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Brickell Partners v. Wise

794 A.2d 1 (2001)

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Brickell Partners v. Wise

Delaware Court of Chancery

794 A.2d 1 (2001)

Facts

Brickell Partners (Brickell) (plaintiff), a limited partner in El Paso Energy Partners, L.P. (El Paso), filed a derivative suit on behalf of El Paso challenging El Paso’s acquisition of Crystal Gas Storage, Inc. (Crystal) from El Paso Energy Corporation (Energy). Energy also owned and controlled El Paso’s general partner, DeepTech International, Inc. (DeepTech), and held a minority interest in El Paso. El Paso purchased Crystal for $170 million in newly issued El Paso preference units. According to Brickell, that price exceeded Crystal’s value. As provided in the El Paso partnership agreement (the agreement), the transaction was subject to a special approval process by DeepTech’s Conflicts and Audit Committee (the committee), whose members were Michael Bracy, a director of DeepTech and former employee of Energy, and H. Douglas Church, also a DeepTech director. The committee approved the transaction. El Paso’s complaint alleged that the transaction was invalid due to the conflict of interest created by Energy’s ownership and control of DeepTech and due to the fact that the committee was made up solely of DeepTech directors, effectively giving Energy control over El Paso’s approval of the transaction. DeepTech and its directors filed a motion to dismiss the complaint.

Rule of Law

Issue

Holding and Reasoning (Strine, J.)

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