Longview Amended Petition

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cAusE NO. I l -09-12483 -ZCV NA

L ONGVIE1V ENEROV COMP.{NY,

Plaíntiff,

IN TI{E DISTRICT COURT

L.P,,OF ZAVALA COTJNTY' TEXAS

W.R.LLA,,RTCK D,BRY0RouP:, Ltc,

Def,endaüts. 3 6åth JTIDICIAT DISTRICT

flRSÎÂNTENDED FETTÎION

plaihtiff l,onryicw Energy C.om,pan¡r bdngs úis,anion againvt defendarrts The ÍI'uff

Ënergy Firnd, L'P., \ArRH Enetgy P4rtrrer.s, L.L'c', \u,R l{uff A.sset Managemerit Co., LLC,

William R, .igill, Huff, Rick D'Angeto, Ed Dartley, Brfån Blootn, RilÉy-Huff Enr¡gy Group,

LLC,,and BobbY RileY.

Discovcty Conüfol Phn

l. Pursuant to Toxas. Rule of Civíl Procedwç 190'3, 'tongviow interids that

discovery be conducted undor Level 2'

lntnoductior

Z, This Èååe a¡os€ b,e-cau$e two faithlebs corporatie directors hijacked çpr,prate

opportunities worth hund¡eds of m.illions of dollars,for their own gain. rn execrrting'this scherne,

these two djreptors brcached their fiducíary duties to Longview, stote snd misus€d L-o¡lgyrew's

conñdentiel and proprietary informatìorç and,defrauded tl¡ vtr-y oom'p'atry they

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to protect and defend. The other defendants conspired with and/or aided and abetted the faithless

directors.

JurÍsdiction and Venue

3. This Court has jurisdiction over the parties who are Texas citizens or who

maintain a principal residence or place of business in Texas. Further, this Court has jurisdiction

over the parties as each has done business in Texas and/or because each of the parties has had

sufficient minimum or continuing contacts with Texas and is amenable to service by a Texas

court,

4. This Court has subject-matter jurisdiotion over this case because the amount in

controversy exceeds the Court's minimum jurisdictional limits.

5. Venue is mandatory and proper in this district pursuant to Tex. Clv. Pnec. &

Rnv. CooB $ 15.01 1 because this is an action to recover an interest in real property, all or part of

which is located in Zavala County. See also In re Kerr, 293 S.W'3d 353, 356 (Tex.App. -

Beaumont 2009, orig. proceeding). Specifically, the defendants stole Longview's opportunity to

purchase tens of thousands of acres of oil and gas leases located in the Eagle Ford trend.

Longview, the true and equitable owner of these properties, f,rled this lawsuit to recovet title to

the pilfered Eagle Ford leases. Further, given the common allegations of fact against these

defendants, venue is proper over all claims in this lawsuit pursuant to Tnx, Ctv. Pnnc. & RBtr¿.

" Coo¡ $ 15.004.

L The Parties

6. Plaintiff Longview Energy Company is a corporation organized and existing

under the laws of the State of Delaware, with its principal place of business in Dallas County,

Texas.

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7, Defendant The Huff Energy Fund, L.P. ("Huff Energy") is a Delaware limited

partnership. Huff Energy has several limited partners who are Texas citizens. As a consequence

and by operation of law, Huff Energy is a Texas citizen and a local defendant. Huff Energy has

previously appeared in this lawsuit and may be served through its counsel of record.

8. Defendant WRH Energy Partners, L.L.C. ("WRH Energy") is a Delaware limited

liability company. WRH Energy has previously appeared in this lawsuit and may be served

through its counsel ofrecord.

g, Defendant W.R, Huff Asset Management Co., LLC ("Huff Asset Management")

is a Delaware limited liability company. Huff Asset Management has previously appeared in

this lawsuit and may be served through its counsel of record.

10. Defendant William R. "Bill" Huff is a citizen of the State of New Jersey. Huff

has previously appeared in this lawsuit and may be served through his counsel of record.

11, Defendant Rick D'Angelo is acitizen of the State of New Jersey, D'Angelo has

previously appeared in this lawsuit and may be served through his counsel of record.

12. Defendant Ed Danley is a citizen of the State of New Jersey, Dartley has

previously appeared in this lawsuit and may be served through his counsel of record.

13, Defendant Bryan Bloom is a citizen of the State of New Jersey. Bloom has

previously appeared in this lawsuit and may be served through his counsel of record.

14, Defendant Riley-Huff Energy Group LLC ("Riley-Huff') is a Texas limited

liabitity company and has its principal place of business in the State of Texas' BC&D Co',

which has an ownership interest in Riley-Huff is a Delaware corporation. Therefore, Riley-Huff

is a citizen of Delaware and not diverse from Longview, Riley-Huff has previously appeared in

this lawsuit and may be served through its counsel of record.

