Energy Pipeline operator Kinder Morgan Inc is on the hook for the bulk of $171 million in damages owed to investors in an affiliate of El Paso Corp, which Kinder Morgan acquired in 2014, a Delaware judge ruled on Dec. 2.
The ruling follows a decision in April that found investors in a MLP were shortchanged when it overpaid in a 2011 pipeline deal with El Paso, which controlled the MLP.
The April ruling set the damage award, which is among the largest judgments of its kind by the Court of Chancery, a key venue for corporate disputes.
On Dec. 2, Vice Chancellor Travis Laster rejected Kinder Morgan's arguments to dismiss the case because last year it acquired control of both El Paso and the MLP, El Paso Pipeline Partners.
Kinder Morgan essentially had argued one of its controlled affiliates now owned the litigation and investors lacked standing to sue.
Laster said in his 110-page opinion that dismissing the case would "generate a windfall" for Kinder Morgan at the expense of the limited partners who brought the case.
Laster did find that Kinder Morgan was only liable for 58.6 percent of judgment, which represented the portion of the MLP owned by independent investors.
Kinder Morgan said it was reviewing the decision.
The Houston-based company has said it may appeal to the Delaware Supreme Court once the case was concluded in the Court of Chancery.
The lawsuit was brought by Peter Brinckerhoff, a holder of common units of the MLP, who alleged the MLP overpaid for two natural gas subsidiaries of El Paso for the benefit of the parent company.
Laster found the directors of the MLP caved to parent company demands and approved a deal that they had criticized in private.
The directors had argued the deal was fair because it would increase the distributions to holders of common units.
Attorneys did not respond to a request for comment.
Shares of Kinder Morgan were down 7.4 percent at $20.75 in midday trade on the New York Stock Exchange. Moody's lowered it credit rating outlook for Kinder Morgan to negative on Dec. 1.
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