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Olagues v. Muncrief

United States District Court, N.D. Oklahoma

January 26, 2018

JOHN OLAGUES, Plaintiff,
v.
RICHARD E. MUNCRIEF, DENNIS CAMERON, and WPX ENERGY INC., Defendants.

          OPINION AND ORDER

          CLAIRE V. EAGAN, UNITED STATES DISTRICT JUDGE

         Now before the Court are Defendants' Motion to Dismiss Plaintiff's First Amended Complaint (Dkt. # 26) and Plaintiff's Motion for Partial Modification of the PLSRA Discovery Stay and Brief in Support (Dkt. # 40). Plaintiff John Olagues filed this case alleging that Richard E. Muncrief and Dennis Cameron abused their positions as corporate officers of WPX Energy Inc. (WPX) and engaged in prohibited short-swing transactions in violation of Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p. Defendants filed a motion to dismiss asserting that the transactions identified by plaintiff are exempt from the requirements of § 16(b), and they asked the Court to take judicial notice of documents related to the transactions. Dkt. # 27, 28. The Court converted the motion to dismiss into a motion for summary judgment, and the parties were directed to submit any additional evidence and arguments in support of their positions. Dkt. # 39. Plaintiff asks the Court to allow him to conduct “discrete” discovery as to defendants' intent in entering agreements for the distribution of shares of WPX stock to Muncrief and Cameron, and defendants oppose plaintiff's request. Dkt. ## 40, 41.

         I.

         Olagues alleges that he is a shareholder of WPX and was a shareholder when the transactions at issue in this case occurred. Dkt. # 24, at 1. Muncrief is the president and chief executive officer (CEO) of WPX, and Cameron is the general counsel of WPX. Id. at 2. WPX is a Delaware corporation with its principal place of business in Tulsa, Oklahoma, and its stock is publicly traded on the New York Stock Exchange. Id. Plaintiff alleges that Muncrief purchased 90, 000 shares of WPX stock between December 10, 2014 and August 21, 2015, and he alleges that Cameron purchased 1, 800 shares of WPX stock on August 25, 2015. Id. at 4. Plaintiff claims that defendants engaged in prohibited short-swing transactions by either purchasing and selling or selling and purchasing shares of WPX stock within a six month time period. Id. The amended complaint alleges that Muncrief disposed of 90, 000 shares of WPX stock on May 15, 2015, and plaintiff matches this disposition against the purchases made between December 10, 2014 and August 21, 2015. Id. Plaintiff claims that Cameron disposed of 1, 800 shares on March 2, 2015, and this was within six months of his subsequent purchase of 1, 800 shares on August 25, 2015. He alleges that Muncrief realized a short swing profit of $375, 600 and Cameron realized a short swing profit of $9, 324. Id.

         Plaintiff is correct that defendants made some open market purchases of WPX stock, but the dispositions identified in the amended complaint were made pursuant to restricted stock unit agreements (RSU Agreements). Plaintiff alleges that Muncrief disposed of 90, 000 shares of WPX stock on May 15, 2015, and defendants have produced a Securities and Exchange Commission (SEC) Form 4 showing that Muncrief disposed of 90, 843 shares to WPX on that date. Dkt. # 28-3. However, he also received 192, 463 shares on the same day, and the SEC Form 4 clearly states that he received the shares when his right to the shares vested under an RSU agreement. Id. Cameron received 5, 724 shares of WPX stock on March 3, 2015, and a note on the SEC Form 4 states that he received the shares pursuant to an RSU agreement. Dkt. # 28-7, at 2. Cameron disposed of 1, 866 shares to WPX on the same day, and a separate note on the SEC Form 4 states that these shares were withheld to satisfy Cameron's tax obligation upon the receipt of shares under the RSU agreeement. Id.

         WPX established an Incentive Plan (the Plan) on May 22, 2013, which states that it will remain in effect for 10 years unless terminated by WPX's board of directors. Dkt. # 28-9, at 6. The Plan is intended to “allow selected employees and officers of the Company and its Affiliates to acquire or increase equity ownership in the Company, thereby strengthening their commitment to the success of the Company and stimulating their efforts on behalf of the Company . . . .” Id. The Plan is administered by the board of directors with respect to non-management directors, but the Plan created an independent committee with respect to awards of stock to executive officers of WPX. Id. at 9. The Plan states that the independent committee was expressly created for the purpose of complying with § 16(b) and other statutory requirements:

In addition, to the extent that the Board considers it desirable to comply with Rule 16b-3[1] or meet the Performance-Based Exception, the Committee shall consist of two or more directors of the Company, all of whom qualify both as “outside directors” within the meaning of Section 162(m) of the Code[2] and as Section 16 Non-Management Directors (the “Independent Committee”). The number of members of the Committee shall from time to time be increased or decreased, and shall be subject to such conditions, in each case as the Board deems appropriate to permit transactions in Shares pursuant to the Plan to satisfy such conditions of Rule 16b-3 and the Performance-Based Exception as then in effect.