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15, Defendant Bobby Riley is a citizen of the State of New Jersey. Riley has

previously appeared in this lawsuit and may be served through his counsel of record.

il. X'actual Background

A. Relationship of the Parties.

16. Longview is a private Dallas-based independent oil and gas exploration,

development, and production company, It was incorporated in 1999 in Delaware and operates

oil and gas wells in Fresno County, California, LeFlore County, Oklahoma and Sebastian

County, Arkansas, and has invested significant time and resources exploring the Eagle Ford play,

including Zavala Courty, Texas. Longview has eight employees in Dallas and four in Fresno

Corurty, Califomia.

17, Despite its modest number of employees, Longview has assembled an

experienced and talented senior management team with average oil and gas experience in excess

of 30 years each. Bob Gershen, Longview's Chairman, President, and CEO, has been actively

involved in the oil and gas investment business for 32 years (since Jimmy Carter was President)

and has advised and sat on the boards of many energy companies, including publicly traded

cornpanies. Longview's technical team includes Rick Pearce, Longview's Chief Operating

Ofhcer, who is a registered petroleum engineer in the State of Texas with more than 38 years

(since Richard Nixon was President) of hands-on operating and management experience in oil

and gas drilling and operations, field evaluation and redevelopment, and exploration program

management, including the identification, evaluation, and acquisition of trend acreage, Greg

Anderson, also a petroleum engineer, has 26 years of experience (since Mark liVhite was

Governor of Texas) in drilling and operations management and reseryoir evaluations. David

Fuller, Longview's Vice President of Land and Legal, has been an oil and gas attorney and

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landman active in leasing and land management for both development and exploration programs

for more than 36 years (since Dolph Briscoe was Governor of Texas). Mark Lober, a geological

and geophysical consultant to Longview for more than eight yerirs, has developed and evaluated

exploration prospects and projects in multiple oil and gas basins across the United States fot 34

years (since John Hill was the Attorney General of the State of Texas). Dana Spratt, Longview's

consulting Chief Financial Officer, is an MBA/CPA with more than 25 years of experience

(since phil Gramm was a freshman United States Senator) in financial modeling and accounting,

including several years as the CFO of a publicly-traded, oil and gas syndication company, But

Longview,s depth of expertise does not end with its internal team and carefully selected

consultants: Board member Harold Carter, the former president of a Dallas-based oil and gas

company traded on the New York Stock Exchange and a past-President of the American

Association of professional Landmen, has nearly fifty years of direct oil and gas experience

(since John Kennedy was President); Board member Thomas Vessels, who also has decades of

industry experience, is the former president of a vertically integrated oil and gas company, the

current president of a gas production company, and a present or former director of or advisor to

numerous energy companies and industry associations.

18, Longview has more than 100 shareholders. Most own less than one percent of

Longview,s shares. In 2006, Huff Energy, a New Jersey-based $500 million investment fund,

invested in Longview and ultimately became Longview's largest shareholder, holding

approximately 39yo of Longview's outstanding stock. Huff Energy's strategy was to invest in

companies that could balance traditional exploration and resource type plays, and it saw an ideal

investment candidate in Longview. In connection with its original investment in Longview-

which was Huff Energy's first investment in any company-the parties executed a Shareholders

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Agreement, which, among other things, entitled Huff Energy to appoint two members of

Longview's Board of Directors, to have a representative on every Board committee, and to

prevent unilaterally any future issuance of Longview equity securities. Huff Energy appointed

Bill Huff and Rick D'Angelo as its members of the Longview Board.

19. At the time of Huff Energy's investment, WRH Energy was Huff Energy's

general partner and therefore liable for all of Huff Energy's debts and other liabilities, Huff

Asset Management, on information and belief, is the asset manager of Huff Energy and the

controlling manager of WRH Energy.

20. While serving as a Longview Director, Bill Huff has sat at the head of a nest of

investment funds bearing his name or initials. Huff founded and controls W.R. Huff Asset

Management, as well as all other Huff entities. His positions include Chief Investment Officer

of Huff Asset Management and WRH Energy, These funds invest billions of dollars on behalf of

their investors and have generated a personal fortune for Huff estimated in the hundreds of

millions.

21,. In the financial industry, Huff is known for a "my way or the highway" business

style and as "a rough-and-tumble guy, not well polished, not a great communicator," According

to a former colleague, "[h]e's like a great white shark. He doesn't kill out of anger, he just can't

stop himself. He's prograrnmed to do it." Not surprisingly, then, Hufls business record is

littered with claims of inadequate disclosure and self-dealing, and a number of state and city

pension funds have replaced him as their investment manager as a result of this conduct. In

keeping with this pattern of malfeasance and neglect of his duties, Huff never visited Longview's

offices, never attended a Longview Board meeting in Dallas, and rarely bothered to participate

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by telephone in Longview Board meetings, relying instead on his underlings to carry out his

schemes.

ZZ, Although Huff is known for his self-described "abrasive" style and willingness to

.,tak[e] off the gloves and put[] on the brass knuckles," it has been said that "he is charming

compared with the people beneath him," which in this case includes D'Angelo, Dartley, and

Bloom.

