2015 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-5-2015

In Re: Semcrude L.P.

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

______

No. 14-1204

______

IN RE: SEMCRUDE L.P., et al.,

 Debtors

Thomas L. Kivisto, 

 Appellant

______

On Appeal from United States Bankruptcy Court 

for the District of Delaware

(08-bk-11525)

Honorable Brendan L. Shannon, U.S. Bankruptcy Judge

______

Argued December 9, 2014

Before: FUENTES, FISHER and KRAUSE, Circuit Judges.

(Filed: August 5, 2015 )
2

Paul R. Bessette, Esq. ARGUED

James P. Sullivan, Esq.

King & Spalding

401 Congress Avenue

Suite 3200

Austin, TX 78701

Counsel for Appellant

Andrew S. Hicks, Esq.

Adam P. Schiffer, Esq. ARGUED

Schiffer Odom Hicks & Johnson

700 Louisiana

Suite 2640

Houston, TX 77002

Gary F. Seitz, Esq.

Gellert Scali Busenkell & Brown

601 Walnut Street

The Curtis Center, Suite 280 South

Philadelphia, PA 19106

Counsel for Appellees

______

OPINION OF THE COURT

______
3

FISHER, Circuit Judge.

Thomas L. Kivisto, co-founder and former President 

and CEO of SemCrude L.P., an Oklahoma-based oil and gas 

company, allegedly drove SemCrude into bankruptcy through 

his self-dealing and speculative trading strategies. 

SemCrude’s Litigation Trust sued Kivisto, and the parties 

reached a settlement agreement and granted a mutual release

of all claims. One month later, a group of SemCrude’s

former limited partners (collectively, “Oklahoma Plaintiffs”) 

sued Kivisto in state court, alleging breach of fiduciary duty, 

negligent misrepresentation, and fraud. Kivisto filed an 

emergency motion to enjoin the state action on the theory that 

the Oklahoma Plaintiffs’ claims derived from the Litigation 

Trust’s claims, which the U.S. Bankruptcy Court for the 

District of Delaware granted. On appeal, the U.S. District 

Court for the District of Delaware reversed, concluding that 

the claims were possibly direct and remanded. The 

Bankruptcy Court thereafter adopted the District Court’s 

order in its entirety and denied injunctive relief. Because we 

conclude that the claims are derivative, we will reverse.

I.

A.

Kivisto co-founded SemCrude in Tulsa, Oklahoma, in 

2000 and served as its President and CEO until 2008. 

SemCrude provided transportation, storage, distribution, and 

other oil-and-gas services to crude oil producers and refiners 

across North America’s energy corridor. By 2006, SemCrude

became one of the largest privately-held companies in the 

United States, with assets worth almost $14 billion. 

In 2007 and 2008, however, SemCrude was driven into 

bankruptcy, the cause of which is disputed by the parties. 

Kivisto blames the company’s collapse on, among other 
4

market factors, rising oil prices and tight credit markets that 

were inhospitable to Kivisto’s previously successful trading 

strategy. The Oklahoma Plaintiffs, on the other hand, blame 

Kivisto for “engag[ing] in a pattern of egregious self-dealing 

and related-party transactions, commingl[ing] personal and 

corporate funds, and ma[king] wildly speculative trades for 

his own benefit” that allegedly caused SemCrude billions of 

dollars in losses. Appellees’ Br. at 2 n.1. In particular, they 

allege that Kivisto used SemCrude’s funds to place bets on oil 

for his personal benefit through a trading company that he 

owned with his wife, Westback Purchasing Company, LLC 

(“Westback”), causing SemCrude to incur a $290 million 

receivable; and engaged in high-risk, double-or-nothing

trades on behalf of SemCrude, stripping SemCrude of its 

ability to finance its operations and causing over $3 billion in 

losses. App. 333-43. 

The Oklahoma Plaintiffs further allege that Kivisto

concealed these decisions and actively misrepresented

SemCrude’s financial health and stability in order to induce 

them to invest additional capital or retain their investments in 

SemCrude. They specifically assert that Kivisto, among other 

things, misrepresented that SemCrude’s “trading positions

were always ‘delta neutral’” and that it “‘closed its positions 

in its trading books every day,’” and concealed the existence 

of his personal trading scheme as well as SemCrude’s trade 

exposure and attendant risks. App. 338. The Oklahoma 

Plaintiffs claim that “Kivisto made these misrepresentations

to [the Oklahoma] Plaintiffs during shareholders’ meetings, 

‘informative unitholder meetings,’ and other meetings—both 

formal and informal” in 2000; 2001; April and September 

2002; July 2003; December 2004; and later. App. 338. In 

“reli[ance] upon Kivisto’s representations,” the Oklahoma 

Plaintiffs allege that they “contributed millions of dollars to 
5

Sem[Crude] through capital contributions made [i]n” 

December 2000; November 2002; December 2003; January 

2005; and May 2006. App. 338. 

