Gerber v. Enterprise Products Holdings, LLC
67 A.3d 400
| Del. | 2013Background
- Gerber, a former EPE LP unitholder, sues on behalf of two classes challenging (i) the 2009 Teppco GP/Teppco LP sales, and (ii) the 2010 merger of EPE into a subsidiary of Enterprise Products LP.
- EPE’s general partner before the merger was Enterprise Products GP; Duncan control and EPCO are related through Duncan’s Estate.
- Morgan Stanley provided fairness opinions for the 2009 sale; the 2010 merger involved an exchange ratio based on that period’s considerations.
- The LPA imposes a contractual “good faith” duty and creates safe harbors (Section 7.9) and a conclusive presumption (Section 7.10) regarding reliance on fairness opinions.
- The Court of Chancery dismissed the complaint in 2012, holding that the 7.9(a) Special Approval safely insulated the defendants and that the implied covenant claim was precluded by 7.10(b).
- The Delaware Supreme Court reverses in part, holds that the conclusive presumption does not bar implied covenant claims, remands for further proceedings on remaining issues, and addresses liability against affiliates.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 7.10(b) conclusive presumption bars implied covenant claims | Gerber argues 7.10(b) only binds fiduciary duties and cannot bar implied covenants. | Defendants contend 7.10(b) conclusively presumes good faith for reliance on expert opinions and bars implied claims. | 7.10(b) does not bar implied covenant claims. |
| Whether the 2009 Sale violated the implied covenant | Gerber asserts the Special Approval relied on a flawed Morgan Stanley opinion and harmed LP unitholders. | Defendants argue Special Approval and reliance on Morgan Stanley foreclose claims. | Implied covenant claim stated; remand to address merits. |
| Whether the 2010 Merger violated the implied covenant | Gerber contends the merger primarily aimed to terminate claims without valuing them. | Defendants rely on Special Approval and 7.10(b) to shield liability. | Implied covenant claim stateable; reversal of dismissal on this point. |
| Whether affiliates other than the general partner may be liable on secondary claims | Gerber seeks liability for tortious interference and aiding/abetting against non-signatories. | LPA protections foreclose such claims against non-signatories only if applicable. | Issues to be determined on remand; not resolved here. |
Key Cases Cited
- Nemec v. Shrader, 991 A.2d 1120 (Del.2010) (implied covenant scope and Nemec’s limits on eliminating implied covenants)
- ASB Allegiance Real Estate Fund v. Scion Breckenridge Managing Member, LLC, — (—) (distinguishes implied covenant from fiduciary duty; relied upon for framework (court adopts disciplined implied cov’t analysis))
- Cent. Mortg. Co. v. Morgan Stanley, 27 A.3d 531 (Del.2011) (limits and interpretation of reliance on fairness opinions; governs 7.10(b) impact)
- Brinckerhoff v. Tex. E. Prods. Pipeline Co., 986 A.2d 370 (Del.Ch.2010) (implied covenant applicability to nonparties and contractual scope)
- Dunlap v. State Farm Fire & Cas. Co., 878 A.2d 434 (Del.2005) (implied covenant attaches to every contract; general principle)