23. While serving as a Longview Director, D'Angelo also served as a Principal of

WRH Energy and as a Manager of at least three Huff Energy portfolio companies that are (or

were during the relevant time) direct competitors of Longview: Riley-Huff, Marshfield Oil &

Gas, LLC (,,Marshfield"), and Krescent Energy co., LLC ("Krescent").

24. While attending Longview board meetings as a Huff factotum, Dartley also

served as Counsel and Chief Compliance officer for Huff Asset Management and as a Manager

of at least two Huff Energy portfolio companies that are (or were during the relevant time) direct

competitors of Longview: Riley-Huff and Marshfield'

25, While serving as counsel to WRH Energy, Bloom also served as a Manager of at

least two Huff Energy portfolio companies that are (or were during the relevant time) direct

competitors of Longview: Riley-Huff and Marshfield'

26. Riley-Huff is a direct competitor of Longview; on information and belief, one or

more of the Huff Energy companies is directly or indirectly the majority and controlling investor

of Riley-Huff.

27. Bobby Ritey is the President and a Manager of Riley-Huff.

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Zg, Wyldfire Energy, Inc. ("Wyldfire") is engaged in obtaining oil, gas, and mineral

interests for oil and gas exploration, development and production companies. Tamara Ford is the

President of Wyldfire.

B. The Scheme and Its Roots.

29. Longview diligently educated its Directors conceming their duties of loyalty to

the company. These duties demand absolute frdelity to Longview's interests and require an extra

n.easure of diligence when a director may have divided interests by, for instance, simultaneously

serving as a director, officer, partner, investor or manager of entities in competition with

Longview. Accordingly, in 2007, Longview distributed a guidance letter prepared by its

corporate counsel, the nationally-acclaimed WilmerHale law firm (www.wilmerhale.com). It

cautioned that ,,[i]f an investor opposes or favors, out of its own economic self-interest and not

necessarily that of the corporation, an action being considered by the corporation, it should

express that position in its capacity as a stockholder of the corporation , . . and not as a director."

It also warned that ,,[a] director of a corporation has a fiduciary duty to the corporation and all of

its stockholders, regardless of other interests or duties that director may have to other parties

(including aperrty that appointed him or her)." In an ironic foreshadowing, D'Angelo responded

to wilmerHale,s letter and its inclusion as a Board-meeting agenda item by saying, "[d]on't we

have much more important operational and financial issues to discuss with our time that impact

shareholders much more critically?" The answer turned out to be "No"'

30. Beginning around August 2009, Huff, D'Angelo, and Dartley charged Longview

management with the task of finding growth opportunities on Longview's properties and the

then-emerging ,,resource plays" (i,e., emerging geographical a¡eas that were prospective for

unconventional oil and gas reserves made economically viable through recent advances in

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technology and, therefore, iikely to attract significant oil and gas exploration and development).

Accordingly, throughout late August and early September, Longview gathered publically

available information on resource plays to allow it to assess the economic viability of the

Bakken, the Marcellus, and the newly emergent Eagle Ford plays.

31. Resource plays were one of the key subjects of a meeting held in Huffs New

Jersey offices in September 2009. At that meeting and in the witten materials prepared for it,

Longview identihed the Bakken, Marcellus, and Eagle Ford resource plays as having what

appeared to be good economics at the then-current oil and gas prices. D'Angelo stated that he

had done a preliminary investigation of the Eagle Ford play, and was interested in it. Huff and

D'Angelo then specifically directed Longview management to investigate the Eagle Ford, and

Huff offered that Huff Energy would fund any attractive resource play investment Longview

could identify. This squared with Huff Energy's publicly-stated position that "[w]e have to be

ready to back up the original investment with further capital'"

32. The Eagle Ford trend occupies an area cutting a large swath across numerous

south Texas counties, and stretches from Zavala County near the Mexican border northeastward

for several hundred miles. It is one of the newest trends to be developed and is perhaps the

largest of the "shale" oil and gas formations in the United States. For decades, these formations

were thought to be virtually valueless because-although they were known to contain large

quantities of oil and gas-no technology was available to unlock their oil and gas economically.

This changed with technological advances in horizontal drilling and hydraulic fracturing

(,,fracking"), which were successfully deployed and perfected first in the Barnett shale play near

Fort Worth and later in the Bakken shale play in North Dakota, among others. Using these

techniques, the first successful horizontal well was drilled in the Eagle Ford late in 2008.

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33. The Eagle Ford play rapidly attracted attention during 2009-2010: drilling

permits on record jumped ftom26 in 2008 to more than a thousand in 2010. Lease prices made a

corresponding upward move in late 2009 and2010, from mere hundreds of dollars per acre to

many thousands of dollars per acre. The magnitude of the Eagle Ford is hard to overestimate:

according to Texas Railroad Commissioner David Porter, "[t]he Eagle Ford shale has the

potential to be the single most significant economic development in our state's history." Today,

the Eagle Ford is renowned in oil and gas circles, both in Texas and beyond. During most of

2¡¡g,however, it was just beginning to develop-in the parlance of oil and gas investors, it was

"early in the play)'

34, Not long after Huff, D'Angelo and their associates directed Longview to pursue

the Eagle Ford, Riley-Huff was formed (on October 28, 2009). Huff operatives Dartley,

D,Angelo, and Bloom were listed as Riley-Huffls Managers. Bobby Riley was listed as its

President as well as a Manager.

