Preview
FILED
2/17/2022 2:31 PM
FELICIA PITRE
DISTRICT CLERK
DALLAS CO., TEXAS
Treva Parker-Ayodele DEPUTY
CAUSE NO. DC-19-18070
TRINITY INDUSTRIES LEASING IN THE DISTRICT COURT
COMPANY,
PLAINTIFF,
Vv. DALLAS COUNTY, TEXAS
CLOVER OIL & GAS, INC. f/k/a
CLOVER OIL & GAS, LLC,
DEFENDANT. § 192ND JUDICIAL DISTRICT
MOTION FOR LEAVE TO ADD DEFENDANT AND AMEND PETITION
Plaintiff Trinity Industries Leasing Company (“Trinity”) seeks leave of the Coutt to file a
Second Amended Petition’ in this action against Defendant Clover Oil & Gas, Inc. (“Clover Inc.”)
£/k/a Clover Oil & Gas, LLC (“Clover LLC”) — (collectively “Clover”) — and its former CEO, Brett
Osmond (“Osmond”). Trinity acknowledges and anticipates that such amendment and inclusion of
an additional party will necessitate resetting the trial of this action. The amendment and addition are
sought not for delay (which does not assist Trinity because it seeks recovery of significant damages)
but so justice can be done.
I SUMMARY OF MOTION
This case arises from the negotiations between Trinity and Clover. Trinity and Clover
negotiated various contracts in which Trinity agreed to manufacture and lease tank cars for Clover’s
use in transporting crude oil from Canada to Texas refineries. Information obtained during former
Clover CEO Osmond’s Jong-sought deposition of December 6, 2021’—for which Trinity received
| Trinity appends the proposed Second Amended Petition as Tab 1. Upon entry of an order granting this Motion, Trinity
requests the Court accept the Second Amended Petition as filed for all purposes.
? Trinity initially requested dates for the deposition of Osmond, and a Clover corporate representative on designated topics
March 22, 2021, which request was ignored, resulting
in Trinity unilaterally noticing those depositions on May 11-12, 2021.
By Rule 11 Agreement dated April 16, 2021, the parties agreed to reschedule the depositions. On May 7, 2021, Clover’s
counsel advised Trinity he intended withdrawal from Clover’s representation because Clover sought dissolution under
Delaware law. Upon said counsel not filing a motion for withdrawal, Trinity again requested deposition dates on June 7,
PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE
‘(0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 1
the transcript about six weeks later—demonstrate both Clover’s intent not to comply with any of the
contracts it executed with Trinity and Osmond’s own misrepresentations regarding the Clover
business model, upon which Trinity depended to its detriment.
Ultimately, the Osmond deposition demonstrated he intended for Trinity and Clover’s other
business partners to rely on misleading and inaccurate factual representations. Osmond’s goal was
clear: enable Clover to avail itself of business opportunities that would not have existed but for its
fraud. To fully set forth the claims at issue, Trinity requests the Court grant it leave to amend its
petition.
I. FACTUAL BACKGROUND
The key facts are not subject to dispute: (1) Clover ordered and leased 110 newly built railroad
tank cars from Trinity, and Trinity fabricated the 110 newly built railroad tank cars to Clover’s
specifications (the “110 Tank Cars”); (2) Trinity delivered the 110 Tank Cars to Clover, at the location
designated by Clover, and Clover accepted delivery of the 110 Tank Cars; (3) Clover has not paid
Trinity for the 110 Tank Cars.
By its January 18, 2022 Order (the “ Order” ), the Court granted Clover’s motion for summary
judgment regarding the legal meaning of the “Condition Precedent Provision” of the first rider (“Rider
One”) to the parties’ final agreement, the Master Lease—as applicable to the 110 Tank Cars.
Nonetheless, prior to entering Rider One, Clover agreed in October 2018 to lease the 110 Tank Cars
from Trinity and Trinity relied upon that agreement to manufacture the rail cars. Clover
2021. The parties thereafter filed cross-motions for summary judgment on a discrete point of law and agreed to table those
depositions until they obtained a ruling on their competing summary judgment motions. The parties understood their
motions were set for submission to the Court on October 15, 2021. But the parties were mistaken. The parties thereafter
obtained a January 13, 2022 heating date on the competing motions which resulted in the Court’s January 18, 2022 Order.
As noted, running out of time to conduct the depositions during the discovery petiod, the depositions proceeded on the
above-stated date. In support of these averments, pursuant to Texas Rule of Evidence 201, Trinity incorporates the
allegations and evidence appended to its prior July 15, 2021 Motion to Strike the Deposition of Brent Osmond.
> A true and correct copy of the parties’ Pricing and Term of Lease Agreement executed October 29, 2018 is appended as
Tab 2. Clover LLC agreed to lease the 110 Tank Cars — fabricated to Clover’s specifications — at the price of “$1,130 per
month for a 5 year term.” See id.
PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE
‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 2
representatives literally watched the cars be built, directed Trinity to deliver the cars to its location,
negotiated modifications to the railcars, and stood by as Trinity made the modifications for Clover.
In February 2019, based upon Clover’s direct representations regarding its extant business
commitments, the parties entered a second term sheet.* The February 2019 Term Sheet contemplated
the parties’ further entry ofa profit-sharing plan — or “ARB share” — because Clover lacked sufficient
security or credit facilities to secure Trinity’s fabrication of the additional 440 Tank Cars Clover had
committed to lease in the February 2019 Term Sheet.
Relying upon Clover’s representations as to demand for its services, Trinity and its affiliates
waived a deposit and guarantee Trinity otherwise would have required from Clover to secure
fabrication and delivery of the 440 Tank Cars and waived the original $2,000,000 Letter of Credit that
Clover had committed to secure the existing order of the 110 Tank Cars. No patty disputes that Trinity
fabricated the 110 Tank Cars, and Clover cannot colorably dispute that Trinity delivered them to
Clover, nor that Clover remitted no lease payments to Trinity for its significant efforts and expense.
The key information revealed in the Osmond deposition is the extent of Osmond’s mendacity.
In “late 2018,” Osmond revealed he distributed the “Clover Oil & Gas” fundraising memorandum
(“Eundraising Memo”) and made related representations to various industry companies, including
Trinity. That memorandum and Osmond’s related representations included specific false and
materially misleading representations regarding Clover’s business commitments, including that Clover
had entered into and secured certain business arrangements when, in fact, it had not. Osmond and
Clover used those materially false business commitments as a basis to induce Trinity to enter the
February 2019 Term Sheet, forego the letter of credit it previously required, and enter a speculative
agreement with Clover that the latter had no intent of performing.
+ A true and correct copy of the parties’ Pricing and Terms of Lease Agreement executed February 26, 2019 is appended
as Tab 3.
PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE
‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 3
III. STANDARD
Texas Rule of Civil Procedure 63 states that parties may amend pleadings “after such time as
may be ordered by the judge under Rule 166. . . only after leave of the judge is obtained, which leave
shall be granted by the judge unless there is a showing that such filing will operate as a surprise to the
opposite party.” The Court has no discretion to refuse an amendment unless the opposing party
presents evidence of surprise or prejudice; or the amendment asserts a new cause of action or defense
that would render the amendment prejudicial on its face and the opposing party objects to the
amendment. Halmos v. Bombardier Aerospace Corp., 314 8.W.3d 606, 622 (Tex. App. - Dallas 2010, no
pet.).
The Fifth Court of Appeals explained that an amendment is “prejudicial on its face” if “(1) it
asserts a new substantive matter that reshapes the nature of the trial itself; (2) the opposing party could
not have anticipated the new matter in light of the development of the case up to the time the
amendment was requested; and (3) the amendment would detrimentally affect the opposing party's
presentation of its case.” Id. at 623.
IV. ARGUMENT
Trinity’s motion for leave to amend its claims against Clover cannot cause surprise or
prejudice. It also does not meet the definition of an amendment “prejudicial on its face.” None of the
three criteria apply.
The proposed amended petition would add a promissory estoppel cause of action against
Clover and both fraud and fraudulent inducement causes of action against Osmond. The Court should
grant the amended petition and allow it to bring Osmond into this lawsuit as a party.
1 The Court Should Allow the Amended Claims Against Clover.
Clover will suffer no surprise or prejudice by Trinity bringing a promissory estoppel cause of
action. By the January 18, 2022 Order, the Court held that Trinity cannot recover on the OTS or
PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE
‘(0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 4
Rider One due to its interpretation of the condition precedent provision at issue in the parties’ cross-
motions for summary judgment.’ But none of the parties dispute (or reasonably can dispute) that they
entered the October 2018 and February 2019 agreements, that Trinity relied upon the promises in
those agreements, that Trinity’s reliance was foreseeable, and that such reliance proved detrimental
because Clover never paid Trinity. Aubrey v. Workman, 384 SW.2d 389, 393 (Tex. Civ. App.—Fort
Worth 1964, writ refd n.r.e.) (discussing elements of promissory estoppel — reliance upon promises,
foreseeability of reliance, and damages to the reliant); see Trammell Crow Co. No. 60 v. Harkinson, 944
S.W.2d 631, 636 (Tex. 1997) (discussing defensive nature of promissory estoppel such that the theory
blocks promisor from denying enforceability of its promise). Thus, the elements of promissory
estoppel have been at issue throughout this action.
Adding the promissory estoppel cause of action to Trinity’s petition is not prejudicial on its
face because it does not add a new substantive matter that changes the nature of the trial; the
promissory estoppel proof overlaps the breach of contract proof Trinity had developed in discovery,
and the amendment therefore will not detrimentally affect Clover’s presentation of its case. To the
extent Trinity cannot recover on its extant contract claims or its unjust enrichment cause of action,
the promissory estoppel claim will fill in any possible gaps. The Court should allow the amendment
of claims against Clover.
