Judge says Howard Energy Partners CEO of San Antonio violated court order in founders’ dispute

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On June 18, two weeks after a co-founder of Howard Energy Partners sued to dissolve the San Antonio pipeline and storage company, its chief executive sought to put investors at ease.

“The company believes this lawsuit to be without merit and is vigorously defending it,” CEO Mike Howard assured investors in a notice written on company letterhead.

Brad Bynum, former chairman of Howard Energy Partners, has filed a lawsuit to dissolve the company.

Company president Brad Bynum and two other executives filed a lawsuit against Howard and three other directors a week after ending the trio on May 27. Howard and Bynum founded Howard Energy 10 years ago.

“We are confident that the court will ultimately confirm that the applicants’ dismissal was valid and that the board is certainly not deadlocked or unable to continue its operations,” Howard added in his memo.

A Delaware Chancery Court judge on Thursday ruled Howard’s missive violated a court order she made a day before her notice was released.

Vice-Chancellor Lori W. Will’s “standstill” order prohibited parties to the dispute from taking action on behalf of the company “outside the ordinary course of business” without giving one week’s written notice to the parties. three leaders ousted.

Howard’s note strayed from the normal course of business for the company, the judge ruled Thursday via Zoom.

“It does not protect the company that Mr. Howard is telling unitholders at this point in the case that he expects some outcome after the trial,” Will said. “This result is unknown and the company, as the nominal respondent, cannot prejudge it.”

Howard Energy must “remain neutral” and not take sides for the rest of the case as the dispute hinges on control of the company and the composition of its board of directors, the judge added.

Howard Energy is due to issue a new disclosure that essentially corrects the statements in Howard’s memo. It may include a mention that the company should remain neutral, the judge said.

In the lawsuit to dissolve Howard Energy, Bynum – joined by former CFO Scott Archer and general counsel Brett Braden – says it is “no longer possible to carry on the business” of the company under the terms of ‘an agreement that governs it.

Howard and three administrators responded that the lawsuit was just a ploy by the three applicants to extract hefty severance pay.

The parties know there has to be a “commercial divorce”, but they cannot agree on how to accomplish it. The judge has agreed to hold a one or two day trial over the litigation, possibly this summer.

In a court hearing last month, the judge granted a request to relocate Bynum and Archer to the board of directors as the agreement governing the company “empowered” a six-member board to manage. the business of the company. But Will did not agree to reinstate Bynum, Archere and Braden to their management positions.

The dispute poses an existential threat to Howard Energy, a private company that employs more than 350 people and has $ 3 billion in assets.

Howard Energy operates several pipelines transporting natural gas, crude oil, hydrogen and refined products.

In addition to pipelines, it owns and operates natural gas processing plants, liquid storage terminals, deep water docks and terminal facilities, railway facilities, terminals and transshipment facilities, as well as assets related. It operates in Texas, New Mexico, Oklahoma, Pennsylvania and Mexico.

The dispute takes place in Delaware, as this is where Howard Midstream Energy Partners LLC, which operates as Howard Energy Partners, is incorporated.

During Thursday’s hearing, Jeremy Fielding, an attorney for the defendants, defended the advice Howard sent to the company’s 40 investors.

“There is a lawsuit that … pointedly says you have to dissolve this business within three months,” Fielding told the judge. “Of course, unitholders are nervous and need reassurance that the business will not be gone in three months. So Mr. Howard provided those assurances” in his opinion.

Fielding added that there has already been at least one instance where a lender has said the company may be in breach of a loan clause. The lender said he was going to need an opinion from the company on “the likelihood that you didn’t exist in October,” he said.

“What are the petitioners saying that we are supposed to be doing in this context? Fielding wondered.

After the hearing, lawyer A. Thompson Bayliss, who represents the three claimants, said his clients did not want to create problems for the company with its lenders.

“I expect that we can work with them to ensure that the company’s formal response to incoming requests is reasonable under the circumstances,” he said. “Nobody wants to create a problem there.”

The judge ordered the parties to meet to work out an appropriate disclosure that could be made to lenders, customers and employees of Howard Energy.

A Howard Energy spokesperson did not comment. A representative of the petitioners did not respond to a request for comment.

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