Louisiana Municipal Police Employees Retirement System v. Continental Resources Inc et al

Filing 98

ORDER granting 87 Motion to Dismiss. Signed by Honorable Timothy D. DeGiusti on 5/30/2013. (mb)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA

LOUISIANA MUNICIPAL POLICE
EMPLOYEES’ RETIREMENT SYSTEM,

)
)
)
Plaintiff,
)
)
v.
)
)
CONTINENTAL RESOURCES, INC.,
)
HAROLD G. HAMM, H. R. SANDERS, JR., )
JOHN T. McNABB II, MARK E. MONROE, )
ELLIS L. McCAIN, ROBERT J. GRANT,
)
JEFFREY B. HUME, and WHEATLAND
)
OIL INC.,
)
)
Defendants.

NO. CIV-12-667-D

ORDER
Before the Court is the motion [Doc. No. 87] to dismiss the Amended Class Action
Complaint (“Amended Complaint”) filed jointly by Defendants Harold G. Hamm (“Hamm”), Jeffrey
B. Hume (“Hume”), and Wheatland Oil, Inc. (“Wheatland”). The movants seek dismissal pursuant
to Fed. R. Civ. P. 12(b)(6), arguing the Amended Complaint fails to state claims for relief against
them. Plaintiff timely responded to the motion, and the movants filed a reply brief.
In a separate motion, Defendants Continental Resources, Inc. (“Continental”), H.R. Sanders,
Jr., John T. McNabb II, Mark E. Monroe, Ellis L. McCain, and Robert J. Grant (the “Special
Committee Directors”) sought dismissal of the claims against them pursuant to Fed. R. Civ. P.
12(b)(6). In a May 16, 2013 Order [Doc. No. 97] (“May 16 Order”), the Court granted the motion
in all respects, and it denied leave to amend on futility grounds. The legal conclusions in the May
16 Order regarding the plausibility of Plaintiff’s claims against Continental and the Special

Committee Directors also apply to Plaintiff’s claims against Hamm, Hume, and Wheatland.
Accordingly, the May 16 Order [Doc. No. 97] is adopted and incorporated as though fully set forth
herein.
The background of this action is explained in the May 16 Order and need not be repeated in
detail in this Order. In brief summary, Plaintiff brought this action to assert claims that the
defendants breached their fiduciary duties to the minority shareholders of Continental in connection
with Continental’s proposed acquisition of certain assets owned by Wheatland. Hamm is the
majority shareholder and Chief Executive Officer of Continental. Wheatland is owned by Hamm and
Hume, who is also Continental’s Vice Chairman of Strategic Growth Initiatives and its former
President and Chief Operating officer. Consistent with Securities and Exchange Commission rules,
Continental was required to obtain shareholder approval for the proposed acquisition. Accordingly,
it issued a definitive proxy statement (“Proxy”) setting out the terms of the acquisition. The
shareholder vote was scheduled for August 10, 2012.
Plaintiff is a Louisiana public retirement system owning Continental stock, and it was among
the minority shareholders whose approval of the acquisition was required. In this lawsuit, it
contends that the Proxy and related materials omitted material facts regarding the proposed
acquisition, and the omission of such facts constitutes a breach of fiduciary duty. After filing this
lawsuit, Plaintiff initially sought to prevent the scheduled shareholder vote, filing a motion for a
temporary restraining order (“TRO”). After a hearing, the Court denied the TRO motion. Plaintiff
then sought a preliminary injunction; following a hearing, the Court also denied that request. On
August 10, 2012, the scheduled meeting of the Continental shareholders was conducted, and the
shareholders approved the Wheatland Acquisition. On August 22, 2012, Plaintiff filed the Amended
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Complaint [Doc. No. 79] which is the subject of the current motion to dismiss.
Plaintiff’s breach of fiduciary duty claim against Continental and the Special Committee
Directors is set forth in Count I of the Amended Complaint. Its claim against Hume is asserted in
Count II, and alleges that Hume aided and abetted Continental and the Special Committee Directors
in their alleged breaches of fiduciary duty. Plaintiff does not specifically include Hamm as a
defendant on Count I or Count II and does not assert a specific count against him. However, as
movants suggest, Plaintiff’s factual allegations against Hamm are the same as those underlying its
Count I allegations against Continental and the Special Committee Directors. With respect to
Wheatland, Plaintiff asserts no claims against it, but characterizes it as a “nominal defendant.”
Amended Complaint at ¶ 15.
Plaintiff’s claims against Defendant Hamm are based on the same factual allegations which
the Court, in its May 16 Order, found inadequate to state a plausible claim for relief based on a
breach of fiduciary duty. In the May 16 Order, the Court explained in detail the governing law as
applied to the facts of this case, and concluded that Plaintiff cannot state a plausible claim against
Continental and the Special Committee Directors because no breach of fiduciary duty can, as a
matter of law, be found on the basis of any of Plaintiff’s allegations. That same conclusion applies
equally to Plaintiff’s allegations against Hamm. Accordingly, the motion to dismiss is GRANTED
as to Defendant Hamm, and the claims against him are dismissed.1

1

As the movants suggest, the Amended Complaint could be construed as alleging that Hamm breached a
fiduciary duty by failing to ensure that the Special Committee Directors disclosed all material facts in the Proxy and
related materials. Any such claim must be dismissed because the Court has held that there was no failure to omit material
facts. In any event, as the movants point out, as an interested director, Hamm could not lawfully participate in the
decisions of the Special Committee Directors. As the proxy materials clearly state, Hamm did not participate in those
decisions, and abstained from voting on the acquisition. See Proxy, Exhibit 2 to motion to dismiss, pp. 6, 11,12, 22, and
23.

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With respect to the Count II claim against Hume, the claim asserts that Hume aided and
abetted the breaches of fiduciary duty on which Count I is based. The Court’s dismissal of the Count
I claim based on breaches of fiduciary duty necessarily requires dismissal of the claim that Hume is
liable for aiding and abetting2 breaches which the Court has concluded did not occur. Accordingly,
the motion to dismiss as to the claim asserted against Defendant Hume is also GRANTED.
With respect to Defendant Wheatland, the movants correctly argue that no claim for relief
is asserted against it, and it is named only as a “nominal defendant.” Plaintiff argues that it is
necessary to name Wheatland to allow Plaintiff to obtain complete relief because Wheatland is an
interested party. Response at p. 16. However, as the movants correctly point out, Plaintiff seeks
no relief against Wheatland. Even if it had done so, however, dismissal of Wheatland is mandated
at this time because the Court has granted the motions to dismiss the claims asserted against all other
defendants. Accordingly, there is no basis for relief which could require Wheatland’s inclusion as
a defendant at this stage. The motion to dismiss Wheatland is GRANTED.
Having granted the motions to dismiss of all defendants in this action, the Court must
determine whether leave to amend should be authorized. In the May 16 Order, the Court considered
the rules applicable to determining whether leave to amend is mandated, and concluded that further
amendment of the asserted claims would be futile. Again, the Court need not repeat that discussion
in this Order. For the reasons stated in the May 16 Order, leave to amend is futile and will not be
authorized.
Accordingly, the motion to dismiss [Doc. No. 87] of Defendants Hamm, Hume, and

2

For this reason, the Court does not address Hume’s argument that Oklahoma does not recognize a cause of
action based on aiding and abetting a breach of fiduciary duty.

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Wheatland is GRANTED in all respects. Inasmuch as no other claims remain against any other
defendant, this action is dismissed.
IT IS SO ORDERED this 30th day of May, 2013.

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