On May 21, 2009, Chimicles Schwartz Kriner & Donaldson-Smith LLP filed a class action complaint on behalf of all holders of Class B Common Units of Atlas Energy Resources, LLC (“Energy” or the “Company”). The complaint asserted that as a controlling unitholder of Energy, Atlas America, Inc. (“America”) was obligated to offer a fair buyout price that was fair to Energy’s unitholders and engage in a fair process. The lawsuit further alleged that by entering into the merger agreement at an unfair price and structuring its offer in a manner that is unfair to the public unitholders, America and the Energy Board members breached their fiduciary duties to Energy’s unitholders.
On April 27, 2009, America and Energy jointly announced that they had executed a definitive merger agreement, pursuant to which America would acquire 100% ownership of Energy (the “Merger”). America was already Energy’s controlling unitholder. Under the terms of the merger agreement, Energy unitholders would receive stock valued at $14.40 per share.
Energy was one of the largest independent energy producers in the Eastern United States. Energy was a limited liability company focused on the development and production of natural gas. Energy owed much of its value to its industry leading position in vertical production in the Marcellus Shale. Its indirect subsidiary, Atlas Resources, LLC, sponsored and managed natural gas drilling partnerships, in which Energy co–invested, to finance the exploration and development of Energy’s acreage. America was a controlling unitholder of Energy from Energy’s formation in 2006 and owned an approximately 47% common unit interest and all of the Class A and management incentive interests in Energy, together representing about 48% of the voting power of all classes of Energy’s voting securities. In addition, America exerted control over Energy by virtue of various operational agreements and by virtue of three America executives sitting on the Energy Board.
After the announcement of the Merger, multiple actions were filed. CSK&D is Co-Lead Counsel representing the Energy unitholders.
On July 1, 2009, Co-Lead Counsel for Plaintiffs filed the Verified Consolidated Class Action Complaint, a copy of which is available below. Plaintiffs’ Counsel negotiated with Defendants and stipulated to an expedited discovery schedule in advance of a Motion for Preliminary Injunction, seeking to halt the vote on the Merger unless or until material deficiencies in the Preliminary Proxy regarding disclosures made by America were corrected. The stipulated schedule was entered by the Court on July 27, 2009, and the parties engaged in active discovery. On July 28, 2009, America amended the Preliminary Proxy, adding some of the disclosures complained to be deficient in the Verified Consolidated Class Action Complaint. On August 7, 2009, Co-Lead Counsel withdrew the motion.
On December 15, 2009 Plaintiffs filed the Amended Verified Consolidated Class Action Complaint under seal, a public version of which is available here. The Court of Chancery upheld Plaintiffs’ claims against America. The Court’s opinion is available here. After additional discovery, the parties reached an agreement to settle the case. The settlement, which was approved by the Court of Chancery on May 14, 2012, created a $20 million fund for former Energy unitholders.