Title: WILLIAMS GAS PROCESSING CO. v. UNION PACIFIC RESOURCES CO.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

WILLIAMS GAS PROCESSING CO. v. UNION PACIFIC RESOURCES CO.2001 WY 5725 P.3d 1064Case Number: 00-40Decided: 06/20/2001

APRIL TERM, A.D. 2001

                                                                                                    

 

WILLIAMS 
GAS PROCESSING --

WAMSUTTER 
COMPANY, and

WILLIAMS 
GAS PROCESSING COMPANY,

Appellants(Plaintiffs),

 

v.

 

UNION 
PACIFIC RESOURCES COMPANY,

UNION 
PACIFIC FUELS, INC., and

FUELS 
ACQUISITION COMPANY,

Appellees(Defendants).

 

 

Appeal 
from the District Court of Carbon County

The 
Honorable Kenneth Stebner, Judge

 

Representing 
Appellant:

Ford T. 
Bussart of Bussart, West, Rossetti, Piaia & Tyler, P.C., Rock Springs, WY; 
and John D. Ray and Robert Palmer Rees of Fabian & Clendenin of Salt Lake 
City, UT.  Argument by Mr. 
Rees.

 Representing 
Appellee:

Paul J. 
Hickey of Hickey, Mackey, Evans & Walker, Cheyenne, WY; John B. Thomas of 
Hicks, Thomas & Lilienstern, Houston, TX; Jerome T. Wolf and Jan P. Helder 
Jr. of Sonnenschein, Nath & Rosenthal, Kansas City, MO; and Thomas F. Reese 
and Morris R. Massey of Brown, Drew & Massey, LLP, Casper, WY.  Argument by Mr. 
Hickey.

  

Before 
LEHMAN, C.J., and GOLDEN, HILL, JJ.; and DAN SPANGLER, D.J. 
(Retired)

 
            
HILL, Justice.

 [¶1]      In this appeal, 
we review Appellants', Williams Gas Processing  Wamsutter Division (a Delaware 
corporation) and Williams Gas Processing Company (a Delaware corporation) 
(hereafter collectively "Williams"), challenge to an order of the district court 
that denied a motion for partial summary judgment in favor of Williams.  The district court instead granted a 
motion for summary judgment in favor of Appellees, Union Pacific Resources 
Company (a Delaware corporation) (hereafter "UPRC" or "UPR"), Union Pacific 
Fuels, Inc. (a Delaware corporation) (hereafter "UPF1"), and Fuels Acquisition Company (a 
Delaware corporation) (hereafter "FAC"), and Williams also challenges that 
decision on a variety of grounds.  
According to Williams, UPRC structured its transfer of a gas processing 
plant and gathering system (hereafter "Echo System") to Duke Energy Field 
Services, Inc. (hereafter "DEFS" or "Duke") in such a manner as to violate the 
preferential purchase rights afforded Williams under the agreements between 
Williams and UPRC.  Williams 
contends that the district court's resolution of this case is contrary to its 
unambiguous contractual rights and applicable law.  In other arguments, Williams contends 
that there are genuine issues of material fact which must be resolved by a jury, 
and that the district court abused its discretion in disallowing discovery 
requested by Williams.

 

[¶2]      We will reverse 
and remand for further proceedings consistent with this 
opinion.

 

 

ISSUES

 

[¶3]      Williams provides 
this statement of the issues for review:

 

            
The issues on appeal are whether the lower court erred in denying 
Plaintiffs-Appellants Williams' motion for partial summary judgment and granting 
the Defendants-Appellees' cross-motion for summary judgment.  Specifically:

            
1.  Williams and defendant UPRC were co-owners of a gas plant 
and gathering system.  The Ownership 
Agreements granted each owner a preferential purchase right if the other owner 
"desires to sell" its co-interests, either "as a separate transaction" or "in a 
package of assets."  Did the lower 
court err in ruling that UPRC did not "sell" its co-interests to Duke when it 
executed a contract mandating each of the following steps:

a.  UPRC 
must create a new second-tier subsidiary (i.e., defendant 
FAC),

b.  UPRC 
must next deed its co-interests into FAC, and

c.  UPRC 
must next sell to Duke all the stock of defendant UP Fuels (i.e., UPRC's 
first-tier subsidiary and FAC's parent company)?

            
2.  An exemption to Williams' preference rights permitted UPRC 
to transfer its co-interests to any "Affiliate."  Did the lower court err in holding that 
FAC was still an "Affiliate" of UPRC on the transfer date, even though UPRC was 
already contractually committed to sell all the stock of FAC's parent company to 
Duke?

