COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

4. COMMITMENTS AND CONTINGENCIES

Claims and Legal Proceedings

In the ordinary course of business, we are involved in various claims and legal proceedings, some of which are covered by insurance.  We are generally unable to predict the timing or outcome of these claims and proceedings.  Based upon our evaluation of existing claims and proceedings and the probability of losses resulting from such contingencies, we have accrued certain amounts relating to such claims and proceedings, none of which are considered material.

Unitholder Litigation

On June 13, 2019, a purported unitholder of Buckeye filed a complaint in a putative class action in the United States District Court for the Southern District of Texas, Houston Division, captioned Harry Curtis, individually and on behalf of all others similarly situated, v. Buckeye Partners, L.P., et al., Case No. 4:19-cv-2147 (the “Curtis Action”). On June 18, 2019, a purported unitholder of Buckeye filed a complaint in a putative class action in the United States District Court for the District of Delaware, captioned Michael Kent, individually and on behalf of all others similarly situated, v. Buckeye Partners, L.P., et al., Case No. 1:19-cv-01128 (the “Kent Action”). On June 19, 2019, a purported unitholder of Buckeye filed a complaint in the United States District Court for the Southern District of New York, captioned John Greer v. Buckeye Partners, L.P., et al., Case No. 1:19-cv-05741 (the “Greer Action”). On June 20, 2019, a purported unitholder of Buckeye filed a complaint in the United States District Court for the Southern District of New York, captioned Anthony Luers v. Buckeye Partners, L.P., et al., Case No. 1:19-cv-05767 (the “Luers Action”). On June 26, 2019, a purported unitholder of Buckeye filed a complaint in the United States District Court for the District of Delaware, captioned Michael Weston, individually and on behalf of all others similarly situated, v. Buckeye Partners, L.P., et al., Case No. 1:19-cv-01208 (the “Weston Action”). On June 26, 2019, a purported unitholder of Buckeye filed a complaint in the United States District Court for the Southern District of New York, captioned Heather McManus, individually and on behalf of all others similarly situated, v. Buckeye Partners, L.P., et al., Case No. 1:19-cv-06000 (the “McManus Action”). On June 28, 2019, a purported unitholder of Buckeye filed a complaint in the United States District Court for the Southern District of New York, captioned John Ingalls, individually and on behalf of all others similarly situated, v. Buckeye Partners, L.P., et al., Case No. 1:19-cv-06098 (the “Ingalls Action”). On June 28, 2019, a purported unitholder of Buckeye filed a complaint in the United States District Court for the District of Delaware, captioned Michael Riss, on behalf of himself and all others similarly situated, v. Buckeye Partners, L.P., et al., Case No. 1:19-cv-01241 (the “Riss Action” and, together with the Curtis Action, the Kent Action, the Greer Action, the Luers Action, the Weston Action, the McManus Action and the Ingalls Action, the “Federal Merger Litigation”). On June 28, 2019, Buckeye also received a joint demand letter from the plaintiffs of each of the Curtis Action, the Kent Action and the Greer Action reiterating the claims contained in each of those actions. On July 18, 2019, the Greer Action, the Luers Action, the McManus Action and the Ingalls Action were transferred to the United States District Court for Southern District of Texas, Houston Division. These cases are now docketed as Case No. 4:19-cv-02648, 4:19-cv-02647, 4:19-cv-02644 and 4:19-cv-02645, respectively.

The Curtis Action alleges, among other things, that in pursuing the Merger, the Board breached its express and implied contractual duties pursuant to Buckeye’s limited partnership agreement and its fiduciary duties to Buckeye’s unitholders in agreeing to enter into the Merger Agreement by means of an allegedly unfair process and for an allegedly unfair price. Each of the Federal Merger Litigation cases alleges that (i) either Buckeye’s preliminary proxy statement, filed with the SEC on June 7, 2019 (the “Preliminary Proxy Statement”) or Buckeye’s definitive proxy statement, filed with the SEC on June 25, 2019 (the “Proxy Statement”) omits material information with respect to the Merger, rendering it false and misleading and, as a result, that Buckeye and the members of the Board violated Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, and (ii) the members of the Board, as alleged control persons of Buckeye, violated Section 20(a) of the Exchange Act in connection with the filing of the allegedly materially deficient Preliminary Proxy Statement or Proxy Statement.