They also allege that “Kivisto was particularly 

aggressive in his efforts to induce [the Oklahoma] Plaintiffs 

to make their 2006 capital contributions.” App. 338. On or 

about May 25, 2006, during a lunch meeting at Southern Hills 

Country Club in Tulsa that occurred one day before a capital 

contribution deadline, “Kivisto approached certain of the 

[Oklahoma] Plaintiffs and made several statements clearly 

intended to induce them to make these capital contributions.” 

App. 338. He allegedly told some of the Oklahoma Plaintiffs 

that “you’ve got 24 hours to get your money in,” and “you 

don’t want to miss this one,” emphasizing that the value of 

their shares would increase substantially in the future and that 

failing to make the contributions would cause them financial 

loss. App. 338-39 (internal quotation marks omitted). Those

Oklahoma Plaintiffs contributed several million dollars to 

SemCrude shortly thereafter.

In essence, the Oklahoma Plaintiffs claim that, as a 

result of their personal dealings with Kivisto, they “acted 

and/or forewent certain actions in reliance upon Kivisto’s 

misrepresentations and omissions. . . . [This is] illustrated, in 

part, by the millions of dollars [the Oklahoma] Plaintiffs paid 

to Sem[Crude] in the form of capital contributions.” App. 

350. They distinguish themselves from other limited partners 

because they allege that Kivisto’s misrepresentations were 

made specifically to them. They also distinguish themselves

as “non-insider” limited partners, claiming that all other 

limited partners held board or management positions or were 

involved in “sweetheart side deals” with Kivisto, which 

allowed these “insiders” to obtain information not available to 
6

the Oklahoma Plaintiffs or dissuaded them from disclosing 

Kivisto’s alleged misconduct. Appellees’ Br. at 2.

B.

On July 22, 2008, SemCrude, its parent company, 

SemGroup L.P., and certain direct and indirect subsidiaries 

(collectively, “SemCrude”) filed for Chapter 11 bankruptcy in 

the U.S. Bankruptcy Court for the District of Delaware. The 

Bankruptcy Court entered a confirmation order on October 

28, 2009, confirming SemCrude’s plan of reorganization. 

The reorganization plan established a Litigation Trust and 

transferred to it the claims belonging to SemCrude’s 

bankruptcy estate. The Litigation Trust was therefore entitled 

to pursue SemCrude’s claims and distribute the money it 

recovered to SemCrude’s creditors.

In 2009, the Litigation Trust1asserted against Kivisto, 

certain former SemCrude officers, and Westback thirty claims 

related to breach of fiduciary duty, breach of contract, 

fraudulent transfer, and unjust enrichment. See App. 61-150. 

Following mediation, the parties reached a $30 million 

settlement agreement (that was paid out of the directors’ and 

officers’ liability insurance policies) and granted a mutual 

release of all claims. The Litigation Trust also discharged 

Kivisto and the other SemCrude officers from liability to any 

party for contribution or indemnity relating to the released 

claims. The Bankruptcy Court approved the settlement 

agreement on November 19, 2010. 

 

1 More precisely, the Litigation Trust was substituted 

as the plaintiff in an adversary proceeding brought by an 

unofficial committee of SemCrude’s unsecured creditors.
7

One month later, on December 22, 2010, the 

Oklahoma Plaintiffs2filed suit against Kivisto and

PriceWaterhouseCoopers LLP (“PwC”), SemCrude’s prebankruptcy auditor, in the Tulsa County District Court in 

Oklahoma. Asserting injuries allegedly separate and distinct 

from the injuries sustained by SemCrude, the Oklahoma 

Plaintiffs sought money damages from Kivisto for breach of 

fiduciary duty, negligent misrepresentation, and fraud, and 

from PwC for professional negligence and a violation of the 

Oklahoma Accountancy Act. See App. 325-53. PwC 

removed the case, but the U.S. District Court for the Northern 

District of Oklahoma remanded the case back to state court.

Ultimately, although PwC is not a party to this appeal, the 

Bankruptcy Court enjoined the action against PwC as 

derivative on October 7, 2011,3and the District Court 

affirmed that order on November 15, 2012. 

On May 4, 2011, Kivisto filed an emergency motion in 

the Bankruptcy Court to enjoin the Oklahoma Plaintiffs’ 

lawsuit from proceeding in state court and, specifically, to 

enforce the confirmation order, the terms of the 

reorganization plan, and the settlement agreement. He 

alleged that the Oklahoma Plaintiffs’ claims belonged to the 

Litigation Trust and had been released. SemCrude and the 

Litigation Trust joined the motion. 

 

2 The Oklahoma Plaintiffs include Cottonwood 

Partnership, L.L.P; Dunbar Family Partnership, L.P.; Rosene 

Family L.L.C.; Warren F. Kruger; Katherine A. Kruger; 

David S. Kruger; and Kathryn E. Shelley.

