Court Opinion

ID: 4444735
Source: CourtListenerOpinion
Date Created: 2019-10-07 15:03:08.343842+00
Date Added: 2024-06-11T14:53:07.114024
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

BANDERA MASTER FUND LP, BANDERA                  )
VALUE FUND LLC, BANDERA OFFSHORE                 )
VALUE FUND LTD., LEE-WAY                         )
FINANCIAL SERVICES, INC., and JAMES              )
R. MCBRIDE, on behalf of themselves and          )
similarly situated BOARDWALK PIPELINE            )
PARTNERS, LP UNITHOLDERS,                        )
                                                 )
               Plaintiffs,                       )
                                                 )
       v.                                        )    C.A. No. 2018-0372-JTL
                                                 )
BOARDWALK PIPELINE PARTNERS, LP,                 )
BOARDWALK PIPELINES HOLDING                      )
CORP., BOARDWALK GP, LP,                         )
BOARDWALK GP, LLC, and LOEWS                     )
CORP.,                                           )
                                                 )
               Defendants.                       )

                             MEMORANDUM OPINION

                              Date Submitted: July 2, 2019
                             Date Decided: October 7, 2019

A. Thompson Bayliss, J. Peter Shindel, Jr., ABRAMS & BAYLISS LLP, Wilmington,
Delaware; Attorneys for Plaintiffs.

Srinivas M. Raju, Blake Rohrbacher, Matthew D. Perri, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, Delaware; Rolin P. Bissell, YOUNG CONAWAY
STARGATT & TAYLOR LLP, Wilmington, Delaware; Daniel A. Mason, PAUL, WEISS,
RIFKIND, WHARTON & GARRISON LLP, Wilmington, Delaware; Lawrence Portnoy,
Charles S. Duggan, Gina Cora, DAVIS POLK & WARDWELL LLP, New York, New
York; Stephen P. Lamb, Andrew G. Gordon, PAUL, WEISS, RIFKIND, WHARTON &
GARRISON LLP, New York, New York; Attorneys for Defendants.

LASTER, V.C.
       In April 2018, Boardwalk Pipeline Partners, LP (the “Partnership” or “Boardwalk”)

announced that its general partner was seriously considering whether to exercise an option

to purchase all the Partnership’s publicly traded common units (the “Call Right”). The

announcement caused the trading price of the common units to plummet. In July, the

general partner exercised the Call Right and purchased the common units at what the

plaintiffs contend was an artificially depressed price.

       The plaintiffs are former holders of common units who seek to hold the defendants

accountable for the allegedly wrongful exercise of the Call Right. The plaintiffs contend

that the defendants should be held primarily liable for breaching their fiduciary duties, their

express contractual obligations, and their implied contractual obligations. The plaintiffs

contend that the defendants who are not primarily liable should be secondarily liable for

aiding and abetting the other defendants’ breaches of fiduciary duty and for tortious

interference with contract.

       The defendants moved to dismiss the complaint under Rule 12(b)(6) for failing to

state a claim on which relief can be granted. This decision grants the motion as to the claims

premised on breaches of fiduciary duty. It also grants the motion as to certain claims that

sound in contract. It denies the motion as to other contract-based claims.

                          I.      FACTUAL BACKGROUND

       The facts are drawn from the currently operative complaint, the documents integral

to it, and the documents that it incorporates by reference. At this procedural stage, the

complaint’s allegations are assumed to be true, and the plaintiffs receive the benefit of all
reasonable inferences. Citations in the form “Ex. — at —” refer to exhibits to the

complaint.

A.     The Partnership

       The Partnership is a Delaware limited partnership engaged in the business of storing

and transporting natural gas products. The Partnership’s general partner is defendant

Boardwalk GP, LP (the “General Partner”), which owns a 2% general partner interest in

the Partnership. The General Partner is itself a Delaware limited partnership, and the

general partner of the General Partner is defendant Boardwalk GP, LLC (“GPGP”).

Defendant Loews Corporation (“Loews”) owns and controls GPGP through defendant

Boardwalk Pipelines Holding Corp. (“Holdings”), which is the sole member of GPGP.

Loews thus controls both the General Partner and the Partnership.

       Before the events giving rise to this litigation, the Partnership’s common units

traded on the New York Stock Exchange under the symbol BWP. Through Holdings,

Loews owned common units representing a 51.2% limited partner interest in the

Partnership.

       The Partnership’s internal affairs were governed by its Third Amended and Restated

Agreement of Limited Partnership (the “Partnership Agreement” or “Agr.”). Section 15.1

of the Partnership Agreement set out the Call Right, which gave the General Partner the

option under specified circumstances to acquire all of the common units that the General

Partner or its affiliates did not already own.

       Two conditions had to be met before the General Partner could exercise the Call

Right. First, the General Partner and its affiliates had to own more than 50% of the

                                                 2
Partnership’s limited partner interests. Second, the General Partner had to receive an

“Opinion of Counsel” that its pass-through tax status “has or will reasonably likely in the

future have a material adverse effect on the maximum applicable rate that can be charged

to customers.” Agr. § 15.1(b). The Partnership Agreement defined the term “Opinion of

Counsel” as “a written opinion of counsel . . . acceptable to the General Partner.” Id. § 1.1

at 17.

         Section 15.1(c) of the Partnership Agreement required the Partnership to mail a

notice to the record holders of common units informing them about the exercise of the Call

Right. The pricing formula for the Call Right used a date three days before the mailing of

the notice as the end date for a measurement period. Under the formula, the purchase price

per common unit would be the average of the daily closing prices for the common units

during the 180 consecutive trading days immediately before the end date. Through this

mechanism, the purchase price would be set before the holders of common units received

notice that the General Partner had exercised the Call Right, resulting in a purchase price

that was not affected by the exercise of the Call Right.

B.       FERC Changes Its Rate-Setting Policies.

         The Partnership earns money by charging customers for natural gas transportation

and storage services. In pipeline parlance, the customers are sometimes called shippers,

and the rates that the pipeline charges its shippers are sometimes called tariffs.

         The Federal Energy Regulatory Commission (“FERC”) establishes a schedule of

approved rates for each interstate pipeline. The approved rates are not mandatory rates. The

pipeline and its shippers can contract for services at negotiated rates, which can be higher

                                              3
or lower than the FERC-approved rates. When negotiating the terms of the contract,

however, the shipper can always reject the pipeline’s terms and choose to ship at the FERC-

approved rates. Because the shipper has recourse to the FERC-approved rates, the latter are

called “recourse rates.” The pipeline can also choose to charge shippers discounted rates,

which must be less than the recourse rates.

       When setting recourse rates, FERC calculates an amount sufficient to enable the

pipeline to recover all of its costs of service plus earn a profit that will compensate its

investors. One component of a pipeline’s cost of service is the income taxes that it pays.

The level of profit reflects the pipeline’s cost of capital based on the components of its

capital structure.

       Historically, FERC allowed pipeline owners to recover an income tax allowance

based on the assumption that the pipeline would pay federal corporate income taxes at the

longstanding headline rate of 35%. FERC even allowed pipelines organized as master

limited partnerships (“MLP pipelines”) to recover this income tax allowance, despite the

fact that MLP pipelines are pass-through entities for tax purposes and thus do not pay tax

at the entity level.

       On March 15, 2018, FERC announced a major change in its treatment of MLP

pipelines for purposes of setting tariff rates. Ex. 4 (the “Revised Policy Statement”). Under

the new policy, MLP pipelines would no longer be permitted to recover an income tax

allowance when calculating their costs of service. The Revised Policy Statement became

effective when it was published in the Federal Register on March 21, 2018.

                                              4
       At the same time it announced the Revised Policy Statement, FERC issued a notice

of inquiry that solicited comment on the implications of the Revised Policy Statement for

a separate aspect of pipeline tax treatment. See Inquiry Regarding the Effect of the Tax

Cuts and Jobs Act on Commission-Jurisdictional Rates, 83 Fed. Reg. 12,371 (Mar. 21,

2018) (the “Notice of Inquiry”). Various tax regulations permit pipelines to depreciate their

assets on an accelerated basis. When calculating tariff rates, however, FERC uses straight-

line depreciation. Because a pipeline can claim depreciation more quickly than FERC’s

method anticipates, the pipeline pays lower taxes in the early years, resulting in greater

cash flows than FERC’s projections contemplate. The value of the increased cash flows

builds up as an asset on the pipeline’s balance sheet called “Accumulated Deferred Income

Tax” or “ADIT.” Once the accelerated depreciation ends, the pipeline pays higher taxes

than FERC’s projections contemplate, and the increased tax payments reduce the ADIT

balance.

       By accelerating depreciation and deferring taxes, the pipeline benefits from the

time-value of money. FERC therefore historically treated the value of the pipeline’s ADIT

balance as cost-free capital when determining the rate of return that a pipeline needed to

earn from its tariff rates. All else equal, a pipeline with an ADIT balance would have lower

recourse rates than a pipeline without an ADIT balance, because the pipeline with an ADIT

balance would not need to earn a return on that portion of its capital structure. The same

principle would hold for a relatively higher ADIT balance versus a lower ADIT balance.

       In the Notice of Inquiry, FERC asked for comments regarding the implications of

the Revised Policy Statement for the rules governing ADIT balances. One possible

                                             5
implication would be the elimination of ADIT balances for MLP pipelines. Eliminating

their ADIT balances would benefit those entities by removing a block of cost-free capital

from their asset bases, thereby increasing the value of the assets on which MLP pipelines

needed to earn a return. Viewed in isolation, the elimination of ADIT balances would

enable MLP pipelines to ask FERC to approve higher recourse rates. The implications of

removing the ADIT balances were not entirely clear, however, because it could be argued

that any benefits from removing the ADIT balances should be shared with shippers,

creating near-term liabilities for the MLP pipelines that could offset the benefits.

       The Notice of Inquiry also addressed the implications of the Tax Cuts and Jobs Act

of 2017 (the “Tax Act”), which reduced the headline corporate income tax rate from 35%

to 21%. Viewed in isolation, a reduction in the tax rate would reduce the value of

accelerated depreciation and hence the value of the ADIT balances. The implementation

of the Tax Act thus had the same potential implications as the elimination of ADIT

balances, albeit to a lesser degree because the ADIT balances would be reduced rather than

eliminated. The Tax Act also affected all pipelines, not just MLP pipelines.

       In addition to the Revised Policy Statement and Notice of Inquiry, FERC issued a

notice of proposed rulemaking that set out a process for addressing the implications of the

Revised Policy Statement and the Tax Act for pipeline recourse rates (the “Notice of

Rulemaking”). The proposed rulemaking contemplated that each pipeline would submit a

new form to FERC in which the pipeline owner would report information and select one

of four options for its rates.

                                              6
C.     The Partnership Responds To The Revised Policy Statement.

       The day after FERC issued the Revised Policy Statement, the Notice of Inquiry, and

the Notice of Rulemaking, the Partnership addressed the implications of the regulatory

changes. In a press release dated March 16, 2018, the Partnership stated: “Based on a

preliminary assessment, Boardwalk does not expect FERC’s proposed policy revisions to

have a material impact on the company’s revenues.” Ex. 9. The press release explained that

for two of the Partnership’s four operating subsidiaries, “[a]ll of the firm contracts are

negotiated or discounted rate agreements, which are not ordinarily affected by FERC’s

policy revisions.” Id. For its other two operating subsidiaries, a rate moratorium remained

in place until 2023, so the Revised Policy Statement would not affect the rates those

subsidiaries could charge.

       Approximately one month later, on April 25, 2018, the Partnership responded to the

Notice of Inquiry by submitting comments to FERC. The Partnership essentially asked

FERC to reverse the Revised Policy Statement and provide instead “that all pipelines,

including, [sic] MLP pipelines, are permitted to propose a tax allowance in future rate

proceedings . . . .” Ex. 10 at 5. The Partnership also asked FERC to clarify how it planned

to treat ADIT balances and confirm that the revised policy would not affect negotiated rate

agreements.

D.     The Partnership Announces The Potential Exercise Of The Call Right.

       On April 30, 2018, the Partnership filed its Form 10-Q. In a section discussing

FERC’s recent regulatory actions, the Partnership stated:

                                            7
       While we are continuing to review FERC’s Revised Policy Statement,
       [Notice of Inquiry,] and [Notice of Rulemaking], based on a preliminary
       assessment, we do not expect them to have a material impact on our revenues
       in the near term. All of the firm contracts on Gulf Crossing and the majority
       of contracts on Texas Gas Transmission, LLC are negotiated or discounted
       rate agreements, which are not ordinarily affected by FERC’s policy
       revisions. Gulf South currently has a rate moratorium in place with its
       customers until 2023, which we believe will be unaffected by these actions.

Ex. 11 at 28. The Partnership thus generally maintained the position taken in its initial press

release, while clarifying that FERC’s regulatory actions were unlikely to have a material

impact on revenues in the near term. The Partnership’s initial press release had not limited

the absence of a material impact to the near term.

