Reed Smith In-depth

In Bandera Master Fund, LP v. Boardwalk Pipeline Partners, LP, 2022 Del. LEXIS 381 (Dec. 19, 2022), the Delaware Supreme Court reversed a partial final judgment from the Court of Chancery, which held that a general partner of a master limited partnership was liable for improperly exercising a call right prescribed in the partnership agreement. According to the Court of Chancery, the general partner had improperly exercised the call right because the opinion of counsel that the general partner obtained to satisfy the necessary condition precedent (for the exercise of the call right) had not been issued in good faith. The Supreme Court disagreed, reasoning that the general partner had complied with the relevant provisions of the partnership agreement and properly exercised the call right.


The parties

Boardwalk Pipeline Partners (Boardwalk) is a master limited partnership (MLP) formed under Delaware law by Loews Corporation (Loews). Loews owned a majority of Boardwalk’s units through Boardwalk’s general partner, Boardwalk GP, LP (the General Partner). Itself a Delaware limited partnership, the General Partner had its own general partner, Boardwalk GP, LLC (the GPGP). The GPGP, in turn, had a board of directors, as well as a sole member, Boardwalk Pipelines Holding Corp. (the Sole Member). The Sole Member was a wholly-owned subsidiary of Loews, and the Sole Member’s board, as the Supreme Court observed in its opinion, “was controlled by Loews insiders.” The terms governing the management of the GPGP ‒ an issue that was central to both courts’ opinions ‒ were set forth in the GPGP LLC Agreement.

The plaintiffs, former minority unitholders of Boardwalk (collectively, Plaintiffs), initiated the underlying action in the Court of Chancery after their interests were repurchased in connection with the General Partner’s exercise of a call right prescribed in Boardwalk’s limited partnership agreement (the Partnership Agreement). Plaintiffs’ operative complaint named each of the above-described entities as defendants ‒ i.e., Boardwalk, the General Partner, the GPGP, the Sole Member, and Loews (collectively, Defendants).