error is not reversible unless it “probably caused the 89 authorized it to do: plugging inactive wells whose rendition of an improper judgment” or “probably prevented operator was financially insolvent. See Tex. Nat. Res. the petitioner from properly presenting the case to the Code § 89.043. To the extent this conduct resulted appellate courts”). Charge error “is generally considered in damages, section 89.045's good-faith defense was harmful” and thus reversible “if it relates to a contested, triggered. critical issue.” Columbia Rio Grande Healthcare, L.P. v. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 8 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 Hawley, 284 S.W.3d 851, 856 (Tex.2009). *572 The good- well on May 19, 2008.” The Commission further argued that, faith defense qualifies as such an issue, and the trial court assuming the parties entered into a valid contract, “it was not committed reversible error in failing to submit it to the jury. formed until June 9, so nobody breached the June 9 contract Accordingly, we reverse the court of appeals' judgment. by plugging the well on May 26.” We agree with the Commission that its objection to the contract question and its argument in the court of appeals are B. Contract Claim similar in substance. The Commission contended both at the charge conference and on appeal that the May 19 agreement 1. Contract Formation was not binding and that the issue of contract formation should have been submitted to the jury. The court of appeals The Commission's remaining issues concern the jury's finding erred in holding that the Commission waived its charge-error that the Commission breached its contract with Gulf Energy complaint on the contract question. in light of the Commission's assertion that a binding contract did not exist when the breach occurred. The parties' specific Turning to the merits, our analysis is governed by Foreca, dispute is whether Gulf Energy and the Commission entered S.A. v. GRD Development Co., in which we addressed the into a binding contract on May 19, 2008—the date of “increasingly common [situation] in business negotiations” the meeting between representatives of Gulf Energy, the in which an “[a]greement was reached as to certain material Commission, and ACE—even though a formal written terms, yet another formal document was contemplated agreement was not signed by all parties until June 9. The by the parties.” 758 S.W.2d 744, 745 (Tex.1988). We Commission argues they did not, and that it could not have considered whether “the contemplated formal document breached the contract by plugging the well on May 25 because [was] a condition precedent to *573 the formation of a no contract existed at that time. The Commission contends contract or merely a memorial of an already enforceable that a fact issue exists as to when the contract was formed and contract.”20 Id. The answer depends on the intent of the that the trial court erred in failing to submit that issue to the parties, which is usually a question for the trier of fact. Id. jury. at 746 (citing Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554, 557 (Tex.1972)). The documents evidencing the alleged The court of appeals held that the Commission waived this agreement in Foreca stated that they were “subject to complaint, concluding that the Commission “did not object legal documentation contract to be drafted by [one party's at trial to question one [the breach-of-contract question] attorney].” Id. at 745. We held that such language was not on the basis it complains of on appeal.” 480 S.W.3d at conclusive, that the evidence was disputed as to the parties' 576. We disagree. Question one asked the jury: “Did the intent to be bound before “execution of the contemplated legal Railroad Commission fail to comply with its agreement to documentation,” and that the issue was properly submitted postpone plugging and abandoning the 708S–5?” At the to the jury. Id. at 746; see also Martin v. Black, 909 S.W.2d charge conference, the Commission objected “to the failure 192, 197 (Tex.App.–Houston [14th Dist.] 1995, writ denied) to have a formation question with regard to the contract,” (holding that the parties' briefing on a motion to enforce arguing: a mediated settlement agreement “reflect[ed] a dispute on With the way [the question] is submitted now, it will allow a whether the parties intended the term sheets to be the ‘final breach of contract prior to the meeting of the minds, which agreement merely memorialized by a formal document’ ”). is antithetical to the law of breach of contract because it is vague and because also question one, the way it is worded, 20 This is a related but distinct issue from whether an does not tie in when the actual agreement was reached and agreement is not binding because it “leaves material when the breach may have occurred.... matters open for future adjustment and agreement that In the court of appeals, the Commission argued that the trial never occur.” Fort Worth Indep. Sch. Dist. v. City of Fort court “erred by instructing the jury that there was a legally Worth, 22 S.W.3d 831, 846 (Tex.2000). binding contract between the Railroad Commission and Gulf By contrast, in Hardman v. Dault, the court of appeals held Energy on May 19, 2008,” and that the submitted question as a matter of law that a memorandum outlining the essential “erroneously assumes that the Railroad Commission entered terms of a mediated settlement was a binding contract as into a legally-enforceable agreement to postpone plugging the opposed to a tentative agreement to agree, even though © 2025 Thomson Reuters. No claim to original U.S. Government Works. 9 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 one of the provisions stated that “[f]inal documents [were] sending this to EVERYONE and thus must respectfully to be signed by” a particular date. 2 S.W.3d 378, 380–81 reserve the right for the [Commission], who has not (Tex.App.–San Antonio 1999, no pet.). The court explained previously been furnished this writing, with the ability that the provision did not contain any “subject to” language to make suggested changes.” or otherwise indicate that signing the subsequent documents was a condition precedent to the formation of an enforceable • ACE's attorney also sent an e-mail “to confirm the contract. Id. at 381. key terms of the settlement/compromise negotiated” between the Commission and ACE. In this case, the evidence is conflicting as to whether the • Several drafts of the agreement were e-mailed in the Commission and Gulf Energy intended to be bound by the days following the meeting, confirming among other oral agreement reached at the May 19 meeting, or whether the things the particular wells that would not be plugged, formal Forbearance and Settlement Agreement subsequently the amount of the bond Gulf Energy would be required signed by the parties was necessary for the formation of a binding contract. The following evidence is relevant to this to post,21 and the date by which Gulf Energy would issue: post the bond. The e-mails reflect a dispute between the parties on the latter term, with the Commission • Sheila Weigand, a Commission employee who attended ultimately agreeing to allow Gulf Energy to post the the meeting, testified that the Commission agreed in bond by the date of the hearing on Gulf Energy's motion the meeting to postpone plugging four wells (including to supersede the plugging order, rather than the date the the 708S–5) to give Gulf Energy an opportunity to motion was to be filed. get approval from the ACE bankruptcy judge and to obtain an order from the Commission superseding the • In a May 23 e-mail, Morris wrote: “Understandably, plugging order as to those wells. Ms. Weigand was until I have the [Commission's] sign off, I cannot finally then asked whether there would be any justification for approve the agreement but as you know from our the Commission to plug those wells “contrary to the previous communications over the past week, [ACE] and agreement they just made,” and she responded, “No.” the [Commission] have indeed reached an agreement as has been memorialized in principle in numerous emails • Lowell Williams, the supervisor of the enforcement and we are now merely at producing final documentation section of the Commission's office of general counsel, to submit to [the bankruptcy judge].” also attended the meeting and ultimately signed the written agreement on the Commission's behalf. Mr. • The bankruptcy court signed an agreed order approving Williams testified: “I don't think anything had been the settlement agreement “entered into on June 9, 2008.” agreed to in that meeting other than we would look at In a later opinion, the bankruptcy court stated that ACE —the Railroad Commission being ‘we’—would look at and the Commission “entered into a settlement” on May and try to determine whether or not it was possible that 19, 2008. In re Am. Coastal Energy, Inc., 399 B.R. 805, we could delay our operations and whether we wanted to 808 (Bankr.S.D.Tex.2009). delay our operations in proceeding to carry out the terms • The legislative resolution waiving the Commission's of the [plugging] order.” Mr. Williams also testified that immunity from suit stated that the parties “reached “there was some confusion” at the meeting “as to what a tentative settlement and forbearance agreement” on particular wells” Gulf Energy wanted to take over and May 19, “pending approval of the commission, attorney *574 that, when he left the meeting, he “didn't have a general, and bankruptcy court.” clear understanding of what wells were involved.” • Bill Rhea, Gulf Energy's CEO, was asked whether he had • In an e-mail exchange the day after the meeting among authority from the company's board of directors “to go its participants, Hal Morris, an assistant attorney general forward with the project” on May 19. He testified that in the bankruptcy division, wrote that the purpose of the he “had authority to participate in that meeting and see e-mail was “to endeavor to memorialize our agreement what would come of the opportunity.” As to whether reached yesterday.” Included in the email was a “FIRST he had authority “to say yes we're going to take over ROUGH DRAFT” of the agreement. Morris also stated all of those wells in that project,” Mr. Rhea testified in the e-mail that “[a]s time is of the essence, I am that he “had the overall approval, but [he] had to go © 2025 Thomson Reuters. No claim to original U.S. Government Works. 10 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 back to the Board with specifics” and get the Board's defense's application to Gulf Energy's contract claim. The approval “to say yes we are going to this deal.” Later, Mr. Commission argues that, because section 89.045 protects the Rhea testified inconsistently that, before going into the Commission from liability for any damages resulting from the meeting, he “received authority *575 from the Board Commission's good-faith efforts to carry out chapter 89, the to make the agreement that [he] made that day.” defense is not limited to tort liability and limits Gulf Energy's ability to recover on the contract claim as well. Gulf Energy • In a memorandum to Gulf Energy's board of directors counters that good faith is irrelevant in a breach-of-contract prepared two days after the meeting, Mr. Rhea wrote context.22 that he “met Monday with ACE, the [Commission], and the State Attorney General's office in a bid to 22 Gulf Energy argues that the Commission failed to postpone further abandonment and allow for some time for [Gulf Energy] to assess the opportunity, undertake preserve section 89.045 as a defense to the contract claim because, in the trial court and court of appeals, due diligence, and seek approval from the Company's the Commission pled and argued the statute only as a Board to proceed.” defense to the negligence claim. Because charge error necessitates a new trial on both claims, we address the 21 Gulf Energy deposited $400,000 with the Commission issue of whether the defense applies to the contract claim as security when it applied to take over operation of the to provide clarity to the parties and the trial court. four wells. After discovering that the 708S–5 had been The Commission does not dispute that bad faith is not plugged, Gulf Energy sought and received a $100,000 an element of a breach-of-contract claim and that a party refund from the Commission. generally may be liable for breach of contract regardless of In light of this evidence, we agree with the Commission that whether the breach was intentional or inadvertent. However, whether the parties intended to be legally bound on May section 89.045 does not tie the good-faith defense to a 19 is a disputed fact issue that should have been presented specific cause of action or category of claims. Rather, it to the jury. Some portions of the e-mails and testimony applies broadly to “any damages” resulting from “acts done or described above support Gulf Energy's position that the omitted to be done by [the Commission] in a good-faith effort formal Settlement and Forbearance Agreement was “merely to carry out this chapter.” Tex. Nat. Res. Code § 89.045. Had a memorial of an already enforceable contract.” Foreca, 758 the Legislature intended to apply the defense to a particular S.W.2d at 745. Others support the Commission's position claim or class of claims, it could have done so. Instead, the that the parties did not intend to be legally bound absent a Legislature determined that the policies underlying chapter 89 negotiated formal document. Id. The question of the parties' —protection of Texas's water and land through the plugging intent to be bound is usually one of fact, and we cannot say *576 of abandoned wells—warranted a defense to liability that this case presents the unusual situation in which that for entities that are carrying out those policies in good faith. question may be decided as a matter of law. See id. §§ 89.001, .045. Limiting the defense's reach in the manner Gulf Energy suggests would require us to rewrite the Accordingly, we hold that the trial court erred in resolving statute. Accordingly, we hold that the good-faith defense is the contract-formation issue as a matter of law. Whether not limited to tort actions. the Commission's conduct in plugging the well on May 25 constituted a breach of contract depends on whether the parties had entered into a binding contract at that time. See David J. Sacks, PC v. Haden, 266 S.W.3d 447, 450 (Tex.2008) III. Conclusion (“A meeting of the minds is necessary to form a binding We hold that the trial court erred in (1) failing to submit a contract.”). On remand, the Commission is entitled to have jury question on section 89.045's good-faith defense and (2) this disputed issue of material fact resolved by the jury. failing to submit a jury question on contract formation. We reverse the court of appeals' judgment and remand the case for a new trial. 2. Application of Good–Faith Defense to Contract Claim Because we are remanding for a new trial, we address an additional dispute between the parties on the good-faith © 2025 Thomson Reuters. No claim to original U.S. Government Works. 11 Railroad Commission of Texas v. Gulf Energy Exploration..., 482 S.W.3d 559 (2016) 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 All Citations 482 S.W.3d 559, 184 Oil & Gas Rep. 580, 59 Tex. Sup. Ct. J. 309 End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 12 Houle v. Casillas, 594 S.W.3d 524 (2019) Procedural Posture(s): On Appeal; Motion for Summary 594 S.W.3d 524 Judgment; Motion to Amend the Complaint; Motion to Strike Court of Appeals of Texas, El Paso. Affidavit; Motion for New Trial. *532 Appeal from the 210th District Court of El Paso Robert G. HOULE, Appellant, County, Texas (TC #2011-2614), The Honorable Alyssa G. v. Perez, Judge Jose Luis CASILLAS, Casco Investments Attorneys and Law Firms Inc. and JLC Ventures, Inc., Appellees. ATTORNEY FOR APPELLANT, Robert E. Hedicke, P. O. No. 08-17-00189-CV Box 640175, El Paso, TX 79904-0175. | ATTORNEY FOR APPELLEES, David James Ellis, 4115 September 24, 2019 Trowbridge Dr, El Paso, TX 79903-1825. Synopsis Before Rodriguez, J., Palafox, J., and Larsen, J. (Senior Background: Investor sued renovator, and renovator brought Judge), Larsen, J. (Senior Judge), sitting by assignment counterclaims and third-party complaint against investor and related entities related to a real estate investment and renovation project that failed to pan out as planned. The 210th District Court, El Paso County, Alyssa G. Perez, J., OPINION granted investor's motion for summary judgment. Renovator GINA M. PALAFOX, Justice appealed. Appellant Robert G. Houle appeals from several different orders by the trial court which were not subject to review Holdings: The Court of Appeals, Palafox, J., held that: until after the court finally disposed of all claims. After Appellee Casco Investments, Inc. (Casco), filed suit against renovator failed to preserve for review denial of summary Appellant Houle, he returned fire by filing a variety of causes judgment on his claim for wrongful foreclosure; of action against Casco, and asserted those same claims by cross-claim against Casco's sole owner, Jose Luis Casillas evidence existed to support renovator's claims for breach (Casillas), and against JLC Ventures, Inc. (JLC Ventures), a of fiduciary duty, breach of implied covenant of good faith second entity Casillas had also established. Ultimately, the and fair dealing, unjust enrichment, breach of contract, and trial court granted judgment in favor of Casillas, individually, constructive fraud; and as a corporate representative of Casco and JLC Ventures (collectively, “Appellees”). The parties' suit against each affidavit of renovator setting forth his understanding of other stemmed from difficulties that arose from a real estate agreement with investor was admissible; investment and renovation project that failed to pan out as planned. For the reasons set forth below, we affirm in part, renovator was qualified as lay witness to offer estimate of and reverse and remand in part. damages; summary judgment was warranted on renovator's claim for FACTUAL AND PROCEDURAL BACKGROUND fraud; and renovator waived review of trial court's decision to strike third The Parties' Agreement amended pleading. Most of the facts regarding when and how the parties first entered into their business venture in the summer of 2009 Affirmed in part, reversed in part, and remanded. are undisputed. At that time, Houle, an El Paso resident, and Casillas, a resident of Mexico, had known each other © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 Houle v. Casillas, 594 S.W.3d 524 (2019) for approximately 25 years. Houle was then married to On July 27, 2009, the Pershing LLC purchased the property Casillas' sister, Ana Casillas, although they were in the for $100,000, and with Houle's agreement, Casillas took back process of divorcing after 18 years of marriage. The venture a promissory note from the Pershing LLC, secured by a deed began when Houle—who worked for a bank in El Paso of trust on the property in the principal amount of $100,000 and harbored an interest in owning *533 real estate— (the “original deed of trust”). The promissory note, which learned of a large, older home for sale in El Paso that was dated July 27, 2009, named Casillas as lender and the had already been divided into apartment units. The property Pershing LLC as borrower with the entire principal balance was located at 3901 Pershing (the “Pershing Property”). and all accrued unpaid interest being due and payable, in a Eventually, Houle met with Casillas and the two orally agreed lump sum, on or before July 31, 2010. The note indicated that to purchase the property. The parties initially intended to the annual interest rate “shall be the daily Prime Interest Rate renovate the building for resale, but soon they decided they during the term of the Note, with interest calculated based would keep it instead and lease out the apartment units after on the Prime Interest Rate in effect for each day during the they were renovated. Before purchasing, the parties inspected term of the loan.” Prime Interest Rate is further defined as the building during which Houle informed Casillas that he “the annual rate of interest identified as the ‘prime rate’ in the believed renovations could be accomplished in three to four ‘Money Rates’ column published in the Wall Street Journal.” months, at a cost amounting somewhere between $40,000 and After the note became due and payable, the interest rate would $50,000. rise to 18 percent on matured, unpaid amounts. In general, the parties agreed that Casillas would provide financing for purchasing and renovating the property while The Year-Long Renovation Project Houle would apply his expertise in overseeing renovations; thereafter, once Casillas had been reimbursed for his initial The renovations began shortly after the purchase and investment, the parties would split profits equally regardless continued for a year, until July of 2010, with Houle overseeing of whether profits arose from selling the property, or from the project. From time to time, Houle made purchases himself rental income generated from leasing units. Houle further and paid renovation workers using a credit card in the claims that the parties agreed he would be entitled to manage LLC's *534 name, but he sought reimbursement for his the property after renovations were completed. expenses from Casillas. According to Houle, he submitted approximately 16 reimbursements totaling $45,030.25 in In furtherance of their agreement, Houle suggested that they the first year of the renovations. Although Houle admitted form a limited liability corporation (LLC) to purchase the that the project was not completed within the contemplated Pershing Property with the entity to be known as the Pershing timeframe, he claimed that delays occurred because he ran 3901 LLC (“the Pershing LLC”).1 At Houle's suggestion, into unexpected plumbing, draining, and electrical issues Casillas formed a separate corporation to shield himself from which caused renovations to require significantly longer time personal liability, which he named Casco Investments, Inc.2 than he had initially estimated. Thereafter, Houle and Casco were named as the two sole members of the Pershing LLC. The parties orally agreed that Casillas, in his individual capacity, would fund the project The July 6, 2010 Memo by loaning $100,000 to the Pershing LLC to purchase the property, and he would loan additional monies thereafter to On July 6, 2010, Casillas sent a detailed email to Houle fund renovations as planned. outlining the parties' original agreement, i.e., to complete renovations in three to four months at cost expected to total 1 $40,000. Casillas complained that Houle had not fulfilled The documents forming the LLC simply stated that the LLC was formed for any “lawful purpose[.]” his commitment given that a year had already passed, and the renovations remained incomplete despite Casillas having 2 Casco was formed on July 24, 2009, with Casillas as its already spent around $40,000, or the total amount originally president and only director. In turn, Casco, was wholly expected. Casillas accused Houle of making unilateral owned by another entity that Casillas had formed in decisions, such as not hiring a general contractor, trying to do Mexico as part of his farming business, along with his much of the work himself, and taking unauthorized “draws” mother, known as Verduras Deliciosas. in return for his work, despite the fact that there was no © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Houle v. Casillas, 594 S.W.3d 524 (2019) agreement that Houle would be reimbursed for his services. receive after Casillas was reimbursed for his investment. He further complained that none of the apartments had been Casillas claimed that Houle refused to cooperate as he did not leased and that he had not yet received any return on his believe Casillas would get his money back if the property was investment.3 sold at that time. 3 We note, however, that evidence was presented showing that at least one unit was being rented out at that time. The Second Promissory Note and Deed of Trust Moreover, in Casco's original petition, it was alleged that three units had been leased out, two of which Casillas thereafter contacted a law firm in El Paso (the had been completely renovated, and one of which was “Gordon Law Firm”), to determine how best to protect his apparently leased in its original condition. That pleading investment. At that point, the parties agree that Casillas was verified by Casillas as president of Casco. had the right to foreclose on his original promissory note Expressing concern over the security of his investment, of $100,000. However, in order to protect his additional Casillas requested an accounting, an updated projected budget investment for sums he had advanced for renovations, the and repair schedule, and an addendum to the promissory law firm drafted a promissory note that Casillas signed on note to increase the interest rate. Casillas expressed that if November 15, 2010, to “memorialize” the advances that he felt more secure in his investment he would not mind if he had previously made to the Pershing LLC.5 In addition, Houle kept “delaying the project in a reasonable manner.” the law firm drafted a second deed of trust in which it In addition, Casillas further expressed his opinion that the identified the Pershing, LLC, as the “borrower,” and Casillas property belonged to him, repeatedly referring to the property as the “lender,” stating that the amount owed to Casillas was as being “mine,” unless and until he received a reimbursement $45,030.25. Marcelo Rivera, a member of the law firm, was for his investment.4 designated as the trustee on the deed of trust. The deed stated that in order to secure payment of the obligation, the Pershing 4 LLC, as grantor, conveyed the Pershing Property to the trustee At trial, Houle claimed that he hired laborers to perform (Rivera) in trust. The note further stated that if the Pershing work on the property, but he paid for their service by writing a check to himself, then cashed it, then paid cash LLC failed to perform any of its obligations, the lender had to the laborer. Occasionally, he worked on the project the right to declare any unpaid principal balance due and himself. He further admitted that, although the parties payable immediately, and to direct the trustee to foreclose never agreed to such, he did reimburse himself for some the lien through a duly noticed foreclosure sale. The deed of the mileage that he had incurred in delivering parts was dated November 15, 2010, and the maturity date was on to the project site, but claimed that he did not take any that same date—in essence allowing Casillas to immediately draws for the actual work that he did on the project. start foreclosure proceedings on the deed. Casillas signed the The parties disagree over what occurred after the memo was document on December 6, 2010, in the capacity indicated as sent. Houle claimed that he provided some of the requested follows: information, including a partial proposed budget, but that PERSHING 3901, L.L.C. Casillas refused to continue funding the renovations in July of 2010, and instead suggested that they have a meeting in By: Casco Investments, Inc. September of that year. Houle recalled that the parties met, but apparently did not resolve the matter; he claims that he Its: Manager nevertheless did additional work on the project for which he was never compensated. BY: ____________________ Jose Luis Casillas, President According to Casillas, however, Houle did not provide him with the requested information, and at their September 2010 5 The second deed of trust references the promissory note, meeting, Houle advised him that he no longer intended to but the promissory note itself does not appear to be work on the project, and thereafter refused to communicate in the record. Nevertheless, both parties agreed that a with him; he therefore faulted Houle for breaching the promissory note was in fact executed. agreement. Casillas recalled that he suggested they try to sell the *535 building at that time and split any profits they might © 2025 Thomson Reuters. No claim to original U.S. Government Works. 3 Houle v. Casillas, 594 S.W.3d 524 (2019) According to Houle, Casillas signed this second deed of trust, to Casco and to the Pershing LLC, had engaged in wrongful, as well as the promissory note, without his knowledge or fraudulent, and unauthorized conduct, and had impaired consent. Casco with abusive self-dealing. In addition to damages, Casco sought a declaratory judgment, inspection of corporate Shortly thereafter, on April 8, 2011, Casillas signed a books and records, and an accounting, among his many substitute trustee instrument naming another member of claims. Casco further asserted that it intended to wind up the the Gordon Law Firm, Salena Ayoub, as substitute trustee. Pershing LLC. Casillas signed the substitute trustee instrument in the same capacity as he did the deed of trust, i.e., in his capacity as On September 22, 2011, Houle filed a denial of Casco's president and/or manager on behalf of either Pershing LLC or claims along with a combined counterclaim against Casco Casco Investments, Inc., rather than in his individual capacity and third-party complaint against Casillas and JLC Ventures. as the lender. Seeking affirmative relief, Houle asserted a variety of claims to include breach of contract, breach of fiduciary duty, and On April 9, 2011, Ayoub signed a Notice of Substitute trespass. In addition to damages, Houle sought a constructive Trustee's Sale, dated April 8, 2011, stating that pursuant to trust over the subject property, an accounting of income the default on the second deed of trust dated November 15, and expenses, a partition of the property, and an award 2010, the Pershing Property would be sold on May 3, 2011 of quantum meruit for the reasonable value of his unpaid at any time beginning at 10 a.m., up to three hours later, in labor. Thereafter, on November 15, 2013, Houle filed a first the El Paso County Courthouse. Houle acknowledges that he amended counterclaim and third-party petition, in which he received actual notice of the foreclosure sale from Casillas on reasserted his original claims and added claims for “money or about March 14, 2011. Houle claims he sought a temporary had and received,” for “conversion,” and for a “violation of restraining order (TRO) to prevent the foreclosure sale from Texas Business Organizations Code” arising from unilateral going through, but after a hearing on April 8, 2011, his request actions by Casillas, Casco, and/or JLC Ventures, in procuring was denied.6 the second deed of trust used to foreclose on the property. After he obtained a new attorney, Houle then filed a second 6 amended counterclaim and third-party petition on April 19, We note that the appellate record does not contain any 2016, which remained the live pleading of Houle's claims documents pertaining to the TRO proceedings. against Appellees. *536 On May 3, 2011, Ayoub signed a substitute trustee's deed, stating that the foreclosure sale took place on that same In his live pleading, Houle incorporated by reference day at 11:55 a.m. in the designated area of the courthouse, for paragraphs 5 through 76 of his first amended pleading a sale price of $50,000, and that the buyer was “JLC Ventures, relating to his denial of Casco's allegations and his affirmative Inc.,” with an address of 833 River Oaks Drive in El Paso defenses. The second amended pleading alleged that Casillas Texas, the same address that Casillas used as his address as and Houle were partners, and that Casillas—both in his the “lender” in the second deed of trust. However, as Houle individual capacity and as president of Casco—owed him points out, and Casillas admits, JLC Ventures had not yet been a fiduciary duty and duty of good faith and fair dealing. formed; instead, at that time, the Gordon Law Firm was in the Houle alleged that these duties were violated when Casillas process of forming the corporation as the entity to hold title ceased advancing funds to him and when Casillas obtained to the Pershing Property upon foreclosure. In addition, Houle the second deed of trust without notice to him, leading to what claimed that he was at the courthouse at the appointed time, Houle labelled as the “fraudulent” and “completely fictitious” but did not observe a sale take place, and alleges that the sale foreclosure sale of the property. Houle further alleged that was therefore a “fiction.” Casillas controlled both Casco and JLC Ventures, and that he used those entities “to perpetrate fraud and engage in unjust enrichment.” Although Houle's second amended pleading is The Parties' Pleadings somewhat vague about which causes of action are asserted, when construed liberally Houle appears to allege a claim for On June 29, 2011, Casco, the corporate entity wholly owned breach of contract, breach of fiduciary duty, breach of the by Casillas, filed suit against Houle in his individual capacity. implied covenant of good faith and fair dealing, fraud, and Casco alleged Houle had breached his fiduciary duties owed unjust enrichment. