Opinion ID: 4109387
Heading Depth: 2
Heading Rank: 1

Heading: Standing is a Threshold Issue

Text: “The concept of standing, in its procedural sense, refers to the right of a party to invoke the jurisdiction of a court to enforce a claim or redress a grievance.”20 Accordingly, “[a]s a preliminary matter, a party must have standing to sue in order to invoke the jurisdiction of a Delaware court.”21 Standing is therefore properly viewed as a threshold issue to “ensure that the litigation before the tribunal is a „case or controversy‟ 19 Id. at 105. 20 Schoon v. Smith, 953 A.2d 196, 200 (Del. 2008) (en banc) (quoting Stuart Kingston, Inc. v. Robinson, 596 A.2d 1378, 1382 (Del. 1991)) (internal quotation marks omitted). 21 Ala. By-Prods. Corp. v. Cede & Co., 657 A.2d 254, 264 (Del. 1995) (citing Stuart Kingston, 596 A.2d at 1382). 14 that is appropriate for the exercise of the court‟s judicial powers.”22 Whether a party has standing is a question of law that is subject to de novo review.23 Derivative standing is a “creature of equity”24 that was created to enable a court of equity to exercise jurisdiction over corporate claims asserted by stockholders “to prevent a complete failure of justice on behalf of the corporation.”25 We have observed that “[a] change in the parties‟ standing may result from a myriad of subsequent legal or factual causes that occur while the litigation is in progress.”26 For instance, in corporate derivative litigation, loss of a plaintiff‟s status as shareholder generally extinguishes the plaintiff‟s standing.27 Once standing is lost, the court lacks the power to adjudicate the matter,28 and the action will be dismissed as moot unless an exception applies.29 Accordingly, the question of derivative standing is “properly a threshold question that the [c]ourt may not avoid.”30 22 Dover Historical Soc’y v. City of Dover Planning Comm’n, 838 A.2d 1103, 1110 (Del. 2003). 23 Schoon, 953 A.2d at 200 (“Because the Court of Chancery‟s decision on director standing implicates rulings of law, we review it de novo.” (citation omitted)). 24 Id. at 202 (quoting 13 Fletcher Cyclopedia of the Law of Private Corporations § 5940). 25 Id. at 208 (footnote omitted). 26 Gen. Motors Corp. v. New Castle Cnty., 701 A.2d 819, 824 (Del. 1997) (citations omitted). 27 See Lewis, 477 A.2d at 1049. 28 See Ala. By-Prods., 657 A.2d at 264 (citing Stuart Kingston, 596 A.2d at 1382); Gerber v. EPE Holdings, LLC, 2013 WL 209658, at  (Del. Ch. Jan. 18, 2013) (“If there is no standing, there is no justiciable substantive controversy.” (citation omitted)). 29 See Gen. Motors, 701 A.2d at 823 (“A proceeding may become moot in one of two ways: if the legal issue in dispute is no longer amenable to a judicial resolution; or, if a party has been divested of standing.”). 30 Gerber, 2013 WL 209658, at . 15 B. Under the Partnership Agreement, the Partnership Owned the Claim In the context of conflicted transactions involving master limited partnerships, many of the cases involve “Conflicts of Interest” provisions which may contain common features, but are often different in nuanced ways. Thus, the prevalence of entity-specific provisions in an area of law defined by expansive contractual freedom requires a nuanced analysis and renders deriving “general principles” a cautious enterprise. The Court of Chancery has characterized Brinckerhoff‟s allegation as a breach of the LPA‟s conflicts-of-interest provision (“Section 7.9(a)”).31 Section 7.9(a) provides in relevant part: Unless otherwise expressly provided in this Agreement or any Group Member Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates, on the one hand, and the Partnership, any Group Member, any Partner or any Assignee, on the other, any resolution or course of action by the General Partner or its Affiliates in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of any Group Member Agreement, of any agreement contemplated herein or therein, or of any duty stated or implied by law or equity, if the resolution or course of action in respect of such conflict of interest is (i) approved by Special Approval, . . . . The General Partner shall be authorized but not required in connection with its resolution of such conflict of interest to seek Special Approval of such resolution, and the General Partner may also adopt a resolution or course of action that has not received Special Approval. If Special Approval is sought, then it shall be presumed that, in making its decision, the Conflicts Committee acted in good faith, . . . in any proceeding brought by any Limited Partner or Assignee or by or on behalf of such Limited Partner or Assignee or any other Limited Partner or Assignee or the Partnership challenging such 31 Standing Op., 132 A.3d at 97. 