35. Acting on Huff and D'Angelo's exhortations to pursue Eagle Ford opportunities,

Longview's management evaluated publicly available reports, and, in early November 2009,

engaged its consultant, Mark Lober, to study the Eagle Ford play. Lober was already familiar

with the Eagle Ford and, throughout November, he further analyzed it for Longview. He also

knew oil and gas lease brokers with acreage available for leasing within the Eagle Ford and

introduced Longview to two of them, Pat Gooden and Tamara Ford (and her land company,

Wyldfrre). As Longview later learned, much of the acreage Ford and Wyldfire presented to

Longview was obtained through assignments from Bubba Riggs and Riggs Energy, Inc.

36. Ford was a critical element in converting an idea into an investment. She had

previous expelience in shale plays, having worked in the Barnett play, and recognized that the

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Eagle Ford might be as significant as or even eclipse the Barnett play, Ford was especially

important because she was an early mover in the Eagle Ford trend æea, and had by late 2009

already established a network of local, personal connections (including Bubba Riggs and Riggs

Energy, Inc.) needed to secure large tracts of acreage in prime areas on short notice.

37, On December 2, 2009, Ford, Gooden, Lober, and members of Longview's

management team met at Longview's offices to discuss a potential acquisition of trend acreage in

the Eagle Ford. In this meeting, Ford presented Longview with acreage available through

Wyldfire-via Riggs and others -in the Eag\e Ford trend, some of which was contiguous with

the much touted ,,Hoff' well recently drilled by EOG. Ford explained that Eagle Ford acreage

would move fast, although it was still early in the play's development. This squared with

Longview management's recognition that the Eagle Ford play was moving rapidly and that,

consequently, the opportunities for investment at reasonable prices would enjoy only a narrow

window. Longview's management also recognized immediately the immense value of

associating with Ford, who told Longview that Wyldfire and its team of landmen had been "on

the ground,'developing contacts and building relationships with landowners and their advisors in

the Eagle Ford prospective counties since the spring of 2009'

3g. Shortly after the December 2 meeting, Ford requested additional information from

Lober, including Eagle Ford maps, which Lober had prepared at Longview's request and which

she acknowledged as confidential and proprietary,

39. Around the first of December, Dartley summoned Longview's CEO, Gershen, to

a December 4 meeting with Bloom, D'Angelo, and Dartley in Huffls office in New Jersey.

D'Angelo began the meeting by expressing dissatisfaction that Longview had not yet sent Huff

Energy any deals as a result of the September meeting. He then asked why Longview had not

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responded to him on several deals that he had brought to Longview management's attention. In

a characteristic display of hubris and disregard of his fiduciary responsibilities to act in the best

interest of all Longview shareholders, D'Angelo asked Gershen, "[a]fter all, who's working for

who here?" Gershen informed the assembled Huff Energy group that Longview had in fact

already hired consultants to analyze the Bakken and Eagle Ford trends, and that Longview

should have their reports shortly. D'Angelo asked for and received Lober's report on the Eagle

Ford. And because D'Angelo was also serving as a Manager of Riley-Huff at that time (afact

that he failed to disclose to Longview), Riley-Huff also received Lober's report.

40, After being advised that Wyldfire had significant acreage available in the Eagle

Ford trend, D'Angelo's interest in the Eagle Ford grew, ffid he encouraged Longview's

management to work quickly on this opportunity, He was particularly interested in the area

around EOG's Hoff well, aî area in which Ford told Longview that Wyldhre could deliver

substantial leaseholds, He also requested proprietary information developed by Longview

concerning the Eagle Ford, including Mark Lober's work and maps prepared by Ford showing

acreage being brokered or offered for lease by Wyldfire. Longview employees spent most of

December further analyzingthe Eagle Ford and related economics. This work included technical

analysis performed by Longview's two petroleum engineers, Rick Pearce and Greg Anderson.

Pearce was especially well suited for work of this nature based in part on his previous experience

in regularly buying trend acreage for a previous employer. During this timeframe, Longview's

management continually warned D'Angelo that the play was on a short fuse, a fact that

D'Angelo, a geophysicist, well understood.

41. On December 16, 2009,D'Angelo and Dartley flew over several counties in south

Texas with Bobby Riley to review the state of Eagle Ford drilling. Later that day, they told

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Longview management that they had witnessed multiple locations being prepared for drilling.

They expressed particular interest in EOG's exploration in the area, which adjoined some of the

acreage that Ford had identified at Longview's December 2 meeting. Without question, this

activity had whetted their collective appetite for investing in the Eagle Ford.

