Norton v. K-Sea Transportation Partners L.P.
Delaware Supreme Court
67 A.3d 354 (2013)
K-Sea Transportation Partners L.P. (K-Sea) (defendant) was a publicly traded limited partnership. Kirby Corporation offered $329 million to purchase K-Sea, including $18 million for incentive distribution rights (IDRs) held by K-Sea’s general partner, K-Sea General Partner L.P. (the general partner) (defendant). The conflict of interest in the proposed compensation for IDRs triggered a review of the transaction by an independent conflicts committee. K-Sea’s partnership agreement modified the general partner’s common-law fiduciary duty by stating that in approving a transaction, the general partner did not have to consider the interests of K-Sea or its limited partners. Rather, the agreement gave the general partner discretion to approve a transaction so long as the general partner reasonably believed that the transaction was in the best interests of the partnership. In addition, the partnership agreement imposed on the general partner a duty of good faith in approving the transaction. However, the agreement established a conclusive presumption that the general partner acted in good faith if the general partner relied on an expert’s opinion in rendering its decision. The conflicts committee hired Stifel, Nicolaus & Company (Stifel) as an independent financial expert to review the merger. Stifel did not address the IDRs specifically but found that the price paid to K-Sea’s unaffiliated unitholders was fair. The conflicts committee recommended approval of the merger, and a majority of K-Sea’s unit-holders voted in favor. Edward Norton (plaintiff) filed a class action suit on behalf of the unaffiliated common unit-holders of K-Sea. Norton claimed that the general partner received excessive compensation for the IDRs and thus breached the partnership agreement. The Delaware Court of Chancery granted the defendants’ motion to dismiss. Norton appealed.
Rule of Law
Holding and Reasoning (Steele, C.J.)
What to do next…
Unlock this case brief with a free (no-commitment) trial membership of Quimbee.
You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 724,000 law students since 2011. Some law schools—such as Yale, Berkeley, and Northwestern—even subscribe directly to Quimbee for all their law students.Unlock this case briefRead our student testimonials
Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.
Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students.Learn about our approachRead more about Quimbee
Here's why 724,000 law students have relied on our case briefs:
- Written by law professors and practitioners, not other law students. 45,500 briefs, keyed to 983 casebooks. Top-notch customer support.
- The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
- Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
- Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.