      IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

 WILLIAMS FIELD SERVICES GROUP, LLC, )
                                      )
      Plaintiff,                      )
                                      )
      v.                              )
                                      ) C.A. No. 2019-0350-JTL
 CAIMAN ENERGY II, LLC; ENCAP )
 FLATROCK MIDSTREAM FUND II, L.P.; )
 ENCAP     ENERGY    INFRASTRUCTURE )
 FUND, L.P.; TT-EEIF CO-INVESTMENTS, )
 LLC; UT EEIF SIDE CAR, LLC; LIC-EEIF )
 SIDECAR, LLC; OAKTREE CAPITAL )
 MANAGEMENT, L.P.; HIGHSTAR IV )
 CAIMAN II HOLDINGS, LLC; FR BR )
 HOLDINGS L.L.C.; JACK M. LAFIELD; )
 RICHARD D. MONCRIEF; STEPHEN L. )
 ARATA; WILLIAM R. LEMMONS, JR.; )
 DENNIS F. JAGGI; STEVEN GUDOVIC; and )
 BLUE RACER MIDSTREAM, LLC,           )
                                      )
      Defendants.                     )

                            MEMORANDUM OPINION

                           Date Submitted: July 29, 2019
                          Date Decided: September 25, 2019

William M. Lafferty, Kevin M. Coen, Lauren Neal Bennett, Sabrina Hendershot, Lauren
P. Russell, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware;
Andrew Ditchfield, Paul S. Mishkin, Daniel J. Schwartz, Tina Hwa Joe, Alexa B. Lutchen,
Connie L. Dang, DAVIS POLK & WARDWELL LLP, New York, New York; Counsel
for Plaintiff Williams Field Services Group, LLC.

Rolin P. Bissell, James M. Yoch, Jr., YOUNG CONAWAY STARGATT & TAYLOR,
LLP, Wilmington, Delaware; Michael C. Holmes, John C. Wander, Craig E. Zieminski,
George M. Padis, Margaret D. Terwey, VINSON & ELKINS LLP, Dallas, Texas; Counsel
for Defendants Caiman Energy II, LLC, Jack M. Lafield, Richard D. Moncrief, Stephen L.
Arata, Steven Gudovic, and Blue Racer Midstream, LLC.

A. Thompson Bayliss, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Alan S.
Goudiss, K. Mallory Brennan, Ryan Martin-Patterson, Susan Loeb, SHEARMAN &
STERLING LLP, Counsel for Defendants EnCap Flatrock Midstream Fund II, L.P.,
EnCap Energy Infrastructure Fund, L.P., TT EEIF Co-Investments, LLC, UT EEIF Side
Car, LLC, LIC-EEIF Side Car, LLC, Dennis F. Jaggi, and William R. Lemmons.

Raymond J. DiCamillo, Robert L. Burns, Brian S. Yu, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, Delaware; Paul C. Gluckow, SIMPSON THACHER &
BARTLETT LLP, New York, New York; Counsel for Defendants FR BR Holdings, L.L.C.

Raymond J. DiCamillo, Robert L. Burns, Brian S. Yu, RICHARDS, LAYTON &
FINGER, P.A., Wilmington, Delaware; Michael J. Shipley, David A. Klein, KIRKLAND
& ELLIS LLP, Los Angeles, California; Counsel for Defendants Oaktree Capital
Management, L.P. and Highstar IV Caiman II Holdings, LLC.

LASTER, V.C.
       This post-trial decision addresses the parties’ competing requests for declaratory

judgments that interpret the currently operative limited liability company agreement of

Caiman Energy II, LLC (“Caiman II”). The parties agree that the LLC agreement gives

EnCap Capital Management (“EnCap”) the sole and exclusive right to cause Caiman II to

approve an initial public offering that meets the definition of a “Qualified IPO.” They

further agree that the LLC agreement gives EnCap the sole and exclusive right to take any

action that is “required or necessary to facilitate” a Qualified IPO. Their superficial

agreement on these realities masks a fundamental disagreement on the scope of authority

that these provisions confer.

       The defendants read the provisions as granting plenary authority to EnCap in

connection with a Qualified IPO, including the power to modify the definition of a

Qualified IPO and to alter steps that the LLC agreement otherwise would require in

connection with a Qualified IPO. Using the expansive authority that the defendants contend

it possesses, EnCap has proposed an intricate, multi-step reorganization that will culminate

in what the parties describe as an “Up-C IPO.” EnCap’s proposed transaction, however, is

far more complex than a standard Up-C IPO. Among other things, it will invert the Caiman

II entity structure, transforming Caiman II from its current status as the top-tier entity into

a post-IPO role as the lowest-tier subsidiary. The defendants contend that EnCap has the

authority to implement its Up-C IPO.

       The plaintiff reads the same provisions narrowly as granting, at best, limited

authority to EnCap to approve what the LLC agreement defines as a Qualified IPO, and

then to take actions that are necessary to achieve an IPO that meets the contractual
definition. As the plaintiff sees it, EnCap cannot amend the definition of a Qualified IPO

or evade otherwise mandatory steps for pursuing a Qualified IPO. More broadly, the

plaintiff contends that EnCap cannot take action that would conflict with veto rights that

the plaintiff possesses under other sections in the LLC agreement. The plaintiff concludes

that EnCap lacks the authority to implement its Up-C IPO.

       This decision interprets the plain language of the LLC agreement differently than

either of the extreme positions taken by the parties. This decision concludes that EnCap

has the power to implement certain steps in its proposed Up-C IPO, but lacks the power to

implement others. This decision further concludes that EnCap cannot rely on a cooperation

clause in the LLC agreement to compel the plaintiff to give up its contractual rights.

                          I.       FACTUAL BACKGROUND

       The parties reached agreement on fifty-four stipulations of fact. During two days of

trial, the parties introduced 250 exhibits and lodged fourteen depositions in evidence.

Seven fact witnesses testified live. What follows are the court’s findings based on a

preponderance of the evidence.1




       1
         Citations in the form “PTO ¶ ––” refer to stipulated facts in the pre-trial order. Dkt.
138. Citations in the form “[Name] Tr.” refer to witness testimony from the trial transcript.
Citations in the form “[Name] Dep.” refer to witness testimony from a deposition
transcript. Citations in the form “JX –– at ––” refer to a trial exhibit with the page
designated by the last three digits of the control or JX number. If a trial exhibit used
paragraph or section numbers, then references are by paragraph or section.

                                               2
A.     Caiman I

       In 2009, defendants Jack M. Lafield and Richard D. Moncrief formed Caiman

Energy, LLC (“Caiman I”). Defendant Stephen L. Arata later joined the Caiman I

management team. This decision refers to Lafield, Moncrief, and Arata as “Caiman

Management.”

       Between 2009 and 2012, Caiman I acquired and developed midstream assets in the

Marcellus Shale in West Virginia. In March 2012, Caiman I sold its assets to The Williams

Companies, Inc. for $2.5 billion (the “Caiman I Sale”). As part of that transaction, Caiman

Management entered into non-competition agreements that prohibited them from

competing with their former business in its area of operations for a period of two years (the

“Non-Compete Agreements”).

B.     Caiman II

       In June 2012, three months after the Caiman I Sale, Caiman Management formed

Caiman II. Through Caiman II, they planned to pursue the same midstream business model

that Caiman I had used, this time in the Utica Shale in Ohio and Pennsylvania.

       Caiman II obtained funding from many of the same investors who had backed

Caiman I. EnCap committed $285 million.2 Oaktree Capital Management (“Oaktree”)




       2
          EnCap invested through five separate funds, each of which is a defendant and
counterclaim plaintiff: EnCap Flatrock Midstream Fund II, L.P., EnCap Energy
Infrastructure Fund, L.P., TT-EEIF Co-Investments, LLC, UT EEIF Side Car, LLC, and
LIC-EEIF Side Car, LLC. See PTO ¶¶ 17–21. EnCap manages the funds, and the
distinctions among the entities are not important for purposes of this decision, which refers
generally to “EnCap.” This simplified usage should not obscure the fact that the individual

                                             3
committed $95 million.3 Caiman Management committed approximately $29 million, and

a smattering of other individuals invested. See JX 1, sched. I.

       During the negotiations over the Caiman I Sale, Caiman Management had expressed

interest in pursuing a follow-on venture, and Williams had expressed interest in investing.

As a result, when Caiman Management formed Caiman II, they sought and obtained capital

from Williams.4 Williams committed $380 million, making it the largest investor in

Caiman II.

       Williams did not want Caiman Management to use Williams’ capital to compete

with the business that Williams had only recently purchased in the Caiman I Sale. See

Armstrong Dep. 146–48; Scheel Dep. 175. Williams had protection for the first two years

in the form of the Non-Compete Agreements, but once they expired, Williams could find




funds are the formal members of Caiman II and thus the parties that are bound by and have
rights under its limited liability company agreement.
       3
          Oaktree’s predecessor firm, Highstar Capital, made the investment using
defendant and counterclaim plaintiff Highstar IV Caiman II Holdings, LLC. See PTO ¶ 23.
The distinctions between and among Oaktree, its predecessor, and the special purpose
vehicle are not important for purposes of this decision, which refers generally to “Oaktree.”
As with the references to EnCap, this simplified usage should not obscure the fact that the
special purpose vehicle is the formal member of Caiman II.
       4
        Williams invested through its subsidiary, Williams Field Services Group, LLC,
which is the plaintiff and counterclaim defendant. The distinction between The Williams
Companies and Williams Field Services Group, LLC is not important for purposes of this
decision. This decision therefore refers generally to “Williams.” As with the references to
EnCap and Oaktree, this simplified usage should not obscure the fact that Williams Field
Services is the formal member of Caiman II.


