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Dieckman v. Regency General Partner LP
Delaware Supreme Court
155 A.3d 358 (2017)
Regency Energy Partners LP (Regency) (defendant) was a publicly traded limited partnership. Regency General Partner LP (general partner) (defendant) was the general partner of Regency. The partnership agreement eliminated the general partner’s common-law fiduciary duty. The general partner proposed a merger of Regency with Energy Transfer Partners L.P. (ETP). Both Regency and ETP were indirectly controlled by Energy Transfer Equity, L.P. Given this conflict, certain provisions of Regency’s partnership agreement applied to the merger review. The agreement contained two safe-harbor provisions, which, if met, validated a conflicted transaction. First, a transaction was valid if approved by a majority of the members of an independent conflicts committee. Second, the transaction was valid if approved by a majority of unaffiliated Regency unit-holders. The general partner appointed Richard Brannon (defendant) to a two-person conflicts committee. Brannon was a member of the board of Sunoco LP (Sunoco), an ETP subsidiary, when he was appointed to the committee. Brannon resigned from the Sunoco board four days after his appointment, but rejoined the Sunoco board on the day the Regency-ETP merger closed. The partnership agreement also required the general partner to provide to unit-holders the merger agreement or a summary thereof prior to the vote. To satisfy this requirement, the general partner sent unaffiliated Regency unit-holders a proxy statement describing the merger. The proxy statement did not disclose Brannon’s conflicts. The conflicts committee and a majority of the unaffiliated Regency unitholders approved the merger. Adrien Dieckman (plaintiff), a Regency unit-holder, brought suit claiming that the merger breached the partnership agreement. The general partner moved to dismiss based on the safe-harbor provisions. The Delaware Court of Chancery granted the motion, finding that the approval by unaffiliated Regency unitholders validated the merger. The chancery court found that the safe harbor provisions displaced any implied requirement to disclose conflicts in the proxy statement. Dieckman appealed.
Rule of Law
Holding and Reasoning (Seitz, J.)
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