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Shareholder dispute puts century-old trust in the spotlight

The Texas Pacific Land Trust, a 130-year-old trust holding over 900,000 acres of land in the Texas oil and gas basin, has become the center of a high-profile shareholder fight in recent months.

Unusual governing structure leads to tensions

Since the 1880s, the Texas Pacific Land Trust has operated under a unique governing structure – three trustees serving lifetime appointments make up the board. For over 100 years, board members were chosen according to the 1888 trust instrument, which named Charles J. Candan, Simeon J. Drake and William Strauss, along with their survivors and successors, as trustees.

When longtime trustee Maurice Meyer III passed away in March of this year, shareholders saw an opportunity to bring a new perspective to the board, nominating hedge fund manager Eric Oliver as Meyer’s replacement.

Shareholders were set to meet on June 6 to vote, but the remaining trustees put the referendum on hold by filing a lawsuit against Oliver. The board’s lawsuit alleges that Oliver made material misstatements and failed to disclose material information to shareholders.

Competing interests culminate in a proxy fight

Horizon Kinetics, a New York investment firm that currently owns around 23% of the trust, now leads the shareholder side of the proxy fight. According to the Houston Chronicle, investors wish to restructure the trust as a traditional corporation with a larger board of trustees. Opposition shareholders view the voting delays as the trustees tampering with the corporate voting system.

Meanwhile, the two remaining trustees reportedly told shareholders that the purpose of their lawsuit and the delay in the vote was to ensure shareholders could be fully and accurately informed of the nominees’ qualifications before voting.

Many shareholder disputes can resolve through negotiation. However, some – like the situation with the Texas Pacific Land Trust – reach such an impasse that litigation is the best option. When that happens, partners and shareholders benefit from working with experienced advocates.

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