Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2013 |
Commitments and Contingencies [Abstract] | ' |
Commitments and Contingencies Disclosure | ' |
Commitments and Contingencies |
The Partnership is not currently a party to, or aware of, any material legal or governmental proceedings against it, aside from the legal proceedings described below. While many of these proceedings and claims involve inherent uncertainty, the Partnership believes that the amount of the liability, if any, ultimately incurred with respect to such proceedings and claims will not have a material adverse effect on the Partnership's consolidated financial position as a whole or on its liquidity, capital resources or future annual results of operations. The Partnership records reserves for contingencies when information available indicates that a loss is probable and the amount of the loss can be reasonably estimated. |
Lawsuits filed in state and federal courts in Texas relating to the Merger. On May 15, 2013, David Flecker, a purported unitholder of the Partnership, filed a class action petition on behalf of the Partnership's unitholders and a derivative suit on behalf of the Partnership against, Pioneer, Pioneer USA, the General Partner and the directors of the General Partner, in the 134th Judicial District of Dallas County, Texas (the "Flecker Lawsuit"). A similar class action petition and derivative suit was filed against the same defendants on May 20, 2013, in the 160th Judicial District of Dallas County, Texas, by purported unitholder Vipul Patel (the "Patel Lawsuit"). On August 27, 2013, the plaintiff in the Flecker Lawsuit filed an amended petition. On September 3, 2013, the court consolidated the Patel Lawsuit into the Flecker Lawsuit (as consolidated, the "Texas State Court Lawsuit"), and the plaintiffs filed a consolidated derivative and class action petition on September 5, 2013. |
The Texas State Court Lawsuit alleges, among other things, that the consideration offered by Pioneer in the Merger is unfair and inadequate and that, by pursuing a transaction that is the result of an allegedly conflicted and unfair process, the defendants have breached their duties under the Partnership Agreement as well as the implied covenant of good faith and fair dealing, and are engaging in self-dealing. Specifically, the lawsuit alleges that the director defendants: (i) engaged in self-dealing, failed to act in good faith toward the Partnership, and breached their duties owed to the Partnership; (ii) failed to properly value the Partnership and its various assets and operations and ignored or failed to protect against the numerous conflicts of interest arising out of the proposed transaction; and (iii) breached the implied covenant of good faith and fair dealing by engaging in a flawed merger process. The Texas State Court Lawsuit also alleges that Pioneer, Pioneer USA and the General Partner aided and abetted the director defendants in their purported breach of fiduciary duties. |
Based on these allegations, the plaintiffs in the Texas State Court Lawsuit seek to enjoin the defendants from proceeding with or consummating the proposed transaction. To the extent that the Merger is implemented before relief is granted, the plaintiffs seek to have the Merger rescinded. The plaintiffs also seek money damages and attorneys' fees. The defendants have filed a motion to dismiss the Texas State Court Lawsuit based on improper forum. |
On August 21, 2013, Allan H. Beverly, a purported unitholder, filed a class action complaint against the Partnership, Pioneer, Pioneer USA, MergerCo and the directors of the General Partner in the United States District Court for the Northern District of Texas (the "Beverly Lawsuit"). The Beverly Lawsuit alleges that the defendants breached their fiduciary duties by agreeing to the Merger by means of an unfair process and for an unfair price. Specifically, the lawsuit alleges that the director defendants: (i) failed to maximize the value of the Partnership to its public unitholders and took steps to avoid competitive bidding; (ii) failed to properly value the Partnership; and (iii) ignored or failed to protect against the numerous conflicts of interest arising out of the proposed transaction. The Beverly Lawsuit also alleges that Pioneer, Pioneer USA and MergerCo aided and abetted the director defendants in their purported breach of fiduciary duties. |
