Del. High Court Nixes Suit Over Kinder Morgan Consolidation

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By Michael Greene

March 10 — Kinder Morgan Energy LP investors can't revive a lawsuit challenging part of the consolidation of Kinder Morgan Inc.’s pipeline interests, the Delaware Supreme Court ruled March 10.

In a brief order, the state high court said the plaintiffs—unitholders of a limited partnership—couldn't litigate their case as if they were investors in a corporation, whose directors have traditional fiduciary duties. Instead, the court reasoned that the plaintiffs were limited to relying upon the terms of the limited partnership agreements for deal protection.

Take-Private Deal

The appeal stemmed from an August 2015 decision in which the Delaware Chancery Court dismissed claims alleging that the take-private transaction wasn't fair . The plaintiffs claimed that the limited partnership’s merger into a subsidiary of Kinder Morgan GP Inc. was tainted by conflicts.

Writing for the court, Chief Justice Leo E. Strine Jr. said the chancery court properly dismissed the claims on the ground that there was no room for substantive judicial review of the transaction because the general partner had complied with its contractual duties.

“This case therefore stands as another reminder that with the benefits of investing in alternative entities often comes the limitation of looking to the contract as the exclusive source of protective rights,” Strine wrote.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com