3 Prior to the Oklahoma Plaintiffs’ suit, the Litigation 

Trust sued PwC in the Tulsa County District Court for 

professional negligence, breach of fiduciary duty, and a 

violation of the Oklahoma Accountancy Act.
8

The Bankruptcy Court granted the motion to enjoin all 

three claims on October 7, 2011. It explained that the 

Oklahoma Plaintiffs’ claims were derivative causes of action 

for the following reasons: (1) “[T]he injury suffered by the 

Oklahoma Plaintiffs is no different from the injury suffered 

by SemCrude as a result of Kivisto’s wrongful conduct”; (2) 

the Oklahoma Plaintiffs did not show that Kivisto owed them 

any duties distinct from his fiduciary duties owed to 

SemCrude and its other equity holders; and (3) any recovery 

would be deemed equity in SemCrude’s estate and, therefore, 

the Oklahoma Plaintiffs would not be entitled to recovery 

outside the terms of the reorganization plan. App. 19. The 

parties agreed to stay the lawsuit in state court pending final 

resolution of these proceedings. 

The Oklahoma Plaintiffs appealed to the District 

Court, and, on November 15, 2012, the District Court 

reversed and remanded the Bankruptcy Court’s order on all 

three claims. The District Court explained that the 

Bankruptcy Court did not properly consider the Oklahoma 

Plaintiffs’ claims that they had been separately harmed and 

found that there was a sufficient basis to conclude that they 

had been. As to negligent misrepresentation and fraud, it 

pointed to Kivisto’s misrepresentations to the Oklahoma 

Plaintiffs “personally to induce them to make capital 

contributions.” App. 36. As to breach of fiduciary duty, it 

pointed to “the length and nature” of Kivisto’s relationship 

with the Oklahoma Plaintiffs and the “trust and confidence 

reasonably placed by [the Oklahoma] Plaintiffs in the 

integrity and loyalty of Kivisto.” App. 37 (internal quotation 

marks omitted). Therefore, since the Oklahoma Plaintiffs 

sufficiently alleged distinct duties, they “may be able to 

demonstrate entitlement to a recovery separate from 
9

Sem[Crude].” App. 37. The District Court thereafter denied 

Kivisto’s motion for rehearing on March 12, 2013. 

On remand, the Bankruptcy Court denied Kivisto’s 

motion to enjoin the negligent misrepresentation and fraud 

claims, but granted the motion with respect to the breach of

fiduciary duty claim. This order was entered on July 2, 2013, 

and both Kivisto and the Oklahoma Plaintiffs appealed. On 

October 30, 2013, the Bankruptcy Court amended its order 

and “adopt[ed] and incorporate[d] by reference herein the 

legal analysis, findings of fact and conclusions of law of the 

District Court’s November 15, 2012 [] [o]rder, in its entirety.” 

App. 6. It therefore denied Kivisto’s motion to enjoin with 

respect to all three claims. Kivisto timely appealed from the 

amended order.

II.

Because Kivisto’s motion to enjoin is related to the 

Chapter 11 reorganization plan and requires a determination 

that the Oklahoma Plaintiffs’ claims are property of the

Litigation Trust, the Bankruptcy Court had subject-matter 

jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(A). This 

Court exercises jurisdiction over Kivisto’s direct appeal 

pursuant to certification by the Bankruptcy Court, the District 

Court, and the parties acting jointly under 28 U.S.C. § 

158(d)(2).4

 

4 The Bankruptcy Court certified Kivisto’s request for 

direct appeal to the Third Circuit in its October 30, 2013, 

amended order; the parties jointly certified the appeal on 

November 22, 2013; and the District Court certified the 

parties’ joint request on March 11, 2014, and Kivisto’s 

request on March 31, 2014. This Court authorized the appeal 

on January 21, 2014.
10

This Court “review[s] the Bankruptcy Court’s factual 

findings under a clearly erroneous standard and exercise[s] 

plenary review over legal issues.” In re Emoral, Inc., 740 

F.3d 875, 879 (3d Cir. 2014). Whether a claim is derivative 

or direct is a question of (state) law, see Official Comm. of 

Unsecured Creditors v. R.F. Lafferty & Co., Inc., 267 F.3d 

340, 348 (3d Cir. 2001), so we exercise plenary review. 

While we review a court’s denial of injunctive relief for abuse 

of discretion, plenary review of the issue of derivative status 

is appropriate here because “[a] district court by definition 

abuses its discretion when it makes an error of law.” Koon v. 

United States, 518 U.S. 81, 100 (1996). 

III.

“The derivative injury rule holds that a shareholder . . . 

may not sue for personal injuries that result directly from

injuries to the corporation.” In re Kaplan, 143 F.3d 807, 811-

12 (3d Cir. 1998) (applying Illinois law). The rule is 

premised on the legal fiction of corporate existence, in which 

“an injury to the corporate body is legally distinct from an

injury to another person.” Official Comm. of Unsecured 

Creditors, 267 F.3d at 348. Under Oklahoma law, which the 

parties concede controls here, the derivative injury rule does 

not apply when a shareholder alleges that he or she “sustained 

any loss in addition to the loss sustained by the corporation.”