            
3.  A second exception to Williams' preference rights permitted 
UPRC to dispose of its co-interests by "merger."  Did the lower court err in holding that 
UPRC disposed of its co-interests by a merger, even though UPRC itself never 
merged?

            
4.  Did the lower court err in not ruling that the following 
were genuine issues of material fact precluding summary judgment in favor of 
Defendants-Appellees:

a.  When 
UPRC and Williams executed their Ownership Agreements, did both parties intend 
that their preferential rights could not be avoided by a multi-step 
transaction?

b.  If 
a multi-step transfer does not trigger the preference rights as written, 
did UPRC and Williams commit a mutual mistake in drafting their 
preference rights language?

            
5.  Did the lower court abuse its discretion by not granting 
plaintiffs an opportunity, as requested pursuant to Wyoming Rule of Civil 
Procedure 56(f), to take depositions and conduct other 
discovery?

 

Appellees 
propose these as the issues:

 

            
Although Williams now attempts to raise numerous issues related to the 
Echo System Agreements, the ultimate issue in this appeal 
is:

            
1.  Whether the district court was correct in entering summary 
judgment for UPR based upon its construction of the unambiguous provisions of 
the Echo System Agreements?

            
Because Williams has raised novel issues on appeal, this Court should 
address additional procedural issues, specifically:

            
2.  Whether Williams can raise for the first time on appeal, 
theories of contract construction not presented to the district 
court?

            
3.  Whether the district court abused its discretion in not 
allowing discovery when both parties argued the contracts were unambiguous and 
requested deferral of discovery?

 

In its 
reply brief, Williams articulates these additional issues:

 

            
The new issues and arguments raised in Appellees' Brief, addressed 
herein, are:

            
1.  Does this Court's intervening decision in McGuire v. 
Lowery support or reject Appellants' claim that a "sale" occurred under 
Raymond (Wyoming) and Prince (Utah)?

            
2.  Is Appellants' claim that a "sale" occurred upon execution 
of the November 20, 1998 Purchase Agreement a new argument on 
appeal?

            
3.  Does the magnitude of the overall Purchase Agreement mean 
that a "sale" of the individual Property did not occur?

            
4.  Does Appellees' Brief establish that FAC was an exempt 
"Affiliate" as of its December 2 deed from UPRC?

            
5.  Does Appellees' Brief identify any exempt "merger" or 
"reorganization" within the language of Article 9.3?

            
6.  Do Appellees' own constructions of Articles 9.1, 9.2 and 
9.3 establish that those clauses are ambiguous?

            
7.  Have Appellants established a prima facie case of mutual 
mistake?

            
8.  Have Appellants waived their right to request relief under 
Rule 56(f)?

 

 

FACTS

 

[¶4]      On August 27, 
1993, Williams and UPRC entered into two agreements.  The first was entitled Echo Springs Gas 
Processing Plant Construction, Ownership and Operation Agreement, and the second 
was entitled Wamsutter Gas Gathering System Construction, Ownership and 
Operation Agreement.  For purposes 
of this appeal the terms of both contracts are identical, and the provisions of 
those contracts, which are set out below, apply equally to both.  In those contracts, Williams and UPRC 
agreed to build a gas processing plant and a gas gathering system, with Williams 
owning 66% of the property and UPRC owning 34%2 of the property.  Williams was designated as the operator 
under both contracts.  In 1998, UPRC 
decided to sell3 its interests under those 
contracts, and the process by which that transfer to Duke was achieved created 
the controversy that must be resolved in this appeal.  Of central importance to this appeal are 
these provisions of the Echo System agreements:

 

IX.  SALE OF PLANT [SYSTEM] 
INTEREST

 

            
9.1       
Should any Owner4 desire to sell all or part of its 
interest in the Plant [System] to a non-Affiliate5 as a separate transaction, it shall 
promptly give written notice to the other Owners with full information 
concerning its proposed sale, which shall include the name and address of any 
prospective purchaser, the purchase price, and all other terms of any offer 
received by that Owner.  Any of the 
other Owners shall then have an optional prior right, for a period of thirty 
(30) days after receipt of the notice, to purchase on the same terms and 
conditions the entire interest which the other Owner proposes to sell; and, if 
this optional right is exercised, the purchasing Owners shall share the 
purchased interest in the proportions that the interest of each bears to the 
total interest of all purchasing Owners.