16 approval, the Person bringing or prosecuting such proceeding shall have the burden of overcoming such presumption. . . .32 Section 7.9(b) is also relevant and provides that “[w]henever the General Partner makes a determination or takes or declines to take any other action” in its capacity as General Partner, “then, unless another express standard is provided for in this Agreement, the General Partner . . . shall make such determination or take or decline to take such other action in good faith and shall not be subject to any other or different standards (including fiduciary standards imposed by this Agreement . . . or under the Delaware Act or any other law, rule or regulation or at equity.”33 Likewise, “[w]henever the Conflicts Committee makes a determination or takes or declines to take any other action, it shall make such determination or take or decline to take such other action in good faith and shall not be subject to any other or different standards (including fiduciary standards) imposed by this Agreement . . . .”34 Importantly, Section 7.9(b) defines “good faith” as follows: In order for a determination or other action to be in “good faith” for purposes of this Agreement, the Person or Persons making such determination or taking or declining to take such other action must believe that the determination or other action is in the best interests of the Partnership.35 The Court of Chancery concluded that Section 7.9(a) “barred the General Partner from causing [the Partnership] to engage in any transaction that (i) involved a potential 32 El Paso Pipeline Partners, L.P., First Amended and Restated Agreement of Limited Partnership at § 7.9(a), A922-23 [hereinafter LPA]. 33 Id. at § 7.9(b), A923. 34 Id. 35 Id. 17 conflict of interest and (ii) failed to comply with one of the four contractual paths.”36 In its view, if the General Partner failed to satisfy one of four “contractually specified routes” for handling a conflict of interest (e.g., Special Approval) set forth in Section 7.9(a), “then the General Partner would breach the [LPA].” 37 Accordingly, the court concluded that Brinckerhoff‟s “claim that the General Partner proceeded with the Fall Dropdown without complying with [Section 7.9(a)] is thus a direct claim for breach of contract.”38 The court then relied on this Court‟s decision in NAF Holdings39 to support its view that the Tooley test for distinguishing between direct and derivative claims “does not apply to contract rights.”40 Although the Vice Chancellor‟s analysis of Section 7.9(a) and (b) presents interesting interpretive issues,41 we need not address them here. Instead, we focus on the narrow question of whether the plaintiff had standing post-merger. 36 Standing Op., 132 A.3d at 97. 37 Id. at 77. 38 Id. at 97. 39 NAF Holdings, LLC v. Li & Fung (Trading) Ltd., 118 A.3d 175 (Del. 2015). 40 Standing Op., 132 A.3d at 99 (citing NAF Holdings, 118 A.3d at 179). 41 Cf. Allen v. Encore Energy Partners, L.P., 72 A.3d 93, 102 (Del. 2013) (en banc) (describing a nearly identical provision to that set forth in Section 7.9(a) as “establish[ing] four „safe harbors‟ that the [d]efendants can use to discharge their contractual duty of good faith when confronted with a conflict of interest”) (quoting Norton v. K-Sea Transp. Partners L.P., 67 A.3d 354, 364-65 (Del. 2013) (en banc)); Norton, 67 A.3d at 365 (rejecting an argument that failing to meet a similar procedure for addressing conflicts “automatically put [the general partner] in breach” of the limited partnership agreement” (footnote omitted)); In re Kinder Morgan, Inc. Corporate Reorganization Litig., 2015 WL 4975270, at  (Del. Ch. Aug. 20, 2015) (applying Norton to determine that “the [g]eneral [p]artner is not obligated to comply with [a similar safe harbor provision]; it has the choice whether or not to do so”), judgment entered sub nom. In re Kinder Morgan, Inc., 2015 WL 5032517 (Del. Ch. Aug. 24, 2015), and aff’d sub nom. Haynes Family Trust v. Kinder Morgan G.P., Inc., 2016 WL 912184 (Del. Mar. 10, 2016). 