Bloomberg News

Kinder Morgan Wins Dismissal of El Paso Partnership Suits

October 09, 2012

Kinder Morgan Inc.’s El Paso Corp. unit persuaded a judge to dismiss investor claims that the $21.1 billion takeover of the oil-pipeline provider harmed their interests.

Delaware Chancery Court Judge Sam Glasscock III ruled today that investors in El Paso Pipeline Partners LP (EPB:US), a natural gas partnership part-owned by El Paso, can’t make viable claims over Kinder Morgan’s $29.91-a-share buyout of the parent company.

Because “the partnership agreement eliminates any fiduciary duties El Paso might otherwise owe to the limited partners,” investors have no grounds to proceed with their damage claims, Glasscock concluded in a 13-page ruling.

Kinder Morgan officials said in July that second-quarter profit (KMI:US) fell as the pipeline company cut the value of some of the assets it’s selling to obtain regulatory approval for the El Paso acquisition. Net income dropped to $153 million from $230 million a year earlier, company officials said.

Larry Pierce, a spokesman for Houston-based Kinder Morgan, said the company doesn’t comment on pending litigation.

Kinder Morgan completed its acquisition of Houston-based El Paso in May, two months after a Delaware judge refused to block a shareholder vote on the takeover.

Pipeline Shifts

Investors in El Paso Pipeline Partners, also known as EPB, said the entity was set up in 2007 as a publicly traded partnership to which the parent company shifted ownership of pipeline assets for tax purposes.

After the takeover, El Paso’s pipeline assets were no longer exclusively available to the partnership and were slated to be transferred to an entity owned by Kinder Morgan, the investors said.

“The non-controlling EPB unitholders have not benefitted from the transaction, but instead have lost substantial value,” they said in court filings.

In his decision, Glasscock said the investment agreement covering the partnership specifically stated that El Paso wasn’t legally bound to transfer company assets to the entity.

“At most, there has been a withholding of transactions to which EPB had no legal right,” the judge wrote. That meant investors hadn’t been unfairly damaged by the buyout, he said.

Kinder Morgan officials agreed last month to pay $110 million to settle lawsuits by other El Paso investors over the buyout.

The pipeline case is Hite Hedge LP v. El Paso Corp, CA No. 7117, Delaware Chancery Court (Georgetown).

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware at

To contact the editor responsible for this story: Michael Hytha at

Cash Is for Losers

Companies Mentioned

  • EPB
    (El Paso Pipeline Partners LP)
    • $41.96 USD
    • -0.25
    • -0.6%
  • KMI
    (Kinder Morgan Inc/DE)
    • $39.75 USD
    • -0.17
    • -0.43%
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