In re Columbia Pipeline Grp., Merger Litig.

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IN RE COLUMBIA PIPELINE GROUP, MERGER LITIGATION

C. A. No. 2018-0484-JTL

Court of Chancery of Delaware

June 30, 2023

Date Submitted: November 22, 2022

Ned Weinberger, Derrick Farrell, Brendan W. Sullivan, LABATON SUCHAROW LLP, Wilmington, Delaware; Gregory V. Varallo BERNSTEIN LITOWITZ BERGER &GROSSMANN LLP, Wilmington Delaware; Stephen E. Jenkins, Marie M. Degnan, ASHBY &GEDDES, P.A., Wilmington, Delaware; Jeroen van Kwawegen Lauren A. Ormsbee, Thomas G. James, Margaret Sanborn-Lowing BERNSTEIN LITOWITZ BERGER &GROSSMANN LLP, New York, New York; Counsel for co-lead plaintiffs.

Martin S. Lessner, James M. Yoch, Jr., Kevin P. Rickert, YOUNG CONAWAY STARGATT &TAYLOR, LLP, Wilmington, Delaware; Brian J. Massengill, Michael Olsen, Matthew C. Sostrin, Linda X. Shi, MAYER BROWN LLP, Chicago, Illinois; Counsel for defendant TC Energy Corporation.

POST-TRIAL OPINION ADDRESSING LIABILITY FOR AIDING AND ABETTING

LASTER, V.C.

TABLE OF CONTENTS

I. FACTUAL BACKGROUND ................................................................................... 11

A. Columbia ........................................................................................................... 13

B. The Spinoff ....................................................................................................... 14

1. Spectra And Dominion Contact Skaggs. .................................................. 17

2. TransCanada Approaches Smith. ............................................................. 18

3. The Two-Track Strategy ........................................................................... 20

4. The Launch Of The November Sale Process ........................................... 21

5. The Management Team Favors Berkshire And TransCanada. ................ 23

6. The End Of The November Sale Process ................................................. 25

C. Poirier's November 25 Call With Smith ........................................................... 27

D. Girling's December 2 Call To Skaggs .............................................................. 29

E. Fornell's Interactions With Skaggs And Smith ................................................ 31

F. Poirier's December 17 Call To Smith ............................................................... 32

G. Skaggs Primes The Directors For A Deal. ........................................................ 33

H. The Lead-Up To The January 7 Meeting .......................................................... 34

I. The January 7 Meeting...................................................................................... 36

J. TransCanada Begins Due Diligence. ................................................................ 41

K. The Debate Over A Request To Make A Proposal ........................................... 43

L. The January 25 Proposal ................................................................................... 48

M. The End-Of-January Board Meeting ................................................................ 49

N. The Deal Process Moves Forward. ................................................................... 51

1. The February 9 Meeting ........................................................................... 53

2. TransCanada Slows Down The Process. .................................................. 54

3. TransCanada Lays The Groundwork For Dropping Its Price. ................. 56

4. Columbia Extends Exclusivity. ................................................................ 58

5. TransCanada Drops Its Price. ................................................................... 60

6. The Board Rejects TransCanada's Offer. ................................................. 62

O. The Process Resumes. ....................................................................................... 62

1. The Wall Street Journal Leak ................................................................... 64

2. The $26 Deal ............................................................................................ 66

3. The Board Is “Freaking Out” And Wants A Deal “Whatever It Takes.” . 68

4. The Renewed Exclusivity Agreement ...................................................... 70

5. Columbia Declines To Engage With Spectra. .......................................... 73

6. TransCanada Signs Off On The Script. .................................................... 74

7. The $25.50 Offer ...................................................................................... 77

8. Columbia Accepts The $25.50 Offer. ....................................................... 81

P. The Merger Agreement ..................................................................................... 84

Q. The Proxy Statement ......................................................................................... 86

R. The Deal-Related Litigation ............................................................................. 92

1. The Appraisal Proceeding ........................................................................ 92

2. This Lawsuit ............................................................................................. 93

II. LEGAL ANALYSIS ................................................................................................. 94

A. The Sale Process Claim .................................................................................... 94

1. The Fiduciary Relationship For The Sale Process Claim ......................... 96

2. The Breaches Of Duty In The Sale Process ........................................... 112

3. Knowing Participation In The Sale Process Breaches ........................... 132

4. Damages For The Sale Process Claim .................................................... 153

B. The Disclosure Claim ..................................................................................... 156

1. The Fiduciary Relationship For The Disclosure Claim .......................... 157

2. The Breaches Of The Duty Of Disclosure ............................................. 161

3. Knowing Participation In The Disclosure Violations ............................ 165

4. Damages For The Disclosure Claim ....................................................... 169

5. A Remedy For The Disclosure Claim .................................................... 178

C. Are The Remedies Concurrent Or Cumulative? ............................................. 188

III. CONCLUSION ....................................................................................................... 191

In June 2016, TC Energy Corp. ("TransCanada") paid $25.50 per share in cash to acquire Columbia Pipeline Group, Inc. ("Columbia" or "CPG"). Columbia was a newly minted public company, spun off one year earlier.

During the sale process, Robert Skaggs, Jr. served as Columbia's Chief Executive Officer and chair of its board of directors (the "Board"). Stephen Smith served as Columbia's Executive Vice President and Chief Financial Officer. Both men held the same roles at Columbia's parent company before the spinoff. Both wanted to retire early. Both thought 2016 was the ideal year to retire, and both wanted to cash out through a merger that would trigger their change-in-control benefits. Both supported the spinoff and joined Columbia expecting to get it sold.

Immediately after the spinoff, buyers came calling. Skaggs led a haphazard sale process, during which each bidder entered into a non-disclosure agreement ("NDA") containing a don't-ask-don't-waive standstill. That type of provision both serves the traditional standstill's role of prohibiting a bidder from seeking to acquire the target without the target board's permission and provides the additional protection of barring the bidder from asking the target to waive the standstill or otherwise grant permission. It puts the target board in the driver's seat, because a bidder can only make an approach if the target board invites it.

TransCanada was one of the bidders. Francois Poirier, TransCanada's Senior Vice President for Strategy and Corporate Development, led TransCanada's deal team. Poirier is a savvy former investment banker and repeat player in the M&A game. He fully understood the implications of the standstill, both from his work as an M&A professional and from a briefing by TransCanada's in-house counsel.

During an earlier stage in his career, Poirier had spent a decade as a relationship manager for J.P. Morgan Chase &Co., and he visited Smith regularly in that role. Poirier made Smith his principal point of contact for the sale process, and that tactical decision proved pivotal. Smith was an experienced CFO, but he had never been on the front lines of an M&A negotiation. Plus Smith is trusting, team-oriented, and transparent-all virtues for a public company CFO, but vulnerabilities for a neophyte dealmaker on his first and only assignment. Smith shared information freely. He has no poker face. For Poirier, Smith was a compliant informant.

At the end of November 2015, the Board shut down the sale process so that Columbia could shore up its balance sheet with an equity offering. Under the standstill, TransCanada could not contact Columbia without an invitation. Poirier immediately made a backchannel call to Smith. Through that call, Poirier learned that management still wanted to sell and planned to resume the effort in a couple months.

During December 2015, Poirier and his colleagues engaged in further communications with Smith and Skaggs. Most notably, Poirier told Smith on December 19 that TransCanada remained interested in a deal and could pay up to $28 per share. He asked Smith to meet during the first week...