                                             4
itself in the position of having funded a competitor. To address this risk, Williams insisted

on a geographic limitation that would restrict Caiman II to the Utica Shale.5 Without the

geographic limitation, Williams would not have invested in Caiman II.6

       The geographic limitation was memorialized in Caiman II’s original limited liability

company agreement, dated as of July 9, 2012 (the “Original LLC Agreement”). In the

initial draft, Caiman Management proposed that Caiman II could “acquire, own, hold,

maintain, develop and operate Midstream Assets in the continental United States and the

state and federal waters offshore thereto.” JX 13 at ‘217. Williams struck the reference to

the continental United States and its offshore waters, substituting “Utica Shale in Ohio and

northwestern Pennsylvania.” Id. at ‘217 to ‘218. Caiman Management accepted this change

but added the language “and such other areas as determined by the Board with the approval

required for a Special Voting Item.” JX 14 at ‘550 to ‘551. In the final version of the

Original LLC Agreement, Section 1.3 provided as follows:

       Purpose. The purposes for which [Caiman II] is organized are:

       (a)      to acquire, own, hold, maintain, develop and operate Midstream
                Assets in the Utica Shale in Ohio and northwestern Pennsylvania and
                such other areas as determined by the Board with the approval
                required for a Special Voting Item;

       (b)      to sell, abandon and otherwise Dispose of Midstream Assets; and

       (c)      to engage in or perform any and all activities that are related to or
                incident to the foregoing or otherwise authorized by the Board in


       5
       See Miller Tr. 467; Reaves Tr. 587–89; Miller Dep. 24–25; Armstrong Dep. 143–
48; Carmichael Dep. 42–44; Lemmons Dep. 22, 31; Scheel Dep. 39–40, 175.
       6
           See Scheel Tr. 73–74; Armstrong Tr. 23–25; JX 31 at 5.

                                              5
              accordance with the terms of this Agreement, and that may be lawfully
              conducted by a limited liability company under the Act.

       In carrying out the business and purposes of [Caiman II], [Caiman II] may
       act directly or indirectly through one or more entities.

See JX 17, § 1.3 (formatting altered). This decision refers to this language as the “Original

Purpose Clause.”

       Clause (a) of the Original Purpose Clause limited Caiman II’s operations to “the

Utica Shale in Ohio and northwestern Pennsylvania and such other areas as determined by

the Board with the approval required for a Special Voting Item.” See id. (emphasis added).

The concept of a “Special Voting Item” referenced an aspect of Caiman II’s governance

regime. Under the Original LLC Agreement, Caiman II was a manager-managed LLC with

a nine-member board of managers (the “Board”). Williams received the right to designate

three of the members of the Board; it designated Curt Carmichael, David Keylor, and T.J.

Rinke (the “Williams Managers”). EnCap received the right to designate two of the

members of the Board; it designated William R. Lemmons, Jr. and Dennis F. Jaggi (the

“EnCap Managers”). Oaktree received the right to designate one member of the Board; it

designated Steven Gudovic (the “Oaktree Manager”). Caiman Management held the

remaining three seats. See PTO ¶ 37.

       The Original LLC Agreement provided that as a general matter, valid Board action

required a number of votes equal to or exceeding a majority of the managers then entitled

to be designated to the Board. See JX 17, §§ 6.1, 6.8(a). In other words, with nine managers

entitled to be designated to the Board, valid Board action required five votes. But the

Original LLC Agreement then identified a list of eleven additional matters, each defined

                                             6
as a “Special Voting Item,” for which valid Board action also required “the affirmative

vote of at least one EnCap Manager and at least one [Williams] Manager.” See id. § 6.8(b).

If either EnCap or Williams opposed a Special Voting Item, their representatives could

block it by withholding support, even if a majority of the Board otherwise approved.

       By providing that Caiman II could only operate outside of the Utica Shale “as

determined by the Board with the approval required for a Special Voting Item,” Clause (a)

of the Original Purpose Clause required approval from at least one EnCap Manager and at

least one Williams Manager. As a result, Caiman II would not be able to operate outside

the Utica Shale without both EnCap’s and Williams’ consent. Making this agreement

doubly clear, the list of Special Voting Items included taking “any action that is

inconsistent with [Caiman II’s] purpose, as set forth in Section 1.3.” Id. § 6.8(b)(x).

       Other pertinent Special Voting Items included:

       (iii)    unless such matter is a Major Special Voting Item, to merge, combine,
                or consolidate [Caiman II] with any other entity, convert [Caiman II]
                into another form of entity, or exchange interests in [Caiman II] with
                any other person (except as part of a Drag-Along Sale effected
                pursuant to Section 9.3);

                                            ***

        (xi)    to approve a Qualified IPO; or

       (xii)    to take any action, authorize or approve, or enter into any binding
                agreement with respect to or otherwise omit to any of the foregoing.

Id. § 6.8(b).

       As indicated by item (iii) in this list, the Original LLC Agreement identified an

additional category of Board actions known as “Major Special Voting Items.” See id.

§ 6.8(c). For these items, Board approval required the affirmative vote of one EnCap
                                                 7
Manager. Id. A Major Special Voting Item could not be approved by any other means,

meaning that a single EnCap Manager could determine unilaterally whether to approve a

Major Special Voting Item. Id. The list of Major Special Voting Items in the Original LLC

Agreement identified only one substantive item, followed by a general catchall for actions

related to that item:

       (i)    subject to the applicable requirements of Section 9.7, to enter into or
              consummate any transaction that will constitute an Exit Event,
              including

              the Disposition of all or substantially all of the assets of [Caiman II]
              (including by way of Disposition of all or any portion of any equity
              interests held by [Caiman II] or its subsidiaries),

              the Disposition of all of the Membership Interests as a Drag-Along
              Sale effected pursuant to Section 9.3, or

              a merger of [Caiman II] with and into another entity or pursuant to
              which [Caiman II] is not the surviving entity (any such transaction
              approved pursuant to this Section 6.8(c), a “Company Sale”), or

       (ii)   to take any action, authorize or approve, or enter into any binding
              agreement with respect to or otherwise commit to do any of the
              foregoing.

Id. (formatting altered). The possibility of effectuating an Exit Event through a “Drag-

Along Sale” referred to Section 9.3 of the Original LLC Agreement, which gave EnCap

the right to cause the Board to approve and Caiman II to engage in “a sale of [Caiman II]

that will be an Exit Event . . . structured as a sale of the Membership Interests.” Id. § 9.3(a).

       By making the effectuation of an Exit Event a Major Special Voting Item, Section

6.8(c)(i) gave EnCap the unilateral ability to cause the Board to approve and Caiman II to

consummate an Exit Event. Consistent with the examples included in Section 6.8(c)(i), the

Original LLC Agreement defined “Exit Event” as

                                               8
       the sale of [Caiman II], in one transaction or a series of related transactions,
       whether structured as

       (i) a sale or other transfer of all or substantially all of the Equity Securities
       (including by way of merger, consolidation, share exchange, or similar
       transaction),

       (ii) the sale or other transfer of all or substantially all of the assets of [Caiman
       II], promptly followed by a dissolution and liquidation of [Caiman II],

       (iii) any other dissolution or liquidation of [Caiman II], or

       (iv) a combination of any of the foregoing.

Id. § 2.1 (formatting altered).

       Although EnCap had the unilateral ability to cause the Board to approve and Caiman

II to consummate an Exit Event, the exercise and implementation of that right was not

unfettered. EnCap’s rights under Section 6.8(c)(i) were “subject to the applicable

requirements of Section 9.7.” In that section, Williams had a right of first offer under which

EnCap had to provide Williams with written notice of the proposed Exit Event, then

negotiate in good faith with Williams

       with respect to a transaction pursuant to which [Williams] would
       consummate an Exit Event pursuant to which [Williams] would acquire all
       of the Equity Interests (if a Drag-Along Sale), all of the assets of [Caiman II]
       (if a Company Sale) or all of the assets of [Caiman II] to be sold (if a Material
       Asset Sale) . . . .

Id. § 9.7(b). EnCap’s right to effectuate a Drag-Along Sale under Section 9.3 was likewise

subject to Williams’ right of first offer in Section 9.7. Id. § 9.3(b).

       Through its right of first offer, Williams had the opportunity to consummate the Exit

Sale itself. By doing so, Williams could avoid the prospect of a new owner buying Caiman




                                                9
II, eliminating the Original Purpose Clause, and using Caiman II to compete with the

business that Williams had purchased from Caiman I.

C.    The Dominion Transaction

      In fall 2012, Caiman II identified an opportunity to partner with Dominion Energy,

Inc. (“Dominion”) to form a joint venture that Caiman Management would manage (the

“Dominion Transaction”). In November, Caiman II and Dominion negotiated a letter of

intent, and Caiman II formed a wholly owned subsidiary called Blue Racer Midstream LLC

(“Blue Racer”) to serve as the vehicle for the Dominion Transaction. See JX 20; JX 21; JX

34 at 1. Blue Racer became and remains Caiman II’s only revenue producing asset. It is

also the only entity through which Caiman II does business.

      In December 2012, Dominion effectuated the first step of the Dominion Transaction

by causing its wholly owned subsidiary, Dominion Natrium Holdings, Inc., to contribute

certain midstream assets to Blue Racer in exchange for cash at closing. Dominion also

committed to cause Dominion Natrium to contribute additional assets over time in return

for additional cash payments to be funded by Caiman II. As part of the Dominion

Transaction, Dominion received equity interests reflecting a 50% ownership interest in

Blue Racer, leaving Caiman II with the remaining 50% ownership interest. See generally

JX 31; JX 33.

      In connection with the Dominion Transaction, Caiman II and Dominion entered into

a new limited liability company agreement for Blue Racer. See JX 34 (the “Blue Racer

LLC Agreement”). At around the same time, the members of Caiman II entered into an

amended and restated limited liability company agreement for Caiman II. See JX 1. This

                                           10
agreement is still the operative agreement that governs Caiman II, so this decision refers to

it as the “Caiman LLC Agreement.”

       When entering into the Blue Racer LLC Agreement and the Caiman LLC

Agreement, the parties addressed a variety of issues. Two are pertinent to the current

dispute: (i) a modification to the geographic area in which Caiman II and Blue Racer would

operate, and (ii) a restructuring of EnCap’s exit rights.

