Opinion-of-Counsel Conditions as Independent, Good‑Faith Safeguards in Delaware MLPs: Commentary on Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP

Opinion-of-Counsel Conditions as Independent, Good‑Faith Safeguards in Delaware MLPs:
A Commentary on Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP (Del. Dec. 10, 2025)

I. Introduction

This Delaware Supreme Court decision arises out of Loews Corporation’s 2018 take‑private of Boardwalk Pipeline Partners, LP, a publicly traded master limited partnership (“MLP”) that owned major natural gas pipelines. The transaction turned on a contractual “Call Right” that allowed Boardwalk’s general partner to forcibly acquire all publicly held units if certain tax‑related regulatory changes occurred.

The central legal dispute concerns a familiar but often under‑litigated device: a requirement that an “Opinion of Counsel” be delivered as a condition precedent to exercising a contractual right. The Boardwalk partnership agreement required, as a condition to exercising the Call Right, receipt of:

  • an Opinion of Counsel that FERC‑driven tax developments were reasonably likely to have a material adverse effect (“MAE”) on the maximum rates the pipelines could charge; and
  • a further determination by the general partner that this opinion was “acceptable”.

In 2018, after FERC announced proposed tax‑policy changes that shook the MLP sector, Loews and Boardwalk engaged Baker Botts to deliver the MAE opinion and Skadden to opine that Baker Botts’s opinion was acceptable. The general partner then exercised the Call Right and took Boardwalk private at $12.06 per unit. The very next day, FERC’s final action confirmed that the feared adverse rate effect would not materialize.

Boardwalk unitholders challenged the transaction, leading to:

  1. a 2021 post‑trial Court of Chancery opinion finding that Baker Botts’s opinion was not rendered in good faith and that the Call Right exercise breached the partnership agreement;
  2. a 2022 Delaware Supreme Court decision (Boardwalk 2022) holding that the general partner was nevertheless exculpated from monetary liability because it reasonably relied on Skadden in deeming the opinion acceptable; and
  3. a 2024 Chancery remand decision dismissing all remaining claims, which is the subject of the present 2025 appeal.

The 2025 Supreme Court opinion (the focus of this commentary) clarifies the scope of the 2022 decision, re‑affirms the substantive bite of opinion‑of‑counsel conditions, and delineates the limits and reach of contractual exculpation. It also resurrects, at least in part, unitholders’ potential remedies through a remanded tortious‑interference claim against Loews and related entities.

II. Summary of the 2025 Opinion

A. Holdings in Brief

The Delaware Supreme Court, sitting en banc, holds that:

  1. The Court of Chancery misread the 2022 Supreme Court decision. The earlier opinion exculpated the general partner from monetary damages based on reasonable reliance on Skadden’s acceptability advice, but it did not decide whether:
    • the Baker Botts MAE opinion satisfied the contractual “Opinion of Counsel” condition, or
    • the exercise of the Call Right was a breach of the partnership agreement.
  2. The “Opinion Condition” and “Acceptability Condition” are distinct, independent requirements. An opinion-of-counsel condition that functions as a contractual trigger is a “meaningful limitation” that must be satisfied on its own terms; a separate “acceptability” determination cannot cure an opinion that was not rendered in good faith.
  3. The Baker Botts opinion was not rendered in subjective good faith; the Opinion Condition failed; the Call Right exercise breached the partnership agreement. The Court:
    • endorses the Williams standard that opinion counsel must make a subjective good‑faith judgment, grounded in its expertise and the actual facts, when issuing a condition‑precedent opinion; and
    • upholds as not clearly erroneous the Chancery Court’s detailed factual findings that Baker Botts instead engaged in “motivated reasoning” to deliver Loews’s desired outcome.
  4. Nevertheless, the general partner remains exculpated from all monetary liability (legal and equitable) for that breach.
    • Section 7.8(a) of the partnership agreement bars “monetary damages” against the general partner absent a final finding of its own bad faith.
    • The Court confirms that “monetary damages” includes equitable monetary remedies (e.g., rescissory damages, disgorgement) and cannot be sidestepped by re‑packaging a damages claim in equitable form.
  5. The Court reverses the dismissal of the tortious‑interference claim against Loews and affiliates (Count IV) and remands.
    • Because there was an underlying breach of the partnership agreement (the failed Opinion Condition), the Court of Chancery erred in dismissing the interference claim on the “no breach” premise.
    • The Chancery Court must now adjudicate that claim (and any defenses) on a correct understanding of the Supreme Court’s holdings.
  6. The Court affirms judgment for defendants on:
    • Count II (breach of contract based on allegedly “gaming” the Call Right exercise price via the April 30, 2018 10‑Q disclosures),
    • Count III (implied covenant of good faith and fair dealing), and
    • Count V (unjust enrichment).
    The “Potential Exercise Disclosures” did not breach the agreement, were required or appropriate under federal securities law, and any omissions plaintiffs identify were immaterial or already publicly disclosed.
  7. The Supreme Court declines to decide, in this opinion, whether other non‑GP defendants are exculpated. That issue remains open for the Court of Chancery on remand as needed.