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 4 Houle v. Casillas, 594 S.W.3d 524 (2019) causes of action against him from the balance of the case, *537 Houle claimed that he was damaged as a result of the to create a final and appealable order in the event the court allegedly tortious and fraudulent conduct of Casillas “and his granted Casillas' motion. corporate entities,” citing his loss of time, labor and “business opportunity.” He asked for an accounting of “all receipts, 9 In his motion, Casillas also stated that Houle had expenses, and profits concerning the Property since 2010,” alleged a sixth cause of action, i.e., “criminal enterprise.” and asked the trial court to “award the past receipt[s] and However, it does not appear that Houle ever raised profits” from the property to Houle as damages, together that claim in any of his pleadings, and he does not with attorney's fees and punitive damages for the alleged address that claim on appeal. Moreover, in response fraud. And finally, Houle asked the court for a “Declaratory to Casillas' first motion for summary judgment, Houle Judgment declaring the rights of the parties and imposing a expressly stated that he did not intend to raise a claim constructive trust [on the subject property,] if necessary[,] and of “criminal enterprise,” but that he did intend to raise for such other and further relief as to which Houle shall show a civil RICO claim as the result of “the wire fraud (use of the internet and email) and mail fraud (sending himself justly entitled.” notices of acceleration and foreclosure through the mails) and the existence of a criminal enterprise (CASCO INVESTMENTS, INC.) which is used to perpetrate The Parties' Motions for Summary Judgment those frauds.” Houle, however, never actually alleged a RICO claim in any of his pleadings, and also fails to Houle filed a motion for partial summary judgment (albeit discuss any purported RICO claim on appeal. on a request for relief not set forth in his second amended Houle filed his response to Casillas' motion in which he pleading), asking that the trial court “set aside” the foreclosure attached as evidence (1) the memo of July 6, 2010; and sale of the property based on his allegation that the purported (2) his own affidavit. Houle asserted that a partnership had conveyance was “fatally defective.” He argued that the been formed between himself and Casillas which gave rise substitute trustee (Ayoub) had not been properly appointed to fiduciary duties owed to each other. Houle asserted that given that Casillas had made the appointment in his capacity Casillas had breached their agreement, had engaged in a as president/manager of Casco rather than as the original fraudulent course of *538 conduct in foreclosing on the lender of the outstanding debt.7 Following a hearing held on Pershing Property, and had been unduly enriched by taking July 29, 2016, the trial court denied Houle's motion by written sole control of the property without any compensation to order signed on August 5, 2016, without elaboration.8 Houle. After a hearing, the trial court granted Casillas' motion in part, dismissing Houle's claims for unjust enrichment and 7 for breach of fiduciary duty and the implied covenant of good As explained below, Houle filed a third amended faith and fair dealing; but allowed Houle's breach of contract pleading months later in which he requested that the foreclosure sale be set aside, but the trial court ultimately and fraud claims to proceed to trial.10 struck that pleading. 8 10 At the hearing on Casillas' motion, Casillas orally The reporter's record of this hearing is not included in the appellate record. objected to Houle's affidavit, alleging that it was not competent evidence, that it consisted solely of hearsay Thereafter, Casillas, as a third-party defendant, filed his first and unsupported opinions. However, it does not appear motion for summary judgment, as both a no-evidence and that the trial court ruled on that objection. traditional motion, arguing that Houle had no evidence to support any of his causes of action, challenging all elements of Houle's claims, and arguing that Houle owed no fiduciary The Recusal and Mistrial duties to Houle as a matter of law. In his motion, Casillas identified five causes of action that Houle had alleged in his The matter then went to trial on Houle's two remaining claims live pleading as follows: (1) fraud; (2) unjust enrichment; on February 21, 2017. After hearing testimony from several (3) breach of contract; (4) breach of fiduciary duty; and (5) witnesses, including Houle and Casillas, Houle's attorney made a motion to recuse the trial court contending that the breach of the implied covenant of good faith and fair dealing.9 court had exhibited “bias” throughout the proceedings. After Casillas also requested that the court sever Houle's claims and a conference held off the record, the trial court granted Houle's © 2025 Thomson Reuters. No claim to original U.S. Government Works. 5 Houle v. Casillas, 594 S.W.3d 524 (2019) motion to recuse and his motion for a mistrial. On February credible, free from contradiction, and uncontroverted,” *539 22, 2017, the trial court issued a written order of recusal and as required by Tex. R. Civ. P. 166a(c). On May 17, 2017, the matter was assigned to a new judge. Casillas filed more detailed objections to Houle's affidavit, objecting with more particularity to each paragraph in the affidavit, raising various objections to the affidavit, including hearsay objections, objections based on the statute of frauds, Casillas' Second Motion for Summary Judgment objections based on Houle's reference to documents not Shortly thereafter, on March 15, 2017, Casillas filed his attached to the affidavit, objections to statements considered second motion for summary judgment, seeking dismissal of to be uncorroborated and self-serving “opinions” and/or Houle's two remaining claims for breach of contract and impermissible “legal conclusions.” fraud. In the motion, Casillas challenged all elements of Houle's fraud claim, arguing that Houle had no evidence After a hearing, the trial court issued two orders with both to establish that Casillas had made a material and false dated May 30, 2017. First, the court issued evidentiary rulings representation upon which he intended for Houle to rely. In granting and denying a variety of objections raised against addition, Casillas also contended that Houle had no evidence Houle's affidavit. Second, the trial court granted Casillas' to establish that he was “injured or damaged” as a result second motion for summary judgment dismissing Houle's two of Casillas' allegedly fraudulent conduct. With regard to the remaining causes of action filed against Casillas, individually, breach of contract claim, Casillas challenged only the element and in his representative capacity for Casco and JLC Ventures. of damages, claiming that the parties had agreed to sell the property following the renovations, and that the undisputed evidence demonstrated that the property was now worth less Houle's Motion for New Trial than the amount that Casillas was owed. On June 28, 2017, Houle filed a motion for new trial, Houle responded to the motion attaching a more detailed urging the trial court to reconsider its order granting Casillas' affidavit setting forth how he believed he was damaged, objections to his affidavit; the two orders granting Casillas' primarily arguing that the parties did not agree to sell the motions for summary judgment, and the trial court's earlier property, and that instead, they had agreed to keep the order denying Houle's motion for partial summary judgment. property, lease out the apartment units, then split the profits In support of his motion, Houle attached his response to from the rental income; further, Houle averred that the parties Casillas' requests for disclosure, in which he had identified had agreed that he would serve as property manager at that himself as an expert witness who would testify as to the time, thereby characterizing his damages as primarily being “value of the real estate in issue in this case, knowledge the loss of a business opportunity. In addition, he claimed of business procedures, and valuation of damages,” together that he had been damaged by the fact that he was not with his resume. The trial court held a hearing on Houle's compensated for the work that he performed during the year- motion for new trial on July 19, 2017, and at the close of the long renovation project. In his affidavit, he provided a detailed hearing denied the motion. Thereafter, the trial court granted assessment of what he believed the units in the apartment Casillas' motion for non-suit, dismissing its claims against would have rented for, the amount of money he would have Houle, thereby leaving no claims pending in the trial court. received for managing the property, and provided his estimate This appeal followed. of the value of the work he performed on behalf of the alleged partnership. He also attached a spreadsheet describing the work that had been performed on the project. DISCUSSION On appeal, Houle argues that the trial court erred by denying Casillas' Objections to Houle's Second Affidavit his motion for partial summary judgment, and by granting two motions for summary judgment asserted by Casillas, On April 26, 2017, Casillas filed objections to Houle's individually, and in his representative capacity on behalf of second affidavit, and its attachments, arguing in general, that Casco and JLC Ventures (collectively, Appellees). As well, Houle was an “interested witness,” and that his affidavit Houle argues that the trial court erred by granting Casillas' did not provide testimony that was “clear, positive, direct, objections to his second summary judgment affidavit, and by © 2025 Thomson Reuters. No claim to original U.S. Government Works. 6 Houle v. Casillas, 594 S.W.3d 524 (2019) striking a third amended pleading that he attempted to file foreclosure sale itself was “fatally defective.” Rather than after the mistrial was declared. address the merits of these arguments, Appellees contend that the denial of Houle's motion is not reviewable on appeal given For clarity, we will number each argument then address each that Houle had failed to seek a final judgment in his motion in turn. As a preliminary matter, we first discuss the state of for partial summary judgment. We agree with Appellees. the parties briefing of this appeal. Under Texas law, a cause of action for wrongful foreclosure has three elements: “(1) a defect in the foreclosure sale proceedings; (2) a grossly inadequate selling price; and (3) BRIEFING ISSUES a causal connection between the defect and the grossly Initially, Houle's opening brief included inadequate citations inadequate selling price.” See Sauceda v. GMAC Mortgage to the record and few citations, if any, to legal authorities Corp., 268 S.W.3d 135, 139 (Tex. App.—Corpus Christi relied on in support of his positions. Citing to Texas Rule 2008, no pet.); see also University Sav. Ass'n v. Springwoods of Appellate Procedure 38.1, the responsive brief filed by Shopping Ctr., 644 S.W.2d 705, 706 (Tex. 1982) (a plaintiff Appellees Casillas, Casco, and JLC Ventures, collectively, seeking damages for wrongful foreclosure must show that argued almost exclusively that Houle had waived error, if (1) there was an irregularity in the foreclosure sale and (2) the irregularity caused the plaintiff damages); Sotelo v. any, wholly based on inadequate briefing.11 In reply, Houle Interstate Financial Corp., 224 S.W.3d 517, 523 (Tex. App.— requested permission to file an amended *540 brief, which El Paso 2007, no pet.) (“The elements of wrongful foreclosure he attached with his request. Appellees argued in response are (1) an irregularity at the sale; and (2) the irregularity that the amended brief continued to violate Rule 38.1, and, contributed to an inadequate price.”). “The purpose of a in any event, it would be unfair to allow Houle to file his wrongful foreclosure action is to protect mortgagors against amended brief as Appellees had based their own argument those sales where, through mistake, fraud, or unfairness, the on briefing waiver. Over Appellees' objection, we granted sale results in an inequitably low price.” In re Keener, 268 Houle permission to file his Amended Appellant's Brief on B.R. 912, 921 (Bankr. N.D. Tex. 2001). To void a foreclosure July 6, 2018. We note here that Appellees never sought sale, there must be both grossly inadequate consideration, permission to file their own amended response to address and evidence that there was an irregularity in the sale that the merits of Houle's arguments, nor did they ask for a contributed to the inadequate sale price. Am. Sav. & Loan reconsideration of our decision allowing amended briefing by Ass'n of Houston v. Musick, 531 S.W.2d 581, 587 (Tex. 1975). Houle. Accordingly, we proceed with our discussion without An individual who has been dispossessed of property through benefit of a response on the merits from Appellees. a wrongful foreclosure may request that the sale be set aside, or in the alternative, seek damages equal to the difference 11 Rule 38.1(g) provides that: “The brief must state between the value of the property and the indebtedness. See concisely and without argument the facts pertinent to Pinnacle Premier Prop., Inc. v. Breton, 447 S.W.3d 558, 565 the issues or points presented. In a civil case, the court (Tex. App.—Houston [14th Dist.] 2014, no pet.); Wells Fargo will accept as true the facts stated unless another party Bank, N.A. v. Robinson, 391 S.W.3d 590, 593–94 (Tex. App. contradicts them. The statement must be supported by record references.” Tex. R. App. P. 38.1(g). In addition, —Dallas 2012, no pet.); see also University Savings Ass'n, Rule 38.1(i) provides that: “The brief must contain a clear 644 S.W.2d at 706; UMLIC VP LLC v. T & M Sales and Envtl. and concise argument for the contentions made, with Sys., Inc., 176 S.W.3d 595, 610 (Tex. App.—Corpus Christi appropriate citations to authorities and to the record.” 2005, pet. denied) (citing Univ. Sav. Ass'n, 644 S.W.2d at 706) Tex. R. App. P. 38.1(i). (failure to properly foreclose on property gives rise to a cause of action for either the return of the property or damages). ISSUE ONE: THE DENIAL OF HOULE'S MOTION Here, Houle's petition neither raises a claim for wrongful FOR PARTIAL SUMMARY JUDGMENT foreclosure, expressly nor impliedly, nor does he seek the *541 remedy of setting aside the foreclosure sale. Unlike On appeal, Houle argues first that the trial court erred in his motion, his petition does not allege irregularities either denying his motion for partial summary judgment voiding in Ayoub's appointment or in the foreclosure sale itself. the substitute trustee's deed. Houle asserts that Ayoub's Moreover, Houle did not ask that the foreclosure sale be set appointment as substitute trustee was unlawful and the © 2025 Thomson Reuters. No claim to original U.S. Government Works. 7 Houle v. Casillas, 594 S.W.3d 524 (2019) aside. Instead, it appears that Houle first raised a complaint instance, an appellate court may review both motions and about Ayoub's appointment in his motion for partial summary render the judgment the trial court should have rendered. judgment. Even in his motion, however, Houle does not See, e.g., Holmes v. Morales, 924 S.W.2d 920, 922 (Tex. explain how Ayoub's appointment—whether improper or not 1996) (citing Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. —resulted in an inadequate selling price. This failure is 1988) (recognizing that when both parties move for summary significant in several respects. judgment, the non-prevailing party may appeal both the prevailing party's motion as well as its own)); see also By the very nature of a summary judgment proceeding, Southern Crushed Concrete, LLC v. City of Houston, 398 a plaintiff may only move for summary judgment on a S.W.3d 676, 678 (Tex. 2013) (when both parties move for cause of action that has been actually pleaded. See Tex. summary judgment and the trial court grants one motion R. Civ. P. 166a(a) (“A party seeking to recover upon a and denies the other, an appellate court reviews both sides' claim, counterclaim, or cross-claim or to obtain a declaratory summary judgment evidence and renders the judgment the judgment may, at any time after the adverse party has trial court should have rendered); *542 Lopez-Franco v. appeared or answered, move with or without supporting Hernandez, 351 S.W.3d 387, 391 (Tex. App.—El Paso affidavits for a summary judgment in his favor upon all or any 2011, pet denied) (when both sides move for summary part thereof.”); see generally Cullins v. Foster, 171 S.W.3d judgment and the trial court grants one motion and denies 521, 530 (Tex. App.—Houston [14th Dist.] 2005, pet. denied) the other, the court of appeals reviews the summary judgment (recognizing that a plaintiff moving for summary judgment proof presented by both sides and determines all questions must conclusively prove all essential elements of its claim) presented). Moreover, an appellate court must review all (citing MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986); see of the summary judgment grounds on which the trial Geiselman v. Cramer Fin. Group, Inc., 965 S.W.2d 532, 535 court actually ruled, whether granted or denied, which are (Tex. App.—Houston [14th Dist.] 1997, no writ)). Moreover, dispositive of the appeal regardless of whether the competing it is fundamental that the motion for summary judgment must motions were filed at the same time. Baker Hughes, Inc. v. be supported by the pleadings on file, and the final judgment Keco R. & D., Inc., 12 S.W.3d 1, 5–6 (Tex. 1999). of the court must conform to those pleadings. See, e.g., 68 Tex. Jur. 3d Summary Judgment § 60 n.4 (citing Galtex Nevertheless, as Appellees point out, various courts have held Property Investors, Inc. v. City of Galveston, 113 S.W.3d 922 that in order for this exception to apply both parties must have (Tex. App.—Houston 14th Dist. 2003, no pet.); Elite Towing, sought a final judgment in their competing or cross-motions Inc. v. LSI Financial Group, 985 S.W.2d 635 (Tex. App.— for summary judgment, and the filing of a motion for partial Austin 1999, no pet.)). Therefore, a trial court's order denying summary judgment does not bring the case within the scope a motion for summary judgment on a claim that was not of the exception. See Fair v. Arp Club Lake, Inc., 437 S.W.3d raised by the pleadings in effect leaves nothing for this court 619, 628 (Tex. App.—Tyler 2014, no pet.) (where appellant's to review. See generally Morriss v. Enron Oil & Gas Co., cross-motion for partial summary judgment did not seek 948 S.W.2d 858, 871–72 (Tex. App.—San Antonio 1997, no a final judgment, its denial was not reviewable) (citing In writ) (where even the most liberal reading of the plaintiff's re D.W.G., 391 S.W.3d 154, 164 (Tex. App.—San Antonio petition supports the conclusion that he has never asserted 2012, no pet.)); see also Cowboy's Retail & Wholesale a claim for breach of contract, irrespective of the partial Beverage Distribution, LLC v. Davis, No. 12-14-00085-CV, summary judgment granted on that basis, thus, any complaint 2015 WL 6165884, at *3 (Tex. App.—Tyler Oct. 21, 2015, on appeal with regard to contractual breaches is inappropriate, pet. denied) (mem. op.) (the denial of a cross-motion for and presents nothing for review on appeal). summary judgment is reviewable only if that cross-motion sought a disposition of all claims in the trial court); Shaw v. Moreover, as Appellees point out, the denial of a motion for Shaw, 835 S.W.2d 232, 235 (Tex. App.—Waco 1992, writ summary judgment is not typically considered reviewable as denied) (although the partial summary judgment was merged it is not considered a final judgment. See, e.g., Cincinnati into the final judgment and became appealable at that time, the Life Ins. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996) (citing denial of appellant's motion for a partial summary judgment Novak v. Stevens, 596 S.W.2d 848, 849 (Tex. 1980)). The was interlocutory and not appealable). Moreover, the parties only exception to this rule is when the parties have filed must have filed competing motions for summary judgment competing and/or cross-motions seeking summary judgment, on the same issue for the exception to apply. See generally and the trial court grants one and denies the other; in that CU Lloyd's of Texas v. Feldman, 977 S.W.2d 568, 569 (Tex. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 8 Houle v. Casillas, 594 S.W.3d 524 (2019) 1998) (in order to come under the exception to the general enrichment, breach of fiduciary duty, and breach of the rule that the denial of a motion for summary judgment is implied covenant of good faith and fair dealing. In their brief, not appealable, both parties must have sought final judgment Appellees devote two sentences in responding to Houle's relief in cross-motions for summary judgment or moved for arguments. First, Appellees state in a single sentence that summary judgment on the same issue) (citing Bowman v. Houle “failed to produce more than a scintilla of evidence as Lumberton Indep. Sch. Dist., 801 S.W.2d 883, 889-90 (Tex. to unjust enrichment, breach of fiduciary duty and criminal 1990)). enterprise.” And second, Appellees argue that the trial court properly granted summary judgment as there is no tort Here, Casillas did not file a competing motion for summary involving an implied covenant of good faith and fair dealing. judgment with respect to a claim of wrongful foreclosure, as Houle never raised such a claim in his pleadings. Instead, Casillas moved for final summary judgment listing Standard of Review five causes of action he believed Houle had raised in his live pleadings, and his motion did not include wrongful On appeal, we review a trial court's order granting both no- foreclosure among the causes of action that he challenged. evidence and traditional motions for summary judgment de In his response, Houle did not correct Casillas' assertion novo. See Border Demolition & Envtl., Inc. v. Pineda, 535 and appeared to acquiesce to Casillas' characterization of S.W.3d 140, 151 (Tex. App.—El Paso 2017, no pet.) (citing claims asserted. More importantly, the trial court's two Valence Operating Company v. Dorsett, 164 S.W.3d 656, orders addressing Casillas' motions for summary judgment, 661 (Tex. 2005)); see also Travelers Ins. Co. v. Joachim, taken together, only addressed the five claims discussed in 315 S.W.3d 860, 862 (Tex. 2010). When, as here, a party Casillas' motions, and the trial court therefore never rendered has moved for summary judgment on both no-evidence and judgment on any claim for wrongful foreclosure. Therefore, traditional grounds, we first review the no-evidence grounds. we conclude that a claim of wrongful foreclosure was not See Cmty. Health Sys. Prof'l Services Corp. v. Hansen, 525 properly before the Court.12 Issue One is overruled. S.W.3d 671, 680 (Tex. 2017); Lightning Oil Co. v. Anadarko E & P Onshore, LLC, 520 S.W.3d 39, 45 (Tex. 2017). If 12 We recognize that Houle did request that the foreclosure we conclude that the trial court properly granted the no- sale be set aside in his third amended pleading; however, evidence summary judgment motion, we need not address the trial court later struck this pleading. Thus, the trial the traditional motion to the extent that it addresses the same court did not consider Houle's third amended counter- claims. See Lightning Oil Co., 520 S.W.3d at 45 (citing Ford claim at the time it considered his motion for partial Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004)). summary judgment, and on appeal, our review of the court's ruling is limited to only what was before the No-evidence motions for summary judgment are governed by trial court at the time it made its ruling. See generally Rule 166a(i) of the Texas Rules of Civil Procedure, which Felhaber v. Pieper, No. 08-02-00351-CV, 2003 WL requires a movant to allege that adequate time for discovery 22015551, at *3 (Tex. App.—El Paso Aug. 26, 2003, no has passed and that the non-movant still has no evidence to pet.) (mem. op.) (in considering a motion for summary support one or more essential elements of a claim for which judgment, a trial court may consider only the evidence on the non-movant would bear the burden of proof at trial. See file at the time of the hearing or filed thereafter and before Stierwalt v. FFE Transp. Services, Inc., 499 S.W.3d 181, 194 judgment with permission of the court) (citing Tex. R. Civ. P. 166a(c); Leinen v. Buffington's Bayou City Service (Tex. App.—El Paso 2016, no pet.) (citing KCM Fin. LLC v. Co., 824 S.W.2d 682, 685 (Tex. App.—Houston [14th Bradshaw, 457 S.W.3d 70, 79 (Tex. 2015)); Tex. R. Civ. P. Dist.] 1992, no writ)). 166a(i). The motion must specifically state the elements as to which the movant contends there is no evidence. Tex. R. Civ. P. 166a(i); see also Timpte Industries, Inc. v. Gish, 286 *543 ISSUE TWO: THE GRANTING OF S.W.3d 306, 310 (Tex. 2009); Wade Oil & Gas, Inc. v. Telesis APPELLEES' FIRST MOTION FOR SUMMARY Operating Company, Inc., 417 S.W.3d 531, 540 (Tex. App. JUDGMENT —El Paso 2013, no pet.). The burden thereafter shifts to the non-movant to produce at least a scintilla of evidence to raise In Issue Two, Houle contends that the trial court erred in a genuine issue of material fact regarding each challenged granting summary judgment on his three claims for unjust element. Tex. R. Civ. P. 166a(i); see also Lightning Oil Co., © 2025 Thomson Reuters. No claim to original U.S. Government Works. 9 Houle v. Casillas, 594 S.W.3d 524 (2019) 520 S.W.3d at 45; Smith v. O'Donnell, 288 S.W.3d 417, 424 every reasonable inference in favor of the non-movant and (Tex. 2009); Wade Oil & Gas, 417 S.W.3d at 540. More than a resolve any doubts against the motion. Lightning Oil Co., 520 scintilla of evidence exists when reasonable and fair-minded S.W.3d at 45 (citing City of Keller v. Wilson, 168 S.W.3d individuals could differ in their conclusions. *544 King 802, 824 (Tex. 2005)). If the trial court's order does not Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003). specify the grounds on which the summary judgment was Although the nonmoving party is not required to marshal all granted, “we must affirm the summary judgment if any of the of his proof in response to a summary judgment motion, he theories presented to the trial court and preserved for appellate must present countervailing evidence that raises a genuine review are meritorious.” See Provident Life & Accident Ins. fact issue on the challenged elements. Duchene v. Hernandez, Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003); see also FM 535 S.W.3d 251, 258 (Tex. App.—El Paso 2017, no pet.) Properties Operating Co. v. City of Austin, 22 S.W.3d 868, (citing Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 872–73 (Tex. 2000) (citing Star–Telegram, Inc. v. Doe, 915 2002) (citing Tex. R. Civ. P. 166a)). The non-movant fails in S.W.2d 471, 473 (Tex. 1995)). their burden of creating a fact issue when the evidence is so weak as to do no more than create a mere surmise or suspicion of material fact. Wade Oil & Gas, 417 S.W.3d at 540; see also A. Houle's Claims For Breach of Fiduciary Duty and the Lozano v. Lozano, 52 S.W.3d 141, 145 (Tex. 2001); see also Implied Covenant of Good Faith and Fair Dealing Frost Nat'l Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010). We first note that under Texas law not all contracts contain an implied covenant of good faith and fair dealing. Saucedo v. The movant for traditional summary judgment bears the Horner, 329 S.W.3d 825, 831–32 (Tex. App.—El Paso 2010, burden of proving there is no genuine issue of material fact no pet.) (citing City of Midland v. O'Bryant, 18 S.W.3d 209, as to at least one essential element of the challenged cause 215 (Tex. 2000)); see also English v. Fischer, 660 S.W.2d of action. Lightning Oil Co., 520 S.W.3d at 45 (citing Tex. 521, 522 (Tex. 1983) (expressly rejecting the inclusion of R. Civ. P. 166a(c); Nassar v. Liberty Mut. Fire Ins. Co., 508 a general implied covenant of good faith and fair *545 S.W.3d 254, 257 (Tex. 2017)); see also Amedisys, Inc. v. dealing in Texas contracts). Nonetheless, it is recognized that Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 the duty of “good faith and fair dealing” is one of many (Tex. 2014). If the initial burden is met, the burden then shifts duties that fiduciaries owe to each other. Saucedo, 329 S.W.3d to the non-movant to raise an issue of fact, and in order to at 831–32 (citing City of Midland, 18 S.W.3d at 215); see do so, the non-movant must come forward with more than generally Fred Loya Ins. Agency, Inc. v. Cohen, 446 S.W.3d a scintilla of evidence. Amedisys, Inc., 437 S.W.3d at 511; 913, 919 (Tex. App.—El Paso 2014, pet. denied) (citing Vogt see also Chance v. Elliot & Lillian, LLC, 462 S.W.3d 276, v. Warnock, 107 S.W.3d 778, 782 (Tex. App.—El Paso 2003, 283 (Tex. App.—El Paso 2015, no pet.); Ciguero v. Lara, pet. denied) (in general, a fiduciary owes his principal a high 455 S.W.3d 744, 747 (Tex. App.