TransCanada, Columbia Ex-CEO to Face Suit Over $13 Billion Deal

Columbia Pipeline Group Inc.'s former top executives must face claims that they “persistently favored” TransCanada Corp. when arranging a $13 billion merger between the energy giants, and TransCanada must face allegations that it wrongly exploited its leverage after they tipped their hand, a Delaware judge ruled Monday.

It’s plausible that ex-CEO Robert Skaggs Jr. and former chief financial officer Steven Smith “tilted the playing field towards TransCanada in pursuit of a cash deal that would maximize the value of their retirement benefits,” Vice Chancellor J. Travis Laster wrote in a 124-page ruling for Delaware’s Chancery Court.

TransCanada, meanwhile, appears to have used their favoritism to win negotiating advantages, then “lowered its bid below the range it had offered to secure exclusivity” before threatening “to break off talks” and “make a public announcement” that would turn Columbia into “damaged goods,” Laster said.

Those allegations support fiduciary breach claims against the former Columbia executives and aiding and abetting allegations against TransCanada, the judge found.

The ruling comes about 18 months after Laster upheld the deal price in a statutory appraisal case brought by Columbia shareholders. The pension funds leading the fiduciary breach lawsuit sought unsuccessfully to consolidate it with the appraisal case.

Former Columbia executives also fended off earlier fiduciary breach claims in 2017 and beat a consolidated federal securities case challenging the 2016 deal in 2019.

Those rulings didn’t require throwing out the more recent claims by the Police and Fire Retirement System of the City of Detroit and the Public Employees’ Retirement System of Mississippi, Laster found Monday.

The decision dismissing the securities case rested largely on the requirement of enhanced detail when alleging a federal fraud claim, a standard Delaware doesn’t apply, he said.

And the appraisal action narrowly addressed whether the deal price was within a reasonable range, without considering whether Skaggs and Smith “undermined the company’s ability to extract a higher price from TransCanada or another bidder,” Laster found.

They “brushed off” overtures from competing suitors, including Dominion Energy Inc., Berkshire Hathaway Energy, and especially Spectra Energy Corp., which showed serious interest, the judge noted.

The pension funds are represented by Labaton Sucharow LLP, Bernstein Litowitz Berger & Grossmann LLP, and Ashby & Geddes PA. Skaggs, Smith, and TransCanada are represented by Young Conaway Stargatt & Taylor LLP and Mayer Brown LLP.

The case is In re Columbia Pipeline Grp. Inc. Merger Litig., Del. Ch., No. 2018-0484, 3/1/21.