Sign Up for PublicationsQuinn Emanuel recently achieved A dismissal with prejudice for Pacific Coast Oil Company (“PCEC”) in a case where the plaintiff sought to prevent the dissolution of an oil trust and $50 million in damages.
PCEC owns and operates oil wells in Southern California. Its prior owners created a publicly traded trust that receives 80% of the net profits. But when PCEC set aside funds for plugging and abandonment of the wells in 2019, distributions ceased, and it became clear that the Trust would dissolve at the end of 2021 under the Trust Agreement’s terms. Evergreen, an investor in the Trust, sued to stop dissolution and for $50 million in damages for the reduced distributions.
Quinn Emanuel’s first step was to stop Evergreen’s lawsuit for lack of standing. When Evergreen moved for a preliminary injunction in California Superior Court to stop dissolution, Quinn Emanuel argued that Evergreen’s claims were derivative because they were based on alleged harm to the Trust. The Court agreed, denying Evergreen’s motion and ruling that Evergreen lacked direct standing.
Evergreen then filed an amended complaint pleading derivative claims on behalf of the Trust. Quinn Emanuel immediately threatened to move to compel arbitration and, realizing that its derivative claims were indisputably subject to arbitration, Evergreen agreed. Quinn Emanuel again crafted a knock-out standing argument, this time that the Trust Agreement barred Evergreen from suing derivatively. And despite the state court judge’s initial rejection of this argument, Quinn Emanuel convinced the arbitrators, who denied Evergreen’s motion for preliminary injunction and dismissed all of its claims with prejudice for lack of standing.
While the arbitration was pending, Evergreen tried to evade its standing problems by filing a second amended complaint in California Superior Court in 2022 that advanced a new direct claim for tortious interference against PCEC’s parent company and one of its principals. But Quinn Emanuel crafted a strategy to dismiss this claim under California’s two-year statute of limitations, arguing that the statute began to run in 2019 when distributions stopped. The Court agreed and dismissed that claim with prejudice.
Quinn Emanuel stopped Evergreen’s case in its tracks. The Court and the arbitrators dismissed Evergreen’s $50 million lawsuit with prejudice before it ever reached the merits.