       1.     Geographic Scope

       Dominion contributed assets to Blue Racer that included certain assets located in

West Virginia, near the assets that Williams had purchased in the Caiman I Sale. Under the

Original Purpose Clause, Caiman II could not operate in West Virginia, and Caiman II

would have violated the Original Purpose Clause by engaging in business in West Virginia

through Blue Racer. The parties addressed this problem by including a modified

geographic limitation in the Blue Racer LLC Agreement, then using that modified scope

to frame a revised purpose provision in the Caiman LLC Agreement.

       The Blue Racer LLC Agreement addressed the geographic situation by defining the

“Purposes of the Company” as follows:

       [Blue Racer] is formed for the purposes of developing the business of wet
       gas, lean gas, crude and condensate gathering, processing, and fractionation
       and NGL transportation within the AMI Area and, to the extent necessary for
       owning, operating and expanding the TL-404 Gathering Line, the Natrium
       Facility and G-150 Pipeline, within West Virginia (collectively, the
       “Company Business”). Each of the Members agrees to cause [Blue Racer]
       to conduct, directly and through its subsidiaries, the Company Business in
       accordance with the provisions of this Agreement and the Act.




                                             11
JX 34, § 3.1 (the “Blue Racer Purpose Clause”). The Blue Racer LLC Agreement defined

“AMI Area” as “the area of the Utica Shale formation, specifically the counties in the State

of Ohio and the Commonwealth of Pennsylvania set forth in Schedule 3, as may be

modified pursuant to Section 10.4.”7 The Blue Racer Purpose Clause thus limited Blue

Racer to operating in this area, except that Blue Racer could operate within West Virginia

“to the extent necessary for owning, operating and expanding the TL-404 Gathering Line,

the Natrium Facility and G-150 Pipeline.” Id. § 3.1. These were specific assets that

Dominion Natrium contributed to Blue Racer as part of the Dominion Transaction.

       The Caiman LLC Agreement addressed the geographic situation with a new purpose

clause. Section 1.3 of the Caiman LLC Agreement provided as follows:

       Purpose. The purposes for which [Caiman II] is organized are:

       (a)    to acquire, own, hold, maintain, develop and operate Midstream
              Assets in the Utica Shale in Ohio and northwestern Pennsylvania,
              including all those areas covered by the AMI Area and, to the extent
              necessary for owning, operating and expanding the Natrium Facility,
              the G-150 Pipeline and the TL-404 Gathering Line, within West
              Virginia (provided that, except for the Replacement Natrium
              Processing Contracts (as such term is defined in the Blue Racer
              Investment Agreement), neither [Caiman II] nor its subsidiaries may
              enter into, or cause Blue Racer or its subsidiaries to enter into, new
              gathering, processing or fractionation agreements for hydrocarbons
              produced in West Virginia prior to April 27, 2014), and such other
              areas as determined by the Board with the approval required for a
              Special Voting Item;




       7
        Id. at A-1. Schedule 3 of the Blue Racer LLC Agreement listed thirty-five counties
in Ohio and five counties in Pennsylvania. Pursuant to Section 10.4, Dominion could
remove certain counties from the AMI Area under specified circumstances. Id. § 10.4. This
aspect of the Blue Racer LLC Agreement is not at issue.

                                            12
      (b)      to sell, abandon and otherwise Dispose of Midstream Assets; and

      (c)      to engage in or perform any and all activities that are related to or
               incident to the foregoing or otherwise authorized by the Board in
               accordance with the terms of this Agreement, and that may be lawfully
               conducted by a limited liability company under the Act.

      In carrying out the business and purposes of [Caiman II], [Caiman II] may
      act directly or indirectly through one or more entities. Notwithstanding the
      foregoing, prior to the Equalization Date, [Caiman II] shall not pursue any
      Operation and Enhancement Plans except through Blue Racer and its
      subsidiaries.

JX 1, § 1.3 (formatting altered; the “Caiman Purpose Clause”).

      To ensure that the Blue Racer Purpose Clause and the Caiman Purpose Clause

(together, the “Purpose Clauses”) tracked each other, the Caiman LLC Agreement defined

the term “AMI Area” to have “the meaning set forth in the Blue Racer LLC Agreement.”

Id. § 2.1. Recognizing that the scope of the Caiman Purpose Clause now turned on a

definition in the Blue Racer LLC Agreement, the Caiman LLC Agreement expanded the

list of Special Voting Items to include any action “to amend, modify or otherwise change

(including by waiver or consent . . .) in any material respect any Blue Racer Agreement,

including but not limited to an amendment of the definition of ‘AMI Area’ or ‘ROFO

Development Opportunity’ under the Blue Racer Agreements . . . .” JX 1, § 6.8(b)(xii).8

      As a result of these changes, both before and after the Dominion Transaction,

Caiman II could not compete with the business that Williams had purchased in the Caiman

I Sale. The Caiman Purpose Clause only permitted Caiman II to operate in West Virginia




      8
          The provision authorized limited changes pursuant to exceptions not relevant here.

                                             13
to the extent necessary to own, operate, or expand the specific assets it received in the

Dominion Transaction. Otherwise, Caiman II could not operate outside of the Utica Shale.

Before Caiman II could operate anywhere else, it had to receive the approval of both one

EnCap Manager and one Williams Manager. Caiman II could not violate this limitation

directly or indirectly, whether through Blue Racer or otherwise. Blue Racer also could not

operate outside of that same designated area, and Caiman II could not authorize any change

in this aspect of the Blue Racer LLC Agreement without the approvals necessary for a

Special Voting Item. As a result, neither Caiman II nor Blue Racer could operate outside

of their designated area without Williams’ consent.

       2.     Exit Rights

       A more significant set of changes to the Original LLC Agreement involved the

members’ exit rights. This issue arose because the Blue Racer LLC Agreement

contemplated that Dominion Natrium would contribute additional assets to Blue Racer in

exchange for cash, and it obligated Caiman II to provide the capital necessary for Blue

Racer to finance those transactions. See JX 22. During the lead up to the Dominion

Transaction, Williams submitted a proposal to Caiman Management under which Williams

would fund 100% of the required capital in return for additional member interests in

Caiman II, which would result in Williams holding up to a 66% ownership interest in

Caiman II. JX 24. In exchange for this commitment, Williams’ proposal contemplated that

an Exit Event would no longer be a Major Special Voting Item that EnCap could control

unilaterally. See id.; see also JX 23.



                                           14
       Knowing that EnCap would be focused on its need to exit as its funds entered their

harvesting stage, Caiman Management questioned whether EnCap would be willing to give

up its control over an Exit Event. But Caiman Management believed a compromise was

possible, because they foresaw that the most likely outcome for Caiman II was either a sale

to Williams or an IPO, and Caiman Management believed an IPO would likely generate

greater value for EnCap. Caiman Management therefore thought that EnCap might be

willing to give up its control over an Exit Right in return for greater control over an IPO.

See JX 23.

       In crafting a counteroffer that would be acceptable to both Williams and EnCap,

Caiman Management proposed swapping the approvals required for an Exit Event and a

Qualified IPO. Under the Caiman Management proposal, an Exit Event would become a

Special Voting Item, and a Qualified IPO would become a Major Special Voting Item only

requiring the approval of an EnCap Manager. JX 25. Caiman Management also proposed

that in the event of a Qualified IPO that was structured through a master limited partnership

(“MLP”), the other investors in Caiman II “will sell their GP interest for cash to [Williams]

using a defined valuation mechanism.” Id. at ‘146. At the time, publicly traded midstream

businesses were invariably organized as MLPs, and the parties expected Caiman II to go

public as an MLP. Under this proposal, Williams would have the right to purchase all of

the general partner interests in the MLP and control the post-IPO entity. The Caiman

Management proposal also reduced Williams’ maximum capital contribution and resulting

equity stake from 66% to 62.5%. See id. In addition, Caiman Management proposed that

the geographic restrictions in the Caiman LLC Agreement and the Blue Racer LLC

                                             15
Agreement would fall away once Caiman II had satisfied all of its funding commitments

to Blue Racer. See id. at ‘147; JX 34 at A-6.

       Caiman Management ran its proposal by EnCap. See JX 26. EnCap struck the

language eliminating its right to force an Exit Event, but kept the language that would let

it unilaterally approve a Qualified IPO. Caiman Management sent the amended proposal

to Williams. See JX 28. Williams restored the language eliminating EnCap’s right to force

an Exit Event and struck the point about the geographic restrictions falling away. See JX

30.

       The parties reached an agreement in principle based on Williams’ counterproposal.

Looking back on the negotiations from May 2014, Arata summarized the basic deal as

follows:

       When [Blue Racer] was formed, [Williams] negotiated for the option to
       increase its interest in Caiman II to 62.5%. An additional element of this
       change was [Williams’] request to not be able to be dragged into a sale of
       Caiman II (as they would now most likely be a majority owner of Caiman
       II). This was agreed to on the condition of [EnCap] being allowed to drag
       [Williams] into an IPO of either [Blue Racer] or Caiman II. The final element
       of the change of control adjustments was that, in the event of an IPO of either
       [Blue Racer] or Caiman II, [Williams] would have the right to buy out the
       other Caiman II owners’ interest in the GP of Caiman II for fair market value
       in cash at the closing of the IPO (with an agreed upon process for resolving
       a valuation dispute).

JX 46 at ‘757 to ‘758.

       The lawyers implemented the business deal in the Caiman LLC Agreement. To

document the agreement regarding an Exit Event, the Caiman LLC Agreement (i) struck

Section 9.3 of the Original LLC Agreement in its entirety, thereby eliminating the concept

of a Drag-Along Sale, and (ii) moved the approval of an Exit Event from Section 6.8(c)(i),

                                             16
where it was a Major Special Voting Item, to Section 6.8(b)(xi), where it became a Special

Voting Item. In a related change, the parties revised Section 6.8(b)(iii), which made it a

Special Voting Item “to merge, combine, or consolidate [Caiman II] with any other entity,

convert [Caiman II] into another form of entity, or exchange interests in [Caiman II] with

any other person.” Previously, this provision included an exception that recognized

EnCap’s right to authorize a merger or similar transaction as a Major Special Voting Item

when it was part of an Exit Event. JX 17, § 6.8(b)(iii). The Caiman LLC Agreement

eliminated that exception.