—El Paso 2015, no pet.). duty of good faith, fair dealing, honest performance, and If the initial burden is not satisfied, the non-movant need strict accountability)). Therefore, we combine our discussion not respond or present any evidence. See Amedisys, Inc., of Houle's claim for breach of fiduciary duty and his claim 437 S.W.3d at 511; see also State v. Ninety Thousand Two of breach of the implied covenant of good faith and fair Hundred Thirty–Five Dollars and No Cents in U.S. Currency dealing, as both involve a threshold question of whether ($90,235), 390 S.W.3d 289, 292 (Tex. 2013) (citing M.D. Casillas did in fact owe a fiduciary duty to Houle. See, e.g., Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 First United Pentecostal Church of Beaumont v. Parker, 514 (Tex. 2000) (per curiam)). S.W.3d 214, 220 (Tex. 2017) (the elements of a claim for breach of fiduciary duty are: “(1) the existence of a fiduciary In reviewing the granting of a traditional or a no-evidence duty, (2) breach of the duty, (3) causation, and (4) damages”). motion for summary judgment, we review the evidence in the light most favorable to the non-movant, crediting evidence In his response to Casillas' motion for summary judgment, favorable to that party if reasonable jurors could do so, Houle argued that he and Casillas were in a partnership, and disregarding contrary evidence unless reasonable jurors albeit an informal one, to purchase and renovate the Pershing could not. Pineda, 535 S.W.3d at 151 (citing Mack Trucks, Property, and that under Texas law, partners owe each other Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006)); see also a fiduciary duty. In support of his argument, Houle attached Lightning Oil Co., 520 S.W.3d at 45. We further indulge a copy of the July 6, 2010 memo from Casillas, which © 2025 Thomson Reuters. No claim to original U.S. Government Works. 10 Houle v. Casillas, 594 S.W.3d 524 (2019) chronicled the history of the parties' agreement and their v. Washington Mut. Bank, FA, 142 S.W.3d 393 (Tex. App.— 13 relationship. In addition, Houle submitted his own affidavit El Paso 2004, no pet.); Manufacturers' Hanover Trust Co. v. asserting facts about the parties' agreement and intended Kingston Investors Corp., 819 S.W.2d 607, 610 (Tex. App.— Houston [1st Dist.] 1991, no writ)). partnership.14 In his affidavit, Houle averred that he and Casillas had orally agreed to a partnership for the purpose However, the Texas Supreme Court has recognized that of purchasing and renovating the Pershing Property, and in certain formal relationships, including partnerships, a they further agreed they would form the Pershing LLC to fiduciary duty arises as a matter of law. Ins. Co. of N. Am. effectuate their agreement and partnership. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998); Bohatch v. Butler & Binion, 977 S.W.2d 543, 545 (Tex. 1998). As the 13 Houle alternatively argued that this same fiduciary Court explained, “[t]he relationship between ... partners ... is relationship and duty to each other would still be owed fiduciary in character, and imposes upon all the participants even if the court labeled the parties' agreement as a “joint the obligation of loyalty to the joint concern and of the utmost venture” rather than a partnership. Finding sufficient good faith, fairness, and honesty in their dealings with each evidence of a partnership, we need not address this other with respect to matters pertaining to the enterprise.” alternative argument. Fitz–Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256, 264 (1951) 14 At the hearing on Casillas' motion, Casillas orally (quotation omitted); Bohatch, 977 S.W.2d at 545; see also objected to Houle's affidavit, alleging it was not Home Comfortable Supplies, Inc. v. Cooper, 544 S.W.3d 899, competent evidence because it consisted solely of 907 (Tex. App.—Houston [14th Dist.] 2018, no pet.) (partners hearsay and personal opinions without supporting share “the obligation of loyalty to the joint concern and of evidence. However, it does not appear that the trial court the utmost good faith, fairness, and honesty in their dealings ruled on Casillas' objection, and in any event, much of with each other with respect to matters pertaining to the what Houle averred in his affidavit regarding the parties' enterprise”). agreement was confirmed by the July 6, 2010 memo that Houle attached to his response. It is less clear, however, whether members of an LLC owe At a hearing held on January 20, 2017, Casillas argued there each other a fiduciary duty. Chapter 101 of the Texas Business was no evidence of a partnership or other relationship that Organizations Code, also known as the Limited Liability Act, would give rise to any such duties, arguing that any such which establishes the existence of LLCs, is silent on whether partnership was required to be in writing. In addition, Casillas such a duty is imposed, and at least one of our sister courts has pointed out that the parties had formed an LLC, which it held that the Act does not itself impose a fiduciary duty upon argued had taken the place of any pre-existing partnership, members of an LLC, and that it would be improper to impose and he argued that members of an LLC do not owe each other such a duty as a matter of law. Suntech Processing Sys., L.L.C. any fiduciary duties. v. Sun Communications, Inc., No. 05-99-00213-CV, 2000 WL 1780236, at *6–7 (Tex. App.—Dallas December 5, 2000, pet. denied). By analogizing LLCs to closely-held corporations, Fiduciary Duties Owed in Partnership Relationships Suntech concluded that such a duty may nevertheless arise between members based, at least in part, in situations in which As a preliminary matter, we note that most informal the members are in “unequal” positions of power, such as relationships, such as friendships or even familial when one member exercises superior control over the LLC. relationships, will not necessarily give rise to any special Id., at *6–7. In that instance, the court held that the existence relationship that imposes fiduciary duties on the parties. of a fiduciary relationship is a fact question. Id.; see also Jones v. Thompson, 338 S.W.3d 573, 583–84 (Tex. App.— Kaspar v. Thorne, 755 S.W.2d 151, 155 (Tex. App.—Dallas El Paso 2010, pet. denied) (mere subjective trust resulting 1988) (recognizing that except in limited circumstances, the from an informal and confidential relationship does not create existence of a fiduciary relationship is a fact question); see a fiduciary relationship) (citing Schlumberger Tech. Corp. v. generally In re Lau, 2013 WL 5935616, at 27 (Bankr. E.D. Swanson, 959 S.W.2d 171, 177 (Tex. 1997) (Texas courts Tex. 2013) (noting that Chapter 101 of the Texas Business are reluctant to recognize informal fiduciary relationships)). Organizations Code does not directly address duties owed by Nor does a fiduciary relationship *546 exist in an ordinary LLC managers and members but implies that certain duties lender-borrower relationship. Id. (citing Wil–Roye Inv. Co. II may be owed and allows contracting parties to address duties © 2025 Thomson Reuters. No claim to original U.S. Government Works. 11 Houle v. Casillas, 594 S.W.3d 524 (2019) in their LLC agreement).15 Nevertheless, we note that Houle whether a partnership was actually formed, as the law has long does not appear to be arguing that Casillas owed him a duty recognized the existence of oral partnership agreements.16 as a fellow member of the LLC, and instead, appears to find Malone v. Patel, 397 S.W.3d 658, 674–75 (Tex. App.— the fiduciary relationship in a pre-existing, albeit oral and Houston [1st Dist.] 2012, pet. denied) (citing Ingram v. Deere, informal partnership, which he claims was formed when he 288 S.W.3d 886, 894-97 (Tex. 2009)). Under long-standing and Casillas entered into their agreement to purchase and common law principles, which have since been codified, a renovate the Pershing Property, and that they formed the LLC partnership agreement may be either express or implied from simply as a means of effectuating their *547 pre-existing the parties' conduct. Ingram, 288 S.W.3d at 893-94 (citing partnership. And to this extent, we agree with this argument. Donald v. Phillips, 13 S.W.2d 74, 76 (Tex.Com.App. 1929)). When an express agreement does not exist, the question 15 For example, section 101.401 of the Texas Business of whether the parties intended to enter into a partnership Organizations Code provides that a “company agreement must be “determined by an examination of the totality of the of a limited liability company may expand or restrict any circumstances.” Ingram, 288 S.W.3d at 903-904. duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person has 16 We note that the failure to reduce an agreement to writing to the company or to a member or manager of the (as well as any proffered explanation for that failure) is company[,]” thereby also suggesting the existence of a relevant for the jury's consideration but is not dispositive fiduciary duty between members. Tex. Bus. Orgs. Code of the existence of a partnership agreement. Malone v. Ann. § 101.401. Patel, 397 S.W.3d 658, 674–75 (Tex. App.—Houston The fact that the parties agreed to form an LLC to [1st Dist.] 2012, pet. denied) (citing Ingram v. Deere, 288 effectuate their agreement does not preclude the possibility S.W.3d 886, 894-97 (Tex. 2009)). that the parties already had a pre-existing—and continuing Section 152.051 of the Texas Business Organizations Code, —partnership. In this regard, the present case is similar to which was in effect in July of 2009 when the parties allegedly the facts set forth in Cielo Vista Bank v. McCutcheon, 719 entered into their partnership, provides that: an “association S.W.2d 658 (Tex. App.—El Paso 1986, writ ref'd n.r.e.). In of two or more persons to carry on a business for profit as McCutcheon, two businessmen agreed to open an automobile owners creates a partnership, regardless of whether: (1) the dealership and to share the profits. Id. at 661. The two men persons intend to create a partnership; or (2) the association then formed a corporation for the purpose of buying a piece of is called a ‘partnership,’ ‘joint venture,’ or other name.” Tex. property on which to establish the car lot. Id. at 659. From that Bus. Orgs. Code Ann. § 152.051; see also Ingram, 288 S.W.3d point on, we concluded that the two businessmen were either at 894-95.17 The Code sets forth five factors *548 that a “partners or incorporators,” which in turn created a fiduciary court should review in determining whether a partnership relationship, and therefore, they owed “each other the duty of exists: “(1) receipt or right to receive a share of profits of utmost good faith.” Id. at 660-61. We noted that trust amongst the business; (2) expression of an intent to be partners in the businessmen will not establish a fiduciary relationship, but business; (3) participation or right to participate in control of the “agreement to purchase and the eventual purchase of the the business; (4) agreement to share or sharing: (A) losses of property were within the scope of the duties arising from the business; or (B) liability for claims by third parties against the prior relationship,” and that this agreement was sufficient the business; and (5) agreement to contribute or contributing to create a fiduciary duty between the two men. Id. at 661 money or property to the business.” Tex. Bus. Orgs. Code (citing Winchester Oil Company v. Glass, 683 S.W.2d 35, 39 Ann. § 152.052(a); see also Ingram, 288 S.W.3d at 894–95; (Tex. App.—Texarkana 1984, no writ)). As in McCutcheon, Rojas v. Duarte, 393 S.W.3d 837, 841–46 (Tex. App.—El the relationship at issue here, between Houle and Casillas, Paso 2012, pet. denied) (discussing similar factors under the predates the creation of the LLC and continued long after its TRPA). formation. We therefore must next determine whether in fact the parties' relationship can be considered a partnership. 17 In Ingram, the reviewing court discussed the provisions of the TRPA, the predecessor statutes to the Texas In the trial court, Casillas argued that a partnership was not Business Organizations Code; however, as Ingram noted, formed, primarily because the parties did not sign a written the provisions relating to the definition of a partnership agreement to that effect. The fact that a written agreement and the factors to be used in determining whether a was not signed, however, is not dispositive of the question of partnership exists are virtually identical under the TRPA © 2025 Thomson Reuters. No claim to original U.S. Government Works. 12 Houle v. Casillas, 594 S.W.3d 524 (2019) and the Code. Ingram, 288 S.W.3d at 894 n.4. Therefore, The Texas Business Organizations Code expressly provides we rely on the analysis of Ingram here, when applicable. that a partnership may be found even though the parties Under the Code, a party seeking to establish the existence may not have expressly intended to create a partnership, of a partnership is not required to provide evidence of all and regardless of whatever name they use to describe their five factors; in particular, the Code expressly provides that relationship. Tex. Bus. Orgs. Code Ann. § 152.051; see also an agreement to share losses is not necessary to create Ingram, 288 S.W.3d at 894-95. Therefore, direct proof of the a partnership. Tex. Bus. Orgs. Code Ann. § 152.052(c). parties' intent to form a partnership is not needed. Ingram, The Code further provides that evidence of only one factor 288 S.W.3d at 895-96; see also Tubb v. Aspect Int'l, Inc., No. standing alone is not sufficient to establish a partnership in 12-14-00323-CV, 2017 WL 192919, at *9 (Tex. App.—Tyler a business. Tex. Bus. Orgs. Code Ann. § 152.052. However, Jan. 18, 2017, pet. denied) (mem. op.) (citing Tex. Bus. Orgs. as the Court in Ingram explained, evidence of all five factors Code Ann. §§ 152.051(b)(1) and 152.052(a)(2)). establishes a partnership as a matter of law, and therefore, the five-factor test is considered on a “continuum” between *549 Nevertheless, the question of whether the parties made these two points. Ingram, 288 S.W.3d at 893-94, 896; see a direct expression of their intent is one factor, albeit not a also Rojas, 393 S.W.3d at 846 (noting that the evidence, or necessary one, which can be used to establish the existence of lack thereof, in support of the five factors is considered on a a partnership.19 Ingram, 288 S.W.3d at 900. In determining continuum). whether a direct expression was made, a court may look to the “partners' speech, writings, and conduct” to see if such an Based on this statutory framework, we next consider whether intent has been expressed, although “there must be evidence Houle presented more than a scintilla of evidence to establish that both parties expressed their intent to be partners.” Id. at the factors indicative of a partnership. 899-900. The Court noted that, “[e]vidence of expressions of intent could include, for example, the parties' statements that they are partners, one party holding the other party out as a partner on the business's letterhead or name plate, or in a 1. Profit Sharing signed partnership agreement.” Id. at 900 (citing Reagan v. With his affidavit supported by the memo dated July 6, Lyberger, 156 S.W.3d 925, 928 (Tex. App.—Dallas 2005, no 2010, Houle presented evidence indicating that the parties pet.)); see also Rojas, 393 S.W.3d at 842 (finding evidence had an agreement to share equally in profits after renovations of an expression of intent where three witnesses testified that were completed and after Casillas was reimbursed for his they heard both parties introduce themselves as partners in investment.18 Although the partnership ended before any different business settings). profits were shared, we find that the undisputed summary judgment evidence demonstrated that the parties had agreed 19 Ingram noted, “[r]eferring to a friend, employee, spouse, they would share profits when profits were earned. We teammate, or fishing companion as a ‘partner’ in a therefore conclude that this factor supports a finding that a colloquial sense is not legally sufficient evidence of partnership existed. See, e.g., Rojas, 393 S.W.3d at 841-42 expression of intent to form a business partnership.” Ingram, 288 S.W.3d at 900 (citing Murphy v. McDermott (where the evidence demonstrated that the parties intended Inc., 807 S.W.2d 606, 613 (Tex. App.—Houston [14th to share profits in the future, this supported a finding that a Dist.] 1991, pet. denied) (explaining that although one partnership existed even though the parties had not yet started party referred to the other party as his partner, this alone sharing profits). did not create a partnership)). 18 Here, we see only one mention of the term “partner” in In fact, the original petition filed by Casillas on behalf the communications between the parties. In the July 6, of Casco, indicated that the “rents would be split 2010 memo, Casillas complained that Houle was making evenly between” Houle and Casco, after Casillas was unilateral decisions regarding “how to do things” during reimbursed for his investment. the renovations, and he further asserted that he was “not a ‘Silent Partner’ as [Houle] called [him] once.” Although this 2. Expression of Intent to Be Partners indicates that Houle—at some point in their relationship— expressed to Casillas that he considered him to be a partner, there is no evidence that Casillas similarly expressed any such © 2025 Thomson Reuters. No claim to original U.S. Government Works. 13 Houle v. Casillas, 594 S.W.3d 524 (2019) intent to Houle or to anyone else. We therefore conclude that (finding that all parties participated in exercising control over the record does not contain evidence that both parties made a the business of their partnership, where they jointly made direct expression of their intent to form a partnership. decisions regarding the purchase of property and the method of the purchase, decided when to sell property and the terms of sale, and agreed upon who would operate the property and who would receive salaries and how much salary each would 3. Control receive); see also Price v. Wrather, 443 S.W.2d 348, 351–52 The third factor under the analysis is participation in or right (Tex. Civ. App.—Dallas 1969, writ ref'd n.r.e.) (noting that to participate in control of the business, which this Court has a party could control a business by receiving and managing noted is one of the most important factors in determining all of the business's assets and monies); Brown v. Cole, 155 whether a partnership exists. Rojas, 393 S.W.3d at 843. As Tex. 624, 291 S.W.2d 704, 710 (1956) (noting that evidence this Court has recognized, “[t]he right to control a business of control of a business could be found in the exercise of is the right to make executive decisions.” Id. (citing Ingram, authority over the business's operations). 288 S.W.3d at 901). As we have further recognized, “[s]everal sub-factors are relevant to concluding that a party has the right The fact that the parties may have effectively controlled to make executive decisions, including: (1) the exercise of different aspects of the business operations does not foreclose authority over the business's operation; (2) the right to write a finding that they both had the right to make, and did checks on the business's checking account; (3) control over in fact make, executive decisions about those operations. and access to the business's books; and (4) the receipt of and See, e.g., Rojas, 393 S.W.3d at 843 (finding evidence of management of all of the business's assets and monies.” Id. at “control” one party was considered “management,” but the 843 (citing Ingram, 288 S.W.3d at 901–02). two parties nevertheless made decisions collaboratively, such as the decision to purchase a certain property, and both parties Here, Houle's affidavit and Casillas' July 6, 2010 memo had access to the business's finances). We therefore conclude indicate that the parties handled their arrangement informally. that this factor supports a finding that a partnership existed. We note additionally that there is no direct evidence that the partnership maintained any “books” or a “checking account.” Nonetheless, we find clear evidence that the parties 4. Sharing of Losses and Liability for Third Party Claims both controlled various aspects of the business's operation, and both exercised control over its assets and monies. Under the Texas Business Organizations Code, an agreement The undisputed summary judgment evidence demonstrates to share losses although a factor in the analysis, is not that Houle and Casillas jointly made the decision to necessary to create a partnership. Tex. Bus. Orgs. Code Ann. § purchase the Pershing Property, decided how to finance 152.052(c); see also Ingram, 288 S.W.3d at 901. In the present *550 the property, and agreed to form an LLC for the case, while the parties did agree to share profits equally after purpose of protecting their personal interests. In addition, the Casillas was reimbursed, there is nothing in the record to undisputed evidence demonstrates that the two men jointly suggest that they also agreed to share equally in the losses or decided how they would divide up their responsibilities, liabilities of the partnership. Therefore, although this factor with Casillas providing the financing for the project, is not necessary to the creation of a partnership, we conclude and Houle providing his expertise and management skills that it weighs against finding a partnership. in overseeing the renovations; moreover, the undisputed evidence establishes that for the first year of the project, the parties communicated regularly, with Houle submitting 5. Contribution of Money or Property requests for reimbursements, and Casillas approving those requests. The final factor under the Texas Business Organizations Code, considers whether the parties agreed to contribute On this record, we find there is more than a scintilla money and/or property to the partnership. Tex. Bus. Orgs. of evidence that the parties made executive decisions Code Ann. § 152.052(A)(5); see also Ingram, 288 S.W.3d at together and exercised joint control over the operation of 902 (noting that under the TRPA, “property” was defined as the partnership. See, e.g., Nguyen v. Hoang, 507 S.W.3d “all property, real, personal, or mixed, tangible or intangible, 360, 373 (Tex. App.—Houston [1st Dist.] 2016, no pet.) or an interest in that property”). © 2025 Thomson Reuters. No claim to original U.S. Government Works. 14 Houle v. Casillas, 594 S.W.3d 524 (2019) Here, the undisputed evidence demonstrated that the parties agreed that Casillas would contribute money to fund the Conclusion project by extending a loan to the LLC to purchase and renovate the Pershing Property, while Houle would contribute We conclude that the record contains more than a scintilla of by offering *551 his skills and services. We have no trouble evidence in support of three of the five factors for establishing finding that Casillas' agreement to lend money to fund the a partnership under the Texas Business Organizations Code: project was the equivalent of contributing money to the (1) an agreement to share profits, (2) control over the partnership. See generally Hoss v. Alardin, 338 S.W.3d 635, enterprise, and (3) a contribution of money and property 647 (Tex. App.—Dallas 2011, no pet.) (recognizing that loans to the enterprise by both parties. Given that these factors of money can constitute contributions to the business under are generally recognized as being the most dispositive the TRPA) (citing Reagan, 156 S.W.3d at 928). and important factors of the analysis, we further conclude that there is sufficient evidence to raise a factual question Although not quite as clear, we also conclude that Houle's regarding the existence of a partnership between the parties. agreement to lend his labor and time to oversee or supervise Because partners owe each other fiduciary duties, we turn the renovations of the Pershing Property, was the equivalent next to determine whether the evidence also raises a question of contributing money or property to the partnership. of fact on a breach of their fiduciary duties. In reaching this conclusion, we recognize that if Houle had simply been an employee of the company, and only contributed his services in that capacity, this would not result Breach of Fiduciary Duties and Duty of Good Faith and in a finding that he contributed anything of value to the Fair Dealing partnership itself. See Ingram, 288 S.W.3d at 903 (noting that although employees may contribute to a business endeavor Assuming that a fiduciary relationship did exist, we must by lending their time and reputation, this is not a contribution next determine whether Houle presented more than a scintilla to the venture indicative of a partnership interest). However, of evidence to raise a question of fact on the issue of the undisputed summary judgment evidence established that whether Casillas breached his fiduciary duties including his Houle was not serving in an employee capacity during the *552 duty of good faith and fair dealing. Houle argues renovations, and that he instead contributed his time and that his affidavit, which chronicled Casillas' conduct, starting skills, or in other words his “sweat equity” in furtherance of with Casillas' decision to stop funding the renovations, his the partnership itself. We find this to be sufficient to constitute subsequent decision to sign a promissory note to himself and a contribution to the partnership under the Code. See, e.g., to take out a second deed of trust on the Pershing Property, Tubb, 2017 WL 192919, at *9 (finding that the agreement without notice to Houle, and his steps taken to foreclose on of a party to lend his name and reputation to a business the property, without considering any interest that Houle may venture could be considered a contribution of property to have had in the property, all raised a question of fact on support the creation of a partnership); Estate Land Co. v. whether Casillas breached his fiduciary duties.20 We agree. Wiese, No. 14-13-00524-CV, 2015 WL 1061553, at *7 (Tex. App.—Houston [14th Dist.] March 10, 2015, pet. denied) 20 Houle argues that Casillas' fraudulent intent or scheme (mem. op.) (upholding the trial court's determination that a party's contribution of “sweat equity” towards a project was can be found in his July 6, 2010 memo, in which he sufficient to support a finding of partnership); Malone, 397 repeatedly states that he believed he owned the property, asserting that Casillas was in effect telegraphing his S.W.3d at 678 (party's unpaid work, time and effort in starting intent to obtain the property for himself. We do not up a company, which he considered to be his “sweat equity,” necessarily read Casillas' memo in such a harsh light, could be considered as evidence of his contribution to the as it can be fairly read instead as Casillas expressing company); see generally Black v. Redmond, 709 Fed. Appx. his concerns about the security of his investment in the 766, 770 (5th Cir. 2017) (noting that a party's contribution property and otherwise reminding Houle that he held the of “know-how and sweat equity” to a partnership could be original deed of trust on the property for which he was considered a contribution to the partnership for which he was entitled to foreclose. entitled to reimbursement). We therefore conclude that this In general, partners owe each other a strict duty of good factor supports a finding that a partnership existed. faith and candor, as well as a duty to one another to make © 2025 Thomson Reuters. No claim to original U.S. Government Works. 15 Houle v. Casillas, 594 S.W.3d 524 (2019) full disclosure of all matters affecting the partnership and a result of any breach. Houle's response was weakest on this to account for all partnership profits and property. Zinda v. issue, with Houle's affidavit asserting a general claim that McCann St., Ltd., 178 S.W.3d 883, 890–91 (Tex. App.— he was injured when Casillas took control over the Pershing Texarkana 2005, pet. denied) (citing Brosseau v. Ranzau, Property for himself alone through his allegedly fraudulent 81 S.W.3d 381, 394 (Tex. App.—Beaumont 2002, pet. course of conduct, thereby depriving Houle of his “interest” denied)). The evidence that Casillas engaged in a course of in the property, and without compensating Houle for the work conduct with regard to clearly significant matters affecting the that he performed in improving the property over the course partnership, such as signing the promissory note and deed of of the year-long renovations. In his affidavit, Houle provided trust without notice to Houle, and subsequently foreclosing no information regarding the amount of any damages he had on the subject property, without considering any of Houle's suffered as a result of the breach, and in particular, he did interests, was sufficient to raise a question of fact with respect not provide any evidence of what he believed the value of to whether Casillas breached his fiduciary duties to Houle his “interest” in the property was and/or the value of the including his duty of good faith and fair dealing. services he contributed to the partnership for which he was not reimbursed. In reaching this conclusion, we note that Casillas, at some point, could have taken steps to foreclose on the original Nevertheless, we conclude that Houle's affidavit provides at deed of trust and/or to end the partnership if he believed that least a scintilla of evidence to raise a question of fact on the Houle was not fulfilling his obligations. See, e.g., Bohatch, issue of whether he did in fact suffer an injury as a result 977 S.W.2d at 545 (quoting Gelder Med. Group v. Webber, of Casillas' conduct. In reaching this conclusion, we find it 41 N.Y.2d 680, 394 N.Y.S.2d 867, 870–71, 363 N.E.2d 573, significant that in his motion for summary judgment, Casillas 577 (1977)) (recognizing that even though partners owe each only argued in very general terms that Houle had no evidence other a fiduciary duty, they have “no obligation to remain to establish that Houle had suffered any injury as a result partners,” because, at the “heart of the partnership concept of Casillas' alleged breach or that Casillas benefitted from is the principle that partners may choose with whom they such a breach. More importantly, we note that in his first wish to be associated”); see also Bendalin v. Youngblood motion for summary judgment—unlike his second motion & Associates, 381 S.W.3d 719, 738 (Tex. App.—Texarkana to be discussed next—Casillas did not challenge Houle to 2012, pet. denied); LG Ins. Mgmt. Services, L.P. v. Leick, provide evidence pertaining to the economic value of his 378 S.W.3d 632, 643 (Tex. App.