On September 13, 2013, Douglas Shelton, another purported unitholder, filed a class action complaint against the same defendants in the Beverly Lawsuit (as well as the General Partner) in the same court as the Beverly Lawsuit (the "Shelton Lawsuit"). The Shelton Lawsuit makes similar allegations to the Beverly Lawsuit, and also alleges that Section 7.9 of the Partnership Agreement fails to alter or eliminate the defendants' common law fiduciary duties owed to unitholders in the context of the Merger. Specifically, the lawsuit alleges: (i) that Pioneer, as controlling unitholder, failed to fulfill its fiduciary duties in connection with the Merger because it purportedly cannot establish that the proposed Merger is the result of a fair process that will return a fair price to the unaffiliated unitholders of the Partnership; (ii) that the director defendants breached their fiduciary duties by failing to exercise due care and diligence in connection with the proposed Merger because the proposed Merger is purportedly not the result of a fair process that will return a fair price to the unaffiliated unitholders; and (iii) that the non-director defendants aided and abetted the director defendants in their purported breach of fiduciary duties. The plaintiffs in the Beverly Lawsuit and the Shelton Lawsuit (together, the "Federal Lawsuits") seek the same remedies as the plaintiffs in the Texas State Court Lawsuit. |
On September 26, 2013, representatives of the plaintiffs in the Texas State Court Lawsuit and the Federal Lawsuits and representatives of the defendants in such lawsuits entered into a memorandum of understanding (the "memorandum of understanding") to settle the claims and allegations made in such lawsuits. The memorandum of understanding provides the plaintiffs with a period of confirmatory discovery during which the plaintiffs can confirm the fairness and reasonableness of the settlement contemplated by the memorandum of understanding. The parties agreed to use their reasonable best efforts to agree upon, execute and present to the Dallas County, Texas District Court a stipulation of settlement, which will provide for, among other things, a certification, for settlement purposes only, of the applicable class of unitholders to which the settlement will apply. Furthermore, the stipulation of settlement will provide for a full and complete discharge, dismissal with prejudice, settlement and release of all claims, suits and causes of action by the plaintiffs (other than appraisal rights under the Merger Agreement) against the defendants and their representatives arising out of or relating to the allegations made in the Texas State Court Lawsuit and the Federal Lawsuits, the Merger or any deliberations, negotiations, disclosures, omissions, press releases, statements or misstatements in connection therewith, any fiduciary or other obligations in respect of the Merger or any alternative transaction or under the Partnership Agreement, or any costs and expenses associated with settlement other than as provided in the stipulation. All proceedings relating to the allegations made in the Texas State Court Lawsuit other than with respect to the settlement have been stayed. As part of the consideration for the settlement, the Merger Agreement was amended to provide for contractual appraisal rights for the unitholders of the Partnership. The parties to the memorandum of understanding have agreed to use their reasonable best efforts to obtain the agreement of any plaintiffs filing similar lawsuits to the Texas State Court Lawsuit or the Federal Lawsuits (whether filed in any state or federal court) to become party to the memorandum of understanding and the related settlement, and it is a condition to the consummation of the final settlement that any such plaintiffs join the settlement or such similar lawsuits otherwise be dismissed with prejudice prior to the final approval of the settlement. On October 15, 2013, the plaintiffs in the Beverly Lawsuit voluntarily dismissed all claims in the lawsuit in accordance with the memorandum of understanding. On October 16, 2013, the plaintiffs in the Shelton Lawsuit likewise voluntarily dismissed all claims in the lawsuit in accordance with the memorandum of understanding. There can be no assurance that a final settlement will be consummated. |
Lawsuit filed in the Delaware Court of Chancery relating to the Merger. On September 23, 2013, Patrick Wilson, another purported unitholder, filed a class action petition on behalf of the unitholders against Pioneer USA, MergerCo, the Partnership, the General Partner and the directors of the General Partner in the Court of Chancery of the State of Delaware (the "Wilson Lawsuit"). The Wilson Lawsuit alleges that the director defendants breached their purported fiduciary obligations to the unitholders by engaging in a process that undervalued the Partnership and which allegedly constitutes gross negligence, recklessness, willful misconduct, bad faith or knowing violations of law. Additionally, the Wilson Lawsuit alleges that the non-director defendants aided and abetted the purported breaches of fiduciary duties of the director defendants. The Wilson Lawsuit seeks the same remedies as the plaintiffs in the Texas State Court Lawsuit and the Federal Lawsuits. As of the date of this Report, the plaintiffs in the Wilson Lawsuit have not joined the memorandum of understanding. |
The Partnership cannot predict the outcome of these or any other lawsuits that might be filed subsequent to the date of the filing of this Report, nor can the Partnership predict the amount of time and expense that will be required to resolve these lawsuits. See Note B for a description of the Merger Agreement. |