B. The Dissent

Justice LeGrow, joined by Justice Valihura, dissents. They would:

  • hold that Baker Botts acted in subjective good faith and that the Opinion Condition was satisfied;
  • conclude there was no breach of contract when the Call Right was exercised;
  • accordingly affirm dismissal of the tortious‑interference claim (no underlying breach); and
  • affirm judgment for defendants on all counts.

The divide between the majority and dissent centers on:

  • how deferential courts must be to opinion counsel’s interpretation under a subjective good‑faith standard; and
  • whether Chancery improperly substituted its legal judgment for Baker Botts’s in finding bad faith.

III. Factual and Procedural Background (Simplified)

A. The Boardwalk Structure and the Call Right

  • Boardwalk Pipeline Partners, LP is a Delaware MLP owning three natural gas pipelines: Texas Gas, Gulf South, and Gulf Crossing.
  • Loews controlled Boardwalk through a chain:
    • Boardwalk Pipeline Partners, LP (the MLP) →
    • Boardwalk GP, LP (the “General Partner”) →
    • Boardwalk GP, LLC (“GPGP”; its board has Loews insiders and independents) →
    • Boardwalk Pipeline Holdings Corp. (the “Sole Member”) →
    • Loews Corporation (ultimate parent).
  • The Third Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement” or “LPA”) governs Boardwalk. Section 15.1(b) contains the Call Right.

The Call Right allowed the General Partner or its affiliate to buy all publicly held units if, among other things:

  • FERC‑related tax changes were reasonably likely to have a material adverse effect on the maximum applicable rates the pipelines could charge; and
  • the General Partner obtained an “Opinion of Counsel” to that effect, and deemed that opinion “acceptable”.

“Opinion of Counsel” is separately defined as a written opinion of counsel acceptable to the General Partner – the source of the “Opinion Condition”/“Acceptability Condition” distinction.

The Call Right price was determined by a 180‑day backwards‑looking trading-price formula: the average closing price over 180 trading days ending three days before notice of exercise.

B. FERC’s 2018 Actions and the MAE Question

FERC regulates interstate pipeline rates under a cost‑of‑service framework that must produce “just and reasonable” rates. Historically, FERC allowed MLPs a tax allowance as if all partners were taxed at the corporate level, even though MLPs are pass‑through entities. This policy drove many pipelines, including Boardwalk, into MLP form in 2005.

Key regulatory events:

  • 2016: D.C. Circuit’s United Airlines v. FERC decision holds that granting both corporate and non‑corporate MLP unitholders the same income tax allowance is unduly discriminatory.
  • March 15, 2018 (“2018 FERC Actions”):
    • FERC issues a Revised Policy Statement ending the automatic income tax allowance for MLPs.
    • FERC issues a Notice of Proposed Rulemaking (NOPR) and Form 501‑G, directing pipelines to quantify the effect of these changes.
    • FERC issues a Notice of Inquiry on Accumulated Deferred Income Taxes (ADIT), asking how to handle the large ADIT balances that had built up under prior rules.

ADIT was critically important: it reflects tax timing differences (accelerated tax depreciation vs. straight‑line for ratemaking) and essentially functions as cost‑free capital. How FERC would treat ADIT in light of the new policy was unknown and hotly contested, with pipelines and shippers lobbying in opposite directions.

Internally, Boardwalk’s rate executive Ben Johnson concluded that:

  • Gulf South and Gulf Crossing were largely insulated because most of their revenues came from negotiated or discounted rates, not recourse rates directly tied to FERC cost‑of‑service; and
  • Texas Gas, operating in a competitive market with significant discounted/negotiated rates, was unlikely to face a rate case in the near term.

Boardwalk’s preliminary assessment: the 2018 FERC Actions were likely to have a minimal or neutral economic impact on its actual revenues; any adverse change to “maximum applicable rates” was uncertain and heavily dependent on unknowns like ADIT treatment and rate case risk.

C. The Opinion‑Writing Process

Loews feared that the new FERC regime could justify exercising the Call Right. It engaged:

  • Baker Botts (lead partner: Mike Rosenwasser, who had drafted the Call Right in 2005 while at Vinson & Elkins) to deliver the MAE opinion; and
  • Skadden, Arps (lead partner: Richard Grossman; Delaware litigator: Jennifer Voss; FERC expert and former Commissioner: Mike Naeve) to:
    • advise on whether the Baker Botts opinion was “acceptable” for purposes of the Acceptability Condition; and
    • “shadow” Baker Botts’s work on the opinion.

Baker Botts’ central analytic device was a simplistic syllogism:

(1) Pipeline rates are set on a cost‑of‑service basis.
(2) Cost of service includes an income tax allowance.
(3) Eliminating the allowance reduces cost of service.
⇒ Therefore, eliminating the allowance must have a material adverse effect on maximum applicable rates.

This approach:

  • treated the MAE question as a purely “abstract” exercise in adjusting one variable in a cost‑of‑service calculation;
  • largely ignored key real‑world factors:
    • whether any rate case would occur at all (without a rate case, recourse rates do not change);
    • the heavy prevalence of negotiated/discounted rates, and a rate moratorium on Gulf South, which insulated actual revenues;
    • the unresolved and central ADIT issue; and
    • Boardwalk’s own public comments to FERC attacking exactly the type of single‑issue ratemaking that Baker Botts was effectively using.