 

            
9.2       
Should any Owner desire to sell or trade its interest in the Plant 
[System] to a non-Affiliate in a package of assets, it shall promptly give 
written notice to the other Owners with full information concerning the proposed 
sale and the selling Owner's valuation of its interest in the Plant 
[System].  Each Owner desiring to 
buy the selling Owner's interest ("Buying owner") must so notify the selling 
Owner in writing within thirty (30) business days of receipt of the selling 
Owner's notice.  Such notice shall 
state whether the Buying Owner accepts or rejects the selling Owner's valuation 
of its interest.

 

            
. . . .

 

            
9.3       
If all other Owners fail to exercise the option, the Owner desiring to 
sell shall be at liberty to close a sale of its interest at any time not later 
than one hundred twenty (120) days after the end of the option period to the 
prospective purchaser at a price not less than and on terms no more favorable to 
the purchaser than the price and terms stated in the aforementioned notice; and 
if such sale is made, the preferential right to purchase shall continue as to 
the interest acquired by said purchaser.  
If the interest is not so sold within such 120-day period, then the 
provisions hereinabove shall apply, in the event of a subsequent offer to sell 
such interest, as though such interest had never been offered for sale.  However, there shall be no preferential 
right to purchase in those cases where any party6 wishes to mortgage its interests, 
or to dispose of its interests by merger, reorganization, consolidation, or sale 
of all of its assets, or a sale or transfer of its interests to a subsidiary or 
parent company, or subsidiary of a parent company, or to any company in which 
any one party owns a majority of the stock.

 

[¶5]      On November 20, 
1998, UPRC and UPF entered into a Merger and Purchase Agreement (the MPA) with 
Duke.  The essence of Williams' 
argument is that the execution of this contract, and the latter but associated 
transfer of the Echo System to Duke, triggered its preferential right to 
purchase the Plant and the System under the terms set out above.  On December 2, 1998, Williams was made 
aware of the transfer.  On December 
23, 1998, Williams filed its complaint to block the transfer, as well as for 
specific performance of its preferential purchase rights.  By order entered on March 8, 1999, the 
parties stipulated that the transaction could close but that UPRC and Duke would 
abide by any ruling of the district court that Williams' preference rights had 
been triggered.

 

[¶6]      A summary of the 
district court's conclusions is an appropriate embarkation point for our own 
analysis of this complex case.  
Although we disagree with portions of the district court's final 
conclusion, we praise the court for its penetrating and extremely helpful 
discussion of the issues in its decision letter.  Williams contended that UPRC sold the 
Echo System as a "package of assets."  
The district court found that the mere fact that the MPA included a 
schedule entitled, "Purchase Price Allocation," valuing each major gas plant and 
pipeline interest (a three-page document totaling $1,350,000,000.007) did not equate with the creation 
of a "package of assets."  
Therefore, the district court granted summary judgment to UPRC on that 
argument.  Williams also contended 
that at the time the Echo System was transferred to FAC, it was a non-Affiliate 
as defined by the agreements, but the district court did not find any material 
facts that supported such a conclusion.  
Williams contended that UPRC and Duke structured the sale in such a 
manner as to defeat Williams' preferential purchase rights, and that such 
machinations amounted to a violation of the duty of good faith and fair dealing 
that is implied in every contract.  
The district court determined that the facts, as a matter of law, did not 
support the existence of the special relationship that is essential to the 
application of the covenant of good faith and fair dealing.  The district court wrapped up its 
holdings by stating that neither party contended that the agreements were 
ambiguous, that the agreements were not ambiguous, and that they plainly 
included an exception to the preferential right to purchase where the interest 
in the properties were transferred "by merger, reorganization, or 
consolidation."  The district court 
determined that what occurred in this case was a "merger" and not a "sale."  We set out that reasoning in 
detail:

 

            
There were several transfers in this case.  First UPRC transferred its interest in 
the Echo System by deed to FAC, an affiliate of UPRC and wholly owned subsidiary 
of UP Fuels.  Then UPRC created 
Holding Company, Inc. (HoldCo8).  The stock of UP Fuels and other UPRC 
entities engaged in the GPM business were transferred into HoldCo.  Finally, HoldCo merged with 
DEFS.