2, The Court Should Permit Trinity to add Osmond as a Defendant.
In his deposition, Osmond admitted that Clover misrepresented its business contacts.
Osmond wrote the Clover Fundraising Memo, which is Exhibit 4 to the Osmond deposition. On page
7, the Clover Fundraising Memo states “Clover Aas secured a buy-side arrangement to supply four
unit-trains of Canadian heavy crude pet month .. . to a large Port Arthur refinery” (emphasis added).
Osmond made related representations in further communications circulated among the parties. But
5 Trinity requests the Court take judicial notice of the Order pursuant to Texas Rule of Evidence 201.
PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE
‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 5
strikingly, at his deposition, Osmond admitted that the commercial “arrangement” Clover touted in
its Fundraising Memo — in which Clover claimed it had secured four monthly 55-car transports of
crude from Canada to Port Arthur, Texas — was neither an arrangement nor even a commitment.’ In
simpler terms, Osmond admitted in his deposition that the arrangement — a synonym for deal, pact,
or agreement — that Clover’s Fundraising Memo represented it had in hand had not even been
committed to by Clover and the Port Arthur refinery in a term sheet.
As patt of its negotiations with prospective business partners, Osmond created and
disseminated the Fundraising Memo. And Osmond communicated related specific false
representations to Trinity personnel in both conversations and emails regarding the scope and status
of Clover’s agreement with the referenced Port Arthur facility to entice Trinity to waive its letter of
credit requirement. Relying upon Osmond’s representations regarding the extent of Clover’s business
deals and its anticipated workflow, Trinity agreed to waive the letter of credit requirement. That
agreement cost Trinity no less than the letter of credit amount it had previously required, $2,000,000.
A corporation’s employee is liable to third parties for tortious acts that s/he participates in
during the course of employment. Leyendecker ¢ Assocs., Inc. v. Wecher, 683 S.W.2d 369, 375 (Tex.1984);
Walkerv. Anderson, 232 SW 3d 899, 918 (Tex. App. — Dallas 2007, no pet.). Osmond personally created
and directed the fraudulent representations by Clover to Trinity. The extent of that fraud did not
become clear until his deposition.
Osmond has been intimately involved in this action as Clover’s CEO, as its primary witness,
and as its custodian of records who responded to all discovery (see Osmond Depo. at 98:23-99:6). The
theories Trinity has developed and pursued against Clover are substantially similar to the claims it
would pursue against Osmond and therefore Trinity’s proposed amendment does not add a new
& See Excerpts of the Osmond Deposition appended as Tab 4 at 90:19-92:5; 91:22-92:7; 96:10-20.
PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE
‘(0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 6
substantive matter that changes the nature of the trial. Osmond’s intimate involvement in all aspects
of both Clover’s dealings with Trinity that give rise to this case and Clover’s defense demonstrates
that the proof against Osmond will overlap the proof Trinity has developed in discovery against Clover
and will not surprise Osmond nor prejudice his preparation. Finally, an amendment bringing Osmond
before the Court as a responsible defendant will not detrimentally affect Clover’s presentation of its
case because the two defendants are not merely aligned, but their respective defenses rely upon the
same information.
Trinity understands that adding an additional party to the lawsuit cannot reasonably be
accomplished within the time set for trial of this matter. Thus, Trinity would agree to a short
continuance to allow Osmond to be brought fully before the Court.
PRAYER
WHEREFORE, Plaintiff Trinity Industries Leasing Company respectfully requests this Court
grant it leave to amend its petition and bring Brett Osmond as a party to this lawsuit.
Respectfully submitted,
RANDALL | GREER PLLC
By: b Aun
mes B. Greer
Texas Bar No. 24014739
5910 N. Central Expressway, Ste. 925
Dallas, Texas 75206
Telephone: (214) 628-9966
Facsimile: (214) 628-9967
igreer@rglaw.com
ATTORNEY FOR PLAINTIFF TRINITY
INDUSTRIES LEASING COMPANY
PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE
‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 7
CERTIFICATE OF CONFERENCE
I certify that I personally spoke with Clover’s counsel, Luke Gilman, regarding the relief sought
by this Motion on February 14, 2022, and that Clover is opposed to same.
b Au,
James B. Greer
CERTIFICATE OF SERVICE
Thereby certify that a true and correct copy of the above and foregoing document was served
on all counsel of record via electronic service pursuant to Tex. R. Civ. P. 21(a) on this the 17th day of
February, 2022.
A Au.
mes B, Greer
PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE
‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 8
Exhibit 1
CAUSE NO. DC-19-18070
TRINITY INDUSTRIES LEASING IN THE DISTRICT COURT
COMPANY,
PLAINTIFF,
Vv. DALLAS COUNTY, TEXAS
CLOVER OIL & GAS, INC. f/k/a
CLOVER OIL & GAS, LLC, AND
BRENT OSMOND,
DEFENDANTS. 192ND JUDICIAL DISTRICT
SECOND AMENDED PETITION
Plaintiff Trinity Industries Leasing Company (“Trinity”) files this Second Amended Petition
complaining of Defendants Clover Oil & Gas, Inc. (“Clover Inc.”) f/k/a Clover Oil & Gas, LLC
(“Clover LLC”) — (collectively “Clover”)' — and Brent Osmond (“Osmond”) as follows:
I PRELIMINARY STATEMENT
This action arises from Trinity’s fabrication and delivery of 110 newly-built tank cars to Clover
(the “110 Tank Cars”). From the time of its November 11, 2019 filing, through the Court’s January
18, 2022 Order (the “Summary Judgment Order”)*—Trinity’s claims primarily centered on the parties’
agreements pursuant to which Trinity fabricated and delivered those tank cars to Clover. However,
both the Court’s Summary Judgment Order and testimony recently given by Clover’s CEO, Brent
Osmond (“Osmond”), at deposition necessitate this Second Amended Petition filed subject to
Trinity’s contemporaneously filed Motion for Leave.
' The various written agreements between the parties were entered among Trinity and Clover LLC. However, Trinity
determined Clover LL.C—without notice to Trinity—terminated its existence on June 28, 2019 by conversion from a
‘Texas limited liability company to Clover Inc., a Delaware corporation. In discovery conducted in this litigation, Clover
Inc. acknowledges it is the corporate successor of Clover LLC.
2'The Summary Judgment Order granted Clover summary judgment on Trinity’s breach of contract claims arising under
the parties’ Master Lease Agreement and Rider One as those terms are defined herein. Specifically, with respect to those
agreements, the Court determined the Condition Precedent Provision contained in Rider One precludes Trinity’s
enforcement of the Agreement and Rider One.
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—>page 1
Il. INTRODUCTION
Trinity fabricated and delivered the 110 Tank Cars to Clover pursuant to agreements among
them, and it is undisputed Trinity did not commence fabrication of the 110 Tank Cars until Clover
delivered to Trinity an October 29, 2018 term sheet, which outlined proposed lease terms, pricing,
and specifications for the 110 Tank Cars.
Soon thereafter, Clover approached Trinity about the possibility of acquiring additional tank
cars. Clover’s business model, which utilizes the transport of crude oil by rail to exploit price arbitrages
in the market for West Canadian Select (“WCS”) heavy oil, necessitated Clover’s acquisition of a
steadily increasing number of tank cars to support its operations.
Clover, then a fledgling start-up company with a modest cash position, had insufficient
financial resources to supply the usual letters of credit, deposits, or guarantees that Trinity required
for new-build tank car transactions. Instead, Clover induced Trinity to forego those usual financial
protections and to explore alternative financing structures. The parties’ negotiations contemplated
Clover’s lease of an additional 440 newly-built tank cars from Trinity (the “440 Tank Cars’) On
February 26, 2019, the parties executed a term sheet that outlined proposed lease terms, pricing, and
specifications for the 440 Tank Cars.
Discussions regarding alternative financing arrangements continued. The parties explored
mitigating Trinity concerns regarding Clover’s creditworthiness with proposals centering on two
structures, (1) the creation ofa reserve account securing 6 months’ rent payments for the Trinity tank
cats, and (2) an arbitrage share agreement and operating agreement through which Trinity might
participate in profits generated by Clover’s use of the Trinity tank cars. The parties manifested their
intentions regarding these proposals in an Omnibus Term Sheet executed among them on June 21,
2019 (the “OTS”).
In contemplation of Clover’s order of the additional 440 Tank Cars, the parties finalized
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 2
negotiations regarding the reserve account, arbitrage share and operating agreements outlined in the
OTS. To facilitate the transaction outlined in the OTS, Trinity (1) agreed to forego the requirement
of a letter of credit, deposit, or guarantor for the 110 Tank Cars, (2) entered a July 1, 2019, Master
Lease Agreement and a Rider of the same date for the 110 Tank Cars, and (3) fabricated and delivered
the 110 Tank Cars to Clover in July and August 2019 at Clover’s designated rail yard in Gardendale,
Texas, at which place Clover took their possession.
At some juncture affer Trinity delivered the 110 Tank Cars to Clover, however, Clover (1)
reneged on its payment obligations for the 110 Tank Cars, (2) refused to execute finalized arbitrage
sharing and operating agreements to which it agreed in the OTS, (3) suspended negotiations for its
acquisition of the 440 Tank Cars, and (4) instead subleased 408 tank cars on the secondary market.