Johnson prepared two key analyses at Baker Botts’ request:

  • a Form 501‑G analysis that modelled cost of service at various tax rates, assuming a particular ADIT amortization method (“Reverse South Georgia”) that pipelines were lobbying against; and
  • a Rate Model Analysis, using a 12% return on equity, that computed “indicative rates” by removing the income tax allowance from cost of service.

FERC expert Barry Sullivan (retained by Baker Botts) later testified that this Rate Model:

  • was “not a recourse rate calculation” at all;
  • considered only one variable (the tax allowance) and ignored all others FERC must consider; and
  • produced “indicative rates” that were “meaningless” as a predictor of actual regulatory outcomes or future maximum rates.

Internally, Johnson himself described the Rate Model as designed to “get us where we need to go.”

Skadden, for its part:

  • had a firm policy of not issuing MAE opinions and refused to bless the conclusion that the FERC actions caused an MAE;
  • expressed doubts that a 10–15% change in hypothetical maximum rates could satisfy Delaware’s MAE standard without a richer, fact‑intensive analysis; and
  • flagged, through Naeve, the importance of rate case likelihood, negotiated rates, discount rates, and moratoria – all of which Baker Botts largely discounted as “speculation.”

Rosenwasser then turned to Delaware firm Richards, Layton & Finger. He:

  • represented Johnson’s cost‑of‑service changes as “top line revenue” declines of roughly 12–16%, even though they were not revenue forecasts; and
  • asked whether a “10%+ in perpetuity” adverse effect would be material under Delaware law.

RLF, seeing sparse caselaw, tentatively indicated that a 12% drop in perpetuity would likely be material, which Baker Botts used to shore up its MAE conclusion.

By April 20, 2018, Baker Botts circulated a preliminary opinion to Loews (substantially identical to its final June 29 opinion) concluding that Boardwalk’s MLP tax status “has or will reasonably likely in the future have a material adverse effect on the maximum applicable rate that can be charged to customers.”

At the same time, Boardwalk filed public comments to FERC blasting the 501‑G “Indicated Rate Reduction” as misleading single‑issue ratemaking and explicitly stating that:

“Until the Commission provides a final decision on the treatment of ADIT, Boardwalk cannot correctly assess the impact of the Revised Policy Statement and ADIT on its pipelines' costs of service, and any response in the Form No. 501‑G will be misleading and inaccurate.”

Rosenwasser underlined this sentence in his copy. Yet Baker Botts’ opinion assumed a calculable effect on maximum rates premised on changes to cost of service alone, while ignoring the ADIT uncertainty.

D. Call Right Exercise, FERC’s Final Order, and Litigation

  • April 30, 2018: Loews and Boardwalk file 10‑Qs disclosing that Loews was “seriously considering” exercising the Call Right if the Opinion Condition was met.
  • Boardwalk’s unit price:
    • initially rose on the prospect of a take‑private; then
    • declined steadily as the market recognized that the 180‑day look‑back formula would capture trading days depressed by uncertainty over a potential forced buyout.
  • May 2018: Initial unitholders file a suit to limit the pricing window; a settlement is reached but later rejected after Bandera objects.
  • June 29, 2018: Baker Botts issues its final opinion; Skadden presents to the Sole Member board that it would be within its “reasonable judgment” to find the opinion acceptable; the Sole Member resolves that the opinion is acceptable and exercises the Call Right.
  • July 18, 2018 (hours after closing): FERC issues a rehearing order and final rule:
    • MLPs would not automatically receive a tax allowance, but could argue for one in rate cases; and
    • pipelines denied a tax allowance could eliminate ADIT balances and not refund them to ratepayers.
    Baker Botts’ Wagner concluded this reduced pipelines’ exposure to rate reductions – in effect, confirming that the feared MAE would not occur.

Litigation history:

  • Bandera and other unitholders file a five‑count complaint:
    • Counts I–II: breach of contract (improper call right exercise; depressed exercise price);
    • Count III: breach of implied covenant;
    • Count IV: tortious interference (against Loews, Sole Member, GPGP);
    • Count V: unjust enrichment (against non‑GP defendants).
  • 2021 Post‑Trial Opinion: Chancery holds:
    • Baker Botts’ opinion was not rendered in subjective good faith; the Opinion Condition failed.
    • The Acceptability Condition was also breached because the wrong internal entity (the Sole Member rather than the GPGP board) made the acceptability determination.
    • The General Partner breached the LPA by exercising the Call Right without satisfying these conditions; damages of roughly $690 million plus interest were awarded on Count I.
    • Remaining counts were severed and stayed.
  • 2022 Supreme Court Opinion (“Boardwalk 2022”):
    • Holds that the Sole Member was the correct decision‑maker for the Acceptability Condition.
    • Holds that the Sole Member “reasonably relied” on Skadden and thus, under LPA §7.10(b), the general partner is conclusively presumed to have acted in good faith in exercising the Call Right.
    • As a result, the general partner is exculpated from monetary damages under §7.8(a).
    • The Court expressly states: “We do not address any other arguments on appeal.” It does not decide whether the Opinion Condition failed or whether the Call Right exercise breached the LPA.
  • 2024 Remand Opinion: Struggling to interpret Boardwalk 2022, the Chancellor adopts a “No Breach View,” reading the Supreme Court as having effectively resolved all aspects of the breach‑of‑contract claim. On that understanding, he dismisses the tortious‑interference and unjust‑enrichment claims and enters judgment for defendants on the remaining counts.
  • 2025 Supreme Court (current opinion): Affirms in part, reverses in part, and remands as summarized above.

