Archive:April 23, 2015

1
Chancery Court Holds That a General Partner Breached a Limited Partnership Agreement for Failure to Act in the Best Interests of the Master Limited Partnership; $171 Million in Damages

Chancery Court Holds That a General Partner Breached a Limited Partnership Agreement for Failure to Act in the Best Interests of the Master Limited Partnership; $171 Million in Damages

By Scott Waxman and Joshua Haft

The Chancery Court held that a general partner of a master limited partnership breached the entity’s limited partnership agreement by failing to act in the best interests of the entity and instead acting in a manner that benefited the parent of its general partner and increased distributions to the entity’s common unitholders. The Chancery Court focused on the general partner’s failure to consider lessons learned from a similar past transaction and the inadequacy of the financial advisor’s fairness opinion.

In In re: El Paso Pipeline Partners, L.P. Derivative Litigation, plaintiff challenged two transactions in which El Paso Corporation (“Parent”) sold to El Paso Pipeline Partners, L.P., a master limited partnership (“El Paso MLP”), its interest in two subsidiaries of Parent, Southern LNG Company, L.L.C. and Elba Express, L.L.C. (collectively, “Elba”). Both subsidiaries were engaged in the liquefied natural gas (“LNG”) business. Parent is the parent company of El Paso MLP’s general partner, El Paso Pipeline GP Company, L.L.C. (the “General Partner”); and thus, Parent exercised control over El Paso MLP through the General Partner. In the first transaction, in March 2010, Parent dropped-down a 51% interest in Elba to El Paso MLP for total consideration of $963 million (the “Spring Dropdown”). In the second transaction, in November 2010, Parent dropped-down to El Paso MLP the remaining 49% interest in Elba for at least $931 million and 15% of another Parent subsidiary, for total consideration of $1.412 billion (the “Fall Dropdown”).

Read More

Copyright © 2024, K&L Gates LLP. All Rights Reserved.