Blackmore Partners, L.P. v. Link Energy LLC

864 A.2d 80 (2004)

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Nature of the Case

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Facts

D is a Delaware limited liability company formed in anticipation of assuming and continuing the business of EOTT Energy Partners, L.P. upon its emergence from bankruptcy. EOTT Energy Partners' publicly traded common units were canceled, and its former common unitholders received equity units in Link representing 3% of D's newly issued equity units. EOTT Energy Partners canceled $235 million of its outstanding 11% senior unsecured notes in exchange for which the holders received a pro rata share of $104 million in 9% senior unsecured notes issued by D and a pro rata share of D equity units. The remaining equity units were distributed to other allowed unsecured creditors. P is a Delaware investment partnership. P beneficially owned 16, 239 D equity units through March 16, 2004, and remains a unitholder. D's capital structure was highly leveraged. D's management and board announced that they were considering alternatives to continuing operation. D agreed to sell its assets and business to Plains. D issued a press release. The day following D units traded at $1 per unit, down from over $5 per unit. Before they were eventually stopped regular trading, the units traded at, or below, $0.20. Certain unitholders who were not also 9% noteholders, including a representative of P, contacted D to discuss an alternative transaction to avoid the asset sale. It is alleged that Chevron Texaco was 'willing and eager' to take over some of D's marketing activities, which were limited by Link's inability to obtain substantial letters of credit for such activities. This would allow D to increase its revenue while improving its balance sheet. After receiving the Proposal, D's stated that D would not do anything without first discussing a transaction with P and other unitholders. Without any further contact, D made public in a press release its sale of assets to Plains. D was to receive $290 million in consideration: $273 million in cash from Plains and the assumption of certain obligations, and $17 million in cash from Texas-New Mexico Pipe Line Company. All but $25 million was to be used to repay debt, including the 9% notes. P filed a class action suit against Ds for breach of fiduciary duty. Ds filed a motion to dismiss pursuant to Court of Chancery Rule 12(b)(6). P filed its amended complaint alleging that the board members violated their fiduciary duties. It alleges that D's board favored the 9% noteholders, to whom they did not owe a fiduciary duty, at the expense of the unitholders, to whom they did owe a fiduciary duty. P also alleges that the board failed to maximize unitholder value in a sale of control transaction and, therefore, violated its duty of loyalty under Revlon. Ds renewed their 12(b)(6) motion to dismiss. The claim P bears the burden of pleading facts sufficient for the court to infer that the board's decision was motivated by self-interest, lack of independence or bad faith.