IV. Analysis of the Supreme Court’s Reasoning

A. Opinion Condition vs. Acceptability Condition: Independent Requirements

A central interpretive issue is whether Section 15.1(b) of the LPA establishes one blended precondition (an Opinion of Counsel that is “acceptable to the General Partner”) or two distinct requirements:

  1. Opinion Condition: that counsel render a written Opinion of Counsel that the partnership’s tax status “has or will reasonably likely in the future have a material adverse effect” on maximum applicable rates; and
  2. Acceptability Condition: that the General Partner, acting through the appropriate internal body, deem that opinion “acceptable.”

The Court:

  • endorses the Chancery Court’s original three‑step framework for exercising the Call Right:
    1. obtaining an Opinion of Counsel that satisfies the contractual Opinion Condition;
    2. the General Partner’s internal determination that the opinion is “acceptable” (Acceptability Condition); and
    3. the separate business decision to exercise the Call Right.
  • rejects defendants’ post‑remand argument that there was only a single, amalgamated condition, which would allow the acceptability determination to “cure” any deficiency in the content or good faith of the opinion itself.

Critically, the Court describes the Opinion Condition as a “meaningful limitation” on the exercise of the Call Right that must “stand on its own two feet.” If an opinion is rendered in bad faith or does not fulfill its basic function, the condition is not satisfied—regardless of any separate acceptability opinion.

This structuring has important doctrinal and practical consequences:

  • it treats Opinion‑of‑Counsel conditions as substantive investor protections, not mere procedural boxes to be checked; and
  • it prevents controllers from laundering a defective opinion through a second lawyer’s “acceptability” blessing that never grapples with the underlying substance.

B. The Good‑Faith Standard for Opinion‑of‑Counsel Conditions

1. The Williams standard

In Williams Cos. Inc. v. Energy Transfer Equity, L.P., a merger failed because counsel for the acquiror concluded it could not issue a tax‑free reorganization opinion required as a closing condition. The Court of Chancery (later affirmed) held that:

  • the condition required counsel’s subjective good‑faith determination, not some abstract “correctness”; and
  • counsel must apply its independent expertise to the actual facts of the transaction; opinion conditions cannot be defeated or satisfied by pretextual or bad‑faith analysis.

Here, the Court:

  • explicitly reaffirms Williams as the governing standard; and
  • holds that the Chancery Court applied the correct legal standard: the opinion had to be rendered in subjective good faith after a genuine application of expert judgment to the facts, not as a contrived vehicle to reach a client‑preferred result.

The Court further cites the Restatement (Third) of the Law Governing Lawyers §95 cmt. c, emphasizing that customary opinion practice requires a fair and objective opinion. It extends those principles to opinions delivered for the client’s benefit but known to have major consequences for non‑client investors.

2. Applying the standard: deference to fact finding

Defendants argued on appeal that Chancery applied the wrong standard or unfairly reweighed the evidence. The Supreme Court—reviewing legal standards de novo but factual findings for clear error—rejects those challenges. It highlights, and accepts, the Chancery Court’s central factual determinations, including:

  • Credibility: The Vice Chancellor found Rosenwasser repeatedly non‑credible on “little things” and “big things.” Appellate courts do not second‑guess such credibility determinations.
  • Known regulatory uncertainty:
    • Boardwalk’s own FERC comments acknowledged that ADIT treatment was unknown and that any Form 501‑G analysis would be “misleading and inaccurate” until FERC decided ADIT.
    • Rosenwasser underlined that language but nonetheless premised the opinion on precisely such incomplete cost‑of‑service calculations, ignoring ADIT uncertainty.
  • Divergence from Boardwalk’s public position:
    • Boardwalk told FERC that an “Indicated Rate Reduction” based solely on tax‑allowance removal was misleading single‑issue ratemaking and had “little bearing” on any actual rate reduction.
    • Baker Botts’s reasoning essentially used that exact single‑issue approach to claim an MAE on maximum applicable rates.
  • Selective use of “real‑world” factors:
    • When it helped reach the desired MAE conclusion, Baker Botts invoked real‑world considerations; when such factors cut the other way (rate‑case likelihood, negotiated rates, rate moratoria), they were dismissed as “speculation.”
  • Result‑oriented modelling:
    • Johnson’s Rate Model was described internally as designed to “get us where we need to go.”
    • It used assumptions (e.g., a particular ADIT amortization approach and a 12% ROE from an external report) that were inconsistent with Boardwalk’s simultaneous lobbying and not consistent with FERC’s full ratemaking framework.
    • FERC expert Barry Sullivan testified that the “indicative rates” were “meaningless” as a proxy for actual rates.
  • Stretching the MAE standard:
    • Richards Layton tentatively suggested that a 12% adverse effect “in perpetuity” would likely be material; Skadden doubted that 11% would suffice.
    • The final Baker Botts opinion declared that “an estimated reduction in excess of ten percent” would constitute an MAE, even though the Rate Model produced roughly 11.7% for Texas Gas and similar figures for the others, and those were not actual rate changes.
  • Timing and failure to wait:
    • Everyone knew FERC would soon respond to comments and that ADIT and related issues could be clarified in a July meeting—and indeed were clarified on July 18, 2018.
    • Skadden’s Naeve wrote, “If I were Baker Botts I would prefer to wait until FERC acts on the comments.”
    • Nevertheless, Baker Botts pressed ahead with a final opinion before that guidance, to meet Loews’ timing objective.
  • Personal incentives and conflicts:
    • Rosenwasser had drafted the Call Right itself in 2005 and had a strong interest in seeing his drafting function as Loews envisioned.
    • Baker Botts arguably under‑analyzed conflict‑of‑interest issues by not treating opinion work on the same clause as “substantially related” to its original drafting engagement.