42. The next day, D'Angelo and Dartley attended a meeting in Longview's Dallas

office to discuss the Eagle Ford with Longview management and Mark Lober. Their enthusiasm

for the Eagle Ford was matched only by their desire to accumulate as much information as

possible regarding it. At that meeting, Longview provided D'Angelo with the results of its

review of information on activity in the Eagle Ford and its proprietary reserve and economic

evaluations of the new wells being drilled by others, Lober provided maps showing "fairways"

(i,e., the most potentially fruitful prospects) and described proprietary log research he was

performing, which indicated that some areas outside those pubtished fairways might be

prospective. These maps also reflected acreage proposed by Ford as available through Wyldfire,

D'Angelo,s interest in Lober's maps was palpable, and they were later sent to him at his request.

And because D,Angelo and Dartley were Managers of Riley-Huff (a fact neither of them

disclosed to Longview), Riley-Huff also received this proprietary information.

43. D'Angelo also represented that he wanted to move the process forward quickly

and that he intended to pitch the project to Huff the next day. In response to D'Angelo's

encouragement and direction, Longview's managoment moved quickly with the Eagle Ford

project and impressed upon Ford and Gooden that they would also need to move quickly and to

deliver as promised.

44. On December 2I,2009, Longview hosted another meeting with Ford and Gooden

to assess the inventory of acreage that Wyldhre could deliver. D'Angelo participated by phone.

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At this meeting, Ford showed availabl e aoreage next to the recently-drilled and much-discussed

EOG wells. She also identified trend acreage located in multiple locations across the Eagle Ford,

including areas identified by Lober in his work for Longview as prime prospects for drilling.

Ford made it clear, however, that this opportunity would not be available for long and

encouraged Longview to act quickly and decisively.

45. The next day, Longview provided its updated proprietary internal economic

analyses for the Eagle Ford play to D'Angelo and Dartley. Dartley then requested and received

from Longview the updated Wyldfire maps that Ford had presented at the December 2l meeting.

While D,Angelo and Dartley were plainly interested, they again requested further analysis by

Longview,

46. On Christmas Eve, Longview had a follow-up meeting with D'Angelo to discuss

play economics and their preparations for a meeting with Huff. At that meeting, D'Angelo

stated that Huff would require well logs in and around any acreage that Longview proposed to

buy and any supporting2-D seismic information.

47. On January !2,2070, after Longview reported that Lober would be in its offices

to review his most recent proprietary subsurface work, including logs and cross sections through

the Eagle Ford fairway, D'Angelo responded that he wanted to listen in to Lober's presentation

because he might have his own information about certain Eagle Ford property. Lober's

presentation included a review of the proprietary temperature survey of existing wells that

Longview had commissioned him to prepare; this survey resulted in new maps showing revised

fairways indicating that Frio and Atascosa Counties were likely good drilling prospects. At this

time, D,Angelo offered that "a colløborøtive effort would be more beneftcia'l to all Longview

shareholdels , . .."

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48. Throughout early-to-mid January 2010, Longview worked towæds pulling

together all the materials necessary to present this opportunity to Huff and, latet, to Longview's

Board. Working with D'Angelo and Dartley, Longview repeatedly attempted to set up a meeting

with Huff to gain his confidence in an Eagle Ford investment prior to the Board meeting

scheduled for January 28,2010. D'Angelo continued to express enthusiasm for the project and

suggested that plenty of time be reserved for a discussion of the Eagle Ford at the Longview

Board meeting. But despite this continued expression of interest, the Huff operatives continued

to delay the proposed pre-Board meeting with Huff.

49. Unable to meet with Huff, Longview went forward and on January 25,2010

circulated Director Pre-Reading Materials, which included a recommendation to invest

approximately $40 million in the Eagle Ford. But on this same day-and unbeknownst to

Longview-Riley-Huff signed a contract with Ford's company, Wyldfire, to purchase Eagle

Ford leases.

50. On the eve of the January 28,2010 Board meeting, Dartley sent a letter on behalf

of WRH Energy to Longview expressing its displeasure with Longview's management,

especially with regard to asset acquisitions. The letter also stated that, as an example of good

management, "the Eagle Ford play doesn't count, as \rr'e told you months ago that Longview

should be looking in that ateal The letter did not disclose that the Huff parties had decided to

pu,.sue Eagle Ford opportunities through Riley-Huff and its other portfolio companies rather than

Longview, nor that it already had negotiated a contract with Ford's company, Wyldfire.

Accordingly, the letter is plainly a pretext designed to obscure the decision to hijack Longview's

valuaSle Eagle Ford opportunity. Moreover, the inherent conflict ignored by Huff and his

minions was that-although their control of multiple portfolio companies in the energy sector

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allowed them the luxury of covering losses in many of these companies with a bonanza in one

company-Longview rises and falls according to its individual perforrnance. In other words,

Longview had duties to all its shareholders, not just to Huff Energy; it made a gteat difference to

those Longview shareholders whether an Eagle Ford payday wound up in Longview rather than

inside another Huff ponfolio company.

