Title: The Haynes Family Trust, et al. v. Kinder Morgan G.P.,Inc.,et al.

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
THE HAYNES FAMILY TRUST and 
WILLIAM BRYCE ARENDT,  
 
 
Plaintiff Below-Appellant, 
 
 
v. 
 
KINDER MORGAN G.P., INC., TED 
A. GARDNER, GARY L. 
HULTQUIST, and PERRY M. 
WAUGHTAL, 
 
Defendants Below-Appellees. 
 
 
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No. 515, 2015 
 
Court Below: Court of Chancery  
of the State of Delaware 
 
C.A. No. 10093-VCL 
 
 
Submitted: March 9, 2016 
Decided: 
March 10, 2016 
 
Before STRINE, Chief Justice; HOLLAND, VALIHURA, and VAUGHN, 
Justices; and RENNIE, Judge,* constituting the Court en banc.  
 
ORDER 
 
This 10th day of March 2016, having considered this matter on the briefs 
and after oral argument, it appears to the Court that: 
(1)  
In a careful decision, the Court of Chancery dismissed the claims of 
unitholders of a limited partnership who alleged that a going-private transaction 
was unfair.  On appeal, the unitholders reiterate the arguments made below, which 
largely rest on their contention that they ought to be able to litigate this case as if 
they were investors in a corporation, whose directors had the traditional duties of 
                                          
 
* Sitting by designation under Del. Const. art. IV, § 12. 
 
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loyalty and care.  But, the unitholders were investors in a limited partnership under 
a statute that permits limited partnership agreements to eliminate fiduciary duties 
and restrict investors to relying upon the agreement’s terms for protection.1  As we 
and the Court of Chancery have long noted, investors in these agreements must be 
careful to read those agreements and to understand the limitations on their rights.2  
Here, the Court of Chancery properly held that there was no room for a substantive 
                                          
 
1 See 6 Del. C. § 17-1101(f) (“A [limited] partnership agreement may provide for the limitation 
or elimination of any and all liabilities for breach of contract and breach of duties (including 
fiduciary duties) of a partner or other person to a limited partnership or to another partner or to 
another person that is a party to or is otherwise bound by a partnership agreement; provided, that 
a partnership agreement may not limit or eliminate liability for any act or omission that 
constitutes a bad faith violation of the implied contractual covenant of good faith and fair 
dealing.”); see also 2 R. FRANKLIN BALOTTI & JESSE A. FINKELSTEIN, THE DELAWARE LAW OF 
CORPORATIONS & BUSINESS ORGANIZATIONS § 21.6, at 21-7 (3d ed. 2016) (“A [limited] 
partnership agreement may provide for the limitation or elimination of any and all liabilities of a 
partner or other person to a Delaware limited partnership or to another partner or to another 
person that is a party to or is otherwise bound by a partnership agreement. . . .  As a result, a 
partnership agreement may aggressively exculpate a general partner from liability to the limited 
partnership and the other partners and, given the policy of the Act [to give effect to freedom of 
contract], such provision in a partnership agreement should be enforced.”) (internal citation 
omitted). 
2 See, e.g., Norton v. K-Sea Transp. Partners LP, 67 A.3d 354, 368 (Del. 2013) (“Norton 
willingly invested in a limited partnership that provided fewer protections to limited partners 
than those provided under corporate fiduciary duty principles.  He is bound by his investment 
decision.”); Lonergan v. EPE Holdings, LLC, 5 A.3d 1008, 1018 (Del. Ch. 2010) (“When parties 
exercise the authority provided by the LP Act to eliminate fiduciary duties, they take away the 
most powerful of a court’s remedial and gap-filling powers.  As a result, parties must draft an LP 
agreement as completely as possible, and they bear the risk of incompleteness.  If the parties 
have agreed how to proceed under a future state of the world, then their bargain naturally 
controls.”); Miller v. Am. Real Estate Partners, L.P., 2001 WL 1045643, at *8 (Del. Ch. Sept. 6, 
2001) (“This court has made clear that it will not [be] tempted by the piteous pleas of limited 
partners who are seeking to escape the consequences of their own decisions to become investors 
in a partnership whose general partner has clearly exempted itself from traditional fiduciary 
duties.  The DRULPA puts investors on notice that fiduciary duties may be altered by 
partnership agreements, and therefore that investors should be careful to read partnership 
agreements before buying units.”). 
 
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judicial review of the fairness of the transaction, because the general partner had 
complied with its contractual duties in the approval process of the merger and that 
compliance conclusively established the fairness of the transaction, precluding the 
judicial scrutiny that the unitholders now seek.3   
(2) 
Likewise, the Court of Chancery properly held that the unitholders 
could not seek to hold the general partner or the other defendants responsible for 
duties inconsistent with the agreement, simply because the approval committee 
opined as to its view of the fairness of the transaction to the unitholders 
unaffiliated with the general partner.4  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.   
NOW, THEREFORE, having carefully and accurately applied the terms of 
the limited partnership agreement to the unitholder’s claim, the judgment of the 
Court of Chancery is AFFIRMED on the basis of its well-reasoned decision of 
August 20, 2015. 
 
 
 
 
BY THE COURT:  
 
 
 
 
 
 
 
 
/s/ Leo E. Strine, Jr. 
 
 
 
 
 
 
 
 
Chief Justice  
                                          
 
3 See In re Kinder Morgan, Inc. Corporate Reorganization Litig., 2015 WL 4975270, at *8 (Del. 
Ch. Aug. 20, 2015). 
4 See id. at *8–9.