At his recent deposition, Osmond confirmed that Clover accepted assignment of the Alberta
Petroleum Marketing Commission’s (“APMC”) lease of 408 tank cars from Valero (the “Valero
Sublease Cars”), which occurred in December 2019. Clover acquited the Valero Sublease Cars at
discounted monthly lease rates below which Trinity could rent the newly-built 110 Tank Cars to
Clover. And Clover put the Valero Sublease Cars to the same uses for which it intended to deploy
the 110 Tank Cars—including transporting crude-by-rail to Motiva’s Port Arthur Refinery and
servicing other crude-by-rail contracts assigned to Clover by the APMC (the “APMC Contracts”).
Clover never communicated to Trinity its intention not to pay for the 110 Tank Cars delivered
it by Trinity. Rather, even in the face of subsequent written assurance from Clover’s chief executive
officer to Trinity on September 10, 2019 that, “[Clover] will work with the original 110 we have based
on the monthly lease rate. . . [five years as agreed[],”’ Clover has not remitted even one payment for
the 110 Tank Cars.
3 A true and correct copy ofa November 27, 2019 news article appearing in The Global and Mail, a Canadian newspaper of
broad circulation — appended as Exhibit 1 — corroborates Clover’s pursuit of the APMC crude-by-rail contracts.
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 3
il. DISCOVERY AND STATEMENT OF RELIEF SOUGHT
1 Plaintiff intends to conduct discovery under Level 3 pursuant to Texas Rule of Civil
Procedure 190.3.
2. Plaintiff seeks monetary relief over $2,000,000. See Tex. R. Civ. P. 47(C).
IV. PARTIES
3 Trinity is a Delaware corporation with its principal place of business at 14221 North
Dallas Parkway, Suite 1100, Dallas, Texas 75254.
4. By June 28, 2019 Certificate of Conversion, Clover LLC—a Texas limited liability with
its principal office at 17171 Park Row, Suite 160, Houston, Texas 77084-4927—became Clover Inc., a
Delaware corporation, with its principal office at 9400 Grogans Mill Road, Suite 225, The Woodlands,
Texas, 77380.* Clover Inc.—the successor entity for all purposes relevant to this action—appeared and
answered herein and may be served though its attorneys of record, Luke J. Gilman of Jackson Walker
LLP, 1401 McKinney, Suite 1900, Houston, Texas 77010.
5 Brent Osmond (“Osmond”), is an individual and a Canadian resident, residing at 29
Artists View Drive, Calgary, Alberta, Canada. Pursuant to Article 2, 3, 5 of the Hague Convention,
Osmond may be served process through the designed Central Authority for the province of Alberta:
Ministry of Justice and Solicitor General, Office of the Sheriff, Civil Enforcement, 2nd Floor, 108th
Street, Building 9942-108 Street, Edmonton, Alberta T5K 2]5, Canada.’ Alternately, pursuant to
Article 10 of the Hague Convention, Osmond may be served directly by postal channels by delivery
of the Amended Petition and Request for Disclosure to its principal office located at Suite 2000, 300
5th Avenue SW, Calgary, Alberta T2P 3C4.6
4 A true and correct copy of Clovet’s L Certificate of Conversion dated June 28, 2019 is appended as Exhibit 2.
5 See Service Abroad of Judicial and Extrajudical Documents Convention done at ‘The Hague November 15, 1965, art. 2-
3, 5, entered into force Feb 10, 1969, 20 U.S.T. 361, T.LA.S. No. 6638.
6 See Water Splash, Inc., v. Menon, __ U.S. __, 137 S.Ct. 1504, 1512, n. 7 (2017)(recognizing that Article 10 of the Hague
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 4
Vv. JURISDICTION AND VENUE
6. Jurisdiction is proper because the amount in controversy, exclusive of interest and
costs, is within the jurisdictional limits of the Court. Trinity seeks monetary relief within the
jurisdictional limits of the court, non-monetary declaratory relief, and all other relief to which it is
entitled.
7
Jurisdiction over Clover Inc. is proper because it entered contracts with a corporation
whose principal place of business is in Texas. The parties negotiated the contracts in Texas; the
contracts ate governed by Texas law; most of the performance contemplated under the contracts
occurred in Texas; this dispute arises directly from such contracts; and Clover has appeared generally
in this action. Moreover, Clover Inc.’s principal place of is also located in Texas.
8 Jurisdiction over Osmond is proper because he made numerous material mis-
representations in negotiations with Texas entities, and thereby committed torts and in whole or part
in Texas sufficient to subject himself not only to personal liability for those torts, but also to personal
jurisdiction in Texas pursuant to the Texas Long Arm Statute and constitutional requirements of due
process. Additionally, Osmond systematically travelled to Texas in furtherance of his misconduct.
For these reasons, the Court has personal jurisdiction over Osmond.
9 Venue is proper in Dallas County, Texas pursuant to the Texas Civil Practice &
Remedies Code § 15.002(a)(1) because all or a substantial part of the event or omissions giving rise to
the claim occurred here and Clover has not challenged venue.
VI. FACTUAL BACKGROUND
10. Clover approached Trinity in mid-2018 seeking tank cars by which it planned to
transport WCS crude by rail for refining in the U.S. Clover’s business model was premised on a price
Convention authorizes direct service by postal channels—unless the member country objects—and holding that “Canada.
. does not object to service by postal channels.”).
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 5
arbitrage between the prevailing sales price for WCS in the Canadian markets and the price it
commanded in U.S. markets. As Osmond confirmed at his recent deposition’—as the time Clover
approached Trinity, it was merely a “shell” Texas limited liability company owned by Osmond and his
wife created to operationalize the WCS opportunity. It had no officers and directors—and was
directed solely by Osmond and his wife until it late completed its conversion to a Delaware
corporation.’
THE PREVAILING TANK CAR MARKET
able At the time Clover approached Trinity—as reflected in contemporaneous Clover
materials drafted and disseminated by Osmond in late 2018 or early 2019 (the “Fundraising
Memo”)'’—the market for tank cars was extremely tight due to a shortage of crude pipeline capacity
in Northern America:
* The rail car market is extremely tight due to current shortage of crude pipeline
capacity in North America
12. The Fundraising Memo, as Clover acknowledges, was intended to solicit up to
$10,000,000 in funds to provide security for railcar leases for railcars:''
* Clover requires up to a $10 million to provide security for railcar leases,
freight deposits and the expansion of its logistics and operations staff;
te Clover sought this capital because, as the Fundraising Memo depicts, Clover’s own
assessment of existing tank car market conditions noted prevailing lessor demands for “5-7 year
? True and correct excerpts of the Oral and Video Deposition of Brent Osmond, Individually, and as the Corporate
Representative of Clover Oil & Gas, Inc. (the “Osmond Deposition”) are appended as Exhibit 4.
8 See Exhibit 4 — (Osmond Depo 28:6-29:3).
° See Exhibit 4 — (Osmond Depo 28:13-31:8).
10 A true and correct Clover’s fundraising document authored by and disseminated by Osmond in late 2018 or early 2019
is appended hereto as Exhibit 3.
"See Exhibit 3, p. 9.
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 6
leases” and “$2M letters of credit” to secure fabrication of new tank cats given the scarcity of existing
available tank cars:'*
* Rail car lessors require five to seven year leases at present due to market
conditions, and a $2 milion letter of credit to build the cars for lease;
14. The Fundraising Memo cited Clover’s need to obtain a minimum of 650 railcars to
facilitate successful operations under its business model.
tS At all times in its negotiations with Trinity, Clover understood—as Osmond concedes—
that any order placed with the Trinity would necessitate fabrication of new tank cars to complete the
Clover order.
16. In addition to examining the availability and cost dynamics of existing tank cars, the
Fundraising Memo captures a number of key representations made by Clover regarding the status of
its efforts to procure crude-by-rail delivery contracts with major U.S. refineries. Clover, through
Osmond, disseminated these representations—both as formatted in the Fundraising Memo drafted
by Osmond—and separately incorporated in emails sent Trinity during the course of its negotiations
with Clover regarding the 110 Tank Cars.
17. Most notable among these representations is Clover’s representation that it has
secured a buy side arrangement to supply four unit trains of [WCS]to a large Port Arthur Refinery,
the largest in the United States:'*
* Clover has secured a buy side arrangement to supply four unit trains of Canadian
heavy crude per month (approximately 220K bbls) to a large Port Arthur
Refinery, the largest refinery in the United States;
18. At deposition, Osmond admitted this representation was a direct reference to Motiva’s
'2 See Exhibit 3, p. 15.
13 See Exhibit 3, p. 7.
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 7
Port Arthur Refinery.'*
tO As discussed below, this representation parallels those made by Clover as inducements
for Trinity to forego its customary lessee credit requirement protections—which included the
requirements of letters of credit, deposits and guarantors.
20. Despite these representations, as Osmond recently acknowledged at deposition, the
Fundraising Memo’s use of the words “has secured” did not mean a tangible agreement of any kind —
not even a term sheet.'°
216 Moreover, asked if Clover ever clarified with Trinity that it had no agreement of any
kind with Motiva—despite perhaps calculated misimpressions intended by the Fundraising Memo’s
representation that Clover “has secured a buy side arrangement with. . . the largest refinery in the
United States”—Osmond’s response demonstrated a startling absence of any agreement between
Clover and Motiva:
2 And sitting here today under oath, you have no recollection of an email sent by you to Trinity advising
that Clover had failed in procuring the Motiva contract?
* * *
To say that we failed in procuring, yeah. I don't Rnow that I ever sent an email saying ~ but I may
have, But I can't recall sitting here today.
