Derivative Complaint Dismissed for Failure to Plead Bad Faith

In the recent decision of Brinckerhoff v. Enbridge Energy Co. Inc.,  C.A. No. 11314-VCS (Del. Ch. Apr. 29, 2016), the Court of Chancery dismissed a derivative complaint on the basis that it failed to plead allegations of wrongdoing.  Of note, this opinion constitutes one of the first written opinions of Vice Chancellor Slights, who was recently appointed to the bench to replace former Vice Chancellor John W. Noble.

Notably, the decision explains what is required to adequately allege bad faith sufficient to overcome an exculpatory provision in a limited partnership agreement for a conflicted transaction. The Court found that various factors served to overcome mere allegations that directors approved a transaction in bad faith.  These factors include the use of a special negotiation committee, receipt of an adequate fairness opinion and use of independent counsel.