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Keywords

litigationliabilitytrialmotionpartnershipcorporationmotion to dismiss

litigationliabilitytrialmotionmotion to dismiss

Related Cases

In re El Paso Pipeline Partners, L.P. Derivative Litigation, 132 A.3d 67

Facts

El Paso Corporation sold member interests in three limited liability companies to El Paso Pipeline Partners, L.P. The general partner was found liable for breaching the limited partnership agreement, resulting in a $171 million liability award. Following the trial, Kinder Morgan acquired El Paso Parent, and a related-party merger ended El Paso MLP's separate existence. The general partner moved to dismiss the litigation, claiming the limited partner lost standing due to the merger.

While the litigation was pending, Kinder Morgan, Inc. acquired El Paso Parent. Shorty after trial, however, Kinder Morgan, El Paso Parent, El Paso MLP, and the General Partner consummated a related-party merger that brought an end to El Paso MLP's separate existence as a publicly traded entity (the “Merger”).

Issue

Did the limited partner lose standing to maintain the action against the general partner as a result of the merger?

The General Partner contends that this court must choose between two exclusive alternatives by categorizing the claim that supported the Liability Award as either derivative or direct.

Rule

Claims that are direct in nature survive a merger, while derivative claims do not. Delaware law recognizes dual-natured claims that can be treated as direct for purposes of standing post-merger.

If Delaware law requires that stark choice, then this decision concludes that the claim was direct.

Analysis

The court analyzed whether the claim was direct or derivative. It concluded that the claim was best viewed as dual-natured, allowing the limited partner to continue pursuing it despite the merger. The court emphasized that the general partner's breach of the limited partnership agreement entitled the limited partners to enforce the terms of that agreement.

In my view, the claim that supported the Liability Award is best understood as having dual aspects such that Brinckerhoff can continue to litigate his claim.

Conclusion

The court denied the general partner's motion to dismiss, allowing the limited partner to pursue the claim and ensuring that the limited partners could receive their proportionate share of the liability award.

The General Partner's motion to dismiss is therefore denied.

Who won?

The limited partner prevailed because the court found that the claim against the general partner was direct and could be pursued despite the merger.

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