Well, let’s reframe it. Stating that Clover did not obtain the Motiva contract. Did you ever send an
email of that nature?
* * *
A Sir, I would never enter into a contract to deliver crude without cars to put it in. And so I would
never have contracted with Motiva. It would have been an ongoing negotiation to be —
MR. GREER: Objection; nonresponsive.
My question is very simple. And the question is: Did you ever notify Trinity in writing, whether by
email or text, that Clover did not procure the Motiva contract?
* * *
14 See Exhibit 4 — (Osmond Depo 90:19-91:1).
15 See Exhibit 4 — (Osmond Depo 91:22-92:7).
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 8
There was never any one contract. There was never any one opportunity. It was always a constant
discussion with the refiner. If these terms can be worked out, are you interested? And so the discussions
with Motiva carried on, I mean, you know, we would still talk to them today if we were moving crude.
So it's not like negotiations ever broke off. Motiva never told us don’t call."
22. The Fundraising Memo made similar misrepresentations regarding another “buy side
arrangement” that it represents Clover “has secured.”"”
* Clover has secured a buy side arrangement to supply up to two unit trains of
Canadian heavy crude per month (approximately 110K bbls} to a refinery in
Washington State;
23. But as with the Fundraising Memo’s representations regarding the Motiva refinery, at
deposition Osmond conceded Clover, in fact, had no agreement of any kind with the Washington
State refinery—not even a term sheet:
2 Did Clover enter an agreement with this referenced refinery?
* * *
Define “agreement.” Do we have a written document? No. Did we have, you know, terms and a
finalized contract? No.
But whatever you had, you found it a sufficient basis to represent to people that you were trying to
solicit funds from that -- that the arrangement had been secured?
* * *
Secure enough. Secure enough to be able to move forward with raising money to -- to do it, yes.
In this particular example was there even a term sheet?
* * *
A I don’t believe so, no."*
24. Unbeknownst to Trinity, at the time Osmond made the above representations, Clover
'6 See Exhibit 4 — (Osmond Depo 99:17 to 100:25).
17 See Exhibit 3, p. 8.
18 See Exhibit 4 — (Osmond Depo 110:18 to 111:12).
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 9
remained a Texas limited liability company owned solely by him and his wife—had no company
assets—and operated subject to their sole direction and control."
THE OCTOBER 2018 TERM SHEET
25. Against the backdrop of the existing tank car market conditions noted in the
Fundraising Memo, the parties began their negotiations for Clover’s lease of new tank cars to be built
pursuant to Clover’s specifications.
20. On October 29, 2018, Clover and Trinity executed a Pricing and Term of Lease term
sheet (the “October 2018 Term Sheet”) in which Clover LLC agreed to lease the 110 Tank Cars—
described as 110 “[njewly-constructed 25,498 gallon, coiled and insulated Class DOT 117J100W tank
cars, as described in the attached Trinity Rail Specification Number T255CI-27088. . . [d]elivery
commencing June 2019 (subject to availability)” at the price of “$1,130 per month for a 5 year term. 9920
27. Clover selected the Class DOT 17/117J100W specification for the 110 Tank Cars as
particularly well-suited for the purpose of shipping WCS.
28. Because they were new cars, the October 2018 Term Sheet included a provision for
adjustment of lease pricing based on raw material costs.
29. At all times, Trinity required Clover’s delivery of an executed copy of the October
2018 Term Sheet as a prerequisite to fabrication of the 110 Tank Cars requested by Clover.
THE REQUEST FOR ADDITIONAL CARS
30. Shortly after placing the order for the 110 Tank Cars—as evidenced by the October
2018 Term Sheet, Osmond admits Clover approached Trinity about leasing an additional 400 tank
cars." And, as Osmond acknowledges, Trinity solicited a $1.6M deposit to place an order for the
© See Exhibit 4 — (Osmond Depo 28:13-31:8).
2 A true and correct copy of the October 2018 Term Sheet is appended as Exhibit 5. The above quoted language is set
forth on page 1.
21 Exhibit 4 — (Osmond Depo. 118:2-5).
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 10
additional 440 tank cars.”
ote Osmond advised Trinity by February 14, 2019 email (“February 14th Email”) of
Clover’s inability to provide the requested $1.62M deposit for the 400 tank cars, and unwillingness to
provide a Guarantor if a deposit is also required by Trinity.”
2s In the same February 14th Email-as Osmond admits—Clover offered Trinity
participation in Clover’s margin if Trinity was willing to forgo the $2M LOC or guarantor on the
fitst 100 cats and waive the need fora guarantor or letter of credit on any additional cars.™
Clover is very much open and willing to discuss a larger partnership with Trinity. Howaver, for any partnership to work, both partners have to benefit.
Regarding investment in Clover, there is more than one way to contribute.
hundred cars, and waive the need for a guarantor or letter of crediton any additional cars, we would explore 2 margin share based on the proposed terms in
the contract. The waiving of those credit terms would be viewed as commitment to sharing in the risk in Clover, and would be rewarded ith sharing in the
upside.
33. In response to the February 14th Email, Trinity indicated willingness to waive the
$2,000,000 Letter of Credit (the “$2M LOC”) for the 110 Tank Cars “currently on order”—subject
to Clover’s provision of a credit approved Guarantor for a defined term—/f Clover agreed to the
below ARB Sharing terms for those tank cars:
© §.265/bb! if the margin (after admin fee) is >$2.50/bbI
© §.50/bb! if the margin (AAF) is > $5.00/bbI
© $1.00/bbI if the margin (AAF) is greater than $10.00/bbt
34. Trinity separately indicated willingness to waive the $1.62M deposit for the 400
additional tank cars /fClover provided a credit approved Guarantor for a defined term and agreed the
same ARB Sharing terms above would apply to those additional tank cars.”
2 xhibit 4 — (Osmond Depo. 118:6-11).
true and correct copy of the February 14 Email is appended as Exhibit 6; See alo Exhibit 4 — (Osmond Depo.
118:22-119:15).
24 Exhibit 4 — (Osmond Depo. 118:15-122:19).
25 See Exhibit 6; see a/so Exhibit 4 — (Osmond Depo. 127:2-129:11).
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 11
THE FEBRUARY 2019 TERM SHEET
35 Trinity and Clover thereafter negotitated a second proposed Pricing and Term of
Lease Agreement for the additional 400 tank cars—with Trinity’s ARB share participation a deciding
inducement for waiver of its customary financial protections: the requested LOC and deposit.
36. During those negotiations Clover, through Osmond, represented to Trinity—to
extract Trinity’s further agreement to forego the continuing Guarantor requirement for both tank car
orders—tepresented it was “finalizing two year supply deals with Shell’s St James refinery, Hunt’s
Tuscaloosa refinery, and Motiva’s Beaumont refinery.
37 Clover made these representations in Osmond’s February 15, 2019 email (“February
15th Email”)—an excerpt of which is copied below: 26
Ie Trinity is wil sao forego the $2.50/bbI
. $.100/bbI if the margin (AAF} is > $5.00/bbI
. $1.75/bbI if the margin *(AAF) is> $1 00/bbt
*(After Admin Fee)
42. As with October 2018 Term Sheet, by executing the February 2019 Term Sheet,
Clover placed an order for newly-constructed tank cars of Clover’s specifications for delivery on a
specified timeline: “[nJewly-constructed 25,498 gallon, coiled and insulated Class DOT 117J100W
tank cars, as described in the attached Trinity Rail Specification Number T255CI-27088. . . [delivery
commencing in 100 cars in Q4 2019 and 300 cars in Q1 (Production space subject to availability).””
THE OMNIBUS TERM SHEET
43. Thereafter in June 2019, the parties negotiated the OTS, which contemplated the
29 See Exhibit 4 — (Osmond Depo. 91:21-92:7; 96:10-20).
30 A true and correct copy of the February 2019 Term Sheet is appended as Exhibit 8.
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 13
parties’ entry of an Operating Agreement and Arbitrage Share Agreement incident to which, “[g]ross
revenue from [Clover’s] arbitrage business using [‘Trinity’s”] railcars will be placed in a Collection
Account ... to be allocated to pay [Clover’s] expenses, including rail car lease payments and pay
[Irinity an] incremental fee[-]dependent Arb Share Rate.”*! The OTS expounded upon the “ARB
share” profit-sharing plan referenced in the February 2019 Term Sheet.
44. The OTS incorporated the below lease terms:
Lease Rider 1
Lease Type: Full Service
Lease Rent: $1,130 per car per month base rent
$80 increase for add'l mileage, up to 60,000 miles per year
$1,210 per car per month total rent; subject to escalation
Car Quantity: 110
Lease Term: 60 months
LT
Lease Rider 2
Lease Type: Full Service
Lease Rent: $1,350 per car per month; subject to escalation
Car Quantity: 440
Lease Term: 220 cars, 84 months
220 cars, 96 months
—_—_——— ee =. _
45. At all times, however, the OTS expressly clarified the “[rJental payments and other
[Clover] obligations under the lease are firm commitments not subject to [the] success of [Clover’s]
arbitrage business. 9932
46. And Osmond admits during these OTS negotiations that Clover was notified of
Trinity’s proposed schedule to deliver “the First 110 cars = 55 in July and 55 cars in August”—a
schedule of which he was aware.
47. Osmond further acknowledges that—at the time he executed the OTS—Clover knew
the 110 Tank Cars were coming off the production line Trinity’s tank car facility in Monclova, Mexico
(“Monclova Facility’).
MA true and correct copy of the Omnibus Term Sheet is appended as Exhibit 9,
°2 See Exhibit 9, p.1.
TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 14
48. Osmond admits that on July 23, 2019—one month after the OTS’s execution—he
along with Clover’s executive team traveled to Trinity’s Monclova Facility on Trinity’s corporate jet. 33
Osmond acknowledged the purpose of that meeting was ‘to witness cars that Clover had ordeted
under construction for delivery to Clover. 2934 And Osmond admitted he witnessed cars coming off the
production line, and also saw previously completed cars, that he understood were Clover’ 76.35
Preview
FILED 2/17/2022 2:31 PM FELICIA PITRE DISTRICT CLERK DALLAS CO., TEXAS Treva Parker-Ayodele DEPUTY CAUSE NO. DC-19-18070 TRINITY INDUSTRIES LEASING IN THE DISTRICT COURT COMPANY, PLAINTIFF, Vv. DALLAS COUNTY, TEXAS CLOVER OIL & GAS, INC. f/k/a CLOVER OIL & GAS, LLC, DEFENDANT. § 192ND JUDICIAL DISTRICT MOTION FOR LEAVE TO ADD DEFENDANT AND AMEND PETITION Plaintiff Trinity Industries Leasing Company (“Trinity”) seeks leave of the Coutt to file a Second Amended Petition’ in this action against Defendant Clover Oil & Gas, Inc. (“Clover Inc.”) £/k/a Clover Oil & Gas, LLC (“Clover LLC”) — (collectively “Clover”) — and its former CEO, Brett Osmond (“Osmond”). Trinity acknowledges and anticipates that such amendment and inclusion of an additional party will necessitate resetting the trial of this action. The amendment and addition are sought not for delay (which does not assist Trinity because it seeks recovery of significant damages) but so justice can be done. I SUMMARY OF MOTION This case arises from the negotiations between Trinity and Clover. Trinity and Clover negotiated various contracts in which Trinity agreed to manufacture and lease tank cars for Clover’s use in transporting crude oil from Canada to Texas refineries. Information obtained during former Clover CEO Osmond’s Jong-sought deposition of December 6, 2021’—for which Trinity received | Trinity appends the proposed Second Amended Petition as Tab 1. Upon entry of an order granting this Motion, Trinity requests the Court accept the Second Amended Petition as filed for all purposes. ? Trinity initially requested dates for the deposition of Osmond, and a Clover corporate representative on designated topics March 22, 2021, which request was ignored, resulting in Trinity unilaterally noticing those depositions on May 11-12, 2021. By Rule 11 Agreement dated April 16, 2021, the parties agreed to reschedule the depositions. On May 7, 2021, Clover’s counsel advised Trinity he intended withdrawal from Clover’s representation because Clover sought dissolution under Delaware law. Upon said counsel not filing a motion for withdrawal, Trinity again requested deposition dates on June 7, PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE ‘(0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 1 the transcript about six weeks later—demonstrate both Clover’s intent not to comply with any of the contracts it executed with Trinity and Osmond’s own misrepresentations regarding the Clover business model, upon which Trinity depended to its detriment. Ultimately, the Osmond deposition demonstrated he intended for Trinity and Clover’s other business partners to rely on misleading and inaccurate factual representations. Osmond’s goal was clear: enable Clover to avail itself of business opportunities that would not have existed but for its fraud. To fully set forth the claims at issue, Trinity requests the Court grant it leave to amend its petition. I. FACTUAL BACKGROUND The key facts are not subject to dispute: (1) Clover ordered and leased 110 newly built railroad tank cars from Trinity, and Trinity fabricated the 110 newly built railroad tank cars to Clover’s specifications (the “110 Tank Cars”); (2) Trinity delivered the 110 Tank Cars to Clover, at the location designated by Clover, and Clover accepted delivery of the 110 Tank Cars; (3) Clover has not paid Trinity for the 110 Tank Cars. By its January 18, 2022 Order (the “ Order” ), the Court granted Clover’s motion for summary judgment regarding the legal meaning of the “Condition Precedent Provision” of the first rider (“Rider One”) to the parties’ final agreement, the Master Lease—as applicable to the 110 Tank Cars. Nonetheless, prior to entering Rider One, Clover agreed in October 2018 to lease the 110 Tank Cars from Trinity and Trinity relied upon that agreement to manufacture the rail cars. Clover 2021. The parties thereafter filed cross-motions for summary judgment on a discrete point of law and agreed to table those depositions until they obtained a ruling on their competing summary judgment motions. The parties understood their motions were set for submission to the Court on October 15, 2021. But the parties were mistaken. The parties thereafter obtained a January 13, 2022 heating date on the competing motions which resulted in the Court’s January 18, 2022 Order. As noted, running out of time to conduct the depositions during the discovery petiod, the depositions proceeded on the above-stated date. In support of these averments, pursuant to Texas Rule of Evidence 201, Trinity incorporates the allegations and evidence appended to its prior July 15, 2021 Motion to Strike the Deposition of Brent Osmond. > A true and correct copy of the parties’ Pricing and Term of Lease Agreement executed October 29, 2018 is appended as Tab 2. Clover LLC agreed to lease the 110 Tank Cars — fabricated to Clover’s specifications — at the price of “$1,130 per month for a 5 year term.” See id. PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE ‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 2 representatives literally watched the cars be built, directed Trinity to deliver the cars to its location, negotiated modifications to the railcars, and stood by as Trinity made the modifications for Clover. In February 2019, based upon Clover’s direct representations regarding its extant business commitments, the parties entered a second term sheet.* The February 2019 Term Sheet contemplated the parties’ further entry ofa profit-sharing plan — or “ARB share” — because Clover lacked sufficient security or credit facilities to secure Trinity’s fabrication of the additional 440 Tank Cars Clover had committed to lease in the February 2019 Term Sheet. Relying upon Clover’s representations as to demand for its services, Trinity and its affiliates waived a deposit and guarantee Trinity otherwise would have required from Clover to secure fabrication and delivery of the 440 Tank Cars and waived the original $2,000,000 Letter of Credit that Clover had committed to secure the existing order of the 110 Tank Cars. No patty disputes that Trinity fabricated the 110 Tank Cars, and Clover cannot colorably dispute that Trinity delivered them to Clover, nor that Clover remitted no lease payments to Trinity for its significant efforts and expense. The key information revealed in the Osmond deposition is the extent of Osmond’s mendacity. In “late 2018,” Osmond revealed he distributed the “Clover Oil & Gas” fundraising memorandum (“Eundraising Memo”) and made related representations to various industry companies, including Trinity. That memorandum and Osmond’s related representations included specific false and materially misleading representations regarding Clover’s business commitments, including that Clover had entered into and secured certain business arrangements when, in fact, it had not. Osmond and Clover used those materially false business commitments as a basis to induce Trinity to enter the February 2019 Term Sheet, forego the letter of credit it previously required, and enter a speculative agreement with Clover that the latter had no intent of performing. + A true and correct copy of the parties’ Pricing and Terms of Lease Agreement executed February 26, 2019 is appended as Tab 3. PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE ‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 3 III. STANDARD Texas Rule of Civil Procedure 63 states that parties may amend pleadings “after such time as may be ordered by the judge under Rule 166. . . only after leave of the judge is obtained, which leave shall be granted by the judge unless there is a showing that such filing will operate as a surprise to the opposite party.” The Court has no discretion to refuse an amendment unless the opposing party presents evidence of surprise or prejudice; or the amendment asserts a new cause of action or defense that would render the amendment prejudicial on its face and the opposing party objects to the amendment. Halmos v. Bombardier Aerospace Corp., 314 8.W.3d 606, 622 (Tex. App. - Dallas 2010, no pet.). The Fifth Court of Appeals explained that an amendment is “prejudicial on its face” if “(1) it asserts a new substantive matter that reshapes the nature of the trial itself; (2) the opposing party could not have anticipated the new matter in light of the development of the case up to the time the amendment was requested; and (3) the amendment would detrimentally affect the opposing party's presentation of its case.” Id. at 623. IV. ARGUMENT Trinity’s motion for leave to amend its claims against Clover cannot cause surprise or prejudice. It also does not meet the definition of an amendment “prejudicial on its face.” None of the three criteria apply. The proposed amended petition would add a promissory estoppel cause of action against Clover and both fraud and fraudulent inducement causes of action against Osmond. The Court should grant the amended petition and allow it to bring Osmond into this lawsuit as a party. 1 The Court Should Allow the Amended Claims Against Clover. Clover will suffer no surprise or prejudice by Trinity bringing a promissory estoppel cause of action. By the January 18, 2022 Order, the Court held that Trinity cannot recover on the OTS or PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE ‘(0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 4 Rider One due to its interpretation of the condition precedent provision at issue in the parties’ cross- motions for summary judgment.’ But none of the parties dispute (or reasonably can dispute) that they entered the October 2018 and February 2019 agreements, that Trinity relied upon the promises in those agreements, that Trinity’s reliance was foreseeable, and that such reliance proved detrimental because Clover never paid Trinity. Aubrey v. Workman, 384 SW.2d 389, 393 (Tex. Civ. App.