—Dallas 2012, pet. denied). alleged injury and/or the economic value of the benefit that However, in exiting the partnership, Casillas was required Casillas received. to do so in a manner that was consistent with fiduciary duties owed to Houle and consistent with the terms of the As we recently discussed, it is critical for a party moving parties' partnership agreement. See generally Bohatch, 977 for summary judgment to provide the non-movant with S.W.2d at 547 (holding that a partner who was expelled notice of the elements that are being challenged so that the from a partnership was entitled to damages where the non-movant will know how to respond. See, e.g., Pineda, partnership reduced her tentative distribution for that year 535 S.W.3d at 156 (citing Tex. R. Civ. P. 166a(i); Timpte to zero without requisite notice to her in violation of the Industries, Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009); partnership agreement). We believe that a question of fact Wade Oil & Gas, 417 S.W.3d at 540). The requirement that exists on the issue of whether Casillas acted in accordance a moving party identify the element upon which it is moving with his obligations by essentially terminating the partnership for summary judgment “serves the purposes of providing agreement in the manner in which he did. adequate information to the opposing party by which it may oppose the motion and defining the issues to be considered for summary judgment.” Id. at 157 (citing Gish, 286 S.W.3d at 311) (quoting Westchester Fire Ins. Co. v. Alvarez, 576 S.W.2d Evidence of an Injury Resulting from the Breach 771, 772 (Tex. 1978)). As Casillas only challenged Houle to And finally, we must next determine whether Houle provided come forward with evidence of an alleged “injury,” we do sufficient evidence to respond to Casillas' claim in his motion not believe that this would have put Houle on notice that he that Houle had no evidence to support *553 a finding that needed to provide an accounting of the monetary amount of he suffered “any injury” as a result of any alleged breach of the injury that he suffered. And as set forth above, Houle fiduciary duties, and/or that Casillas obtained a “benefit” as © 2025 Thomson Reuters. No claim to original U.S. Government Works. 16 Houle v. Casillas, 594 S.W.3d 524 (2019) simply responded in kind by providing evidence, albeit in come forward with evidence to support his claim for unjust general terms, regarding the nature of his injury. enrichment. We agree with Houle on this issue. Moreover, we note that in the present case, Houle did not simply seek monetary damages for Casillas' alleged breach The Law on Unjust Enrichment of fiduciary duty, and instead also requested equitable relief, such as a “Declaratory Judgment declaring the rights of the A claim for relief under a theory of “unjust enrichment” parties and imposing a constructive trust” on the subject is an equitable concept that arises in situations in which property, based on Casillas' allegedly fraudulent conduct in another person has “wrongfully secured a benefit or has taking the property for himself. In analogous situations, the passively received one which it would be unconscionable to Texas Supreme Court has held that when a plaintiff seeks retain.” Eun Bok Lee v. Ho Chang Lee, 411 S.W.3d 95, 111– equitable relief for the breach of fiduciary duty, the plaintiff 12 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (citing does not necessarily need to present evidence of actual Tex. Integrated Conveyor Sys., Inc. v. Innovative Conveyor damages stemming from the breach. See, e.g., First United Concepts, Inc., 300 S.W.3d 348, 367 (Tex. App.—Dallas Pentecostal Church of Beaumont v. Parker, 514 S.W.3d 214, 2009, pet. denied)); see also Kohannim v. Katoli, 440 S.W.3d 220-21 (Tex. 2017) (referring to laws on agency and trust 798, 813 (Tex. App.—El Paso 2013, pet. denied), disapproved relationships, the Court held that a client of an attorney *554 of on other grounds by Ritchie v. Rupe, 443 S.W.3d 856 who allegedly took money from the client's trust fund account (Tex. 2014) (citing Heldenfels Brothers, Inc. v. City of Corpus was not required to prove actual damages for the attorney's Christi, 832 S.W.2d 39, 43 (Tex. 1992)) (“Unjust enrichment breach of his fiduciary duties, as the client was entitled to demands restitution when a party receiving property or equitable relief, including the forfeiture or disgorgement of benefits would be unjustly enriched if it were permitted to any benefit obtained by the attorney as the result of his retain the property or benefits at the expense of another.”). A breach); see also Kinzbach Tool Co. v. Corbett-Wallace Corp., person is unjustly enriched when he obtains a benefit from 138 Tex. 565, 160 S.W.2d 509, 514 (1942) (holding that another by fraud, duress, or the taking of an undue advantage. the plaintiff, who established that the defendant breached a Kohannim, 440 S.W.3d at 813 (citing Heldenfels Brothers, fiduciary duty and obtained a “secret gain or benefit” from a 832 S.W.2d at 41). third party while serving as the plaintiff's agent, was entitled to equitable relief requiring the defendant to account to his Recovery under a theory of unjust enrichment is based on principal for all he has received). quasi-contract, and therefore, when a valid, express contract covers the subject matter of the parties' dispute, there can Accordingly, for the reasons set forth above, we conclude generally be no recovery under this theory, as allowing such that Houle provided at least a scintilla of evidence to raise recovery would be inconsistent with the parties' express a question of fact regarding whether Casillas owed him a agreement. See Fortune Prod. Co. v. Conoco, Inc., 52 fiduciary duty, whether that duty was breached, and whether S.W.3d 671, 683–84 (Tex. 2000); see also In re Kellogg he was injured by the breach and/or whether he was entitled Brown & Root, Inc., 166 S.W.3d 732, 740 (Tex. 2005) (“A to the equitable relief requested in his pleadings. We therefore party generally cannot recover under quantum meruit when conclude that the trial court erred by granting Casillas' motion there is a valid contract covering the services or materials for summary judgment on Houle's cause of action for breach furnished.”); Amoco Prod. Co. v. Smith, 946 S.W.2d 162, 164 of fiduciary duty and the implied covenant of good faith and (Tex. App.—El Paso 1997, no writ) (the unjust enrichment fair dealing. doctrine applies the principles of restitution to disputes which *555 are not governed by a contract between the contending parties). However, when a person has been unjustly enriched B. Houle's Claim for Unjust Enrichment by the receipt of benefits in a manner not governed by contract, the law implies a contractual obligation upon that Houle next argues that the trial court erred by dismissing person to restore the benefits to the plaintiff. Eun Bok Lee, 411 his claim for unjust enrichment. And, as set forth above, S.W.3d at 111–12 (citing Burlington N. R.R. Co. v. Sw. Elec. in response to Houle's argument, Appellees' brief does no Power Co., 925 S.W.2d 92, 97 (Tex. App.—Texarkana 1996), more than proclaim, in a single sentence, that Houle did not aff'd sub nom., Sw. Elec. Power Co. v. Burlington N. R.R. Co., 966 S.W.2d 467 (Tex. 1998)). A plaintiff may also recover © 2025 Thomson Reuters. No claim to original U.S. Government Works. 17 Houle v. Casillas, 594 S.W.3d 524 (2019) under this equitable doctrine if a contemplated agreement is Paso 2013, pet. denied) (in a party's live pleadings, assertions unenforceable, impossible, not fully performed, thwarted by of fact that are not pleaded in the alternative are regarded as mutual mistake, or void for other legal reasons. Id. (citing formal judicial admissions) (citing Holy Cross Church of God French v. Moore, 169 S.W.3d 1, 11 (Tex. App.—Houston [1st in Christ v. Wolf, 44 S.W.3d 562, 568 (Tex. 2001)). Third, Dist.] 2004, no pet.)). although Casillas denied any wrongdoing, Houle's affidavit provides support for his theory that Casillas engaged in a As a preliminary matter, we note that in his live pleading, fraudulent course of conduct by which he took sole possession Houle pleaded both a claim for breach of contract and a claim of the Pershing Property through the foreclosure sale, without for equitable relief under the quasi-contract theory of unjust *556 compensating Houle for any of the work that he enrichment. Therefore, as explained above, Houle would not performed in improving the property and/or without regard to be permitted to obtain relief on both claims; nevertheless, any interest that Houle may have had in the property. we conclude that he was entitled to plead both claims for relief, in the alternative, allowing him the opportunity to Therefore, we conclude that there was sufficient evidence seek relief on his quasi-contract claim if a jury rejected his in the record to raise a question of fact on the issue of claim for breach of contract. See generally 58 Tex. Jur. 3d whether Casillas, by taking the improved property without Pleading § 129 (recognizing that a pleader may set forth two compensation to Houle, “wrongfully secured a benefit or has or more statements of a claim, alternatively or hypothetically, passively received one which it would be unconscionable either in one count or in separate counts, and that a party to retain.” Eun Bok Lee, 411 S.W.3d at 111. Accordingly, may state as many separate claims as it has, regardless of we conclude that the trial court erred by granting summary consistency, and whether based on legal or equitable grounds judgment in Appellees' favor on Houle's claim for unjust or both). Further, we conclude that Houle provided at least enrichment. Issue Two is sustained. a scintilla of evidence in response to Casillas' motion for summary judgment to raise a question of fact regarding whether Casillas was unjustly enriched by his allegedly ISSUE THREE: THE SECOND MOTION FOR fraudulent conduct. SUMMARY JUDGMENT AND HOULE'S SECOND AFFIDAVIT First, the evidence clearly supports a finding that Houle provided a substantial amount of his time and effort toward After the trial court declared a mistrial pertaining to Houle's renovating the Pershing Property pursuant to the parties' remaining two causes of action for fraud and breach of agreement. As described above, Houle's affidavit, as well as contract, and after a new trial court judge was appointed Casillas' July 6, 2010 memo, demonstrate that Houle spent to hear those claims, Casillas filed a second motion for approximately one year contributing his time and efforts into summary judgment seeking dismissal of remaining claims, renovating the property. Second, Houle attached a spreadsheet but this time primarily focusing on the element of damages. to his affidavit, chronicling the various improvements that Although Houle responded with a second affidavit providing were made to the property during the year-long renovation more details on his factual allegations, including his claim project. As well, although the parties' dispute exactly how for damages, the trial court sustained Casillas' objections to much improvements were made to the property, in his verified the affidavit, and struck substantial portions of the affidavit, original petition in this matter, which was filed on June 29, leaving him with little evidence to support his claim for 2011, Casillas acknowledged that after Houle worked on the damages. Thereafter, the trial court granted Casillas' motion project for a year, at least two of the units at the building for summary judgment, dismissing Houle's two remaining had been completely renovated and were being rented out. claims. In two separate, but related issues, Houle claims that We consider this to be a judicial admission that the property the trial court erred in granting Casillas' objections to his was in fact improved to some extent during the year-long affidavit, and contends that if the trial court had not granted project. See generally In re A.E.A., 406 S.W.3d 404, 410 (Tex. the objections, his affidavit would have provided sufficient App.—Fort Worth 2013, no pet.) (factual allegations in live summary judgment evidence to rebut the motion for summary pleadings constitute a judicial admission of the facts alleged judgment. and relieves the opposing party from the requirement of putting on proof of the admitted fact); see also Trinity Drywall Once again, Casillas does not address the merits of Houle's v. Toka Gen. Contrs., 416 S.W.3d 201, 213 (Tex. App.—El arguments, and instead argues that Houle did not adequately © 2025 Thomson Reuters. No claim to original U.S. Government Works. 18 Houle v. Casillas, 594 S.W.3d 524 (2019) brief this issue, as Houle did not address each of the objections after Casillas was reimbursed for his initial investment of that the trial court granted, and did not provide adequate $100,000 to purchase the property, and advances that he record cites with respect to the objections. We note, however, made for renovations. Casillas also provided a copy of the that in his amended brief, Houle did provide adequate record original promissory note and deed of trust, indicating that he cites, and addressed each category of objections that Casillas had loaned the LLC $100,000 to purchase the property, and made to his affidavit. We find this sufficient to enable our that he was entitled to interest on the loan. Next, Casillas review on appeal. provided excerpts from Houle's testimony acknowledging that Casillas thereafter funded the renovations, and that in all, We start our analysis by reviewing the summary judgment Casillas had advanced over $45,000 for renovations. In total, evidence that Houle presented in support of his claim that Casillas provided a spreadsheet in which he calculated that he suffered damages as a result of Casillas' alleged breach of he was owed a balance totaling $266,824.52 as of February contract. of 2017. And finally, Casillas attached excerpts from Houle's deposition and trial testimony in which he acknowledged that the value of the Pershing Property was approximately $150,000 at various times, beginning in 2011, together with A. The Breach of Contract Claim a letter that Houle wrote to the IRS in June of 2013, in The four elements of a breach of contract claim are: (1) which he argued that the value of the property was worth that the existence of a valid contract; (2) performance by the same amount. Based on this evidence, Casillas argued that plaintiff; (3) breach of the contract by the defendant; and (4) the Pershing Property was worth less than what he was owed, damages to the plaintiff resulting from that breach. Velvet and that Houle therefore, by his own admissions, could not Snout, LLC v. Sharp, 441 S.W.3d 448, 451 (Tex. App.— prove that he suffered any damages by any alleged breach of El Paso 2014, no pet.) (citing McCulley Fine Arts Gallery, contract. Inc. v. “X” Partners, 860 S.W.2d 473, 477 (Tex. App.— El Paso 1993, no writ)). The last element encompasses a In his response, Houle argued, among other things, that the causation requirement. Id. (citing Pagosa Oil and Gas, L.L.C. value of the property was in “flux,” and that at most, his v. Marrs and Smith Partnership, 323 S.W.3d 203, 215 (Tex. prior testimony constituted an estimate of the property's value, App.—El Paso 2010, pet. denied)). Specifically, the evidence and argued that prior to the mistrial, no “firm evidence” must show that the damages are the “natural, probable, and of the value of the property had been presented by either foreseeable consequence” of the defendant's conduct. Id. party.21 More importantly, Houle pointed out that the parties' (citing Prudential Securities, Inc. v. Haugland, 973 S.W.2d agreement was not to sell the property, and that the parties 394, 397 (Tex. App.—El Paso 1998, pet. denied)). had instead decided to renovate the property and thereafter rent out the apartment units, and split any profits from the *557 Here, Casillas' motion for summary judgment only rental income after Casillas had been reimbursed for his challenged the damages element of Houle's claim for breach investment. Houle therefore argued that he had suffered of contract. Casillas alleged that the parties had agreed to an entirely different type of damage, i.e., the loss of a purchase and renovate the property, with Casillas providing “business opportunity,” as outlined with more particularity the funding and Houle supervising the renovation, and to in his attached affidavit. In support of his response, Houle then sell the property, splitting any profits evenly after submitted a second, more detailed affidavit outlining the Casillas was reimbursed for his investment. Casillas then parties' agreement to renovate the Pershing Property and to argued that the undisputed evidence demonstrated that he was thereafter keep it and rent out the apartment units rather than entitled to be reimbursed for well over $150,000, and whereas sell the building, and to split the profits after Casillas was the undisputed evidence demonstrated that the value of the reimbursed for his investment. In addition, Houle attached the property would not exceed $150,000, if it were sold to a third July 6, 2010 memo from Casillas, in which Casillas himself party there would have been no profits to split. stated that the parties had in fact agreed not to sell the building after it was renovated, and to *558 instead lease out the In support of his argument, Casillas attached multiple apartment units and split any profits after expenses, and after excerpts from Houle's deposition and trial testimony, in which Casillas was reimbursed for his investment. Houle acknowledged that the parties had agreed that he would not be entitled to receive any portion of the profits until © 2025 Thomson Reuters. No claim to original U.S. Government Works. 19 Houle v. Casillas, 594 S.W.3d 524 (2019) 21 In his response, Houle also argued that he had evidence Casillas had filed against him, which included various fraud to support the elements of ALL of his causes of action, allegations. including those previously dismissed. However, since the second motion for summary judgment only addresses the breach of contract and fraud claims, we need Damages Arising from a Lost Business Opportunity not consider Houle's arguments about his previously- dismissed claims for relief. As a preliminary matter, we note that a plaintiff is generally In his affidavit, Houle also addressed the issue of damages in entitled to contract damages based on lost profits, including great detail, expressing his opinion that based on 2011 rental lost rental income, from a business venture gone awry, rates, the property, which had nine units, should be generating if those losses were the natural, probable and foreseeable income of approximately $63,000, less taxes and various consequence of the defendant's conduct, and the plaintiff expenses, for a total net annual income that he estimated to be is able to “show the loss by competent evidence and with $52,750.22 Houle then multiplied that amount by 26.5 years reasonable certainty.” See, e.g., Peterson Group, Inc. v. PLTQ to arrive at a figure of $1,397,875 in “business damages” Lotus Group, L.P., 417 S.W.3d 46, 64 (Tex. App.—Houston for this lost business opportunity. Houle also claimed that by [1st Dist.] 2013, pet. denied) (citing ERI Consulting Eng'rs, taking the property away from the partnership, Casillas had Inc. v. Swinnea, 318 S.W.3d 867, 876 (Tex. 2010); Tex. prevented him from managing the property from May of 2011 Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d until the day he signed his affidavit, a period of six years, 276, 279 (Tex. 1994)). If the business for which lost profits and that the “market rate” for property management in the are sought is shown to be an ongoing business, then evidence area was approximately 6 percent of gross receipts. Using that the business was established and making a profit at the the above-described figures, Houle calculated that he was time when the tort was committed is admissible to show deprived of approximately $18,990 in property management lost profits. El Dorado Motors, Inc. v. Koch, 168 S.W.3d fees during that time. 360, 366–67 (Tex. App.—Dallas 2005, no pet.) (citing *559 Turner v. PV Int'l Corp., 765 S.W.2d 455, 465 (Tex. App.— 22 Dallas 1988, no pet.)). However, a claim for lost profits will In particular, he stated that the three upstairs units not be denied simply because a business was new, where there in the building would generate monthly income of $1,600, the two full downstairs units would generate are “firmer reasons to expect a business to yield a profit[.]” monthly income of $900, a garage studio unit would See Fraud-Tech, Inc. v. Choicepoint, Inc., 102 S.W.3d 366, generate monthly income of $350, a ¾ downstairs space 381–82 (Tex. App.—Fort Worth 2003, pet. denied). would generate monthly income of $700, a side storage/ commercial unit would generate monthly income of A party seeking to recover lost profits must prove the $500, and a basement unit would generate monthly loss through competent evidence with reasonable certainty. income of $500, for a monthly total of $5,250. Szczepanik v. First Southern Trust Co., 883 S.W.2d 648, In addition, Houle claimed that he had spent approximately 649 (Tex. 1994); VingCard A.S. v. Merrimac Hospitality 836.75 hours over the course of the year-long renovation Sys., Inc., 59 S.W.3d 847, 863 (Tex. App.—Fort Worth in overseeing the work on the project. Valuing his work at 2001, pet. denied). The requirement of “reasonable certainty” $20 an hour, he claimed that the total value of his “sweat is a flexible one in order to accommodate the myriad equity” amounted to $16,375. In addition, he claimed that circumstances in which claims for lost profits arise. Tex. he had contributed approximately 96.5 hours in accounting Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d or bookkeeping work on behalf of the partnership, which he 276, 279 (Tex. 1994); Szczepanik, 883 S.W.2d at 649; valued at $30 an hour for a total of $2,895. As well, Houle VingCard A.S., 59 S.W.3d at 863 (at a minimum, opinions claimed that he had approximately $2,000 in unreimbursed or estimates of lost profits must be based on objective facts, expenses to date. In support of this allegation, Houle attached figures, or data from which the amount of lost profits can be a copy of the spreadsheet chronicling the work that had ascertained). Reasonable certainty is not demonstrated when been performed on the property over the course of the year- the profits claimed to be lost are largely speculative or a long renovation project. And finally, Houle claimed that he mere hope for success, as from an activity dependent on had suffered lost wages, as he was unable to find work at uncertain or changing market conditions, on chancy business a comparable salary to his former positions because future opportunities, or on promotion of untested products or employers were allegedly aware of the pending lawsuit that entry into unknown or unproven enterprises. Teletron Energy © 2025 Thomson Reuters. No claim to original U.S. Government Works. 20 Houle v. Casillas, 594 S.W.3d 524 (2019) Mgmt., Inc., 877 S.W.2d at 279; VingCard A.S., 59 S.W.3d at 863. In general, “What constitutes reasonably certain 23 As a preliminary matter, Houle argues on appeal evidence of lost profits is a fact intensive determination.” that Rule 166a does not apply to affidavits filed in Szczepanik, 883 S.W.2d at 649. However, recovery for lost opposition to motions for summary judgment, and that profits does not require that the loss be susceptible of exact the Rule only applies to affidavits attached in support calculation. ERI Consulting Engineers, Inc. v. Swinnea, 318 of motions for summary judgment. This, however, is S.W.3d 867, 876 (Tex. 2010). not true. As we have previously recognized, affidavits, whether supporting or opposing the motion for summary We conclude that Houle's affidavit was sufficient to raise a judgment, must meet the requirements of Rule 166a. See, question of fact regarding whether he was deprived of a lost e.g., Felhaber, 2003 WL 22015551, at *1–3. business opportunity, as it provided his opinion and estimates However, conclusory statements are not credible or of what his losses were with reasonable certainty, and he susceptible to being readily controverted, and therefore will explained the objective basis of his estimates. Unlike many not support a summary judgment. See Ryland Group, Inc. v. of the cases involving a lost business opportunity, this was a Hood, 924 S.W.2d 120, 122 (Tex. 1996); see also Concierge relatively simple case involving two factors, i.e., rental rates Nursing Ctrs., Inc., 433 S.W.3d at 50 (conclusory statements for similar apartment units in the area, and the market rates in affidavits are incompetent to support the rendition of for property management. Calculating lost rent or lost wages summary judgment as a matter of law). Similarly, affidavits does not require speculation, and instead, can be calculated consisting only of conclusions are insufficient to raise based on objective facts and data. As such, we conclude that an issue of fact in response to a motion for summary Houle's affidavit provided a legitimate basis for calculating judgment. Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. damages based on his theory of a lost business opportunity. 1984). A conclusory statement is one that does not provide the underlying facts to support the conclusion. Residential However, as set forth above, the trial court sustained several Dynamics, LLC v. Loveless, 186 S.W.3d 192, 198 (Tex. objections that Casillas made to the affidavit, and therefore App.—Fort Worth 2006, no pet.) (citing Haynes v. City much of the information that Casillas provided regarding of Beaumont, 35 S.W.3d 166, 178 (Tex. App.—Texarkana his alleged damages was stricken, which we assume led the 2000, no pet.)); see also Concierge Nursing Ctrs., Inc., trial court to grant Casillas' motion for summary judgment. 433 S.W.3d at 50 (conclusory means expressing a factual Therefore, we must next determine whether the trial court inference without stating the underlying facts in which the erred in this regard. inference is based). Parties may raise objections to the form of an affidavit, and in particular may raise the following objections: (1) lack 1. The Law on Summary Judgment Affidavits of personal knowledge; (2) hearsay; (3) statement of an The Texas Rules of Civil Procedure provide that both interested witness that is not clear, positive, direct, or free “[s]upporting and opposing affidavits shall be made on from contradiction; and (4) competence. Rockwall Commons personal knowledge, shall set forth such facts as would be Associates, Ltd. v. MRC Mortg. Grantor Tr. I, 331 S.W.3d admissible in evidence, and shall show affirmatively that the 500, 507 (Tex. App.—El Paso 2010, no pet.) (citing Broadnax affiant is competent to testify to the matters stated therein.” v. Kroger Texas, L.P., No. 05–04–01306–CV, 2005 WL Tex. R. Civ. P. 166a(f); see also Concierge Nursing Ctrs., 2031783, at *4 (Tex. App.—Dallas August 24, 2005, no pet.)) Inc. v. Antex Roofing, Inc., 433 S.W.3d 37, 50 (Tex. App.— (mem. op.) (citing Stewart v. Sanmina Texas L.P., 156 S.W.3d Houston [1st Dist.] 2013, pet. denied). In addition, to prove 198, 207 (Tex. App.—Dallas 2005, no pet.) (lack of personal facts through the affidavit testimony of an interested witness, knowledge and hearsay), Choctaw Properties, L.L.C. v. Aledo the witness's testimony *560 must be uncontroverted, I.S.D., 127 S.W.3d 235, 241 (Tex. App.—Waco 2003, no pet.) clear, positive, direct, credible, free from contradiction, and (interested witness, hearsay, and lack of personal knowledge), susceptible to being readily controverted. Tex. R. Civ. P. and Rizkallah v. Conner, 952 S.W.2d 580, 585–86 (Tex. 166a(c). Testimonial statements by an interested witness that App.—Houston [1st Dist.] 1997, no pet.) (lack of personal meet these requirements may be the basis for a summary knowledge and competence)). judgment.23 Id.; see also Casso v. Brand, 776 S.W.2d 551, 558 (Tex. 1989). © 2025 Thomson Reuters. No claim to original U.S. Government Works. 21 Houle v. Casillas, 594 S.W.3d 524 (2019) those objections, and therefore did not strike any of those statements. 2. Houle's Statements Regarding the Parties' Agreement In order to raise a claim for this lost business opportunity, i.e., the lost profits, the first thing Houle was required to 4. Houle's Statements that he was Damaged by the Loss provide evidence to support his assertion that the parties of the Pershing Property had agreed to not sell the Pershing Property, and to instead keep the property as an ongoing business, and lease out The trial court, however, did sustain Casillas' next objection the apartment units. Houle addresses this in his affidavit to the paragraphs in which Houle stated that the Pershing by describing his understanding of the parties' agreement. Property was the sole asset of the parties' partnership and Casillas, however, objected to these paragraphs, contending that he was damaged when Casillas took that property for that they contained Houle's “personal opinions,” which himself. In his objection, Casillas argued that “[Houle's] were not based on facts, and were “biased,” and “wholly entire argument fails to overcome the statute of frauds in unsupported by competent facts, evidence or documents.” that no written contract exists making the subject property a The trial court struck all but one paragraph of Houle's partnership asset.” We do not, however, believe that this is a statements regarding his assessment *561 of the parties' valid objection to the affidavit, as it does not go to the form of agreement, apparently agreeing with Casillas' argument. We the affidavit, and is instead a legal argument that goes to the disagree with the trial court's conclusion. merits of Houle's theory of liability.24 While Casillas arguably could have objected to the form of the affidavit by alleging As set forth above, even though Houle was a party to the that Houle was providing an improper legal conclusion, this case, and therefore an “interested witness,” he was entitled was not the basis of Casillas' objection, and we therefore to provide testimony regarding factual matters within his decline to address *562 that issue on appeal. See, generally, personal knowledge, if uncontroverted, clear, positive, direct, Rockwall Commons Associates, Ltd., 331 S.W.3d at 507 credible, free from contradiction, and susceptible to being (defects in the form of affidavits or attachments will not readily controverted. Tex. R. Civ. P. 166a(c). In his affidavit, be grounds for reversal unless specifically pointed out by Houle provided clear and direct statements regarding the objection by an opposing party with opportunity, but refusal, terms of the parties' agreement, which could have been to amend). easily controverted by Casillas. See generally Republic Nat. Leasing Corp. v. Schindler, 717 S.W.2d 606, 607 (Tex. 1986) 24 Casillas' argument appears to be incorrect in any event. (statements in affidavit contending that plaintiff had failed First, as set forth above, there is no requirement that to make certain payments on a lease and stating the amount a partnership agreement be in writing, and instead, the of damages claimed pertained to factual matters that were Texas Business Organizations Code clearly recognizes readily controvertible). Moreover, we note that Casillas did the existence of oral, informal partnerships. Tex. Bus. not in fact controvert these statements, and in fact appeared Orgs. Code Ann. § 152.051. Second, the statute of frauds to agree with those terms in his own July 6, 2010 memo only requires “a contract for the sale of real estate” to Houle. We therefore conclude that the trial court erred to be in writing. See Tex. Bus. & Com. Code Ann. § in sustaining Casillas' objection to Houle's recitation of the 26.01. In the present case, Houle did not argue that the parties' agreement in his affidavit. partnership actually purchased the partnership, and he instead recognizes that the Pershing LLC made the actual purchase and held the legal title to the property. However, as explained above, Houle's theory is that the parties 3. Houle's Statements Regarding Casillas' Alleged Breach created the LLC simply as a means of effectuating the of the Agreement partnership and protecting them from personal liability, but that the Pershing Property itself was an asset that Second, Casillas objected to several of Houle's statements, in belonged to the partnership, and was inextricably tied to which Houle expressed his belief that Casillas had breached the partnership's very purpose and existence. the parties' agreement and acted in a fraudulent manner by unilaterally stopping the funding of the project and thereafter taking steps to “take control of the property.” However, 5. Houle's Detailed Estimates of his Damages the trial court in its order expressly refused to consider © 2025 Thomson Reuters. No claim to original U.S. Government Works. 