Reed Smith Client Alerts

In Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, C.A. 2018-0372-JTL, 2021 Del. Ch. LEXIS 266 (Del. Ch. Nov. 12, 2021), the Delaware Court of Chancery has ordered Loews Corporation (one of the named defendants) to pay the former limited partners of Boardwalk Pipeline Partners $690 million in damages in connection with a $1.56 billion take-private transaction of Boardwalk. The court found that management and other agents of Loews, which formed Boardwalk in 2005 and indirectly controlled its general partner, breached the Boardwalk partnership agreement in 2018 by orchestrating a “sham” trigger of the general partner’s right to buy back the partnership’s interests. The take-private transaction was based on a legal opinion that the court found was delivered and accepted in bad faith, as it had been “contrived” to reach the result that Loews sought.


Loews formed Boardwalk in 2005, which Loews controlled through Boardwalk’s general partner (the General Partner). Around this same time, the Federal Energy Regulatory Commission (FERC) announced a change in a regulatory policy that made master limited partnerships (MLPs) an attractive investment vehicle for pipelines. Seizing on this opportunity, Loews took Boardwalk public as an MLP. However, if FERC policies changed in the future, Loews wanted the option to take Boardwalk private again. To achieve that goal, Boardwalk’s partnership agreement (the Partnership Agreement) granted Loews a call right (the Call Right) to acquire the limited partnership interests, which required a legal opinion (the Opinion) that a material adverse event would likely occur (the Opinion Condition).

In 2018, FERC announced proposed policy changes that potentially could have a negative effect on Boardwalk. Industry participants acknowledged that until FERC clarified how it would treat a pipeline’s outstanding balance for accumulated deferred income taxes (the Tax Issue) under the new policy, it was impossible to know whether the policy changes would have a negative, neutral, or positive effect on Boardwalk.

While the Tax Issue remained unsettled, Loews obtained the Opinion from outside counsel and exercised the Call Right. The take-private transaction closed one day before FERC announced the full, final package of policy changes. Based on that final policy, it was clear that there would have been no effect on Boardwalk. Certain former Boardwalk limited partners initiated litigation challenging the transaction, alleging that Loews leveraged the 2018 tax policy guidance from FERC to artificially drive down the price of Boardwalk shares and buy the company’s minority units at a significant discount.