18 The standing analysis centers on the LPA‟s contractual duty of good faith. In its Liability Opinion, the Court of Chancery observed that, “[i]n this case, Section 7.9(b) established a known duty: the Committee members had to form a subjective belief that the Fall Dropdown was in the best interests of the Partnership.”42 More specifically, to comport with Section 7.9(b), the General Partner and the Conflicts Committee had to “believe that [their] determination or other action [was] in the best interest of the Partnership.”43 Accordingly, the contractual duty of good faith was owed to the Partnership, not the individual limited partners.44 But the source of the duty owed—the entity‟s constitutive agreement, i.e., the LPA—does not alone answer the question as to whether Brinckerhoff‟s claim was derivative, direct, or both.45 The Court of Chancery read our discussion in NAF Holdings to suggest that Tooley does not apply where the alleged harm involves contract rights. 46 We believe the trial court reads NAF Holdings too broadly. In NAF Holdings, we held that “a suit by a 42 Liability Op., 2015 WL 1815846, at . 43 LPA, supra note 32, at § 7.9(b), A923 (emphasis added). 44 See Kinder Morgan, 2015 WL 4975270, at  (“[T]he members of the [c]ommittee did not have to believe that the MLP [m]erger was in the best interests of the limited partners. They rather had to believe in good faith that the MLP [m]erger was in the best interests of the [p]artnership.”); Allen v. El Paso Pipeline GP Co., L.L.C., 113 A.3d 167, 181 (Del. Ch. 2014) (“Rather than requiring the [c]onflicts [c]ommittee to reach a subjective belief that the Drop[d]own was in the best interests of [the partnership] and its limited partners, the LP [a]greement requires only that the [c]onflicts [c]ommittee believe subjectively that the Drop[d]own was in the best interests of [the partnership].”), judgment entered, (Del. Ch. July 8, 2014), aff’d, 2015 WL 803053 (Del. Feb. 26, 2015). 45 Brinckerhoff reads Section 7.9(a)‟s reference to “any proceeding brought by any Limited Partner” as creating a direct cause of action for limited partners. However, this reference is better viewed as addressing the manner in which a limited partner‟s own rights can be enforced—which importantly includes derivative claims challenging conflicted transactions. 46 Standing Op., 132 A.3d at 99. 19 party to a commercial contract to enforce its own contractual rights is not a derivative action under Delaware law.”47 We explained that: Tooley and its progeny do not, and were never intended to, subject commercial contract actions to a derivative suit requirement. That body of case law was intended to deal with a different subject: determining the line between direct actions for breach of fiduciary duty suits by stockholders and derivative actions for breach of fiduciary duty suits subject to the demand excusal rules set forth in § 327 of the Delaware General Corporation Law, Court of Chancery Rule 23.1, and related case law.48 In NAF Holdings, we rejected the defendant‟s contention that Tooley was “intended to be a general statement requiring all claims, whether based on a tort, contract, or statutory cause of action (e.g., antitrust), to be brought derivatively whenever the corporation of which the plaintiff is a stockholder suffered the alleged harm.”49 Thus, in NAF Holdings, the Tooley analysis was not needed to determine whether the commercial-contract claim was direct or derivative. As we explained there, when a plaintiff asserts a claim based upon the plaintiff‟s own right, such as a claim for breach of a commercial contract, Tooley does not apply. NAF Holdings does not support the proposition that any claim sounding in contract is direct by default, irrespective of Tooley. Nor does it mean that Brinckerhoff‟s status as a limited partner and party to the LPA enable him to litigate directly every claim arising from the LPA. Such a rule would essentially abrogate Tooley with respect to 47 NAF Holdings, 118 A.3d at 182. 