—Fort Worth 1964, writ refd n.r.e.) (discussing elements of promissory estoppel — reliance upon promises, foreseeability of reliance, and damages to the reliant); see Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636 (Tex. 1997) (discussing defensive nature of promissory estoppel such that the theory blocks promisor from denying enforceability of its promise). Thus, the elements of promissory estoppel have been at issue throughout this action. Adding the promissory estoppel cause of action to Trinity’s petition is not prejudicial on its face because it does not add a new substantive matter that changes the nature of the trial; the promissory estoppel proof overlaps the breach of contract proof Trinity had developed in discovery, and the amendment therefore will not detrimentally affect Clover’s presentation of its case. To the extent Trinity cannot recover on its extant contract claims or its unjust enrichment cause of action, the promissory estoppel claim will fill in any possible gaps. The Court should allow the amendment of claims against Clover. 2, The Court Should Permit Trinity to add Osmond as a Defendant. In his deposition, Osmond admitted that Clover misrepresented its business contacts. Osmond wrote the Clover Fundraising Memo, which is Exhibit 4 to the Osmond deposition. On page 7, the Clover Fundraising Memo states “Clover Aas secured a buy-side arrangement to supply four unit-trains of Canadian heavy crude pet month .. . to a large Port Arthur refinery” (emphasis added). Osmond made related representations in further communications circulated among the parties. But 5 Trinity requests the Court take judicial notice of the Order pursuant to Texas Rule of Evidence 201. PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE ‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 5 strikingly, at his deposition, Osmond admitted that the commercial “arrangement” Clover touted in its Fundraising Memo — in which Clover claimed it had secured four monthly 55-car transports of crude from Canada to Port Arthur, Texas — was neither an arrangement nor even a commitment.’ In simpler terms, Osmond admitted in his deposition that the arrangement — a synonym for deal, pact, or agreement — that Clover’s Fundraising Memo represented it had in hand had not even been committed to by Clover and the Port Arthur refinery in a term sheet. As patt of its negotiations with prospective business partners, Osmond created and disseminated the Fundraising Memo. And Osmond communicated related specific false representations to Trinity personnel in both conversations and emails regarding the scope and status of Clover’s agreement with the referenced Port Arthur facility to entice Trinity to waive its letter of credit requirement. Relying upon Osmond’s representations regarding the extent of Clover’s business deals and its anticipated workflow, Trinity agreed to waive the letter of credit requirement. That agreement cost Trinity no less than the letter of credit amount it had previously required, $2,000,000. A corporation’s employee is liable to third parties for tortious acts that s/he participates in during the course of employment. Leyendecker ¢ Assocs., Inc. v. Wecher, 683 S.W.2d 369, 375 (Tex.1984); Walkerv. Anderson, 232 SW 3d 899, 918 (Tex. App. — Dallas 2007, no pet.). Osmond personally created and directed the fraudulent representations by Clover to Trinity. The extent of that fraud did not become clear until his deposition. Osmond has been intimately involved in this action as Clover’s CEO, as its primary witness, and as its custodian of records who responded to all discovery (see Osmond Depo. at 98:23-99:6). The theories Trinity has developed and pursued against Clover are substantially similar to the claims it would pursue against Osmond and therefore Trinity’s proposed amendment does not add a new & See Excerpts of the Osmond Deposition appended as Tab 4 at 90:19-92:5; 91:22-92:7; 96:10-20. PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE ‘(0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 6 substantive matter that changes the nature of the trial. Osmond’s intimate involvement in all aspects of both Clover’s dealings with Trinity that give rise to this case and Clover’s defense demonstrates that the proof against Osmond will overlap the proof Trinity has developed in discovery against Clover and will not surprise Osmond nor prejudice his preparation. Finally, an amendment bringing Osmond before the Court as a responsible defendant will not detrimentally affect Clover’s presentation of its case because the two defendants are not merely aligned, but their respective defenses rely upon the same information. Trinity understands that adding an additional party to the lawsuit cannot reasonably be accomplished within the time set for trial of this matter. Thus, Trinity would agree to a short continuance to allow Osmond to be brought fully before the Court. PRAYER WHEREFORE, Plaintiff Trinity Industries Leasing Company respectfully requests this Court grant it leave to amend its petition and bring Brett Osmond as a party to this lawsuit. Respectfully submitted, RANDALL | GREER PLLC By: b Aun mes B. Greer Texas Bar No. 24014739 5910 N. Central Expressway, Ste. 925 Dallas, Texas 75206 Telephone: (214) 628-9966 Facsimile: (214) 628-9967 igreer@rglaw.com ATTORNEY FOR PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE ‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 7 CERTIFICATE OF CONFERENCE I certify that I personally spoke with Clover’s counsel, Luke Gilman, regarding the relief sought by this Motion on February 14, 2022, and that Clover is opposed to same. b Au, James B. Greer CERTIFICATE OF SERVICE Thereby certify that a true and correct copy of the above and foregoing document was served on all counsel of record via electronic service pursuant to Tex. R. Civ. P. 21(a) on this the 17th day of February, 2022. A Au. mes B, Greer PLAINTIFF TRINITY INDUSTRIES LEASING COMPANY’S RESPONSE ‘0 CLOVER’S MOTION FOR PARTIAL SUMMARY JUDGMENT—page 8 Exhibit 1 CAUSE NO. DC-19-18070 TRINITY INDUSTRIES LEASING IN THE DISTRICT COURT COMPANY, PLAINTIFF, Vv. DALLAS COUNTY, TEXAS CLOVER OIL & GAS, INC. f/k/a CLOVER OIL & GAS, LLC, AND BRENT OSMOND, DEFENDANTS. 192ND JUDICIAL DISTRICT SECOND AMENDED PETITION Plaintiff Trinity Industries Leasing Company (“Trinity”) files this Second Amended Petition complaining of Defendants Clover Oil & Gas, Inc. (“Clover Inc.”) f/k/a Clover Oil & Gas, LLC (“Clover LLC”) — (collectively “Clover”)' — and Brent Osmond (“Osmond”) as follows: I PRELIMINARY STATEMENT This action arises from Trinity’s fabrication and delivery of 110 newly-built tank cars to Clover (the “110 Tank Cars”). From the time of its November 11, 2019 filing, through the Court’s January 18, 2022 Order (the “Summary Judgment Order”)*—Trinity’s claims primarily centered on the parties’ agreements pursuant to which Trinity fabricated and delivered those tank cars to Clover. However, both the Court’s Summary Judgment Order and testimony recently given by Clover’s CEO, Brent Osmond (“Osmond”), at deposition necessitate this Second Amended Petition filed subject to Trinity’s contemporaneously filed Motion for Leave. ' The various written agreements between the parties were entered among Trinity and Clover LLC. However, Trinity determined Clover LL.C—without notice to Trinity—terminated its existence on June 28, 2019 by conversion from a ‘Texas limited liability company to Clover Inc., a Delaware corporation. In discovery conducted in this litigation, Clover Inc. acknowledges it is the corporate successor of Clover LLC. 2'The Summary Judgment Order granted Clover summary judgment on Trinity’s breach of contract claims arising under the parties’ Master Lease Agreement and Rider One as those terms are defined herein. Specifically, with respect to those agreements, the Court determined the Condition Precedent Provision contained in Rider One precludes Trinity’s enforcement of the Agreement and Rider One. TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—>page 1 Il. INTRODUCTION Trinity fabricated and delivered the 110 Tank Cars to Clover pursuant to agreements among them, and it is undisputed Trinity did not commence fabrication of the 110 Tank Cars until Clover delivered to Trinity an October 29, 2018 term sheet, which outlined proposed lease terms, pricing, and specifications for the 110 Tank Cars. Soon thereafter, Clover approached Trinity about the possibility of acquiring additional tank cars. Clover’s business model, which utilizes the transport of crude oil by rail to exploit price arbitrages in the market for West Canadian Select (“WCS”) heavy oil, necessitated Clover’s acquisition of a steadily increasing number of tank cars to support its operations. Clover, then a fledgling start-up company with a modest cash position, had insufficient financial resources to supply the usual letters of credit, deposits, or guarantees that Trinity required for new-build tank car transactions. Instead, Clover induced Trinity to forego those usual financial protections and to explore alternative financing structures. The parties’ negotiations contemplated Clover’s lease of an additional 440 newly-built tank cars from Trinity (the “440 Tank Cars’) On February 26, 2019, the parties executed a term sheet that outlined proposed lease terms, pricing, and specifications for the 440 Tank Cars. Discussions regarding alternative financing arrangements continued. The parties explored mitigating Trinity concerns regarding Clover’s creditworthiness with proposals centering on two structures, (1) the creation ofa reserve account securing 6 months’ rent payments for the Trinity tank cats, and (2) an arbitrage share agreement and operating agreement through which Trinity might participate in profits generated by Clover’s use of the Trinity tank cars. The parties manifested their intentions regarding these proposals in an Omnibus Term Sheet executed among them on June 21, 2019 (the “OTS”). In contemplation of Clover’s order of the additional 440 Tank Cars, the parties finalized TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 2 negotiations regarding the reserve account, arbitrage share and operating agreements outlined in the OTS. To facilitate the transaction outlined in the OTS, Trinity (1) agreed to forego the requirement of a letter of credit, deposit, or guarantor for the 110 Tank Cars, (2) entered a July 1, 2019, Master Lease Agreement and a Rider of the same date for the 110 Tank Cars, and (3) fabricated and delivered the 110 Tank Cars to Clover in July and August 2019 at Clover’s designated rail yard in Gardendale, Texas, at which place Clover took their possession. At