51. The January 28,2010 Board meeting was contentious, and Dartley and D'Angelo

rejected the proposed $40 million Eagle-Ford investment recommended by Longview's

management. They made it clear that Huff Energy had no interest in acquiring "trend acteage in

the Eagle Ford,,, and would neither finance such a venture nor permit Longview to otherwise

finance one, The Longview management team and the other Longview Board members were

stunned. What they didn,t rcalize, however, was why the Huff operatives had decided to "bare

their knuckles;,, they needed to conceal that they already had stolen the Eagle Ford opportunity

and given it to Riley-Huff. This perfidious conduct aside, they also knew that the best defense is

a good offense, and so they spared no criticism of Longview's management and its analysis of

the Eagle Ford.

52. In December 2009 and January 2010, Longview was poised to capitalize on the

competitive advantage that it had forged from its intemal analysis of the Eagle Ford, Lober's

technical work and foresight concerning the trend, and its relationship with Ford and Wyldfire'

Longview,s plan was to invest approximately $40 million in the Eagle Ford' At that time, it had

at least $1 million per month in free cash flow, a line of credit (with availability under its

borrowing base), substanti¿il assets that could be quickly sold (including properties in Oklahoma

worth $i6-20 million or more), and the potential to sell or issue stock to raise capital.

Collectively, these sources of capital were sufficient to permit Longview to exercise fully the

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Eagle Ford opportunity. Furthermore, Longview had the industry connections and experience

needed to engage in joint ventures and other affangements required to develop an investment in

the Eagle Ford,

53, Soon after execution of its January 25, 2070 agreement with Wyldfire, Huff

Energy's majority-owned portfolio companies embarked on an ambitious investment program in

the Eagle Ford acres previously presented to Longview, ultimately pouring millions of dollars

into lease acquisitions and drilling wells on these very properties. Riley-Huff ultimately

acquired through Wyldfire thousands of acres first identified and targeted by Longview and it

obtained tens of thousands of acres from other sources. Contrary to their fiduciary duties to

Longview, neither Huff nor D'Angelo ever presented these opportunities to Longview or its

Board.

54. By as early as April 2010, Huff Energy had dumped almost $40 million into

Riley-Huffs Eagle Ford play, which-by no coincidence--was exactly what Longview had

proposed to do only weeks earlier to its Board (and to Huff and D'Angelo as Directors). Huff

Energy took this investment tack for its own benefit because it would reap nearly 100% of the

value from investments made tluough its majority owned and controlled companies, whereas it

would gain only a fraction of any profits from an investment made through independently owned

and managed Longview. This, of course, flatly contravened Huff and D'Angelo's strict duty of

loyalty to Longview, which prohibited them from exploiting business opportunities that fairly

belonged to Longview and required them to present such opportunities to Longview before

exploiting them for their own self-interests, Their usurpation is all the more egregious because

Huff and D'Angelo (aided by their cohorts) acted under the cloak of their directorships and acted

not only surreptitiously but implemented their scheme through the misuse of confidential,

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proprietary corporate information supplied by Longview. The duty of loyaþ, described well by

WilmerHale in 2007, required more, even if D'Angelo thought other matters deserved more

attention. In fact, the WilmerHale letter proved uncannily prescient when it wamed Huff and

D'Angelo that

A director of a corporation has a fiduciary duty to the corporation and all of itsstockholders, regardless of other interests or duties that directot rnay have to other

parties (including aparty that appointed him or her);

The use of confidential corporate information by a director to his own advantage

would be a breach of the duty of loyalty;

There may be an inherent conflict of interest engendered by a shareholder-

appointed director's fiduciary duties to two entities; and

When an investor becomes or designates its representative as a director, that

director assumes a primary duty to the corporation and all of its stockholders.

Huff and D'Angelo heeded none of this and thereby failed their duties at every turn.

III. Claims

A. Breach of Fiduciary Duty/Usurpation of corporate opportunity(Against Huff and D'Angelo)

55. D'Angelo and Huff owe Longview a duty of loyalty.

56. Longview was frnancially able to exploit the Eagle Ford opportunity.

57. The Eagle Ford opportunity was within Longview's line of business.

58. Longview had an interest or expectancy in the Eagle Ford opportunity.

59. By diverting the Eagle Ford opportunity to themselves, D'Angelo and Huff placed

themselves in a position of conflict or competition with Longview.

60. D'Angelo and Huff breached their fiduciary duties to Longview by usurping the

Eagle Ford opportunity and misusing proprietary information supplied by Longview in regard to

the Eagle Ford.

t

a

a

a

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61, D'Angelo and Huff acted with malice'

62. D'Angelo and Huff s breaches of duty and usurpation of Longview's opportunity

proximately caused Longview injury and damages'

B. Fraud - (Against all Defendants)

63. D,Angelo and Huff concealed from Longview their intentions to appropriate the

Eagle Ford opportunity for themselves and affirmatively misrepresented that Huff intended to

fund an Eagle Ford investment through Longview'

64. As Longview directors, D'Angelo and Huff had a fiduciary duty to fully and

unequivocally disclose such information to Longview and to refrain from making aff,rrmative

misrepresentations to Longview,

65, D,Angelo and Huffs secret intention to divert the Eagle Ford opportunity for

themselves was material information.