Dobry v. Yukon Elec. Co., 290 P.2d 135, 138 (Okla. 1955)

(emphasis added). This standard extends to limited 
11

partnerships.5 Okla. Stat. Ann. tit. 54, § 500-1001A(b) (“A 

partner commencing a direct action under this section is 

required to plead and prove an actual or threatened injury that 

is not solely the result of an injury suffered or threatened to 

be suffered by the limited partnership.”). 

We discuss the Oklahoma Plaintiffs’ claims for (A) 

negligent misrepresentation and fraud6and (B) breach of 

fiduciary duty in turn. The Court ultimately concludes that 

the Oklahoma Plaintiffs fail to show “any loss in addition to” 

SemCrude’s loss and, therefore, that their claims derive from 

the claims released by the Litigation Trust. 

 

5 Under Oklahoma law, we may rely upon corporate as 

well as partnership case law in analyzing the derivative/direct 

nature of the Oklahoma Plaintiffs’ claims because the 

determination is substantially the same in the corporate and 

limited partnership contexts. See Lenz v. Associated Inns & 

Rests. Co. of Am., 833 F. Supp. 362, 379 n.18 (S.D.N.Y. 

1993) (applying Oklahoma law); see also Adco Oil Co. v. 

Rovell, 357 F.3d 664, 666 (7th Cir. 2004) (construing 

Oklahoma law and applying the derivative injury rule in a 

limited partnership context). 

6 The District Court and the parties treat negligent 

misrepresentation and fraud together in light of their doctrinal 

similarity under Oklahoma law. See App. 36 (citing 

Roberson v. PaineWebber, Inc., 998 P.2d 193, 197 (Okla. 

Civ. App. 1999) (stating the elements for fraud); Ragland v. 

Shattuck Nat’l Bank, 36 F.3d 983, 991 (10th Cir. 1994) 

(stating the elements for negligent misrepresentation)). 
12

A.

1.

Before analyzing whether the Oklahoma Plaintiffs’ 

claims state derivative or direct causes of action, we lay out

the analytical framework established by the Supreme Court of 

Oklahoma in Dobry v. Yukon Electric Company, 290 P.2d at 

138. The parties agree that Dobry creates the governing 

standard for determining the derivative status of claims in 

Oklahoma.

The Dobry Court considered whether the plaintiffstockholder could bring a direct claim against the directors of 

a corporation whose fraudulent conduct resulted in loss “by 

depriving [the shareholder] of dividends which he might 

otherwise have received or by depressing the value of his 

stock.” Id. at 137. Adopting the universal principles 

underlying the derivative injury rule, the Court explained that 

there is no individual loss in such a situation:

In view of the legal concept of corporate entity 

under which stockholders as such lose their 

individualities in the individuality of the 

corporation as a separate and distinct person, 

and of the fact that stockholders by investing 

their money in the corporation recognize it as 

the person primarily entitled to control and 

manage its use for the common benefit of all the 

stockholders, it is a well-established general 

rule that a stockholder of a corporation has no 

personal or individual right of action against 

third persons, including officers and directors of 

the corporation, for a wrong or injury to the 

corporation which results in the destruction or 

depreciation of the value of his stock, since the 

wrong thus suffered by the stockholder is
13

merely incidental to the wrong suffered by the 

corporation and affects all stockholders alike.

Id. (quoting H.A. Wood, Stockholder’s Right to Maintain 

(Personal) Action Against Third Person as Affected by 

Corporation’s Right of Action for the Same Wrong, 167 

A.L.R. 280 (1947)) (emphasis added). In other words, the 

Court underscored, where the alleged loss stems from

management’s wrong to the corporation that incidentally 

affects the shareholder’s stock and affects all shareholders 

alike, the rights are derivative. This is because “‘[i]t was not 

as individuals that plaintiffs suffered detriment and damage, 

but as stockholders in common with others similarly situated. 

No fraud or deceit was practiced on plaintiffs, nor was any 

illegal act performed to their detriment, which was not 

common to all persons similarly situated in their legal 

relations to defendants.’” Id. at 138 (quoting Stuart v. 

Robertson, 248 P. 617, 619 (Okla. 1926)).

The Court reiterated the following rule: “‘If the 

plaintiff has sustained no loss in addition to the loss to the 

corporation, the action cannot be maintained as an individual 

even though the wrongful acts were done with the specific 

intent of injuring the plaintiff.’” Id. at 137 (quoting 12B 

Fletcher Cyc. Corp. § 5914). It concluded that “[i]n the 

instant case the plaintiff did not allege . . . that he sustained 

any loss in addition to the loss sustained by the corporation. 

