On August 2, 2013, Chimicles & Tikellis LLP made a books and records demand on Continental Resources, Inc. (“Continental” or the “Company”) pursuant to 180 O.S. §1065(b) to investigate breaches of fiduciary duty and mismanagement by the Continental Board of Directors in connection with Continental’s commitment of $95.8 million to fund the construction of a pipeline being developed by Hiland Partnerts, LP (“Hiland”) (the “Pipeline Deal”), a company controlled by Continental’s founder, controlling shareholder and Chief Executive Officer Harold Hamm (“Hamm”) and his family. Continental subsequently produced books and records (the “Demand Documents”) pursuant to a confidentiality agreement.
On February 28, 2013, Continental disclosed in a filing with the Securities and Exchange Commission that it had entered an agreement in September 2012 with an “affiliate” to guarantee access to an unbuilt pipeline. The Company did not disclose that the “affiliate” was Hiland until April 10, 2013. The Pipeline Deal requires Continental to pay Hiland $95.8 million regardless of whether the Company actually ships oil on the Pipeline. Continental agreed to the Pipeline Deal even though pipelines on a parallel route have had a 44% drop in oil transported since the summer of 2012 and Hamm has publicly stated on numerous occasions that shipping oil by rail is more cost effective for the Company.
After receiving and reviewing the Demand Documents, on November 12, 2013, Chimicles & Tikellis LLP filed a Verified Derivative Action Petition in the District Court of Oklahoma County of the State of Oklahoma (“the Action”). The Action alleges wrongdoing by Continental directors and officers for causing the Company to enter the Pipeline Deal to the benefit of Hamm and to the detriment of the Company and its shareholders.
On January 6, 2014, the District Court of Oklahoma County of the State of Oklahoma entered an order consolidating several related actions and appointing Chimicles & Tikellis LLP as Co-Lead Counsel. On February 10, 2014, Plaintiffs filed their Verified Amended Shareholder Derivative Petition (“Amended Petition”).
On March 27, 2014, Defendants filed several motions to dismiss the Amended Petition. Plaintiffs will file an opposition to the motions to dismiss on May 12, 2014. Defendants will then file a reply brief in support of their motions on May 27, 2014. A hearing on the motions to dismiss is likely to be held in July 2014.
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