 

            
The transfers that took place prior to the merger of HoldCo and DEFS did 
not trigger the preferential right because they were transfers to a subsidiary 
of the parent company.  UPRC formed 
FAC and then transferred its 34% interest in the Echo System into FAC.  FAC was a wholly owned subsidiary of UP 
Fuels which in turn was a wholly owned subsidiary of UPRC, thus, the transfer of 
the Echo System to FAC did not trigger the preferential rights.  The stock of the Echo System was 
transferred along with other interests in the GPM business into HoldCo which was 
a wholly owned subsidiary of UPRC; this transfer did not trigger the 
preferential rights either.

 

            
Finally, HoldCo merged with DEFS.  
Under the Echo System Agreement a merger does not trigger the 
preferential right to purchase.  
"[T]here shall be no preferential right to purchase in those cases where 
any party wishes  to dispose of its interests by merger[.]"  The Echo System Agreement paragraph 
9.3.  In addition, Defendants' 
argument that Plaintiffs could have bargained for a change of control clause if 
they wanted to protect against the intrusion of a stranger into the management 
of the Echo System is well taken.  
Since UPRC's interest in the Echo System was transferred to Duke by a 
merger (HoldCo and DEFS) the Raymond v. Steen definition of "sale" does 
not apply.  What does apply in this 
case is the Echo System Agreement which allowed UPRC to dispose of its interest 
by merger without triggering the preferential right to purchase.  Both parties were sophisticated business 
entities entering an unambiguous agreement and certainly understood the language 
which was utilized.  The 
interpretation of an unambiguous contract is a question of law and thus 
Defendants' motion for summary judgment will be granted.

 

[¶7]      For good reason, 
the district court did not devote much attention to the MPA in its summary 
judgment order.  However, for 
purposes of background, a brief description of some of its provisions is useful 
to our disposition of this appeal.  
The MPA's opening paragraph provided:

 

            
AGREEMENT dated  as of 
November 20, 1998 among Union Pacific Resources Company, a Delaware corporation 
("Seller"), Union Pacific Fuels, Inc., a Delaware corporation and a 
wholly-owned subsidiary of Seller (the "Company"), Duke Energy Field 
Services, Inc., a Colorado corporation ("Buyer"), and DEFS Merger Sub 
Corp., a Delaware corporation and a wholly-owned subsidiary of Buyer ("Merger 
Sub").

 

[¶8]      The MPA then went 
on to provide that "Merger Sub," which was formed solely for purposes of 
effecting "the Merger," shall be merged with and into "the Company" and the 
separate existence of "Merger Sub" shall cease.  "The Company" was then to become known 
as the "Surviving Corporation"  although it was required to change its 
name so as not to resemble that of UPRC, UPF, or any other UP derivative.  One of the results of "the Merger" was 
that Duke would become the owner of "the Company" free and clear of "any lien 
and free [and clear] of any other limitation or restriction (including any 
restriction on the right to vote, sell or otherwise dispose of such 
Shares)."

 

[¶9]      On December 2, 
1998, the President of UPF sent the following letter to 
Williams:

 

As you 
may know9, Union Pacific Resources Company 
("UPR") has signed a definitive agreement with Duke Energy Field Services, Inc. 
("Duke") for the acquisition by Duke of UPR's gas gathering, processing and 
marketing subsidiary, Union Pacific Fuels, Inc. ("UPFI").  Through a merger, UPFI will become a 
wholly owned subsidiary of Duke.  
The transaction is expected to close by the end of March, 
1999.

 

By 
acquiring UPFI, Duke will also acquire all of the stock of Fuels Acquisition 
Company, a wholly owned subsidiary of UPFI.  Fuels Acquisition Company is the owner 
of the UPR interests in the Echo Springs Gas Processing Plant and the Wamsutter 
Gas Gathering System (collectively "the Plant").

 

In a 
July 2, 1998 letter to UPR from Mr. McMillan Hummel, Williams threatened to 
"take . . . legal action" if UPR did not give Williams a 
right of first refusal to purchase the Plant.  The rights of first refusal provisions 
in the Echo Springs Gas Processing Plant Construction, Ownership and Operation 
Agreement and the Wamsutter Gas Gathering System Construction, Ownership and 
Operation Agreement (collectively, the "Agreements") have no application to the 
transaction with Duke.  The stock of 
Fuels Acquisition Company is wholly owned by UPFI, which is being merged with a 
Duke subsidiary.  Under both the 
terms of the Agreements and established law, the merger of a company or sale of 
stock of a company does not constitute a sale of assets by a company such as 
would trigger the right of first refusal.  
In short, there are no proper or appropriate grounds for Williams to 
"take . . . legal action" relating to UPR's transaction with 
Duke.

