On June 14, 2023, the United States Bankruptcy Court for the District of Delaware entered judgment for the defendants, the former owners of Samson Investment Company (the “SIC”), in a fraudulent transfer action brought by Samson’s liquidating trustee (the “Trustee”). After a three-week long trial in which the defendants presented extensive evidence showing the robust marketing, diligence, and bargaining that led to the sale, the court found the trustee failed to show that the $7.2 billion dollar sale of SIC to a private equity consortium constituted a fraudulent transfer.

In 2011, SIC was sold to a consortium of private equity investors led by Kohl Kravis Roberts & Co. In 2015, amid a downturn in the oil and gas market, Samson Resources Corporation (“SRC”) and certain affiliates (together with SRC, the “Debtors”) filed for a chapter 11 bankruptcy. The Debtors’ plan of reorganization created a liquidating trust to pursue recoveries, including fraudulent transfer claims against the selling shareholders and entities involved in the leveraged.

At the trial, the Trustee argued the methods used to arrive at the purchase price were inconsistent with the standards used in the oil and gas industry for the classification and valuation of petroleum reserves and resources. The Trustee’s expert witness testified that, based on the available information, his calculation revealed the value of SIC was billions of dollars less than the sale price. The Trustee’s expert also testified that SIC was inadequately capitalized.

Defendants’ primary argued that the market-tested purchase price was the fair market value. Defendants’ evidence extensively showed the amount of marketing and diligence that went into the transaction.

In siding with Defendants, the court stated, “It is the black letter law in this Circuit that the gold standard for determining the value of an asset is to sell it in an open and fair market. A thing is worth what a willing buyer will pay to a willing seller following a proper marketing process.” The fact that the company ultimately filed for bankruptcy, the court reasoned, “does not mean the sale process was flawed or the price unfair.”

The case is In re: Samson Resources Corp., et al., No. 17-51524 (Bankr. D. Del. June 14, 2023). The Settlement Trust is represented by Michael J. Farnan of Farnan LLP and J. Christopher Shore and Colin T. West of White & Case. Defendants are represented by Michael S. Neiberg of Young, Conaway Stargatt & Taylor, LLP; Sabin Willett of Morgan, Lewis & Bockius; and David M. Stern of KTBS Law LLP. The Opinion is available here.