       Despite this relatively anodyne disclosure, the Partnership’s Form 10-Q went on to

disclose that in light of FERC’s actions, the Partnership was evaluating whether to remain

a publicly traded entity, citing the potential exercise of the Call Right by the General

Partner (the “Potential-Exercise Disclosure”). See id. at 28–29, 34. The Form 10-Q stated

flatly: “[O]ur general partner has a call right that may become exercisable because of

recent FERC action. Any such transaction or exercise may require you to dispose of

your common units at an undesirable time or price, and may be taxable to you.” Id. at 34

(emphasis in original). Continuing, the Form 10-Q explained:

       [A]s has been described in our SEC filings since our initial public offering,
       our general partner has the right under our partnership agreement to call and
       purchase all of our common units if (i) it and its affiliates own more than
       50% in the aggregate of our outstanding common units and (ii) it receives an
       opinion of legal counsel to the effect that our being a pass-through entity for
       tax purposes has or will reasonably likely in the future have a material
       adverse effect on the maximum applicable rate that can be charged to
       customers by our subsidiaries that are regulated interstate natural gas
       pipelines. Because our general partner and its affiliates hold more than 50%

                                              8
        of our outstanding common units, this call right would become exercisable
        if our general partner receives the specified opinion of legal counsel.

        The magnitude of the effect of the FERC’s Revised Policy Statement may
        result in our general partner being able to exercise this call right. Any
        exercise by our general partner of its call right is permitted to be made in our
        general partner’s individual, rather than representative, capacity; meaning
        that under the terms of our partnership agreement our general partner is
        entitled to exercise such right free of any fiduciary duty or obligation to any
        limited partner and it is not required to act in good faith or pursuant to any
        other standard imposed by our partnership agreement. Any decision by our
        general partner to exercise such call right will be made by [Holdings], the
        sole member of [GPGP], rather than by our Board. . . . We have been
        informed by [Holdings] that it is analyzing the FERC’s recent actions and
        seriously considering its purchase right under our partnership agreement in
        connection therewith.

Id. at 34 (emphasis added).

        On the same day, the Partnership held an earnings call. During the call, the

Partnership reiterated its clarification that the policy was unlikely to have a material impact

on revenues in the near term. See Ex. 12 at 5. The Partnership also reiterated that Loews

was “seriously considering” whether to cause the General Partner to exercise the Call

Right. Id. The Partnership declined to take questions concerning “the decision making

process or the possible timing of any such decision,” instead referring investors to its public

filings. Id.; see id. at 8.

        Later that day, Loews made a similar announcement during its earnings call. Loews

stated that it was “exploring all [its] options” and that “no decisions ha[d] yet been made.”

Ex. 13 at 3. Loews likewise declined to answer questions about the Call Right, instead

referring investors to its public filings. See id. at 3, 6, 7.

                                                 9
       During the week after the Potential-Exercise Disclosure, the market price of the

Partnership’s common units fell from $11.04 to $9.26, reflecting a decline of 16%.

Numerous investors and research analysts objected to Lowes and the General Partner

relying on FERC’s regulatory actions as a basis for exercising the Call Right. They also

objected that the Potential-Exercise Disclosure enabled the Partnership and Loews to

undermine the contractually specified mechanism for determining the call price.

E.     The Original Plaintiffs File Suit And Reach A Settlement.

       On May 24, 2018, two holders of common units (the “Original Plaintiffs”) filed this

action and moved for expedited proceedings. The Original Plaintiffs wanted to prevent the

General Partner from exercising the Call Right using a 180-day measurement window that

included trading days that had been affected by the Potential-Exercise Disclosure. The

defendants opposed the motion, arguing that the dispute was not ripe because the General

Partner had not yet elected to exercise the Call Right. The court agreed with the defendants

and denied the motion to expedite.

       After defeating the motion to expedite on the theory that the claims were not yet

ripe, defense counsel contacted the lawyers for the Original Plaintiffs to explore settling

the not-yet-ripe claims. Ex. 35 at 14–17. On May 30, 2018, the Original Plaintiffs offered

to settle if the defendants agreed to exercise the Call Right using June 1, 2018, as the end

date for the 180-day measurement period, which would have included twenty-four affected

trading days in the calculation. The defendants countered with an end date of September 1,

2018, which would have included sixty-four affected days in the calculation. After further

back and forth, the parties agreed to an end date of June 29, 2018, which included forty-

                                            10
four affected days in the calculation. Using that end date, the pricing formula yielded a

purchase price for the Call Right of $12.06 per unit.

       The parties spent two weeks drafting settlement documents. On June 22, 2018, they

informed the court by email that they had reached an agreement in principle and asked the

court to review the settlement papers in camera. The court rejected that request as seeking

a non-public advisory opinion.

       Later that night, the parties signed and filed their proposed settlement, which

contemplated the certification of a class and provided the defendants with a broad release

of all claims. After the settlement was announced, several unitholders objected to its terms.

See Exs. 41 & 42.

F.     The Call-Right Exercise

       On June 29, 2018, the Partnership announced that the General Partner would

exercise the Call Right on July 18 at a price of $12.06 per unit (the “Call-Right Exercise”).

The Partnership reported that Baker Botts LLP had provided the General Partner with the

opinion of counsel required by the Partnership Agreement (the “Tax Opinion”).

       A few hours later, FERC announced a final rule that addressed several open issues

about its rate-setting policies for MLP pipelines, including two of the issues that the

Partnership had raised in its comments. Ex. 2 (the “Final Rule”). First, FERC announced

that because the Revised Policy had eliminated the income tax allowance for MLP

pipelines, those entities could eliminate their accumulated ADIT balances. Going forward,

a pipeline owner like the Partnership would not need to need subtract an ADIT balance

from the pipeline’s asset base when seeking approval for a tariff rate and thus could seek a

                                             11
competitive rate of return on its entire rate base. The practical effect of the Final Rule was

to enable MLP pipelines to ask FERC to approve higher rates. Equally important, FERC

determined that when an MLP pipeline eliminated its ADIT balance, it would not be

required to return any amounts to shippers. Ex. 2 at 85–90. As a result of these

clarifications, instead of the Revised Policy Statement having an adverse impact on the

rates that MLP pipelines could charge, the Revised Policy Statement had a potentially

favorable impact.

       On the second issue, FERC confirmed that the Revised Policy Statement would not

affect negotiated rate contracts. Id. at 157–60. The Revised Policy Statement would thus

not affect the Partnership’s negotiated rates, consistent with the announcement the

Partnership initially made in response to the Revised Policy Statement.

       On July 18, 2018, the General Partner exercised the Call Right. As a result, the

Partnership became a wholly owned subsidiary of the General Partner and its affiliates.

G.     The Settlement Is Rejected, And The Current Plaintiffs Pursue The
       Litigation.

       The current plaintiffs objected to the proposed settlement. On September 28, 2018,

the court declined to approve it. Because the current plaintiffs had prevailed on their

objections, the court permitted them to take over the litigation.

       The current plaintiffs subsequently filed the operative complaint. They allege that

the defendants carried out a “deliberate scheme” to “manipulate[] Boardwalk’s common

unit price for their own benefit” that included making the Potential-Exercise Disclosure so

                                             12
that the price of the common units would plummet. Compl. ¶¶ 1, 171. Based on the

allegations in the complaint, the current plaintiffs assert six causes of action:

      Count I seeks a declaratory judgment that the defendants breached the express terms
       of the Partnership Agreement, the implied covenant of good faith and fair dealing,
       and their fiduciary duties.

      Count II contends that the Partnership, the General Partner, and GPGP breached the
       Partnership Agreement by exercising the Call Right in bad faith and in breach of the
       express terms of the Partnership Agreement.

      Count III contends that the Partnership, the General Partner, and GPGP breached
       the implied covenant of good faith and fair dealing that inheres in the Partnership
       Agreement by “teasing” the market that they were “seriously considering”
       exercising the Call Right, thereby depressing the unit price and allowing the General
       Partner to exercise the Call Right at a price significantly lower than intended by the
       Partnership Agreement. Compl. ¶ 226.

      Count IV contends that Holdings, the General Partner, GPGP, and Loews breached
       their equitable and contractual fiduciary duties to the Partnership and its limited
       partners by engaging in a “scheme [that] culminat[ed] in the improper and
       unauthorized exercise of the Call Right to purchase the common units of all minority
       unitholders after Defendants had deliberately depressed the Purchase Price by
       threatening to exercise the Call Right . . . .” Compl. ¶¶ 240, 242.

      Count V contends that GPGP, Holdings, and Loews aided and abetted the General
       Partner’s breach of its equitable and contractual fiduciary duties to the Partnership
       and its limited partners by causing the General Partner to breach its duties.

      Count VI alleges that GPGP, Holdings, and Loews tortiously interfered with
       contractual relations by using their control over the General Partner to cause it to
       breach the Partnership Agreement.

                               II.      LEGAL ANALYSIS

       The defendants have moved to dismiss the complaint under Rule 12(b)(6) for failure

to state a claim on which relief can be granted. When considering a Rule 12(b)(6) motion,

this court (i) accepts as true all well-pleaded factual allegations in the complaint, (ii) credits

vague allegations if they give the opposing party notice of the claim, and (iii) draws all

                                               13
reasonable inferences in favor of the plaintiffs. Central Mortg. Co. v. Morgan Stanley

Mortg. Capital Hldgs. LLC, 27 A.3d 531, 535 (Del. 2011). Dismissal is inappropriate

“unless the plaintiff would not be entitled to recover under any reasonably conceivable set

of circumstances.” Id.

       This decision does not address the counts of the complaint in the order presented. It

does not discuss Count I at all, because that count seeks redundant declaratory judgments

on the same issues raised substantively by the other counts. This decision’s rulings on the

other counts suffice to address the parallel declaratory judgments sought in Count I. This

decision starts with Count IV, which asserts a claim for breach of fiduciary duty, then

addresses a related claim in Count V for aiding and abetting a breach of fiduciary duty.

These claims are readily swept away because the Partnership Agreement eliminated all

fiduciary duties. This decision then returns the core contract-based claims that logically

demarcate the disputed terrain in a purely contractual entity. At the pleading stage, the

complaint states claims for breach of the express provisions of the Partnership Agreement

(Count II), breach of the implied covenant that inheres in the Partnership Agreement

(Count III), and tortious interference with the Partnership Agreement (Count VI).

A.     Count IV: Breach Of Fiduciary Duty

       Count IV of the complaint contends that the General Partner and its controllers

breached their fiduciary duties when engaging in the conduct challenged in the complaint.

The language of the Partnership Agreement clearly eliminated fiduciary duties. As a result,

Count IV fails to state a viable claim.

                                            14
       The Delaware Limited Partnership Act gives “maximum effect to the principle of

freedom of contract and to the enforceability of partnership agreements.” 6 Del. C. § 17-

1101(c). This freedom is “often exercised in the MLP context” by “eliminating any

fiduciary duties a partner owes to others in the partnership structure.” Dieckman v. Regency

GP LP, 155 A.3d 358, 366 (Del. 2017) (citing 6 Del. C. § 17-1101(d)). By doing so, the

drafters of a limited partnership agreement replace fiduciary duties with contractual

obligations. Id. If fiduciary duties have been validly eliminated, “the limited partners

cannot rely on traditional fiduciary principles to regulate the general partner’s conduct.”

Brinckerhoff v. Enbridge Energy Co., 159 A.3d 242, 252 (Del. 2017).

       The drafters of the Partnership Agreement chose to eliminate all common law

duties, including fiduciary duties, that the General Partner and its affiliates might otherwise

have owed to the Partnership and its limited partners. Section 7.9(e) of the Partnership

Agreement states:

       Except as expressly set forth in this Agreement, neither the General Partner
       nor any other Indemnitee shall have any duties or liabilities, including
       fiduciary duties, to the Partnership or any Limited Partner or Assignee and
       the provisions of this Agreement, to the extent that they restrict, eliminate or
       otherwise modify the duties and liabilities, including fiduciary duties, of the
       General Partner or any other Indemnitee otherwise existing at law or in
       equity, are agreed by the Partners to replace such other duties and liabilities
       of the General Partner or such other Indemnitee.

Agr. § 7.9(e). The Partnership Agreement defines the term “Indemnitee” to include the

General Partner and “any Person who is or was an Affiliate of the General Partner . . . .”

Id. § 1.1 at 12. The Partnership Agreement defines the term “Affiliate” as “with respect to

any Person, any other Person that directly or indirectly through one or more intermediaries

                                              15
controls, is controlled by or is under common control with, the Person in question.” Id.

§ 1.1 at 3. Consequently, GPGP, Holdings, and Loews are Indemnitees for purposes of the

Partnership Agreement.

       The language of Section 7.9(e) eliminated all “duties or liabilities, including

fiduciary duties” owed by the General Partner and its affiliates to the Partnership and its

limited partners. Section 7.9(e) left in place only those duties and liabilities “expressly set

forth in [the Partnership] Agreement.” Thus, the only duties and liabilities that the General

Partner, GPGP, Holdings, and Loews owed to the Partnership and its limited partners were

contractual obligations found in the Partnership Agreement.

       Because the Partnership Agreement eliminated fiduciary duties and replaced those

duties with contractual obligations, the plaintiffs have not stated a claim for breach of

fiduciary duty. See Allen v. El Paso Pipeline GP Co., 90 A.3d 1097, 1100–01 (Del. Ch.

2014) (interpreting identical provision). Count IV is therefore dismissed.

