Opinion of Counsel Must Be Rendered in Subjective Good Faith as an Independent Condition Precedent to an MLP Call Right

1. Introduction

This decision arises from the 2018 take-private of a publicly traded master limited partnership (“MLP”), Boardwalk Pipeline Partners, LP (“Boardwalk”), controlled by Loews Corporation (“Loews”). Boardwalk’s partnership agreement contained a contractual “Call Right” allowing its General Partner to buy out the public unitholders if specified conditions were met—most importantly, receipt of an “Opinion of Counsel” that the partnership’s pass-through 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.”

After the Federal Energy Regulatory Commission (“FERC”) issued March 2018 policy actions that could affect pipeline ratemaking—including elimination of an income tax allowance for MLP pipelines and an open question about treatment of accumulated deferred income taxes (“ADIT”)—Loews pursued the call right. Baker Botts delivered the requisite opinion; Skadden advised that Baker Botts’ opinion was “acceptable” to the General Partner. The General Partner exercised the call right and acquired the public float at a price derived from a 180-day look-back formula.

Unitholders led by Bandera sued Boardwalk, its General Partner, and Loews-related entities, alleging (i) the call right conditions were not met, (ii) the call right was exercised at a depressed price, (iii) implied covenant violations, and (iv) tortious interference and unjust enrichment. The litigation already had a major prior appeal (the Court’s 2022 decision). The central issues here are (a) what the 2022 mandate actually decided and left open, (b) whether the “Opinion of Counsel” condition is an independent, meaningful limitation requiring subjective good faith under Delaware law, and (c) what that means for the remaining non-exculpated claims—most notably tortious interference against Loews.

2. Summary of the Opinion

3. Analysis

3.1 Precedents Cited

A. The case’s own procedural trilogy

• Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, 2021 WL 5267734 (Del. Ch. Nov. 12, 2021) (“Post-Trial Opinion”): Found both (i) the “Opinion of Counsel” was not rendered in good faith and (ii) the wrong entity made the acceptability determination; awarded massive damages. The Supreme Court here endorses the Post-Trial Opinion’s legal standard for opinion good faith and defers to key factual findings (not clearly erroneous), while clarifying how much of that earlier reasoning survived the 2022 appeal.
• Boardwalk Pipeline Partners, LP v. Bandera Master Fund LP, 288 A.3d 1083 (Del. 2022) (“Boardwalk 2022”): Reversed the damages judgment based on contractual exculpation and conclusive presumption of good faith from reliance on Skadden. Crucially, the 2025 Court explains that 2022 did not decide whether the opinion condition failed or whether breach occurred—only that monetary damages against the General Partner were barred.
• Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, 2024 WL 4115729 (Del. Ch. Sept. 9, 2024) (“Remand Opinion”): The Court of Chancery adopted a “No Breach View” of 2022 and dismissed remaining counts. The Supreme Court reverses that interpretive move as an overextension of the mandate.

B. Condition-precedent opinion practice and subjective good faith

• Williams Cos. Inc. v. Energy Transfer Equity, L.P., 2016 WL 3576682 (Del. Ch. June 24, 2016) aff'd, 159 A.3d 264 (Del. 2017): The Court treats Williams as the doctrinal anchor: when a contract makes counsel’s opinion a condition precedent, the relevant question is whether counsel reached its conclusion in subjective good faith by applying independent expertise to transaction facts. The Boardwalk majority uses Williams to reject a “safe harbor” theory under which a second firm’s “acceptability” advice could sanitize a first firm’s bad-faith opinion.
• Gerber v. Enter. Prod. Hldgs., LLC, 67 A.3d 400 (Del. 2013): Cited (as in the Post-Trial Opinion) for the principle that reliance on an opinion that does not fulfill its basic function can ground liability (there, under implied covenant). Here, the majority invokes Gerber mainly to support the general proposition that “opinions” must be functionally real, not performative.

C. Mandate/law-of-the-case and judicial restraint

• State v. Wright, 131 A.3d 310 (Del. 2016): Used to define the “law of the case” doctrine: it binds only issues actually decided. The Court deploys this to hold that 2022 did not decide “no breach,” nor did it decide the good-faith validity of Baker Botts’ opinion.
• PDK Lab'ys v. United States Drug Enf. Admin., 362 F.3d 786 (D.C. Cir. 2004) (Roberts, J., concurring): Quoted for judicial restraint—do not decide more than necessary—reinforcing that 2022 properly avoided reaching the opinion-condition merits once exculpation disposed of damages.

D. Standards of review

• Cede & Co. v. Technicolor, Inc., 884 A.2d 26 (Del. 2005): de novo review for legal questions.
• Gatz Props., LLC v. Auriga Cap. Corp., 59 A.3d 1206 (Del. 2012): clear-error review for factual findings.
• DV Realty Advisors LLC v. Policemen's Annuity & Benefit Fund of Chicago, 75 A.3d 101 (Del. 2013): good faith as a legal issue reviewed de novo, but underlying factual findings are clear-error reviewed.
• Bank of N.Y. Mellon v. Liberty Media Corp., 29 A.3d 225 (Del. 2011): where evidence permits two views, the factfinder’s choice is not clearly erroneous.

