Dieckman v. Regency (Nov. 3, 2019) reflects the potential for general partners of master limited partnerships (i.e., publicly traded limited partnerships) to be subject to scrutiny and possible liability in connection with approving conflicted transactions. More broadly, the decision underscores the critical importance of clarity in drafting and compliance with the precise terms of agreements.
The decision is the latest issued in long-standing litigation challenging the 2015 acquisition of Regency Energy Partners LP, a master limited partnership (“Regency”), by Energy Transfer Partners L.P. (“ETP”), in an $11 billion unit-for-unit merger (representing a 13.2% premium to the unaffected unit price) (the “Merger”). Both Regency’s general partner (the “General Partner”) and the general partner of ETP were indirectly owned and controlled by Energy Transfer Equity, L.P. (“ETE”). Given ETE’s control of both Regency and ETP, it was undisputed that the Merger presented a potential conflict of interest between, on the one hand, the General Partner, and, on the other hand, the common unitholders of Regency, who had no connections to ETE.