B.     Count V: Aiding And Abetting A Breach Of Fiduciary Duty

       Count V of the complaint contends that GPGP, Holdings, and Loews aided and

abetted the General Partner’s breach of its fiduciary duties. One of the elements of a claim

for aiding and abetting a breach of a fiduciary duty is “the existence of a fiduciary

relationship.” Gotham P’rs, L.P. v. Hallwood Realty P’rs, L.P., 817 A.2d 160, 172 (Del.

2002) (internal quotation marks omitted). Once Section 7.9(e) of the Partnership

Agreement eliminated the General Partner’s fiduciary duties, there was no fiduciary

relationship that could support a claim for aiding and abetting a breach of fiduciary duty.

Count V is therefore dismissed.

                                              16
C.     Count II: Breach Of The Express Terms Of The Partnership Agreement

       Count II of the complaint contends that the General Partner, GPGP, and the

Partnership breached their express obligations under the Partnership Agreement. First, the

plaintiffs claim that the General Partner failed to adhere to the standards of conduct set

forth in Section 7.9 of the Partnership Agreement.1 Second, the plaintiffs claim that the

       1
         The complaint refers to the standards of conduct in Section 7.9 as “contractual
fiduciary duties.” As discussed supra, Section 7.9(e) eliminated all fiduciary duties and, in
place of those equitable duties, substituted contractual commitments, including the
standards of conduct that appear in Section 7.9. Accordingly, this opinion analyzes any
claims that the plaintiffs brought for breach of “contractual fiduciary duties” as claims for
breach of contract.

       This choice of language reflects the location of the Partnership Agreement at the
extreme contractual end of the spectrum of relationships that can implicate fiduciary duties.
At the other end of the spectrum is a fiduciary relationship where the parties have not
reached any agreements regarding the scope of the fiduciary’s duties or the standards that
will govern the fiduciary’s behavior. In that setting, the doctrines of equity control.

        Between those ends lies a range of possible blends of contract and equity. A contract
might clearly create the fiduciary relationship and specify in what respects the counterparty
acts as a fiduciary. For instance, an engagement letter or other agreement might appoint an
agent for a particular purpose. A fiduciary duty of that type, which would not exist but for
the contract, is perhaps most fittingly described as a contractual fiduciary duty. A more
common scenario involves a fiduciary relationship that arises by virtue of a party’s status
but is regulated or modified by contract. For practitioners of Delaware entity law, a familiar
example involves the director of a Delaware corporation. That fiduciary relationship arises
once the individual assumes the role of director, but the scope, dimensions, and details of
the relationship can be regulated through the corporate contract, which consists of the
Delaware General Corporation Law, charter, and bylaws. Most plainly, the charter may
provide that the director is not liable for damages for breach of the duty of care, although
the duty itself continues to operate. Compare 8 Del. C. § 102(b)(7) (authorizing limitation
of damages), with Malpiede v. Townson, 780 A.2d 1075, 1095 n.68 (Del. 2001) (noting
that Section 102(b)(7) does not eliminate the underlying fiduciary duty). The charter may
also contain provisions renouncing certain corporate opportunities, see 8 Del. C. § 122(17),
or placing limitations on the extent to which the business and affairs of the corporation
shall be managed by or under the board of directors, see 8 Del. C. § 141(a). In these settings,
                                              17
General Partner exercised the Call Right in breach of the requirements set forth in Section

15.1(b) of the Partnership Agreement. Both theories state claims on which relief can be

granted.

              1.     Principles Of Contract Interpretation

       The Partnership Agreement is a contract governed by Delaware law. See 6 Del. C.

§ 17-1101(c). When interpreting such a contract, “the role of a court is to effectuate the

parties’ intent.” Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del.

2006). Absent ambiguity, the court “will give priority to the parties’ intentions as reflected

in the four corners of the agreement, construing the agreement as a whole and giving effect

to all its provisions.” In re Viking Pump, Inc., 148 A.3d 633, 648 (Del. 2016) (internal

quotation marks omitted).

       “Unless there is ambiguity, Delaware courts interpret contract terms according to

their plain, ordinary meaning.” Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385

(Del. 2012). “Contract language is not ambiguous merely because the parties dispute what

the fiduciary duty is technically not contractual, but it arises out of a voluntary, contract-
like relationship and can be modified by contract. A fiduciary duty in that setting might be
described as a contractually regulated or modified fiduciary duty.

        When a contract creates the fiduciary relationship, or when the status that carries
with it fiduciary duties has a contractual or contract-like dimension, then it may be helpful
to use terms like contractual fiduciary duties or contractually regulated fiduciary duties. In
the current setting, where the Partnership Agreement eliminates fiduciary duties entirely,
it seems unhelpful, even potentially misleading, to refer to contractual fiduciary duties,
thereby partially restoring an equitable framework that the parties who created the
relationship sought to avoid. This decision therefore speaks only in terms of breach of
contract.

                                             18
it means. To be ambiguous, a disputed contract term must be fairly or reasonably

susceptible to more than one meaning.” Id. (footnote omitted). “Absent some ambiguity,

Delaware courts will not destroy or twist [contract] language under the guise of construing

it.” Rhone-Poulenc Basic Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del.

1992). “If a writing is plain and clear on its face, i.e., its language conveys an unmistakable

meaning, the writing itself is the sole source for gaining an understanding of intent.” City

Investing Co. Liquidating Tr. v. Cont’l Cas. Co., 624 A.2d 1191, 1198 (Del. 1993).

       If the language of a contract is ambiguous, the court “cannot choose between two

differing reasonable interpretations” when deciding a Rule 12(b)(6) motion to dismiss.

Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609,

613 (Del. 1996). “Dismissal is proper only if the defendants’ interpretation is the only

reasonable construction as a matter of law.” Id. (emphasis in original).

              2.     Breach Of Section 7.9

       The plaintiffs contend that the General Partner failed on two occasions to adhere to

the standards of conduct set forth in Section 7.9: initially when it made the Potential-

Exercise Disclosure and subsequently when it engaged in the Call-Right Exercise. The

complaint states a claim for breach of contract in connection with the Potential-Exercise

Disclosure. The complaint does not state a claim in connection with the Call-Right

Exercise.2

       2
         Although the complaint does not separately describe the Potential-Exercise
Disclosure as a breach of Section 7.9(a), the complaint fairly presents the contention that
Section 7.9(a) governs the decision to make that disclosure. The complaint describes the
                                              19
                      a.     The Contractual Standards In Section 7.9

       Section 7.9 of the Partnership Agreement divides the actions that the General

Partner might take into three broad categories and establishes a standard of conduct for

each. One standard addresses actions taken by the General Partner in its individual

capacity, another addresses actions taken by the General Partner in its official capacity as

the general partner that do not involve any potential conflicts of interest, and a third

addresses actions taken by the General Partner in its official capacity as the general partner

that involve a potential conflict of interest.

       When the General Partner takes an action in its individual capacity, the standard set

out in Section 7.9(c) applies:

       Whenever the General Partner makes a determination or takes or declines to
       take any other action . . . in its individual capacity as opposed to in its
       capacity as the general partner of the Partnership, . . . then the General Partner
       . . . [is] entitled to make such determination or to take or decline to take such
       other action free of any fiduciary duty or obligation whatsoever to the
       Partnership, any Limited Partner or Assignee, and the General Partner . . .
       shall not be required to act in good faith or pursuant to any other standard
       imposed by this Agreement . . . [or] any other agreement contemplated
       hereby or under the Delaware Act or any other law, rule or regulation or at
       equity.

two actions it challenges—the Potential-Exercise Disclosure and the Call-Right Exercise—
as part of a single “conflicted and disloyal scheme . . . to artificially depress the price of
Boardwalk units and then purport to exercise the Call Right based on a sham Opinion of
Counsel . . . .” Compl. ¶ 188(c). The plaintiffs contend that the defendants achieved the
artificial depression of Boardwalk’s unit price by making the Potential-Exercise
Disclosure. See Compl. ¶ 229. The complaint thus advances the contention that both the
Potential-Exercise Disclosure and Call-Right Exercise implicated a potential conflict of
interest.

                                                 20
Agr. § 7.9(c). Under this provision, when acting in its individual capacity, the General

Partner does not owe any duty to the Partnership or its limited partners, can act in its own

interest, and does not have to believe in good faith that its actions are in the best interest of

the Partnership. See Allen v. El Paso Pipeline GP Co., 113 A.3d 167, 173–75 (Del. Ch.

2014) (interpreting identical provision), aff’d, — A.3d —, 2015 WL 803053 (Del. Ch. Feb.

26, 2015) (TABLE). The General Partner’s ability to act in its individual capacity, free of

competing obligations or commitments, parallels the ability of a corporate fiduciary to

exercise rights that are not held or exercised in a fiduciary capacity, such as a controlling

stockholder’s ability to exercise its rights as a lender or to vote its shares in its own interest.

See generally 1 Stephen A. Radin, The Business Judgment Rule 1171 (6th ed. 2009).

       When taking an action in its official capacity as the general partner, the General

Partner faces two different standards of conduct, each of which requires giving

consideration to interests other than its own. If the matter that the General Partner is

addressing in its official capacity does not involve a potential conflict of interest, then the

standard of conduct set out in Section 7.9(b) applies:

       Whenever the General Partner makes a determination or takes or declines to
       take any other action, or any of its Affiliates causes it to do so, in its capacity
       as the general partner of the Partnership as opposed to its individual capacity,
       . . . then, unless another express standard is provided for in this Agreement,
       the General Partner, or such Affiliates causing it to do so, 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 imposed by this
       Agreement . . . [or] any other agreement contemplated hereby or under the
       Delaware Act or any other law, rule or regulation or at equity.

       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

                                                21
       taking or declining to take such other action must believe that the
       determination or other action is in the best interests of the Partnership.

Agr. § 7.9(b) (formatting altered). Under this standard, the General Partner must act in

good faith, meaning that the General Partner must subjectively believe that its decision is

in the best interests of the Partnership. See Allen v. Encore Energy P’rs, L.P., 72 A.3d 93,

104 (Del. 2013) (interpreting “believes” as opposed to “reasonably believes” to refer to

subjective belief rather than objective belief).

       If the action that the General Partner is taking in its official capacity involves a

potential conflict of interest, then the standard of conduct set out in Section 7.9(a) applies:

       Unless otherwise expressly provided in this 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 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 . . . 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, (ii) approved by the vote of a
       majority of the Common Units (excluding Common Units owned by the
       General Partner and its Affiliates), (iii) on terms no less favorable to the
       Partnership than those generally being provided to or available from
       unrelated third parties or (iv) fair and reasonable to the Partnership, taking
       into account the totality of the relationships between the parties involved
       (including other transactions that may be particularly favorable or
       advantageous to the Partnership).

Agr. § 7.9(a). Under this provision, the General Partner must be able to show that it

complied with one of four enumerated paths for its action “not [to] constitute a breach of

this Agreement . . . or of any duty stated or implied by law or equity.” See id.

       The Delaware Supreme Court affirmed this interpretation of a nearly identical set

of provisions. See Allen v. El Paso Pipeline GP Co., L.L.C., 2015 WL 803053, at *1 (Del.

                                              22
Feb. 26, 2015) (TABLE). The plaintiffs, however, argue for a different interpretation. They

claim that nothing in the language of Section 7.9(a) limits its application to actions taken

by the General Partner in its official capacity, and they assert that Section 7.9(a) therefore

also applies whenever the General Partner acts in its individual capacity and faces a

potential conflict.

       In addition to running contrary to precedent, the plaintiffs’ proposed reading

disregards the broad authority granted to the General Partner in Section 7.9(c) when acting

in its individual capacity. That section does not impose limitations of any kind. The

plaintiffs’ proposed reading also ignores the structure of Section 7.9 as a whole, in which

the standards of conduct progress from the most closely regulated category of action (the

General Partner acting in its official capacity on a matter involving a potential conflict of

interest under Section 7.9(a)), through a less regulated category of action (the General

Partner acting in its official capacity on a matter not involving a potential conflict of interest

under Section 7.9(b)), to the least regulated category of action (the General Partner acting

on an issue in its individual capacity under Section 7.9(c)). It would be inconsistent with

the structure of this progression to double back and impose the heightened standard set out

in Section 7.9(a) on a subset of the category of actions covered by Section 7.9(c).

       The structure of Section 7.9 also must be interpreted against the backdrop of the

common law. As the El Paso decision explained, the progression of standards in Section

7.9

       resembles the analytical progression of fiduciary duty law, where the highly
       deferential business judgment rule applies to non-conflict transactions, the
       entire fairness test applies to conflict transactions, and specific standards like

                                               23
       the corporate opportunity doctrine apply under particular circumstances. The
       absence of any contractual duty on the General Partner when not acting in
       that capacity similarly resembles the ability of a controlling stockholder
       (otherwise a fiduciary) to vote its shares in its own interest or for reasons of
       whim or caprice. In this way, the [Partnership] Agreement borrows its basic
       framework from the common law, but replaces the common law rules with
       contractual standards more favorable to the General Partner.

El Paso, 90 A.3d at 1103. Under the plaintiffs’ reading, the Partnership Agreement would

borrow its basic framework from the common law, then introduce a far more onerous

contractual standard that would apply when the General Partner faced a potential conflict

of interest while acting in its individual capacity.

