Loews Corp. Owes $690 Million in Suit Over Pipeline Gamesmanship

Loews Corp. breached a partnership agreement and must pay $690 million in an investor lawsuit claiming the company intentionally tanked the price of a partial subsidiary in order to buy it on the cheap, a Delaware judge ruled Friday.

The legal opinion from Baker Botts LLP that Loews relied on in exercising its call rights in Boardwalk Pipeline Partners LLP was a “contrived effort” to reach the company’s desired result, and it didn’t reflect a “good faith effort to discern the actual facts and apply professional judgment,” the Delaware Court of Chancery said in a lengthy opinion by Vice Chancellor J. Travis Laster.

The Loews-controlled general partner of Boardwalk therefore breached the partnership agreement, which required an “opinion of counsel” before call rights could be exercised, Laster said.

The record reflects “a contrived effort to generate the client’s desired result when the real-world facts would not support it,” he said. “Baker Botts produced a simulacrum of an opinion, and that flawed imitation did not satisfy the Opinion Condition.”

The suit, filed by several funds affiliated with New York hedge fund Bandera Partners LLC, says Loews drove down the share price of Boardwalk through well-timed public disclosures in order to exercise its call rights and buy up the pipeline company’s outstanding shares for $1.5 billion. Bandera accuses Loews of leveraging 2018 tax policy guidance from the Federal Energy Regulatory Commission to artificially drive down the price of Boardwalk shares and buy the company’s minority units at a significant discount.

Laster, who presided over a four-day trial via the Zoom videoconferencing platform, awarded the plaintiffs about $690 million in damages, along with pre- and post-judgment interest. He called this figure “conservative,” saying he could have awarded more than $900 million had he adopted the plaintiffs’ damages calculation in full.

Loews plans to appeal the ruling, president and chief executive officer James S. Tisch said in a statement.

Abrams & Bayliss LLP represents the plaintiffs.

The defendants are represented by Richards, Layton & Finger PA; Young Conaway Stargatt & Taylor LLP; Paul, Weiss, Rifkind, Wharton & Garrison LLP; and Davis Polk & Wardwell LLP.

The case is Bandera Master Fund LP v. Boardwalk Pipeline Partners, LP, Del. Ch., No. 2018-0372-JTL, 11/12/21.