Dieckman v. Regency GP LP

Supreme Court of Delaware · 2017 · Corporations

155 A.3d 358

Updated July 9, 2026

corporationsmaster limited partnershipsimplied covenant of good faith and fair dealingsafe harbor conflict resolutionDelaware limited partnershipMLPimplied covenantsafe harbor

Facts

Regency's general partner pursued a merger with ETP, an affiliated entity indirectly owned by the same controller, creating a conflict of interest. To invoke the LP Agreement's safe harbors, the general partner sought both Special Approval from a Conflicts Committee and approval from unaffiliated unitholders. The complaint alleged that one committee member began reviewing the deal while still serving on an affiliate's board, resigned four days later to join the conflicts committee, and then both committee members joined or rejoined the affiliate's board on the day the merger closed. The general partner also sent a 165-page proxy statement stating that an independent conflicts committee had granted Special Approval, while allegedly omitting the committee members' shifting affiliate ties, and the unaffiliated unitholders approved the merger.

Issue

When an MLP agreement waives fiduciary duties and expressly provides safe harbors for conflicted transactions, can the implied covenant of good faith and fair dealing be used to challenge the general partner's alleged use of misleading disclosures and a non-independent conflicts committee to obtain those safe-harbor approvals? At the pleading stage, did the complaint allege enough facts to support a reasonable inference that neither safe harbor was validly obtained?

Rule

Although Delaware limited partnership agreements may eliminate fiduciary duties, the implied covenant of good faith and fair dealing remains and can fill gaps necessary to vindicate the parties' reasonable expectations. Where a partnership agreement's conflict-resolution safe harbors naturally imply corresponding conditions, the general partner may not undermine those protections by using false or misleading statements to secure unaffiliated-unitholder approval or by subverting Special Approval through a conflicts committee that is not genuinely independent at the relevant times.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Red Mesa Logistics LP, a Delaware MLP based in Tulsa, proposes to sell a pipeline terminal to an affiliate controlled by the same parent. Its partnership agreement waives fiduciary duties and provides that an affiliated transaction is conclusively deemed approved if a majority of unaffiliated unitholders vote for it. To obtain the vote, the general partner mails a 140-page proxy stating that a negotiating committee was fully independent, while omitting that one committee member had accepted an offer to join the affiliate's board immediately after closing.

If an unaffiliated unitholder sues for breach of the partnership agreement and the defendants move to dismiss based on the vote safe harbor, what is the best answer?

Explanation. The majority held that, even where fiduciary duties are eliminated and express merger-disclosure duties are minimal, the implied covenant can supply obvious anti-subversion conditions to the contractual conflict-resolution process. When the general partner seeks unaffiliated-unitholder approval as a safe harbor, it may not use false or misleading statements to secure that approval. A complaint alleging materially misleading statements about committee independence is sufficient at the pleading stage to call the safe harbor into question.