48 Id. at 179 (footnotes omitted). 49 Id. at 180. 20 alternative entities merely because they are creatures of contract. 50 Limited partnerships are governed by their partnership agreements and by the Delaware Revised Uniform Limited Partnership Act (the “DRULPA”). The partnership agreement sets forth the rights and duties owed by the partners. The trial court treated the governing instrument of the Partnership as if it were a separate commercial contract, rather than it being the constitutive contract of the Partnership under the DRULPA itself. The reality that limited partnership agreements often govern the territory that in corporate law is covered by equitable principles of fiduciary duties does not make all provisions of a limited partnership agreement enforceable by a direct claim. Because Brinckerhoff‟s claim sounds in breach of a contractual duty owed to the Partnership, we employ the two-pronged Tooley51 analysis to determine whether the claim “to enforce the [Partnership‟s] own rights must be asserted derivatively” 52 or is dual in nature such that it can proceed directly. 53 We have observed that “[t]he Tooley direct/derivative test is „substantially the same‟ for claims involving limited partnerships.”54 While the test may be substantially the same, cases involving limited partnerships often present unique facts relating to the provisions and structure of the 50 See Norton, 67 A.3d at 360 (“Limited partnership agreements are a type of contract.”). 51 845 A.2d at 1033. 52 Citigroup Inc. v. AHW Inv. P’ship, 140 A.3d 1125, 1127 (Del. 2016). 53 See Loral Space & Commc’ns, Inc. v. Highland Crusader Offshore Partners, L.P. (Loral Space II), 977 A.2d 867, 868 (Del. 2009) (stating that “[b]oth [direct and derivative] claims may be litigated” where a claim is dual-natured). 54 Culverhouse v. Paulson & Co., 133 A.3d 195, 198 n.9 (Del. 2016) (quoting Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 293 n.40 (Del. 1999)) (citations omitted). 21 limited partnership agreement and how it defines the rights and responsibilities of the limited partners.55 Under Tooley, whether a claim is solely derivative or may continue as a dualnatured claim “must turn solely on the following questions: (1) who suffered the alleged harm (the corporation or the suing stockholders, individually); and (2) who would receive the benefit of any recovery or other remedy (the corporation or the stockholders, individually)?”56 In addition, to prove that a claim is direct, a plaintiff “must demonstrate that the duty breached was owed to the stockholder and that he or she can prevail without showing an injury to the corporation.”57 Applying the first prong of Tooley, the harm alleged in Brinckerhoff‟s complaint solely affected the Partnership. The Fall Complaint alleged injury to Brinckerhoff only in terms of the alleged harm to the Partnership.58 The “core theory” of Brinckerhoff‟s complaint “was that „the Partnership was injured‟ when the defendants caused [the 55 Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304, 306 n.3 (Del. 2015) (“[I]n cases involving [alternative] entities, distinctive arguments often arise due to the greater contractual flexibility given to those entities under our statutory law.”); see Haynes Family Trust, 2016 WL 912184, at  (rejecting limited partnership unitholders‟ “contention that they ought to be able to litigate this case as if they were investors in a corporation”). 56 Tooley, 845 A.2d at 1033 (emphasis in original). 57 Id. at 1039. “The party invoking the jurisdiction of a court bears the burden of establishing the elements of standing.” Dover Historical Soc’y, 838 A.2d at 1109 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)). 58 See Verified Derivative Compl. at A118 ¶ 6, Brinckerhoff v. El Paso Pipeline GP Co., No. 7141-VCL (Del. Ch. Mar. 5, 2012) (alleging that the Fall Dropdown benefited the Parent “at the expense of [the Partnership], including at the expense of [Brinckerhoff] and the other nonaffiliated limited partners”); id. at A144 ¶ 100 (alleging that the Fall Dropdown‟s terms “were not fair and reasonable to [the Partnership]”); id. at A145 ¶ 102 (seeking damages “on behalf of [the Partnership]”); id. at A147 (requesting that the court order the “defendants to account to” the Partnership). 