some juncture affer Trinity delivered the 110 Tank Cars to Clover, however, Clover (1) reneged on its payment obligations for the 110 Tank Cars, (2) refused to execute finalized arbitrage sharing and operating agreements to which it agreed in the OTS, (3) suspended negotiations for its acquisition of the 440 Tank Cars, and (4) instead subleased 408 tank cars on the secondary market. At his recent deposition, Osmond confirmed that Clover accepted assignment of the Alberta Petroleum Marketing Commission’s (“APMC”) lease of 408 tank cars from Valero (the “Valero Sublease Cars”), which occurred in December 2019. Clover acquited the Valero Sublease Cars at discounted monthly lease rates below which Trinity could rent the newly-built 110 Tank Cars to Clover. And Clover put the Valero Sublease Cars to the same uses for which it intended to deploy the 110 Tank Cars—including transporting crude-by-rail to Motiva’s Port Arthur Refinery and servicing other crude-by-rail contracts assigned to Clover by the APMC (the “APMC Contracts”). Clover never communicated to Trinity its intention not to pay for the 110 Tank Cars delivered it by Trinity. Rather, even in the face of subsequent written assurance from Clover’s chief executive officer to Trinity on September 10, 2019 that, “[Clover] will work with the original 110 we have based on the monthly lease rate. . . [five years as agreed[],”’ Clover has not remitted even one payment for the 110 Tank Cars. 3 A true and correct copy ofa November 27, 2019 news article appearing in The Global and Mail, a Canadian newspaper of broad circulation — appended as Exhibit 1 — corroborates Clover’s pursuit of the APMC crude-by-rail contracts. TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 3 il. DISCOVERY AND STATEMENT OF RELIEF SOUGHT 1 Plaintiff intends to conduct discovery under Level 3 pursuant to Texas Rule of Civil Procedure 190.3. 2. Plaintiff seeks monetary relief over $2,000,000. See Tex. R. Civ. P. 47(C). IV. PARTIES 3 Trinity is a Delaware corporation with its principal place of business at 14221 North Dallas Parkway, Suite 1100, Dallas, Texas 75254. 4. By June 28, 2019 Certificate of Conversion, Clover LLC—a Texas limited liability with its principal office at 17171 Park Row, Suite 160, Houston, Texas 77084-4927—became Clover Inc., a Delaware corporation, with its principal office at 9400 Grogans Mill Road, Suite 225, The Woodlands, Texas, 77380.* Clover Inc.—the successor entity for all purposes relevant to this action—appeared and answered herein and may be served though its attorneys of record, Luke J. Gilman of Jackson Walker LLP, 1401 McKinney, Suite 1900, Houston, Texas 77010. 5 Brent Osmond (“Osmond”), is an individual and a Canadian resident, residing at 29 Artists View Drive, Calgary, Alberta, Canada. Pursuant to Article 2, 3, 5 of the Hague Convention, Osmond may be served process through the designed Central Authority for the province of Alberta: Ministry of Justice and Solicitor General, Office of the Sheriff, Civil Enforcement, 2nd Floor, 108th Street, Building 9942-108 Street, Edmonton, Alberta T5K 2]5, Canada.’ Alternately, pursuant to Article 10 of the Hague Convention, Osmond may be served directly by postal channels by delivery of the Amended Petition and Request for Disclosure to its principal office located at Suite 2000, 300 5th Avenue SW, Calgary, Alberta T2P 3C4.6 4 A true and correct copy of Clovet’s L Certificate of Conversion dated June 28, 2019 is appended as Exhibit 2. 5 See Service Abroad of Judicial and Extrajudical Documents Convention done at ‘The Hague November 15, 1965, art. 2- 3, 5, entered into force Feb 10, 1969, 20 U.S.T. 361, T.LA.S. No. 6638. 6 See Water Splash, Inc., v. Menon, __ U.S. __, 137 S.Ct. 1504, 1512, n. 7 (2017)(recognizing that Article 10 of the Hague TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 4 Vv. JURISDICTION AND VENUE 6. Jurisdiction is proper because the amount in controversy, exclusive of interest and costs, is within the jurisdictional limits of the Court. Trinity seeks monetary relief within the jurisdictional limits of the court, non-monetary declaratory relief, and all other relief to which it is entitled. 7 Jurisdiction over Clover Inc. is proper because it entered contracts with a corporation whose principal place of business is in Texas. The parties negotiated the contracts in Texas; the contracts ate governed by Texas law; most of the performance contemplated under the contracts occurred in Texas; this dispute arises directly from such contracts; and Clover has appeared generally in this action. Moreover, Clover Inc.’s principal place of is also located in Texas. 8 Jurisdiction over Osmond is proper because he made numerous material mis- representations in negotiations with Texas entities, and thereby committed torts and in whole or part in Texas sufficient to subject himself not only to personal liability for those torts, but also to personal jurisdiction in Texas pursuant to the Texas Long Arm Statute and constitutional requirements of due process. Additionally, Osmond systematically travelled to Texas in furtherance of his misconduct. For these reasons, the Court has personal jurisdiction over Osmond. 9 Venue is proper in Dallas County, Texas pursuant to the Texas Civil Practice & Remedies Code § 15.002(a)(1) because all or a substantial part of the event or omissions giving rise to the claim occurred here and Clover has not challenged venue. VI. FACTUAL BACKGROUND 10. Clover approached Trinity in mid-2018 seeking tank cars by which it planned to transport WCS crude by rail for refining in the U.S. Clover’s business model was premised on a price Convention authorizes direct service by postal channels—unless the member country objects—and holding that “Canada. . does not object to service by postal channels.”). TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 5 arbitrage between the prevailing sales price for WCS in the Canadian markets and the price it commanded in U.S. markets. As Osmond confirmed at his recent deposition’—as the time Clover approached Trinity, it was merely a “shell” Texas limited liability company owned by Osmond and his wife created to operationalize the WCS opportunity. It had no officers and directors—and was directed solely by Osmond and his wife until it late completed its conversion to a Delaware corporation.’ THE PREVAILING TANK CAR MARKET able At the time Clover approached Trinity—as reflected in contemporaneous Clover materials drafted and disseminated by Osmond in late 2018 or early 2019 (the “Fundraising Memo”)'’—the market for tank cars was extremely tight due to a shortage of crude pipeline capacity in Northern America: * The rail car market is extremely tight due to current shortage of crude pipeline capacity in North America 12. The Fundraising Memo, as Clover acknowledges, was intended to solicit up to $10,000,000 in funds to provide security for railcar leases for railcars:'' * Clover requires up to a $10 million to provide security for railcar leases, freight deposits and the expansion of its logistics and operations staff; te Clover sought this capital because, as the Fundraising Memo depicts, Clover’s own assessment of existing tank car market conditions noted prevailing lessor demands for “5-7 year ? True and correct excerpts of the Oral and Video Deposition of Brent Osmond, Individually, and as the Corporate Representative of Clover Oil & Gas, Inc. (the “Osmond Deposition”) are appended as Exhibit 4. 8 See Exhibit 4 — (Osmond Depo 28:6-29:3). ° See Exhibit 4 — (Osmond Depo 28:13-31:8). 10 A true and correct Clover’s fundraising document authored by and disseminated by Osmond in late 2018 or early 2019 is appended hereto as Exhibit 3. "See Exhibit 3, p. 9. TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 6 leases” and “$2M letters of credit” to secure fabrication of new tank cats given the scarcity of existing available tank cars:'* * Rail car lessors require five to seven year leases at present due to market conditions, and a $2 milion letter of credit to build the cars for lease; 14. The Fundraising Memo cited Clover’s need to obtain a minimum of 650 railcars to facilitate successful operations under its business model. tS At all times in its negotiations with Trinity, Clover understood—as Osmond concedes— that any order placed with the Trinity would necessitate fabrication of new tank cars to complete the Clover order. 16. In addition to examining the availability and cost dynamics of existing tank cars, the Fundraising Memo captures a number of key representations made by Clover regarding the status of its efforts to procure crude-by-rail delivery contracts with major U.S. refineries. Clover, through Osmond, disseminated these representations—both as formatted in the Fundraising Memo drafted by Osmond—and separately incorporated in emails sent Trinity during the course of its negotiations with Clover regarding the 110 Tank Cars. 17. Most notable among these representations is Clover’s representation that it has secured a buy side arrangement to supply four unit trains of [WCS]to a large Port Arthur Refinery, the largest in the United States:'* * Clover has secured a buy side arrangement to supply four unit trains of Canadian heavy crude per month (approximately 220K bbls) to a large Port Arthur Refinery, the largest refinery in the United States; 18. At deposition, Osmond admitted this representation was a direct reference to Motiva’s '2 See Exhibit 3, p. 15. 13 See Exhibit 3, p. 7. TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 7 Port Arthur Refinery.'* tO As discussed below, this representation parallels those made by Clover as inducements for Trinity to forego its customary lessee credit requirement protections—which included the requirements of letters of credit, deposits and guarantors. 20. Despite these representations, as Osmond recently acknowledged at deposition, the Fundraising Memo’s use of the words “has secured” did not mean a tangible agreement of any kind — not even a term sheet.'