Delaware Supreme Court Strictly Construes Limited Partnership Agreement in Reviewing a Related Party Transaction: Delaware Supreme Court “Changes Course” on Prior Ruling and Reverses Court of Chancery

Sullivan & Cromwell LLP - March 24, 2017
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On March 20, 2017, in Brinckerhoff v. Enbridge Energy Co., Inc., the Delaware Supreme Court reversed the Court of Chancery’s April 29, 2016 decision  that granted defendants’ motion to dismiss a master limited partnership unitholder’s challenge to an affiliate transaction.  In reversing the Court of Chancery’s dismissal, the Supreme Court retreated from two prior holdings.  The Court reversed itself on its previously established pleading standard for bad faith, making it easier for a master limited partnership unitholder to state a claim for relief.  The Court also rejected its previous interpretation of the Limited Partnership Agreement’s (LPA) provisions related to affiliate transactions.