Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, C. A. 2018-0372-JTL (Del. Ch. Nov. 12, 2021) is a three-act case that ends with the Supreme Court delivering two words to MLP investors: caveat emptor. If you invest in a limited partnership that contractually disclaims fiduciary duties and provides a conclusive presumption of good faith when the general partner relies on counsel, you cannot complain when the controller uses those protections to its advantage. For litigation counsel advising MLP investors or sponsors, this case is the definitive statement on where the contractual limits of MLP governance lie — and what happens when a controller pushes them to the edge.
The Call Right and the Regulatory Trigger
Loews Corporation formed Boardwalk Pipeline Partners in 2005 as a publicly traded master limited partnership to own and operate natural gas pipelines. Loews controlled Boardwalk’s general partner through a layered structure: Boardwalk GP, LP was the general partner; Boardwalk GP, LLC was the general partner of Boardwalk GP; and Loews controlled the LLC through its sole member. The structure gave Loews effective control while the public unitholders provided capital.
Boardwalk’s partnership agreement included a call right: if certain regulatory changes occurred that were reasonably likely to have a material adverse effect (MAE) on Boardwalk, the general partner could buy all the public LP units and take the company private. Two conditions had to be satisfied before the call right could be exercised: the general partner needed to receive an opinion of counsel that the regulatory change met the MAE threshold (the “Opinion Condition”), and the general partner had to deem that opinion acceptable (the “Acceptability Condition”).
In March 2018, FERC proposed new regulations that would potentially affect how MLPs treated accumulated deferred income taxes. The proposal created uncertainty. Loews saw an opportunity. Marc Alpert, Loews’ general counsel, contacted Baker Botts — specifically targeting the attorney who had originally drafted the call right provision — and asked him to issue the required legal opinion. Alpert described the matter as urgent. Baker Botts assembled a team and began working toward the conclusion Loews wanted.
Loews exercised the call right in July 2018, acquiring the public units at $12.06 per unit in a $1.56 billion take-private transaction. The call right was exercised the day before FERC finalized its new regulations. When FERC’s final rules came out, they actually made the MLP structure more attractive for pipeline companies — not less. The regulatory threat that supposedly justified the call right evaporated the day after it was exercised.
Act One: Laster Awards $690 Million
The public unitholders sued, alleging the general partner breached the partnership agreement by exercising the call right without satisfying the Opinion and Acceptability Conditions. After a four-day trial, Vice Chancellor Laster issued a 200-page post-trial opinion eviscerating the process.
On the Opinion Condition, Laster found that Baker Botts’ legal opinion was not delivered in good faith. He described it as a “contrived effort to reach the result that the General Partner wanted,” built on “counterfactual assumptions” that “addressed an imaginary scenario that was never reasonably likely to come to pass.” The opinion focused on hypothetical regulatory outcomes rather than whether the actual FERC changes would cause an MAE on Boardwalk’s business. Baker Botts constructed what the court called a “simple syllogism” that “ineluctably led” to the conclusion Loews needed.
On the Acceptability Condition, Laster found that the wrong entity within the layered MLP structure made the acceptability determination. The court held that the determination should have been made by the LLC’s board of directors (which included independent members), not by the sole member (which was entirely controlled by Loews insiders).
The damages award was $689,827,343.38 — the difference between the present value of the future distributions the unitholders were deprived of by the call-right exercise and the $12.06 call price. Laster noted that this was conservative relative to other damages estimates he had considered.
Act Two: The Supreme Court Reverses
In December 2022, the Delaware Supreme Court reversed. The majority opinion reframed the entire analysis around the partnership agreement’s contractual protections for the general partner.
On the Acceptability Condition, the Supreme Court held that the partnership agreement was unambiguous: the acceptability determination belonged to the general partner, and since the partnership agreement didn’t specify which internal decision-maker within the GP structure should make it, the LLC’s operating agreement controlled. The sole member — not the board — was the correct decision-maker.
On exculpation, the Supreme Court focused on a provision Laster had given less weight: the partnership agreement stated that the general partner could rely on counsel’s advice, and such reliance created a “conclusive presumption” of good faith. Loews had retained Skadden to advise that it would be reasonable for the sole member to accept the Baker Botts opinion. The Supreme Court held that this reliance was sufficient to trigger the conclusive presumption, regardless of the underlying quality of the Baker Botts opinion itself. The general partner was exculpated from damages.
The Supreme Court’s message was explicit: investors in MLPs are “willingly investing” in entities that provide fewer protections than corporate fiduciary principles. Boardwalk’s public offering documents disclosed the call right, the disclaimers of fiduciary duties, and the general partner’s ability to exercise the call right free from fiduciary constraints. The unitholders agreed to those terms when they bought in. Caveat emptor.