° 216 Moreover, asked if Clover ever clarified with Trinity that it had no agreement of any kind with Motiva—despite perhaps calculated misimpressions intended by the Fundraising Memo’s representation that Clover “has secured a buy side arrangement with. . . the largest refinery in the United States”—Osmond’s response demonstrated a startling absence of any agreement between Clover and Motiva: 2 And sitting here today under oath, you have no recollection of an email sent by you to Trinity advising that Clover had failed in procuring the Motiva contract? * * * To say that we failed in procuring, yeah. I don't Rnow that I ever sent an email saying ~ but I may have, But I can't recall sitting here today. Well, let’s reframe it. Stating that Clover did not obtain the Motiva contract. Did you ever send an email of that nature? * * * A Sir, I would never enter into a contract to deliver crude without cars to put it in. And so I would never have contracted with Motiva. It would have been an ongoing negotiation to be — MR. GREER: Objection; nonresponsive. My question is very simple. And the question is: Did you ever notify Trinity in writing, whether by email or text, that Clover did not procure the Motiva contract? * * * 14 See Exhibit 4 — (Osmond Depo 90:19-91:1). 15 See Exhibit 4 — (Osmond Depo 91:22-92:7). TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 8 There was never any one contract. There was never any one opportunity. It was always a constant discussion with the refiner. If these terms can be worked out, are you interested? And so the discussions with Motiva carried on, I mean, you know, we would still talk to them today if we were moving crude. So it's not like negotiations ever broke off. Motiva never told us don’t call." 22. The Fundraising Memo made similar misrepresentations regarding another “buy side arrangement” that it represents Clover “has secured.”"” * Clover has secured a buy side arrangement to supply up to two unit trains of Canadian heavy crude per month (approximately 110K bbls} to a refinery in Washington State; 23. But as with the Fundraising Memo’s representations regarding the Motiva refinery, at deposition Osmond conceded Clover, in fact, had no agreement of any kind with the Washington State refinery—not even a term sheet: 2 Did Clover enter an agreement with this referenced refinery? * * * Define “agreement.” Do we have a written document? No. Did we have, you know, terms and a finalized contract? No. But whatever you had, you found it a sufficient basis to represent to people that you were trying to solicit funds from that -- that the arrangement had been secured? * * * Secure enough. Secure enough to be able to move forward with raising money to -- to do it, yes. In this particular example was there even a term sheet? * * * A I don’t believe so, no."* 24. Unbeknownst to Trinity, at the time Osmond made the above representations, Clover '6 See Exhibit 4 — (Osmond Depo 99:17 to 100:25). 17 See Exhibit 3, p. 8. 18 See Exhibit 4 — (Osmond Depo 110:18 to 111:12). TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 9 remained a Texas limited liability company owned solely by him and his wife—had no company assets—and operated subject to their sole direction and control." THE OCTOBER 2018 TERM SHEET 25. Against the backdrop of the existing tank car market conditions noted in the Fundraising Memo, the parties began their negotiations for Clover’s lease of new tank cars to be built pursuant to Clover’s specifications. 20. On October 29, 2018, Clover and Trinity executed a Pricing and Term of Lease term sheet (the “October 2018 Term Sheet”) in which Clover LLC agreed to lease the 110 Tank Cars— described as 110 “[njewly-constructed 25,498 gallon, coiled and insulated Class DOT 117J100W tank cars, as described in the attached Trinity Rail Specification Number T255CI-27088. . . [d]elivery commencing June 2019 (subject to availability)” at the price of “$1,130 per month for a 5 year term. 9920 27. Clover selected the Class DOT 17/117J100W specification for the 110 Tank Cars as particularly well-suited for the purpose of shipping WCS. 28. Because they were new cars, the October 2018 Term Sheet included a provision for adjustment of lease pricing based on raw material costs. 29. At all times, Trinity required Clover’s delivery of an executed copy of the October 2018 Term Sheet as a prerequisite to fabrication of the 110 Tank Cars requested by Clover. THE REQUEST FOR ADDITIONAL CARS 30. Shortly after placing the order for the 110 Tank Cars—as evidenced by the October 2018 Term Sheet, Osmond admits Clover approached Trinity about leasing an additional 400 tank cars." And, as Osmond acknowledges, Trinity solicited a $1.6M deposit to place an order for the © See Exhibit 4 — (Osmond Depo 28:13-31:8). 2 A true and correct copy of the October 2018 Term Sheet is appended as Exhibit 5. The above quoted language is set forth on page 1. 21 Exhibit 4 — (Osmond Depo. 118:2-5). TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 10 additional 440 tank cars.” ote Osmond advised Trinity by February 14, 2019 email (“February 14th Email”) of Clover’s inability to provide the requested $1.62M deposit for the 400 tank cars, and unwillingness to provide a Guarantor if a deposit is also required by Trinity.” 2s In the same February 14th Email-as Osmond admits—Clover offered Trinity participation in Clover’s margin if Trinity was willing to forgo the $2M LOC or guarantor on the fitst 100 cats and waive the need fora guarantor or letter of credit on any additional cars.™ Clover is very much open and willing to discuss a larger partnership with Trinity. Howaver, for any partnership to work, both partners have to benefit. Regarding investment in Clover, there is more than one way to contribute. hundred cars, and waive the need for a guarantor or letter of crediton any additional cars, we would explore 2 margin share based on the proposed terms in the contract. The waiving of those credit terms would be viewed as commitment to sharing in the risk in Clover, and would be rewarded ith sharing in the upside. 33. In response to the February 14th Email, Trinity indicated willingness to waive the $2,000,000 Letter of Credit (the “$2M LOC”) for the 110 Tank Cars “currently on order”—subject to Clover’s provision of a credit approved Guarantor for a defined term—/f Clover agreed to the below ARB Sharing terms for those tank cars: © §.265/bb! if the margin (after admin fee) is >$2.50/bbI © §.50/bb! if the margin (AAF) is > $5.00/bbI © $1.00/bbI if the margin (AAF) is greater than $10.00/bbt 34. Trinity separately indicated willingness to waive the $1.62M deposit for the 400 additional tank cars /fClover provided a credit approved Guarantor for a defined term and agreed the same ARB Sharing terms above would apply to those additional tank cars.” 2 xhibit 4 — (Osmond Depo. 118:6-11). true and correct copy of the February 14 Email is appended as Exhibit 6; See alo Exhibit 4 — (Osmond Depo. 118:22-119:15). 24 Exhibit 4 — (Osmond Depo. 118:15-122:19). 25 See Exhibit 6; see a/so Exhibit 4 — (Osmond Depo. 127:2-129:11). TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 11 THE FEBRUARY 2019 TERM SHEET 35 Trinity and Clover thereafter negotitated a second proposed Pricing and Term of Lease Agreement for the additional 400 tank cars—with Trinity’s ARB share participation a deciding inducement for waiver of its customary financial protections: the requested LOC and deposit. 36. During those negotiations Clover, through Osmond, represented to Trinity—to extract Trinity’s further agreement to forego the continuing Guarantor requirement for both tank car orders—tepresented it was “finalizing two year supply deals with Shell’s St James refinery, Hunt’s Tuscaloosa refinery, and Motiva’s Beaumont refinery. 37 Clover made these representations in Osmond’s February 15, 2019 email (“February 15th Email”)—an excerpt of which is copied below: 26 Ie Trinity is wil sao forego the $2.50/bbI . $.100/bbI if the margin (AAF} is > $5.00/bbI . $1.75/bbI if the margin *(AAF) is> $1 00/bbt *(After Admin Fee) 42. As with October 2018 Term Sheet, by executing the February 2019 Term Sheet, Clover placed an order for newly-constructed tank cars of Clover’s specifications for delivery on a specified timeline: “[nJewly-constructed 25,498 gallon, coiled and insulated Class DOT 117J100W tank cars, as described in the attached Trinity Rail Specification Number T255CI-27088. . . [delivery commencing in 100 cars in Q4 2019 and 300 cars in Q1 (Production space subject to availability).”” THE OMNIBUS TERM SHEET 43. Thereafter in June 2019, the parties negotiated the OTS, which contemplated the 29 See Exhibit 4 — (Osmond Depo. 91:21-92:7; 96:10-20). 30 A true and correct copy of the February 2019 Term Sheet is appended as Exhibit 8. TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 13 parties’ entry of an Operating Agreement and Arbitrage Share Agreement incident to which, “[g]ross revenue from [Clover’s] arbitrage business using [‘Trinity’s”] railcars will be placed in a Collection Account ... to be allocated to pay [Clover’s] expenses, including rail car lease payments and pay [Irinity an] incremental fee[-]dependent Arb Share Rate.”*! The OTS expounded upon the “ARB share” profit-sharing plan referenced in the February 2019 Term Sheet. 44. The OTS incorporated the below lease terms: Lease Rider 1 Lease Type: Full Service Lease Rent: $1,130 per car per month base rent $80 increase for add'l mileage, up to 60,000 miles per year $1,210 per car per month total rent; subject to escalation Car Quantity: 110 Lease Term: 60 months LT Lease Rider 2 Lease Type: Full Service Lease Rent: $1,350 per car per month; subject to escalation Car Quantity: 440 Lease Term: 220 cars, 84 months 220 cars, 96 months —_—_——— ee =. _ 45. At all times, however, the OTS expressly clarified the “[rJental payments and other [Clover] obligations under the lease are firm commitments not subject to [the] success of [Clover’s] arbitrage business. 9932 46. And Osmond admits during these OTS negotiations that Clover was notified of Trinity’s proposed schedule to deliver “the First 110 cars = 55 in July and 55 cars in August”—a schedule of which he was aware. 47. Osmond further acknowledges that—at the time he executed the OTS—Clover knew the 110 Tank Cars were coming off the production line Trinity’s tank car facility in Monclova, Mexico (“Monclova Facility’). MA true and correct copy of the Omnibus Term Sheet is appended as Exhibit 9, °2 See Exhibit 9, p.1. TRINITY INDUSTRIES LEASING COMPANY’S SECOND AMENDED PETITION—page 14 48. Osmond admits that on July 23, 2019—one month after the OTS’s execution—he along with Clover’s executive team traveled to Trinity’s Monclova Facility on Trinity’s corporate jet. 33 Osmond acknowledged the purpose of that meeting was ‘to witness cars that Clover had ordeted under construction for delivery to Clover. 2934 And Osmond admitted he witnessed cars coming off the production line, and also saw previously completed cars, that he understood were Clover’ 76.35