Co-authored by Elizabeth D. Langdale.
The Court of Chancery of the State of Delaware recently dismissed a claim for breach of fiduciary duty brought by common unitholders in a master limited partnership against the controlling unitholder where the language of the partnership agreement expressly eliminated any fiduciary duties owed to the unitholders.
Plaintiffs HITE Hedge LP, HITE MLP LP and Sealedge Partners LLC are common unitholders of El Paso Pipeline Partners, L.P. (EPB), a publicly traded master limited partnership that was formed by El Paso Corporation (El Paso), the controlling unitholder of EPB. Plaintiffs claimed that El Paso breached its fiduciary duties by entering into a merger that harmed the partnership. As evidence of the harm, plaintiffs pointed to a drop in the trading price of partnership units contemporaneous with the announcement of the merger.
El Paso moved to dismiss plaintiffs’ complaint for failure to state a viable claim for relief. The Chancery Court granted El Paso’s motion, and found that the EPB partnership agreement expressly eliminated, in plain and unambiguous terms, any fiduciary duties owed by El Paso to EPB’s minority unitholders. The Court noted that the Delaware Revised Uniform Limited Partnership Act permits the elimination of fiduciary duties by contract where the intent to do so is explicit. The Court found that the operative language in the partnership agreement was sufficiently explicit and effectively eliminated any fiduciary duties El Paso owed to EPB’s unitholders.
HITE Hedge LP v. El Paso Corp., No. 7117-VCG (Del. Ch. Oct. 9, 2012).