Last week, the Delaware Supreme Court affirmed the Chancery Court’s decision in The Williams Companies v. Energy Transfer. There’s nothing unusual about that – the Supreme Court and the Chancery Court are usually on the same page. But this case is interesting because it involved a rare dissent by one of the justices – and even more interesting is the fact that the dissenter was Chief Justice Strine.
The Chancery Court’s decision upheld Energy Transfer’s termination of its deal with The Williams Companies based upon its lawyers’ inability to render a tax opinion that was a condition to closing. The Court rejected Williams’ contentions that Energy Transfer breached its obligations to use “commercially reasonable efforts” to cause its lawyers to issue the opinion and to use its “reasonable best efforts” to close the deal.
The Supreme Court disagreed with Chancery Court’s analysis of what Energy Transfer’s covenants required of it, but Vice Chancellor Glasscock’s ruling was saved by a footnote in which he applied the approach advocated by Williams and still found the complaint lacking.
Chief Justice Strine was not impressed with the footnote, particularly in light of his misgivings about whether Energy Transfer’s conduct after becoming aware of the potential issue with the tax opinion was consistent with its contractual obligations.
Anyone who has followed this case would likely agree on one thing – Energy Transfer’s tax lawyer found himself in a spot that no deal lawyer wants to be in. How he got put in that spot is a big part of what Justice Strine’s dissent is all about – and this article from Alison Frankel says that his opinion is a “cautionary tale for deal lawyers.”
– John Jenkins