Id. at 10. The independent committee is authorized to take any necessary action to ensure that a transaction complies with § 16(b), and this includes the authority to amend the Plan or any provision of an award agreement. Id. at 17. When shares of WPX stock are delivered to a grantee, the grantee is required to “remit an amount in cash, or in the Company's discretion, in Shares, valued at their Fair Markey Value on the date the withholding obligation arises, sufficient to satisfy all of the employer's federal, state, and local tax withholding requirements related thereto . . . .” Id. at 28.

         WPX and Muncrief executed an RSU Agreement giving him the opportunity to earn shares of WPX stock, and Muncrief's right to receive the shares would vest on May 15, 2015 if he remained an employee of WPX at that time. Dkt. # 28-11, at 1. The RSU Agreement contains the following provision concerning tax withholding:

(e) Upon conversion of RSUs into Shares under this Agreement, such RSUs shall be cancelled. Shares that become payable under this Agreement will be paid by the Company by the delivery to the Participant, or the Participant's beneficiary or legal representative, of one or more certificates (or other indicia of ownership) representing shares of Common Stock equal in number to the number of Shares otherwise payable under this Agreement less the number of Shares having a Fair Market Value, as of the date the withholding tax obligation arises, equal to the minimum statutory withholding requirements. Notwithstanding the foregoing, to the extent permitted by Section 409A of the Code and the guidance issued by the Internal Revenue Service thereunder, if federal employment taxes become due when the Participant becomes entitled to payment of Shares, the number of Shares necessary to cover minimum statutory withholding requirements may, in the discretion of the Company, be used to satisfy such requirements upon such entitlement.

Id. at 3. Defendants have not submitted a copy of Cameron's award agreement, but the parties do not dispute that the same form RSU Agreement was used and that the relevant provision concerning tax withholding was contained in Cameron's agreement. Dkt. # 27, at 11; Dkt. # 34, at 6.

         On September 12, 2016, plaintiff sent a letter to WPX alleging that Muncrief and Cameron made $385, 924 in profits on short-swing transactions, and he stated that he was a shareholder authorized to file suit on behalf of WPX for the alleged violations of § 16(b). Dkt. # 28-12, at 2. WPX sent plaintiff a letter explaining that the transactions that he had identified were exempt tax withholding transactions and that no violation of § 16(b) had occurred. Dkt. # 28-13, at 2-4. On January 7, 2017, plaintiff sent a second letter threatening to file suit on behalf of WPX, and he attached a copy of a pro se complaint that he intended to file in the United States District Court for the Northern District of Oklahoma. Dkt. # 28-14. Plaintiff did file suit alleging that Muncrief and Cameron engaged in prohibited short-swing transactions in violation of §16(b), but he was not represented by an attorney. Dkt. # 1. The case was randomly assigned to the Honorable Gregory K. Frizzell. Defendants filed a motion to dismiss (Dkt. # 11) the complaint on the ground that a pro se plaintiff cannot proceed with a claim under § 16(b). The motion to dismiss was granted and plaintiff's pro se complaint was dismissed, but he was given 30 days to obtain counsel and file an amended complaint. Dkt. # 16. Plaintiff retained counsel and filed an amended complaint (Dkt. # 24), and defendants filed a motion to dismiss (Dkt. # 26) asserting that plaintiff had failed to state a claim upon which relief could be granted. Defendants also filed a motion asking the Court to take judicial notice of certain documents that were not referenced in or attached to the amended complaint. Dkt. # 28. The case was reassigned to the undersigned, who converted the motion to dismiss into a motion for summary judgment, and gave the parties 14 days to submit any additional evidence or arguments. Dkt. # 40. Neither plaintiff nor defendants provided any additional evidence, and defendants' motion for summary judgment is fully briefed.

         II.

         Summary judgment pursuant to Fed.R.Civ.P. 56 is appropriate where there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Kendall v. Watkins, 998 F.2d 848, 850 (10th Cir. 1993). The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 317. ‚ÄúSummary judgment procedure is properly regarded not as a disfavored ...


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