E. Remedy/exculpation framing

• Arnold v. Soc'y for Sav. Bancorp, Inc., 678 A.2d 533 (Del. 1996): Used to reject attempts to evade an exculpation bar on “monetary damages” by relabeling payments as equitable relief.

F. Tortious interference elements (for the remand posture)

• WaveDivision Holdings, LLC v. Highland Capital Mgmt., L.P., 49 A.3d 1168 (Del. 2012): Although discussed in the dissent, it reflects the central point that an underlying breach is ordinarily essential to tortious interference; the majority’s reinstatement of “breach” reopens Count IV.

G. Regulatory and industry backdrop (not Delaware corporate law, but pivotal facts)

• United Airlines v. Federal Energy Regulatory Commission, 827 F.3d 122 (D.C. Cir. 2016): catalyzed FERC’s reassessment of the MLP tax allowance.
• SFPP, L.P. v. FERC, 967 F.3d 788 (D.C. Cir. 2020): illustrates the broader regulatory litigation context for the income tax allowance issue.

3.2 Legal Reasoning

A. The mandate problem: exculpation is not “no breach”

The opinion’s first major doctrinal contribution is procedural but consequential: it rejects a common post-remand error—treating an appellate exculpation holding as if it resolved liability itself.

• In 2022, the Court held the Sole Member reasonably relied on Skadden such that the General Partner was “conclusively presumed” to have acted in good faith and therefore was exculpated from damages.
• In 2025, the Court emphasizes that this does not equate to a determination that contractual conditions were satisfied or that the call right exercise was contractually proper.
• The practical reason this matters is tortious interference: if the underlying act is not a breach, the interference claim collapses; if it is a breach but the primary breaching party is exculpated from damages, third-party exposure may still exist depending on contract and tort doctrines. The Court insists the Chancery Court must decide the remaining counts under a correct understanding of what was (and was not) decided in 2022.

B. The “Opinion of Counsel” condition is a separate, substantive gate

The Court rejects defendants’ effort to collapse Section 15.1(b) into a single, unitary requirement—“an opinion acceptable to the General Partner”—that would make “acceptability” the only meaningful checkpoint. The Court instead affirms the Post-Trial Opinion’s “tripartite” framework: (1) the opinion must exist and be validly rendered (Opinion Condition), (2) it must be accepted by the right decision-maker (Acceptability Condition), and (3) the General Partner must decide to exercise.

This is not mere textualism. The Court’s reasoning is functional: the “Opinion Condition” was described (even in 2022) as a “meaningful limitation” on the call right. If an “acceptable” but bad-faith opinion could trigger the call right, the limitation would be “toothless.”

C. Subjective good faith in opinion practice: Williams governs

The Court squarely endorses the Court of Chancery’s use of Williams Cos. Inc. v. Energy Transfer Equity, L.P. as the governing lens: a condition-precedent legal opinion must reflect counsel’s subjective good-faith determination based on independent expertise applied to relevant facts. Importantly, the Court characterizes defendants’ current theory as an “end run around Williams.”

The Court also aligns this with professional norms (citing the Restatement (Third) of the Law Governing Lawyers for the proposition that opinion practice entails a “fair and objective” opinion), emphasizing that contractual “opinion” conditions serve protective functions for persons who are not part of the opinion-generation process (here, public unitholders).

D. Deference to trial-level factfinding: why the bad-faith finding survived

Applying clear-error review, the Court holds the evidentiary record supports the Court of Chancery’s bad-faith determination as to Baker Botts’ opinion. The majority highlights (among many points) the trial court’s credibility determination against Rosenwasser and the internal recognition that key variables (ADIT treatment, rate-case likelihood, negotiated/discounted rates, moratoria, and the preliminary nature of FERC actions) undercut the opinion’s asserted certainty.

The Court treats the opinion process as having been driven by a result-oriented “syllogism” (no tax allowance → lower cost of service → material adverse effect on maximum rates), which ignored or bracketed real-world constraints and regulatory uncertainty that Boardwalk itself publicly acknowledged. The Court is particularly influenced by the proximity of FERC’s clarifying July 18 actions—hours after the transaction closed—which made the asserted adverse rate effect unascertainable or nonexistent.

E. Remedies: “monetary damages” means monetary damages

Even though the Court holds the call right exercise breached the Partnership Agreement, it reaffirms that Section 7.8(a)’s exculpation for “monetary damages” bars recovery against the General Partner, and plaintiffs cannot re-label monetary payments (rescissory damages, disgorgement) as “equitable relief” to avoid that bar. This is a contract-enforcement message: sophisticated parties who draft “monetary damages” bars get what they wrote, across both legal and equitable theories.