 

Given 
the fact that the rights of first refusal under the Agreements clearly do not 
apply to the transaction with Duke, UPR will view any attempt by Williams to 
disrupt the transaction as tortious interference.  Under such circumstance, UPR will seek 
actual and punitive damages in addition to attorney's fees and 
costs.

 

[¶10]   We also note at this juncture that 
UPRC and Duke entered into a second agreement, on the same date as the MPA, 
which detailed the procedures to be followed if supposedly "un-triggered" 
preference rights, such as those held by Williams in the Echo System, were 
deemed to be triggered by "an appropriate court."

 

 

STANDARDS 
OF REVIEW

 

Summary 
Judgment

 

[¶11]   When we review a summary judgment, 
we have before us the same materials as did the district court, and we follow 
the same standards which applied to the proceedings below.  The propriety of granting a motion for 
summary judgment depends on the correctness of the dual findings that there is 
no genuine issue as to any material fact and that the prevailing party is 
entitled to judgment as a matter of law.  
Reed v. Miles Land and Livestock Company, 2001 WY 16, ¶9, 18 P.3d 1161, ¶9, (Wyo. 2001); Mercado v. Trujillo, 980 P.2d 824, 825-26 (Wyo. 
1999).  A genuine issue of material 
fact exists when a disputed fact, if proven, would have the effect of 
establishing or refuting an essential element of an asserted cause of action or 
defense.  We, of course, examine the 
record from a vantage point most favorable to that party who opposed the motion, 
affording to that party the benefit of all favorable inferences that fairly may 
be drawn from the record.  
Scherer Construction, LLC v. Hedquist Construction, Inc., 2001 WY 
23, ¶15, 18 P.3d 645, ¶15 (Wyo. 2001).

 

Construction 
of Contracts

 

[¶12]   Our primary focus in construing or 
interpreting a contract is to determine the parties' intent, and our initial 
inquiry centers on whether the language of the contract is clear and 
unambiguous.  If the language of the 
contract is clear and unambiguous, then we secure the parties' intent from the 
words of the agreement as they are expressed within the four corners of the 
contract.  Common sense and good 
faith are leading precepts of contract construction, and the interpretation and 
construction of contracts is a matter of law for the courts.  Reed, ¶10.  We have also recognized that the 
language of a contract is to be construed within the context in which it was 
written, and the court may look to the surrounding circumstances, the subject 
matter, and the purpose of the contract to ascertain the intent of the parties 
at the time the agreement was made.  
Polo Ranch Company v. City of Cheyenne, 969 P.2d 132, 136 (Wyo. 
1998).

 

Construction 
of Preferential Purchase Right (Right of First Refusal) 
Contracts

 

[¶13]   UPRC suggests that we adopt a 
standard of review that would require this Court to narrowly construe rights of 
first refusal and other provisions that effectively restrict the free transfer 
of stock.  Tenneco, Inc. v. 
Enterprise Products Company, 925 S.W.2d 640, 646 (Tex. 1996).  We decline to adopt such a 
standard.  Absent something more 
(e.g., overreaching, unconscionability), we see no reason to construe 
such contracts any differently than any other business agreement.  The very purpose of such contracts is to 
restrict free transfer of property (whether stock, assets, real estate, etc.), 
and it hardly seems logical to treat them more restrictively because they 
actually achieve the bargained for purpose.

 

DISCUSSION

 

[¶14]   Our conclusion is that the 
contracts should be construed as follows:

 

9.1       Should 
[UPRC or Williams] desire to sell all or part of its interest in the Plant 
[System] to a non-Affiliate as a separate transaction, it shall promptly give 
notice to the other,  with full 
information concerning its proposed sale, which shall include the name and 
address of any prospective purchaser, the purchase price, and all other terms of 
any offer received.  The other shall 
then have an optional prior right, for a period of thirty (30) days after 
receipt of the notice, to purchase on the same terms and conditions the entire 
interest which the other proposes to sell.

 

It is 
also our conclusion that § 9.2 would be construed in exactly the same way as § 
9.1.  Thus, whether UPRC wanted to 
sell just the Echo System or to sell it as part of a package of $1.35 billion 
worth of other assets, the result is the same.  Section 9.3 would then be construed as 
follows:

 

            
9.3       
* * *.  However, there shall 
be no preferential right to purchase in those cases where [UPRC or Williams] 
wishes to mortgage its interests, or to dispose of its interests by merger, 
reorganization, consolidation, or sale of all its assets, or a sale or transfer 
of its interests to a subsidiary or parent company, or subsidiary of a parent 
company, or to any company in which [either UPRC or Williams] owns a majority of 
the stock.