       To document the agreement regarding a Qualified IPO, the Caiman LLC Agreement

moved the approval of a Qualified IPO from Section 6.8(b)(xi), where it had been a Special

Voting Item, to Section 6.8(c)(i), where became a Major Special Voting Item. As a result,

the list of Major Special Voting Items in the Caiman LLC Agreement consisted of the

following:

       (i)      to approve a Qualified IPO, or

       (ii)  to take any action, authorize or approve, or enter into any binding
       agreement with respect to or otherwise commit to do any of the foregoing.

Id. § 6.8(c).

       The Caiman LLC Agreement did not make any changes to the definition of a

Qualified IPO. Both in the Original LLC Agreement and in the Caiman LLC Agreement,

a “Qualified IPO” was defined as

       any underwritten initial public offering by the IPO Issuer of equity securities
       pursuant to an effective registration statement under the Securities Act for
       which aggregate cash proceeds to be received by the IPO Issuer from such
       offering (without deducting underwriting discounts, expenses and

                                             17
       commissions) are at least $75,000,000; provided that a Qualified IPO shall
       not include an offering made in connection with a business acquisition or
       combination pursuant to a registration statement on Form S-4 or any similar
       form, or an employee benefit plan pursuant to a registration statement on
       Form S-8 or any similar form.

Id. § 2.1(a); JX 17, § 2.1(a).

       The definition of “Qualified IPO” referred to the concept of the “IPO Issuer,” and

the Caiman LLC Agreement changed that definition. It now stated:

       “IPO Issuer” means (i) [Caiman II] or (ii) an Affiliate of [Caiman II] that will
       be the issuer in a Qualified IPO. For the avoidance of doubt, and without
       limiting the definition of Affiliate, Blue Racer and its subsidiaries will be
       considered Affiliates of [Caiman II] for purposes of this definition.

JX 1, § 2.1(a). The qualification “[f]or the avoidance of doubt” was an addition. It made

clear that Blue Racer or one of its subsidiaries could be the IPO Issuer.

       In the Original LLC Agreement, Section 9.5 governed the implementation of a

Qualified IPO, and in the Caiman LLC Agreement, the parties made relatively limited

changes to this set of provisions. See JX 1, § 9.5 (the “Qualified IPO Section”). To

implement the agreement regarding who could control a Qualified IPO, the parties added

language to Section 9.5(a) to make clear that (i) the decision to effectuate a Qualified IPO

was a Major Special Voting Item and (ii) any references to approvals by the Board in

Section 9.5 meant the approval necessary for a Major Special Voting Item, i.e., EnCap’s

sole approval. See JX 1, § 9.5(a).

       The only other significant modification to the Qualified IPO Section addressed

Williams’ right to acquire 100% of the general partner interest in the event of a Qualified

IPO involving an MLP, which the Caiman LLC Agreement defined as an “MLP


                                             18
Conversion.” To implement this agreement, the parties added a new Section 9.5(e) which

granted Williams “the sole and exclusive right to purchase each other Investor’s Equity

Interests in the general partner, including any incentive distribution rights and similar

incentive securities” for cash in an amount equal to “fair market value.” See JX 1, § 9.5(e).

The new section included a mechanism for determining fair market value, including for the

appointment of an appraiser. See id.

       In January 2013, weeks after executing the Caiman LLC Agreement, Williams

prepared a summary of its terms. The summary of the Qualified IPO Section stated:

“Actions requiring Board approval in connection with a Qualified IPO are considered

Major Special Voting Items (as defined below), which require the affirmative vote of one

EnCap Manager and no other.” JX 35 at ‘448.

D.     The Contemplated MLP Conversion In 2015

       Beginning in early 2014, Caiman Management explored the possibility of

conducting a Qualified IPO, believing initially that it “would optimally be timed in early

Q2 of 2015.” JX 46 at ‘757; see PTO ¶ 38; JX 55. Publicly traded midstream companies

continued to be organized as MLPs, and Caiman Management expected that a Qualified

IPO would take place through an MLP Conversion.

       Caiman Management did not want the MLP to face geographic restrictions and

asked their outside counsel whether the restrictions would apply. In an email sent in May

2014, counsel expressed the view that

       the restrictions in the Caiman II purpose clause would naturally fall away at
       a Caiman II level at IPO b/c we will have a new partnership agreement,
       however, absent amending the Blue Racer LLC Agreement, Caiman II would

                                             19
       still be limited by the purpose clause in Blue Racer to the extent it is pursuing
       activities through Blue Racer.

JX 43 at ‘328. After receiving this advice, Caiman Management and EnCap discussed how

to negotiate with Williams over removing the Blue Racer Purpose Clause. See JX 46 at

‘758. Their discussions assumed that the amendment would require Williams’ consent. See

id.

       When EnCap engaged with Williams about the Qualified IPO, Williams suggested

the possibility of buying Caiman II. See JX 50 at ‘021. For a time, the discussions focused

on a sale of Caiman II to Williams. See JX 59.

       In November 2014, with the discussions over a sale bogging down, Caiman

Management resumed their preparations for an MLP Conversion. Caiman Management

anticipated that Williams would exercise its right to acquire 100% of the general partner

and asked Williams to confirm that fact. Notwithstanding the advice they had received six

months earlier about the Caiman Purpose Clause “fall[ing] away,” Caiman Management

asked Williams to agree that the Purpose Clauses would be removed post-IPO “as they

would be unduly restrictive for marketing purposes.” JX 70. Caiman Management argued

this should be an easy concession for Williams because if Williams exercised its right to

acquire 100% of the general partner, then Williams “will be in joint control of [Blue Racer]

at that point” and could ensure that the MLP and Blue Racer did not expand into the

Marcellus Shale. Id.

       In January 2015, counsel for Caiman II prepared a draft Form S-1. It disclosed as a

risk factor that both the MLP’s limited partnership agreement and the Blue Racer LLC


                                              20
Agreement would “limit[] our ability to expand [our or] Blue Racer’s operations beyond

the Utica Shale and certain portions of the Marcellus Shale.” JX 71 at ‘139 (bracketed text

in original). A drafting note from counsel called for confirming with Williams whether this

disclosure needed to be retained, or whether Williams would agree to eliminate the

geographic restrictions: “NTD: confirm [Williams] intent to leave purpose limitation in

place.” Id. Williams “held to the position that we did want to maintain [the business

purpose limitation], and that it should be in the [S-1] disclosures.” Carmichael Tr. 124.

       Caiman II subsequently filed a preliminary Form S-1 on a confidential basis with

the SEC on May 13, 2015. JX 77 at ‘710. The as-filed Form S-1 included the same risk

factor language and contained additional disclosures regarding how the business purpose

provisions would limit the operations of the post-IPO entities. It stated that the “sole

purpose” of Caiman II and Blue Racer was “pursuing midstream energy opportunities in

the Utica Shale.” Id. at ‘716. It later stated that “Blue Racer’s assets are exclusively located

in . . . the Utica Shale and certain adjacent areas in the Marcellus Shale, and the Blue Racer

LLC Agreement restricts it from engaging in operations outside of this area.” Id. at 749.

The as-filed version added that “entry into any business other than the company’s stated

purposes” would require approval of members holding 100% of Blue Racer’s member

interests. Id. at ‘763 to ‘764. See generally PTO ¶¶ 3843.

E.     The Contemplated MLP Conversion In 2017

       Because of adverse market conditions, Caiman II did not proceed with the MLP

Conversion in 2015. Caiman Management revisited the prospect of an MLP Conversion in

2017. This time, Caiman Management did not assume that Williams would exercise its

                                              21
right to acquire 100% of the MLP’s general partner and proceeded with the expectation

that the Form S-1 would have to disclose both the possibility that Williams would exercise

its option and the possibility that the general partner would have multiple members. As

before, Caiman Management wanted to remove the business purpose limitations, but did

not believe it could be done without Williams’ consent. See Juban Dep. 111; see also JX

137 at ‘828. When Caiman II filed a new Form S-1 confidentially in 2017, it disclosed that

the business purpose provisions would limit the ability of IPO Issuer and Blue Racer to

operate and discussed the resulting implications for investors.9

       While Caiman Management was preparing for the 2017 MLP Conversion, Williams

supported the Qualified IPO, but proceeded slowly and deliberately. Williams had a

contractual obligation to support a Qualified IPO, and it took care to comply with that

obligation, but it also sought to limit its support to what was contractually required. At the

same time, Williams continued to dangle the possibility of a purchase of Caiman II. By

February 2017, little progress had been made, and Caiman Management and EnCap had




       9
          JX 126 at ‘461 (“Our limited partnership agreement and Blue Racer’s limited
liability company agreement . . . limit our ability to expand our or Blue Racer’s operations
beyond the Utica Shale and certain portions of the Marcellus Shale.”); id. at ‘466
(disclosing that Caiman II was formed “for the sole purpose of pursuing midstream energy
opportunities in the Utica Shale”); id. at ‘473 (disclosing that Blue Racer was formed “for
the limited purpose of” operating in Ohio and Pennsylvania); id. at ‘475 (disclosing that
the Blue Racer Agreement “restricts [Blue Racer] from engaging in operations outside of
the Utica Shale and certain adjacent areas in the Marcellus Shale”); id. at ‘500 (same); id.
at ‘515 to ‘516 (disclosing as a risk factor that “entering into any business for any purpose
other than the company’s stated purposes” would require approval from holders of 100%
of Blue Racer’s member interests).

                                             22
grown frustrated with Williams. See JX 112 at ‘132, JX 113 at ‘193. Those dynamics

persisted through the balance of 2017. See, e.g., JX 140; JX 141; JX 142; JX 149; JX 154.

       Unfavorable market conditions in late 2017 put an end to the prospect of the MLP

Conversion. In June 2018, when Caiman Management tried to re-start the IPO process.