His loss was only incidental to the corporation’s loss and 

under the rules set forth herein, his rights were derivative.”

Id. at 138. 

With this backdrop, we turn to whether the Oklahoma 

Plaintiffs allege direct claims—that is, whether they allege 

loss “in addition to” SemCrude’s loss. 
14

2.

Because whether a suit is derivative or direct is drawn 

from the face of the complaint, see 12B Fletcher Cyc. Corp. § 

5913, our analysis is drawn from the state-court petition filed 

by the Oklahoma Plaintiffs against Kivisto.

The Oklahoma Plaintiffs’ first claim for distinct loss is 

based on Kivisto’s alleged face-to-face misrepresentations 

and omissions directed at the Oklahoma Plaintiffs during

formal and informal limited partner meetings, in particular the 

2006 lunch meeting at the Southern Hills Country Club, and 

based on their alleged status as “non-insider” limited partners. 

They allege that they relied on Kivisto’s inducement by

(a) making additional capital contributions and (b) foregoing

opportunities to sell their limited partner units. 

Kivisto counters that the Oklahoma Plaintiffs are 

functionally indistinguishable from any other investor who

acted upon or forewent opportunities to sell their limited 

partner units as a result of Kivisto’s misrepresentations and 

omissions. He argues that all SemCrude limited partners 

suffered the same loss of capital on a pro rata basis as a result 

of his alleged misconduct and, therefore, the Oklahoma 

Plaintiffs’ “[r]espective losses differ only in amount, not in 

kind,” making their claims derivative. Appellant’s Br. at 30.

We agree. “It is well settled that an injury done to the 

stock and capital of a corporation by the negligence or 

misfeasance of its officers and directors is an injury done to 

the whole body of stockholders in common, and not an injury

for which a single stockholder can sue.” Stuart, 248 P. at 619 

(internal quotation marks omitted); see also 12B Fletcher 

Cyc. Corp. § 5913 (“The reasoning behind this rule is said to 

be that a diminution in the value of corporate stock resulting 
15

from some depreciation or injury to corporate assets is a 

direct injury only to the corporation; it is merely an indirect or 

incidental injury to an individual shareholder.”). Nor may 

claims for corporate mismanagement be brought directly. See 

Weston v. Acme Tool, Inc., 441 P.2d 959, 962 (Okla. 1968) 

(“The remedial rights of minority stockholders with respect to 

wrongs committed against the corporation by the officers and 

directors in the management of corporate affairs are 

derivative rights . . . .”). Accordingly, to the extent the 

Oklahoma Plaintiffs’ claims are masked claims for a 

diminution in value of their limited partner units as a result of 

Kivisto’s mismanagement, their claims are derivative of the 

claims released by the Litigation Trust. See Lipton v. News 

Int’l, Plc, 514 A.2d 1075, 1078 (Del. 1986), disapproved of 

on other grounds by Tooley v. Donaldson, Lufkin & Jenrette, 

Inc., 845 A.2d 1031 (Del. 2004) (“[W]e must look to the 

nature of the wrongs alleged in the body of the complaint, not 

to the plaintiff’s designation or stated intention.”); Arent v. 

Distribution Scis., Inc., 975 F.2d 1370, 1373 (8th Cir. 1992) 

(“[T]he fact that plaintiffs framed the harm as a direct fraud 

[does] not permit them to go forward on a claim that [i]s, at 

its core, derivative.”).

Of course, the Oklahoma Plaintiffs oppose this 

characterization and attribute their injury before SemCrude’s 

bankruptcy in 2008 to the various times when the Oklahoma 

Plaintiffs contributed additional capital or retained their 

investments as a result of Kivisto’s inducement. They argue 

that, at the times they were induced to contribute, the capital 

they received was not worth what they paid. However, closer 

scrutiny reveals that the gravamen of the Oklahoma 

Plaintiffs’ injury is the demise of SemCrude as a result of 

Kivisto’s alleged misconduct. That is, the course of conduct 

underlying the Oklahoma Plaintiffs’ alleged loss—i.e., 
16

Kivisto’s failure to disclose his risky trades or self-dealing or 

actively misrepresenting SemCrude’s trading positions—is 

the exact same conduct underlying the alleged cause of 

SemCrude’s bankruptcy and, therefore, the Litigation Trust’s 

released claims against Kivisto. See App. 326 (asserting in 

their state court petition that Kivisto’s speculative trading 

strategy and self-dealing caused the Oklahoma Plaintiffs to 

“los[e] the full value of their limited partnership units when 

Sem[Crude] declared bankruptcy in July 2008”). Thus, the 

Bankruptcy Court got it right the first time it passed on the 

issue: “[T]he injury suffered by the Oklahoma Plaintiffs is no 

different from the injury suffered by SemCrude as a result of 

Kivisto’s wrongful conduct. Indeed, the Oklahoma Plaintiffs’ 

alleged loss of capital went hand-in-hand with the titanic 

losses that SemCrude suffered in the run-up to its bankruptcy 

filing.” App. 19. The Oklahoma Plaintiffs’ alleged injury 

therefore derives from SemCrude’s injury. See, e.g., Arent, 

975 F.2d at 1374 (“[Plaintiffs’] claim also fails as a matter of 

law because any injury to plaintiffs was not caused by [the 

corporation’s] failure to disclose. Plaintiffs were not harmed 

because they were unable to realize the true value of their 

stock—they were harmed because the true value of their stock 

was zero.”); Crocker v. FDIC, 826 F.2d 347, 350-51 (5th Cir.