 

[¶15]   It is unmistakable that UPRC 
desired to sell its interest in the Echo System.  It did not wish to merge with Duke or 
any other corporate entity.  Its 
goal was to reduce its debt by means of a sale of assets.  UPRC solicited buyers for those assets 
and eventually "sold" them to Duke  or at least "sold" them to Duke insofar as 
the term "sold" was used by the parties in the Echo System Agreements.  We will not argue with UPRC's 
denomination of this transaction as a "merger" for whatever other purposes that 
may serve.  However, for purposes 
relevant to the resolution of this case, we hold that it was a 
"sale."

 

[¶16]   We are aided in reaching this 
conclusion by our decision in Raymond v. Steen, 882 P.2d 852, 857 (Wyo. 
1994) wherein we embraced this definition of the word "sale" in the context of a 
right of first refusal:  "[A] sale 
is made for purposes of a right of first refusal when there is a transfer for 
value of a significant interest in the subject property to a stranger who 
thereby gains substantial control over the subject property."  Also see Chapman v. Mutual Life 
Insurance Company of New York, 800 P.2d 1147, 1150-52 (Wyo. 1990); Prince 
v. Elm Investment Company, Inc., 649 P.2d 820, 823 (Utah 1982); and 
Wilson v. Whinery, 678 P.2d 354, 356-57 (Wash. App. 1984).  Our decision in McGuire v. 
Lowery, 2 P.3d 527, 532-33 (Wyo. 2000) also sustains our conclusion.  The decision there would be analogous to 
a decision by UPRC to transfer its interests in the Echo System to an affiliate 
such as UPF  that would not be a sale which triggered the right of first 
refusal -- but Williams would then retain the same future preferential purchase 
rights vis- -vis UPF, as it had vis- -vis UPRC.  Although we will not go so far as to 
characterize what UPRC did as a "sham transaction," we agree with Williams that 
UPRC's position rests upon a highly tortured and technical reading of the 
contract terms.  We will not adopt a 
construction of this contract which serves to permit UPRC to evade Williams' 
right of first refusal.  See 
Raymond, 882 P.2d  at 857.  The 
agreements did not include a different or more technical definition of "sell" or 
"sale" and, consistent with the applicable standard of review, we conclude that 
common sense and good faith mandate application of the general definition set 
out above.  Polo Ranch, 969 P.2d  at 136.

 

[¶17]   We also agree with Williams that 
our decision in Rainbow Oil Company v. Christmann, 656 P.2d 538, 543-44 
(Wyo. 1982) does not speak directly to the resolution of this case.  In Rainbow we held that, under 
the complex facts present in that case, some transactions were never challenged 
by the Appellants, some transactions were not sales, and that "[p]urchasing 
corporate stock does not constitute . . . [a sale] of a corporation's 
. . . assets for any purpose with which we are here concerned."  656 P.2d  at 544.  UPRC purports to see a parallel between 
this case and the Rainbow case, but we are not able to see any 
pertinence, much less a parallel.  
Purchase of the Rainbow Oil Company stock got the buyer Rainbow Oil  
purchase of the stock at issue here got the buyer bits and pieces of what used 
to be UPRC.  Moreover, it was very 
clear that in Rainbow none of the questioned transactions were designed 
to frustrate a right of first refusal, nor did any of them actually frustrate a 
right of first refusal.  In the 
instant case, UPRC's actions transparently were calculated to attempt to do 
indirectly that which the governing agreements would not allow UPRC to do 
directly.  See Prince, 649 P.2d  at 823 n.3.  We have carefully 
reviewed all cases cited by UPRC, in particular, Tenneco Inc. v. Enterprise 
Products Company, 925 S.W.2d 640 (Tex. 1996) and Fina Oil & Chemical 
v. Amoco Production Company, 673 So. 2d 668 (La.App. 1 Cir. 1996), and we 
found those cases to be instructive.  
Like the instant case, those cases involved unique and complex sets of 
facts that bear some similarity to this dispute.  However, none of those cases dissuades 
us from looking primarily to our own cases concerning the construction of 
contracts, and rights of first refusal in particular.  Were we to adopt the arguments 
propounded by UPRC, we would render the contract rights Williams bargained for, 
at arm's length, meaningless.  UPRC 
contends that Williams could have bargained more aggressively, for example, for 
a "change of control provision."  
That may be correct, but that argument does not erase the rights that 
Williams did bargain for and received.  We do not think that it can be fairly 
argued that UPRC merely sold the stock of an affiliate via a merger.  UPRC did not desire to sell an 
affiliate; it desired to sell certain assets that were packaged in the form of 
an affiliate.  It is fair to 
conclude that the preferential purchase rights provisions were the lubricant 
that greased the skids of the initial agreement reached by Williams and UPRC -- 
just as it would be fair to conclude that attempting to structure the sale of 
UPRC's GPM Business, in a manner so as to attempt to evade the preferential 
purchase rights of Williams, lubricated UPRC's bargain with Duke.  UPRC contends that Williams unfairly 
relies in part on an argument that UPRC took a position very similar to that 
taken by Williams here in the Tenneco case, but we find it unnecessary to 
rely on that position.