22 Houle v. Casillas, 594 S.W.3d 524 (2019) And finally, Casillas made multiple objections to Houle's testimony is helpful to clearly understanding their testimony statements in which he provides his estimate of the damages or determining a fact in issue. Id. (citing Tex. R. Evid. 701). he suffered in terms of his lost business opportunity to receive rental income from the property and/or management Here, as Houle points out, this issue was addressed, at least fees; his estimate of the value of the work that he put into in part, by the first judge hearing the case, who ruled prior the renovations and the value of his unreimbursed business to trial that even though Houle had not been designated as expenses; as well as his estimate of his legal fees and other an expert witness, he would be allowed to testify at trial as a expenses. In particular, Casillas contended that Houle was not lay witness on the issue of the value of the Pershing Property an expert witness, and that as a “lay witness” he was “wholly and his damages. After the mistrial, we recognize that the unqualified to render his detailed valuations of the damages newly appointed judge was, of course, entitled to come to a which he alleges[;]” that his valuations were “nothing more different conclusion. Nonetheless, we believe it was improper tha[n] his biased, self-serving, personal opinions,” and his for the *563 trial court to make the determination that Houle claim of damages was not supported by “any documentation was not qualified to testify as a lay witness based solely on or other evidence[.]” The trial court granted all of these Casillas' bald statement that Houle was a “lay witness wholly objections and struck the entire portion of the affidavit in unqualified to render” his opinion on damages. Casillas which Houle testified about the measure and amount of his provided no argument or legal authorities for the proposition estimated damages. that Houle was not qualified to testify as a lay witness; in particular, he did not explain why Houle, who averred that As a preliminary matter, we note the Texas Rules of Evidence he had personal knowledge and experience in business and permit opinion testimony from lay witnesses as well as expert real estate, could not testify on the question of how much an witnesses. Health Care Serv. Corp. v. E. Texas Med. Ctr., 495 apartment that he himself renovated would rent for, or why S.W.3d 333, 338 (Tex. App.—Tyler 2016, no pet.) (citing Tex. he could not express an opinion regarding the market rates R. Evid. 701, 702). The personal experience and knowledge for property managers in the area. Further, Casillas did not of a lay witness may establish that the witness is capable, explain why Houle would not have had personal knowledge without qualification as an expert, of expressing an opinion on of the value of the work that he performed in renovating the a subject outside the realm of common knowledge. Id. (citing project, the value of his accounting and bookkeeping work, Hathcock v. Hankook Tire Am. Corp., 330 S.W.3d 733, 747 or the business expenses he incurred for which he had not (Tex. App.—Texarkana 2010, no pet.)). It is only where the been reimbursed. We therefore conclude that the trial court fact finder may not fully understand the evidence or be able to erred by sustaining Casillas' unsupported objection to Houle's determine the fact in issue without the assistance of someone statements in his affidavit. with specialized knowledge that a witness must be qualified as an expert. Id. We also note that Casillas alleged, and the trial court agreed, that Houle's estimates of his damages were improper Therefore, “Texas courts regularly allow business owners because they were not supported by “documentation or and company officers to testify as lay witnesses, based on other evidence.” Casillas, however, did not cite any legal knowledge derived from their positions and any other relevant authority for the proposition that damages estimates must in experience.” Id. at 338-39 (citing Am. Heritage, Inc. v. Nev. all instances be supported by documentary evidence, nor are Gold & Casino, Inc., 259 S.W.3d 816, 827 (Tex. App.— we aware of any. To the contrary, the Texas Supreme Court Houston [1st Dist.] 2008, no pet.) (former chief financial has held that when a witness testifies as to his estimate of officer testified about lost profits); Lamajak, Inc. v. Frazin, the damages suffered by the loss of a business opportunity, 230 S.W.3d 786, 797 (Tex. App.—Dallas 2007, no pet.) it is not necessary to produce in court the documents (business owner testified about value of services he provided supporting the opinions or estimates, although the lack of such to retail chain); SAS & Assoc., Inc. v. Home Mktg. Servicing, documentation may affect the weight of the testimony. See, Inc., 168 S.W.3d 296, 302 (Tex. App.—Dallas 2005, pet. e.g., Swinnea, 318 S.W.3d at 876 (citing Holt Atherton Indus., denied) (sole shareholder, director, and officer testified about Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992)). reasonable cost of repairing company's damaged personal property)). However, such opinion testimony is limited to And finally, we note that Casillas objected to the spreadsheet those opinions or inferences that are rationally based on that Houle attached to his affidavit in which he set forth the lay witness's perceptions and in situations in which the the amount of work that was done on the Pershing Property © 2025 Thomson Reuters. No claim to original U.S. Government Works. 23 Houle v. Casillas, 594 S.W.3d 524 (2019) during the year that he supervised the renovations, on the arguing that his affidavit provided sufficient evidence of ground that Rule 166a(f) requires “sworn or certified copies the allegedly fraudulent course of conduct in which Casillas of all papers or parts of papers referred to in an affidavit.” engaged. On appeal, Appellees do not address the merits Although it is not entirely clear, it appears that the trial court of Houle's argument, and instead argue that Houle did not sustained that objection as well. We find this decision to be provide adequate cites to the record and/or provide adequate in error. citations to legal authorities in his original brief to support his argument, and that Houle therefore waived this issue. As the Supreme Court has recognized, “copies of documents which are attached to a properly prepared affidavit are Texas law recognizes two types of common law fraud sworn copies within the meaning” of the Rule's requirements. claims: actual fraud and constructive fraud. In re Estate of Schindler, 717 S.W.2d at 607 (citing Zarges v. Bevan, 652 Kuykendall, 206 S.W.3d 766, 770–71 (Tex. App.—Texarkana S.W.2d 368, 369 (Tex. 1983); Life Insurance Company of 2006, no pet.) (citing Chien v. Chen, 759 S.W.2d 484, 494– Virginia v. Gar-Dal, Inc., 570 S.W.2d 378, 380 (Tex. 1978)). 95 (Tex. App.—Austin 1988, no writ)). The elements of a Thus, where an affidavit states that the attached documents claim for actual fraud are: “(1) that a material representation are true and correct copies of the originals, and the affidavit was made; (2) the representation was false; (3) when the itself is properly sworn, the trial court may consider the representation was made, the speaker knew it was false or attached documents as proper summary judgment evidence. made it recklessly without any knowledge of the truth and as Id.; see also Landry's Seafood Restaurants, Inc. v. Waterfront a positive assertion; (4) the speaker made the representation Cafe, Inc., 49 S.W.3d 544, 551 (Tex. App.—Austin 2001, with the intent that the other party should act upon it; (5) pet. dism'd) (recognizing that copies of documents attached the party acted in reliance on the representation; and (6) the to a properly prepared affidavit are sworn copies within the party thereby suffered injury.” See Italian Cowboy Partners, meaning of Rule 166a(f)). In his affidavit, Houle expressly Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 stated that “[t]he facts stated herein and in Exhibits A [the (Tex. 2011) (citing Aquaplex, Inc. v. Rancho La Valencia, spreadsheet] and C are true and correct of my own personal Inc., 297 S.W.3d 768, 774 (Tex. 2009) (per curiam)); see knowledge.” As such, we conclude that the trial court erred also Sprick v. Sprick, 25 S.W.3d 7, 15 (Tex. App.—El Paso by sustaining Casillas' objection to this exhibit. 1999, pet. denied) (citing Stone v. Lawyers Title Insurance Corp., 554 S.W.2d 183, 185 (Tex. 1977)). A claim for actual In conclusion, we find that Houle provided clear and direct fraud therefore involves dishonesty of purpose or intent to testimony explaining how he arrived at his calculation of deceive. See TransPecos Banks v. Strobach, 487 S.W.3d 722, damages, explaining in detail the metrics he used in arriving 730 (Tex. App.—El Paso 2016, no pet.) (citing Castleberry v. at his estimate. As well, *564 his statements pertaining to Branscum, 721 S.W.2d 270, 273 (Tex. 1986)); see also Sprick, the market rate for rents and property management, as well 25 S.W.3d at 15. as his estimates of the value of the work he performed, were all easily controvertible, and therefore constituted admissible On the other hand, in a claim for constructive fraud, the summary judgment evidence under Tex. R. Civ. P. 166a(c). actor's intent is irrelevant. Kuykendall, 206 S.W.3d at 770– We therefore conclude that the trial court erred in striking 71 (citing Sprick, 25 S.W.3d at 15); see also Chien, 759 these statements from Houle's affidavit, and as expressed S.W.2d at 495 (citing Archer v. Griffith, 390 S.W.2d 735 above, we believe that the affidavit, as submitted by Houle (Tex. 1965)). Instead, constructive fraud is the breach of some in its original form, provided at least a scintilla of evidence legal or equitable duty which, irrespective of moral guilt, the to support the damages element of his claim for breach of law declares fraudulent because of its tendency to deceive contract. Accordingly, we conclude that the trial court erred others, to violate confidence, or to injure public interests. in granting summary judgment on Houle's claim for breach Strobach, 487 S.W.3d at 730 (citing Castleberry, 721 S.W.2d of contract. at 273). As this Court has recognized, constructive fraud occurs when a party violates a fiduciary duty or breaches a confidential relationship. Holland v. Thompson, 338 S.W.3d 586, 598 (Tex. App.—El Paso 2010, pet. denied) (citing Texas B. Actual and Constructive Fraud Integrated Conveyor Systems, Inc. v. Innovative Conveyor Houle also argues that the trial court erred by granting Concepts, Inc., 300 S.W.3d 348, 366 (Tex. App.—Dallas Casillas' motion for summary judgment on his claim for fraud, © 2025 Thomson Reuters. No claim to original U.S. Government Works. 24 Houle v. Casillas, 594 S.W.3d 524 (2019) dealing), which the trial court had dismissed by summary 2009, pet. denied)); see also In re Estate of Kuykendall, 206 judgment, as well as a request that the trial court set aside S.W.3d at 770–71. the foreclosure sale. On March 9, 2017, Casillas moved to strike the third amended pleading on the grounds that Houle As set forth above, in his motion for summary judgment, was seeking to raise previously dismissed causes of action. Casillas challenged *565 Houle to come forward with Ultimately, on May 24, 2017, the trial court granted Casillas' evidence to support all elements of his fraud claim, primarily motion to strike the pleading and dismissed it with prejudice. focusing on the question of whether Houle had any evidence to establish that Casillas had made a material and false In his fourth argument, Houle contends that the trial court's representation to Houle upon which he intended for him to order striking his third amended pleading was in error, as rely. We agree with Casillas that Houle did not come forward he believes the law allows him to file an amended pleading with evidence of any actual misrepresentation that Casillas that raises previously dismissed claims. Houle, however, does made to him. Therefore, we conclude that there is no evidence not cite any legal authority for this proposition nor are we to support a claim for actual fraud. aware of any. To the contrary, as Houle points out, the trial court explained at the hearing on Houle's motion for new However, the evidence does raise a question of fact regarding trial, that it had struck the third amended pleading because it whether Casillas committed constructive fraud. As discussed contained causes of action that were previously dismissed by above, Houle presented evidence in his affidavit to support a summary judgment. Houle's only recourse once the trial court conclusion that the parties had entered into an oral partnership dismissed his claims was to raise a challenge to the dismissal agreement for which they owed each other fiduciary duties to by way of direct appeal. We therefore conclude that the trial include a duty of good faith and fair dealing, a duty of candor, court did not abuse its discretion in striking the third amended and a duty to make full disclosures to each other. Zinda, 178 pleading. See generally Hardin v. Hardin, 597 S.W.2d 347, S.W.3d at 890–91. Houle included facts in his affidavit, which 349-50 (Tex. 1980) (holding that a trial court's ruling on an the trial court did not strike, chronicling what he believed was amended pleading is reviewed under an abuse of discretion a breach of such fiduciary duties and assertion of conduct standard). Houle's Issue Four is overruled. which was intended to deceive Houle. As such, we conclude that Houle came forward with at least a scintilla of evidence to raise a question of fact regarding whether Casillas engaged in constructive fraud. CONCLUSION Accordingly, we conclude that the trial court did not err We affirm the trial court's order to the extent it granted in granting summary judgment on Houle's claim of actual summary judgment to *566 Appellees on Houle's cause of fraud. However, we conclude the trial court erred in granting action for actual fraud. However, we reverse the trial court's summary judgment on Houle's claim for constructive fraud. order to the extent it granted summary judgment to Appellees Houle's Issue Three is overruled in part and sustained in part. on Houle's causes of action for breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, unjust enrichment, breach of contract, and constructive fraud. We therefore remand to the trial court for further proceedings ISSUE FOUR: HOULE'S THIRD AMENDED consistent with this opinion. PLEADING Shortly after the mistrial, on February 27, 2017, Houle filed a All Citations third amended pleading, which, among other things, appeared to raise the same causes of action (i.e. unjust enrichment 594 S.W.3d 524 and breach of fiduciary duty and duty of good faith and fair End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 25 Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (2019) 63 Tex. Sup. Ct. J. 250 Opinion 592 S.W.3d 125 Supreme Court of Texas. Justice Busby delivered the opinion of the Court. Ralph S. JANVEY, in his Capacity as The Texas Uniform Fraudulent Transfer Act (TUFTA) is “designed to protect creditors from being defrauded or left Court-Appointed Receiver for the Stanford without recourse due to the actions of unscrupulous debtors.” International Bank Limited, et al., Appellants, KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 89 (Tex. 2015). v. Creditors may invoke TUFTA to “claw back” fraudulent transfers from their debtors to third-party transferees. Yet GMAG, L.L.C.; Magness Securities, L.L.C.; even if a transfer is fraudulent, the statute does not always Gary D. Magness; Mango Five Family require the transferee to relinquish the transferred asset. If the Incorporated, in its Capacity as Trustee for the transferee proves as an affirmative defense that it acted in Gary D. Magness Irrevocable Trust, Appellees good faith and the transfer was for a reasonably equivalent value, it may keep the transferred asset. No. 19-0452 | The U.S. Court of Appeals for the Fifth Circuit has Argued October 8, 2019 requested our guidance on what constitutes good faith | under TUFTA. Specifically, the Fifth Circuit asks whether a OPINION DELIVERED: December 20, 2019 transferee on inquiry notice of fraudulent intent can achieve good faith without investigating its suspicions. Without Synopsis comprehensively defining the contours of TUFTA's good- Background: Receiver appointed to recover bank's assets faith defense, we answer the question no. When a transferee and distribute them to victims of Ponzi scheme perpetrated on inquiry notice attempts to use TUFTA's affirmative by bank brought action against investors who profited from defense to shield the transfer from the statute's clawback scheme, seeking to recover funds pursuant to Texas Uniform provision, it must show at minimum that it investigated Fraudulent Transfer Act (TUFTA). After jury verdict in its suspicions diligently. The investigation may not turn up investors' favor, the United States District Court for the additional evidence of fraud that should be imputed to the Northern District of Texas, David C. Godbey, J., 2017 WL transferee, but that result does not negate the suspicions 8780882, denied receiver's motions for judgment as matter that a transferee on inquiry notice has at the time of the of law and for entry of judgment, and, 2017 WL 8780883, transfer. An investigation is an opportunity for the transferee denied receiver's renewed motions for judgment as matter of to demonstrate its good faith, and requiring proof of an law and entry of judgment. Receiver appealed. On rehearing, investigation negates any incentive transferees may have to the Court of Appeals, 925 F.3d 229, certified question. remain willfully ignorant of fraud. As a matter of first impression, the Supreme Court, Busby, J., Background held that a transferee on inquiry notice of a fraudulent transfer Stanford International Bank, Ltd. (the Bank) ran a highly may not satisfy the good-faith defense under TUFTA without complex Ponzi scheme for almost two decades that attracted conducting a diligent investigation. over $7 billion in investments. The Bank sold *127 fraudulent certificates of deposit and issued “returns” to its Question answered. old investors with money procured from new investors. The Bank deceived over 18,000 investors before the Securities and Procedural Posture(s): Certified Question. Exchange Commission (SEC) uncovered the scheme in 2009. *126 On Certified Question from the United States Court of Appellee Gary D. Magness and several entities through Appeals for the Fifth Circuit which Magness invested his funds (collectively, Magness) were among the investors deceived by the Bank. Magness © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (2019) 63 Tex. Sup. Ct. J. 250 was one of the largest investors, purchasing $79 million of The Receiver appealed to the Fifth Circuit, raising several the fraudulent certificates of deposit. Magness withdrew his issues. Id. As relevant here, the Receiver contended “the jury's investments from the Bank sometime after news of the SEC's finding of inquiry notice defeated Magness's TUFTA good investigation became public. In 2008, Magness recovered faith defense as a matter of law.” Id. The Fifth Circuit agreed $88.2 million through loans from the Bank: his original and reversed the district court's judgment, rendering judgment investment of $79 million and $9.2 million of “accrued for the Receiver. Id. at 458. Specifically, the Fifth Circuit interest” credited to his account with the Bank. He later repaid determined that Magness failed to satisfy TUFTA's good-faith $700,000 to the Bank, so his net return was $8.5 million. affirmative defense and that there is no “futility exception” to that defense. Id. Once the SEC discovered the Bank's Ponzi scheme, a federal district court appointed appellant Ralph S. Janvey (the Following the Fifth Circuit's decision, Magness sought Receiver) to recover the Bank's assets and distribute them rehearing. He urged the Fifth Circuit to certify the good-faith among the investors equitably. The Receiver sought return of question instead of relying on its Erie guess. The Fifth Circuit Magness's net payout from the Bank. vacated its prior opinion *128 and certified the following question, which we accepted: The Receiver sued Magness in federal district court to recover these funds, alleging (1) Magness's withdrawal from the Bank Is the Texas Uniform Fraudulent Transfer Act's “good should be avoided because it constituted a fraudulent transfer faith” defense against fraudulent transfer clawbacks, as under TUFTA, and (2) Magness was unjustly enriched. codified at Tex. Bus. & Com. Code § 24.009(a), available Janvey v. GMAG, L.L.C., 913 F.3d 452, 454 (5th Cir. 2019), to a transferee who had inquiry notice of the fraudulent vacated and superseded on reh'g, 925 F.3d 229 (5th Cir. behavior, did not conduct a diligent inquiry, but who would 2019). Magness responded that he satisfied TUFTA's good- not have been reasonably able to discover that fraudulent faith defense, thus preventing the Receiver from avoiding the activity through diligent inquiry? Bank's transfer to Magness. The district court granted the Janvey v. GMAG, L.L.C., 925 F.3d 229, 235 (5th Cir. 2019). Receiver's motion for partial summary judgment for the net amount Magness received from the Bank in excess of his investment; Magness subsequently paid the Receiver this $8.5 Analysis million. Id. The district court left to the jury, however, whether the Receiver was entitled to claw back Magness's original May a transferee on inquiry notice of a fraudulent transfer $79 million investment. Id. The district court also denied satisfy TUFTA's good-faith defense without conducting a Magness's motions for partial summary judgment regarding diligent investigation? We conclude that the answer is no. his defense of good faith and the Receiver's claim of unjust If a transferee has actual knowledge of facts that would enrichment. Id. lead a reasonable person to suspect the transfer is voidable under TUFTA but does not investigate, the transferee may Following trial, the jury found Magness had inquiry notice not achieve good-faith status to avoid TUFTA's clawback of the Ponzi scheme. Id. at 454–55. The jury charge provision—regardless of whether the transferee reasonably provided: “Inquiry notice is knowledge of facts relating to the could have discovered the fraudulent activity through diligent transaction at issue that would have excited the suspicions of inquiry. a reasonable person and led that person to investigate.” Id. at 454. The next question in the charge asked whether “a diligent I. Standard and scope of review inquiry would ... have revealed to a reasonable person that “The Supreme Court of Texas may answer questions of law Stanford was running a Ponzi scheme.” Id. at 455. The jury certified to it by any federal appellate court if the certifying found that “an investigation [would] have been futile.” Id. court is presented with determinative questions of Texas law The district court denied the Receiver's motion for entry of having no controlling Supreme Court precedent.” Tex. R. judgment on the verdict and renewed motion for judgment as App. P. 58.1; accord Tex. Const. art. V, § 3–c(a). The question a matter of law, holding that Magness satisfied his good-faith certified requires us to interpret section 24.009 of the Texas affirmative defense. Id. Business and Commerce Code. GMAG, 925 F.3d at 235. We are asked to determine how a transferee found to be on inquiry © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (2019) 63 Tex. Sup. Ct. J. 250 notice can prove good faith to qualify for section 24.009's the transfer or obligation, or to obtain certain other remedies. affirmative defense, which is a question of law. Id. Id. § 24.008. Although the Fifth Circuit certified its question without Avoidance is not unbridled, however. TUFTA protects a limiting this Court's response, we typically “provide answers transferee against avoidance of a fraudulent transfer (or an solely as to the status of Texas law on the questions asked.” obligee against avoidance of a fraudulent obligation) if it can Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d prove it “took in good faith and for a reasonably equivalent 605, 620 (Tex. 2004). This certified question is narrow and value.” Id. § 24.009(a). We have previously considered the assumes the transferee did not investigate the suspicious “reasonably equivalent value” prong of this defense. See circumstances initially raising concern.1 We limit our holding generally Golf Channel, 487 S.W.3d 560. Today, we address to this question. the “good faith” prong. 1 “How our answer is to be applied to the facts of this III. The “good faith” prong of the transferee's defense case is the province of the certifying court.” Interstate includes concepts of inquiry notice, honesty in fact, and Contracting Corp., 135 S.W.3d at 620 (citing Amberboy lack of willful ignorance. v. Societe de Banque Privee, 831 S.W.2d 793, 798 (Tex. TUFTA does not define good faith. Cf. Bus. & Com. Code 1992)). Therefore, although Magness asserted in his § 24.002 (listing defined terms). UFTA, which we have used briefing and at oral argument that he actually investigated his suspicions, we express no opinion on that issue. previously to interpret TUFTA,2 similarly fails to define good faith. When a statute does not define a word or phrase, we II. TUFTA protects creditors but provides an affirmative look to its plain or common meaning. In re Lipsky, 460 S.W.3d defense for transferees. 579, 590 (Tex. 2015). Mindful of TUFTA's instruction that The Uniform Fraudulent Transfer Act (UFTA) was created to “principles of law and equity ... supplement its provisions,” ensure defrauded creditors attain similar remedies. See Unif. Bus. & Com. Code § 24.011, we also consider the common Fraudulent Transfer Act Prefatory Note, 7A pt. II U.L.A. law in determining the meaning of good faith. 4–7 (2006). Creditors may circumvent transfers made or obligations incurred by their debtors in certain circumstances, 2 Cf. Golf Channel, 487 S.W.3d at 572–73 (using UFTA to including where the transfer was made or obligation incurred construe TUFTA's “reasonably equivalent value” prong). with the intent to hinder, delay, or defraud any creditor. Good faith has been defined as “[a] state of mind consisting Id. § 7. Because “the intent to hinder, delay, or defraud in (1) honesty in belief or purpose, (2) faithfulness to one's creditors is seldom susceptible of direct proof,” UFTA duty or obligation, (3) observance of reasonable commercial provides badges of fraud on which creditors and courts can standards of fair dealing ..., or (4) absence of intent to defraud rely. Id. at Prefatory Note. UFTA allows defrauded creditors or to seek unconscionable advantage.” Good Faith, Black's to “obtain ... avoidance of the transfer or obligation to the Law Dictionary (11th ed. 2019).3 We have explained that extent necessary to satisfy” their claims. Id. § 7(a)(1). good faith “requires conduct that is honest in fact and is free of both improper motive and willful ignorance of the facts *129 At least twenty-five jurisdictions have adopted some at hand.” Gulf Energy, 482 S.W.3d at 569 (defining good version of UFTA. Id. at Prefatory Note. Texas joined that faith in the Texas Natural Resources Code when the Railroad group in 1987. Tex. Bus. & Com. Code ch. 24. TUFTA's Commission mistakenly plugged an offshore well). And we purpose mirrors UFTA's and is designed “to prevent debtors have recognized “reasonableness” as a component of good from prejudicing creditors by improperly moving assets faith. Wichita County v. Hart, 917 S.W.2d 779, 786 (Tex. beyond their reach.” Janvey v. Golf Channel, Inc., 487 1996) (combining “honesty in fact” with “reasonableness” to S.W.3d 560, 566 (Tex. 2016). TUFTA provides its own define what constitutes good faith under the Whistleblower badges of fraud in “a list of eleven, nonexclusive indicia Act). of fraudulent intent.” Id. Similar to UFTA, TUFTA's badges provide guidance in determining whether a transfer was made 3 See R.R. Comm'n of Tex. v. Gulf Energy Expl. Corp., or obligation incurred with actual intent to hinder, delay, or defraud a creditor. Bus. & Com. Code § 24.005(b). If so, a 482 S.W.3d 559, 568 (Tex. 2016) (using dictionary to creditor may invoke TUFTA's clawback provision to avoid © 2025 Thomson Reuters. No claim to original U.S. Government Works. 3 Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (2019) 63 Tex. Sup. Ct. J. 250 give undefined term in Natural Resources Code its plain prove good faith without conducting a diligent investigation meaning). —regardless of what that investigation would reveal. We conclude that the meaning of good faith under TUFTA is consistent with these principles. A transferee must show In the context of inquiry notice, actual knowledge means that its conduct was honest in fact, reasonable in light “[k]nowledge of information that would lead a reasonable of known facts, and free from willful ignorance of fraud. person to inquire further.” Actual Knowledge, Black's Law In applying this standard, Texas courts have considered Dictionary (11th ed. 2019). As we have recognized, actual “whether a transferee received fraudulent transfers with actual knowledge of suspicious facts shifts a transferee's status from knowledge or inquiry notice of fraud.” GMAG, 913 F.3d at taking in good faith to being on inquiry notice of fraud. 455–56 (citing *130 Citizens Nat'l Bank of Tex. v. NXS See Blum v. Simpson, 66 Tex. 84, 17 S.W. 402, 403 (1886) Constr., Inc., 387 S.W.3d 74, 85 (Tex. App.