WATKINS v. HAMM, 2018 OK CIV APP 2

Continental Resources acquired 100% of Wheatland Oil's assets in 2012; Harold Hamm (founder/CEO, controlling shareholder of Continental) and Jeffrey Hume (Wheatland co-owner) received Continental stock for Wheatland assets.
Hamm owned ~68% of Continental pre-transaction; minority shareholders’ percentage fell slightly after issuance of ~$313 million in new shares to Hamm and Hume.
Minority shareholders (Watkins and a pension fund) originally filed derivative and class claims alleging breach of fiduciary duty, unjust enrichment, and misleading proxy disclosures, claiming Continental overpaid (by ~$100M) and thereby diluted minority interests.
Plaintiffs dismissed derivative claims and amended to assert a direct claim on behalf of minority shareholders for unlawful dilution and rescission/monetary relief. Defendants moved to dismiss, arguing Oklahoma does not recognize such direct claims and that the alleged injury is derivative.
The district court dismissed the amended (direct) petition with prejudice. The Court of Civil Appeals affirmed, declining to adopt Delaware’s direct-action approach (as in Gentile) and holding the pleaded claim is derivative in nature and thus not maintainable as a direct claim.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Oklahoma recognizes a direct shareholder action against officers/directors for dilution like Gentile	Minority shareholders may bring a direct claim when a controlling shareholder causes over-issuance that uniquely injures minorities	Oklahoma has only derivative statutory remedy; recognizing a direct claim would swallow derivative rules and bypass demand requirements	Oklahoma declines to adopt a broad direct-action doctrine here; will not recognize the direct claim in this case
Whether the amended petition pleads a viable Gentile-type direct claim under Tooley's test	The dilution and transfer of value/voting power to Hamm/Hume caused a unique injury to minority shareholders making the claim direct	The alleged injury is to Continental (corporate overpayment); remedies would benefit the corporation; plaintiffs cannot prevail without proving corporate injury	Plaintiffs fail Tooley prongs: harm is corporate, relief would benefit the corporation, and plaintiffs cannot prevail absent showing injury to Continental; claim is derivative and dismissed

Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (test for distinguishing direct vs. derivative claims based on who suffered harm and who benefits from recovery)
Gentile v. Rossette, 906 A.2d 91 (Del. 2006) (recognized a limited dual-natured direct claim for dilution where controlling shareholder caused over-issuance and uniquely harmed minority holders)
El Paso Pipeline GP Co. v. Brinckerhoff, 152 A.3d 1248 (Del. 2016) (refused to extend Gentile; warned against allowing direct suits to subsume derivative rule)
Feldman v. Cutaia, 951 A.2d 727 (Del. 2008) (dilution/overpayment claims are generally derivative because harm is to corporation)
Aronson v. Lewis, 473 A.2d 805 (Del. 1984) (demand-futility pleading standard for derivative suits)
Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (addressed standard of review in controller transactions; relevant to demand and fairness analyses)
In re J.P. Morgan Chase & Co. S'holder Litig., 906 A.2d 766 (Del. Ch. 2006) (discussion that dilution alone often does not constitute injury to voting interests)