22 Partnership] to pay too much” in the Fall Dropdown.59 Such claims of corporate overpayment are normally treated as causing harm solely to the corporation and, thus, are regarded as derivative.60 In Tooley terms, the harm is to the corporation, because such claims “naturally assert that the corporation‟s funds have been wrongfully depleted, which, though harming the corporation directly, harms the stockholders only derivatively so far as their stock loses value.”61 The recovery—“restoration of the improperly reduced value”—flows to the corporation.62 At trial, Brinckerhoff sought to prove “how [the Partnership] was harmed[,]” and he presented evidence of harm only as to the Partnership, not to the individual unitholders.63 The Defendants, at trial, were required to respond to the proof presented. 59 Standing Op., 132 A.3d at 78 (quoting Verified Derivative Compl., supra note 58, at A119 ¶ 8). See also Pre-Trial Stipulation & Order at A529, In re El Paso Pipeline Partners, L.P. Derivative Litig., C.A. No. 7141-VCL (Nov. 10, 2014) (contending that the Partnership “paid [the Parent] an unfairly high price” in the Fall Dropdown); see also Verified Derivative Compl., supra note 58, at A144 ¶ 100 (alleging that “the terms of the [Fall Dropdown] were not fair and reasonable to [the Partnership]” because the General Partner caused the Partnership to pay “hundreds of millions of dollars more than the value of those assets”). 60 Gentile, 906 A.2d at 99; see also Caspian Select Credit Master Fund Ltd. v. Gohl, 2015 WL 5718592, at  (Del. Ch. Sept. 28, 2015) (noting the general rule that “claims of corporate overpayment are derivative”). 61 Protas v. Cavanagh, 2012 WL 1580969, at  (Del. Ch. May 4, 2012) (citing Gentile, 906 A.2d at 99). 62 Gentile, 906 A.2d at 99. 63 Standing Op., 132 A.3d at 80 (“Brinckerhoff focused on proving damages by showing that [the Partnership] overpaid in the Fall Dropdown, and the General Partner sought to rebut that theory. The parties did not present evidence at trial regarding specific harm to the unaffiliated limited partners.”); see Liability Op., 2015 WL 1815846, at  (stating that Brinckerhoff argued in support of damages that, due to the General Partner‟s breach of the LPA, the Partnership paid too much in the Fall Dropdown); id. at -27 (discussing Brinckerhoff‟s trial expert, who presented a calculation of the overpayment that occurred in the Fall Dropdown at the Partnership level); see also A653 (Tr. 289:17-24) (testimony of Brinckerhoff‟s damages expert agreeing that his opinion was “limited to a determination of whether the purchase price paid by [the Partnership] 23 Based on the evidence presented at trial, the Court of Chancery found that the alleged overpayment “left the Partnership $171 million poorer.”64 Any economic harm to Brinckerhoff devolved upon him as an equity holder in the form of the proportionally reduced value of his units—a classically derivative injury. “Where all of a corporation‟s stockholders are harmed and would recover pro rata in proportion with their ownership of the corporation‟s stock solely because they are stockholders, then the claim is derivative in nature.”65 The Court of Chancery‟s analysis in Gerber v. EPE Holdings, LLC66 is persuasive. In Gerber, the Court of Chancery considered a limited partner‟s claim that an MLP‟s general partner caused the partnership to purchase an asset for hundreds of millions of dollars more than its fair value. The limited partnership agreement provided a mechanism for resolving conflicts using a safe harbor provision.67 Following a merger, the defendants challenged the plaintiff‟s standing. The Court of Chancery, applying Tooley, held that the plaintiff‟s claims were derivative, reasoning that the plaintiff had was fair and reasonable to the [P]artnership and no less favorable to the [P]artnership than those generally being provided to or available from unrelated third parties”). 64 Standing Op., 132 A.3d at 104 (emphasis added). 65 Feldman v. Cutaia (Feldman II), 951 A.2d. 727, 733 (Del. 2008) (citing Gentile, 906 A.2d at 99). 66 2013 WL 209658 (Del. Ch. Jan. 18, 2013). 