       Finally, to read such a standard into the Partnership Agreement would run contrary

to the approach invariably taken by the drafters of agreements that govern publicly traded

alternative entities. That approach employs the contractual freedom offered by the

alternative entity statutes to establish regimes that are less constraining of controllers and

less protective of investors than the common law.3 It is not reasonable to read the

Partnership Agreement as the lone exception to that overwhelming trend.

       3
         See generally Sandra K. Miller & Yvonne L. Antonucci, Default Rules and
Fiduciary Duty Waivers in Alternative Entities: Policy Issues and Empirical Insights, 42
J. Corp. L. 147 (2016); Sandra K. Miller & Karie Davis-Nozemack, Toward Consistent
Fiduciary Duties for Publicly Traded Entities, 68 Fla. L. Rev. 263 (2016); Sandra K.
Miller, The Best of Both Worlds: Default Fiduciary Duties and Contractual Freedom in
Alternative Business Entities, 39 J. Corp. L. 295 (2014); Brent J. Horton, The Going-
Private Freeze-Out: A Unique Danger for Investors in Delaware Non-Corporate Business
Associations, 38 Del. J. Corp. L. 53 (2013); Mohsen Manesh, Contractual Freedom Under
Delaware Alternative Entity Law: Evidence from Publicly Traded LPs and LLCs, 37 J.
Corp. L. 555 (2012).

                                              24
                       b.    The Call-Right Exercise

       The plaintiffs claim that the General Partner breached its obligations under Section

7.9 by engaging in the Call-Right Exercise. The threshold question is which subsection of

Section 7.9 applies. The plaintiffs contend that Section 7.9(a) applies because the express

terms of that section do not limit its applicability to actions taken by the General Partner in

its official capacity. For the reasons explained in the prior section, that reading conflicts

with the plain meaning of the Partnership Agreement.

       Instead, Section 7.9(c) governs. That section applies “[w]henever the General

Partner . . . [acts] in its individual capacity,” and according to Section 7.9(c), the General

Partner acts in its individual capacity “whenever the phrase, ‘at the option of the General

Partner,’ or some variation of that phrase, is used in [the Partnership] Agreement.” Agr.

§ 7.9(c). Under Section 15.1(b), the Call Right was “exercisable at [the General Partner’s]

option” upon satisfaction of the two preconditions. Id. § 15.1(b). The General Partner

therefore exercised the Call Right in its individual capacity subject to the Section 7.9(c)

standard of conduct.

       Because the General Partner exercised the Call Right subject to the standard of

conduct in Section 7.9(c), the General Partner was entitled to do so “free of any fiduciary

duty or obligation whatsoever” and was not “required to act in good faith or pursuant to

any other standard imposed by [the Partnership] Agreement . . . .” See id. § 7.9(c). Section

7.9(c) relieved the General Partner of any duties or obligations with respect to the Call-

Right Exercise, so the General Partner could not have breached that section by exercising

                                              25
the Call Right. To the extent that Count II asserts a breach of Section 7.9 based on the Call-

Right Exercise, that claim is dismissed.

                     c.        The Potential-Exercise Disclosure

       The plaintiffs also contend that the General Partner breached its obligations under

Section 7.9 by issuing the Potential-Exercise Disclosure. The analysis of that issue is more

complex because the parties agree that the General Partner was acting in its official capacity

as the general partner when it made the Potential-Exercise Disclosure. See Dkt. 99 at 47;

Dkt. 106 at 38 n.16. The next question is whether the General Partner faced a potential

conflict of interest when making that decision. If it did, then Section 7.9(a) applies. If not,

then Section 7.9(b) applies.

       Section 7.9(a) applies when “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

Partner or any Assignee, on the other . . . .” Agr. § 7.9(a). The Agreement defines “Partners”

to refer to the limited partners. Id. § 1.1 at 18. Section 7.9(a) then specifies four ways by

which “the resolution or course of action in respect of such conflict of interest” may be

approved. Id. § 7.9(a).

       The complaint alleges facts supporting a reasonable inference that the course of

action that the General Partner followed when issuing the Potential-Exercise Disclosure

involved a potential conflict of interest. The disclosure was highly likely to have a negative

impact on the trading price of the common units. Because the purchase price under the Call

Right was based on the units’ average trading price over a 180-day measuring period, a

decline in the trading price would enable the General Partner to pay less if the General

                                              26
Partner later chose to exercise the Call Right. All else equal, an earlier disclosure and a

longer delay between the disclosure and the exercise of the Call Right would benefit the

General Partner and harm the limited partners by reducing the number of unaffected days

in the measuring period.

       The defendants have argued that the Partnership “was obligated under Item 1A of

Form 10-Q to disclose in its April 2018 Form 10-Q . . . the fact that the General Partner

was seriously considering exercising the Call Right.” Dkt. 99 at 42 n.13. Item 1A requires

the disclosure of “any material changes from risk factors as previously disclosed in the

registrant’s Form 10-K.” Id. (quoting SEC Form 10-Q, Item 1A). In each annual filing

since the time of its IPO in 2005, the Partnership’s Form 10-K has disclosed as risk factors

the Call Right and the limitations on the General Partner’s duties in connection with the

Call Right. Id. (citing Ex. 3 at 19–20). According to the defendants, the Revised Policy

Statement and the fact that the General Partner was seriously considering exercising the

Call Right constituted material changes in those risk factors. Id. (citing Ex. 11 at 33–35).

       This is one possible inference, but it is not the only possible inference. The point at

which the consideration of a potential acquisition becomes sufficiently definite to be

material is a judgment-laden issue that turns on the facts and circumstances. See Basic Inc.

v. Levinson, 485 U.S. 224, 236 (1988); Shamrock Hldgs., Inc. v. Polaroid Corp., 559 A.2d

257, 275 (Del. Ch. 1989); see also Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 38–

40 (2011). Determining the issue of materiality “requires delicate assessments of the

inferences a reasonable shareholder would draw from a given set of facts and the

significance of those inferences . . . . Only if the established omissions are so obviously

                                             27
important to an investor, that reasonable minds cannot differ on the question of materiality

is the ultimate issue of materiality appropriately resolved as a matter of law . . . .” TSC

Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976) (footnote and internal quotation

marks omitted). It is not possible to determine at the pleading stage whether the General

Partner was obligated under the federal securities laws to cause the Partnership to make the

Potential-Exercise Disclosure when it did. It is reasonably conceivable that the Potential-

Exercise Disclosure was made early and strategically with the goal of driving down the

price of the common units and enabling the General Partner to exercise the Call Right at a

lower price.

       It is therefore reasonably conceivable that when the General Partner faced the

decision about whether and when to make the Potential-Exercise Disclosure, the General

Partner faced a potential conflict implicating Section 7.9(a). Under that section, the

“resolution” of the potential conflict and the “course of action” that the General Partner

chose to follow is “permitted and deemed approved by all Partners, and shall not constitute

a breach of this Agreement,” if the General Partner proceeded along one of four

contractually specified paths. Agr. § 7.9(a). In general terms, the four paths are (i) good

faith approval by a committee composed of disinterested members of the General Partner’s

board, (ii) approval by disinterested unitholders, (iii) a resolution on arm’s-length terms

comparable to what a third party would provide, or (iv) a resolution that is fair and

reasonable to the Partnership.

       There is no suggestion that the General Partner proceeded along either the first or

second paths. It is reasonably conceivable that the third path was not available to the

                                            28
General Partner because it turns on whether the Partnership received arm’s-length terms in

a transaction. That leaves the fourth path. At the pleading stage, it is reasonably conceivable

that it was not “fair and reasonable” to the Partnership for the General Partner to cause the

Partnership to make the Potential-Exercise Disclosure.

       Importantly, the “fair and reasonable” standard focuses on the Partnership. As the

Delaware Supreme Court has recognized, a standard of this type does not require a

determination that the decision in question is in the best interests of the limited partners,

but only whether it “was in the best interests of the Partnership (which included the general

partner and the limited partners).” Norton v. K-Sea Transp. P’rs, L.P., 67 A.3d 354, 367

(Del. 2013). This court has reached the same conclusion on multiple occasions.4

       The decision to use “best interests of the Partnership” reflects a contractual

departure from the fiduciary standard of conduct that would apply in the corporate arena,

       4
         See In re Kinder Morgan, Inc. Corp. Reorganization Litig., 2015 WL 4975270, at
*7 (Del. Ch. Aug. 20, 2015) (“Importantly, the operative tests focus on the Partnership,
viz., whether the MLP Merger was (i) in the best interests of the Partnership and (ii) fair
and reasonable to the Partnership.”), aff’d, 135 A.3d 76 (Del. 2016); El Paso, 113 A.3d at
180 (“The second aspect of the contractual test that deserves additional discussion is the
referent for the Conflicts Committee’s good faith belief, namely that the conflict-of-interest
transaction is in the best interests of the Partnership. The contractual standard does not
require the Conflicts Committee to make a determination regarding the best interests of the
limited partners as a class.”); Gelfman v. Weeden Invs., L.P., 792 A.2d 977, 986 (Del. Ch.
2001) (concluding that a standard that obligated the General Partner to consider the best
interest of the Partnership meant that the General Partner “need not—as a contractual
matter—consider the interests of the limited partners”) (emphasis in original); Sonet v.
Timber Co., 722 A.2d 319, 325 (Del. Ch. 1998) (“In any event, pursuant to § 6(b) of the
agreement, in situations where the General Partner is authorized to act according to its own
discretion, there is no requirement that the General Partner consider the interests of the
limited partners in resolution of a conflict of interest.”).

                                              29
and that would have applied by default under an alternative entity agreement that did not

modify or eliminate fiduciary duties. In the settled Delaware formulation, fiduciary duties

run not only to the corporation, but rather “to the corporation and its shareholders.”5 A

board of directors thus owes fiduciary duties to the corporation for the ultimate benefit of

its residual risk bearers, viz., the class of claimants represented by the undifferentiated

equity.6 When exercising their authority, directors must seek “to promote the value of the

corporation for the benefit of its stockholders.”7 “It is, of course, accepted that a corporation

may take steps, such as giving charitable contributions or paying higher wages, that do not

maximize corporate profits currently. They may do so, however, because such activities

       5
         In re Rural Metro Corp., 88 A.3d 54, 80 (Del. Ch. 2014) (quoting N. Am. Catholic
Educ. Programming Found., Inc. v. Gheewalla, 930 A.2d 92, 99 (Del. 2007)), aff’d sub
nom., RBC Capital Mkts., LLC v. Jervis, 129 A.3d 816 (Del. 2015); accord Mills Acq. Co.
v. Macmillan, Inc., 559 A.2d 1261, 1280 (Del. 1989) (“[D]irectors owe fiduciary duties . .
. to the corporation and its shareholders . . . .”); Polk v. Good, 507 A.2d 531, 536 (Del.
1986) (“In performing their duties the directors owe fundamental fiduciary duties . . . to
the corporation and its shareholders.”).
       6
        See Frederick Hsu Living Trust v. ODN Hldg. Corp., 2017 WL 1437308, at *17
(Del. Ch. Apr. 14, 2017); In re Trados Inc. S’holder Litg., 73 A.3d 17, 36–37 (Del. Ch.
2013).
       7
         eBay Domestic Hldgs., Inc. v. Newmark, 16 A.3d 1, 34 (Del. Ch. 2010); accord
Gheewalla, 930 A.2d at 101 (“The directors of Delaware corporations have the legal
responsibility to manage the business of a corporation for the benefit of its shareholder[]
owners.”) (internal quotation marks omitted); Unocal Corp. v. Mesa Petroleum Co., 493
A.2d 946, 955 (Del. 1985) (citing “the basic principle that corporate directors have a
fiduciary duty to act in the best interests of the corporation’s stockholders”); see also Leo
E. Strine, Jr. et al., Loyalty’s Core Demand: The Defining Role of Good Faith in
Corporation Law, 98 Geo. L.J. 629, 634 (2010) (“[I]t is essential that directors take their
responsibilities seriously by actually trying to manage the corporation in a manner
advantageous to the stockholders.”).

                                               30
are rationalized as producing greater profits over the long-term.” Leo E. Strine, Jr., Our

Continuing Struggle with the Idea that For-Profit Corporations Seek Profit, 47 Wake

Forest L. Rev. 135, 147 n.34 (2012). Decisions of this nature benefit the corporation as a

whole and, by increasing the value of the corporation, increase the share of value available

for the residual claimants. Nevertheless, “Delaware case law is clear that the board of

directors of a for-profit corporation . . . must, within the limits of its legal discretion, treat

stockholder welfare as the only end, considering other interests only to the extent that doing

so is rationally related to stockholder welfare.”8

       Because of the obligation to maximize the value of the corporation for the benefit

of the undifferentiated equity, directors must consider how their decisions affect the

common stockholders. When making decisions that have divergent implications for

different aspects of the capital structure, a board’s fiduciary duties call for the directors to

prefer the interests of the common stock, so long as that can be done in compliance with

the corporation’s commitments to contractual claimants.9

       8
          Leo E. Strine, Jr., A Job is Not a Hobby: The Judicial Revival of Corporate
Paternalism and its Problematic Implications, 41 J. Corp. L. 71, 107 (2015); accord Leo
E. Strine, Jr. The Dangers of Denial: The Need for a Clear-Eyed Understanding of the
Power and Accountability Structure Established by the Delaware General Corporation
Law, 50 Wake Forest L. Rev 761, 771 (2015) (“Non-stockholder constituencies and
interests can be considered, but only instrumentally, in other words, when giving
consideration to them can be justified as benefiting the stockholders.”); Strine, For-Profit
Corporations, supra, at 147 n.34 (“[S]tockholders’ best interest must always, within legal
limits, be the end. Other constituencies may be considered only instrumentally to advance
that end.”).