66. Longview did not know and had no way of knowing that D'Angelo and Huff-

with the participation of Dartley and Bloom, who acted for Huff and the Huff companies-

would appropriate the very business opportunity they had encouraged and induced Longview to

pursue. Rather, Longview reasonably relied on the defendants' affirmative representations that

Huff intended to fund an Eagle Ford investment through Longview'

67. D,Angelo and Huff were deliberately silent when they had a duty to speak and

they made affirmative representations that they knew to be untrue. Indeed, they went to great

lengths to fraudulently conceal their ultimate design to appropriate the Eagle Ford opportunity

for themselves.

6g, By concealing and facilitating the scheme to appropriate the Eagle Ford

opportunity, D'Angelo, Dartley, Bloom, Huff, Huff Energy, Huff Asset Management, WRH

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Energy, Riley, and Riley-Huff intended to cause Longview to: (a) use its own resources to

develop the information necessary to make an investment in the Eagle Ford; and (b) refrain from

pursuing alternative means for exploiting the Eagle Ford opportunity.

69, Longview reasonably relied on D'Angelo and Huff s good-faith and reasonably

believed that: (a) D'Angelo and Huff did not intend to appropriate the Eagle Ford opportunity for

themselves; and (b) Huff intended to fund an Eagle Ford investment through Longview.

70, In carrying out their fraudulent scheme, the defendants acted with malice.

TL Longview suffered injury as a result of the defendants' omission of material

information, false pretenses, and affirmative misrepresentations, including but not limited to, lost

profits.

C. Tortious Interference with Prospective Business Relationships -(Against all Defendants)

72, There is a reasonable probability that Longview would have entered into a

business relationship with Ford, Gooden, and/or Wyldfire to acquire acreage in the Eagle Ford.

73. The defendants intentionally interfered with this prospective relationship by

appropriating the Eagle Ford opportunity for themselves.

74, This intentional interference \ryas malicious and independently tortious,

constituting fraud, misappropriation of Longview's trade seorets, and a breach of their f,rduciary

duties to Longview,

15. Longview suffered damages as a result of the defendants' intentional interference,

including, but not limited to, lost profits.

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D. Misappropriation of Trade Secrets - (Against all Defendants)

76. Longview owned multiple trade secrets, including but not limited to: (a) Lober's

analysis of seismic and geological data and well logs; (b) commissioned maps; and (c) economic

analyses and projections regarding the Eagle Ford opportunity.

77, D'Angelo ærd Huff used Longview's trade secrets without Longview's

permission in order to further their own-self interests, Such use constituted a breach of the

fiduciary duties owed by D'Angelo and Huff to Longview.

78. D'Angelo, Huff, Dartley, Bloom, Riley, Riley-Huff, Huff Energy, WRH Energy,

and Huff Asset Management all used Longview's trade secrets without Longview's permission

and for their own commercial gain, after acquiring such trade secrets through improper means

committed with malice.

79. Longview suffered damages as a result of the defendants' use of its trade secrets,

including, but not limited to, lost profits and the value of a reasonable royalty.

E. Aiding and Abetting - (Against all Defendants)

80. D'Angelo and Huff breached their duties of loyalty to Longview, rnisappropriated

Longview's trade secrets, and defrauded Longview.

81. All of the defendants knew that Huff and/or D'Angelo's conduct was tortious.

82, All of the defendants intended to assist Huff and/or D'Angelo in committing these

torts.

83. All of the defendantb provided assistance to Huff and/or D'Angelo in the

commission of these torts and all acted with malice.

84, All of the defendants' assistance was a substantial factor in causing these torts.

2l

85. Longview suffered damages as a result of the defendants' wrongful conduct.

F. Conspiracy - (Against all Defendants)

86. All of the defendants combined for the purpose of: (a) misappropriating

Longview's trade secrets; (b) defrauding Longview; and (c) breaching (or aiding and abetting the

breach) of Huff and D'Angelo's fiduciary duty to Longview'

87. All of the defendants had knowledge of and agreed to participate in a scheme to

misappropriate Longview's trade secrets, defraud Longview, and steal Longview's corporate

opportunity and each of them acted with malice.

88. D,Angelo and Huff misappropriated Longview's trade secrets and defrauded

Longview.

89. Bloom, Riley, Riley-Huff, Huff Energy, wRH Energy, and Huff Asset

Management also misappropriated Longview's trade secrets'

90. Longview suffered substantial damages as a result of the defendants' tortious acts.

G. ConstructÍve Trust

gl. The defendants wongfrrlly usurped the Eagle Ford opportunity, and they were

unjustly enriched by their wrongful conduct. Specifrcally, the defendants unjustly obtained

thousands of acres of leases in the Eagle Ford that fairly belong to Longview. Accordingly,

Longview is entitled to a constructive trust over all of the subject leases in the defendants'

possession or on any assets that the defendants obtained by virtue of the usurpation.

H. Punitive Damages (Against all Defendants)

91. In committing each of the wrongs identified above, the individual defendants

acted with gross negligence and malice, as defined in Section 41 of the Texas Civil Practice and

22

Remedies Code, and for the purpose of increasing their own pecuniary gain. As such, the

individual defendants are liable for punitive damages, for which recovery is hereby sought.