EnCap did not support the idea, believing it was “a waste of time unless Williams is on

board.” JX 162.

F.     First Reserve Buys Out Dominion.

       In September 2018, a private equity firm named First Reserve Corporation

contacted EnCap. First Reserve was exploring a purchase of Dominion’s interest in Blue

Racer but did not want to buy in without a path to liquidity. First Reserve proposed that the

two private equity firms work together to achieve an Up-C IPO of Blue Racer in 2019 or

2020 to open the door to secondary offerings that would enable them to exit from their

positions. See JX 163.

       By agreement dated October 31, 2018, a subsidiary of First Reserve committed to

purchase Dominion’s interest in Blue Racer. The acquisition closed on December 14, 2018.

PTO ¶ 44. Through this transaction, First Reserve replaced Dominion as the other 50%

member in Blue Racer. Id. Under an agreement also dated October 31, 2018, the same

subsidiary of First Reserve and EnCap committed to work together to achieve an IPO of

Blue Racer. See JX 167.

G.     The Up-C IPO

       After hearing from First Reserve, Caiman Management and EnCap began exploring

the possibility of an Up-C IPO. See JX 165. In this structure, an existing limited liability

                                             23
company that is taxed as a pass-through entity undertakes a public offering through a newly

formed corporation (“NewCo”), which is structured as a holding company that owns an

interest in the LLC. The basic steps in a typical Up-C are as follows:

    NewCo issues Class A common stock to the public in an IPO, with the Class A stock
     carrying both economic rights and voting rights.

    NewCo uses the proceeds from the IPO to purchase member interests in the LLC,
     giving NewCo an ownership interest in the LLC and diluting the ownership interest
     of the pre-IPO owners (the “Sponsors”).

    The Sponsors retain their pre-IPO member interests in the LLC, for which they
     continue to receive pass-through tax treatment.

    The Sponsors receive Class B common stock in NewCo, with the Class B stock
     carrying voting rights but no economic rights. The voting rights allocated to the
     Class B shares track the equity interest reflected by the Sponsor’s member interests
     in the LLC.

    NewCo is designated as the managing member of the LLC and is governed by a
     board of directors elected by the Class A and Class B stockholders of NewCo.

    Each Sponsor can exchange a member interest in the LLC and the corresponding
     shares of Class B stock for an equivalent amount of Class A stock.

See JX 184 at ‘716. Although EnCap and Caiman Management ultimately sought to move

forward with what they have called an Up-C IPO, their version is far more complex and

involves many more steps than the typical Up-C transaction. See JX 225.

       During their initial exploration of an Up-C IPO, Caiman Management and EnCap

did not perceive it as a means of eliminating the Purpose Clauses. Instead, during March

2019, Caiman Management explored whether they could induce Williams to agree to

change the Purpose Clauses, either by invoking their ability to exclude Williams from

decisions about “competitive activities” or by withholding consent to a transaction that

Williams wanted to pursue. See JX 180; JX 182; Arata Tr. 41314, 41920.
                                            24
       Around the same time, Arata suggested that maybe Williams would “lose[] the right

to vote regarding changes to the business purpose clause in connection with the IPO.” JX

181. The general counsel of Caiman II shot down that idea. After citing some points that

might support Arata’s argument, he asked outside counsel, “[W]e can’t use the IPO reorg

to strip Williams of rights it currently has, correct? Or have I missed something

somewhere?” JX 181. Although the same counsel had expressed the view in an email five

years earlier that the Caiman Purpose Clause would fall away in an IPO if there was a new

entity, no one gave that advice at this point. Arata also texted with First Reserve about his

idea of using an Up-C IPO to eliminate the Purpose Clauses. This was the first time First

Reserve had heard of the idea. See JX 182.

       Later in March 2019, EnCap informed Williams that it was once again considering

a Qualified IPO. Caiman Management and EnCap subsequently called a special meeting

of the Board to consider moving forward with a Qualified IPO of Blue Racer “or an entity

formed for such purpose” and to

       [a]uthorize management . . . to hire advisors, form, merge or consolidate
       entities, draft and file registration statements, file documents with such
       regulatory authorities as management deems necessary or appropriate and to
       take or cause to be taken any and all actions as and to the extent necessary to
       effectuate a Qualified IPO of Blue Racer.

JX 185. Williams recognized that “EnCap has a right to take Caiman or [Blue Racer]

public” and told Caiman Management that Williams would support the IPO “if our

agreement rights are maintained.” JX 186; see JX 188. During a meeting on April 5, 2019,

the Board unanimously approved the proposed resolutions. PTO ¶ 46.



                                             25
      On April 17, 2019, the Board held an organizational meeting to discuss the Qualified

IPO. PTO ¶ 49. The Up-C structure as presented involved at least the following steps.

    Step One: Form three new entities.

      o Caiman Ohio Midstream, LLC (“Ohio Midstream”), an existing holding
        company through which Caiman II holds its 50% interest in Blue Racer, forms
        a wholly owned subsidiary called Blue Racer Midstream Inc. (“PubCo”).

      o PubCo forms a wholly owned subsidiary called Blue Racer Midstream Holdings,
        LLC (“HoldCo”).

      o HoldCo forms a wholly owned subsidiary called BR Holdco Merger Sub, LLC
        (“Holdco Merger Sub”).

    Step Two: Caiman II and Dominion amend and restate the Blue Racer LLC
     Agreement to convert Blue Racer’s member units into a single class.

    Step Three: Caiman II contributes its retained assets to Ohio Midstream, except for
     its ownership interest in Ohio Midstream.

    Step Four: Ohio Midstream distributes all of its Blue Racer units to Caiman II.

    Step Five: Caiman II distributes all of its newly received Blue Racer units to its
     members.

    Step Six: Caiman II distributes its ownership interest in Ohio Midstream to Caiman
     Management.

    Step Seven: Blue Racer forms a wholly owned subsidiary called BRM Merger Sub
     LLC.

    Step Eight: Caiman II merges with and into BRM Merger Sub LLC, with Caiman
     II surviving as a new entity named Blue Racer Midstream Management LLC.

    Step Nine: PubCo issues (i) Class A shares to the public in exchange for cash,
     contributing the cash to HoldCo, (ii) contributes Class B shares to Holdco, and (iii)
     agrees with Ohio Midstream to cancel Ohio Midstream’s interest in PubCo.

    Step Ten: HoldCo Merger Sub merges with and into Blue Racer, with Blue Racer
     surviving as a wholly owned subsidiary of HoldCo and former unitholders of Blue
     Racer receiving a combination of cash raised in the IPO, Class B stock in PubCo,
     and units of HoldCo.

                                           26
See JX 184 at ‘722 to ‘728.

     At the meeting, Caiman Management asked Williams to consent to the removal of the

Purpose Provisions. See JX 194 at ‘109. The lead Williams representatives said that

Williams would not consent. Carmichael Tr. 147.

H.      The Defendants Develop Their Strategy.

        Toward the end of April 2019, the defendants focused on using the Up-C IPO to

eliminate the Purpose Clauses. On April 30, 2019, Caiman Management informed

Williams that the Board would meet on May 7 to consider whether to remove the Purpose

Clauses from the Caiman LLC Agreement and the Blue Racer LLC Agreement. During

this call, Caiman Management mentioned that “maybe” Williams’ consent would not be

required to remove the provisions in an IPO. Carmichael Tr. 15152. This was the first

time anyone had expressed that view to Williams. Id. at 152.

        On May 2, 2019, two EnCap representatives had a discussion with EnCap’s outside

counsel about the “BRM purpose clause.” JX 241; Lemmons Tr. 54344. The next day,

Caiman Management, EnCap, and First Reserve had a call about “strategy wrt [W]illiams

and [the] purpose clause.” JX 213; see Reaves Tr. 61213. After the meeting, Caiman II’s

Chief Financial Officer exchanged text messages with an EnCap representative about using

a new entity to circumvent the Purpose Clauses. They decided that the idea would not work

See JX 212.

        Three days later, on May 6, 2019, the board of managers of Blue Racer voted to

amend the Blue Racer Purpose Clause to eliminate any geographic restrictions, subject to

approval from the board of Caiman II. PTO ¶ 50. On May 7, 2019, the Board met to

                                           27
consider changing the Purpose Clauses. Caiman Management formally proposed to amend

the Caiman Purpose Clause to eliminate any geographic restriction and to approve the

conditional amendment to the Blue Racer Purpose Clause that the Blue Racer board had

approved. See JX 222; JX 223. The lead Williams representative stated that Williams

would not consent to the proposed changes. The Williams Managers did not vote in favor

of the proposal, causing it to fail. See JX 220; PTO ¶ 51.

       On May 8, 2019, Caiman Management advised Williams that although the Purpose

Clauses could not be changed without Williams’ consent outside of an IPO, Caiman II

could amend the Purpose Clauses as part of a Qualified IPO. PTO ¶ 52; Lafield Dep.

16364. Before May 8, no one had taken this positon.

       Later in May 2019, Blue Racer filed a confidential Form S-1 for its IPO. In it, Blue

Racer described the Up-C IPO somewhat differently, characterizing it as having the

following steps:

    “Blue Racer LLC’s limited liability company agreement will be amended and
     restated to, among other things, create a single class of units in Blue Racer LLC,
     referred to herein as ‘Blue Racer Units,’ held by First Reserve, and following a
     distribution by Caiman of the Blue Racer Units to its members, the Legacy Caiman
     Owners[.]”

    “Holdco’s limited liability company agreement will be amended and restated to,
     among other things and as described further under ‘Certain Relationships and




                                            28
        Related Party Transactions—Limited Liability Company Agreement of Holdco,’
        create a single class of units in Holdco, referred to herein as ‘Holdco Units[.]’”

      “[W]e will issue     Class A shares to the public in this offering, representing 100%
       of the economic rights in Blue Racer Inc., at an initial offering price of $ per share
       (the midpoint of the price range set forth on the cover page of this prospectus)[.]”

