Attorneys often find it essential to quickly understand the commercial, technical, operational and broad business practices of their client’s industry. This understanding is pivotal to assessing the risks and value of the case in large commercial litigation. Mr. Langley has assisted attorneys in such instances, as is illustrated by the following examples.
CRUDE OIL ROYALTIES: A class action lawsuit was filed on behalf of royalty interests, alleging under-pricing of crude oil as it was removed from the lease. Mr. Langley was retained to advise attorneys for defendant oil companies (a large joint defense group) as to industry practices for pricing and payments, and to reconcile the differences in local and regional prices with respect to quality, location and other unaccounted for risks assumed. The data management requirements encompassed ten years of monthly lease level data from thirty companies, considering multiple grades of crude oil and changing business practices over the period. He was deposed in a single party “test” case, and prepared analyses for the group in anticipation of trial. The cases were ultimately settled for an amount within one percent of the originally paid prices.
PIPELINE THROUGHPUT MAXIMIZATION: Two companies owned a pipeline jointly, with one, the operator, having a duty to operate it at maximum capacity at all times. The non-operator alleged that this duty was not met, and filed suit. For the operator, Mr. Langley was retained to review the operations and form an opinion as to whether maximum throughput had been achieved. Recognizing that “maximum” is influenced by many factors, he drew from client engineering, maintenance, operating and accounting records to reconstruct the operation of the pipeline over a 27 month period, and to calculate a theoretical “maximum” for comparison to actual operations. The pipeline simulation, created in one-minute segments, showed that the pipeline had operated within one percent of its theoretical maximum for the entire time. The parties settled amicably.
VALUATIONS BASED ON PROJECTED EVENTS: For a company involved in the hostile acquisition of an integrated oil and gas business, the target’s management and board of directors refused to support the buyer’s tender offer for the target’s publicly traded shares. Management stated that their forward business plans were worth considerably more that the current market or tender value. Over a four week period Mr. Langley led a multi-disciplined team of industry experts through each segment of the business and its plans, and compared the key assumptions to company history and industry projections. This in-depth analysis showed the best, worst and most likely outcomes for management’s plans.
ENERGY TRADING INVESTIGATIONS: For a large client under investigation for conducting “wash trades” in its energy trading business, Mr. Langley lead a team of analysts to read and document the individual trading log books from a two-year period, for the entire trading organization. This intensive effort was expended over a brief period of time so that attorneys could better plan their actions. Review of the findings, coupled with an explanation of good controls and management practices, led to dismissal of certain traders, significant scale back of the trading business, and ultimately successful settlement of the cases.
REFINING BUSINESS VALUATION: For an international client involved in a dispute regarding the value of an integrated refining and marketing business, Mr. Langley provided replacement cost, depreciated cost and comparable sales transaction for each segment of the business. An assessment of maintenance practices and effectiveness of marketing was used to support the overall valuation. The parties used the analyses to conduct and conclude an arbitration proceeding.
REFINERY LOST PROFITS: A refiner claimed business interruption losses related to the delayed startup of a major capital investment. Working for the attorneys representing the EPC contractor, significant discrepancies were found in the refiner’s claim for damages, largely from failure to consider the overall business impact of the delay. Mr. Langley requested additional, specific documents related to the overall business and found that the losses were far less than claimed. By approaching the claim as a business investigation, rather than an engineering investigation, attorneys and the court learned that while operations may have been impacted, profits were not.
SUITABLE FUEL WAS UNAVAILABLE: A manufacturer of special-purpose vehicles sold and delivered several such vehicles to a buyer in the Middle East. The vehicles required ultra-low sulfur diesel if operated in the US or Europe, but ULSD was not mandated for use in the buyer’s country. The buyer asserted that the product was defective, and claimed that no suitable fuel was available. As consultant to attorneys for the manufacturer, Mr. Langley studied the local and regional markets and found several refiners and suppliers who could provide ULSD, and do so on a cost-effective basis.