Delaware Chancery Court
G&E represented a public pension fund and was appointed co-lead counsel in a class action against El Paso’s Board of Directors, Goldman Sachs, and Kinder Morgan, Inc. alleging that the Board, aided and abetted by Goldman Sachs and Kinder Morgan, breached its fiduciary duties by agreeing to sell El Paso to Kinder Morgan for a less-than-value-maximizing price. Plaintiffs alleged that the merger was tainted by significant conflicts of interest, including (i) Goldman’s serving as financial advisor to El Paso’s Board despite Goldman’s $4 billion buy-side interest in the deal stemming from its 19% ownership stake in Kinder Morgan, and (ii) the undisclosed interests of El Paso’s sole negotiator for the deal – CEO and Chairman, Douglas Foshee – in acquiring El Paso’s exploration and production assets for himself in a management buyout. Although the Delaware Chancery Court “reluctantly” declined to enjoin the merger, it found that the plaintiffs had a reasonable likelihood of success in proving that the merger was “tainted by disloyalty” and that they had uncovered some “disturbing” behavior in connection with the negotiations. The case settled for $110 million.