## Facts

- Brickell Partners (Brickell) was a limited partner of El Paso Energy Partners, L.P. (El Paso), a publicly traded Delaware limited partnership.
- El Paso’s general partner was DeepTech International, Inc. (DeepTech).
- El Paso Energy Corporation (Energy) owned Crystal Gas Storage, Inc. (Crystal) and also owned and controlled DeepTech; Energy also held about 34.5% of El Paso’s publicly traded units.
- El Paso acquired Crystal from Energy for $170 million, paid in newly issued El Paso preference units.
- Brickell sued derivatively on El Paso’s behalf, alleging the consideration exceeded Crystal’s value and that the acquisition was unfair to El Paso and its unaffiliated unitholders. Brickell pointed, among other things, to declines in Crystal’s revenues in 1999.
- El Paso’s limited partnership agreement set out a conflicts framework for affiliate transactions. As relevant here, the agreement provided a contractual “Special Approval” mechanism through DeepTech’s Conflicts and Audit Committee (the committee).
- The committee consisted of two DeepTech directors: Michael B. Bracy (a former Energy employee) and H. Douglas Church (also a DeepTech director).
- The committee approved the Crystal acquisition.
- Brickell alleged the approval process was compromised because Energy controlled DeepTech and because the committee members, as DeepTech directors (and in Bracy’s case as a former Energy employee), could not impartially approve a transaction between El Paso and Energy.
- DeepTech and related defendants moved to dismiss for failure to state a claim, arguing that the partnership agreement displaced default fiduciary concepts and that Special Approval barred Brickell’s challenge absent well-pled facts showing a contractual violation or bad faith.

## Issues

1. Whether the El Paso limited partnership agreement validly limited or displaced default fiduciary duties and supplied the governing standard for review of an affiliate transaction.
2. Whether Brickell pled facts supporting a reasonable inference that the committee’s Special Approval failed to satisfy the agreement’s requirements (including any contractual good-faith standard) or otherwise breached duties that remained under the agreement.
3. Whether allegations of an unfair price and structural conflicts, without well-pled facts showing a contractual defect in the Special Approval process, stated a claim for relief.

## Decision

- The Court of Chancery (Strine, V.C.) granted the motion to dismiss.
- The court treated the partnership agreement as controlling and analyzed Brickell’s claims through the agreement’s express conflict-resolution and duty-limiting provisions rather than through default corporate fiduciary doctrine.
- The court held that Special Approval operated as a contractual safe harbor for conflict transactions to the extent the agreement’s conditions were satisfied.
- The complaint did not plead nonconclusory facts showing that Bracy or Church failed to meet the agreement’s committee standards or that their approval was given in bad faith.
- Allegations that the committee members were DeepTech directors, and that one had prior employment with Energy, were not enough—standing alone—to plead a failure of Special Approval under the contract.
- The complaint’s substantive unfairness allegations (including limited references to revenue declines) were too thin to support a reasonable inference that the committee could not have approved the deal in good faith under the agreement’s governing standards.
- Because Brickell did not plead a viable contractual claim (or a plausible implied-covenant theory) that survived the agreement’s limitations, the derivative complaint was dismissed.

## Legal Principles

- In Delaware limited partnerships, the partnership agreement is the primary source of the parties’ rights and obligations; default fiduciary duties apply only to the extent the agreement does not alter them.
- A limited partnership agreement may restrict or eliminate fiduciary duties, but it cannot eliminate the implied covenant of good faith and fair dealing.
- When an agreement provides an express conflicts mechanism (such as Special Approval by a conflicts committee) and ties legal consequences to satisfying that mechanism, Delaware courts generally enforce that contractual framework as written.
- A plaintiff challenging an affiliate transaction governed by a contractual safe harbor must plead specific, nonconclusory facts showing a failure to satisfy the agreement’s stated requirements or facts supporting a reasonable inference of bad faith.
- Courts will not automatically import corporate-law “independence” or “entire fairness” concepts into an alternative-entity dispute where the parties’ contract supplies different standards for conflict transactions.

## Conclusion

Brickell Partners v. Wise enforced a limited partnership agreement that channeled review of an affiliate acquisition through a contract-defined Special Approval process, and the Court of Chancery dismissed the derivative complaint because it did not plead specific facts showing the conflicts committee’s approval violated the agreement or was given in bad faith, nor did it plead a sufficient basis to overcome the agreement’s contractual protections based on generalized claims of conflict and unfair price.


Brickell Partners v. Wise, 794 A.2d 1 (2001)