Collectively, these facts support the Chancery Court’s ultimate conclusion, endorsed by the Supreme Court, that the Baker Botts opinion was not a fair, good‑faith application of legal expertise to the actual regulatory and factual environment. Instead, it was a “contrived effort to generate the client’s desired result,” and therefore did not satisfy the Opinion Condition.

C. Law of the Case and the Scope of the 2022 Decision

On remand, Chancery confronted the interaction between its original findings and the 2022 Supreme Court decision. It identified three possible readings:

  • No Breach View: the 2022 opinion implicitly resolved all aspects of the breach‑of‑contract claim (including the Opinion Condition), such that the Call Right exercise was not a breach at all;
  • Good Faith View: the 2022 Court only resolved the Acceptability Condition and exculpation, but its finding that the general partner was conclusively presumed to have acted in good faith in exercising the Call Right implied or affected the analysis of the Opinion Condition; or
  • Separate Breach View: the Opinion Condition breach remained a separate and unresolved basis for breach of contract, unaffected by the 2022 holding on acceptability and exculpation.

The Chancellor, candidly uncertain, chose the “No Breach View” as his operative reading and dismissed the remaining counts, including tortious interference (which requires an underlying breach).

The Supreme Court rejects that reading:

  • It emphasizes that the law‑of‑the‑case doctrine applies only to issues “actually decided.”
  • It notes that the 2022 opinion expressly declined to address any issues beyond exculpation, and specifically did not review the Chancery Court’s bad‑faith finding regarding the Baker Botts opinion or rule on whether the Opinion Condition was satisfied.
  • Thus, the Opinion Condition breach was left open, and Chancery’s later assumption that there was “no breach” was incorrect.

This clarification matters not just in this case but more generally: litigants and trial courts should not read an appellate court’s silence on an issue as an implicit resolution, especially where the opinion says, as Boardwalk 2022 did, “We do not address any other arguments on appeal.”

D. Exculpation, Reliance on Counsel, and the Limits of Monetary Relief

1. Section 7.8(a) and 7.10(b) of the Partnership Agreement

Two key provisions shape the liability landscape:

  • Section 7.8(a) (Exculpation):
    “No Indemnitee shall be liable for monetary damages … for losses sustained or liabilities incurred as a result of any act or omission … unless there has been a final and non‑appealable judgment … determining that … the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was criminal.”
  • Section 7.10(b) (Reliance on Experts):
    “The General Partner may consult with legal counsel … and any act taken or omitted … in reliance upon the advice or opinion (including an Opinion of Counsel) of such Persons … shall be conclusively presumed to have been done or omitted in good faith and in accordance with such advice or opinion.”

In 2022, the Supreme Court held that:

  • the Sole Member, advised by Skadden, was the proper decision‑maker for the Acceptability Condition;
  • the Sole Member reasonably relied on Skadden in deeming the Baker Botts opinion “acceptable;” and therefore
  • the general partner was conclusively presumed to have acted in good faith in exercising the Call Right, and could not be held liable for monetary damages under §7.8(a).

2. No “equitable monetary” workaround

On this appeal, plaintiffs argued that while the general partner was shielded from “legal damages,” “equitable remedies” such as rescission, rescissory damages, constructive trust, or disgorgement remained open.

The Supreme Court squarely rejects that argument, invoking Arnold v. Society for Savings Bancorp, Inc., which held that a statutory exculpation under DGCL §102(b)(7) for “monetary damages” covers monetary relief whether characterized as legal or equitable. The Court applies analogous reasoning here:

  • “Monetary damages” in §7.8(a) is not limited to legal damages; it encompasses all monetary recovery.
  • Plaintiffs’ own complaint sought “all available damages, including rescissory damages, unjust enrichment, and disgorgement” for breaches of contract; they did not earlier draw a legal/equitable distinction.
  • Recasting damages as equitable relief cannot circumvent the contracted‑for exculpation.

However, the exculpation only protects the general partner as an “Indemnitee” under the LPA. Whether other parties (Loews, Sole Member, GPGP) qualify for that protection is a separate question, not decided in this opinion and left to Chancery on remand if necessary.

E. Potential Exercise Disclosures and the “Gaming” of the Call Price

Counts II and related unjust‑enrichment theories argued that defendants deliberately depressed the Call Right exercise price by strategically drafting and timing the April 30, 2018 10‑Q disclosures warning that Loews was “seriously considering” exercising the Call Right.