       See Gheewalla, 930 A.2d at 101 (“When a solvent corporation is navigating in the
       9

zone of insolvency, the focus for Delaware directors does not change: directors must
                                               31
       The Partnership Agreement eliminates any analogous duty to prefer the interests of

the limited partners. Section 7.9(a)(iv) instead requires that the General Partner follow a

course of action that is fair and reasonable to the Partnership as an entity. When considering

that issue, the General Partner has discretion to consider the full range of entity

constituencies in addition to the limited partners, including but not limited to employees,

creditors, suppliers, customers, and the General Partner itself. Nevertheless, because the

limited partners are one of the Partnership’s constituencies, “[a] transaction that is in the

continue to discharge their fiduciary duties to the corporation and its shareholders by
exercising their business judgment in the best interests of the corporation for the benefit of
its shareholder owners.”); LC Capital Master Fund, Ltd. v. James, 990 A.2d 435, 452 (Del.
Ch. 2010) (“[I]t is the duty of directors to pursue the best interests of the corporation and
its common stockholders, if that can be done faithfully with the contractual promises owed
to the preferred . . . .”); Prod. Res. Gp., L.L.C. v. NCT Gp., Inc., 863 A.2d 772, 790 (Del.
Ch. 2004) ( “Having complied with all legal obligations owed to the firm’s creditors, the
board would . . . ordinarily be free to take economic risk for the benefit of the firm’s equity
owners, so long as the directors comply with their fiduciary duties to the firm by selecting
and pursuing with fidelity and prudence a plausible strategy to maximize the firm’s
value.”); Blackmore P’rs, L.P. v. Link Energy LLC, 864 A.2d 80, 86 (Del. Ch. 2004)
(“[T]he allegation that the Defendant Directors approved a sale of substantially all of [the
company’s] assets and a resultant distribution of proceeds that went exclusively to the
company’s creditors raises a reasonable inference of disloyalty or intentional misconduct.
Of course, it is also possible to infer (and the record at a later stage may well show) that
the Director Defendants made a good faith judgment, after reasonable investigation, that
there was no future for the business and no better alternative . . . . [I]t would appear that no
transaction could have been worse for the unit holders and [it is] reasonable to infer . . .
that a properly motivated board of directors would not have agreed to a proposal that wiped
out the value of the common equity and surrendered all of that value to the company’s
creditors.”); Equity-Linked Inv’rs, L.P. v. Adams, 705 A.2d 1040, 1042 (Del. Ch. 1997)
(“[G]enerally it will be the duty of the board, where discretionary judgment is to be
exercised, to prefer the interests of common stock—as the good faith judgment of the board
sees them to be—to the interests created by the special rights, preferences, etc., of preferred
stock, where there is a conflict.”).

                                              32
best interests of the Partnership logically should not be highly unfair to the limited

partners.” Dieckman v. Regency GP LP, 2018 WL 1006558, at *4 (Del. Ch. Feb. 20, 2018)

(ORDER) (internal quotation marks omitted).

       On the facts pled, it is reasonably conceivable that that the Potential-Exercise

Disclosure was so highly unfair to the limited partners as to make it not fair and reasonable

to the Partnership. The complaint alleges that by causing the Partnership to issue the

Potential-Exercise Disclosure, the General Partner “eviscerated the contractual . . .

protections afforded to minority unitholders by publicly threatening to consummate a

buyout, without actually committing to do so.” Compl. ¶ 11. The pertinent allegations of

the complaint state:

       The purpose of Defendants’ disclosures was clear: by threatening to exercise
       the option in the near term and at some uncertain price, the General Partner .
       . . sent Boardwalk’s market price into immediate freefall. This sharp drop in
       Boardwalk’s market price uniquely benefitted Defendants at the expense of
       Boardwalk’s minority unitholders.

       Each day that Boardwalk’s units traded lower, the average 180-trading day
       price moved lower and made the option cheaper to exercise. Relatively
       higher closing prices at the beginning of the 180-trading day average were
       pushed out and replaced with dramatically (and artificially) depressed
       closing prices at the end of the period.

Id. ¶ 12 (formatting altered).

       Under a constituency-based regime like the one established by the Partnership

Agreement, it is possible that benefits to the entity as whole or to its other constituencies

might outweigh harm to a particular constituency, such as the limited partners. Causing a

company to comply with its disclosure obligations under the federal securities laws is

obviously a benefit to the entity. For the reasons previously discussed, however, it is not

                                             33
clear at the pleading stage whether the General Partner was obligated to cause the

Partnership to make the Potential-Exercise Disclosure, or whether the disclosure was made

opportunistically. If the defendants are able to prove that that the disclosure was legally

required, then that would go a long way to establishing that the General Partner acted in a

manner that was fair and reasonable to the Partnership.

       Setting aside the benefit to the Partnership of complying with the federal securities

laws, it is unclear at the current stage of the case whether the Potential-Exercise Disclosure

had any effect on the entity as a whole or any constituencies other than the General Partner

and the limited partners. The only evident effect of that disclosure was to drive down the

price of the common units so that the contractual pricing mechanism would cause a transfer

of value from the holders of common units to the General Partner. It is not intuitively

apparent how the Potential-Exercise Disclosure would have had offsetting positive effects

on the Partnership’s business, employees, customers, suppliers, or the communities in

which it operates.

       The factual scenario as-pled thus has two dimensions: (i) intentional harm to one

constituency without any apparent benefit to other constituencies or to the business of the

entity as a whole, and (ii) a causal mechanism by which the harm inflicted on one

constituency benefits the party in control of the decision. Taken together, these dimensions

support a reasonable inference that it was not “fair and reasonable to the Partnership” for

the General Partner to cause the Partnership to issue the Potential-Exercise Disclosure on

April 30, 2018. A party in control of an enterprise should not be able to transfer value from

a particular constituency to itself, even under a constituency-based regime. Rather than a

                                             34
reasoned exercise of judgment about what is in the best interests of the entity, that type of

value expropriation more closely resembles theft.10

       The complaint’s allegations support a pleading-stage inference that the Potential-

Exercise Disclosure was “highly unfair” to the limited partners and thus not “fair and

reasonable” to the Partnership. Accordingly, with respect to the disclosure, the complaint

states a claim against the General Partner for breach of Section 7.9(a).

              3.     Breach Of Section 15.1

       Shifting away from the contractual standards in Section 7.9, the plaintiffs separately

contend that the General Partner failed to comply with the contractual requirements of the

Call Right itself. The complaint identifies five alleged faults in the Call-Right Exercise.

Two of them support a reasonably conceivable claim for breach of contract. The others do

not.

       10
         The case would be stronger for the defendants if the Partnership had the right to
buy the common units because in that case, the entity as a whole would benefit from the
lower price. Even then, the analysis would likely turn on whether the General Partner was
obligated to make the disclosure under the federal securities laws, or whether it acted
opportunistically to drive down the price of the common units.

       The case would be much stronger for the defendants if it were clear at the pleading
stage that the contractual standard only required the defendants to believe subjectively in
good faith that the course of action benefitted the Partnership, as would be the case under
Section 7.9(b). In that event, it is possible that the claim would not survive a motion to
dismiss. See Kinder Morgan, 2015 WL 4975270, at *8 (dismissing claim for breach of a
limited partnership agreement where the defendants had only to believe subjectively that a
course of action was in the best interests of the partnership and “[t]he Complaint’s
allegations do not provide a basis to question the Committee’s decision from the standpoint
of the Partnership”).

                                             35
       To exercise the Call Right, Section 15.1(b) of the Partnership Agreement required

that the General Partner first obtain an “Opinion of Counsel” to the effect that the

Partnership’s status as a pass-through entity for tax purposes “has or will reasonably likely

in the future have a material adverse effect on the maximum applicable rate that can be

charged to customers . . . .” Agr. § 15.1(b)(ii). If this condition was not met, then the

General Partner was not entitled to exercise the Call Right, and its improper exercise

breached Section 15.1(b).

       The General Partner obtained the Tax Opinion, but the plaintiffs contend that its

contents failed to satisfy the condition. The plaintiffs say that the Tax Opinion was

inadequate because it failed to address (i) the Partnership’s competitive position vis-à-vis

non-MLP pipelines, (ii) the effect of the Revised Policy Statement on the maximum

applicable rates that the Partnership could charge, and (iii) the potential implications of a

FERC ruling on the treatment of ADIT balances. The plaintiffs also contend that the Tax

Opinion fell short because it was based on two purportedly false assumptions: (i) an

assumption that the Revised Policy Statement would not change, and (ii) an assumption

that the Partnership was charging the maximum recourse rate set by FERC to all of its

customers.

                     a.     The Partnership’s Competitive Position

       According to the plaintiffs, Section 15.1(b) required that the Tax Opinion address

whether the FERC policy change would put the Partnership at a “competitive disadvantage

vis-à-vis other, non-MLP pipelines.” Compl. ¶ 204. To support that contention, the

plaintiffs point to Section 15.1(b)’s reference to the partnership’s “status as an association

                                             36
not taxable as a corporation.” Id. ¶ 34. As the plaintiffs interpret it, that provision was

“intended to allow the General Partner to collapse the MLP structure [only] if Boardwalk’s

status as a pass-through entity did or was reasonably likely to put the [Partnership] at a

material competitive disadvantage vis-à-vis other, non-MLP pipelines.” Id. ¶ 204.

       The language of Section 15.1(b) is clear on its face: The General Partner had to

receive an opinion of counsel to the effect that

       the Partnership’s status as an association not taxable as a corporation and not
       otherwise subject to an entity-level tax for federal, state or local income tax
       purposes has or will reasonably likely in the future have a material adverse
       effect on the maximum applicable rate that can be charged to customers by
       subsidiaries of the Partnership that are regulated interstate natural gas
       pipelines . . . .

Agr. § 15.1(b). The analysis only needed to address whether the Partnership’s tax-exempt

status had or was reasonably likely to have a material adverse effect on the maximum

applicable rates that the Partnership could charge its customers. Section 15.1(b) did not

require a comparative assessment of the potential effects on the Partnership relative to its

non-MLP competitors. Phrases such as “competitive disadvantage” and “vis-à-vis other,

non-MLP pipelines” do not appear in Section 15.1(b). The plaintiffs’ proposed construction

would introduce an analytical requirement that does not appear in the text. The motion to

dismiss this aspect of Count II is granted.

                     b.      “Maximum Applicable Rates”

       The plaintiffs next contend that the Tax Opinion failed to address the probable effect

of the FERC policy change on the “maximum applicable rate” that the Partnership could

charge its customers. The plaintiffs contend that the term “maximum applicable rate” refers

                                              37
to the rates that the Partnership could actually charge, taking into account its long-term

contracts that established customer-specific rates. When preparing the Tax Opinion, Baker

Botts interpreted the term “maximum applicable rate” to mean recourse rates, which are

the FERC-approved rates that a shipper can opt to pay for services if the shipper has not

contracted for negotiated rates and if the Partnership does not offer discounted rates.

       The defendants argue that a plain reading of the term “maximum applicable rate”

means recourse rates. The Partnership Agreement could have addressed this issue directly

by defining the term “maximum applicable rate.” It could have addressed this issue

indirectly by defining any number of related terms such as “applicable rate,” “negotiated

rate,” “recourse rate,” “maximum rate,” or “maximum negotiated rate.” It did not.

       To establish that a plain reading of the term “maximum applicable rate” means

recourse rates, the defendants claim that FERC treats those terms as synonymous. Dkt. 99

at 26 (collecting FERC regulatory rulings). The FERC regulatory rulings that the

defendants cite do not actually use the term “maximum applicable rate.” They use a variety

of terms, with the closest being “applicable maximum rate.” None of the regulatory rulings

define the term “applicable maximum rate,” nor do they define any of the related terms that

they use.

