## Facts

- Link Energy LLC, successor to a reorganized energy partnership, had a highly leveraged capital structure; former public unitholders held a small minority equity position.
- Link faced severe financial distress and a substantial risk of bankruptcy, with limited access to growth capital.
- The board commenced a strategic review and ultimately agreed to sell substantially all assets to Plains All American Pipeline, L.P. for approximately $290 million in aggregate consideration.
- Sale proceeds were largely used to retire debt, including unsecured notes, leaving equity effectively out of the money; Link’s equity units declined sharply after the sale announcement.
- Minority equity holders alleged the board favored noteholders, ignored a purported alternative involving Chevron Texaco, and failed to provide adequate information about Link’s condition and options.
- After an earlier partial denial of a motion to dismiss, discovery proceeded and defendants moved for summary judgment.

## Issues

1. Whether directors breached fiduciary duties to equity holders by approving an asset sale that largely paid creditors and left no value for equity in an insolvent or near-insolvent company.
2. Whether the record supported disloyalty, bad faith, lack of independence, or conflicted dealing sufficient to displace business judgment review.
3. Whether directors committed an actionable disclosure breach in connection with the transaction when no unitholder vote or consent was required.
4. Whether any genuine disputes of material fact precluded summary judgment.

## Decision

- The Court of Chancery granted summary judgment to defendants on all remaining claims.
- The court held the challenged sale decision was protected by the business judgment rule and the record did not support bad faith, self-dealing, or a disabling conflict.
- The court found no triable showing that a concrete, superior alternative transaction was available and unreasonably disregarded.
- The court rejected the disclosure-based claims as a basis for liability in these circumstances, emphasizing that the transaction did not require or solicit unitholder action.

## Legal Principles

- When an entity is insolvent or near-insolvent, directors may consider creditor interests as residual claimants; paying creditors ahead of equity is not, by itself, evidence of disloyalty where equity lacks economic value.
- Business judgment deference applies absent evidence that a majority of the board lacked independence or that directors acted in bad faith, engaged in self-dealing, or conducted a grossly uninformed process.
- Revlon-style value maximization concepts do not require directors of an insolvent entity to forgo the only viable value-maximizing sale merely to attempt to create residual equity value.
- Stand-alone disclosure liability is generally tied to communications seeking owner action (e.g., a vote or consent); where no such action is required, omissions typically do not support an independent disclosure claim.

## Conclusion

The Court of Chancery upheld, on summary judgment, directors’ approval of a distressed company’s sale that left equity out of the money, applying business judgment review and finding no evidence of disloyal conduct or a superior alternative, and it rejected disclosure claims where unitholders were not asked to act.


Blackmore Partners, L.P. v. Link Energy LLC, 2005 WL 2709639 (Del. Ch. 2005)