Bad Faith – Page 4 – Delaware Docket

In re: El Paso Pipeline Partners L.P. Derivative Litigation, C.A. No. 7141-VCL (June 12, 2014)

Jul 01 2014

In In re: El Paso Pipeline Partners L.P. Derivative Litigation, the Delaware Court of Chancery granted summary judgment in favor of the defendants on claims for breach of contract and breach of the implied contractual covenant of good faith and fair dealing in connection with a conflicted transaction.

In March 2010, El Paso Pipeline Partners, L.P., a Delaware limited partnership that operates as a publicly traded master limited partnership (the “MLP”), purchased a 51% interest in two entities that owned certain liquid natural gas (“LNG”) assets (the “Drop-down”) from its parent corporation that “sponsored” the MLP, El Paso Corporation (the “Parent”). Parent also indirectly owned the general partner of the MLP, El Paso Pipeline GP, L.L.C. (the “General Partner”), giving it control over and an economic interest in the MLP. As a result, the proposed Drop-down created a conflict of interest for the General Partner.

In re Answers Corporation Shareholders Litigation, C.A. No 6170 (February 3, 2014) (Noble, V.C.)

Feb 12 2014

By Kristy Harlan and Eric Taylor

In re Answers Corporation involves an allegation that the board of a publicly-traded Delaware corporation, Answers Corporation (the “Company”), breached its fiduciary duties in negotiating and approving a sale of the Company. The plaintiffs alleged that the three conflicted directors controlled the Board, that the four remaining directors breached their duty of loyalty and acted in bad faith, and that the buyer of the Company (“AFCV”) aided and abetted the directors’ breach of fiduciary duty.

In March 2010, the Company received an unsolicited expression of interest from AFCV concerning a possible transaction. Shortly thereafter, the Board discussed the possibility of exploring strategic alternatives, including the recent expression of interest, ultimately deciding to explore potential transactions and engage a financial advisor to assist in the process. As part of this process, the Board’s financial advisor continued discussions with AFCV regarding a potential transaction, in addition to conducting a market check where it approached ten other potential buyers. Despite discussions with at least seven other possible buyers, no potential buyer other than AFCV made an offer. During this time, the Board rejected multiple requests for exclusivity from AFCV in order to preserve the Board’s opportunity to negotiate with other potential purchasers. The Board also rejected several offers from AFCV, deeming them to be inadequate, and pressured AFCV to increase the price offered until the transaction was finally approved. The Board’s financial advisor discussed with the Board the relative merits of pursuing various sales processes, advising the Board that additional bidders were unlikely to come forward, and ultimately provided a fairness opinion with respect to the final price offered by AFCV. During the final stages of negotiation with AFCV, after several quarters of declining revenues, the Company received quarterly results reflecting significant improvements in performance and record revenues. Despite the improved results, the Board was concerned about the future stability and performance of the Company, primarily due to its significant reliance on Google-directed traffic (which was entirely dependent on Google algorithms, subject to change at any time in Google’s discretion) and increasing competitive pressures, and ultimately approved the sale of the Company to AFCV.

Catagory:Bad Faith