—Houston [14th (“Taking all these circumstances in connection, it does seem Dist.] 2012, no pet.)). The Fifth Circuit's certified question that there was enough to arouse a suspicion in the mind of any presumes, and the jury found, that Magness was on inquiry prudent man that there was an intention on the part of [debtor] notice. We therefore focus our analysis on how a transferee to dispose of his property in such a way that, if he had any with inquiry notice of fraud can prove good faith. creditors, ... they would be deprived of all power to enforce their claims against him.”).5 Inquiry notice is “[n]otice attributed to a person when the information would lead an ordinarily prudent person to 5 Blum was decided under a predecessor fraudulent investigate the matter further.” Inquiry Notice, Black's Law transfer statute providing that a purchaser with “notice” Dictionary (11th ed. 2019). A person is on inquiry notice of the debtor's fraudulent intent could not keep the when he or she is “aware of facts that would have prompted a transfer. See Tex. Rev. Civ. Stat. Ann. art. 2465 (1879). reasonable person to investigate.” Id. Whether inquiry notice If a diligent inquiry could have uncovered facts showing exists is determined at the time of the transfer, not with fraudulent intent, Texas common law imputes knowledge of the benefit of hindsight. See Golf Channel, 487 S.W.3d at those additional facts to the transferee as well. Woodward v. 569 (reaching same conclusion as to value and reasonable Ortiz, 150 Tex. 75, 237 S.W.2d 286, 289 (1951). Constructive equivalency components of defense). knowledge is “[k]nowledge that one using reasonable care or diligence should have, and therefore that is attributed by As one court of appeals has explained, a transferee is on law to a given person.” Constructive Knowledge, Black's Law inquiry notice when it “takes property with knowledge of Dictionary (11th ed. 2019). The transferee can be charged such facts as would excite the suspicions of a person of with this knowledge in hindsight so long as it reasonably ordinary prudence” regarding “the fraudulent nature of an *131 could have been discovered at the time of the transfer. alleged transfer.” Hahn v. Love, 321 S.W.3d 517, 527 (Tex. Ruebeck v. Hunt, 142 Tex. 167, 176 S.W.2d 738, 739 (1943) App.—Houston [1st Dist.] 2009, pet. denied). A transferee on (“Knowledge of facts that would cause a reasonably prudent inquiry notice knows facts that are, or should be, suspicious: person to make inquiry, which if pursued would lead to a red flags that a reasonable person would have investigated discovery of fraud, is in law equivalent to knowledge of the prior to engaging in the transfer.4 fraud.”). 4 Quilling v. Stark, No. 3-05-CV-1976-BD, 2007 WL 415351, at *3 (N.D. Tex. Feb. 7, 2007) (holding IV. A transferee on inquiry notice of fraud must conduct transferee's attempt to prove TUFTA's good-faith a diligent investigation to prove good faith. defense failed as matter of law because a reasonable As framed by these legal principles regarding good faith and person would have investigated legitimacy of transfer). inquiry notice, the question we must decide is: how can a transferee prove good faith when it has actual knowledge of There are at least two types of knowledge a transferee facts raising a suspicion that the transfer is voidable under has when on inquiry notice: (1) actual knowledge of TUFTA but lacks constructive knowledge of facts showing facts that raise a suspicion of fraud, and (2) constructive fraudulent intent? The jury found that Magness was on knowledge of what the transferee could have uncovered inquiry notice because he or his agents had actual “knowledge in an investigation. Understanding the distinction between of facts relating to the transaction at issue that would have these types of knowledge helps to explain why a transferee excited the suspicions of a reasonable person and led that on inquiry notice of the debtor's fraudulent intent cannot © 2025 Thomson Reuters. No claim to original U.S. Government Works. 4 Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (2019) 63 Tex. Sup. Ct. J. 250 person to investigate.” In this circumstance, a transferee good faith without any investigation at all. We conclude that seeking to prove good faith must show that it investigated the in this situation, a transferee wishing to take advantage of the suspicious facts diligently. A transferee who simply accepts a defense must show it conducted a diligent investigation. transfer despite knowledge of facts leading it to suspect fraud does not take in good faith. See Blum, 17 S.W. at 403 (“Yet 6 17 Tex. 143, 150 (1856) (“The general doctrine is, [transferee] made no inquiry .... This showed a disposition on that whatever puts a party upon an inquiry amounts, in his part to make the trade, and get possession of the property at judgment of law, to notice, provided the inquiry becomes a low figure, no matter how much the seller's creditors might a duty ... and would lead to the knowledge of the suffer thereby.”). requisite fact, by the exercise of ordinary diligence and understanding.”). Magness responds by pointing out that the jury also found 7 See id. at 148–49, 151 (reversing judgment based on “a diligent inquiry would not have revealed to a reasonable jury finding of inquiry notice where transferee conducted person that Stanford was running a Ponzi scheme.” Because diligent investigation). any investigation would have been fruitless, he contends knowledge of the Bank's fraudulent intent cannot be imputed The parties and amici also dispute whether Humphries to him, and therefore he took in good faith. v. Freeman, 22 Tex. 45 (1858), supports the proposition that a transferee can take in good faith despite its initial We agree with Magness's premise, but we reject suspicions of fraud when a diligent investigation would not his conclusion. Whether a transferee lacks constructive have revealed the fraud. Applying a predecessor statute to knowledge of the debtor's fraudulent intent does not, by TUFTA,8 we explained in Humphries: itself, determine good faith. Magness's proposed rule does It is not necessary that [transferee] should have been not acknowledge his actual knowledge of facts that raised a influenced in what he did, by a like fraudulent intent, suspicion of fraud. Nor does it acknowledge that choosing to in order to avoid the assignment as to him also; or that remain willfully ignorant of any information an investigation he should have intended to assist [debtor] to defraud his might reveal is incompatible with good faith. creditors; or that he should have had actual knowledge that such, in fact, was the intention of [debtor]. It is sufficient A transferee cannot show good faith in this situation because, to affect him with notice, if by ordinary diligence he might irrespective of what a hypothetical investigation could reveal, have known. If he had a knowledge of such facts, as were the facts giving rise to a reasonable suspicion of fraud calculated to create a suspicion that such was the purpose have not been confronted. Even if the fraud is inherently of [debtor], and to put him upon inquiry; if, in a word, he undiscoverable, the transferee still has actual knowledge of had reason to know or believe that such was the intention of facts at the time of the transfer that would lead a reasonable [debtor], it is sufficient to avoid the assignment as to him, person to suspect fraud and investigate. If the transferee fails as effectually as if he had actually known it. to demonstrate its good faith and avoid willful ignorance by Id. at 50. conducting a diligent investigation, it cannot be characterized as acting with honesty in fact. 8 See Act approved Jan. 18, 1840, 4th Cong., R.S., § 2, Magness contends that our decision in Wethered's 1840 Repub. Tex. Laws 28, 29, reprinted in 2 H.P.N. Administrator v. Boon supports his position that when a Gammel, The Laws of Texas 1822–1897, at 202, 203 reasonable inquiry could not have revealed the true facts, a (Austin, Gammel Book Co. 1898) (providing fraudulent transfer was void unless “possession shall really and finding of inquiry notice is inappropriate.6 But the transferee bona fide remain with the donee”). in Wethered's Administrator investigated his suspicions The Receiver relies on the last sentence to argue that a diligently,7 so that case is not instructive in answering the transferee on inquiry notice cannot achieve good faith. But certified question. We are *132 not asked to define under according to the University of Miami as amicus, the second what circumstances a diligent investigation by a transferee sentence suggests that a transferee on inquiry notice can still on inquiry notice of fraud will be sufficient to establish good take in good faith unless a hypothetical diligent investigation faith, and we express no view on that issue. Instead, we are would reveal fraud, as the transferee only has constructive simply asked whether an investigation is necessary—that is, knowledge of what the investigation would reveal. Under this whether a transferee on inquiry notice of fraud may achieve © 2025 Thomson Reuters. No claim to original U.S. Government Works. 5 Janvey v. GMAG, L.L.C., 592 S.W.3d 125 (2019) 63 Tex. Sup. Ct. J. 250 ‘those things which a reasonably diligent inquiry and exercise view, Magness would not be responsible for the knowledge that initially raised his suspicions of fraud because the jury of the means of information at hand would have disclosed.’ ”9 found an investigation would have been futile, and he may The cases cited decide whether an individual may be charged invoke TUFTA's good-faith defense successfully. with constructive knowledge, which is not the question before us. Rather, we are asked to decide how a transferee on inquiry We conclude that Humphries does not affect our answer to notice can prove good faith to invoke TUFTA's defense. the certified question. That case addressed whether a creditor seeking to void a transfer must show that the transferee had 9 Quoting Woodward, 237 S.W.2d at 289; see also Flack fraudulent intent or actual knowledge of fraud, or whether v. First Nat'l Bank of Dalhart, 148 Tex. 495, 226 S.W.2d a lesser standard of notice is also sufficient. We concluded 628 (1950); Ruebeck, 176 S.W.2d at 739–40; Ron Carter, that notice is sufficient and reversed a jury's verdict for the Inc. v. Kane, No. 01-10-00815-CV, 2011 WL 5100903 transferee as contrary to the evidence, which showed the facts (Tex. App.—Houston [1st Dist.] Oct. 27, 2011, pet. known to the transferee denied) (mem. op.). were certainly sufficient to put him on inquiry, and to affect him with notice; and consequently, to affect the property, Conclusion in his hands, with the fraud of his assignor. The evidence A transferee on inquiry notice of fraud cannot shield ought to have been decisive in the minds of the jury, that itself from TUFTA's clawback provision without diligently the assignment was fraudulent and void under the statute, investigating its initial suspicions—irrespective of whether a as having been made with the intent to delay, hinder and hypothetical investigation would reveal fraudulent conduct. defraud the creditors of [debtor]. To hold otherwise rewards willful ignorance and undermines Id. at 51. We went on to observe that the jury should have been the purpose of TUFTA. We answer the certified question no. instructed actual knowledge was not required, id. at 53, but we had no occasion to parse the concepts of inquiry notice and constructive knowledge *133 to provide a detailed analysis All Citations of what proof would be sufficient to avoid the transfer. 592 S.W.3d 125, 63 Tex. Sup. Ct. J. 250 Magness also cites a litany of cases he argues “consistently recogniz[e] that a party may be charged with notice only of End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 6 Morgan Buildings and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (2003) 49 UCC Rep.Serv.2d 941 97 S.W.3d 871 Court of Appeals of Texas, OPINION Dallas. Opinion by Justice LANG. MORGAN BUILDINGS Morgan Buildings and Spas, Inc. (“Morgan”) appeals the AND SPAS, INC., Appellant, summary judgment rendered against it in favor of Turn– v. Key Leasing, Ltd. (“Turn–Key”). Morgan brings forth two issues asserting the trial court erred in granting Turn–Key's TURN–KEY LEASING, LTD., Appellee. motion for partial summary judgment because (1) Turn–Key's purported foreclosure on Morgan's partnership interest failed No. 05–02–00819–CV. to comply with the provisions of the Texas version of Uniform | Commercial Code (“U.C.C.” or “the Code”) Article Nine2 Feb. 5, 2003. and is therefore invalid and void, and (2) numerous fact issues Synopsis preclude the entry of summary judgment. For reasons stated Building company brought action against leasing company below, we resolve Morgan's first issue in its favor, reverse with which it had formed a partnership, alleging that leasing the trial court's decision, and remand this cause for further company's retention of building company's partnership proceedings. interest as partial satisfaction of loan which building company defaulted on was void. The 192nd Judicial District Court, 2 Substantial revisions to Chapter Nine of the Texas Dallas County, Merrill Hartman, J., granted leasing company Business and Commerce Code were made during the partial summary judgment. Building company appealed. The 76th Legislature. See Act of June 18, 1999, 76th Leg., Court of Appeals, Douglas S. Lang, J., held that: (1) Uniform R.S., Ch. 414, § 1.01, 1999 Tex. Gen. Laws 2639– Commercial Code (UCC) provisions regarding secured 2736. These amendments took effect on July 1, 2001. transactions applied to amended partnership agreement, and All references to the Business and Commerce Code or the Uniform Commercial Code (U.C.C.) in this (2) agreement could not vary the requirement of advanced opinion are to the version that existed prior to the notice of disposition and commercially reasonable disposition 1999 revisions because the applicable agreements in this of collateral under the UCC. case were entered into before the revisions took effect. For convenience, citation in the text will refer to the Reversed and remanded. relevant provisions of the sections as they existed under the previous version of Article Nine, while the correct Procedural Posture(s): On Appeal; Motion for Summary citation of these repealed sections will be included, where Judgment. appropriate, in footnotes. Attorneys and Law Firms Factual and Procedural Background *873 Clifton T. Hutchinson, Hughes & Luce, L.L.P., Dallas, for appellant. In 1993, Morgan and Turn–Key formed a joint venture (the “partnership”) by entering into a joint venture agreement Kirk E. Crutcher, Amarillo, for appellee. (the “JVA”) for the limited purpose of acquiring, owning, leasing, financing, and selling modular buildings. In late Before Justices MOSELEY, LANG, and LAGARDE.1 2000, Morgan experienced a cash flow shortage and consulted 1 Turn–Key about a distribution from the partnership. Michael The Honorable Sue Lagarde, Justice, Court of Appeals, Borger, Turn–Key's president, proposed a loan from Turn– Fifth District of Texas at Dallas, Retired, sitting by Key to Morgan as opposed to having the partnership pay assignment. distributions. Morgan agreed to Turn–Key's proposed loan. On January 9, 2001, Turn–Key lent Morgan $450,000. Morgan, in turn, signed a promissory note and a security © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 Morgan Buildings and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (2003) 49 UCC Rep.Serv.2d 941 agreement. The promissory note was scheduled to mature renew and extend the loan. The June 21 letter stated that the on June 15, 2001 and described the collateral securing $450,000 loan, which had become due and payable six days its payment as a “security interest created in a security earlier, would now need to be repaid no later than June 28, agreement that covers [Morgan's] right, title, and interest in 2001. Morgan claims its efforts to contact Turn–Key after and to” the partnership. The security agreement classified the receipt of the June 21 letter were unsuccessful. collateral as “general intangibles” and described it as: “All of [Morgan's] interest in and to [the partnership] under [the On June 29, 2001, Turn–Key sent another letter to Morgan JVA] ... together with all income and distributions from the stating that it considered Morgan to be in default. The letter [partnership] (whether upon the dissolution and winding up of also notified Morgan that, in accordance with the terms of the the [partnership] or otherwise); all of the foregoing, whether amended agreement, the following actions had already taken now owned or hereafter acquired and the proceeds thereof.” place: (1) Morgan's interest in the partnership passed to Turn– Key; (2) Turn–Key reduced Morgan's capital account by the Contemporaneous with the execution of the promissory amount of the principal, interest, and attorney's fees (totaling note and security agreement, *874 Morgan and Turn–Key $455,384.93); (3) Turn–Key increased its own capital account executed an amendment to their 1993 JVA (the “amended in the same amount by which it reduced Morgan's capital agreement”). This amended agreement changed paragraph 14 account; and (4) Turn–Key adjusted the distributive shares of the 1993 JVA entitled “Limitation on Transfer.”3 of the partnership in the same proportion as the adjusted capital accounts. Turn–Key also informed Morgan that it 3 remained liable to Turn–Key for the deficiency of the loan in The 1993 JVA provided that no partner could “sell, the amount of $112,124.71. Furthermore, the June 29 letter assign, transfer, encumber, or otherwise dispose of” any stated that, notwithstanding Turn–Key's exercise of its rights interest in the partnership. The amended agreement, however, provided the following: under the amended agreement, Turn–Key intended that (1) the It is understood and agreed that a partner may indebtedness evidenced by the promissory note had not been encumber all or a part of its interest in the joint cancelled or extinguished, and (2) the security interest created venture to another partner to secure performance of an by the security agreement was not released and was to remain obligation to that partner. The terms of such pledge, “valid and in full force against the collateral.” Finally, Turn– including events of default, must be in a writing Key informed Morgan that the security interest created by the signed by the partners. In the event of default which security agreement would continue to be effective and would allows foreclosure on the pledged interest, title of be reinstated if at any time payment or reduction of all or any the pledged joint venture interest shall immediately part of the indebtedness evidenced by the promissory note pass according to this paragraph. Title shall pass by was “rescinded or must otherwise be returned by Turn–Key, adjusting the capital accounts defined in Paragraph 11 as though such payment or reduction had not been made.” of this Agreement by reducing the capital account of the defaulting partner by the amount of the default and by increasing the capital account of the non- On July 11, 2001, Morgan wrote to Turn–Key. Morgan said defaulting partner by the same amount. In the event that Turn–Key's June 29 letter appeared to propose that *875 such an adjustment to the capital account occurs, Turn–Key retain Morgan's partnership interest in satisfaction the distributive share of each partner pursuant to of all or any portion of the note. Morgan protested any such Paragraph 12 will be adjusted so that the pro rata retention of Morgan's partnership interest. Rather, Morgan distributive shares will be allocated in the same stated that because of its objection, Turn–Key was compelled proportion as the capital accounts after adjustment. In to dispose of the interest in accordance with the applicable the event the default amount exceeds the defaulting provisions of the Texas U.C.C. Then, Morgan reserved the partner's capital account balance, the partner's joint right to hold Turn–Key liable for any losses caused by Turn– venture interest will terminate, and the defaulting Key's failure to comply with the U.C.C. partner shall remain liable for the excess amount. As the scheduled maturity date of June 15, 2001 approached, Morgan filed suit on July 9, 2001, claiming, inter alia, Morgan contacted Turn–Key to seek an extension of the loan that Turn–Key's attempted retention4 of Morgan's partnership until December 31, 2001. The parties discussed an extension interest in partial satisfaction of Morgan's debt was void. but reached no agreement. On June 21, Turn–Key wrote a Morgan alleged that both the terms of the amended agreement letter to Morgan notifying it of Turn–Key's decision not to and Turn–Key's actions violated the advance notice and © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Morgan Buildings and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (2003) 49 UCC Rep.Serv.2d 941 commercially reasonable disposition requirements of sections (2) numerous fact issues preclude the entry of summary 9.504 and 9.505 of Article Nine. Turn–Key filed a motion judgment. Although Morgan raises two issues, both center for partial summary judgment on December 26, 2001.5 on whether the provisions of the amended agreement and the Morgan then filed its own motion for partial summary actions in disposition or retention of the partnership account and/or its partnership interest are governed by the U.C.C. If judgment on February 22, 2002.6 On March 21, 2002, the we were to find that the U.C.C. does not govern, Morgan's trial court granted Turn–Key's motion for partial summary contention as to the existence of fact issues would be of no judgment without specifying the grounds. Morgan non-suited merit, since any such fact issues hinge on its claim that the its remaining claims,7 and this appeal followed. U.C.C. applies to this transaction. However, if we were to find that the U.C.C. does apply, then the case should be reversed 4 By its actions in adjusting the partnership interests and and remanded *876 for further proceedings consistent with capital accounts in its favor, Morgan claimed that Turn– this opinion. Key had “retained” the collateral as that term is used under Article Nine. However, at oral argument of this appeal, Morgan indicated that Turn–Key had since sold (i.e., “disposed” of) a portion of the partnership to a third Standard of Review party. There is no evidence in the record regarding the sale of any portion of the partnership to a third party. The standards for reviewing summary judgment under rule 166a(c) are well established. See Nixon v. Mr. Prop. Mgmt. 5 Turn–Key moved for partial summary judgment on Co., 690 S.W.2d 546, 548–49 (Tex.1985); Orozco v. Dallas Morgan's claims for (1) breach of the JVA; (2) breach Morning News, Inc., 975 S.W.2d 392, 394 (Tex.App.-Dallas of the duty of loyalty; (3) usurpation of partnership 1998, no pet.). We review a summary judgment de novo to opportunity; (4) wrongful foreclosure; (5) unreasonable determine whether a party's right to prevail is established as disposition of partnership assets; (6) impermissible a matter of law. Dickey v. Club Corp. of Am., 12 S.W.3d foreclosure; (7) impermissible winding up of the 172, 175 (Tex.App.-Dallas 2000, pet. denied); West End Pink, partnership; (8) injunctive relief requiring Turn–Key to Ltd. v. City of Irving, 22 S.W.3d 5, 7 (Tex.App.-Dallas 1999, continue the partnership; (9) injunctive relief preventing Turn–Key from disposing of partnership assets; and (10) pet. denied) (citing Keever v. Finlan, 988 S.W.2d 300, 305 injunctive relief preventing Turn–Key from using the (Tex.App.-Dallas 1999, pet. dism'd)). partnership name. 6 Morgan moved for partial summary judgment on the grounds that (1) Turn–Key's notice was untimely; (2) U.C.C. Article Nine Governing Secured Transactions Turn–Key could not retain the collateral; (3) Turn–Key's disposition of the collateral was unreasonable; (4) Turn– A. Applicable Law Key could not retain the collateral and claim a deficiency; Article Nine of the U.C.C. applies “to any transaction (5) the advance notice and commercially reasonable (regardless of its form) which is intended to create a security disposition requirements of the Texas U.C.C. could not interest in personal property or fixtures including goods, be waived; and (6) Turn–Key's attempted transfer of its documents, instruments, general intangibles, chattel paper partnership interest was invalid. or accounts.”8 Generally, the test for creation of a security 7 The claims Morgan non-suited were its request for interest is whether the transaction was intended to have an accounting, its request for a winding up of the the effect as security, because parties must have intended partnership, and “other declaratory relief” regarding the that their transaction fall within the scope of Article Nine. applicability of the U.C.C. to the Turn–Key foreclosure. Superior Packing, Inc. v. Worldwide Leasing & Fin., Inc., These claims are not before us, and we do not address 880 S.W.2d 67, 71 (Tex.App.-Houston [14th Dist.] 1994, writ their merits. denied) (citing John Bezdek Ins. Assocs., Inc. v. Am. Indem. On appeal, Morgan argues the trial court erred in granting Co., 834 S.W.2d 401, 403 (Tex.App.-San Antonio 1992, no Turn–Key's motion for partial summary judgment because (1) writ)). Accordingly, we look to the transaction to determine Turn–Key's purported foreclosure on Morgan's partnership if the parties intended to create a security interest in the type interest failed to comply with the provisions of Texas's of property specified in section 9.102 of the Code for the U.C.C. Article Nine and is therefore invalid and void, and purpose of securing payment or performance of an obligation. John Bezdek Ins., 834 S.W.2d at 403. No formal wording © 2025 Thomson Reuters. No claim to original U.S. Government Works. 3 Morgan Buildings and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (2003) 49 UCC Rep.Serv.2d 941 is required, and the court, in arriving at the intent of the of May 20, 1977, 65th Leg., R.S., ch. 163, § 4, 1977 parties, should examine the substance of the documents in Tex. Gen. Laws 334 (current version at Tex. Bus. & light of the circumstances of the case. Id. (citing In re Miller, Com.Code Ann. § 9.610 (Vernon Supp.2003)) (emphasis 545 F.2d 916, 918 (5th Cir.1977) (applying Texas law)). added). We determine the true intention of the parties by examining “the entire writing in an effort to harmonize and give effect Unless collateral is perishable or threatens to decline to all the provisions of the contract so that none will be speedily in value or is of a type customarily sold on a rendered meaningless.” Coker v. Coker, 650 S.W.2d 391, 393 recognized market, reasonable notification of the time (Tex.1983) (emphasis omitted). Finally, documents executed and place of any public sale or reasonable notification contemporaneously for the same purpose and as part of the of the time after which any private sale or other same transaction should be read and construed together to intended disposition is to be made shall be sent by the determine the intent of the parties. Jones v. Kelley, 614 S.W.2d secured party to the debtor, if he has not signed after 95, 98 (Tex.1981). default a statement renouncing or modifying his right to notification of sale.10 8 Act of June 18, 1965, 59th Leg., R.S., ch. 721, § 9–102, 10 Id. (emphasis added). 1965 Tex. Gen. Laws 151, amended by Act of June 14, A secured creditor, however, may elect not to dispose of the 1967, 60th Leg., R.S., ch. 785, § 9.102, 1967 Tex. Gen. collateral. Section 9.505 allows a creditor to retain collateral Laws 2520, amended by Act of June 14, 1973, 63rd Leg., in complete satisfaction of the indebtedness once it notifies R.S., ch. 400, § 5, 1973 Tex. Gen. Laws 999, amended by Act of June 18, 1997, 75th Leg., R.S., ch. 930, § 1, 1997 the debtor of its intent. “Written notice of such proposal Tex. Gen. Laws 2926–27 (current version at Tex. Bus. & shall be sent to the debtor if he has not signed after default Com.Code Ann. § 9.109 (Vernon Supp.2003)). a statement renouncing or modifying his rights under this subsection.... If the secured party receives objection in writing Section five of Article Nine governs the rights and duties of from a person entitled to receive notification within twenty- secured parties and debtors in the event of default. Section one days after the notice was sent, the secured party must 9.504 gives a secured party the right to sell or dispose of collateral after the debtor's default, while section 9.505 dispose of the collateral under Section 9.504.”11 gives the secured party the right to retain the collateral in satisfaction of the debtor's obligation. However, advance 11 Act of June 18, 1965, 59th Leg., R.S., ch. 721, § 9–505, notice of either means of disposition must be given by the 1965 Tex. Gen. Laws 177, amended by Act of June 14, secured party. See Tanenbaum v. Econ. Lab., Inc., 628 S.W.2d 1967, 60th Leg., R.S., ch. 785, § 9.505, 1967 Tex. Gen. 769, 771 (Tex.1982); Acuff v. Lamesa Nat'l Bank, 919 S.W.2d Laws 2551, amended by Act of June 14, 1973, 63rd Leg., 154, 156 (Tex.App.-Eastland 1996, no writ). R.S., ch. 400, § 5, 1973 Tex. Gen. Laws 1029, amended by Act of June 19, 1975, 64th Leg., R.S., ch. 353, § 9, 1975 Tex. Gen. Laws 943, amended by Act of May 20, *877 Section 9.504(c) governs a secured party's right to 1977, 65th Leg., R.S., ch. 163, § 6, 1977 Tex. Gen. Laws dispose of collateral after default by the debtor. It states: 334 (current version at Tex. Bus. & Com.Code Ann. § “Disposition of the collateral may be by public or private 9.620 (Vernon Supp.2003)) (emphasis added). proceedings and may be made by way of one or more contracts.... [B]ut every aspect of the disposition including the Finally, section 9.501(c) states that certain provisions relating method, manner, time, place, and terms must be commercially to the disposition and retention of collateral may not be waived, but that the parties may agree to “not manifestly reasonable.”9 Section 9.504 describes the “advance notice” unreasonable” standards as to fulfillment of those rights and requirement as follows: duties. Specifically, that section provides: 9 Act of June 18, 1965, 59th Leg., R.S., ch. 721, § 9– [T]he rules stated in the subsections below may not be 504(3), 1965 Tex. Gen. Laws 176, amended by Act of waived or varied ... but the parties may by agreement June 14, 1967, 60th Leg., R.S., ch. 785, § 9.504(c), 1967 determine the standards by which the fulfillment of these Tex. Gen. Laws 2550, amended by Act of June 14, 1973, rights and duties is to be measured if such standards are 63rd Leg., R.S., ch. 400, § 5, 1973 Tex. Gen. Laws 1028, not manifestly unreasonable: amended by Act of June 19, 1975, 64th Leg., R.S., ch. 353, § 8, 1975 Tex. Gen. Laws 942–43, amended by Act .... © 2025 Thomson Reuters. No claim to original U.S. Government Works. 