92, The corporate, limited-partnership, and timited-liability-company defendants are

also liable for punitive damages because: (1) the individual defendants were employed as vice-

principals of these entities and acted within the scope of their employment; and (2) the individual

defendants' grossly negligent and malicious acts were previously authorized or subsequently

ratified by these entities.

93. The defendants are liable for punitive damages in excess of the limitations

prescribed by Section 41.00S(b) of the Texas Civil Practice and Remedies Code because they

knowingly and intentionally misused Longview's proprietary information in violation of section

32.45 of the Texas Penal Code. SeeTYx.CIv. Pn¡.c. &RBrr¡. Coor $ 41.008(cX10).

Demand for Jury Trial

Longview hereby demands trial by jury upon all issues raised herein,

PRAYER

Longview PraYs that:

(a) the Court impose a constructive trust over the proceeds, including all leaseholds

and the enhanced value oi past production revenues, obtained by defendants through their

misappropriation and utilization oi Longview's confidential and proprietary information, their

b."aóúes ãf fiduciary duty, their tortious interferences ot any other tortious conduct;

(b) an injunction be entered against the corporate, limited partnership, and limited

liability company däfendants prohibiting further transfer of the subject properties in the Eagle

Ford;

(c) an order be entered directing the corporate, limited partnership, and limited

liability company defendants to transfer title to the subject properties in the Eagle Ford to

Longview;

(d) defendants be required to make an accounting to Longview for all money received

in connection with investmerrts in the Eagle Ford or otherwise resulting from their

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misappropriation and utilization of Longview's confidential and proprietary information, their

breaches of fiduciary duty, their tortious interference or any other tortious conduct;

(e) Longview have judgment against defendants, jointly and severally, for its actual,

consequential, and special damages, including lost profits;

(Ð the defendants be ordered to disgorge all property, interests, proceeds, and profits

realizedin connection with their investments in the Eagle Ford;

(g) Longview have judgment for punitive damages against all defendants for allclaims;

(h) Longview be awarded its attorneys' fees and costs; and

Longview recovers such additional relief, at law or in equity, to which it may be(Ðjustly entitled.

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Respectfully submitted,

Mikal C. Watts

Texas State Bar No. 10981820

WATTS GUERRA CRAX'T, LLPFour Dominion Drive, Bldg.Three, Suite 100

San Antonio, Texas 78257

Phone: 210-447-0500Fax:210-447-0501Email : mcwatts @wgclawfirm. com

Brian P. BerrymanTexas State Bar No. 02254300

300 Convent, Suite 100

San Antonio, Texas 78205

Phone: 210-527-0500Fax: 210-527-0501Email : bberryman @w gclawftrm. com

Rolando Jasso

Texas State Bar No. 10591500Claudio HerediaTexas State Bar No. 09505300KNICKERBOCKER, HEREDIA, JASSO& srEwART, P.C.468 Main StreetEagle Pass, Texas 78852Phone: 830-773-9228

B. FlorenceState Bar No. 0

Randy D. GordonTexas State Bar No. 00797838Lucas C, WohlfordTexas State Bar No, 24070871

GARDERE WYNNE SEWELL LLP1601 Elm Street, Suite 3000Dallas, Texas 75201-4761(21 4) 999-3 000 (telePhone)(21 4) 999 -4667 (facsimile)cfl orence(E eardere. comrsordonlAsardere.com

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CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of foregoing was seryed on the following

counsel by the method indicated, on this the2nd day of March,2Ùl2t

Dean V. FlemingMichael V/. O'DonnellJeffrey A. WebbFuLsRrcHr & Jnwonsrl, L.L.P.300 Convent Street, Suite 2100

San Antonio, Texas 78205Facsimile: 210,270.7205

Via Electronic and Certi/ìed Mail RRR

Alfredo Z,PadillaLnw Or'¡'lce Or ALnRBDoZ, PRolLt-R

104 North 5th StreetP.O. Drawer 355Canizo Springs, TX 78834Facsimile: 830.876,9531

Via Certified Mail RRR

Louis M. SolomonHal S. ShaftelSolomon B. ShinerockCeowRLnoER'WIcKERSHAM & Tnrr LLPOne World Financial CenterNew York, NY 10281Facsimile: 212,504.6666

Via Electronic and Certified Mail RRR

Attorneys For Defendants Huff Energy Fund, L.P.,

WRH Energy Partners, L.L.C., W.R. Huff Asset

Management Co., LLC, William R. Huff,Rick D'Angelo, Ed Dartley, Esq., Bryan Bloom, Esq,,

and Riley-Huff Energy GrouP, LLC

Craig A. Duewall Via Electronic and Certifi'ed Mal,RRR

C. Mark StrattonSgelwoN,GRACEY, R¡rlI¡'n & Mtllrn, LLP301 Congress Ave., Suite 1500

Austin, TX 78701Facsimile: 512.499.8559

Attorneys for Bobby Riley

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C. Wohlford