      “[W]e will issue and contribute Class B shares and a portion of the net proceeds
       received in the offering to Holdco in exchange for Holdco Units[.]”

      “Holdco will form a merger subsidiary, which will merge with and into Blue Racer
       LLC, with Blue Racer LLC surviving the merger as a wholly-owned subsidiary of
       Holdco and the Existing Owners receiving, as merger consideration, their allocable
       amounts of Holdco Units and a number of Class B shares equal to the number of
       Holdco Units received by such Existing Owner[.]”

      “[T]he remaining proceeds will be used to (i) pay down $ million in borrowings
       under the Blue Racer credit facility and (ii) purchase $ million of Holdco Units
       (along with a corresponding number of Class B shares, which will be cancelled)
       from the Existing Owners, with the total number of Holdco Units acquired by us
       from Holdco and the Existing Owners equaling the number of Class A shares sold
       by us in the offering.”

JX 225 at ‘436.

I.      This Litigation

        On May 13, 2019, Williams filed this lawsuit, naming as defendants Caiman II, Blue

Racer, EnCap, Oaktree, Caiman Management, the EnCap Managers, and the Oaktree

Manager. Count I asserted a claim for anticipatory breach of the Caiman LLC Agreement

based on the defendants plan to amend the Caiman Purpose Clause and the Blue Racer

Purpose Clause without Williams’ consent. Count II sought a declaratory judgment that

the defendants could not amend the Caiman Purpose Clause or the Blue Racer Purpose

Clause without Williams’ consent.

        On June 13, 2019, the defendants filed counterclaims and asserted affirmative

defenses. The sole count in the counterclaims sought the following declaratory judgments:

                                             29
      “Williams is not entitled to dictate the terms of the Qualified IPO (including, among
       other things, insisting that the [Caiman Purpose Clause] be included in the IPO
       charter documents and remain in place forever unless Williams consents
       otherwise)[.]”

        “In connection with the IPO, Williams is limited to the protections set forth in
         Section 9.5 of the LLC Agreement[.]”

      “Williams is not entitled to consent rights regarding amendments to the charter of
       the IPO Issuer[.]”

      “Williams is not entitled to unilaterally block the Proposed Amendments under
       12.2(a)(v).”

Dkt. 99 at 26–27. The parties agreed to litigate on an expedited basis.

J.       Post-Litigation Developments

         While the litigation was proceeding, the parties continued to negotiate aspects of the

Up-C IPO. See, e.g., JX 231; JX 233; JX 236. Williams advised Caiman II that Williams

would view “as adverse” any amendments to the Caiman LLC Agreement that would

“facilitate an Up-C Structure” or “make the economic waterfall provisions more

advantageous to other parties in connection with an Up-C Structure . . . .” JX 244 at 1.

         In June 2019, Caiman Management met with financial advisors who were vying to

lead the IPO. Barclays recommended an IPO size of approximately $650 million. JX 237

at ‘709. Wells Fargo recommended an IPO of between $500 million and $750 million. JX

238 at ‘022.

                                II.     LEGAL ANALYSIS

         The dispute between the parties reduces to disagreements over their respective rights

under the Caiman LLC Agreement. Each side seeks declaratory judgments establishing its




                                               30
preferred interpretations. To the extent that each side seeks further relief, such as the

issuance of an injunction, that relief is premised on its interpretations being correct.

       The party seeking a declaratory judgment assumes the burden of proving its

position. See San Antonio Fire & Police Pension Fund v. Amylin Pharms., Inc., 983 A.2d

304, 316 n.38 (Del. Ch.), aff’d, 981 A.2d 1173 (Del. 2009). Because both sides have sought

declaratory judgments, each theoretically bears the burden of proving its position by a

preponderance of the evidence. As a practical matter, the allocation of the burden of proof

“becomes relevant only when a judge is rooted on the fence post and thus in equipoise.” In

re S. Peru Copper Corp. S’holder Deriv. Litig., 52 A.3d 761, 791–92 (Del. Ch. 2011), aff’d

sub nom. Ams. Mining Corp. v. Theriault, 51 A.3d 1213 (Del. 2012).

       In this case, the competing burdens of proof are not at issue because this decision

interprets the relevant provisions as a matter of law. For purposes of the factual findings

set forth in this decision, the evidence was not in equipoise, and the preponderance-of-the-

evidence standard would result in the same determinations, regardless of which party bore

the burden of proof.

A.     Principles of Contract Interpretation

       To resolve the parties’ disagreements requires interpretation of the Caiman LLC

Agreement. When interpreting an LLC agreement, “a court applies the same principles that

are used when construing and interpreting other contracts.” Godden v. Franco, 2018 WL

3998431, at *8 (Del. Ch. Aug. 21, 2018). “When interpreting a contract, the role of a court

is to effectuate the parties’ intent.” Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d

728, 739 (Del. 2006). Absent ambiguity, the court “will give priority to the parties’

                                              31
intentions as reflected in the four corners of the agreement, construing the agreement as a

whole and giving effect to all its provisions.” In re Viking Pump, Inc., 148 A.3d 633, 648

(Del. 2016) (internal quotation marks omitted).

       “Unless there is ambiguity, Delaware courts interpret contract terms according to

their plain, ordinary meaning.” Alta Berkeley VI C.V. v. Omneon, Inc., 41 A.3d 381, 385

(Del. 2012). The “contract’s construction should be that which would be understood by an

objective, reasonable third party.” Salamone v. Gorman, 106 A.3d 354, 367–68 (Del. 2014)

(internal quotation marks omitted). “Absent some ambiguity, Delaware courts will not

destroy or twist [contract] language under the guise of construing it.” Rhone-Poulenc Basic

Chems. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992). “If a writing is

plain and clear on its face, i.e., its language conveys an unmistakable meaning, the writing

itself is the sole source for gaining an understanding of intent.” City Investing Co.

Liquidating Tr. v. Cont’l Cas. Co., 624 A.2d 1191, 1198 (Del. 1993).

       “In upholding the intentions of the parties, a court must construe the agreement as

a whole, giving effect to all provisions therein.” E.I. du Pont de Nemours & Co. v. Shell

Oil Co., 498 A.2d 1108, 1113 (Del. 1985). “[T]he meaning which arises from a particular

portion of an agreement cannot control the meaning of the entire agreement where such

inference runs counter to the agreement’s overall scheme or plan.” Id. “[A] court

interpreting any contractual provision . . . must give effect to all terms of the instrument,

must read the instrument as a whole, and, if possible, reconcile all the provisions of the

instrument.” Elliott Assocs. v. Avatex Corp., 715 A.2d 843, 854 (Del. 1998).



                                             32
        “Contract language is not ambiguous merely because the parties dispute what it

means. To be ambiguous, a disputed contract term must be fairly or reasonably susceptible

to more than one meaning.” Alta Berkeley, 41 A.3d at 385 (footnote omitted). If the

language of an agreement is ambiguous, then the court “may consider extrinsic evidence

to resolve the ambiguity.” Salamone, 106 A.3d at 374. Permissible sources of extrinsic

evidence may include “overt statements and acts of the parties, the business context, prior

dealings between the parties, [and] business custom and usage in the industry.” Id. at 374

(quoting In re Mobilactive Media, LLC, 2013 WL 297950, at *15 (Del. Ch. Jan. 25, 2013)

(alteration in original)). A court may consider “evidence of prior agreements and

communications of the parties as well as trade usage or course of dealing.” Eagle Indus.,

Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1233 (Del. 1997). “When the terms of

an agreement are ambiguous, ‘any course of performance accepted or acquiesced in

without objection is given great weight in the interpretation of the agreement.’” Sun-Times

Media Gp. v. Black, 954 A.2d 380, 398 (Del. Ch. 2008) (quoting RESTATEMENT (SECOND)

OF   CONTRACTS § 202). “[T]he private, subjective feelings” of contract “negotiators are

irrelevant and unhelpful to the Court’s consideration of a contract’s meaning, because the

meaning of a properly formed contract must be shared or common.” United Rentals, Inc.

v. RAM Hldgs., Inc., 937 A.2d 810, 835 (Del. Ch. 2007) (footnote omitted).

B.      EnCap’s Authority Under Section 6.8(c)

        As described in Blue Racer’s confidential Form S-1, and as presented at trial, the

defendants’ proposed Up-C IPO has many steps. As authority for EnCap’s ability to

implement these steps, the defendants rely in the first instance on Section 6.8(c) of the

                                            33
Caiman LLC Agreement. This section does not provide EnCap with the expansive

authority that the defendants’ claim.

       Sections 6.8(a), (b), and (c) of the Caiman LLC Agreement identify different

approvals that Caiman II must obtain before it can engage in identified actions. Section

6.8(a) states:

             In addition to any other matters under Applicable Law or pursuant to
       the provisions of this Agreement that require the approval of or a
       determination by the Board . . . ,

              [Caiman II] (or the officers and agents acting on its behalf), on its own
       behalf or on behalf of any of its subsidiaries, shall not take any of the
       following actions without having first received Majority Board Approval,

             unless such matter is a Special Voting Item (in which event the
       approval set forth in Section 6.8(b) and no other shall be required)

              or a Major Special Voting Item (in which event the approval set forth
       in Section 6.8(c) and no other shall be required),

               and unless such actions were previously and expressly approved by
       the Board in connection with, or as a part of, approving the most recently
       approved Overhead Budget, Capital Budget, or Operation and Enhancement
       Plan . . . .

JX 1, § 6.8(a) (formatting altered). Section 6.8(a) then lists the “actions” that Caiman II

cannot engage in “without first having received Majority Board Approval.” Id. The list of

twenty-one actions includes item (xvii), which is “to make a distribution by [Caiman II] to

the Members.” It also includes a catchall item (xxi), which is “to take any action, authorize

or approve, or enter into any binding agreement with respect to or otherwise commit to do

any of the foregoing.” Id. § 6.8(a).