4 Morgan Buildings and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (2003) 49 UCC Rep.Serv.2d 941 reserved all its rights under the security agreement since it (2) Subsection (c) of Section 9.504 and Subsection (a) of had elected to proceed under the amended agreement. Hence, Section 9.505 which deal with disposition of collateral; Turn–Key concludes that its actions pursuant to the amended agreement would not be an Article Nine foreclosure. (3) Subsection (b) of Section 9.505 which deals with acceptance of collateral as discharge of obligation.12 In making its argument, Turn–Key cites us to the Texas Revised Partnership Act (TRPA),13 which it asserts governs 12 Act of June 18, 1965, 59th Leg., R.S., ch. 721, § 9– this transaction to the exclusion of Article Nine of the U.C.C. 501(3), 1965 Tex. Gen. Laws 174, amended by Act of Specifically, Turn–Key cites article 6132b–4.01(c), which June 14, 1967, 60th Leg., R.S., ch. 785, § 9.501(c), 1967 provides that a partner who makes a payment or advance on Tex. Gen. Laws 2548, amended by Act of June 14, 1973, behalf of the partnership is entitled to reimbursement by the 63rd Leg., R.S., ch. 400, § 5, 1973 Tex. Gen. Laws 1026 partnership. See Tex.Rev.Civ. Stat. Ann. art. 6132b–4.01(c) (current version at Tex. Bus. & Com.Code Ann. § 9.602 (Vernon Supp.2003)) (emphasis added). (Vernon Supp.2003).14 Turn–Key informs this Court in its brief that we should not *879 apply Article Nine of the *878 B. Application of Law to the Facts U.C.C. to this transaction unless we are “also prepared to find an irreconcilable statutory conflict between the TRPA 1. Security Agreement or Alternative Means of and the U.C.C.” However, article 6132b–4.01(c) of the TRPA Payment? is inapposite to this case because it clearly refers only to Morgan claims that the substance of the amended agreement transactions between a partner and the partnership itself. creates a security interest that is governed by Article Nine. Turn–Key conceded as much during its oral argument at In that regard, Morgan points to the language of the amended the submission of this appeal. We are not cited to any agreement, which, among other things, reflects the intent applicable provision of the TRPA that references transactions of the parties by authorizing a partner to “encumber” its between partners where the partnership interest of one partner partnership interest to “secure performance” of an obligation is encumbered, in the words of the amended agreement, to that partner. The terms of such “pledge,” including events “to secure performance of an obligation to that partner.” of “default,” must be in a writing signed by the partners. Therefore, we find no irreconcilable statutory conflict Further, the amended agreement provides that any “pledged between the TRPA and Article Nine as it relates to the facts interest” will immediately pass upon any event of default of this case. by adjusting the partners' capital accounts such that any debt is automatically offset by the defaulting party's capital 13 The Texas Revised Partnership Act, Tex.Rev.Civ. Stat. account. If the amount of the debt due and unpaid exceeds Ann. art. 6132b–1.01 to –11.04 (Vernon Supp.2003), the defaulting party's capital account, that partner's interest applies to partnerships formed on or after January 1, terminates, and the defaulting partner remains liable for the 1994 and to those partnerships formed before that date excess amount. that elect to be governed by the new act. Id. art. 6132b– 11.03(a)(1). In this case, the 1993 JVA specifically Turn–Key consistently argues its actions should not be provides that the parties' agreement was subject to the governed by the U.C.C. The primary reason it cites is that Texas Uniform Partnership Act, which preceded the the amended agreement authorized an alternate method of Revised Partnership Act. Although Turn–Key makes payment and, as a result, it was not limited to enforcement no assertion that the parties here ever elected to be of its security interest under Article Nine. Thus, Turn–Key governed by the Revised Partnership Act, we assume for the sake of considering Turn–Key's argument, without asserts it had two options after Morgan defaulted: (1) it could so deciding, that the relevant provisions of the Revised have foreclosed on its security interest subject to the security Partnership Act are applicable to the Morgan/Turn–Key agreement and thus could have been subject to both the duties partnership. and protections of Article Nine, or (2) it could have simply adjusted the capital accounts by the amount of the debt and 14 Notwithstanding the applicability of the Texas Revised then could have sued Morgan for the deficiency, as provided Partnership Act, subsection (c) of article 6132b–4.01 is under the terms of the amended agreement. As evidence of drawn from and quite similar to section 18(1)(c) of the its election to pursue the latter option, Turn–Key directs us repealed Texas Uniform Partnership Act. See Act of May to its June 29 letter, which informed Morgan that Turn–Key 16, 1961, 57th Leg., R.S., ch. 158, § 18(1)(c), 1961 Tex. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 5 Morgan Buildings and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (2003) 49 UCC Rep.Serv.2d 941 Gen. Laws 294, repealed by Act of June 19, 1993, 73rd that, at the very least, the amended agreement was an Leg., R.S., ch. 917, § 1, 1993 Tex. Gen. Laws 3896. impermissible “manifestly unreasonable” modification of Finding no applicable Texas authority to support its argument, these requirements. Morgan asserts that since the amended Turn–Key cites us to a decision from the Georgia Court of agreement provided for absolutely no advance notice of Appeals in the case of Consolidated Equities Corp. v. Bird, disposition, effectively, there was a waiver of the Article 195 Ga.App. 45, 392 S.E.2d 276 (1990). Turn–Key argues Nine notice requirements. Texas courts *880 have long that this Georgia case supports its position that the amended prohibited waivers of the Article Nine requirements. See, e.g., agreement is merely an alternate method of payment and not Tanenbaum v. Econ. Lab., Inc., 628 S.W.2d 769 (Tex.1982); a security agreement governed by Article Nine. Turn–Key Rabinowitz v. Cadle Co. II, Inc., 993 S.W.2d 796 (Tex.App.- suggests that the Georgia case addresses a factual situation Dallas 1999, pet. denied); Burton v. Nat'l Bank of Commerce similar to that before us. of Dallas, 679 S.W.2d 115 (Tex.App.-Dallas 1984, no writ). Further, Morgan advises that Texas courts have not tolerated The court in Consolidated Equities found the offset of several waiver of a secured party's obligation to dispose of collateral defaulting partners' capital accounts to be pursuant to an in a commercially reasonable manner. See United States v. agreement for “alternate methods of payment” as opposed to Terrey, 554 F.2d 685 (5th Cir.1977) (applying Texas law); a transaction governed by the U.C.C. Id. at 278. Although Rabinowitz, 993 S.W.2d at 798–99; O'Neil v. Mack Trucks, we do find some similarities between the facts recited in the Inc., 533 S.W.2d 832, 836 (Tex.Civ.App.-El Paso 1975), Consolidated Equities case and those in the case before us, rev'd in part on other grounds, 542 S.W.2d 112 (Tex.1976), we read Consolidated Equities as distinguishable from the mandate recalled and reissued by 551 S.W.2d 32 (Tex.1977) case at bar and decline to follow it. In Consolidated Equities, (per curiam). Turn–Key responds by arguing that there on the one hand, the court pronounced the general rule that was no waiver. Alternatively, Turn–Key argues that even “[a]n agreement for an alternative form of payment does not if the U.C.C. were to apply, its actions were pursuant to a allow for an indirect evasion by the creditor of the debtor “modification” authorized by section 9.501(c) that could not protection provisions of Article Nine.” Id. Yet, on the other possibly be construed as “manifestly unreasonable,” since hand, the Georgia court found that since the “alternative Morgan had already agreed to the “modification” as to the method of payment” provided that there would be no claim disposition or retention of its partnership interest when it for deficiency, the protection provisions of Article Nine were signed the amended agreement. not evaded. According to that court's reasoning, the debtor protection provisions of Article Nine were “inapplicable and It is clear from a plain reading of section 9.501(c) that irrelevant.” Id. at 278–79. We do not agree with the Georgia debtors' rights and secured creditors' duties under sections court's sweeping statement that Article Nine protections are 9.504 and 9.505 may not be waived regarding (1) commercial “inapplicable and irrelevant” in instances where secured reasonableness of the disposition of collateral, and (2) parties do not pursue defaulting partners for post-disposition advance notice of disposition or retention of collateral. and/or post-retention deficiency claims. Regardless of the While a debtor and creditor may enter into an agreement Georgia court's reasoning, the amended agreement before us that establishes “the standards by which the fulfillment clearly allows for a deficiency claim against the defaulting of these rights and duties is to be measured,” there is a partner. Even if the provisions of the amended agreement limit. The proposed “standards” must not be “manifestly were to be construed by us as an “alternate method of unreasonable.”15 The term “manifestly unreasonable” is not payment,” such an agreement could not be allowed to stand defined in the U.C.C., and no Texas case law has addressed if it has even the indirect effect of “evasion ... of the debtor the specific issue raised in this case. However, Black's Law protection provisions of Article Nine.” Id. at 278. Dictionary defines “manifest” as: “Evident to the senses, especially to the sight, obvious to the understanding, evident to the mind, not obscure or hidden, and is synonymous with 2. Waiver of Debtor Safeguards or Reasonable open, clear, visible, unmistakable, indubitable, indisputable, Modification of Standards? evident, and self-evident.” Black's Law Dictionary 962 (6th Morgan argues the amended agreement constitutes a waiver ed.1990).16 of the notice and commercially reasonable requirements for disposition or retention of collateral in violation of the prohibitions of section 9.501(c). Morgan asserts © 2025 Thomson Reuters. No claim to original U.S. Government Works. 6 Morgan Buildings and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (2003) 49 UCC Rep.Serv.2d 941 The plain intention of the parties found in the complementary 15 See § 9.501(c), supra note 12 (current version at Tex. provisions of the documents is that the amended agreement Bus. & Com.Code Ann. § 9.603 (Vernon Supp.2003)). was created to authorize a security interest and provide an 16 Dictionary definitions can be utilized by courts in alternative means of foreclosure or disposition upon default. construing the plain meaning of words. See Tex. Gov't Hence, we conclude that Article Nine of the U.C.C. applies to Code Ann. § 311.011 (Vernon Supp.2003) (“Words and the amended agreement and to Turn–Key's actions under the phrases shall be read in context and construed according provisions of the amended agreement.18 to the rules of grammar and common usage.”). In reasoning toward our decision, and in view of the dearth 18 See § 9.102(a), supra note 8 (current version at Tex. Bus. of legal authority in Texas, we are mindful of the official & Com.Code Ann. § 9.109 (Vernon Supp.2003)); see comments to the various sections of the U.C.C. prepared by also John Bezdek Ins., 834 S.W.2d at 403. the American Law Institute and the National Conference of Because Article Nine of the U.C.C. applies, we find that Commissioners on the Uniform Commercial Code. These Turn–Key's reliance on the amended agreement is unavailing comments provide valuable guidance to the meaning and to excuse it from failing to provide advance notice. We purpose of the Code as enacted in Texas. In particular, we note hold that the amended agreement is not enforceable to vary that comment four to section 9.501 makes it abundantly clear the requirement of advance notice under Article Nine since that debtors' rights after default are to be carefully protected. It any such omission is violative of section 9.501(c) and the states: “In the area of rights after default our legal system has time honored prohibition of waiver of advance notice of traditionally looked with suspicion on agreements designed the disposition or retention of collateral. See Tanenbaum, to cut down the debtor's rights and free the secured party 628 S.W.2d at 772. Additionally, we hold that Turn–Key is of his duties.... The default situation offers great scope for not excused from its obligations of commercially reasonable overreaching; the suspicious attitude of the courts has been disposition of the collateral based upon the provision of the grounded in common sense.”17 amended agreement providing for an offset of the partnership account as the sole means of disposing of or retaining the 17 See § 9.501(c), supra note 12, at cmt. 4 (current version collateral. That provision of the amended agreement, in at Tex. Bus. & Com.Code Ann. § 9.602 cmt. 2 (Vernon substance, effects an unlawful waiver by the debtor of the Supp.2003)). secured party's obligation to dispose of the collateral in a commercially reasonable manner.19 *881 Conclusion 19 See § 9.501(c), supra note 12 (current version at Tex. Turn–Key's argument that the amended agreement is merely Bus. & Com.Code Ann. § 9.603 (Vernon Supp.2003)); an alternative means of payment, exempt from the U.C.C. see also Rabinowitz, 993 S.W.2d at 798–99. as found in the Consolidated Equities case, is simply not Finally, we conclude that even if the “offset provision” persuasive. The amended agreement does not stand alone. was intended by the parties to define the “standards” for It simply authorizes a partner to “encumber” its partnership compulsory disposition or retention of collateral, including interest to “secure performance of an obligation” to another advance notice, under sections 9.504 and 9.505, those partner. The amended agreement imposes the requirement “standards” were and are “manifestly unreasonable” in light that a “pledge, including events of default,” be in writing of the prohibition of waiver of those provisions. Accordingly, and authorizes “foreclosure” upon occurrence of an “event of the “offset provision” fails to vary the rights and obligations default.” Then, fitting neatly with the amended agreement, the of the parties as a matter of law. security agreement effects a “pledge” of Morgan's partnership interest to “secure” the repayment of the sum due to be paid We reverse the trial court's judgment and remand this cause pursuant to the note, while the note and security agreement for further proceedings consistent with this opinion. specify the “events of default.” It is clear that the promissory note and security agreement, executed contemporaneously with the amended agreement, supply terms required for All Citations the operation of the disposition provisions in the amended agreement. 97 S.W.3d 871, 49 UCC Rep.Serv.2d 941 © 2025 Thomson Reuters. No claim to original U.S. Government Works. 7 Morgan Buildings and Spas, Inc. v. Turn-Key Leasing, Ltd., 97 S.W.3d 871 (2003) 49 UCC Rep.Serv.2d 941 End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 8 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 fact issue as to whether parties intended location of triggering 645 S.W.3d 212 well to limit location of draining well precluded summary Supreme Court of Texas. judgment on contract claim; res judicata did not bar lessors from arguing that lessee's ROSETTA RESOURCES obligation to protect against drainage extended to well drilled OPERATING, LP, Petitioner, in unit that did not adjoin leased acreage; and v. Kevin MARTIN, Jamie Martin, Court of Appeals could not properly reverse summary judgment granted to lessee on tort and statutory claims. and Ashley Lusk, Respondents No. 20-0898 Reversed and remanded. | Argued February 2, 2022 Procedural Posture(s): Petition for Discretionary Review; | On Appeal; Motion for Summary Judgment. OPINION DELIVERED: May 6, 2022 *216 On Petition for Review from the Court of Appeals for Synopsis the Thirteenth District of Texas, Dori Contreras, J. Background: Lessors brought action against lessee and royalty interest assignee alleging breach of mineral lease Attorneys and Law Firms agreements, fraud, negligence, conversion, mineral trespass, George Scott Christian, George S Christian atty at Law, breach of fiduciary duty, and violation of Theft Liability Act. Austin, for Amicus Curiae Texas Civil Justice League. After severance of claims against lessee from those against assignee, the 156th District Court, Live Oak County, granted Christopher Michael Hogan, Hogan Thompson LLP, lessee's motion for summary judgment and denied lessors' Houston, for Amicus Curiae Texas Oil and Gas Association. motion for partial summary judgment. Lessors appealed. The Corpus Christi - Edinburg Court of Appeals, Contreras, C.J., Macey Reasoner Stokes, Amy Pharr Hefley, Joshua Morrow, 2020 WL 5887566, reversed and remanded with instructions. Baker Botts L.L.P., Houston, James Danford Jr., Charles Lessee petitioned for review, which was granted. Stephen Kelley, Susan Alkadri, Mayer Brown LLP, Houston, for Petitioner. Zachary Paul Hudler, Zachary P. Hudler, P.C., Johnson City, Holdings: The Supreme Court, Busby, J., held that: Juan J. Hinojosa, The Hinojosa Law Firm, P.C., Edinburg, for Respondents. well drilled in unit that did not adjoin leased acreage did not qualify as triggering well under lease addendum; Opinion well drilled in unit containing portion of leased acreage Justice Busby delivered the opinion of the Court. qualified as triggering well; In this oil and gas case, the parties dispute the meaning and application of an express covenant to protect against lessee's obligation under addendum to protect “un-drilled drainage. The covenant appears in a unique and mistake- acreage” from drainage was limited to non-pooled southern ridden lease addendum, which expressly limits the location portion of leased acreage; of wells that may trigger the lessee's obligation to protect against drainage but does not directly address the location addendum's phrase “drainage is occurring” required actual of wells that may cause drainage. The lessor plaintiffs argue drainage, not a showing of deemed drainage; that the covenant's language allows for separate triggering and draining wells, and that the lessee breached the covenant by failing to protect against drainage from a non-triggering well. The lessee defendant responds that it is only obligated © 2025 Thomson Reuters. No claim to original U.S. Government Works. 1 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 to protect against drainage from the limited class of triggering “Lessor's”1] undrilled acreage from drainage and [(2)] in wells. the opinions of reasonable and prudent operations [read “operators”2], [(a)] drainage is occurring on the un-drilled We conclude that the addendum is ambiguous because both acreage, even though the draining well is located over three interpretations of this poorly drafted covenant are reasonable. hundred-thirty (330) feet from the un-drilled acreage, [(b)] We also reject the lessee's res judicata defense, but we the Lessee shall spud an offset well on said un-drilled conclude that the court of appeals improperly reversed the acreage or on a unit containing said acreage within twelve trial court's take-nothing summary judgment on the lessors’ (12) months from the date the drainage began or release the tort and statutory claims, which they did not challenge on acreage which is un-drilled or is not a part of a unit which appeal. We therefore reverse the court of appeals’ judgment, is held by production. reinstate the trial court's summary judgment in part as to the lessors’ tort and statutory claims, and remand for further 1 Both parties agree that “lessor” and “lessee” should be proceedings on their claim for breach of the lease. switched due to a scrivener's error. 2 Rosetta argues that “operations” should read “operators” Background and claims that the Martins have never argued otherwise. Mesquite assigned its rights as lessee to petitioner Rosetta The lessors are respondents Kevin Martin, Jamie Martin, Resources Operating, LP, in 2007. Shortly thereafter, and Ashley Lusk (the Martins), who own land in Live Oak Newfield Exploration Co. and Dynamic Production, Inc. County. They entered into mineral lease agreements with (collectively Newfield) joined with Rosetta to create the Mesquite Development in 2001 and 2006. The leases contain Martin Unit, which contained portions of the Martin Lease two key provisions related to drainage. Paragraph 5 of the (the Martin Pooled Acreage) and property from unrelated 2001 agreement provided: leases. The southern portion of the Martin Lease acreage was not included in the unit. Rosetta assigned a percentage of its In the event a well or wells producing oil or gas in paying royalty interest in the Martin Pooled Acreage to Newfield but quantities should be brought in on adjacent land and within retained its entire interest in the non-unitized acreage to the 330 feet of and draining the leased premises, or land pooled south. therewith, Lessee agrees to drill such offset well or wells as a reasonably prudent operator would drill under the same In 2008, Newfield drilled a well on the Martin Pooled Acreage or similar circumstances. Lessee may at any time execute (the Martin Well). In 2009, Newfield created a separate unit and deliver to Lessor or place of record a release or releases (the Simmons Unit) that does not adjoin the Martin Lease and covering any portion or portions of the above described drilled a well on that acreage (the Simmons Well). premises and thereby surrender this lease as to such portion or portions and be relieved of all obligations as to the In 2014, the Martins sued Rosetta and Newfield for breach acreage surrendered. of Addendum 18, alleging that the addendum obligated the In 2006, the parties agreed to various amendments and lessees to protect the undrilled lease acreage south of the extensions including Addendum 18, which altered the terms Martin Unit from drainage caused by the Simmons Well. of Paragraph 5 and is at issue here. The unique, customized The Martins also brought claims for common-law fraud, language of Addendum 18 includes several typographical and negligence, conversion, mineral trespass, breach of fiduciary grammatical errors and lacks helpful punctuation. We have duty, and violation of the Theft Liability Act. The lessees inserted bold numbers and letters into its text (using brackets) responded that the Simmons Well had not triggered their to *217 help organize its content and facilitate our analysis. obligation to protect the undrilled acreage from drainage Addendum 18 provides: because it was not drilled on property adjoining the Martin Notwithstanding anything contained herein to the contrary, Lease. it is further agreed that [(1)(a)] in the event a well is drilled on or in a unit containing part of this acreage or is drilled The trial court granted summary judgment for Newfield and on acreage adjoining this Lease, [(b)] the Lessor [read severed the claims against it from those against Rosetta. “Lessee”], or its agent(s) shall protect the Lessee's [read Rosetta then moved for its own summary judgment on all the Martins’ claims on several grounds. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 2 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 language of Addendum 18 allows for separate triggering and On appeal from Newfield's summary judgment, the Martins draining wells, (2) the court of appeals correctly concluded argued—for the first time—that the Martin Well had triggered that the elements of res judicata were not met, (3) the Addendum 18's covenant to protect against drainage, and that summary judgment record includes production reports that this obligation encompassed any drainage from the Simmons establish drainage, and (4) in the alternative, Addendum 18 Well. Martin v. Newfield Expl. Co., No. 13-17-00104-CV, is ambiguous. 2018 WL 1633574, at *3 (Tex. App.—Corpus Christi– Edinburg Apr. 5, 2018, pet. denied) (mem. op.). Rejecting that position as waived, the court of appeals affirmed, Analysis agreeing with Newfield that the Simmons Well did not trigger Addendum 18. Id. I. Addendum 18 is ambiguous regarding whether the Martin Well triggered Rosetta's obligation to protect After the Newfield appeal, the trial court returned to Rosetta's against drainage from the Simmons Well. motion for summary judgment, inviting the Martins *218 to submit additional briefing and to move for summary A. Standard of review and applicable law judgment regarding the effect of the Martin Well. The We review summary judgments de novo. Scripps NP Martins filed a second amended petition and a motion for Operating, LLC v. Carter, 573 S.W.3d 781, 790 (Tex. 2019). partial summary judgment, asserting that Rosetta's obligation To prevail on a motion for traditional summary judgment, the to protect against drainage—including that caused by the movant must show that no material fact issues exist and that Simmons Well—was triggered by the Martin Well. The trial it is entitled to judgment as a matter of law. Tex. R. Civ. P. court granted Rosetta's motion for summary judgment on all 166a(c). “When both parties move for summary judgment and the Martins’ claims and denied the Martins’ motion. the trial court grants one motion and denies the other, ... we review both sides’ summary judgment evidence and render The court of appeals reversed and remanded, instructing the judgment the trial court should have rendered.” S. Crushed the trial court to grant partial summary judgment for the Concrete, LLC v. City of Houston, 398 S.W.3d 676, 678 (Tex. Martins. ––– S.W.3d ––––, 2020 WL 5887566, at *6 (Tex. 2013). App.—Corpus Christi–Edinburg Oct. 1, 2020). Construing Addendum 18, the court concluded that the Martin Well Mineral leases are contracts, so their meaning is determined triggered both a general duty to protect against drainage using general principles of contract construction. Endeavor and a specific obligation to spud an offset well or release Energy Res., L.P. v. Energen Res. Corp., 615 S.W.3d 144, the undrilled acreage if, “in the opinions of reasonable and 147–48 (Tex. 2020). The goal of contract construction is to prudent operations, drainage is occurring on the un-drilled ascertain the parties’ intent as expressed in the language of acreage.” Id. at ––––, 2020 WL 5887566 at *5. The court the agreement. Id. at 148. of appeals also concluded that the record showed drainage was indisputably occurring. Id. Additionally, because Rosetta *219 Whether a mineral lease is ambiguous is a question and Newfield owned different interests and Rosetta's interests of law. R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., were not at issue during Newfield's summary judgment 596 S.W.2d 517, 518 (Tex. 1980). An ambiguity exists proceedings, the court of appeals rejected Rosetta's res when a contract's “meaning is uncertain and doubtful or it judicata defense. Id. is reasonably susceptible to more than one interpretation.” In re Davenport, 522 S.W.3d 452, 457 (Tex. 2017) Rosetta petitions for review, arguing that (1) Addendum (orig. proceeding). If there is “more than one reasonable 18 cannot be construed to allow separate triggering and interpretation” of the contractual language, then a fact draining wells, (2) the Martins’ argument that the Martin issue arises regarding the parties’ intent. Columbia Gas Well triggered Addendum 18 is barred by res judicata, (3) the Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d court of appeals erroneously concluded that drainage was not 587, 589 (Tex. 1996). Parties’ conflicting interpretations in dispute, and (4) the court erroneously reversed Rosetta's cannot alone create an ambiguity. Apache Deepwater, LLC v. summary judgment as to all the Martins’ claims when the McDaniel Partners, Ltd., 485 S.W.3d 900, 904 (Tex. 2016). Martins’ appeal addressed only their claim for breach of Even if parties agree that a contract is unambiguous and contract. In response, the Martins argue that (1) the plain argue that the unambiguous language merely creates different © 2025 Thomson Reuters. No claim to original U.S. Government Works. 3 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 results, we may independently conclude that the contract is address this allegation. Because we are remanding for ambiguous as a matter of law. URI, Inc. v. Kleberg County, further proceedings on the Martins’ claim for breach of 543 S.W.3d 755, 763 (Tex. 2018). “When a contract contains contract, the parties are free to litigate the alleged implied an ambiguity, the granting of a motion for summary judgment covenant on remand if there is still a dispute regarding whether such a covenant exists or was breached. is improper because the interpretation of the instrument becomes a fact issue.” Coker v. Coker, 650 S.W.2d 391, 394 Though Addendum 18 is an express covenant to protect (Tex. 1983); see also J.M. Davidson, Inc. v. Webster, 128 against drainage, it incorporates the “reasonable and prudent S.W.3d 223, 229 (Tex. 2003). operat[or]” standard of care (RPO standard), which also applies to the implied covenant to protect against drainage.4 To determine whether a lease is ambiguous, we must consider A plaintiff must show two elements to establish breach of an its language as a whole in light of well-settled construction implied covenant: “proof (1) of substantial drainage from the principles. Piranha Partners v. Neuhoff, 596 S.W.3d 740, 743 lessor's field, and (2) that a reasonably prudent operator would (Tex. 2020) (citing URI, 543 S.W.3d at 763). These principles have acted to prevent the drainage.” Kerr–McGee Corp. v. include giving the language its plain, ordinary, generally Helton, 133 S.W.3d 245, 253 (Tex. 2004), abrogated on other accepted meaning, URI, 543 S.W.3d at 764, considering the grounds by Coastal Oil & Gas Corp. v. Garza Energy Tr., 268 context in which words are used, id., avoiding constructions S.W.3d 1 (Tex. 2008). A reasonably prudent operator would that render provisions meaningless, Coker, 650 S.W.2d at not act to prevent drainage unless there was a reasonable 393, and construing contract provisions together so as to give expectation of profit. Clifton v. Koontz, 160 Tex. 82, 325 effect to the whole, Citizens Nat'l Bank in Abilene v. Tex. & S.W.2d 684, 695–96 (1959). P. Ry. Co., 136 Tex. 333, 150 S.W.2d 1003, 1006 (1941). We also avoid constructions of contract language that would lead 4 See Amoco, 622 S.W.2d at 567–68 (explaining that to absurd results. Hemyari v. Stephens, 355 S.W.3d 623, 626 “the standard of care in testing the performance of (Tex. 2011) (per curiam). Extrinsic evidence cannot be used implied covenants by lessees is that of a reasonably to create ambiguity within a contract, but it may be admitted prudent operator under the same or similar facts and if the court determines that the contract is ambiguous. Cmty. circumstances”). Health Sys. Pro. Servs. Corp. v. Hansen, 525 S.W.3d 671, 681 Parties are free to draft novel contractual terms that produce (Tex. 2017). results some may consider odd; a court's duty is to give effect to the parties’ intent as expressed in the contract's language. The Martins’ claims for breach of contract rely largely on Burlington Res. Oil & Gas Co. LP v. Tex. Crude Energy, the plain language of the lease. The lease provision at issue, LLC, 573 S.W.3d 198, 211 (Tex. 2019). From our review of Addendum 18, is an express covenant to protect against available sources, it appears that Addendum 18 is an outlier drainage.3 When oil and gas leases do not expressly address among express covenants to protect against drainage. As the drainage, a covenant to protect against both local and field- court of appeals noted, not only are the addendum's provisions wide drainage is implied. Amoco Prod. Co. v. Alexander, unique, they “suffe[r] from both a lack of accuracy and a lack 622 S.W.2d 563, 567–68 (Tex. 1981). Parties often supersede of clarity,” including typographical and grammatical errors. this implied covenant with contractual language that imposes ––– S.W.3d at ––––, 2020 WL 5887566, at *3. As a result, certain obligations on the lessee. See Bowden v. Phillips we caution that our construction of Addendum 18 in this Petroleum Co., 247 S.W.3d 690, 701 (Tex. 2008); 8 Patrick opinion may not provide useful guidance for determining how H. Martin & Bruce M. Kramer, Williams & Meyers Oil and covenants to protect against drainage typically function. Gas Law: Manual of Terms 683 (2020). Such obligations commonly include the drilling of an offset well, the payment of offset royalties, or the release of acreage. See 8 Manual of B. Though Addendum 18 lacks a coherent structure and Terms at 684–85. Breach of a covenant gives rise to liability helpful punctuation, many of its substantive provisions for *220 damages. See Rogers v. Ricane Enters., Inc., 772 are unambiguous. S.W.2d 76, 79 (Tex. 1989). The parties offer competing interpretations of Addendum 18, and we focus on its language to determine the reasonableness 3 The Martins have also alleged that Rosetta breached of those interpretations. See Columbia Gas, 940 S.W.2d at an implied covenant to protect against drainage, but 589. To frame our discussion of the disputed terms, we begin the parties’ briefing in this Court does not separately by setting out the unambiguous portions of Addendum 18. