Wilmington Savings Fund Society v. Foresight Energy L.L.C.

Foresight Energy, L.P. (the parent company) was the parent of a group of companies founded by Chris Cline that operated in the coal industry. The parent company owned Foresight Energy, L.L.C. (Foresight Energy) (defendant), which in turn owned Foresight Energy Finance Corporation (Foresight Finance) (defendant). Foresight Energy GP, L.L.C. (the GP) was the general partner of the parent company and thereby controlled the parent company’s business and affairs. The GP was 99 percent owned by Foresight Reserves, a company wholly owned by Cline, and 1 percent owned by the GP’s CEO, Michael Beyer. In 2013, in an effort to acquire various coal assets, Cline caused Foresight Energy and Foresight Finance (together, the issuers) to issue $600 million in notes due in 2021. The indenture, in § 4.11, required the issuers to redeem the notes at 101 percent of remaining principal and accrued interest upon a change of control. Section 4.11 defined a change of control as the consummation of any transaction by which anyone other than Cline became the beneficial owner of more than 35 percent of the GP’s voting stock. The definition of beneficial owner cross-referenced Rule 13d-3 of the Securities Exchange Act of 1934. Voting stock was defined as any security with the power to control the GP. In early 2015, Robert Murray, the CEO of Murray Energy Corporation (Murray Energy), approached Cline about a potential acquisition. The acquisition terms provided that Murray Energy paid $1.37 billion for a 34 percent voting interest in the GP, a 77.5 percent economic interest in the GP, and a mix of other units in the parent company. Murray Energy also received an option to purchase an additional 46 percent of the voting interest in the GP for $25 million, subject to certain conditions. Additionally, the terms provided that Murray Energy would have the right to veto the GP from taking certain actions, such as reducing the amount of quarterly distributions or entering into certain transactions. The terms also provided that Robert Murray’s nephew, Robert Moore, would become CEO of the GP and could only be removed with Murray’s consent. Further, the agreement provided that the GP would hire a subsidiary of Murray Energy to manage all business operations through December 31, 2022. Wilmington Savings Fund Society, FSB (Wilmington) (plaintiff) filed suit, contending that the transaction constituted change of control under § 4.11, thus requiring redemption of the notes. The parties cross-moved for judgment on the pleadings.