Plaintiffs framed two contractual theories:

  1. Section 7.9(a) conflict resolution – The disclosures supposedly reflected a conflict of interest between the General Partner and the limited partners and were not “fair and reasonable to the Partnership” because they were “misleading” and omitted material facts about:
    • the potential neutral or positive impact of FERC’s actions;
    • Loews’ retention of counsel and commitments on the Opinion Condition;
    • rate‑case risk and the significance of negotiated rates; and
    • the uncertainty introduced by rehearing requests.
  2. Section 15.1(b) & 16.2 implied prohibition – The three‑day buffer between the end of the 180‑day look‑back and formal notice of exercise was allegedly intended to insulate the Call Right price from market reaction to the exercise. Plaintiffs contended the Potential Exercise Disclosures subverted that design and violated §16.2’s requirement that the general partner not take actions contrary to the “purposes” of the partnership.

The Supreme Court (like Chancery) rejects both theories.

1. No material omissions; fairness under §7.9(a)

The Court emphasizes that:

  • Plaintiffs concede that some disclosure of the potential exercise was required under federal securities laws—it was not optional;
  • Much of the information plaintiffs claim was omitted was either:
    • already disclosed: e.g., that Boardwalk did not expect FERC’s actions to have a material near‑term impact on revenues; that negotiated/discounted rates and a rate moratorium buffered the impact; that rehearing requests had been filed; or
    • immaterial to the market’s pricing of Boardwalk units.

Thus, even assuming a conflict of interest existed, the General Partner’s resolution—making the federally required disclosures—was “fair and reasonable to the Partnership,” satisfying §7.9(a). Complying with securities law, standing alone, does not create a contractual breach merely because the market reacts adversely.

2. No breach of Section 15.1(b) or 16.2

The Court also holds that:

  • Section 15.1(b) addresses the calculation method for the Call Right price and the timing of formal notice; it does not purport to regulate what the company may say about potential exercises over the preceding 180 days.
  • Section 16.2’s admonition not to act contrary to the “purposes” of the partnership cannot be read to forbid disclosures required by federal law or to bar the General Partner from ever communicating that it is “considering” exercising the Call Right.
  • There is no contractual “gap” to fill with the implied covenant of good faith and fair dealing; the LPA is simply silent on forward‑looking communications about possible Call Right exercises, and plaintiffs’ implied‑covenant theory would effectively rewrite the contract to prohibit lawful disclosures that the parties never addressed.

Consequently:

  • No breach occurred in connection with the Potential Exercise Disclosures.
  • Unjust‑enrichment and tortious‑interference claims predicated on those alleged breaches necessarily fail.

F. Tortious Interference and the Remand

Under Delaware law, tortious interference with contract requires, among other elements, an underlying breach of contract. The Chancery Court, having adopted the “No Breach View,” dismissed the tortious‑interference claim (Count IV) on the premise that the Call Right exercise was not a breach.

The Supreme Court now:

  • holds that the Call Right exercise did breach the LPA due to failure of the Opinion Condition; and
  • reverses the dismissal of the tortious‑interference claim.

Although the Chancellor went on to analyze the tortious‑interference claim under hypothetical alternative interpretations (the “Good Faith” and “Separate Breach” views), the Supreme Court refuses to treat that alternative analysis as a binding adjudication. Its remit is to review the judgment actually entered, not an unadopted hypothetical.

On remand, Chancery must now:

  • treat the Opinion Condition breach as established; and
  • decide in the first instance whether Loews, the Sole Member, and GPGP:
    • intentionally and unjustifiably caused that breach (e.g., by directing or inducing the procurement of a bad‑faith opinion); and
    • are liable in tort, subject to any defenses or exculpatory protections they may have under the LPA or otherwise.

G. The Implied Covenant Claim

Bandera argued that even if the defendants complied literally with Section 15.1(b), the implied covenant of good faith and fair dealing should prevent them from “benefiting from their corruption of the opinion process.”

The Supreme Court does not need to reach this theory in light of its holding that the Opinion Condition was actually not satisfied and that the Call Right exercise breached the LPA. The majority affirms Chancery’s judgment against plaintiffs on the implied covenant claim (Count III) by implication: the agreement expressly addresses the conditions for Call Right exercise, leaving no contractual gap for the implied covenant to fill, and the misconduct is addressed within the express breach analysis.

V. The Dissent’s Perspective

The dissent (Justice LeGrow, joined by Justice Valihura) would affirm the Remand Opinion in full, albeit on slightly different reasoning from the Chancellor.

Key points:

  • The dissent agrees that:
    • the Opinion Condition and Acceptability Condition are separate requirements; and
    • the Sole Member validly satisfied the Acceptability Condition under the 2022 decision.
  • But it disagrees with the majority’s acceptance of the bad‑faith finding regarding Baker Botts:
    • In their 2022 concurrence, Justices Valihura and LeGrow viewed the Opinion Condition as the “focal point” and concluded that Baker Botts did act in subjective good faith.
    • They believed Chancery erred by effectively applying de novo review, substituting its own legal interpretation of Section 15.1(b) for counsel’s, instead of asking whether opinion counsel’s interpretation and analysis were genuinely held and within a range of reasonableness.
  • In the dissent’s view:
    • once both the Opinion Condition (properly interpreted) and the Acceptability Condition are met, no breach occurred when the Call Right was exercised; and
    • without a breach, the tortious‑interference claim necessarily fails.
  • On the implied covenant, the dissent stresses:
    • the implied covenant is purely gap‑filling and cannot be used to override express provisions such as §15.1(b); and
    • because the Call Right conditions comprehensively address the conduct at issue, there is no role for the implied covenant.

