In Re El Paso Corporation Shareholder Litigation

Stockholder plaintiffs sought a preliminary injunction to enjoin a merger between El Paso and Kinder Morgan. The CEO of El Paso undertook sole responsibility for negotiating the sale of El Paso to Kinder Morgan in the merger but did not disclose to El Paso's Board his interest in working with other El Paso managers in making a bid to buy El Paso's exploration and production (E&P) business. Further, the Board and management of El Paso relied in part on advice given by a financial advisor, Goldman Sachs, which owned 19% of Kinder Morgan and controlled two Kinder Morgan board seats. The court concluded that plaintiffs have a reasonable likelihood of success in proving that the merger was tainted by disloyalty. Because, however, there was no other bid on the table and the stockholders of El Paso, as the seller, have a choice whether to turn down the merger themselves, the balance of harms counseled against a preliminary injunction. Although the pursuit of a monetary damages award could not be likely to promise full relief, the record did not instill in the court the confidence to deny, by grant of an injunction, El Paso's stockholders from accepting a transaction that they could find desirable in current market conditions, despite the disturbing behavior that led to its final terms. View "In Re El Paso Corporation Shareholder Litigation" on Justia Law