67 Id. at  (“A conflict of interest between the [g]eneral [p]artner and the limited partners „shall be permitted and deemed approved by all [p]artners, and shall not constitute a breach of [the LPA] . . . , or of any duty stated or implied by law or equity, if the resolution or course of action in respect of such conflict of interest is (i) approved by [s]pecial [a]pproval.‟” (alteration in original and added)). 24 “not identified any independent harm suffered by the limited partners. Instead, [the MLP] suffered all the harm at issue—it paid too much.”68 Notably, the court in Gerber declined to distinguish Tooley based on the contractual aspect of the plaintiff‟s claims, reasoning that, “unless Tooley does not apply to limited partnerships, it is difficult to see how [the plaintiff‟s] claims are anything other than derivative.”69 It observed that “[i]f the contractual rights of the limited partners are „independent‟ of the partnership‟s rights, then the claims will be considered direct.”70 However, the court saw “no separation” between the plaintiff‟s claim and a claim belonging to the MLP, noting that the effect of the MLP‟s payment of too much was “immediately and discretely upon” the MLP.71 Thus, the claim was derivative. Like the plaintiff in Gerber, Brinckerhoff asserts an overpayment claim. The alleged overpayment resulted in immediate harm to the Partnership—a reduction in the Partnership‟s overall value. Here the contract right asserted was not separate and distinct from the rights of the entity. The “best interests of the Partnership” standard provided “no separation” between the Partnership‟s contractual rights and any rights of the limited partners. In unique circumstances, this Court has recognized that some claims can be dualnatured—that is, both direct and derivative.72 Again, we caution that simply because 68 Id. at . 69 Id. 70 Id. (quoting Anglo Am., 829 A.2d at 150). 71 Id. 72 See, e.g., Gentile, 906 A.2d at 99. 25 limited partners are parties to the LPA, and duties and rights could potentially flow to either the limited partners or the Partnership, does not mean that every breach of any provision of the LPA is “dual.” Here, the Court of Chancery noted that “the decisions in which the Delaware Supreme Court has recognized dual-natured claims have been controversial and stand in tension with other decisions that have characterized similar claims as purely derivative.”73 It identified this Court‟s decision in Gentile as one such case. In Gentile, a corporation‟s CEO and controlling stockholder forgave a portion of the company‟s $3 million debt to him in exchange for additional equity. The applicable contractual conversion rate was $0.50 of debt per share, but the CEO and the company‟s board of directors (which included himself and one other person) agreed to $0.05 of debt per share. Without disclosing the underlying transaction, the board secured a stockholder vote authorizing the shares needed to issue the additional equity. The share issuance increased the CEO‟s equity position from 61.19% to 93.49%, thereby decreasing the minority stockholders‟ interest from 38.81% to 6.51%. When the CEO later negotiated a merger between the corporation and its only competitor, the CEO received a generous put agreement that was not disclosed to other stockholders. The trial court dismissed the ensuing stockholder litigation after determining that the claims were exclusively derivative and that the plaintiff stockholders lost standing after the merger. On appeal, this Court recognized two independent aspects of the plaintiffs‟ complaint—the overpayment claim and the minority‟s significant loss of cash value and 73 Standing Op., 132 A.3d at 82 (footnote omitted). 26 voting power. These claims constituted “a species of corporate overpayment claim” that is “both derivative and direct in character.”74 This Court concluded that “[u]nlike the typical „overpayment‟ transaction,”75 a dual-natured claim “arises where: (i) a stockholder having majority or effective control causes the corporation to issue „excessive‟ shares of its stock in exchange for assets of the controlling stockholder that have a lesser value; and (2) the exchange causes an increase in the percentage of the outstanding shares owned by the controlling shareholder, and a corresponding decrease in the share percentage owned by the public (minority) shareholders.” 