In sum, the dissent views the majority as giving insufficient deference to opinion counsel’s subjective judgment and endorsing an overly intrusive judicial review of opinion reasoning.

VI. Key Legal and Regulatory Concepts Explained

1. Master Limited Partnerships (MLPs) and Call Rights

  • MLP: A publicly traded partnership, often used for energy assets. For tax purposes, income flows through to partners, avoiding entity‑level tax if certain conditions are met.
  • Call Right: A contractual option granted to a controller (here, the general partner or its affiliate) to acquire all publicly held units under specified conditions, often tied to regulatory or tax changes that affect the economics of the structure.

2. FERC Ratemaking, Recourse vs. Negotiated Rates, and Rate Cases

  • FERC regulates interstate natural gas transportation rates under the Natural Gas Act, which requires “just and reasonable” rates.
  • Cost‑of‑Service Ratemaking: FERC:
    • calculates a pipeline’s cost of service (operating expenses, depreciation, taxes, and a reasonable return on invested capital); and
    • derives a maximum per‑unit rate the pipeline may charge (“recourse rate”).
  • Recourse vs. Negotiated/Discounted Rates:
    • Recourse rate: FERC‑approved maximum; shippers can always fall back to it.
    • Negotiated/discounted rates: commercially agreed rates, often below recourse rates, particularly where competition exists. Many pipelines, including Boardwalk’s, derive most revenues from these, not recourse rates.
  • Rate Case:
    • FERC or a shipper must initiate a proceeding alleging existing rates are too high; FERC then reassesses cost of service and may order rate changes.
    • Pipelines with already low returns are relatively unlikely to face rate cases; FERC resources are limited.
  • Single‑Issue Ratemaking Prohibited:
    • FERC must consider the entire cost‑of‑service picture; it cannot change rates by adjusting only one component (e.g., taxes) in isolation.
    • Boardwalk’s own FERC comments stressed this principle.

3. Accumulated Deferred Income Taxes (ADIT)

  • ADIT arises when tax law allows accelerated depreciation, reducing taxable income earlier than FERC’s straight‑line depreciation model would assume.
  • In early years, the pipeline pays less tax than FERC “expects,” creating a deferred tax liability on the books (ADIT). Over time, when tax depreciation slows, the pipeline’s taxes exceed FERC’s expectation, reducing the ADIT balance.
  • ADIT is effectively cost‑free capital arising from timing differences.
  • How to treat ADIT in the shift away from tax allowances for MLPs was central:
    • Pipelines favored eliminating the ADIT balance, which would increase rate base and support higher rates.
    • Shippers preferred requiring pipelines to refund ADIT “windfalls” to ratepayers.

4. “Material Adverse Effect” (MAE)

  • Under Delaware law, an MAE is typically a significant, enduring deterioration in the target’s overall earnings power or a specified measure, not a short‑term blip.
  • Here, the contract looked to an MAE on the maximum applicable rates that could be charged—distinct from actual revenues or profitability.
  • The question was whether the 2018 FERC Actions were “reasonably likely” to cause such an effect—an inherently predictive and expert‑driven judgment, but one that must rest on a fair evaluation of facts and genuine regulatory risk.

5. Exculpation and Reliance on Counsel

  • Exculpation Clause: A contractual provision eliminating or limiting liability for certain fiduciaries (here, the general partner) absent specified scienter (bad faith, fraud, willful misconduct, or criminal knowledge).
  • Reliance on Experts: LPA §7.10(b) creates a conclusive presumption of good faith when the general partner reasonably relies on expert advice regarding matters within the expert’s competence.
  • Combined effect:
    • If the general partner reasonably relies on counsel (Skadden) in determining that an opinion is acceptable, it is presumed to act in good faith in exercising the Call Right.
    • Absent a finding of its own bad faith, the general partner is exculpated from monetary liability, even if there is an underlying breach caused by a different party’s bad faith (e.g., Baker Botts’s opinion process).

6. Tortious Interference with Contract

  • Elements under Delaware law include:
    1. existence of a contract;
    2. defendant’s knowledge of the contract;
    3. intentional act that is a significant factor in causing a breach;
    4. lack of justification; and
    5. resulting injury.
  • An actual breach is a necessary predicate; there can be no interference without a breach.
  • Here, the alleged wrongdoers are Loews and its affiliates, accused of orchestrating or inducing the procurement of a bad‑faith opinion to enable an otherwise impermissible Call Right exercise.

7. Implied Covenant of Good Faith and Fair Dealing

  • A limited doctrine that:
    • fills gaps where the contract is silent; and
    • ensures that the parties’ reasonable expectations at the time of contracting are honored.
  • It cannot:
    • override express contract terms; or
    • be used as a free‑standing reasonableness standard to police conduct that the contract affirmatively addresses.
  • In MLP and LLC agreements, Delaware courts are particularly reluctant to infer implied‑covenant protections where the parties have already heavily negotiated fiduciary waivers, exculpation, and conflict‑resolution regimes, as they did here.

