THE DISTRICT COURT OF SHAWNEE COUNTY, KANSAS

DIVISION TWELVE

MEMORANDUM DECISION AND ORDER

This action comes before the Court on the Motion to Proceed in One Jurisdiction and Stay Litigation in the Other Jurisdiction filed on September 1, 2006. The Interim Lead Plaintiffs filed a Response on September 5, 2006. A Reply was filed by the Defendants on September 15, 2006. Oral Argument was held on September 28, 2006. Since that time, various supplemental materials have been provided to the Court. Thus, since the issues presented have been fully briefed and argued, the Motion to Proceed in One Jurisdiction and Stay Litigation in the Other Jurisdiction is hereby deemed to be submitted to the Court for ruling.

I. NATURE OF THE CASE

This consolidated action arises out of a private offer to purchase the stock held by the public shareholders of Kinder Morgan, Inc., a Kansas corporation which is headquartered in Houston, Texas. The private offer has been made by a group led by Richard D. Kinder, the Chairman and Chief Executive Officer of Kinder Morgan, Inc. The buyout group also includes other members of senior management as well as certain investors and guarantors identified as Defendants in the Second Consolidated and Amended Class Action Petition. In addition to the buyout group, the Defendants in this case also include three (3) members of a Special Committee formed to evaluate the terms of the private offer by the Board of Directors of Kinder Morgan, Inc.

According to documents filed with the United States Securities and Exchange Commission by Kinder Morgan, Inc., the estimated value of the proposed transaction is $14,589,655,838. This estimate includes the private offer to purchase 133,990,784 shares of Kinder Morgan, Inc. common stock for $107.50 per share. In order to accomplish the proposed transaction, an additional Kansas corporation and a Delaware limited liability company have been formed.

On August 24, 2006, Knight Acquisition Co. filed Articles of Incorporation with the Kansas Secretary of State. According to the proposed “Agreement and Plan of Merger” dated August 28, 2006, Knight Acquisition Co. “shall be merged with and into [Kinder Morgan, Inc.], whereupon the separate corporate existence of [Knight Acquisition Co.] shall cease, and [Kinder Morgan, Inc.] shall continue as the surviving company in the Merger (the “Surviving Corporation”) and a wholly owned subsidiary of [Knight Holdco LLC, a Delaware limited liability company].” Moreover, the Agreement provides that the proposed transaction will “become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Kansas. . . .”

II. PARALLEL LITIGATION

Although there are several related cases pending in various jurisdictions, the Court is aware of one parallel action which involves questions of fact and issues of law which are identical (or nearly identical) to those presented in this Consolidated Action. The parallel action is Crescente v. Kinder Morgan, Inc., et al., Consolidated Case No. 2006-33011, which is currently pending in the District Court of Harris County, Texas (164^th Judicial District). The putative multi-state class and the Defendants appear to be the same in both the Kansas and Texas cases. Moreover, it is the Court’s understanding that an identical Motion to Proceed in One Jurisdiction and Stay Litigation in the Other Jurisdiction has also been filed in the Harris County case. As such, this Court has consulted with the Honorable Martha Jamison, Judge of the District Court of Harris County, Texas (164^th Judicial District), prior to entering this Memorandum Decision and Order.

III. ANALYSIS AND DISCUSSION

It has been written that duplicative or parallel litigation exists where there are “separate actions by class members on the same cause of action raised in the class action, seeking to represent the same or a similar class.” James P. George, Parallel Litigation, 51 Baylor L. Rev. 769, 774 (1999) [hereinafter Parallel Litigation]. In addition, duplicative or parallel litigation can also exist when “substantially the same parties litigate substantially the same issues.” EMCASCO Ins. Co. v. Dairyland Ins. Co., 2004 U.S. Dist. LEXIS 6550, *10 (D. Kan. 2004), quoting Fox v. Maulding, 16 F.3d 1079, 1081 ( N.D. Okla. 1994). Courts throughout the United States have expressed serious concerns regarding the time and resources which are expended by allowing nearly identical class action lawsuits to continue simultaneously in different forums. See Parallel Litigation, supra at 776.

It is well settled that the assignment of identical or nearly identical cases to the same Judge promotes consistency, efficiency and judicial economy. This is particularly true in cases involving multi-state class actions. In fact, it appears that one of the primary reasons that the United States Congress expanded the jurisdiction of federal courts over multi-state class actions was to prevent such cases from going forward in multiple jurisdictions. However, since transfer is not an option in cases pending in different jurisdictions, this Court has two options: 1) to allow this case to go forward notwithstanding the pending action in the District Court of Harris County, Texas; or, 2) to stay this action pending the outcome of the Texas litigation. See Newberg on Class Actions (Fourth Edition), Section 10.123 (2002).

A stay is often the preferred option when there is duplicative or parallel litigation in multiple jurisdictions. See Parallel Litigation, supra at 780. In Kansas, “the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its own docket with economy of time and effort for itself, for counsel, and for litigants.” Henry v. Stewart, 203 Kan. 289, 293, 454 P.2d 7, 10 (1969), quoting Landis v. North American Co., 299 U.S. 248, 254 (1936). “A stay order does not terminate the action, but merely postpones its disposition, and the order may be modified or vacated by the court whenever deemed necessary or proper. Like a continuance, the question of staying an action is largely discretionary with the court and is governed by the same law applicable to continuances.” Henry, 203 Kan. at 293 (1969) citing Dalton v. Hill, 169 Kan. 388, 219 P. 2d 710 (1950).