       The FERC’s regulatory rulings do not reflect a clear pattern of usage sufficient to

establish at the pleading stage that “applicable maximum rate” is a term of art meaning

recourse rates. The defendants have pointed to two regulatory rulings in which FERC

sometimes juxtaposed the term “applicable maximum rate” with the term “negotiated rate,”

                                             38
suggesting that they were mutually exclusive.11 But there are numerous other instances

where FERC’s use of those terms is less clear, and where the use of the word “applicable”

appears to refer a pipeline’s actual rates, whether negotiated, discount, or recourse.12 Using

the word “applicable” in the latter sense comports with its dictionary meaning, in which

the adjective “applicable” would refer to the rates actually being applied in a given

situation, rather than those that theoretically could be applied in the absence of other rates.13

       11
          See, e.g., NextEra Energy Mktg., LLC, 165 FERC ¶ 61,175, at 1 (Nov. 28, 2018)
(“According to Petitioners, the subject negotiated rate is higher than Tennessee’s
applicable maximum rate.”) (emphasis added); EdgeMarc Energy Hldgs., LLC, 165 FERC
¶ 61,036, at 2 (Oct. 22, 2018) (“[T]he Commission would not waive the applicable
maximum rate to permit a release at a rate in excess of the negotiated rate . . . .”) (emphasis
added). The defendants also cited a letter ruling that juxtaposed the concept of “discounted
rates” with “maximum applicable tariff rates,” which introduces additional terms into the
analysis. See Gulf S. Pipeline Co., LP, Dkt. No. RP04-223-000, at 2 (Apr. 16, 2004) (letter
order).
       12
          See Interstate and Intrastate Natural Gas Pipelines; Rate Changes Relating to
Federal Income Tax Rate, 83 Fed. Reg. 12,888, 12,891, 12892 (Mar. 26, 2018) (to be
codified at 18 C.F.R. pts. 154, 260, 284) (using “maximum recourse rate” and “maximum
rate” rather than “applicable maximum rate”; using “all applicable rates” to encompass the
negotiated rate, the maximum recourse rate, or the discounted rate); EdgeMarc Energy
Hldgs., LLC, 165 FERC ¶ 61,036, at 2 (Oct. 22, 2018) (discussing the possibility that a
pipeline’s “applicable rates are above or below the applicable maximum recourse rates”);
Chesapeake Energy Mktg., L.L.C., 164 FERC ¶ 61,277, at 3 (Sept. 27, 2018) (describing
permanent releases in situations where “the negotiated rates applicable to the released
capacity are above the applicable maximum recourse rates”) (emphasis added).
       13
         See Ransom v. FIA Card Servs., N.A., 562 U.S. 61, 69 (2011) (“‘Applicable’
means ‘capable of being applied: having relevance’ or ‘fit, suitable, or right to be applied:
appropriate.’”) (citing Webster’s Third New International Dictionary 105 (2002); New
Oxford American Dictionary 74 (2d ed. 2005); 1 Oxford English Dictionary 575 (2d ed.
1989)); see also Apply, Dictionary.com, https://www.dictionary.com/browse/apply (last
visited Oct. 5, 2019) (“3: to bring into action; use; employ . . . .”).

                                               39
       To prevail on a motion to dismiss, the defendants must establish that their

interpretation of the term “maximum applicable rate” is the only reasonable interpretation.

See United Rentals, Inc. v. RAM Hldgs., Inc., 937 A.2d 810, 830 (Del. Ch. 2007). The

defendants have not made the necessary showing. It is reasonably conceivable that the term

“maximum applicable rates” means the maximum rates that the pipeline actually could

charge, rather than the maximum rates that the pipeline theoretically could charge. The

motion to dismiss this aspect of Count II is denied.

                      c.     The Treatment Of ADIT Balances

       The complaint next contends that the Tax Opinion did not satisfy the requirements

of Section 15.1(b) because it failed to account for FERC’s future treatment of ADIT

balances. The plaintiffs argue that the Tax Opinion should have “address[ed] this critical

issue,” or that Baker Botts should have “wait[ed] for FERC to clarify its treatment of ADIT

balances in light of the policy change . . . .” Dkt. 106 at 27.

       Because the Partnership Agreement did not explicitly require the Tax Opinion to

account for ADIT balances, the plaintiffs’ criticism amounts to an attack on Baker Botts’

methodology. When the parties to a contract agree that the delivery of an opinion of counsel

satisfies a condition precedent, “it is [counsel]’s subjective good-faith determination that

is the condition precedent.” Williams Cos., Inc. v. Energy Transfer Equity, L.P., 2016 WL

3576682, at *11 (Del. Ch. June 24, 2016). Counsel acts in subjective good faith by applying

its independent expertise to the facts presented. Id.

       The question under Williams is not whether Baker Botts used a suboptimal

methodology, nor even whether Baker Botts made mistakes. The question at the pleading

                                              40
stage is whether the complaint has identified sufficient reasons for concern about Baker

Botts’ analysis to raise a reasonable inference that the firm did not apply its independent

expertise to the facts presented, but rather skewed its analysis in a bad-faith effort to reach

the outcome that its client wanted.

       In the Revised Policy Statement, FERC accounted that it would “no longer permit

an MLP to recover an income tax allowance in its cost of service,” but FERC did not

address how it would treat ADIT balances moving forward. Ex. 4 at 1. In fact, the Revised

Policy Statement did not mention ADIT balances at all. At the pleading stage, however,

the plaintiffs are entitled to the reasonable inference that it was obvious to all of the industry

players that the treatment of ADIT balances would be a major issue. Indeed, FERC asked

for input on the treatment of ADIT balances in its Notice of Inquiry and sought comment

on “the effect of the elimination of the income tax allowance for MLPs on ADIT.” Inquiry

Regarding the Effect of the Tax Cuts and Jobs Act on Commission-Jurisdictional Rates, 83

Fed. Reg. 12,371, 12,375 (Mar. 21, 2018). The notice asked commenters to address

“whether previously accumulated sums in ADIT should be eliminated altogether from cost

of service or whether those previously accumulated sums should be placed in a regulatory

liability account and returned to ratepayers.” Id.

       The possibility of eliminating ADIT balances altogether had the potential to flip the

change in the tax treatment of MLP pipelines from a negative to a positive. In the abstract,

the Revised Policy Statement seemed like it could be a negative development for MLP

pipelines, because they could no longer claim taxes as a cost of service for purposes of

setting their rates. But if MLP pipelines also could eliminate their ADIT balances, then

                                               41
they could include their entire asset base for purposes of seeking a reasonable rate of return.

And if MLP pipelines did not have to return any of the ADIT balances to their customers,

then the Revised Policy Statement would likely be a positive development for MLP

pipelines. The Partnership addressed the treatment of ADIT balances when it submitted

comments in response to the Notice of Inquiry. Ex. 33.

       By failing to address the potential treatment of ADIT balances, Baker Botts ignored

the elephant in the room. Once Baker Botts chose not to address the ADIT balances, and

after the firm likewise opted to focus its analysis on recourse rates, its opinion became

simplistic. At the pleading stage, the plaintiffs are entitled to the reasonable inference that

Baker Botts chose to not to analyze the ADIT balances so that it could reach the conclusion

that its client wanted, rather than addressing the real-world situation that FERC’s

regulatory actions presented. The evidence may show that Baker Botts in fact had a good

faith basis for proceeding as it did, but at the pleading stage, the decision to ignore the

treatment of ADIT balances is sufficiently extreme to warrant permitting discovery into

the claim. The motion to dismiss this aspect of Count II is denied.

                     d.      The Assumption That The Revised Policy Statement
                             Would Not Be Changed

       In a related argument, the plaintiffs contend that the Tax Opinion did not satisfy the

condition precedent for the exercise of the Call Right because Baker Botts “relied on

assumptions that Defendants knew to be false.” Compl. ¶ 207. The plaintiffs contend that

Baker Botts assumed that the Revised Policy Statement would not be changed, even though

the defendants purportedly “knew on June 29, 2018 that FERC’s March 15 Proposed [sic]

                                              42
Policy Statement would soon be ‘revised, reversed, [or] modified’ . . . .” Id. (alteration in

original).

       This assumption was not false. FERC did not revise, reverse, or modify the Revised

Policy Statement. FERC issued an order on July 18, 2018, in which it declined to reconsider

the Revised Policy Statement and reaffirmed that FERC “will generally not permit MLP

pipelines . . . to recover an income tax allowance in their cost of service.” Ex. 5 at 23. The

Final Rule addressed other aspects of FERC’s new rate-setting policies, including the

treatment of ADIT balances, but it did not revise, reverse, or modify the Revised Policy

Statement.

       The plaintiffs’ allegations do not support a reasonable inference that Baker Botts

failed to exercise its independent judgment when it assumed that the Revised Policy

Statement would not be revised, reversed, or modified. The motion to dismiss this aspect

of Count II is granted.

                     e.      The Assumption About Recourse Rates

       The plaintiffs last argue that Baker Botts failed to exercise its independent judgment

when it assumed “that each Boardwalk subsidiary would charge all its customers the

maximum recourse rate and recover its entire cost of service.” Dkt. 106 at 22–23; see also

Compl. ¶ 158. To support this argument, the plaintiffs point to the Partnership’s public

announcement that its subsidiaries were not charging the maximum recourse rate to the

majority of their clients. Dkt. 106 at 22–23 (citing Ex. 33 at 9).

        In rendering its opinion, Baker Botts interpreted the phrase “maximum applicable

rate” to mean “the recourse rates of [the Partnership’s] Subsidiaries now and in the future

                                              43
. . . .” Ex. 49 at 4. Based on that assumption, Baker Botts analyzed the impact of the Revised

Policy Statement on the Partnership’s maximum recourse rates, rather than the rates the

Partnership was actually charging its customers.

       As this opinion has already discussed, the term “maximum applicable rate” supports

at least two reasonable interpretations. That term is not defined in the Partnership

Agreement, and Baker Botts reached its own interpretation after considering “the wording

of Section 15.1(b)(ii) of the Partnership Agreement, other provisions of the Partnership

Agreement and support in the Registration Statement . . . .” Ex. 49 at 4. The complaint does

not plead facts sufficient to suggest that Baker Botts failed to use its independent judgment

when it interpreted the term “maximum applicable rate” and based its analysis on an

assumption consistent with that interpretation. This aspect of Count II is therefore

dismissed. The plaintiffs’ challenge to the concept of “maximum applicable rate” must rise

or fall based on what the contract language is shown to mean, not based on Baker Botts’

judgment about what it could mean.

              4.     The Status Of GPGP And The Partnership As Defendants

       Count II asserts claims for breach of contract not only against the General Partner,

who was the primary actor and decision maker, but also against GPGP and the Partnership.

The motion to dismiss the claim for breach of contract against GPGP is granted. The motion

to dismiss the claim for breach of contract against the Partnership is denied.

       The claim for breach of contract against GPGP fails because GPGP is not a party to

the Partnership Agreement. GPGP is the general partner of the General Partner. Although

the General Partner is a party to the Partnership Agreement, GPGP is not. “It is a general

                                             44
principle of contract law that only a party to a contract may be sued for breach of that

contract.” Gotham P’rs, L.P. v. Hallwood Realty P’rs, L.P., 817 A.2d 160, 172 (Del. 2002)

(internal quotation marks omitted). Because GPGP is not a party to the Partnership

Agreement, the claim against it for breach of contract is dismissed.

       The same problem does not infect a claim against the Partnership. By statute, the

Partnership was a party to the Partnership Agreement. See 6 Del. C. § 17-101(14) (“A

limited partnership is bound by its partnership agreement whether or not the limited

partnership executes the partnership agreement.”). The conceptual difficulty arises instead

from the fact that the contractual provisions that the plaintiffs seek to invoke concern

obligations of the General Partner, not the Partnership.

       At this stage, it is not clear the extent to which the Partnership could be liable for

breach of its Partnership Agreement if the underlying breach was committed by the General

Partner. In at least one setting, the Delaware Supreme Court has held that when limited

partners argued that the general partner had breached a provision analogous to Section

7.9(a), the resulting claim was derivative. See El Paso Pipeline GP Co. v. Brinckerhoff,

152 A.3d 1248 (Del. 2016). If the same analysis applied to the plaintiffs’ claim that the

General Partner breached Section 7.9(a) when it made the Potential-Exercise Disclosure,

then that theory would not support a direct claim for breach of contract against and potential

remedy from the Partnership, but rather a derivative claim on behalf of the Partnership. It

is reasonably conceivable, however, that because the breach of contract claim in this case

involves a disclosure, the claim could be viewed as direct. It is also reasonably conceivable

that for remedial purposes, following a transaction in which the limited partners were

                                             45
eliminated from the enterprise, a potential remedy might be awarded against the

Partnership. Because of the absence of applicable precedent, the analysis is even less clear

for the claim for breach of Section 15.1(b).

       At this stage of the case, it would be premature to dismiss the claim for breach of

contract against the Partnership when the Partnership was a party to the operative contract

(the Partnership Agreement), when the General Partner controlled the Partnership and

caused it to take actions that are challenged in the case (such as the issuance of the

disclosure), and where a potential remedy may involve the Partnership. The motion to

dismiss the breach of contract claim against the Partnership is therefore denied.

D.     Count III: Breach Of The Implied Covenant

       Count III of the complaint contends that the General Partner, GPGP, and the

Partnership breached their implied contractual obligations under the Partnership

Agreement by (i) manipulating the call price of the Call Right, and (ii) relying on the Tax

Opinion. Count III states a claim on which relief can be granted.

              1.     Principles Governing The Application Of The Implied Covenant

       “The implied covenant is inherent in all contracts and is used to infer contract terms

to handle developments or contractual gaps that the asserting party pleads neither party

anticipated. It applies when the party asserting the implied covenant proves that the other

party has acted arbitrarily or unreasonably, thereby frustrating the fruits of the bargain that

the asserting party reasonably expected. The reasonable expectations of the contracting

parties are assessed at the time of contracting.” Dieckman, 155 A.3d at 367 (footnotes and

internal quotation marks omitted). The pleading-stage inquiry for cases involving publicly

                                               46
traded MLPs focuses on whether, “based on a reading of the terms of the partnership

agreement and consideration of the relationship it creates between the MLP’s investors and

managers,” the agreement can be reasonably read to imply certain conditions that are

necessary to vindicate the reasonable expectations of the parties. Id.

