UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
February 12, 2009
(Date of earliest event reported)
Torch Energy Royalty Trust
(Exact name of registrant as specified in its charter)
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| Delaware
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1-12474
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74-6411424 |
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(Commission File Number)
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(I.R.S. Employer |
| incorporation or organization)
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Identification Number) |
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices, including zip code)
302/636-6016
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01. Other Events.
As previously disclosed by the Torch Energy Royalty Trust (the “Trust”) in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2007, filed with the Securities and Exchange
Commission on December 31, 2008, Trust Venture Company, LLC (“TVC”) intended to commence a
derivative action against Constellation Energy Partners LLC (“CEP”), the working interest owners of
certain oil and gas fields located in Alabama, in accordance with, inter alia, Section 3816 of the
Delaware Statutory Trust Act, codified at 12 Del. C. 3816(a), to (i) recover any overcharges to the
Trust by CEP related to administrative costs, water gathering, treating and disposal costs and
severance taxes and (ii) require CEP to provide an accounting of its revenues and expenses as
required under the Net Overriding Royalty Conveyance filed of record
in
Tuscaloosa County, Alabama. On December 30, 2008, TVC filed and subsequently served a derivative
lawsuit against CEP in Alabama state court alleging such overcharges, challenging the calculation
of the net profits interests (the “Net Profits Interests”) under the conveyances that were used to
transfer the net profits interests in each state, and demanding an accounting of CEP’s revenues and
expenses. In response to the derivative lawsuit, on February 9, 2009, CEP filed in Alabama state
court a motion to dismiss such lawsuit without prejudice in favor of arbitration on various
grounds, including TVC’s alleged lack of standing and TVC’s alleged failure to comply with certain
contractual agreements.
On February 12, 2009, Wilmington Trust Company, not in its individual capacity but solely as
Trustee of the Trust (“Trustee”) received a certified copy of a demand for arbitration dated
February 9, 2009 by CEP before JAMS (the “Demand Notice”) seeking a declaratory judgment that CEP
(i) correctly calculated and paid the Net Profits Interests payments due to the Trust, (ii)
correctly charged the Trust for certain well accounting services and severance taxes, and (iii) has
complied with its contractual reporting requirements due to the Trust. In the Demand Notice, CEP
claimed that, because the Trust authorized TVC to file the derivative lawsuit, “there exists a
judicable conflict between CEP and the Trust that is subject to resolution by arbitration.”
In addition, on February 12, 2009, TVC filed an emergency motion in Alabama state court to stay the
arbitration demanded by CEP until such time as the court issues a judgment as to the enforceability
of the arbitration agreement made by and between the Trust and CEP. The Trust believes, based on
the parties’ reports of the hearing held on February 18, 2009, that the Alabama state court
accepted CEP’s voluntary agreement to extend the response date for the Trustee to the Demand Notice
until February 26, 2009, to permit the court time to render a decision on the pending motion to
dismiss. Based on the outcome of the hearing on TVC’s emergency motion on February 18, 2009, the
Trust believes that the parties to the derivative action (namely, TVC and CEP) anticipate that the
Alabama court will rule on CEP’s motion to dismiss on or before February 26, 2009.
The Trustee is currently reviewing the Demand Notice and the motions and pleadings filed in, and
with respect to, the derivative lawsuit and arbitration. There can be no assurance as to the
outcome or result of a lawsuit or arbitration or the effect of the derivative lawsuit, motion to
dismiss and demand for arbitration may have on the Trust or the units, including the market value
thereof.
Cautionary Statement on Risks Associated with the Trust’s Forward-Looking Statements.
This Form 8-K contains forward-looking statements, as defined in Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934, by the Trust that are subject to
risks and uncertainties. The words “believe,” “expect,” “anticipate,” “intend,” “plan,”
“estimate,” “may,” “should,” “could,” and similar expressions are intended to identify such
statements. Forward-looking statements are not guarantees of future performance and are to be
interpreted only as of the date on which they are made. The Trust undertakes no obligation to
update or revise any forward-looking statement except as required by law.