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 4 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 When holding that a portion of a contract is ambiguous, on leased acreage and in a unit containing part of the leased an appellate court should explain as much of the contract's acreage. unambiguous meaning as possible regarding the disputed issue, which will assist the parties and trial court in framing the remaining questions for the jury to resolve on remand. Cf. 2. Obligation – part (1)(b) J.M. Davidson, Inc., 128 S.W.3d at 229 (“[W]e must examine and consider the entire writing in an effort to harmonize and Part (1)(b) contains the substance of Rosetta's promise to give effect to all the provisions of the contract so that none the Martins. This part explains what Rosetta is obligated to will be rendered meaningless.”); Columbia Gas, 940 S.W.2d do: protect the lease's “un-drilled acreage” from drainage. at 589 (“Whether a contract is ambiguous is a question of law Express covenants to protect against drainage commonly that must be decided by examining the contract as a whole obligate the lessee to protect the entire lease, but Addendum in light of the circumstances present when the contract was 18 uniquely limits Rosetta's responsibility to the “un-drilled” entered.”). portion of the Martin Lease, which the parties agree is the non-pooled southern portion. This limitation may impact how For ease of reference, we have broken down Addendum 18's a reasonably prudent operator evaluates whether drainage language into four parts: the Trigger (1)(a), Obligation (1) is occurring. Addendum 18 does not otherwise define (b), Standard (2)(a), and Performance (2)(b) parts. Together, “drainage,” and the parties dispute whether “drainage” is these parts unambiguously impose an obligation on Rosetta limited by part (1)(a). We address these issues below. that is triggered under limited conditions and that uses an RPO standard to measure whether and when Rosetta must take certain actions to perform that obligation. 3. Standard – part (2)(a) Compared to the broad “protect[ion]” Rosetta promised to 1. Trigger – part (1)(a) provide in part (1)(b), part (2) contains a more specific set of instructions for when “drainage is occurring.” In particular, Part (1)(a) lists various events that provide an initial condition part (2)(a) selects a standard for measuring whether Rosetta for the covenant *221 contained in parts (1)(b) and (2). must take action or risk breach: the reasonably prudent Though the parties disagree about whether part (1)(a) limits operator standard. Together, parts (2)(a) and (2)(b) provide part (1)(b), a question we address below, part (1)(a) at that when a reasonably prudent operator would conclude least defines a triggering event that marks the beginning of drainage is occurring, it must take certain actions within Rosetta's obligation: when a well is drilled in one of the a twelve-month period thereafter to avoid breaching the specified locations. covenant. Typically, express covenants to protect against drainage As mentioned above, the common-law standard that governs are triggered by drilling on adjoining or proximity-limited an implied covenant to protect against drainage involves two acreage. See 8 Manual of Terms at 683. But under this elements: proof of substantial drainage and that a reasonably non-typical clause, three types of wells may serve as a prudent operator would expect it to be profitable to take action trigger: a well “on [leased] acreage,” a well drilled “in a unit to prevent such drainage. See Kerr–McGee, 133 S.W.3d at containing” leased acreage (thus including acreage pooled 253; Clifton, 325 S.W.2d at 695–96. Addendum 18's text with leased acreage), or a well “on acreage adjoining” leased indicates, however, that the parties did not adopt the common- acreage. law standard in its entirety by referring to reasonable and prudent operations. Applying this language from part (1)(a) to undisputed facts in the summary judgment record, we conclude that the Simmons Departing from the “substantial drainage” element of the Well does not qualify as a triggering well because it is outside standard, part (2)(a) requires a lessee to act only if, “in the lease and unit and is not located on adjoining acreage. the opinions of reasonable and prudent operat[ors], drainage See Newfield, 2018 WL 1633574, at *3–4. The Martin Well is occurring on the un-drilled acreage.” (Emphasis added). qualifies as a triggering well, however, because it is located Though “occurring” drainage provides a lower threshold than “substantial drainage,” the addendum's use of “is occurring” © 2025 Thomson Reuters. No claim to original U.S. Government Works. 5 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 signals that a reasonable opinion regarding actual drainage take one of the specified actions in part (2)(b) to avoid breach. is required, not a showing of deemed drainage (an approach As we discuss below, however, the relationship between parts used in some express covenants). As to the second element (1)(a) and (1)(b) is not clear. of the standard, which requires that an operator act to prevent such drainage *222 only if there is a reasonable expectation of profit, the parties do not address whether the language of C. Addendum 18 is ambiguous because there are two reasonable interpretations regarding whether part (2) is consistent with this element.5 In other words, the “drainage” in part (1)(b) is limited by part (1)(a). parties have not offered any views on whether the reference Having outlined how the unambiguous portions of Addendum to a reasonably prudent operator requires evidence that action 18 function, we come to the heart of the parties’ dispute: would be profitable before Rosetta must take one of the whether the “drainage” that part (1)(b) obligates Rosetta to actions specified in part (2)(b). We likewise express no view protect against is limited to drainage from a well listed in part on this question, and the parties may address it on remand if (1)(a). Rosetta and the Martins offer different interpretations it proves necessary to do so. of how parts (1)(a) and (1)(b) relate, and the prevailing interpretation will inform the outcome of the Martins’ 5 Cf. Bell v. Chesapeake Energy Corp., No. 04-18-00129- claim that Rosetta breached Addendum 18. For example, CV, 2019 WL 1139584, at *10 (Tex. App.—San Antonio if Rosetta's obligation to protect against drainage in part Mar. 13, 2019, pet. denied) (mem. op.) (holding that (1)(b) extends to wells not listed in part (1)(a), and if the because the “second element clearly refers back to Martins can show that a reasonably prudent operator would the first,” change to RPO drainage element—“deemed have concluded the Simmons Well was draining the undrilled drainage” instead of “substantial drainage”—“logically negate[d] the requirement of proving economic benefit”). acreage and that Rosetta did not act as required by part (2) (b) within twelve months thereafter, then Rosetta breached the addendum. By contrast, if drainage in part (1)(b) may 4. Performance – part (2)(b) only come from a triggering well listed in part (1)(a), then Rosetta did not breach the addendum because it need not Part (2)(b) provides the actions that Rosetta must take once protect against alleged drainage from the Simmons Well. We a reasonably prudent operator would form an opinion that consider each interpretation in turn to determine whether it is drainage is occurring. This part of the addendum addresses reasonable. how Rosetta may avoid breach: by spudding an offset well in the twelve months after drainage occurs or releasing First, the Martins argue that “drainage” in part (1)(b) is not the undrilled acreage. Departing from the implied covenant, limited by part (1)(a). Under this interpretation, a part (1) which gives the lessee a variety of options to protect against (a) *223 event—the drilling of a qualifying well—would field-wide drainage,6 Addendum 18 gives Rosetta only two trigger Rosetta's obligation but not necessarily identify the options. source of the drainage. Thus, the drilling of the Martin well—which falls under part (1)(a)—would trigger Rosetta's 6 “The duties of a reasonably prudent operator to obligation to protect against drainage of the “un-drilled protect from field-wide drainage may include (1) acreage,” and that obligation includes drainage from the drilling replacement wells, (2) re-working existing Simmons Well even though it is not in a location listed in part wells, (3) drilling additional wells, (4) seeking (1)(a). field-wide regulatory action, (5) seeking Rule 37 exceptions from the Railroad Commission, (6) seeking This interpretation is reasonable because neither part (1)(a) voluntary unitization, and (7) seeking other available nor part (1)(b) contains express language limiting Rosetta's administrative relief.” Amoco, 622 S.W.2d at 568. drainage-protection obligation to a well in part (1)(a). Despite grammatical problems, scrivener's errors, and a Rather, the word “drainage” in (1)(b) is used without direct dearth of helpful punctuation, most of Addendum 18's modification. requirements are unambiguous. The basic parts are there: Rosetta's obligation in part (1)(b) is triggered by a well drilled If the original parties to the addendum had wanted to in one of the locations listed in part (1)(a), and the standard obligate the lessee to protect only against drainage from wells that applies to Rosetta in part (2)(a) informs whether it must identified in part (1)(a), they could easily have done so. Parties commonly trigger the obligation to drill an offset well © 2025 Thomson Reuters. No claim to original U.S. Government Works. 6 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 by identifying the location of a draining well, not merely a part *224 (2)(b).7 We conclude that such an interpretation triggering well. See 4 Patrick H. Martin & Bruce M. Kramer, is reasonable. Williams & Meyers Oil and Gas Law § 671.3 (2020). In fact, Paragraph 5—the parties’ previous, and superseded, 7 If, on remand, the finder of fact agrees with the Martins’ express covenant—did just that. Paragraph 5 provided that interpretation of Addendum 18, it may need to resolve “[i]n the event a well or wells producing oil or gas in additional fact issues regarding parts (2)(a) and (2)(b). paying quantities should be brought in on adjacent land For example, as the record presently stands, the Martins and within 330 feet of and draining the leased premises, have not proven conclusively under part (2)(a) that a or land pooled therewith, Lessee agrees to drill such offset reasonably prudent operator would have formed the well or wells as a reasonably prudent operator would drill opinion that drainage was occurring. And under part under the same or similar circumstances.” (Emphasis added). (2)(b), the Martins have not proven conclusively that Paragraph 5 thus expressly requires that the triggering well be Rosetta failed to drill such a well within twelve months a draining well. The language of Addendum 18 is different: thereafter. The record includes production logs for the it expressly negates the 330-foot limit, expands where the Martin Well showing a decrease after the Simmons triggering well can be located to include the leased premises Well was drilled. But this evidence does not address other possible causes, or when a reasonably prudent and land pooled therewith, and deletes the requirements that operator would have formed the opinion that drainage the triggering well produce in paying quantities and drain was occurring. the leased premises or land pooled therewith. It would be reasonable to conclude that Addendum 18 should not be read Second, Rosetta argues that “drainage” must come from a to contain language from Paragraph 5 that the parties agreed well identified in part (1)(a). Under this interpretation, a to change. part (1)(a) event—the drilling of a qualifying well—would both trigger Rosetta's obligation and identify the source of In addition, it would be reasonable to conclude that the parties the drainage against which it must protect. Here, Rosetta's intended the drilling of a well under part (1)(a) to signal obligation to protect against drainage from the Simmons Well that the lessee's obligation had begun, but not necessarily would not have arisen because that well does not fall under that drainage was occurring. Rosetta asks why “anyone in part (1)(a). the Martins’ shoes”—i.e., desiring general “protection from drainage to the south and southwest”—would “condition that This interpretation is also reasonable because Addendum protection on whether an entirely separate, non-draining well 18 could be read to suggest that part (1)(b) is restricted happened to have already been drilled elsewhere on their by both parts (1)(a) and (2)(a). Because part (1)(a) is a unit?” Perhaps the parties chose this limitation because until a conditional clause, the drilling of a qualifying well must well is drilled on the lease or unit, the lessee is more likely to occur before part (1)(b), the main clause, goes into effect. It be unaware of the threat of drainage from wells not adjoining would be reasonable to conclude that the conditional clause the lease. Once the lessee has a well operating on the lease or informs the scope of the main clause, especially if it does unit, however, it is easier for it to notice such drainage. not conflict with subsequent limiting language. As Rosetta argues, part (1)(a) references only a single “event” and “well.” Further support for the conclusion that the triggering and If part (1)(a) provides the condition under which Rosetta must draining wells need not be the same comes from the parties’ protect against drainage, then that single event and well could decision to allow a triggering well to be “on ... the leased reasonably be read to inform the scope of the obligation. acreage,” including the non-unitized southern portion of the Martin Lease. A triggering well on this “un-drilled Interpreting part (1)(a) to provide a list of possible draining acreage” could not drain itself, which suggests that the wells would not produce absurd results. It may seem parties contemplated the possibility of separate triggering and counterintuitive, at first glance, to mandate protection against draining wells. drainage from wells drilled on leased property, but parties may agree to prevent “internal drainage” where some lease Ultimately, under the Martins’ interpretation, the covenant acreage is unitized with non-lease acreage. See 4 Williams & begins with the drilling of a well under part (1)(a) but is not Meyers § 669.16. Here, because Rosetta's obligation is limited breached until an RPO would conclude drainage is occurring to drainage of the “un-drilled acreage,” it would have been under part (2)(a) and the lessee fails to take action under reasonable for the parties to include wells located on leased © 2025 Thomson Reuters. No claim to original U.S. Government Works. 7 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 acreage in part (1)(a)—such as the Martin Well—because wells on the Martin Unit may have paid a smaller royalty. II. Res judicata does not bar the Martins’ argument that Additionally, Rosetta's reading would not create conflict drilling the Martin Well triggered an obligation to prevent between the sections of Addendum 18 that inform drainage from the Simmons Well. “drainage”—parts (1)(a) and (2)(a). Part (2)(a) tells us that Rosetta argues that it is nonetheless entitled to summary a draining well under Addendum 18 is not defined by its judgment on the Martins’ claim of breach because it distance from a particular area, as it was under the original conclusively proved its affirmative defense of res judicata. Paragraph 5. But that is not to say that part (2)(a) does In Rosetta's view, the Martins’ argument that the Martin away with all proximity restrictions; the distance from which Well triggered Rosetta's duty to protect against drainage from a reasonably prudent operator would conclude drainage is the Simmons Well is barred because it could have been occurring is necessarily limited. And because part (1)(a)— raised against Newfield in the trial court, but the court of under Rosetta's reading—would create a more restrictive limit appeals in Newfield held that it had not been preserved. on the location of draining wells, there is no conflict between We disagree for two reasons: res judicata does not apply the two provisions. Ultimately, it would be reasonable to between separate actions created by a trial-court severance, conclude that the parties created a two-step system under and Rosetta's challenge is to a new argument raised by the which part (1)(a) describes a limited class of draining wells Martins, not a new claim. and the RPO standard provides a second check before the The doctrine of res judicata, or claim preclusion, bars causes lessee would need to act on its obligation.8 of action that have already been fully adjudicated or that, with the use of diligence, could have been brought in the prior suit. 8 If, on remand, the finder of fact agrees with Rosetta Eagle Oil & Gas Co. v. TRO-X, L.P., 619 S.W.3d 699, 705 about the relationship between parts (1)(a) and (1)(b), (Tex. 2021); Barr v. Resol. Tr. Corp. ex rel. Sunbelt Fed. Sav., then it may need to resolve a sub-ambiguity: whether 837 S.W.2d 627, 628 (Tex. 1992). Res judicata requires proof Addendum 18 contains two separate obligations. The of three elements: “(1) a prior final judgment on the merits court of appeals construed Addendum 18 to contain two by a court of competent jurisdiction; (2) identity of parties duties, one that requires the lessee to protect against drainage and another that requires spudding an offset or those in privity with them; and (3) a second action based well or releasing the acreage if an RPO concludes on the same claims as were raised or could have been raised drainage is occurring. Under this two-duty construction, in the first action.” Amstadt v. U.S. Brass Corp., 919 S.W.2d the first duty—contained in part (1)(b)—would obligate 644, 652 (Tex. 1996); see also 18A Charles Alan Wright & the lessee to protect against drainage only from wells Arthur R. Miller, Federal Practice and Procedure § 4404 (2d identified in part (1)(a) but would arguably give the ed. 2002) (“Res judicata applies as between separate actions, lessee the full range of options to protect against drainage not within the confines of a single action on trial or appeal.”). under the implied covenant. By contrast, the second duty Parties may be in privity if (1) they “control an action,” (2) —contained in part (2)—would apply to any well from “their interests can be represented by a party to the action,” which an RPO would conclude drainage was occurring or (3) they are “successors in interest.” Amstadt, 919 S.W.2d but would limit the lessee's options for compliance. at 653. This two-duty construction is not reasonable if part (1) (a) serves the function that the Martins’ interpretation Though the severance of Newfield's summary judgment suggests. If the Martins are correct that part (1)(a) does not necessarily limit the source of drainage, then neither created a second action, see Hall v. City of Austin, 450 S.W.2d duty could be triggered without the other. But if Rosetta 836, 837–38 (Tex. 1970), and the Martins’ attempt to raise is correct that part (1)(a) describes the source of drainage the argument was unsuccessful in Newfield, claim preclusion from which it “shall protect” under part (1)(b), it may be does not apply for two independent reasons. necessary to determine whether part (2) contains a duty apart from that contained in part (1). First, this case began as a single action against both Rosetta *225 Because we conclude that both interpretations are and Newfield, and the Martins’ claims against Rosetta were reasonable, a fact issue exists and summary judgment for any raised in that action. We have recognized—as a “logical party was improper on the merits of the Martins’ claim that corollary” to the general rule—that “the res judicata effects Rosetta breached Addendum 18. of an action cannot preclude litigation of *226 claims that a trial court explicitly separates or severs from that action.” © 2025 Thomson Reuters. No claim to original U.S. Government Works. 8 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 Van Dyke v. Boswell, O'Toole, Davis & Pickering, 697 We agree. Rosetta sought summary judgment on the Martins’ S.W.2d 381, 384 (Tex. 1985) (holding that, where trial court tort claims under the economic-loss rule and on their Theft granted separate trials for intervention claim and malpractice Liability Act claim on the ground that Rosetta did not benefit counterclaim, judgment in first action did not have a res from the Simmons Well. The Martins did not challenge either judicata effect on second); Morrison v. St. Anthony Hotel, ground on appeal. 295 S.W.2d 246, 249 (Tex. App.—San Antonio 1956, writ ref'd n.r.e.) (concluding that prior severed appeal was not res An appellate court may not reverse a trial court's judgment judicata because third party was not part of appeal); see also without properly assigned error. Cent. Educ. Agency v. Burke, Law Offices of Robert D. Wilson v. Tex. Univest-Frisco, Ltd., 711 S.W.2d 7, 8 (Tex. 1986) (per curiam). When a trial 291 S.W.3d 110, 114 (Tex. App.—Dallas 2009, no pet.) (“The court's order granting summary judgment does not specify the actions taken in the initial suit had no effect on the new cause, grounds on which its order is based, the appealing party must which had been severed by the trial court.”). negate each ground upon which the judgment could have been based. Malooly Bros. v. Napier, 461 S.W.2d 119, 120–21 (Tex. Indeed, the reasons why a severance was permissible here 1970); Jarvis v. Rocanville Corp., 298 S.W.3d 305, 313 (Tex. confirm that the elements of res judicata are not met. One App.—Dallas 2009, pet. denied). reason is that Newfield and Rosetta are not in privity. Neither Rosetta nor Newfield controlled the other, neither succeeded *227 A party may negate each ground by raising separate in interest from the other, and neither held the same interests issues “or asserting a general issue that the trial court erred in with respect to the Martin Lease or Martin Unit. The Martins’ granting summary judgment and within that issue providing claims against each party were also somewhat different, as argument negating all possible grounds upon which summary Rosetta alone held a leasehold interest in the non-unitized judgment could have been granted.” Jarvis, 298 S.W.3d at southern portion of the Martin Lease. In addition, Rosetta was 313; Tweedell v. Hochheim Prairie Farm Mut. Ins. Ass'n, 1 not a party to the Newfield appeal and the claims against it S.W.3d 304, 309 (Tex. App.—Corpus Christi–Edinburg 1999, were not fully adjudicated. See Morrison, 295 S.W.2d at 249. no pet.) (affirming trial court's summary judgment on grounds not challenged “(1) by a separate [issue] or (2) by argument Second, and independently, Rosetta's res judicata defense and citation to authority under” a broader issue). fails because Rosetta does not seek to preclude the Martins’ claim, but rather an issue the Martins have raised in support A general statement that “the trial court erred by granting of that claim. Res judicata applies to claims, not issues. The [the movant's] motion for summary judgment” may be basic nature of the Martins’ claim that Rosetta and Newfield sufficient to allow argument on all possible grounds that breached Addendum 18 has not changed; the Martins simply the summary judgment motion was granted, Plexchem Int'l, added a new argument (with the trial court's permission) Inc. v. Harris Cnty. Appraisal Dist., 922 S.W.2d 930, 931 regarding why Addendum 18 was triggered. See Barr, 837 (Tex. 1996) (per curiam), but if a party does not brief those S.W.2d at 628–29 (differentiating between issue and claim arguments to the court of appeals, the court of appeals preclusion and concluding that alleged failure to bring “all cannot properly reverse summary judgment on those grounds. theories of liability in one suit” constituted defense of claim Malooly Bros., 461 S.W.2d at 121; see also Tex. R. App. preclusion). P. 38.1(i) (“The [appellant's] brief must contain a clear and concise argument for the contentions made, with appropriate For these reasons, Rosetta is not entitled to a take-nothing citations to authorities and to the record.”). judgment on the Martins’ claim of breach based on res judicata. Applying these principles here, we examine the Martins’ causes of action, the grounds on which Rosetta moved for summary judgment, and whether the Martins attacked each III. The court of appeals erred by reversing Rosetta's of those grounds in their court-of-appeals briefing. These summary judgment as to the Martins’ tort and statutory sources show that the court of appeals erroneously reversed claims. Rosetta's summary judgment as to the Martins’ tort and Finally, Rosetta argues that the court of appeals erroneously statutory claims. reversed its entire summary judgment because the Martins failed to challenge Rosetta's independent grounds for granting summary judgment on the Martins’ tort and statutory claims. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 9 Rosetta Resources Operating, LP v. Martin, 645 S.W.3d 212 (2022) 65 Tex. Sup. Ct. J. 949 summary judgment evidence, such as “Rosetta did not show In their second amended petition, the Martins alleged a that they are entitled to a judgment as a matter of law.” Such breach-of-contract cause of action and several tort causes of a statement is not sufficient to challenge Rosetta's economic- action, including common-law fraud, negligence, negligent loss-rule ground for summary judgment on the tort claims misrepresentation, conversion, mineral trespass, breach of or its no-benefit ground for summary judgment on the Theft fiduciary duty, and fraudulent concealment. They also alleged a statutory claim for violation of the Theft Liability Act. Liability Act claim. See Jarvis, 298 S.W.3d at 313. In its motion for summary judgment, Rosetta challenged all Because the Martins did not challenge each independent these claims. On the tort claims, Rosetta first argued that each ground on which the trial court could have based its summary of the Martins’ tort claims were barred by the economic loss judgment on the tort and statutory claims, the trial court's take- rule. Rosetta then argued, in the alternative, that the Martins’ nothing judgment on those claims should stand. The court of tort claims failed because no duty existed in contract. Then, as appeals improperly reversed the trial court's judgment in its to the Theft Liability Act claim and some of the other claims, entirety. Rosetta argued that they failed as a matter of law because it obtained no benefit from the Simmons Well, which was the alleged draining well. Without identifying specific grounds, Conclusion the trial court granted summary judgment for Rosetta on all the Martins’ claims. For these reasons, we hold that Addendum 18 is ambiguous regarding whether the source of “drainage” in part (1)(b) is We conclude that Rosetta's economic-loss-rule and no-benefit limited to the well locations listed in part (1)(a). Therefore, grounds for summary judgment were independent of its a fact issue remains on the Martins’ claim for breach of the breach-of-contract grounds, and thus the Martins needed to lease, and summary judgment is not proper for either party. challenge those grounds separately in the court of appeals. To We also hold that the Martins’ argument that drilling the determine whether a plaintiff's tort claim sounds in contract Martin Well triggered Rosetta's obligation to prevent drainage under the economic loss rule, we look at whether the loss is from the Simmons Well is not barred by res judicata. But the to “the subject of the contract.” LAN/STV v. Martin K. Eby court of appeals erred by reversing the take-nothing summary Constr. Co., 435 S.W.3d 234, 242 (Tex. 2014); see also Jim judgment as to the Martins’ tort and statutory claims. We Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986). therefore reverse the court of appeals’ judgment, reinstate the This is a separate inquiry from whether Rosetta can defeat trial court's summary judgment in part as to the Martins’ tort the Martins’ claim for breach of contract. Similarly, whether and statutory claims, and remand for further proceedings on Rosetta benefited from the Simmons Well is a separate the Martins’ claim for breach of contract. inquiry. In their court-of-appeals briefing, the Martins’ substantive Justice Huddle and Justice Young did not participate in the arguments related only to Rosetta's contractual obligations decision. under Addendum 18. There were no citations or authorities related to their tort or statutory causes of action or to Rosetta's All Citations economic-loss-rule defense. At most, the Martins make broad statements challenging *228 the sufficiency of Rosetta's 645 S.W.3d 212, 65 Tex. Sup. Ct. J. 949 End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works. © 2025 Thomson Reuters. No claim to original U.S. Government Works. 10M. Chris Doyle President & CEO
III. Conclusion
M. Chris Doyle President & CEO
M. TaylorLevesque taylor.levesque@troutman.com 10/14/2025 7:34:04 AM SENT
V.T.C.A., Business Organizations Code § 152.002
V.T.C.A., Business Organizations Code § 152.204
V.T.C.A., Business Organizations Code § 152.205
V.T.C.A., Business Organizations Code § 152.206
V.T.C.A., Business Organizations Code § 21.223
Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP v. Primexx Energy Corporation, M. Christopher Doyle, Angelo Acconcia, Blackstone Inc., Blackstone Holdings III LP, Blackstone EMA II LLC, BMA VII LLC, Blackstone Energy Management Associates II LLC, Blackstone Energy Partners II LP, Blackstone Management Associates VII LLC, Blackstone Capital Partners VII LP, BCP VII/BEP II Holdings Manager LLC, BX Primexx Topco LLC, and BPP Holdco LLC (Primexx Energy Opportunity Fund, LP and Primexx Energy Opportunity Fund II, LP v. Primexx Energy Corporation, M. Christopher Doyle, Angelo Acconcia, Blackstone Inc., Blackstone Holdings III LP, Blackstone EMA II LLC, BMA VII LLC, Blackstone Energy Management Associates II LLC, Blackstone Energy Partners II LP, Blackstone Management Associates VII LLC, Blackstone Capital Partners VII LP, BCP VII/BEP II Holdings Manager LLC, BX Primexx Topco LLC, and BPP Holdco LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.