       The application of the implied covenant is a “cautious enterprise.” Nemec v.

Shrader, 991 A.2d 1120, 1125 (Del. 2010). The implied covenant is “not an equitable

remedy for rebalancing economic interests after events that could have been anticipated,

but were not, that later adversely affected one party to a contract.” Id. at 1128. The implied

covenant “does not apply when the contract addresses the conduct at issue.” Nationwide

Emerging Managers, LLC v. Northpointe Hldgs., LLC, 112 A.3d 878, 896 (Del. 2015). It

applies “only when the contract is truly silent concerning the matter at hand.” Oxbow

Carbon & Minerals Hldgs., Inc. v. Crestview-Oxbow Acq., LLC, 202 A.3d 482, 507 (Del.

2019) (internal quotation marks omitted). Because express contractual provisions “always

supersede” the implied covenant, an implied covenant claim will not survive a motion to

dismiss if it duplicates breach of contract claims. Gerber v. Enter. Prods. Hldgs., LLC, 67

A.3d 400, 419 (Del. 2013), overruled on other grounds by Winshall v. Viacom Intern., Inc.,

76 A.3d 808, 815 n.13 (Del. 2013); Osram Sylvania Inc. v. Townsend Ventures, LLC, 2013

WL 6199554, at *17–18 (Del. Ch. Nov. 19, 2013).

       “In order to plead successfully a breach of an implied covenant of good faith and

fair dealing, the plaintiff must allege a specific implied contractual obligation, a breach of

that obligation by the defendant, and resulting damage to the plaintiff.” Fitzgerald v.

Cantor, 1998 WL 842316, at *1 (Del. Ch. Nov. 10, 1998). In describing the implied

                                             47
contractual obligation, the plaintiffs must allege facts suggesting “from what was expressly

agreed upon that the parties who negotiated the express terms of the contract would have

agreed to proscribe the act later complained of . . . had they thought to negotiate with

respect to that matter.” Katz v. Oak Indus. Inc., 508 A.2d 873, 880 (Del. Ch. 1986). That is

because “[t]he implied covenant seeks to enforce the parties’ contractual bargain by

implying only those terms that the parties would have agreed to during their original

negotiations if they had thought to address them.” El Paso, 113 A.3d at 184. Accordingly,

“[t]he implied covenant is well-suited to imply contractual terms that are so obvious . . .

that the drafter would not have needed to include the conditions as express terms in the

agreement.” Dieckman, 155 A.3d at 361.

              2.     The Call Price

       The plaintiffs claim that the General Partner breached its implied contractual

obligations by manipulating the call price leading up to the Call-Right Exercise. The

plaintiffs have stated a claim on which relief can be granted.

       Section 15.1(b) of the Partnership Agreement established a mechanism for setting

the call price that turned on the mailing of a notice. Under Section 15.1(c), the General

Partner was required to mail notice of its election to exercise the Call Right to minority

unitholders at least ten days, but not more than sixty days, before the date it purchased the

minority unitholders’ units. Agr. § 15.1(c). The Partnership Agreement identified a date

three days before the mailing of the notice as the end date for a pricing formula, which set

the call price at the average of the daily closing prices of the Partnership’s common units

over the 180 consecutive trading days immediately before the end date. Agr. § 15.1(b).

                                             48
       The defendants contend that the plaintiffs’ implied claim fails as a matter of law

because “an implied covenant theory cannot be invoked to avoid an express contractual

provision.” Dkt. 99 at 4. The defendants argue that because “Section 15.1(b) sets forth a

clear mechanism for calculating the call price,” the plaintiffs “cannot avoid that mechanism

by arguing that the same provision contains a conflicting implied term that would require

a different price ‘unaffected’ by Defendants’ statements.” Id. Accordingly, the defendants

reason, the plaintiffs’ “implied covenant claim is foreclosed by the plain terms of the

[Partnership] Agreement.” Id. at 34.

       The defendants’ argument focuses too narrowly on whether the express pricing

mechanism in Section 15.1(b) displaces the implied covenant. Instead, the analysis

involves examining Section 15.1(b) and the reasonable expectations that its terms created.

See Dieckman, 155 A.3d at 367. Section 15.1(b) set forth a seemingly unobjectionable

mechanism for determining the call price. It was “deliberately retrospective,” so that the

call price would not be affected by the General Partner’s decision to exercise. See Compl.

¶ 39. Based on this explicit mechanism, it is reasonable to infer at the pleading stage that

the parties had a reasonable expectation that the General Partner would notify unitholders

about its exercise of the Call Right in a manner that would not affect the call price.

       From this “reasonable expectation,” the plaintiffs assert an implied term that barred

the parties from taking steps to manipulate the price of the common units during the 180-

trading-day window. Id. ¶ 228. The plaintiffs find it unsurprising that the Partnership

Agreement did not include such a term, because they regard a term prohibiting

                                             49
manipulation of the call price as “so obvious” that the drafters would not have needed to

include it in the Partnership Agreement. See Dieckman, 155 A.3d at 361.

       The plaintiffs have asserted an implied term that is reasonably conceivable. They

have also alleged that the General Partner breached the term by manipulating the call price

through the Potential-Exercise Disclosure. Most notably, the Potential-Exercise Disclosure

represented a marked and unexplained shift from the defendants’ initial assessment that the

Revised Policy Statement would not have a material effect on the Partnership’s revenues.

See Ex. 9. Just six weeks later, the Partnership announced that the General Partner was

“seriously considering” exercising the Call Right. Somehow, the effect of the Revised

Policy Statement had shifted from “no material impact on revenues” to an impact

amounting to a “material adverse effect.” Yet during that six-week period, FERC did not

issue any orders or proposed rules, nor did it announce further policy revisions. And other

than the Potential-Exercise Disclosure, there is no indication that the Partnership ever

revised the “preliminary assessment” that it described in its press release. This sequence of

events supports a reasonable inference that the defendants manufactured a basis to make

the Potential-Exercise Disclosure because they believed doing so would drive down the

call price.

       Second, the complaint alleges facts about events connected with this litigation

which support a reasonable inference of manipulation. On May 29, 2018, the defendants

successfully opposed the plaintiffs’ motion to expedite by arguing that the plaintiffs’ claims

were unripe. After convincing the court to accept that argument, the defendants contacted

the original plaintiffs and proposed a settlement. The claims that were not ripe enough to

                                             50
litigate were somehow ripe enough to settle. After reaching a settlement that contemplated

using June 29, 2018, as the end date for calculating the call price, the parties asked the

court to review the settlement agreement in camera, in effect asking this court to render a

non-public advisory opinion before the settlement was announced publicly. This course of

conduct contrasts with the defendants’ comparative willingness to publicly disclose that

they were seriously considering whether to exercise the Call Right.

       After this court declined to review the proposed settlement in camera, the parties

publicly filed the proposed settlement. Four days later, on June 29, 2018, the Partnership

announced that it had obtained the Tax Opinion and that the General Partner would exercise

the Call Right. The apparent ease with which the Partnership obtained the Tax Opinion and

exercised the Call Right after reaching a settlement supports a reasonable inference that the

defendants could have exercised the Call Right earlier, but were delaying to enable the

Potential-Exercise Disclosure to do its work.

       In response, the defendants argue that the parties would not have agreed to restrict

the Partnership’s ability to make truthful disclosures that were required under the federal

securities laws, even if those disclosures might negatively affect the call price. See Dkt.

107 at 19. Although it is reasonably conceivable that parties would have understood that a

no-manipulation principle inhered in the Partnership Agreement, it is not reasonably

conceivable that the parties would have understood that principle to prevent a publicly

traded company from making disclosures required by the federal securities laws.

       Nevertheless, the Partnership’s obligation to comply with the federal securities laws

does not result in a pleading-stage dismissal of the implied covenant claim, because it is

                                             51
reasonably conceivable that the defendants could have proceeded in a manner that would

have complied with their obligations under both the Call Right and the federal securities

laws, without manipulating the price of the Call Right. For example, discovery may

establish that the federal securities laws did not require the Partnership to make the

Potential-Exercise Disclosure. Or discovery may reveal that the General Partner could have

exercised the Call Right promptly in March or April 2018 but instead made the tactical

choice to delay. If the defendants were ready, willing, and able to exercise the Call Right

in March or April, but nevertheless chose not to do so because they believed that making

the Potential-Exercise Disclosure would drive down the price of the common units, then

the defendants’ conduct could violate the implied covenant.

       The allegations of the complaint support a reasonable inference that the defendants

delayed the exercise of the Call Right to manipulate the unit price. At the pleading stage,

the plaintiffs have stated a claim for breach of the implied covenant.

              3.     The Tax Opinion

       The plaintiffs also claim that the General Partner breached its implied contractual

obligations by relying on the Tax Opinion. They contend that the General Partner

“prevented Boardwalk’s minority unitholders from receiving the benefit of [their] bargain

by relying in bad faith on a[ Tax] Opinion that ignored [the] central question” of whether

the Partnership’s “tax status will materially disadvantage the Partnership vis-à-vis other

business entity forms” and was “otherwise flawed.” Dkt. 106 at 42. This argument

duplicates the plaintiffs’ claim that the Tax Opinion did not meet the requirements of

Section 15.1(b)(ii). It therefore does not state a claim for breach of the implied covenant.

                                             52
               4.     The Status of GPGP and the Partnership as Defendants

       As with Count II, Count III asserts a claim for breach of the implied covenant not

only against the General Partner, but also against GPGP and the Partnership. The motion

to dismiss the claim for breach of contract against GPGP is granted. The motion to dismiss

the claim for breach of contract against the Partnership is denied.

       As with Count II, Count III is dismissed as to GPGP because it is not a party to the

Partnership Agreement, and only a party to a contract may be sued for breach of the implied

covenant that inheres in that contract. Gerber, 67 A.3d at 421 n.53. As with Count II, it is

unclear to what extent the Partnership itself could be liable for breach of an implied

obligation in the Partnership Agreement that bound the General Partner, but it is premature

to address that issue at this stage.

E.     Count VI: Tortious Interference With Contract

       Count VI pleads a claim for tortious interference with contract against the General

Partner’s controllers: GPGP, Holdings, and Loews. Count IV states a claim on which relief

can be granted.

       Delaware has adopted the formulation of a claim for tortious interference with

contract that appears in the Restatement (Second) of Torts. WaveDivision Hldgs., LLC v.

Highland Capital Mgmt., L.P., 49 A.3d 1168, 1174 (Del. 2012); ASDI, Inc. v. Beard

Research, Inc., 11 A.3d 749, 751 (Del. 2010). Generally speaking, “[o]ne who intentionally

and improperly interferes with the performance of a contract . . . between another and a

third person by inducing or otherwise causing the third person not to perform the contract,

is subject to liability to the other.” RESTATEMENT (SECOND) OF TORTS § 766 (1979),

                                             53
Westlaw (database updated June 2019). Reframed as elements, a plaintiff must plead “(1)

a contract, (2) about which defendant knew, and (3) an intentional act that is a significant

factor in causing the breach of such contract, (4) without justification, (5) which causes

injury.” Bhole, Inc. v. Shore Invs., Inc., 67 A.3d 444, 453 (Del. 2013) (internal quotation

marks omitted).

              1.      The Four Straight-Forward Elements

       In this case, the complaint easily pleads four of the elements of a claim for tortious

interference with contract. The parties agree that there was a contract (the Partnership

Agreement) and that GPGP, Holdings, and Loews knew about it. The parties also agree

that GPGP, Holdings, and Loews controlled the General Partner, who in turn controlled

the Partnership. The complaint sufficiently alleges that GPGP, Holdings, and Loews made

an intentional decision to cause the General Partner to make the Potential-Exercise

Disclosure, and this decision has held that it is reasonably conceivable that by doing so,

the General Partner breached the Partnership Agreement. The plaintiffs also have pled

generally that they suffered damages, which is sufficient at the pleading stage. See, e.g., In

re Ezcorp, Inc. Consulting Agreement Deriv. Litig., 2016 WL 301245, at *30 (Del. Ch. Jan.

25, 2016); NACCO Indus., Inc. v. Applica Inc., 997 A.2d 1, 19 (Del. Ch. 2009). Elements

(1), (2), (3) and (5) are therefore met.

              2.      The Element Of Justification

       The non-straightforward element is the existence of justification. “The tort of

interference with contractual relations is intended to protect a promisee’s economic interest

in the performance of a contract by making actionable ‘improper’ intentional interference

                                             54
with the promisor’s performance.” Shearin v. E.F. Hutton Gp., 652 A.2d 578, 589 (Del.

