## Facts

- Enbridge Energy Partners, L.P. (EEP) operated as a Delaware master limited partnership governed by a limited partnership agreement (LPA) that largely displaced default fiduciary duties with contractual standards.
- The LPA included (i) general good-faith and exculpation provisions and (ii) a specific provision requiring certain property transactions involving the general partner to be “fair and reasonable to the Partnership.”
- In 2014, Enbridge-affiliated entities proposed a multi-part transaction in which EEP would repurchase an Alberta Clipper pipeline project interest from an Enbridge affiliate for about $200 million more than the affiliate had paid in 2009, despite alleged declines in earnings and oil prices.
- The transaction also included issuance of a new class of partnership securities, repayment of loans, and an LPA amendment creating a “Special Tax Allocation.”
- The Special Tax Allocation allegedly shifted substantial tax burdens from Enbridge and affiliates to public unitholders and reduced long-term tax advantages associated with the MLP investment.
- A unitholder (Brinckerhoff) brought class and derivative claims alleging breaches of the LPA (including the “fair and reasonable” requirement), breach of the implied covenant of good faith and fair dealing, and related theories.
- The Court of Chancery dismissed the complaint, reasoning that the LPA’s good-faith and exculpation provisions insulated the defendants and that the transaction complied with the LPA.

## Issues

1. Whether the LPA’s specific requirement that certain conflicted property transactions be “fair and reasonable to the Partnership” imposed an independent substantive constraint on the general partner’s conduct.
2. Whether more general good-faith and exculpation provisions in the LPA could modify or override that specific “fair and reasonable” standard.
3. Whether the complaint plausibly stated claims under the “fair and reasonable” standard sufficient to survive dismissal, notwithstanding compliance with other LPA provisions addressing unit issuance and tax allocations.

## Decision

- The Delaware Supreme Court affirmed the dismissal insofar as the Special Tax Allocation, viewed under the LPA’s general provisions governing issuance of units and tax allocations, was not itself shown to violate those provisions.
- The court reversed the dismissal to the extent it rested on treating general good-faith and exculpation provisions as modifying or superseding the LPA’s specific “fair and reasonable to the Partnership” requirement for the Alberta Clipper reacquisition.
- The court held that the “fair and reasonable” requirement had independent force and could not be diluted by broader, more general LPA standards.
- The court remanded for further proceedings applying the correct contractual standard, without deciding on the merits whether the transaction was in fact fair and reasonable.

## Legal Principles

- In Delaware alternative entities such as MLPs, the parties’ agreement may eliminate or restrict fiduciary duties, making contract interpretation the principal source of governing obligations.
- Specific contractual standards governing conflicted transactions must be given full effect and are not displaced by more general good-faith or exculpatory provisions unless the agreement clearly provides otherwise.
- Allegations that a conflicted transaction involved a materially higher repurchase price under worsened financial conditions, coupled with a tax allocation shifting burdens from affiliates to public investors, can support a reasonable inference that the transaction may not be “fair and reasonable” at the pleading stage.
- Compliance with general LPA provisions addressing tax allocations and unit issuance does not foreclose a separate claim that a conflicted transaction breached a distinct “fair and reasonable” requirement.
- Exculpation tied to good faith does not automatically bar claims where the agreement imposes an additional substantive constraint that may have been violated.

## Conclusion

The Delaware Supreme Court required enforcement of the LPA’s specific “fair and reasonable to the Partnership” protection for conflicted property transactions and held that broad good-faith and exculpation clauses did not neutralize that requirement, warranting remand for further proceedings under the proper contractual standard.


Brinckerhoff v. Enbridge Energy Co., 159 A.3d 242 (Del. 2017)