“In general, the optimal venue for a shareholder class action is the district in which the defendant company is headquartered. To the extent that cases remain in different courts, each court should consider whether formal or informal coordination is possible to minimize the risk of conflict.” Manuel for Complex Litigation, Fourth, 31.4, pp. 659-660 (2006). As noted above, Kinder Morgan, Inc. is a Kansas corporation and is headquartered in Houston. Although most of the discovery will be conducted in Texas, Kansas has a legitimate interest in protecting the shareholders of a Kansas corporation and in seeing that the claims asserted pursuant to Kansas law are justly resolved. See In re Hesston Corp., 254 Kan. 941, 968, 870 P.2d 17 (1994). Thus, the Court is not inclined to stay this action at this stage of the litigation.

There are various procedural methods which may be utilized to formally or informally coordinate cases pending in two or more jurisdictions in order to eliminate duplication and the risk of inconsistent decisions. One such method of coordination is referral to a Special Master. Manuel for Complex Litigation, Fourth at 660. In particular, “cross appointing” a Special Master or panel of Special Masters may be appropriate in multi-jurisdiction cases which cannot be consolidated. Jokela and Herr, The Role of Special Masters in the Judicial System: Special Masters in State Court Complex Litigation - an Available and Underused Case Management Tool, 31 Wm. Mitchell L. Rev. 1299 (2005).

“Special masters have potential value in coordinating parallel state . . . proceedings.” Id. at 1323. Likewise, “cross appointing a special master . . . may offer tremendous rewards in overall case management.” Id. at 1324. Undoubtedly, this Court sees merit in coordinating with the Harris County District Court to control the pretrial proceedings in both the Kansas and Texas lawsuits. Moreover, this is clearly the type of complex litigation which presents exceptional circumstances which would warrant the use of a Special Master for the coordination of the parallel proceedings.

In Kansas, the Court has the authority to appoint a Special Master pursuant to K.S.A. 60-253 and Texas law also provides for the appointment of Special Masters. After consultation, both Judge Jamison and this Court believe that it would promote the interests of justice if the parties in the Kansas and Texas actions can jointly agree to the appointment of a Special Master possessing the qualifications and expertise necessary to address the procedural and substantive issues which may be presented prior to trial. The appointment of a Special Master to serve in both the Kansas and Texas cases would not only reduce duplication of effort but it would also eliminate the possibility of inconsistent rulings on pretrial issues. Although the appointment of one person to serve as Special Master would be preferable from the standpoint of judicial economy, the Court would be receptive to appointing a panel of Special Masters if the parties agree that this would be beneficial.

Counsel for the parties in the parallel actions are hereby directed to confer within ten (10) business days from the date of this Memorandum Decision and Order in a good faith attempt to agree upon a Special Master or panel of Special Masters to serve in both the Kansas and Texas actions. In addition, counsel shall make a good faith effort to agree upon the terms of an Order of Appointment authorizing the Special Master or panel of Special Masters to control all pretrial matters in both the Kansas and Texas actions in such a way as to substantially reduce, if not eliminate, the possibility of duplication of efforts and/or inconsistent rulings. The Order of Appointment should grant the Special Master or panel of Special Masters all of the powers necessary for the efficient management of both the Kansas and Texas cases prior to trial.

At a minimum, the Order of Appointment should place the Special Master or panel of Special Masters into a position to direct the filing of documents, to control the course of discovery, to set binding deadlines, to receive evidence, to rule on disputed pretrial issues, to make findings of fact and to make recommendations of law to both the Kansas and Texas courts. In order to effectively eliminate the possibility of inconsistent rulings, the Special Master or panel of Special Masters should also have the authority to hear and submit reports to the Kansas and Texas courts on substantive issues as well as on procedural issues. As such, the Special Master or panel of Special Masters should have the authority to hear motions for preliminary injunctions, motions to dismiss, motions for class certification, motions to determine place of trial and other similar pretrial motions.

Of course, it will be necessary for both the Kansas and Texas courts to be periodically advised of the progress of the proceedings before the Special Master or panel of Special Masters. This may be done by communications from the Special Master or panel of Special Masters directly to the Kansas and Texas courts as well as by communications from the liaison or coordinating counsel in Topeka and Houston. In addition, it should be recognized that the Kansas and Texas courts will continue to consult on issues of mutual interest.

CONCLUSION

THEREFORE, the Court hereby denies the Motion to Proceed in One Jurisdiction and Stay Litigation in the Other Jurisdiction at this stage of the proceedings. Moreover, the Court directs that counsel for the parties fully comply with the terms of this Decision and report to the Court in writing no later than fourteen (14) business days regarding the appointment of a Special Master or panel of Special Masters to control all of the pretrial proceedings in both the Kansas and Texas class actions arising out of the proposed private offer to purchase the stock of the public shareholders of Kinder Morgan, Inc. This Memorandum Decision and Order shall serve as the Order of this Court. No further Journal Entry is required.

IT IS SO ORDERED.

Entered on this day ______ day of October, 2006.

CERTIFICATE OF SERVICE

The undersigned hereby certifies that on the day of October, 2006, she served a true and correct copy of the above and foregoing pleading by fax to:

John R. Hamilton, Esq., Fax No. (785) 267-2942

R. Patrick Riordan, Esq., Fax No. (785)2351615