Ch. 1994). “The adjective ‘improper’ is critical. For participants in a competitive capitalist

economy, some types of intentional interference with contractual relations are a legitimate

part of doing business.” NAMA Hldgs., LLC v. Related WMC LLC, 2014 WL 6436647, at

*26 (Del. Ch. Nov. 17, 2014). “[C]laims for unfair competition and tortious interference

must necessarily be balanced against a party’s legitimate right to compete.” Agilent Techs.

v. Kirkland, 2009 WL 119865, at *8 (Del. Ch. Jan. 20, 2009). Determining when

intentional interference becomes improper requires a “complex normative judgment

relating to justification” based on the facts of the case and “an evaluation of many factors.”

Shearin, 652 A.2d at 589 (internal quotation marks omitted).

       The Delaware Supreme Court has adopted the factors identified in Section 767 of

the Restatement as considerations to weigh when evaluating the existence of justification.

WaveDivision, 49 A.3d at 1174. The factors are:

       (a) the nature of the actor’s conduct, (b) the actor’s motive, (c) the interests
       of the other with which the actor’s conduct interferes, (d) the interests sought
       to be advanced by the actor, (e) the social interests in protecting the freedom
       of action of the actor and the contractual interests of the other, (f) the
       proximity or remoteness of the actor’s conduct to the interference and (g) the
       relations between the parties.

Id. Weighing the seven factors identified in the Restatement requires the court to engage

in a fact-specific inquiry to determine whether the interference with contract is improper

under the particular circumstances of the case. See RESTATEMENT (SECOND) OF TORTS

§ 767 cmt. b (1979), Westlaw (database updated June 2019) (“[T]his branch of tort law has

not developed a crystallized set of definite rules as to the existence or non-existence of a

                                             55
privilege . . . . Since the determination of whether an interference is improper is under the

particular circumstances, it is an evaluation of these factors for the precise facts of the case

before the court.”).

        When the defendant that a plaintiff has sued for tortious interference controls an

entity that was a party to the contract, the weighing of factors becomes more complex

because of the need to balance the important policies served by a claim for tortious

interference with contract against the similarly important policies served by the corporate

form.

        Ordinarily, of course, only property belonging to the corporation [that is the
        party to the contract] is available to satisfy obligations of the corporation.
        Thus, while there may be independent grounds to hold another liable for the
        obligations of a corporation . . . [,] those in control of a corporation are not
        typically liable for distinctly corporate obligations by reason of that control.
        This “fact,” of course, supplies one of the principal utilities of the corporate
        form of organization.

Irwin & Leighton, Inc. v. W.M. Anderson Co., 532 A.2d 983, 987 (Del. Ch. 1987) (internal

citations omitted). A party who wishes to have a parent entity or other controller backstop

the obligations of the controlled entity can do so by contract, either by making the parent a

party to the agreement or by obtaining a guarantee. A party should not be able to use a

claim of tortious interference with contract to reap the benefits of protections that it did not

obtain at the bargaining table.

        At the same time, Delaware’s respect for corporate separateness means that

Delaware maintains a role for tortious interference even when one entity controls another.

For example, Delaware law rejects the theory that “a parent and its wholly owned

subsidiaries constitute a single economic unit” such that “a parent cannot be liable for

                                              56
interfering with the performance of a wholly owned subsidiary.” Shearin, 652 A.2d at 590;

accord Allied Capital Corp. v. GC-Sun Hldgs., L.P., 910 A.2d 1020, 1038 (Del. Ch. 2006).

Delaware law instead balances “the significant economic interest of a parent corporation

in its subsidiary,” including the parent’s legitimate interest in consulting with its subsidiary,

against the subsidiary’s status as a separate entity and the interests of third parties in their

contractual relationships with the subsidiary. Shearin, 652 A.2d at 590. The result is a

limited affiliate privilege that protects a parent corporation that “pursues lawful action in

the good faith pursuit of [the subsidiary’s] profit making activities.” Id. Recognizing a

limited affiliate privilege is “consistent with the traditional respect accorded to the

corporate form by Delaware law . . . in that it does not ignore that a parent and a subsidiary

are separate entities. Rather, it recognizes that the close economic relationship of related

entities requires enhanced latitude in defining what ‘improper’ interactions would be.” Id.

at 590 n.13 (internal citation omitted).

       Because these principles are grounded in the economic relationship between a

parent entity and its subsidiary, or among affiliated entities, they logically apply to a claim

asserting that the controllers of a general partner tortiously interfered with the partnership’s

governing agreement by causing the general partner and the partnership to breach that

agreement. See, e.g., NAMA, 2014 WL 6436647, at *28. As with a corporate parent and its

subsidiary, or wholly owned affiliates with a common parent, a general partner and its

controllers “share the commonality of economic interests which underlay the creation of

an interference privilege.” See Shearin, 652 A.2d at 590 n.14 (holding that for purposes of

assessing justification, “the relationship among wholly owned affiliates with a common

                                               57
parent is no different . . . than that between a parent and a subsidiary”). Thus, to sufficiently

plead that the controllers of a general partner acted without justification when interfering

with a contract to which the general partner was a party, the complaint must allege facts

that support a reasonable inference that the interference was “motivated by some malicious

or other bad faith purpose” rather than “to achieve permissible financial goals.” See

Shearin, 652 A.2d at 591.

       Here, because of the fact-intensive nature of this inquiry, it is not possible to

determine at the pleading stage whether GPGP, Holdings, and Loews acted with

justification when they caused the General Partner (through the Partnership) to make the

Potential-Exercise Disclosure and subsequently exercise the Call Right. Based on the facts

alleged in the complaint, however, it is reasonably conceivable that GPGP, Holdings, and

Loews interfered with the Partnership Agreement maliciously or in bad faith by causing

the Partnership to make the Potential-Exercise Disclosure to drive down the price of the

common units and by causing the General Partner to exercise the Call Right

opportunistically.

              3.      The Stranger Rule

       The tortious interference claim against GPGP, Holdings, and Loews implicates the

so-called “stranger rule.” Under this rule, the complaint must allege facts supporting a

reasonable inference that the defendant is “a stranger to both the contract and the business

relationship giving rise to and underpinning the contract.” Tenneco Auto., Inc. v. El Paso

Corp., 2007 WL 92621, at *5 (Del. Ch. Jan. 8, 2007). Two decisions since Tenneco have

                                               58
applied this rule to foreclose liability for tortious interference with contract when the

breaching party was controlled by the defendant.14

       The Tenneco decision derived the stranger rule from a Georgia case. See Tenneco,

2007 WL 92621, at *5 (citing Atlanta Mkt. Ctr. Mgmt., Co. v. McLane, 503 S.E.2d 278,

283–84 (Ga. 1998)). Georgia is part of a competing group of jurisdictions that have adopted

an absolute (rather than limited) affiliate privilege.15 As Chancellor Allen explained,

       According to this theory, a parent and its wholly owned subsidiaries
       constitute a single economic unit. Reasoning from this premise and
       acknowledging that an entity cannot be liable for interfering with its own
       performance of a contract, these courts conclude that a parent cannot be liable
       for interfering with the performance of a wholly owned subsidiary. Under
       this theory, “interference” by a parent in the performance of contractual

       14
          See Mesirov v. Enbridge Energy Co., 2018 WL 4182204, at *12 (Del. Ch. Aug.
29, 2018); Kuroda v. SPJS Hldgs., L.L.C., 971 A.2d 872, 884 (Del. Ch. 2009). Two other
cases have referenced the “stranger rule” without applying it. One cited Tenneco in dicta.
See Fisk Ventures, LLC v. Segal, 2008 WL 1961156, at *12 n.56 (Del. Ch. May 7, 2008)
(declining to reach the issue of whether plaintiff’s tortious interference claims were
foreclosed by the “stranger” rule). Another declined to rule on whether Tenneco accurately
reflected Delaware law. See Dieckman, 2018 WL 1006558, at *5 (indicating that the
plaintiff’s assertion that tortious interference claims are properly assessed against the
contracting entity’s affiliates “may be correct under Delaware law”). A final Delaware case
did not cite the stranger rule, but nevertheless articulated a bright-line principle under
which “a parent cannot be liable for interfering with the performance of a wholly owned
subsidiary.” Cencom Cable Income P’rs II, Inc. v. Wood, 752 A.2d 1175, 1183 (Del. Ch.
1999). That statement runs contrary to the Delaware authorities discussed in the text.
       15
          Alabama and Texas also take this approach. See BellSouth Mobility, Inc. v.
Cellulink, Inc., 814 So. 2d 203, 212 (Ala. 2001) (holding that a plaintiff must establish “the
absence of the defendant’s involvement in the business relationship” as an element of its
tortious-interference claim) (emphasis in original); Cleveland Reg’l Med. Ctr., L.P. v.
Celtic Props., L.C., 323 S.W.3d 322, 348 (Tex. App. 2010) (holding that, under Texas law,
“a parent company cannot tortiously interfere with the contracts of its wholly owned
subsidiary”).

                                             59
       obligations of its wholly owned subsidiary, no matter how aggressive, is not
       actionable.

Shearin, 652 A.2d at 590 (internal citation omitted). By contrast, jurisdictions like

Delaware recognize a limited affiliate privilege and employ “a balancing test of the kind

elaborated in the Restatement (Second) of Torts.” Id. The latter approach acknowledges

“the significant economic interest of a parent corporation in its subsidiary” but does so

without foreclosing potential liability on the sole basis of related-party status. See id. When

applying the stranger rule, the Tenneco court did not explore these differences.

       The Tenneco decision also cited Section 766 of the Restatement. See Tenneco, 2007

WL 92621, at *5 n.25. Section 766 requires that the contract that forms the subject of a

tortious interference claim be between “another and a third person,” but that requirement

reflects the noncontroversial proposition that “a party to a contract cannot be liable both

for breach of [a] contract and for inducing that breach.” RESTATEMENT (SECOND) OF TORTS

§ 766 (1979), Westlaw (database updated June 2019); see Bhole, Inc., 67 A.3d at 453

(alteration in original) (internal quotation marks omitted); Shearin, 652 A.2d at 590.

Another way to describe that requirement is that the defendant must be “a stranger to the

contract.” See 17B Corpus Juris Secundum § 836, Westlaw (database updated Sept. 2019)

(“Generally, only a party to a contract or one in privity may enforce it. Generally, a

stranger to a contract may not bring a claim on the contract.”) (emphasis added). It does

not follow, however, that the defendant must also be a stranger to the “the business

relationship giving rise to and underpinning the contract” to qualify as a “third party” for

purposes of Section 766.

                                              60
       In Tenneco, the defendant being sued for tortious interference had become an actual

party to the insurance policies at issue. See 2007 WL 92621 at *5. The Tenneco decision

therefore did not have to consider the broader implications of applying the stranger rule.

Subsequent decisions of this court have quoted language from Tenneco without examining

these issues. See Mesirov, 2018 WL 4182204, at *12 (quoting Tenneco, 2007 WL 92621,

at *5); Kuroda, 971 A.2d at 884 (quoting Tenneco, 2007 WL 92621, at *5).

       The stranger rule runs contrary to the Delaware Supreme Court’s adoption of the

multi-factor balancing approach under Section 766. Cf. Kernaghan v. BCI Commc’ns, Inc.,

802 F. Supp. 2d 590, 597 (E.D. Pa. 2011) (holding that because Pennsylvania had adopted

Section 766, Pennsylvania law did not require that “a defendant be a ‘stranger’ to the

agreement” to state a claim for tortious interference). It also runs contrary to the more

nuanced approach that Delaware courts have taken when considering whether corporate

controllers or other affiliated entities have interfered with a contract. 16 Delaware’s

approach uses the concept of justification to determine whether interference is improper

and accounts for related-party status when assessing justification. As noted, the result of

that approach is a limited affiliate privilege that protects a parent entity that “pursues lawful

       16
          WaveDivision, 49 A.3d at 1174–75 (affirming trial court’s determination that four
of the seven Restatement factors weighed against a finding of improper interference);
Beard Research, Inc., 11 A.3d at 750–52 (describing trial court’s analysis of justification
and the affiliate privilege as interpreting “too narrowly the nature and scope of a claim for
tortious interference”); NAMA, 2014 WL 6436647, at *28–36 (balancing the Restatement
factors to determine whether the affiliate privilege justified a parent entity’s interference
with a contract to which its subsidiary was a party).

                                               61
action in the good faith pursuit of [the subsidiary’s] profit making activities.” Shearin, 652

A.2d at 590 n.13. A bright-line application of the stranger rule would cut off potential

liability in these situations, effectively converting Delaware’s limited affiliate privilege

into an absolute affiliate privilege and upending the balance that Delaware law has struck

between respecting corporate separateness and preserving a parent entity’s ability to protect

its economic interest in its subsidiaries.

       This decision has applied the concept of justification using the factors identified in

the Restatement and adopted by the Delaware Supreme Court. It would be inconsistent

with those authorities to layer on the stranger rule as an additional element of the analysis.

Because it is reasonably conceivable that GPGP, Holdings, and Loews used their control

over the General Partner to cause it to breach the Partnership Agreement, and that they did

so without justification, the complaint has stated a claim for tortious interference with

contract.

                                 III.        CONCLUSION

       The defendants’ motion to dismiss is granted as to Counts IV and V of the

complaint. The motion is denied as to Counts II, III, and VI of the complaint. The redundant

requests for declaratory judgments in Count I are granted and dismissed to the same extent.

                                               62