76 This Court reversed, allowing the plaintiffs to proceed with direct claims. Gentile concerned a controlling shareholder and transactions that resulted in an improper transfer of both economic value and voting power from the minority 74 Gentile, 906 A.2d at 99; see also Gatz v. Ponsoldt, 925 A.2d 1265, 1280-81 (Del. 2007). 75 Gentile, 906 A.2d at 100 n.21. 76 Id. at 100. In Feldman II, this Court reiterated that “dilution claims are „not normally regarded as direct, because any dilution in value of the corporation‟s stock is merely the unavoidable result (from an accounting standpoint) of the reduction of the value of the entire corporate entity, of which each share of equity represents an equal fraction.‟” Feldman II, 951 A.2d at 732 (quoting Gentile, 906 A.2d at 99). We commented further that “[i]n order to state a direct claim, the plaintiff must have suffered some individualized harm not suffered by all of the stockholders at large.” Id. at 733 (citing Gentile, 906 A.2d at 99) (citation omitted). We decline to extend Gentile further to say that a direct claim arises wherever a controlling stockholder extracts economic value from an entity to its benefit and to the detriment of the minority stockholders. Any broader interpretation would swallow the general rule that equity dilution claims are derivative. See Feldman v. Cutaia, 956 A.2d 644, 657 (Del. Ch. 2007) (seeking to avoid an interpretation of Gentile that “would swallow the general rule that equity dilution claims are solely derivative”), aff’d Feldman II, 951 A.2d 727. Here, the Partnership was already controlled by the General Partner, and there is no suggestion that the transaction increased the General Partner‟s or Parent‟s control at the expense of the limited partners, or that the transaction affected the limited partners‟ voting rights in any way. 27 stockholders to the controlling stockholder.77 Brinckheroff‟s claim does not satisfy the unique circumstances presented by the Gentile “species of corporate overpayment claim[s][.]”78 Brinckerhoff never alleged and did not prove that the Partnership‟s overpayment increased the General Partner‟s or the Parent‟s control at the expense of the limited partners. Brinckerhoff argues that, when the Partnership overpaid for the assets involved in the Fall Dropdown, the Parent was enriched at the expense of the unaffiliated unitholders. He contends that this “expropriation” constituted a direct injury to the unaffiliated limited partners. Although Brinckerhoff concedes that this expropriation of economic value to a controller was not coupled with any voting rights dilution, he argues that this distinction is “immaterial.” We decline the invitation to further expand the universe of claims that can be asserted “dually” to hold here that the extraction of solely economic value from the minority by a controlling stockholder constitutes direct injury. To do so would deviate from the Tooley framework and “largely swallow the rule that claims of corporate 77 Gentile, 906 A.2d at 100 (“[T]he end result of this type of transaction is an improper transfer—or expropriation—of economic value and voting power from the public shareholders to the majority or controlling stockholder.” (emphasis added)); id. (noting that “a separate harm” results, namely, an “extraction from the public shareholders, and a redistribution to the controlling shareholder of a portion of the economic value and voting power embodied in the minority interest” (emphasis added); see also Gatz, 925 A.2d at 1280-81 (determining that a claim was dual in nature where “the fiduciary exercise[d] its stock control to expropriate, for its benefit, economic value and voting power from the public shareholders”); Feldman II, 951 A.2d at 732 n.26 (noting that “Gentile and Gatz both involved situations with a controlling shareholder and transactions that resulted in an improper transfer of both economic value and voting power from the minority stockholders to the controlling stockholder”). 78 Gentile, 906 A.2d at 99. 