1987) (holding that minority shareholders’ claims that they 

“would have” sold their stock had they known that the 

corporation was failing was, at its core, nothing more than a

derivative claim for diminution in the value of corporate 

stock).

Accordingly, the Oklahoma Plaintiffs are unable to 

show that they experienced any loss “in addition to” the other 
17

equity holders or, equally, the company,

7 who were injured

by Kivisto’s alleged misconduct and experienced the same 

pro rata loss by investing or failing to divest their units. 

“Where all of a corporation’s stockholders are harmed and 

would recover pro rata in proportion with their ownership of 

the corporation’s stock solely because they are stockholders, 

then the claim is derivative in nature.” Feldman v. Cutaia, 

951 A.2d 727, 733 (Del. 2008); see also Empire Life Ins. Co. 

of Am. v. Valdak Corp., 468 F.2d 330, 335 (5th Cir. 1972)

(explaining that claims are derivative where “each 

shareholder suffers relatively in proportion to the number of 

shares he owns”). Try as they may to distinguish themselves

from other limited partners, the Oklahoma Plaintiffs’ losses 

differ only in amount, not in kind. 

And even if the Court found arguendo that the 

Oklahoma Plaintiffs were uniquely harmed, the Oklahoma 

Plaintiffs still may not bring claims directly because they 

have no right to recover the losses they assert. The Oklahoma 

Plaintiffs’ asserted losses are the “millions of dollars [they]

paid to Sem[Crude] in the form of [additional] capital 

contributions” at Kivisto’s specific request. App. 350; 

Appellees’ Br. at 21. However, any such recovery would be 

considered equity in SemCrude’s estate, which belongs to the 

Litigation Trust. “[D]estruction or depreciation of the value 

of [a shareholder’s] stock . . . is merely incidental to the 

wrong suffered by the corporation and affects all stockholders 

alike.” Dobry, 290 P.2d at 137 (internal quotations marks 

omitted). Accordingly, the Oklahoma Plaintiffs cannot show 

 

7 See Jarvis v. Great Bend Oil Co., 168 P. 450, 454 

(Okla. 1917) (“Where the injury is to the stockholders 

collectively it is said to be an injury to the corporation.”) 

(internal quotation marks omitted).
18

that they are entitled to receive the benefit of recovery

without showing an injury to SemCrude. See Tooley, 845 

A.2d at 1039 (“The stockholder must demonstrate that . . . he 

or she can prevail without showing an injury to the 

corporation.”).8

The Oklahoma Supreme Court’s decision in Jarvis v. 

Great Bend Oil Co., 168 P. 450 (Okla. 1917), and Johnson v. 

Render, 270 P. 17 (Okla. 1928), which the parties heavily 

dispute, drives this principle home. In Jarvis, a corporation’s 

promoters induced investors to pay an inflated price for the 

corporation’s stock by fraudulently misrepresenting the price 

 

8 Kivisto asserts for the first time on appeal that Tooley

should not be used to decide the derivative status of claims in 

Oklahoma. However, it appears that he specifically makes 

this argument with regard to Tooley’s disavowal of the 

“special injury” test used to identify direct claims. See

Appellant’s Br. at 22 n.5; see also Tooley, 845 A.2d at 1033, 

1035, 1037-39 (disapproving of the “special injury” concept 

and establishing that the analysis must turn solely on “(1) 

who suffered the alleged harm” and “(2) who would receive 

the benefit of any recovery or other remedy”); cf. id. at 1036 

(explaining that the second inquiry “is helpful in analyzing 

the first prong of the analysis: what person or entity has 

suffered the alleged harm? The second prong of the analysis 

should logically follow.”). While we may generally look to 

Delaware law in construing Oklahoma corporate law, see 

Beard v. Love, 173 P.3d 796, 802 (Okla. Civ. App. 2007) 

(“[I]n the absence of Oklahoma authority we may consult 

decisions from the courts of Delaware and other jurisdictions 

concerning derivative actions.”), we do not rely on the special 

injury test here and therefore do not reach whether Tooley is 

inconsistent with Dobry on this basis.
19

of an oil-and-gas lease, which the corporation thereafter 

purchased. 168 P. at 450-53. The corporation sued the 

promoters, and the promoters argued that the corporation did 

not have standing because the fraud occurred “prior to the 

organization of the [] corporation.” Id. at 453. On appeal, the 

Jarvis Court held that the right of action was properly vested 

in the corporation because the promoters purchased the lease 

using corporate funds previously paid in by the investors 

collectively. In other words, the investors could not bring 

direct claims; the wrong complained of was fraud against the 

newly-formed corporate entity, which received a lease worth 

less than the amount of corporate funds used to buy it. As a 

result, all shareholders were affected equally (in proportion to 

their contributions), and “each [shareholder] will be made 

whole if the corporation obtains compensation or restitution 

from the wrongdoer.” Empire Life Ins. Co., 468 F.2d at 335.

