Ryan v. Buckeye Partners, L.P.

Buckeye Partners, L.P. (Buckeye) (defendant) was a publicly traded Delaware limited partnership. Buckeye’s relationship with its limited partners, known as unitholders, was governed by a limited-partnership agreement (LPA). The LPA stated that Buckeye’s unitholders did not have a right to receive distributions. Instead, distributions were at the sole discretion of Buckeye’s general partner, namely, Buckeye’s parent company. The LPA also disclaimed any fiduciary duties owed by Buckeye’s general partner and replaced them with a contractual standard of good faith, defining good faith as a belief that an action was in Buckeye’s best interests. In 2019, Buckeye negotiated a merger with IFM Investors Pty Ltd. (IFM). IFM agreed to purchase Buckeye’s outstanding public units at a 27.5 percent premium over their trading value. To secure that premium, Buckeye agreed to a provision in the merger agreement that prohibited Buckeye from making distributions to unitholders between the agreement’s execution and the transaction’s closing. On July 31, 2019, Buckeye’s unitholders approved the merger transaction, and the transaction closed as planned on November 1, 2019. Walter Ryan (plaintiff) filed a putative class-action suit on behalf of himself and certain other unitholders against Buckeye, its general partner, and the general partner’s board of directors (the Buckeye parties) (defendants). He alleged that they breached their fiduciary duties to unitholders and the implied covenant of good faith and fair dealing by timing the merger so that unitholders did not receive a customary fall distribution. He argued that avoiding the distribution unfairly transferred additional value to IFM at the unitholder’s expense. The Buckeye parties moved to dismiss Ryan’s claims.