Hite Hedge LP v. El Paso Corp., C. A. No. 7117-VCG (Del. Ch. Oct. 9, 2012).
This pithy 12-page opinion is proof that small things can have value. The key issue in this case was whether a controlling party, who controlled the general partner of a limited partnership, was liable for breaches of fiduciary duties. Two key takeaways from this decision are noteworthy:
(i) The court upheld provisions in the applicable agreement that included an “explicit waiver of any fiduciary duties owed by the controlling and general partners to the limited partners…”; and
(ii) a controller (e.g., a majority owner) “cannot be liable for breaching fiduciary duties owed to minority holders unless it uses its control to direct the actions of the entity it controls against the interests of that minority”. That is the key premise of controller/majority liability. See footnote 28. In this case, the harm alleged was “completely divorced” from the defendant’s role as a controller.
Thus, the motion to dismiss was granted.