On the other side of the spectrum is Johnson. In 

Johnson, the promoters of a corporation induced the plaintiff, 

S.P. Render, to pay an additional “bonus” for the company’s 

stock by misrepresenting the corporation’s value and then 

pocketing the bonus for their own benefit. 270 P. at 17-18. 

The Court rejected appellees’ allegation that the right to sue 

was vested in the corporation. It explained that, unlike in 

Jarvis, “[i]n the instant case neither the corporation nor the

stockholders collectively were defrauded of any sum 

whatsoever, [because] the corporation received value, dollar 

for dollar, for its stock,” and because “no breach of duty was 

violated as against the corporation or the stockholders

collectively.” Id. at 20. Rather,

The fraud complained of was against the 

plaintiff, Render, individually, was a breach of 

duty under the original agreement between him 

and the defendants . . . . The fraud arose from a 
20

misrepresentation as to the payment of a bonus 

whereby plaintiff was induced to pay a sum of 

money not in accord with and in violation of 

their original agreement. 

Id. Accordingly, the Court was “unable to see where the 

corporation in the instant case would have the right to 

maintain any action against the defendants for the recovery 

and return of the sum sought to be recovered by the plaintiff, 

Render.” Id.

9

 

 

9 The parties also dispute an unpublished, federal 

district court opinion, Stoner v. Ford, No. 74-311, 1974 WL 

476 (N.D. Okla. Dec. 24, 1974) (applying Oklahoma law), 

which has the least force but which we discuss here for the 

sake of completeness. In Stoner, the plaintiff brought a suit 

against the promoters and directors of a corporation alleging, 

among other things, that the defendants fraudulently induced 

him to purchase stock in their company by failing to disclose 

that they watered the stock and made a secret profit. Id. at *4. 

The Stoner Court considered both Jarvis and Dobry and held 

that the fraudulent inducement claim was a direct claim, i.e., a 

“wrong[] affecting Plaintiff as an individual, distinct from any 

harm to the entire body of shareholders.” Id. at *5. To the 

extent Stoner bears any force, it speaks to the broader 

principle that inducing a particular individual to purchase 

stock may be a direct injury if the fraud injures neither the 

shareholders collectively nor the corporation. Like in 

Johnson, in Stoner “the fraud complained of had its inception 

before the corporation was organized. It was a personal 

transaction between individuals.” Johnson, 270 P. at 20-21 

(internal quotation marks omitted). Compared to the case at 

bar, where Kivisto’s alleged misconduct induced 

contributions beyond the Oklahoma Plaintiffs’ pre-existing 
21

Here, the Oklahoma Plaintiffs’ claims fall along the 

lines of Jarvis, not Johnson. SemCrude, not the Oklahoma 

Plaintiffs, had the right to pursue an action to recover from 

Kivisto’s fraudulent conduct towards SemCrude and its 

equity holders collectively. SemCrude, not the Oklahoma 

Plaintiffs in their individual capacities, was defrauded by 

Kivisto’s misrepresentations and omissions and injured by his 

alleged misconduct. Because “the injury or wrong 

complained of was a fraud against the corporation or its 

subscribers collectively,” “the right of action or recovery [i]s 

in the corporation.” Id. “Stated differently, the misconduct 

alleged by [the Oklahoma Plaintiffs] did not injure [them] or 

any other [unit]holders directly, but instead only injured them 

indirectly as a result of their ownership of [SemCrude’s 

units].” See Smith v. Waste Mgmt., Inc., 407 F.3d 381, 385 

(5th Cir. 2005). Accordingly, the Oklahoma Plaintiffs’

claims for negligent misrepresentation and fraud are 

derivative of the claims belonging to—and, importantly,

released by—the Litigation Trust. 

B.