Each of the Federal Merger Litigation cases sought some or all of the following relief: an order enjoining the Merger, an order enjoining the unitholder vote until disclosure of the allegedly omitted material information identified is provided, the disclosure of all material information concerning the Merger, an order directing the Board to disseminate a proxy statement that does not contain any untrue statements of material fact and that states all material facts required or necessary to make the statements contained therein not misleading, an order rescinding the consummation of the Merger or an award of rescissory damages (in the event the Merger is consummated), a declaration that the defendants violated Sections 14(a) and/or 20(a) of the Exchange Act, as well as Rule 14a-9 promulgated thereunder, an award of damages and an award of attorneys’ and experts’ fees and expenses.

Buckeye believes that each of the Federal Merger Litigation cases is without merit and no supplemental disclosure was required under applicable law. However, in order to avoid the risk of the Federal Merger Litigation delaying or adversely affecting the Merger and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, on July 22, 2019, Buckeye filed with the SEC a Current Report on Form 8-K and a Schedule 14A supplementing certain of the allegedly misleading proxy statement disclosures identified in the Federal Merger Litigation (the “Supplemental Proxy Statement”). Each plaintiff agreed that the disclosure contained in the Supplemental Proxy Statement mooted his or her disclosure claims. On August 27, 2019, the Greer Action was dismissed with prejudice as to the plaintiff. On September 5, 2019, the Kent Action was dismissed without prejudice. On September 11, 2019, the Riss Action was dismissed with prejudice as to the plaintiff. On September 30, 2019, the Ingalls Action was dismissed with prejudice as to the plaintiff. On October 3, 2019, the Curtis Action was dismissed without prejudice. On October 22, 2019, the McManus Action was dismissed with prejudice.

It is possible that additional, similar complaints may be filed or the complaints described above may be amended. If this occurs, Buckeye does not intend to announce the filing of each additional, similar complaint or any amended complaint.

On June 14, 2019, Buckeye also received a demand letter from Walter E. Ryan Jr. (“Mr. Ryan”), a purported unitholder of Buckeye, requesting access to certain books and records of Buckeye to investigate possible mismanagement and/or breaches of fiduciary duty by the Board in connection with the Merger (the “Ryan Demand Letter”). On June 21, 2019, Buckeye responded to the Ryan Demand Letter denying the requests and allegations contained therein. On July 2, 2019, Buckeye received a revised demand letter from Mr. Ryan, which reiterated the demands contained in the Ryan Demand Letter (the “Revised Ryan Demand Letter”). On July 10, 2019, Buckeye responded to the Revised Ryan Demand Letter again denying the requests and allegations contained therein.

On September 6, 2019, Mr. Ryan filed in the Ingalls Action (which, as noted above, was subsequently dismissed as to Mr. Ingalls) a motion for appointment of lead counsel and for leave to file an amended complaint (the “Ryan Proposed Amended Complaint”). The Ryan Proposed Amended Complaint alleges, among other things, that in pursuing the Merger, the Board breached its express and implied contractual duties pursuant to Buckeye’s limited partnership agreement and its fiduciary duties to Buckeye’s unitholders in agreeing to enter into the Merger Agreement by means of an allegedly unfair process and for an allegedly unfair price. The Ryan Proposed Amended Complaint further alleges that (i) Buckeye’s Supplemental Proxy Statement omits material information with respect to the Merger, rendering it false and misleading and, as a result, that Buckeye and the members of the Board violated Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, and (ii) the members of the Board, as alleged control persons of Buckeye, violated Section 20(a) of the Exchange Act in connection with the filing of the allegedly materially deficient Supplemental Proxy Statement. The Ryan Proposed Amended Complaint seeks, among other things, an order enjoining the Merger, an order declaring the unitholder vote invalid, an order directing Buckeye to distribute to unitholders income earned in any stub period prior to the closing of the Merger, an order directing the Board to disseminate a proxy statement that does not contain any untrue statements of material fact and that states all material facts required or necessary to make the statements contained therein not misleading, a declaration that the defendants breached their fiduciary duties and violated Sections 14(a) and/or 20(a) of the Exchange Act, as well as Rule 14a-9 promulgated thereunder, an order rescinding the Merger or awarding rescissory damages (in the event the Merger is consummated), an award of damages and an award of attorneys’ and experts’ fees and expenses. Buckeye believes the Ryan Proposed Amended Complaint is without merit.

Environmental Contingencies

At September 30, 2019 and December 31, 2018, we had $34.5 million and $39.0 million, respectively, of environmental remediation liabilities.  Costs ultimately incurred may be in excess of our estimates, which may have a material impact on our financial condition, results of operations or cash flows.  At September 30, 2019 and December 31, 2018, we had $3.9 million and $4.2 million, respectively, of receivables related to these environmental remediation liabilities covered by insurance or third-party claims.