       The Caiman LLC Agreement defines “Majority Board Approval” as “the approval

of those Managers having the Majority of the Voting Power.” Id. at 10. It defines “Majority

                                             34
of the Voting Power” to mean “those Managers whose aggregate votes equal or exceed,

[sic] a majority of the votes then entitled to be exercised by Managers then entitled to be

designated to the Board.” Id. § 6.2(b). Because the Board consists of nine seats, before

Caiman II can take any of the twenty-one identified actions, it must receive approval from

at least five of the managers serving on the Board.

       As indicated by Section 6.8(a), Section 6.8(b) identifies a list of Special Voting

Items, which are actions that Caiman II cannot engage in without both receiving Majority

Board Approval and the approval of at least one EnCap Manager and one Williams

Manager. In pertinent part, Section 6.8(b) states:

       Notwithstanding Section 6.8(a) . . . [Caiman II] (or the officers and agents
       acting on its behalf), on its own behalf or on behalf of any of its subsidiaries
       (and for the purposes of this Section 6.8(b), Blue Racer shall be deemed to
       be a “subsidiary” of [Caiman II]), shall not take any of the following actions
       (each a “Special Voting Item”) without having first received Majority Board
       Approval, which majority must include the affirmative vote of at least one
       EnCap Manager and at least one [Williams Manager] . . . .

Id. § 6.8(b). The list of fourteen Special Voting Items includes item (xii), “to amend,

modify or otherwise change . . . in any material respect any Blue Racer Agreement . . . .”

Id. It also includes a catchall item (xiv), which is “to take any action, authorize or approve,

or enter into any binding agreement with respect to or otherwise commit to do any of the

foregoing.” Id.

       As further indicated by Section 6.8(a), Section 6.8(c) identifies a list of Major

Special Voting Items, which are actions that a single EnCap Manager has the sole and

exclusive ability to approve. In its entirety, Section 6.8(c) states:



                                              35
       Notwithstanding Section 6.8(a) and Section 6.8(b) the following actions
       (each a “Major Special Voting Item”) shall only require the affirmative vote
       of one EnCap Manager, and upon such affirmative vote shall be deemed
       approved as an act of the Board (and, for the avoidance of doubt, such actions
       may not be taken by any other vote or approval of the Board):

              (i) to approve a Qualified IPO, or

             (ii) to take any action, authorize or approve, or enter into any binding
       agreement with respect to or otherwise commit to do any of the foregoing.

Id. § 6.8(c). Although this provision empowers “a single EnCap Manager” with this

authority, for simplicity, this decision refers to the authority as being vested in EnCap.

       The parties agree that Section 6.8(c) applies “[n]otwithstanding Section 6.8(a) and

Section 6.8(b),” and they agree that Section 6.8(c)(i) gives EnCap the sole and exclusive

authority to approve a Qualified IPO. They disagree about the implications of Section

6.8(c)(ii). The defendants contend that Section 6.8(c)(ii) gives EnCap sole and exclusive

authority to take any action with respect to a Qualified IPO. They read the authority “to

take any action . . . with respect to . . . the foregoing” as meaning “to take any action with

respect to a Qualified IPO.” They conclude that if the Caiman LLC Agreement requires or

empowers the Board to take action on a particular item, and if Section 6.8(a) or (b) would

require a different vote for Board action, then Section 6.8(c) vests EnCap with the sole and

exclusive authority to take action on behalf of the Board if a Qualified IPO is involved.

       Williams reads Section 6.8(c)(ii) more narrowly. As Williams sees it, the grant of

authority in Section 6.8(c)(ii) “to take any action . . . with respect to . . . the foregoing”

means “to take any action with respect the approval of a Qualified IPO.” Williams does




                                             36
not read the resulting authority as extending to any action in connection with a Qualified

IPO, only the steps necessary to approve a Qualified IPO.

       To bolster its reading, Williams points out that the Caiman LLC Agreement contains

the Qualified IPO Section, which contains twelve single-spaced paragraphs identifying

actions that the Board can take in connection with a Qualified IPO and the rights that certain

members have. See id. § 9.5. In particular, Section 9.5(b) states:

       Notwithstanding anything to the contrary in this Agreement, at any time after
       the approval of a Qualified IPO in accordance with this Agreement, the
       Board shall be entitled

       [1] to approve the transaction or transactions to effect the IPO Exchange and

       [2] to take all such other actions as are required or necessary to facilitate the
       Qualified IPO including

              forming any entities required or necessary in connection with the
              Qualified IPO without the consent or approval of any other person
              (including any Member).

Id. § 9.5(b) (formatting altered) (enumeration added). This decision refers to subpart [1] as

the “IPO Exchange Clause,” subpart [2] as the “IPO Facilitation Clause,” and subpart [2]’s

subsidiary right to form entities as the “Entity Formation Clause.”

       Williams correctly observes that under the defendants’ reading of Section 6.8(c)(ii),

the Qualified IPO Section largely becomes surplusage. The IPO Facilitation Clause, for

example, empowers EnCap “to take all such . . . actions as are required or necessary to

facilitate the Qualified IPO . . . .” Id. § 9.5(b). If the defendants were correct that Section

6.8(c)(ii) vested EnCap with the sole and exclusive authority “to take any action . . . with

respect to . . . [a Qualified IPO],” then Section 9.5(b) would not serve any purpose, because

Section 6.8(c)(ii) already would have covered the waterfront.
                                              37
       The defendants’ interpretation of Section 6.8(c) is also unreasonable because it has

no natural limiting principle. As long as EnCap was acting with respect to a Qualified IPO,

the defendants’ interpretation would give a single EnCap Manager the ability to take any

action whatsoever, notwithstanding any requirement in Section 9.5 or any other section of

the Caiman LLC Agreement. For example:

    Section 9.5(a) establishes requirements for proceeding with a Qualified IPO, and
     Sections 9.5(d) and (e) specify requirements for proceeding with an MLP
     Conversion. Under the defendants’ reading of Section 6.8(c)(ii), EnCap could
     override those provisions and effectuate a different transaction that failed to comply
     with those requirements.

    Sections 3.2, 3.7, 3.8 and 9.2 limit the situations under which new members can be
     admitted to Caiman II. Under the defendants’ reading, EnCap could admit new
     members in connection with a Qualified IPO.

    Section 4.3 precludes the payment of interest on capital contributions and forecloses
     a member from requiring the return of its capital contribution. Under the defendants’
     reading, EnCap could recover its capital contribution, with interest, in connection
     with a Qualified IPO.

    Section 6.3(a) empowers the member that appointed a particular manager to remove
     the manager. Under the defendants’ reading, EnCap could remove a Williams
     Manager or the Oaktree Manager in connection with a Qualified IPO.

    Sections 6.3(b) and (c) grant protections against removal to Caiman Management
     in their capacities as members of the Board. Under the defendants’ reading, EnCap
     could override these protections in connection with a Qualified IPO.

    Section 6.4(a) empowers Williams and Oaktree to designate a successor manager to
     fill any vacancy created by the death, disability, retirement, resignation, or removal
     of a designated manager. Under the defendants’ reading, EnCap could fill these
     vacancies in connection with a Qualified IPO.

    Section 6.4(b) empowers certain “Management Investors” to fill any vacancy
     created by the death, disability, retirement, resignation, or removal of a




                                            38
       “Management Manager.” Under the defendants’ reading, EnCap could fill these
       vacancies in connection with a Qualified IPO.

    Section 6.5(d) requires a quorum for a valid meeting of the Board, and the same
     quorum requirement exists under Section 6.5(g) for action by written consent.
     Section 6.8(c) only addresses the voting standard, not the quorum requirement.
     Under the defendants’ reading, EnCap could ignore the quorum requirement for any
     meeting of the Board, or any action by written consent, in connection with a
     Qualified IPO.

    Section 6.5(f) entitles Lafield to serve as chairman of any meeting of the Board as
     long as he is a member and empowers the chairman to determine the order of
     business and the procedure, including the manner of voting and conduct of
     discussion. Under the defendants’ reading, EnCap could take over meetings of the
     Board in connection with a Qualified IPO.

    Section 6.6 prohibits managers from receiving compensation for serving on the
     Board. Under the defendants’ reading, EnCap could pay managers for their service
     in connection with a Qualified IPO.

       To be clear, EnCap is not claiming that Section 6.8(c)(ii) gives it these rights.

Nevertheless, a necessary implication of EnCap’s argument would be that its rights under

Section 6.8(c)(ii) would sweep so broadly that they would override these aspects of the

Caiman LLC Agreement. See Sun-Times, 954 A.2d 400–01 (describing the importance of

considering “the practical implications” of a party’s interpretive position).

       Williams’ reading harmonizes Section 6.8(c)(i) with the Qualified IPO Section and

gives meaning to both sections. Section 6.8(c)(i) gives EnCap the unilateral authority to

approve a Qualified IPO. If EnCap exercises its authority, then the Qualified IPO Section

governs what EnCap can do to structure and carry out the IPO.

       Williams’ reading also gives meaning to Section 6.8(c)(ii), which provides EnCap

with unilateral authority to “to take any action, authorize or approve, or enter into any

binding agreement with respect to or otherwise commit to [the approval of a Qualified

                                             39
IPO].” Absent this additional authority, the quorum requirements in the Caiman LLC

Agreement could interfere with the ability of a single EnCap Manager to act validly at a

meeting or by written consent to approve a Qualified IPO, as could the power of the

chairman of the Board to control the order of business and procedure at a meeting. See id.

§§ 6.5(d)–(g).

       Finally, Williams’ reading explains why Section 9.5(a) takes pains to specify that

references in the Qualified IPO Section to the “Board” refer to “the Board with the approval

required for a Major Special Voting Item.” Id. § 9.5(a). Under the defendants’ reading of

Section 6.8(c)(ii), there would have been no need to include this language because Section

6.8(c)(ii) would have already provided EnCap with sole and exclusive authority “to take

any action . . . with respect to . . . [a Qualified IPO].” Without this language, the references

to “the Board” in the Qualified IPO Section would indicate that although EnCap could

approve the Qualified IPO, only the Board as a whole had the authority to effectuate the

Qualified IPO. The plain language of Section 9.5(a) addresses this problem by providing

EnCap with the authority to effectuate a Qualified IPO. The inclusion of this language

similarly indicates that Section 6.8(c) only grants EnCap authority with respect to the

approval of a Qualified IPO, after which EnCap must look to the Qualified IPO Section to

determine the scope of its authority to carry it out.