28 overpayment are derivative” by permitting stockholders to “maintain a suit directly whenever the corporation transacts with a controller on allegedly unfair terms.”79 As to the second prong of Tooley, the benefit of any recovery must flow solely to the Partnership. The Court of Chancery recognized that “returning the full amount [of the overpayment] to the entity” was the “most obvious” remedy,80 and that Brinkerhoff sought to recover damages “on behalf of” the Partnership.81 Were Brinckerhoff to recover directly for the alleged decrease in the value of the Partnership‟s assets, the damages would be proportionate to his ownership interest. The necessity of a pro rata recovery to remedy the alleged harm indicates that his claim is derivative.82 In deviating from an entity-level remedy, the Court of Chancery relied on cases involving “insider transfers” of stock and “stock dilution cases[,]” which it read to permit remedies “at the stockholder level, without any payment to the corporation, such as an order adjusting the rights of the stock or invalidating a portion of the shares.”83 As discussed above, these cases are inapposite, as Brinckerhoff does not claim that the Fall Dropdown affected his voting rights or the Parent‟s relative control of the Partnership.84 79 Gohl, 2015 WL 5718592, at  (citing Teamsters Union 25 Health Servs. & Ins. Plan v. Baiera, 119 A.3d 44, 55-56 (Del. Ch. 2015)). 80 Standing Op., 132 A.3d at 111. 81 Verified Derivative Compl., supra note 58, at A145 ¶ 102. 82 See Feldman II, 951 A.2d at 733 (citing Gentile, 906 A.2d at 99)). 83 Standing Op., 132 A.3d at 111-12 (citing Carsanaro v. Bloodhound Techs., Inc., 65 A.3d 618, 656-57 (Del. Ch. 2013); In re Loral Space & Commc’ns Inc. (Loral Space I), 2008 WL 4293781, at  (Del. Ch. Sept. 19, 2008), aff’d Loral Space II, 977 A.2d 867; Linton v. Everett, 1997 WL 441189, at  (Del. Ch. July 31, 1997)). 84 Cf. Loral Space I, 2008 WL 4293781, at  (after agreeing with minority shareholders in a derivative action that a controlling stockholder locked up majority ownership of the company in 29 Finally, Brinckerhoff never presented evidence at trial of specific harm suffered by the limited partners, as the Court of Chancery stated. It follows that the General Partner should not be penalized for failing to defend at trial an element of a claim (e.g., that the unitholders were directly harmed by the Fall Dropdown) that the plaintiff never attempted to prove.85 Thus, Brinckerhoff‟s overpayment claim is exclusively derivative under Tooley. C. The Merger Extinguished Brinckerhoff’s Claim In Lewis v. Anderson,86 this Court set forth the continuous ownership requirement.87 We held that “[a] plaintiff who ceases to be a shareholder, whether by reason of a merger or for any other reason, loses standing to continue a derivative suit.”88 This rule flows from the fact that, following a merger, “the derivative claim—originally belonging to the acquired corporation—is transferred to and becomes an asset of the acquiring corporation as a matter of statutory law.”89 an unfair, conflicted stock purchase transaction, reforming the agreement to convert the controller‟s new shares into nonvoting common stock, thereby preserving its previous degree of voting power); Linton, 1997 WL 441189, at  (invalidating stock issuance after the court determined director defendants did not establish that the transaction was entirely fair). 85 See Standing Op., 132 A.3d at 80 (stating that “[t]he parties did not present evidence at trial regarding specific harm to the unaffiliated limited partners”). 86 477 A.2d 1040 (Del. 1984). 87 Id. at 1049. The statutory foundation for the continuous ownership requirement in the corporate realm is echoed in the limited partnership context. Compare 8 Del. C. § 259, with 6 Del. C. § 17-211(h). 88 Lewis, 477 A.2d at 1049. 89 Ark. Teacher, 75 A.3d at 894 (citing Lewis, 477 A.2d at 1049-50; 8 Del. C. § 259 (2013)). 30 Here, Brinckerhoff‟s claims were an asset of the Partnership. The claims passed by operation of law to Kinder Morgan as a result of the Merger. The Merger therefore extinguished Brinckerhoff‟s standing to assert these claims. Brinckerhoff‟s remedy was to challenge the Merger, but he elected not to do so. D. The Cross-Appeal Given our holding that Brinckerhoff lacks standing as to the Fall Dropdown, the same reasoning applies to his claims challenging the Spring Dropdown—the subject of his cross-appeal. We therefore dismiss Brinckerhoff‟s cross appeal.