CAUSE NO

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1 FILED TARRANT COUNTY 6/11/2015 9:34:55 AM THOMAS A. WILDER DISTRICT CLERK CAUSE NO OPERATING COMPANY, LLC, and PRESTON BRYANT, individually, and as Manager of 7711 OPERA TING COMPANY, LLC v. Plaintiffs, CHRISTOPHER WHITMAN, Defendant. IN THE DISTRICT COURT 348TH JUDICIAL DISTRICT TARRANT COUNTY, TEXAS MOTION FOR EXPEDITED DISCOVERY Discovery is capable of abuse. Accordingly, some facts must be known by the Court to aid it in determining the appropriate "expedited" discovery to be ordered prior to the upcoming injunction hearing, without abuse or obfuscation. I. SUMMARY Defendant presents the Court with a mistaken view of the steps the President of 7711 Operating Company, LLC ("7711 Operating") has undertaken to protect the company. Defendant's request for injunctive relief is founded upon a mistaken assertion that the company's President, Preston Bryant, seeks to divest the company of its contractual role as the "operator" of two wells named "Gary Bryant" and "Frankie J". Not so. Rather, the President seeks only to remove two dishonest non-employee, non-manager, non-members, specifically Kipp Whitman and his spouse Beth Whitman, from access to its bank accounts and operations in order to stop their pilfering of the company's assets. MOTION FOR EXPEDITED DISCOVERY Page - 1

2 Stated plainly, Kipp Whitman and Beth Whitman have unlawfully converted to themselves approximately $300 thousand to $500 thousand since January 2014, and that is what the President needs to stop. To do so, the President needs remove Kipp and Beth Whitman from access to the company's accounts and to engage the services of an honest "operator". But, as set out below, firing Kipp and Beth Whitman is not so easy or straightforward, because Kipp Whitman's son, Chris Whitman, is a 50% equal co-owner with the President. Kipp and Beth Whitman can not, therefore, be removed from the company's bank accounts without Chris's consent. Kipp the father controls Chris the son in this regard, and so other solutions must be found. Defendant's canard regarding the President's actions apparently derives from the difference between two non-identical meanings the term "operator". One meaning of "operator" is the contractual and business meaning as set out in 7711 Operating contract (a Joint Operating Agreement, or "JOA"). Pursuant to the JOA, 7711 Operating is contractually assigned the responsibility of operating the wells for the mineral owners, which includes investors. That is unequivocally the President's intention, and that definitely includes operating the business honestly. In that regard, the President does not seek, and does not desire or intend, to disrupt or diminish that contractual relationship. The President seeks only to stop Kipp Whitman's stealing. The second meaning of "operator" is the usage used by the Railroad Commission, in its standard forms such as form P4. There, "operator" means the person or entity authorized to report to the Commission, accountable to it regarding compliance, and which serves as the Commission's contact point. It is commonplace, moreover, for an operating company to contract with a qualified vendor for this role, and the Commission requires a form P4 to initiate a change of the person in this role. Accordingly, the President filed forms P4 for each well to obtain appointment of an honest MOTION FOR EXPEDITED DISCOVERY Page - 2

3 gentleman of many years' experience named Johnny Day. That change involves changing the person conducting the day-to-day work, including paying the bills, as a new vendor. It does not implicate any change in the JOA relationship between 7711 Operating and the mineral owner(s). In short, the President seeks to terminate a very hostile and dishonest vendor, and replace him with an honest one. That is axiomatically consistent with all of the President' s duties owed to the company. II. VERIFIED FACTS A. Pertinent Documents. The primary source documents attached to defendant's application for injunctive relief are authentic, meaning here: (1) the Company Agreement of 7711 Operating Company, LLC ("7711 Operating"); (2) the Joint Operating Agreement between 7711 Operating and 7711 Oil Company, LLC ("7711 Oil"); and (3) the Railroad Commission of Texas forms P-4. Fairly stated, the Company Agreement of 7711 Operating Company, LLC establishes the company, which is equally owned (50%-50%) by Preston Bryant and Chris Whitman as the Members and Managers. Bryant is President, and Chris Whitman, Kipp's son, is the Vice-President Oil is the owner of the minerals (by leases) of the wells named "Gary Bryant" and the "Frankie J". As is normal, 7711 Oil has investors, one of which is 7711 Operating. The Joint Operating Agreement ("JOA") establishes 7711 Operating as the "operator" of the wells on behalf of the mineral owner 7711 Oil. Pursuant to the JOA, 7711 Operating prospected and drilled the wells, which are now producing normally, and the minerals are sold under contract. So now, "operating" basically means receiving money from sales, keeping the wells maintained using MOTION FOR EXPEDITED DISCOVERY Page - 3

4 vendors, paying the bills, and sending checks to investors. Nowhere in any of these documents are Kipp and Beth Whitman granted any rights, offices, or status at all. The two forms P4 submitted to the Railroad Commission were required in order for the President to substitute Johnny Day for Kipp Whitman as the person with authority to report to the Commission, also denoted "operator" in the lexicon of the Commission. The object of the P4's was to substitute one vendor for another, Johnny Day for Kipp Whitman, and that is all. B. The Broader Disputes Among the Parties and Non-Parties. The JAMS Arbitration. On February 6, 2015, 7711 Operating and Preston Bryant filed a Demand for Arbitration against Chris Whitman and Kipp Whitman, pursuant to the 7711 Operating company agreement, seeking disgorgement and/or damages arising from a covert conveyance of valuable mineral interests out of out of 7711 Operating to Chris Whitman. Kipp Whitman challenged jurisdiction on grounds that he is not a party to any of the above-listed agreements and, therefore, not subject to arbitration. The action was dismissed by JAMS for Whitman's failure to pay the fee. This Action. Fairly summarized, Kipp Whitman was (and is) the day-to-day "operator" of the wells. Beth Whitman serves as "bookkeeper". In this way Kipp and Beth Whitman have been able to self-deal to their own companies (i.e., "Oil Patch Kids", a field services vendor) at abusive prices, to Beth Whitman as a vendor at exorbitant prices, and simply to steal from the company via its credit card and otherwise. The President needs for that to stop. It being impossible, because of the ownership structure, to cure this using normal business MOTION FOR EXPEDITED DISCOVERY Page 4

