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Keywords

contractfiduciarypartnershipcontractual obligationjudicial review
contractbreach of contractdefendantstatutefiduciarypartnershipcompliancejudicial review

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The Haynes Family Trust v. Kinder Morgan G.P., Inc., 135 A.3d 76 (Table), 2016 WL 912184

Facts

The case involved unitholders of a limited partnership who challenged the fairness of a going-private transaction. They argued that they should be treated like corporate investors, entitled to traditional fiduciary protections. However, the limited partnership agreement explicitly allowed for the elimination of such fiduciary duties, placing the onus on the unitholders to understand the limitations of their rights under the agreement. The Court of Chancery found that the general partner had fulfilled its contractual obligations in the merger approval process.

The unitholders were investors in a limited partnership under a statute that permits limited partnership agreements to eliminate fiduciary duties and restrict investors to relying upon the agreement's terms for protection.

Issue

Did the Court of Chancery err in dismissing the unitholders' claims regarding the fairness of the going-private transaction based on the terms of the limited partnership agreement?

Did the Court of Chancery err in dismissing the unitholders' claims regarding the fairness of the going-private transaction based on the terms of the limited partnership agreement?

Rule

Limited partnership agreements can eliminate fiduciary duties, and investors must rely on the terms of the agreement for protection, as per Delaware law.

A [limited] partnership agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties (including fiduciary duties) of a partner or other person to a limited partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement.

Analysis

The court applied the rule by determining that the unitholders were bound by the terms of the limited partnership agreement, which allowed for the elimination of fiduciary duties. The court noted that the general partner had complied with its contractual duties during the merger approval process, which established the fairness of the transaction. As such, the court found no basis for judicial review of the transaction's fairness, as the unitholders' claims were inconsistent with the agreement.

Here, the Court of Chancery properly held that there was no room for a substantive judicial review of the fairness of the transaction, because the general partner had complied with its contractual duties in the approval process of the merger and that compliance conclusively established the fairness of the transaction, precluding the judicial scrutiny that the unitholders now seek.

Conclusion

The Court of Chancery's judgment was affirmed, concluding that the unitholders could not hold the general partner accountable for duties that were not provided for in the limited partnership agreement.

NOW, THEREFORE, having carefully and accurately applied the terms of the limited partnership agreement to the unitholder's claim, the judgment of the Court of Chancery is AFFIRMED on the basis of its well-reasoned decision of August 20, 2015.

Who won?

The prevailing party was the general partner, as the court found that it had complied with its contractual obligations, thereby establishing the fairness of the transaction and dismissing the unitholders' claims.

The Court of Chancery properly held that the unitholders could not seek to hold the general partner or the other defendants responsible for duties inconsistent with the agreement.

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