The Delaware Court of Chancery dismissed fiduciary claims asserted by the limited partners of a master limited partnership, El Paso Pipeline Partners, L.P. (“EPB”), against El Paso Corporation (“El Paso”), as the controller of EPB’s general partner, because, inter alia, EPB’s partnership agreement contractually eliminated El Paso’s common-law fiduciary duties to EPB’s limited partners.
EPB provides natural gas transportation pipelines and storage. Until 2011, EPB acquired pipeline and related assets at favorable prices from El Paso, and EPB’s growth was dependent on receiving its assets from El Paso. In 2011, Kinder Morgan, Inc. (“Kinder Morgan”) acquired El Paso. At the time of the merger, Kinder Morgan announced that it would be selling El Paso’s pipeline assets to an affiliate of Kinder Morgan. In this ensuing litigation, plaintiffs claimed that El Paso breached its fiduciary duties to EPB’s limited partners by agreeing to a merger that would result in decreased asset drop-downs to EPB. In other words, plaintiffs argued that El Paso extracted value from EPB at the expense of EPB’s limited partners. The Court rejected plaintiff’s claims by finding that: (1) El Paso owed no fiduciary duties to EPB’s limited partners under the plain language of EPB’s limited partnership agreement, and (2) even if El Paso did owe EPB’s minority holders fiduciary duties, El Paso did not breach those duties in choosing how to exercise control over its own assets.