5 tools, this action was filed to conclude these problems, among others. Mediation and Settlement Discussions. Kipp Whitman and Preston Bryant, represented by the attorneys here, attended mediation with Gary Berman, but did not settle. By their counsel, the parties also met again to discuss settlement, although yet again settlement was not reached. The Dallas Lawsuit. On May 20, 2015, Kipp Whitman sued Preston Bryant, as individuals, seeking damages based upon a very long relationship between Kipp and Preston's deceased father, Gary Bryant, which evolved into a "mentor" relationship with Preston. There Kipp asserts that he is entitled to 40% of Preston's inheritance, in the form of a company that was sold. Kipp is represented in that action by the same law firm as Chris Whitman is here. C. The Cell Phones. and the Bank Accounts. At or about the same time that Kipp filed suit in Dallas County, he also caused Preston's company cell phone to be cut off, and the number redirected to a woman thought to be Beth Whitman. Investors with whom Preston regularly speaks, and various attorneys, and others, could not contact him. Concisely: Kipp Whitman, himself or through his son and/or wife, cut off the President's company cell phone without notice. The confluence of these events satisfied the President that a final "coup" was indeed underway. The President acted immediately. Kipp and Beth Whitman could not simply be removed from 7711 Operating's bank accounts, as that required Chris Whitman's co-approval. It is axiomatic that this was not going to happen. Accordingly, the President sought to protect the company by removing the monies on deposit to MOTION FOR EXPEDITED DISCOVERY Page - 5

6 safety, and then to open new accounts from which the company's obligations could be paid. To begin this, the President wire transferred the deposits to the company' s attorney's trust account for safe keeping until new accounts were opened as soon as possible. Two days later, a temporary restraining order hearing was convened before Hon. David Evans. There, as here, the President adamantly seeks only that 7711 Operating be operated honestly and forthrightly, by whatever mechanisms the Court determines. Judge Evans Order reveals this. III. EXPEDITED DISCOVERY As a threshold matter, despite the style of defendant's motion, there is no "emergency". Presently the company is being "operated" in a very satisfactory manner. Under mutual supervision: minerals are being harvested, the wells are maintained, sales are being deposited, and the bills are being paid, while the insiders receive nothing. This could be continued fairly indefinitely under the Court's supervision. The discovery to be had now, however, should fit the parties bona fide ends, avoid abuse, and preserve the company's honest operation. The expedited discovery to be ordered should comport with the actual dispute to be resolved at the temporary injunction hearing: (1) Whether the President exercised or abdicated his duties by seeking to remove Kipp and Beth Whitman from the company's business affairs for good cause; and (2) Whether the President protected the company, or abused it, by taking action to remove Kipp and Beth Whitman from further and imminent misappropriations. MOTION FOR EXPEDITED DISCOVERY Page - 6

7 IV. SUMMARY AND CONCLUSIONS Plaintiff requests that the Court tailor defendant's expedited discovery so as to hold the process to what is "reasonably calculated" to determine these actual issues, without abuse or obfuscation. Respectfully submitted, Isl Charles H. Steen By:~~~~~~~~~~~~ Charles H. Steen Texas Bar No Charles H. Steen, P.C Turtle Creek Blvd., Suite 300 Dallas, Texas Telephone: (214) Telecopier: (214) Robert P. Kubicki Texas Bar No Prudential Drive, Suite 204 Dallas, Texas Telephone: (214) Telecopier: (214) ATTORNEYS FOR PLAINTIFFS MOTION FOR EXPEDITED DISCOVERY Page - 7

8 CERTIFICATE OF SERVICE I certify that I have caused a true and correct copy of the above and foregoing Plaintiffs Memorandum of Facts in Opposition and Response to Motion for Expedited Discovery to be served upon all opposing parties, by and through their attorneys in charge via electronis service and hand delivery on June 11, Isl Charles H. Steen By:~~~~~~~~~~~ Charles H. Steen MOTION FOR EXPEDITED DISCOVERY Page - 8

9 Cause No OPERATING COMPANY, LLC, and PRESTON BRYANT, Individually, and as MANAGER OF 7711 OPERATING COMPANY, LLC, Plaintiffs v. CHRISTOPHER WHITMAN, De&ndanL IN THE DISTRICT COURT 348TH DISTRICT COURT TARRANT COUNTY, TEXAS VERIFICATION OF PRESTON BRYANT My name is Preston Bryant. I am over the age of eighteen, and have never been convicted of a felony, or crime involving moral turpitude. I have read Plaintiffs Memorandum of Facts in Opposition and Response to Motion for Expedited Discovery and verify on personal knowledge that its factual content is true and correct. Date: June 10, 2015 Subscribed and sworn to before me this June 10, My commission Expires: Notary Public in and for the State of Texas