DealLawyers.com Blog

In December 2022, I blogged about the Delaware Supreme Court’s decision in Boardwalk Pipeline Partners v. Bandera Master Fund, (Del. 12/22). In that case, the Court reversed a 2021 Chancery Court decision which found that the general partner of a Master Limited Partnership (“MLP”) was liable for nearly $700 million in damages as a result of a breach of the partnership agreement involving willful misconduct.

In his 2021 post-trial decision, Vice Chancellor Laster sharply criticized the general partner’s conduct and the process by which its outside counsel rendered a legal opinion required in order to complete the challenged transaction. The Delaware Supreme Court took a much more deferential approach to the general partner’s actions based upon its reading of the operative language of the MLP’s partnership agreement, and in a concurring opinion, Justice Valihura extended that deferential approach to the legal opinion.

The Supreme Court remanded the case to the Chancery Court for further proceedings consistent with its ruling. Yesterday, Vice Chancellor Laster dismissed the case.  Under the circumstances, that result isn’t surprising, but the opinion in the case is a bit unusual. The Vice Chancellor’s 117-page opinion offers a spirited apologia for his prior decision and pushes back against the way that Loews Corporation, which controlled Bandera’s general partner, characterized certain aspects of that decision in briefing before the Delaware Supreme Court.

This excerpt from a section of the Vice Chancellor’s opinion responding to Loews’s claim that, in his earlier decision, he “discerned a nefarious conspiracy of top-flight lawyers, somehow bullied into professional malfeasance to the point of delivering ‘whitewash[ed]’ ‘contrivances’ instead of reasoned legal opinions rendered in good faith” gives you a sense of its combative tone:

Loews seems to believe that no one should ever consider that an attorney at a big firm might engage in motivated reasoning or otherwise act improperly. On behalf of elite, big-firm lawyers everywhere, Loews objects to the possibility that elite lawyers could rationalize as right what is personally beneficial. Those claims equate to assertions that big firm lawyers are inhuman. The scholarship on these points goes back over three decades and is no longer subject to meaningful dispute.

Big firm lawyers are subject to the same pressures and cognitive biases as other humans, and perhaps especially so. Professor Donald Langevoort, a leading scholar in this area, explains “that various cognitive (and cultural) biases lead many lawyers—including, and maybe even especially, elite ones—to deflect, normalize, and rationalize actions that are either illegal or unethical without compromising their internal self-image as good, responsible people and good, responsible lawyers.

This is just one of several issues that Vice Chancellor Laster had with arguments raised by Loews on appeal – but why bother addressing them you’re going to dismiss the case? The Vice Chancellor’s answer to that lies in the reasoning behind the Supreme Court’s decision and the possibility of further appeals.

The defendants argued that the legal opinion condition set forth in the partnership agreement had been satisfied, but the Supreme Court’s decision didn’t resolve that issue.  Instead, it held that the general partner properly relied on another law firm’s advice that it could reasonably rely on the legal opinion at issue. This meant that, under the partnership agreement, the general partner was entitled to a conclusive presumption of good faith, which effectively exculpated it from damage claims.

The arguments made by Loews with which Vice Chancellor Laster took issue relate to the satisfaction of the legal opinion condition, and he argued that his responses to them could be helpful to the Delaware Supreme Court if the plaintiffs appeal, because Loews likely will argue that the justices should determine that the opinion condition was satisfied and affirm on that alternative ground.

– John Jenkins