A Texas jury awarded more than $178 million recently to minority shareholders of a subsidiary of NL Industries, Inc. It was alleged that a pattern of misconduct deprived the shareholders of the true value of their investment. Defendants included Dallas-based NL Industries, its subsidiary NL Environmental Management Services, Inc. (NL EMS) and a Dallas businessman, Harold Simmons, who controls NL Industries.
In 1998, the Plaintiffs, Efficasey Environmental LLC, Highland Environmental Management, LLC, and Industrial Recovery Capital Holdings Company, invested in NL EMS. For the next seven years, the minority shareholders ran the subsidiary, which was created to manage the cleanup of environmental liabilities for NL Industries across the United States. NL Industries retained a controlling position in the subsidiary. When the Plaintiffs exercised their contractual right to sell their stock back to NL Industries in 2005, NL Industries refused to pay more than a small fraction of what the stock was worth.
Plaintiffs proved during the trial that NL Industries and several of its officers had improperly drained NL EMS of assets in the months leading up to the minority shareholders’ sale of their stock back to the company. The Plaintiffs also proved that the Defendants were guilty of bad faith by artificially reducing the value of the assets that they left in the company. The jury found NL Industries liable for breaching its fiduciary duty to the Plaintiffs. In addition, the jury found three executives of another Simmons-controlled company, including Simmons himself, liable for conspiring to drain assets from the company and improperly calculating the value of the Plaintiffs’ stock. The jury’s award includes $33.7 million in actual damages and $140 million in punitive damages against NL Industries. Jurors levied an additional $5 million in punitive damages against NL Industries’ general counsel.
Plaintiffs Efficasey Environmental and Industrial Recovery Capital Holdings Company were represented by Steve Susman, Katherine Treistman and Stephen Shackelford, Jr., all from Susman Godfrey. Plaintiff Highland Environmental Management was represented by Tom Melsheimer, M. Brett Johnson, Renee Skinner and Scott Thomas, all lawyers from the Dallas firm of Fish & Richardson.