In re Atlas Energy Resources, LLC Unitholder Litigation

In 2006 Atlas Energy Resources, LLC (Energy) (defendant) was created. Energy’s business was to own and operate the natural-gas and oil assets and the investment partnership asset-management business of Atlas America, Inc. (America) (defendant). America and a subsidiary of America, Atlas Energy Management (Manager), held 48 percent of Energy’s voting interests. On January 27, 2009, members of America and Energy met to discuss a potential merger. America’s directors and officers were also a part of Energy’s board. Following that meeting, a special committee was formed to investigate what would be Energy’s best move. The special committee concluded that a merger with America was the proper alternative for Energy. On April 27, Energy and America entered into a merger agreement. Energy unitholders would receive 1.16 shares of America in exchange for each of their units. Following the conclusion of the merger on September 29, minority unitholders, as a class, sued Energy, America, and several individual officers and directors of Energy (collectively, the officers) (defendants), most of whom held positions of power in Energy, for breach of their fiduciary duties by negotiating the merger through an unfair process that resulted in unfair terms for the minority unitholders. The minority unitholders argued that during the merger process, the officers withheld material information from the special committee, gave an ultimatum, and were instrumental in the discussions prior to the formation of the special committee that made the merger appear to be the best option. Further, America offered a lower per-unit cost compared with the current trading value of the units on the market. Energy, America, and the officers argued that the limited-liability-company agreement (the LLC agreement) provided a mechanism to resolve the conflict of interest between America and Energy and that the LLC agreement eliminated the fiduciary duties of the directors and officers of Energy and replaced these fiduciary duties with the duty of good faith. Energy, America, and the officers filed a motion to dismiss based on those grounds.