VII. Practical Impact and Broader Significance

A. For Deal Lawyers and Opinion Practice

  • Opinion conditions are real constraints. When a contract makes an opinion of counsel a condition precedent, Delaware courts will treat that condition as a meaningful, stand‑alone protection, not a formality.
  • Subjective good faith is not a rubber stamp.
    • Courts will give deference to counsel’s expertise, but will probe whether the process reflects genuine, fair evaluation—or whether it is “motivated reasoning” tailored to a client’s desired outcome.
    • Ignoring known uncertainties, selectively treating facts, or using modeling explicitly designed to “get us where we need to go” can support a bad‑faith finding.
  • Opinion writers must account for public positions and regulatory context.
    • If the client is simultaneously telling regulators or investors that an effect cannot reasonably be assessed or that single‑issue analysis is misleading, opinion counsel cannot blithely rely on exactly that form of analysis without serious reconciliation.
  • “Shadow counsel” and acceptability opinions cannot cure a bad opinion.
    • Firms like Skadden that limit their role to acceptability and disclaim substantive MAE analysis may preserve their own position, but their involvement does not retroactively validate an opinion that fails the good‑faith standard.

B. For Sponsors and Controllers of MLPs and LPs

  • Call rights tied to regulatory events are litigable. Sponsors should expect intensive scrutiny where:
    • the triggering event is uncertain or contested (e.g., proposed rules, non‑final policy statements); and
    • the economic impact on the partnership is not clearly adverse.
  • Exculpation provisions have real power—but not for affiliates.
    • Well‑drafted exculpation can effectively immunize the general partner from monetary liability for breaches, if reliance on counsel is reasonable and no bad faith is found.
    • However, affiliates and controllers (parents, upstream entities) may remain exposed to:
      • tortious‑interference claims; and
      • unjust‑enrichment or other equitable claims, depending on how exculpation and indemnification are drafted.
  • Public disclosures about potential call‑right exercises must balance securities law and contract risk.
    • Courts will not infer a contractual prohibition on truthful, required disclosures simply because they depress the price used for a backward‑looking exercise formula.
    • But misleading disclosures or manipulative communications could still give rise to other claims (e.g., securities fraud, if misstatements are material and made with scienter).

C. For Investors and Litigators

  • Opinion‑based triggers are fertile ground for challenge. If controllers rely on opinion‑of‑counsel conditions to justify forced buyouts, plaintiffs will scrutinize:
    • the internal record of how opinions were developed;
    • inconsistencies with public or regulatory positions; and
    • the interplay between deal timing and evolving regulatory guidance.
  • Even if the GP is exculpated, affiliate claims can proceed.
    • Here, the key practical “hook” remaining for unitholders is the remanded tortious‑interference claim against Loews and affiliates, resting on a confirmed underlying contract breach.
  • Law of the case has limits. An earlier appellate opinion that resolves a damages issue does not necessarily resolve underlying breach issues; litigants should read such opinions carefully and preserve issues for later phases.

D. Drafting Lessons

  • Clarify whose judgment controls what.
    • If parties intend an opinion-of-counsel requirement to be purely procedural, they should say so explicitly; otherwise, courts will treat it as a substantive safeguard requiring a good‑faith, independent opinion.
  • Be explicit about exculpation’s scope.
    • If exculpation is intended to cover affiliates, they should be defined as “Indemnitees” and included clearly; if not, controllers should anticipate residual exposure.
  • Consider whether to address disclosure timing and content.
    • If the parties care about how and when potential call‑right exercises may be disclosed to the market, they can negotiate explicit provisions rather than relying on implied covenants.

VIII. Conclusion

Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP is a significant refinement of Delaware law at the intersection of alternative entity governance, opinion practice, and exculpation. The Court makes three central contributions:

  1. It confirms that opinion‑of‑counsel conditions are independent, good‑faith safeguards, not mere words on paper. Opinion counsel must genuinely engage the legal and factual complexities; a contrived or result‑oriented opinion will not satisfy a condition precedent even if a second firm later deems it “acceptable.”
  2. It underscores the power—but also the limits—of contractual exculpation. A general partner can be fully insulated from monetary liability for breach, including equitable monetary remedies, if it reasonably relies on expert advice and is not itself in bad faith. Yet that shield does not automatically extend to parents and affiliates, who may face tort liability for procuring the breach.
  3. It clarifies the scope of prior appellate holdings and the law‑of‑the‑case doctrine, emphasizing that silence on an issue is not a decision, and that trial courts must carefully confine their inferences to what the higher court actually decided.

In concrete terms, the decision preserves for Boardwalk’s former unitholders a potentially meaningful remedy against Loews and its affiliates via a remanded tortious‑interference claim, even as it leaves intact the 2022 holding that the general partner is exculpated from monetary damages. More broadly, it sends a clear message to sponsors, counsel, and investors in Delaware MLPs and other alternative entities: contractual opinion conditions and expert‑reliance clauses will be enforced as written, but they come with real duties of independent judgment and cannot be manipulated to convert tentative regulatory developments into opportunistic take‑privates without legal risk.

Case Details

Year: 2025
Court: Supreme Court of Delaware

Judge(s)

Traynor J.

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