 

[¶18]   By our decision, we do not rewrite 
the agreement between UPRC and Duke in any way.  However, we will not utilize that 
agreement in such a manner as to say  "Well, yes, in light of what transpired 
in 1998 in this case (and in 1996 in the Tenneco and Fina cases), 
UPRC did come up with a viable means of rendering the 1993 agreement between it 
and Williams virtually meaningless."  
We will limit ourselves to viewing the four corners of the disputed 
agreements as a whole, in light of all the language that is used in them, and in 
light of the apparent intent of the parties at the time they entered into the 
agreements.  We hasten to add that 
our decision is not one that is intended to simplify that which is complex.  On the contrary, we view this as an 
exercise in giving full recognition to a transaction that was merely of 
relatively ordinary complexity but which has been transported to a much higher 
plane of complexity by UPRC's "merger" agreement with Duke.  Ultimately, of course, it is an exercise 
in resolving that which must be resolved because the parties were unable in good 
faith, good conscience, and in good time, to resolve equitably amongst 
themselves a controversy created by disagreement about the meaning of an 
unambiguous and fairly simple contract.

 

[¶19]   Because of this disposition, we 
need not address the other issues raised by the parties.

 

[¶20]   The order of the district court is 
reversed, and this matter is remanded to the district court with directions that 
it enter summary judgment in favor of Williams and against UPRC, as well as for 
such other additional proceedings as may be necessary to enforce Williams' 
rights of first refusal with respect to the Echo System.

 

FOOTNOTES

  1Union Pacific 
Fuels, Inc. is also denominated "UPFuels," "UP Fuels," and UPFI in some of the 
quoted material, but they are all one and the same.

  
2Because the 
agreements required a 70% vote to do business, UPRC had, in effect, a veto power 
over the activities of the Echo System and, of course, that power passed to any 
UPRC successor, e.g., "Duke".  
Thus, one purpose of the preferential purchase, if not the only purpose 
of the preferential purchase right, was to protect Williams from being saddled 
with a hostile or otherwise incompatible co-owner.

 

  3We use the word 
"sell" qualifiedly at this juncture.  
The following, taken from a UPRC affidavit, is its description of what it 
did:

 

            
4.  At the beginning of 1998, 
the business functions of UPR were divided into what were called business 
units.  Those business units 
organized into the separate areas of "Exploration and Production," "Minerals," 
and the "GPM Business" (for Gathering, Processing and Marketing).  The GPM Business was also commonly referred to as UPFuels, and included virtually all of the 
gas gathering, processing and marketing assets of UPR.  At that time, UPFuels was the seventh 
largest processor of natural gas in the United States, and owned or managed 
interests in twenty natural gas processing facilities, including the Echo 
Springs Gas Processing Plant, located in six different states.  This processing capacity was supported 
by more than four thousand miles of gathering pipelines, including the Wamsutter 
Gas Gathering System.  UPFuels also 
owned or managed interests in a number of natural gas liquids ("NGL") 
fractionation plants and NGL pipelines.  
UPFuels was one of the leading United States marketers of both natural 
gas and NGL's.  As the marketing 
entity for UPR's natural gas and NGL's, UPFuels was a party to thousands of 
marketing and transportation contracts directly pertaining to the GPM 
Business.

            
5.  In April of 
1998, the UPR Board of Directors approved a deleveraging plan which included a 
recommendation to sell the GPM Business.  
This plan was announced to the public on April 27, 1998.  Accordingly, UPR decided to sell UPFuels 
as a separate corporate unit and to reorganize its business structure and place 
all GPM Business assets under one company to conform actual ownership with 
business operations.  This 
reorganization ultimately resulted in all GPM assets being placed under the 
corporate umbrella of Union Pacific Fuels, Inc.  

