## Facts

- Buckeye Partners, L.P. was a publicly traded Delaware limited partnership governed by a limited partnership agreement (LPA) and managed through its general partner and the general partner’s board committee structure.
- The LPA provided that unitholders had no right to receive distributions and left decisions about cash distributions to the general partner’s discretion.
- The LPA disclaimed traditional fiduciary duties and substituted a contractual “good faith” standard, defined subjectively as a belief that the action was in the partnership’s best interests.
- The LPA allowed conflict transactions and provided that a conflict resolution approved by a majority of the general partner board’s Nominating and Corporate Governance Committee would be conclusively deemed “fair and reasonable,” if material facts were disclosed.
- An acquiring fund and its vehicles agreed to buy all public units for $41.50 per unit in cash; the merger was approved by roughly 96% of voting unitholders.
- The merger agreement restricted certain distributions between signing and closing without buyer consent and allowed the buyer to delay closing under specified timing mechanics.
- Buckeye historically declared quarterly cash distributions in late October or early November; the merger closed on November 1, 2019, and no distribution was made for the third quarter of 2019 or the partial fourth-quarter period before closing.
- A former unitholder brought a putative class action alleging the closing date and structure were selected to avoid paying a customary distribution and to shift value and tax benefits to the buyer.

## Issues

1. Whether the complaint stated a breach-of-contract claim by identifying an LPA provision that required a pre-closing distribution or otherwise prohibited the alleged merger timing and structure.
2. Whether an implied covenant of good faith and fair dealing claim was available because the LPA contained a contractual gap regarding distributions, merger timing, or conflict handling.
3. Whether fiduciary-duty claims could proceed despite the LPA’s elimination of fiduciary duties in favor of a contractual good-faith standard, and whether unitholder approval triggered Corwin cleansing and business judgment review.
4. Whether aiding-and-abetting or tortious-interference claims against the buyer-side defendants could survive absent a viable underlying breach by the partnership or its general partner.

## Decision

- The Court of Chancery granted defendants’ Rule 12(b)(6) motions and dismissed all claims with prejudice.
- The breach-of-contract claim was dismissed for failure to plead a breached contractual provision and because the LPA’s express terms negated any asserted right to distributions.
- The implied covenant claim was dismissed because the LPA addressed distributions and managerial discretion, leaving no contractual gap for an implied term.
- Fiduciary-duty claims were dismissed as foreclosed by the LPA’s elimination of traditional fiduciary duties and replacement with a contractual good-faith standard.
- Alternatively, the court held that even if fiduciary duties applied, the fully informed, uncoerced unitholder vote approving the merger invoked Corwin and required dismissal under business judgment review.
- The aiding-and-abetting and tortious-interference claims were dismissed for lack of an underlying actionable breach.
- The Delaware Supreme Court summarily affirmed on the reasoning of the Court of Chancery.

## Legal Principles

- A contract claim must identify the specific contractual provision allegedly breached; conclusory unfairness allegations do not satisfy Delaware notice pleading requirements.
- Where an LPA states unitholders have no right to distributions and grants managerial discretion over distributions, claims premised on an entitlement to “customary” distributions generally fail absent a contrary contractual obligation.
- The implied covenant of good faith and fair dealing is a narrow, gap-filling doctrine and cannot be used to contradict or reallocate risks addressed by express contract terms.
- Delaware alternative-entity agreements may eliminate traditional fiduciary duties and replace them with contract-defined standards (including subjective good faith), leaving the contract and implied covenant as the primary constraints.
- Under Corwin, a fully informed, uncoerced approval by disinterested equityholders generally cleanses post-closing fiduciary-duty challenges to non-controller transactions and results in business judgment review.
- Secondary liability theories such as aiding and abetting or tortious interference generally require a viable underlying breach.

## Conclusion

The courts rejected a unitholder challenge to merger timing and alleged lost distributions because the LPA did not grant distribution rights, displaced fiduciary duties with a contractual good-faith standard, and the merger was approved by an informed, uncoerced supermajority vote that independently supported dismissal under Corwin.


Ryan v. Buckeye Partners, L.P., 2022 WL 389827 (Del. Ch. Feb. 9, 2022)