The Oklahoma Plaintiffs’ second basis for asserting

direct injuries is that Kivisto breached fiduciary duties owed 

 

equity interests, “[t]he misrepresentations that allegedly

caused [their] losses injured not just [the Oklahoma Plaintiffs]

but the corporation as a whole.” See Smith v. Waste Mgmt., 

Inc., 407 F.3d 381, 384-85 (5th Cir. 2005); see also Big Lots 

Stores, Inc. v. Bain Capital Fund VII, LLC, 922 A.2d 1169, 

1177 (Del. Ch. 2006) (“[T]he main dividing line between 

direct and derivative claims styled as ‘fraudulent 

inducement,’ [is] whether the plaintiff has alleged some 

injury other than that to the corporation.”). Thus, Stoner is 

inapposite. 
22

to them as individuals. It is not disputed that Kivisto, as the 

President and CEO of SemCrude, owed fiduciary duties to 

SemCrude, the Oklahoma Plaintiffs, and all other equity 

holders in that role. See, e.g., Wilson v. Harlow, 860 P.2d 

793, 798 (Okla. 1993). The question is whether Kivisto owed 

separate and distinct fiduciary duties to the Oklahoma 

Plaintiffs, and whether the Oklahoma Plaintiffs were 

individually injured on the basis of the breach of those duties 

such that they are entitled to recover separately from 

SemCrude.

Oklahoma Plaintiffs argue that a separate fiduciary 

duty was formed based on the parties’ longstanding 

relationship of trust that led the Oklahoma Plaintiffs to rely 

on Kivisto’s superior influence and expertise. They point to 

Oklahoma law that recognizes the existence of de facto 

fiduciary relationships, in various contexts outside derivative 

suits, where (1) “there is confidence reposed on one side [of a 

relationship] and resulting domination and influence on the 

other,” Lowrance v. Patton, 710 P.2d 108, 111 (Okla. 1985); 

and (2) even when there is no duty to speak, someone 

“volunteers to speak and to convey information which may 

influence the conduct of the other party,” and, as a result, “he 

or she is bound to disclose the whole truth,” Croslin v. 

Enerlex, Inc., 308 P.3d 1041, 1047 (Okla. 2013). They also
23

rely on an Oklahoma pattern jury charge10 and other authority 

to argue that “whether a separate fiduciary [relationship]

exist[s] is a question of fact for the jury.” Appellees’ Br. at 

35-41. 

To be sure, these cases point to a broad interpretation 

of when a fiduciary duty exists under Oklahoma law. See 

Lowrance, 710 P.2d at 111 (“[C]ourts of equity will not set 

any bounds to the facts and circumstances out of which a 

fiduciary relationship may spring.”). However, as Kivisto 

emphasizes, Oklahoma courts have never identified a 

violation of a supposed “special duty” to a shareholder in this 

context as loss “in addition to” the loss sustained by the 

corporation under Dobry. Nor has any other court to our 

knowledge found a direct injury in the context of a derivative 

or direct suit on the basis of a general relationship that forms 

from a power imbalance or out of an obligation to speak the 

truth. If we found direct claims here, there is no reason why 

the other limited partner unitholders, or any other shareholder 

for that matter, could not bring direct claims. Indeed, it 

would be difficult to cognizably administer this much broader 

rule the Oklahoma Plaintiffs ask us to endorse. A reviewing 

court would be forced to determine which communications to 

which equity holders and in what contexts would be 

 

10 The Oklahoma Uniform Jury Instructions state that a 

jury can find a fiduciary relationship “based upon the . . .

[parties’] relationship and the other circumstances in th[e] 

case. A fiduciary relationship exists whenever trust and 

confidence are reasonably placed by one person in the 

integrity and loyalty of another, and the other person 

knowingly accepts that trust and confidence and then 

undertakes to act on behalf of the person.” Okla. Unif. Jury 

Instr. 26.2. 
24

actionable for breach of duty, which appears to undermine the 

principles behind the derivative injury rule. See Dobry, 290 

P.2d at 137 (explaining “the legal concept of corporate entity 

under which stockholders as such lose their individualities in 

the individuality of the corporation as a separate and distinct 

person”) (internal quotation marks omitted). Thus, the 

Bankruptcy Court was not wrong in the first instance to

conclude that the Oklahoma Plaintiffs’ allegations for breach 

of fiduciary duty were insufficient. 

Still, even assuming arguendo that Kivisto owed the 

Oklahoma Plaintiffs unique, individual fiduciary duties in 

addition to the duties owed to them in their legal capacity as 

unitholders, the Oklahoma Plaintiffs can show neither that 

they were injured separately from the company or all other 

unitholders on the basis of that misconduct, nor that they were 

entitled to recovery of the units they allegedly would not have 

contributed or would have sold but for Kivisto’s misconduct. 

Thus, for the same reasons we provided above, the Oklahoma 

Plaintiffs’ breach of fiduciary duty claim is derivative. 

IV.

For the reasons set forth above, we conclude that the 

Oklahoma Plaintiffs’ claims are derivative of the claims 

rightfully belonging to, and released by, SemCrude’s 

Litigation Trust. As such, we reverse the Bankruptcy Court’s 

order denying Kivisto’s motion to enjoin and direct it to enter 

a permanent injunction forbidding the Oklahoma Plaintiffs’ 

claims from proceeding in state court.