F. Disclosures and price distortion: why the Court affirmed dismissal

The Court affirms dismissal of claims premised on the April 30, 2018 “Potential Exercise Disclosures” allegedly depressing the unit price and skewing the 180-day pricing formula. The Court reasons:

• Disclosure of the possibility of exercising the call right was (by plaintiffs’ own concession) required under federal securities law.
• The asserted “omissions” were either not material or were already publicly disclosed (e.g., Boardwalk’s public statements about limited revenue impact in the near term, negotiated/discounted rates, moratoria, and rehearing requests).
• The partnership agreement’s three-day notice window in the pricing formula does not create an implied contractual prohibition on lawful, required securities disclosures made earlier.

3.3 Impact

A. Contract drafting and MLP governance

• Opinion conditions regain teeth: The decision makes clear that “Opinion of Counsel” conditions in alternative entity agreements are not satisfied by paper compliance plus a second firm’s “acceptability” memo. The opinion must be genuinely rendered in subjective good faith, and that question can be litigated on the merits.
• Exculpation vs. breach separation: Drafters and litigators should treat exculpation provisions as limiting remedies, not as dispositive of whether a contractual condition occurred or whether a breach happened. This matters for (i) claims against non-exculpated parties, and (ii) tort claims that depend on the existence of breach.
• Role allocation clarity: The litigation underscores how ambiguity about “who decides acceptability” can drive years of litigation. Although 2022 resolved that the Sole Member could decide acceptability here, this case is a cautionary tale: contracts should specify the decision-maker to avoid contra proferentem risk and governance disputes.

B. Opinion practice and professional risk

• Opinion counsel exposure: While the law firm is not the defendant here for malpractice, the Court’s discussion signals that Delaware courts will scrutinize whether opinion counsel’s work is outcome-driven, fact-avoidant, or built on knowingly incomplete assumptions—especially when the opinion is a contractual trigger reallocating billions of dollars.
• Timing and uncertainty: The Court treats “waiting for imminent regulatory clarity” as relevant to good faith when the opinion purports to predict consequences of non-final agency action. That creates practical pressure to document why an opinion is responsibly issuable now, notwithstanding known unknowns.

C. Litigation consequences: tortious interference revived

The most immediate impact is procedural: Count IV returns to the Court of Chancery. By restoring the possibility of an underlying breach (despite remedy bars against the General Partner), the decision reopens the analysis of Loews’ conduct under tort doctrine and any defenses or privilege/justification arguments—questions the Supreme Court declines to resolve on an alternative, non-dispositive trial-court analysis.

4. Complex Concepts Simplified

• MLP (Master Limited Partnership): A publicly traded partnership, often used in energy infrastructure, typically taxed as a pass-through (no entity-level tax).
• Call Right: A contractual option allowing the General Partner (or affiliate) to buy out public investors if defined conditions occur—often using a formula price.
• Opinion of Counsel (condition precedent): A lawyer’s written opinion that must exist (and meet a contract’s requirements) before a party can exercise a contractual right. Delaware treats such an opinion as requiring counsel’s subjective good faith.
• Acceptability Condition: Here, a separate contractual step requiring the General Partner to deem the opinion “acceptable.” The Court holds acceptability cannot substitute for the opinion’s own good-faith validity.
• Exculpation: A contractual clause eliminating monetary liability for certain actors unless specified misconduct is proven. It limits remedies; it does not necessarily erase “breach.”
• FERC recourse rates / negotiated rates: Recourse rates are FERC-filed maximum rates shippers can pay if they don’t negotiate a deal. Many pipelines mainly earn negotiated or discounted rates, reducing the real-world impact of changes to recourse rates.
• ADIT (Accumulated Deferred Income Taxes): An accounting/tax concept reflecting timing differences (e.g., accelerated tax depreciation) that can affect ratemaking. How regulators treat ADIT can materially change whether rates go down, up, or remain stable.
• Single-issue ratemaking: A ratemaking prohibition against changing rates based on only one cost component without considering the whole cost-of-service picture.
• Law of the case: A rule that issues actually decided earlier in the same case generally cannot be re-litigated; but it does not extend to issues the appellate court expressly declined to decide.
• Tortious interference with contract: A tort claim alleging a third party intentionally caused a contract breach, leading to damages.

5. Conclusion

The Delaware Supreme Court’s 2025 decision clarifies two high-stakes points for alternative-entity governance and deal triggering mechanics. First, an appellate exculpation holding that bars monetary damages does not necessarily resolve whether a breach occurred; trial courts must respect the mandate’s limits under law-of-the-case principles. Second, when a partnership agreement makes an “Opinion of Counsel” a condition precedent to a powerful right like an MLP call right, the opinion must be rendered in subjective good faith under Williams; “acceptability” advice cannot launder a bad-faith opinion into contractual compliance.

While the Court leaves intact the dismissal of disclosure-based price manipulation theories and the implied covenant claim, it revives tortious interference against Loews by reinstating the underlying breach premise and remanding for fresh adjudication. The broader message is that contractual opinion conditions are enforceable safeguards, not formalities—and Delaware courts will evaluate whether they were used as genuine checks or engineered triggers.