Morris v. Spectra Energy Partners (De) GP, LP

Court of Chancery of the State of Delaware · 2019 · Corporations

Updated August 22, 2026

Corporationsmaster limited partnershipsderivative standingmergersPrimediaParnesLewis v. Andersonderivative claim

Facts

Plaintiff was a public unitholder of Spectra Energy Partners, LP whose earlier derivative suit challenged a 2015 reverse dropdown in which SEP sold pipeline interests back to its controller’s affiliate. That derivative claim survived a motion to dismiss on the theory that SEP may have received inadequate consideration and that the general partner may have acted in subjective bad faith under the partnership agreement. In 2018, Enbridge, which already owned about 83% of SEP’s units, acquired the remaining public units in a roll-up merger. In approving the merger, the conflicts committee concluded that the derivative claim had no value to SEP other than about $4 million in avoided future litigation costs, and plaintiff alleged the merger was unfair because no value was obtained for that litigation asset.

Issue

Whether a former SEP unitholder had standing to bring a direct post-merger challenge to the roll-up merger based solely on the allegation that the merger failed to obtain value for an extinguished derivative claim. Specifically, the court had to decide whether the plaintiff satisfied the Primedia requirements, especially whether the derivative claim was material in the context of the merger.

Rule

A former derivative plaintiff may directly challenge a merger for wrongfully extinguishing a derivative claim only if the plaintiff satisfies the Primedia test: (1) the underlying derivative claim survived a motion to dismiss or otherwise could state a claim, (2) the value of that claim was material in the context of the merger, and (3) the complaint supports an inference that the acquirer would not pursue the claim and did not provide value for it. In valuing the claim for materiality, the court discounts the claim to reflect the minority holders’ beneficial interest and the litigation risk of recovery.

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

Lena Ortiz owned units in Prairie Basin Logistics, LP, a Delaware limited partnership based in Tulsa. Her derivative suit alleging that the general partner approved an affiliate asset sale in subjective bad faith survived a motion to dismiss, but before trial the controller merged the partnership into its parent and Lena then sued directly, claiming the merger gave no value for the extinguished claim.

On the viability prong of the post-merger standing test, which is the strongest argument for Lena?

Explanation. The majority opinion treats survival of a motion to dismiss as sufficient to satisfy the first Primedia prong. The court rejected the argument that it should reassess viability using later-developed summary judgment evidence. The viability inquiry is only a threshold inquiry into whether there was a meritorious litigation asset at all.