the Huff Energy Fund, L.P., WRH Energy Partners, L.L.C., William R."Bill" Huff, Rick D'Angelo, Ed Dartley, Bryan Bloom, and Riley-Huff Energy Group, LLC v. Longview Energy Company
04-12-00630-CV
| Tex. App. | May 29, 2015Background
- EnerQuest Oil & Gas submitted an amicus brief supporting Longview Energy in an appeal concerning alleged usurpation of oil-and-gas opportunities in the Eagle Ford Shale.
- Longview is an E&P company that identified and invested in a large shale play (Eagle Ford) and developed leasing and drilling strategies across a broad geographic/geologic area.
- William R. “Bill” Huff and Rick D’Angelo were Longview directors/officers accused of diverting leasehold opportunities that the jury found belonged to Longview.
- The dispute centers on whether those lease acquisitions constituted a “corporate opportunity” that fiduciaries owed to Longview (duty of loyalty).
- EnerQuest argues for a broad application of the corporate-opportunity doctrine in the E&P context and urges the appellate court to affirm the trial judgment against Huff and D’Angelo.
Issues
| Issue | Plaintiff's Argument (EnerQuest/Longview) | Defendant's Argument (Huff/D'Angelo) | Held (position urged by amicus) |
|---|---|---|---|
| Scope of corporate-opportunity doctrine | Directors/officers must not seize opportunities in the company’s line of business; doctrine should be applied broadly | Limits doctrine by narrow geographic/geologic definition to permit private deals | Apply Guth broadly; fiduciaries owe undivided loyalty and cannot usurp such opportunities |
| “Interest or expectancy” test | E&P companies have a reasonable expectancy across large shale plays based on research, leases, and development plans | No present, specific expectancy in any single parcel in a vast play; opportunity too diffuse | Interest/expectancy should be read broadly in shale-play context; prior research and strategy create expectancy |
| Financial-ability defense | Financial distress short of insolvency should not permit fiduciaries to take opportunities | Directors may claim corporation financially unable to pursue opportunity | Financial inability defense should be limited; only actual insolvency (or equivalent) justifies taking the opportunity |
| Policy on fiduciary enforcement | Strict enforcement deters self-dealing and protects investors in risky E&P ventures | Narrow rules prevent undue restraint on individuals and business pragmatism | Strong, predictable fiduciary rules required to prevent gamesmanship and promote investor confidence |
Key Cases Cited
- Guth v. Loft, 5 A.2d 503 (Del. 1939) (establishes corporate-opportunity test and strict duty of loyalty)
- Cede & Co. v. Technicolor, Inc., 634 A.2d 345 (Del. 1993) (fiduciary duties and corporate governance principles)
- Broz v. Cellular Info. Sys., Inc., 673 A.2d 148 (Del. 1996) (discusses limited defenses including financial inability)
- Irving Trust Co. v. Deutsch, 73 F.2d 121 (2d Cir. 1934) (equitable hostility to exceptions that erode undivided loyalty)
- Meinhard v. Salmon, 249 N.Y. 458 (N.Y. 1928) (articulates high standard of fiduciary punctilio of honor)