            
6.  In June and July 1998, 
UPR began to seek buyers for the UPFuels and sought bids for the stock of the 
entity which would ultimately hold the UPFuels assets.  Williams Energy Group was one of the 
parties that expressed an interest in acquiring UP Fuels and was sent certain 
evaluation materials relating to a possible acquisition.  Williams subsequently sent UPR a 
preliminary indication of interest which included a dollar valuation for the 
stock of the entity which would hold UPFuels assets.  However, Williams was not invited to 
attend the UPFuels data room due to the amount of the valuation.  On November 20, 1998, UPR agreed to sell 
Union Pacific Fuels, Inc., to Duke Energy Field services, Inc. (the "Buyer") 
through a merger of Union Pacific Fuels, Inc. and an affiliate of the 
Buyer.

 

This 
description of the transfer/sale/merger is fleshed out by this excerpt from 
another UPRC affidavit:

 

  
3.  As Assistant Secretary of 
UPR, my job duties and responsibilities include causing the formation and 
incorporation of corporate entities and maintaining corporate records on behalf 
of UPR and its affiliates.

  
4.  An agreement was signed 
in November 1998 to sell UPR's wholly owned subsidiary Union Pacific Fuels, Inc. 
("UP Fuels") by merger (the "Merger Transaction") to Duke Energy Field Services, 
Inc. ("Duke") by merging that entity with an affiliate of Duke.  The Merger Transaction resulted in the 
direct or indirect transfer of ownership to Duke of the stock of more than 38 
corporate entities.

  
5.  From November 4, 1998 
through March 1999 Fuels Acquisition Company was a wholly-owned subsidiary of 
Union Pacific Fuels, Inc., and Union Pacific Fuels, Inc. was a wholly-owned 
subsidiary of UPR.

 

  
4In its argument 
UPRC recites that "Owner," as used in this context means: "[A]ny entity that 
owns an interest in the plant."  We 
do not agree with that.  That 
definition of "owners"  would apply 
to any "Owners" other than Williams and UPRC who might come to be included as an 
owner of the Echo System (of course, none ever did, so that definition of 
"Owners" serves no purpose for purposes of this appeal).  We think "Owner," in the instant 
context, is captured by the opening paragraph of the 
agreements:

 

            
This Agreement, made and entered into as of August 27, 1993, by and 
between UNION PACIFIC RESOURCES COMPANY, hereinafter referred to individually as 
"UPRC," WILLIAMS GAS PROCESSING COMPANY, hereinafter referred to as "WGP," and 
WILLIAMS FIELD SERVICES  ROCKY MOUNTAIN REGION COMPANY, an Affiliate of WGP, 
hereinafter referred to as "WFS" or "Operator."  WGP and UPRC are sometimes hereinafter 
referred to individually as "Owner" and collectively as 
"Owners[.]"

 

  
5"Non-Affiliate" 
is not defined by the contract, but "Affiliate" is:

 

            
"Affiliate" shall mean a corporation or other legal entity (including 
limited partnership) directly or indirectly through one or more intermediaries, 
controlling, controlled by or under common control with an Owner.  The term "control," as used herein, 
means the right to exercise, directly or indirectly, more than 50% of the voting 
rights attributable to the shares of the controlled corporation, or in the case 
of a limited partnership where an owner is the managing general partner.  The Uinta Development Company, partially 
owned and operated by UPRC, is specifically excluded from the 
above.

  
6"Party" is not 
defined by the agreement, but we also conclude that it, like "Owners," refers 
only to UPRC and Williams.

  7The purchase 
price allocation applicable to the Echo System amounted to $50.7 
million.

  
8Both parties 
agree that the creation of HoldCo is not a material fact insofar as the 
disposition of this case is concerned.  
It also appears to be agreed that HoldCo was created solely for tax 
purposes.  We agree that the 
creation of HoldCo is of no special significance, and that fact plays no role in 
the disposition of this case.

  
9The first four 
words of the letter are intriguing.  
As best we can tell from the record, the negotiations between UPRC, UPF 
and Duke were "highly confidential," and UPRC and UPF insisted that they remain 
"highly confidential" in this Court.  
As a result, virtually all of the record here was filed under seal, and 
Williams knows of it only because of discovery in this 
litigation.