Act Three: Laster’s 117 Page Rebuttal
On remand in September 2024, Vice Chancellor Laster dismissed the case as required by the reversal. But he didn’t do so quietly. He issued a 117-page opinion pushing back against what he characterized as misrepresentations of his original findings in Loews’ Supreme Court briefing. He defended his factual findings, reaffirmed his conclusion that the Baker Botts opinion was contrived, and addressed the legal opinion condition on the merits — explicitly noting that the Supreme Court had not ruled on whether the Opinion Condition was actually satisfied, only that the general partner was exculpated regardless.
Laster’s remand opinion won’t change the outcome. The Supreme Court’s reversal is final. But for practitioners, the 117-page opinion serves a purpose: it preserves the factual record and Laster’s legal reasoning in case the Supreme Court revisits the scope of MLP exculpation provisions in a future case. It’s also a signal that the Chancery Court and the Supreme Court have fundamentally different views about how much latitude MLP partnership agreements should give controllers — a tension that will shape future MLP litigation.
What This Means for MLP Investors and Sponsors
After Bandera, the landscape for MLP governance disputes is clear:
Contractual exculpation provisions will be enforced as written. If the partnership agreement provides a conclusive presumption of good faith when the GP relies on counsel, that presumption protects the GP even if the underlying legal opinion is — in the Chancery Court’s words — “contrived.” The Supreme Court will not look behind the curtain to evaluate the quality of the advice. The question is whether the GP relied on it, not whether the advice was correct.
Fiduciary duty disclaimers mean what they say. The Supreme Court cited Dieckman v. Regency for the principle that MLP investors “must rely on the express language of the partnership agreement to sort out the rights and obligations” and are not owed non-contractual fiduciary duties. If the partnership agreement disclaims fiduciary duties, the only standard of conduct is what the agreement provides. “Manipulative and opportunistic” conduct that would trigger liability under corporate fiduciary principles is not actionable under a contractual standard that exculpates everything short of fraud, bad faith, or willful misconduct.
The “bad faith” and “willful misconduct” exceptions are narrow. Laster found willful misconduct. The Supreme Court reversed, holding that the Chancery Court improperly aggregated the scienter of multiple individuals across the layered MLP structure. The “proper focus” is on the specific entity responsible for the decision, not on the collective knowledge of officers, agents, and affiliates across the corporate family. This narrowing of the scienter analysis echoes Mindbody and the Supreme Court’s Columbia Pipeline reversal — different mechanisms, same direction: the bar for holding a controller liable is rising.
When the Partnership Agreement is Your Only Protection
The uncomfortable practical lesson of Bandera is that for MLP investors, the partnership agreement is not just the primary protection — it’s the only protection. If the agreement disclaims fiduciary duties, provides a conclusive good-faith presumption for reliance on counsel, and includes broad exculpation, the investor’s recourse when the controller acts opportunistically is limited to the narrowest possible reading of “bad faith” and “willful misconduct.” After Bandera, even the Chancery Court’s finding of willful misconduct wasn’t enough to survive Supreme Court review.
For investors evaluating an MLP investment, the due diligence that matters is in the partnership agreement, not in the financials. Read the call-right provisions. Read the exculpation provisions. Read the good-faith presumption provisions. Understand what the controller can do under the agreement, because Bandera holds that the controller is entitled to do it.
For sponsors structuring MLP partnerships, Bandera confirms that broad exculpation and fiduciary duty disclaimers will be enforced. But the three-year litigation, the $690 million trial judgment, the Supreme Court appeal, and the 117-page remand opinion are reminders that contractual protections don’t prevent litigation — they determine who wins it. The cost of defense is real even when the outcome is favorable.
The Practical Takeaway
Bandera is the most dramatic illustration of caveat emptor in Delaware MLP law. A controller engineered a legal opinion on counterfactual assumptions, exercised a call right the day before the regulatory threat evaporated, took the company private at $12.06 per unit, and walked away without liability — because the partnership agreement said it could. The Chancery Court saw willful misconduct and awarded $690 million. The Supreme Court saw a contractual structure that disclaimed fiduciary duties, provided a good-faith presumption, and exculpated the GP from monetary liability. The contract won.
For litigation counsel: if your client is an MLP investor challenging a controller’s exercise of a contractual right, read the exculpation provisions before you read the facts. If the agreement provides a conclusive presumption of good faith for reliance on counsel, and the controller obtained a legal opinion — however dubious — the path to damages runs through “bad faith” and “willful misconduct” as the Supreme Court defines those terms, not as the Chancery Court does. After Bandera, that’s a very narrow path.
If you’re evaluating damages exposure in an MLP governance dispute and need to determine how the partnership agreement’s exculpation and good-faith provisions affect the valuation of the claim, happy to talk through the analysis. The contractual framework often determines the viability of the claim before any valuation work begins.