       Read in conjunction with other sections in the Caiman LLC Agreement, Section

6.8(c) does not give EnCap expansive authority to take any conceivable action with respect

to a Qualified IPO. Section 6.8(c)(i) grants EnCap sole and exclusive authority to approve

or reject a Qualified IPO, and Section 6.8(c)(ii) ensures that EnCap has the power to take

                                              40
all actions with respect to the approval of a Qualified IPO, notwithstanding potential

procedural impediments in the Caiman LLC Agreement. Once EnCap has approved a

Qualified IPO, the Qualified IPO Section determines what steps EnCap can take to

effectuate the Qualified IPO.

C.      EnCap’s Authority Under The Qualified IPO Section

        The defendants separately argue that EnCap has the unilateral power to carry out

the multiple steps involved in the Up-C IPO under the Qualified IPO Section. Within the

Qualified IPO Section, Section 9.5(b) grants EnCap the authority “to approve the

transaction or transactions to effect the IPO Exchange and to take all such other actions as

are required or necessary to facilitate the Qualified IPO . . . .” Id. § 9.5(b). Within this

provision, the IPO Exchange Clause authorizes EnCap “to approve the transaction or

transactions to effect the IPO Exchange,” and the IPO Facilitation Clause authorizes EnCap

“to take all such other actions as are required or necessary to facilitate the Qualified IPO.”

Providing an example of the latter grant of authority, the Entity Formation Clause

authorizes the “forming any entities required or necessary in connection with the Qualified

IPO.”

        1.     EnCap’s Authority Under The IPO Exchange Clause

        The defendants contend that in carrying out the Up-C IPO, EnCap can rely on the

IPO Exchange Clause. Section 9.5(a) describes the requirements for an “IPO Exchange”

as follows:

        [1] In connection with any proposed Qualified IPO approved in accordance
        with this Agreement, the outstanding Membership Interests will be converted
        or exchanged in accordance with this Section 9.5 into equity securities of the

                                             41
       IPO Issuer (“IPO Securities”) of the same class or series as the securities of
       the IPO Issuer proposed to be offered to the public in the Qualified IPO (the
       “Publicly Offered Securities”).

       [2] Each outstanding Membership Interest will be converted into or
       exchanged for IPO Securities at such time as determined by the Board with
       the approval required for a Major Special Voting Item in a transaction or
       series of transactions that give effect to the provisions of Section 5.4 (the
       “IPO Exchange”) such that each holder of Membership Interests will either

              (i) receive IPO Securities having a Fair Market Value equal to the
       same proportion of the aggregate Pre-IPO Value, if any, that such holder
       would have received if all of [Caiman II’s] cash and other property had been
       distributed by [Caiman II] in complete liquidation pursuant to the rights and
       preferences set forth in Section 10.2(h) as in effect immediately prior to such
       distribution assuming that the value of the IPO Issuer immediately prior to
       such liquidation distribution was equal to the Pre-IPO Value or

             (ii) have such Membership Interests cancelled for no consideration, if
       the application of the foregoing clause (i) would result in a holder of
       Membership Interests receiving no IPO Securities.

Id. § 9.5(a) (formatting altered) (bracketed numbering added). The defendants contend that

sentence [2] gives EnCap further (and, in their view redundant) authority to determine the

“time” at which “[e]ach outstanding Membership Interest will be converted into or changed

for IPO Securities.”

       The primary purpose achieved by the plain language of Section 9.5(a) is not to

empower EnCap, but rather to establish the requirements for carrying out a Qualified IPO.

Sentence [1] provides that in connection with any Qualified IPO, “the outstanding

Membership Interests” must be exchanged for or converted into equity securities of the

IPO Issuer “of the same class or series as the securities of the IPO Issuer proposed to be

offered to the public in the Qualified IPO.” The Caiman LLC Agreement defines the term

“Membership Interests” to mean “the interest of a Member in [Caiman II] . . . .” Id. at 11.

                                             42
Sentence [1] thus imposes two requirements for carrying out a Qualified IPO: (i) the

membership interests in Caiman II must be converted into the securities of the IPO Issuer

(the “Caiman Interests Requirement”), and (ii) the securities that the members receive must

be “of the same class or series as the securities of the IPO Issuer proposed to be offered to

the public” (the “Same Securities Requirement”).

       Sentence [2] starts with language to make clear that EnCap is empowered to act on

behalf of the Board when taking the actions contemplated by the Qualified IPO Section,

but the bulk of that provision imposes additional requirements for the IPO Exchange.

Under sentence [2], “[e]ach outstanding Membership Interest”—a reiteration of the

Caiman Interest Requirement—must be converted into or exchanged for IPO Securities “in

a transaction or series of transactions that give effect to the provisions of Section 5.4.”

Section 5.4 establishes a contractual waterfall for payouts “to the holders of Class A Units,

Class B Units, Class C Units, Cass D Units and Class E Units” based on their respective

“Sharing Percentages.” Id. § 5.4. To calculate the amount of IPO Securities that each

member is entitled to receive, EnCap must determine “the aggregate Pre-IPO Value, if any,

that such holder would have received if all of [Caiman II’s] cash and other property had

been distributed by [Caiman II] in complete liquidation pursuant to the rights and

preferences set forth in Section 10.2(h) . . . .” See id. § 9.5(a). The Caiman LLC Agreement

defines Pre-IPO Value as

       the product of (a) the quotient obtained by dividing (i) the net proceeds to the
       IPO Issuer from a Qualified IPO (less the reasonably estimated expenses of
       such Qualified IPO to the IPO Issuer) by (ii) a fraction (expressed as a
       percentage), the numerator of which is the number of Publicly Offered
       Securities to be sold to the public in the Qualified IPO and the denominator

                                             43
       of which is the total number of securities of the same class or series as the
       Publicly Offered Securities (including the Publicly Offered Securities) that
       will be outstanding immediately after the Qualified IPO and (b) the
       difference between 100% and the percentage described in clause (a)(ii) of
       this definition.

Id. at 13. The “rights and preferences set forth in Section 10.2(h)” incorporate the members’

contractually defined “Sharing Percentages” from Section 5.4(c) and also take into account

their capital account balances. See id. §§ 10.2(d), (h).

       In substance, these calculations require that EnCap determine how much each

Caiman II member would receive under the dissolution waterfall in a hypothetical sale of

Caiman II for an amount equal to the anticipated IPO proceeds, and then use the resulting

amounts to determine the members’ relative ownership stakes in Caiman II. In the IPO

Exchange, the membership interests of each member in Caiman II must either be

(i) converted or exchanged into IPO Securities “having a Fair Market Value equal to the

same proportion of the pre-IPO Value,” or (ii) cancelled for no consideration if the member

would not receive anything in the distribution (the “Waterfall Distribution Requirement”).

       The plain language of the IPO Exchange Clause authorizes EnCap “to approve the

transaction or transactions to effect the IPO Exchange.” Id. § 9.5(b). The IPO Exchange,

however, must comply with the requirements of Section 9.5(a), including the Caiman

Interests Requirement, the Same Securities Requirement, and the Waterfall Distribution

Requirement.

       In this case, the defendants cannot rely on the IPO Exchange Clause as a source of

authority for the Up-C IPO because EnCap is not using its authority “to effect the IPO

Exchange” as defined in Section 9.5(a). In the proposed Up-C IPO, the membership

                                              44
interests of Caiman II would not be converted into the same IPO Securities that the public

would receive, which would violate both the Caiman Interests Requirement and the Same

Securities Requirement. The package of securities that the defendants have proposed to

provide to the members of Caiman II appears to satisfy the allocative component of the

Waterfall Distribution Requirement, but the defendants’ proposal does not contemplate

providing that value in the form of IPO Securities, as called for by the Waterfall

Distribution Requirement.

       The Qualified IPO Section does not recognize any situations in which the Qualified

IPO can depart from the Caiman Interests Requirement or the Waterfall Distribution

Requirement. The Qualified IPO Section only recognizes one situation in which the parties

can depart from the Same Securities Requirement. Section 9.5(d) states that in the event of

an MLP Conversion, the securities of the master limited partnership would be valued in

accordance with the Waterfall Distribution Requirement “and distributed in two sequential,

contemporaneous distributions . . . .” Id. § 9.5(d). The first distribution would consist of

“any cash, the common units and subordinated units of the master limited partnership,” and

the second would consist of “any incentive distribution rights or similar incentive

securities,” recognizing that the distributions made in the first tranche could result in

changes in the amounts that holders would receive under the second tranche. Id. Here,

EnCap is not pursuing an MLP Conversion.

       Demonstrating that the Up-C IPO will not comply with the Caiman Interests

Requirement, the Same Securities Requirement, or the Waterfall Distribution Requirement,

EnCap proposes to amend Section 9.5(a) so that it authorizes the type of transaction that

                                            45
EnCap wants to implement through the Up-C IPO. The defendants claim that EnCap can

make those amendments, and then invoke the IPO Exchange Clause to carry out the IPO

Exchange once EnCap has rewritten that clause. As discussed below, EnCap does not have

the power to amend the Caiman LLC Agreement in pursuit of a Qualified IPO. See infra,

Part II.D.2. EnCap can exercise the authority it possesses under the Caiman LLC

Agreement to approve and effectuate a Qualified IPO, but EnCap does not have the power

to change what constitutes a Qualified IPO or its component parts and thereby grant itself

different and greater rights.

       In sum, the IPO Exchange Clause is not a meaningful source of authority for EnCap

in pursuing the Up-C IPO. The IPO Exchange Clause authorizes EnCap to implement the

IPO Exchange, but the contractual parameters of the IPO Exchange impose limitations on

what EnCap can accomplish. The IPO Exchange Clause restricts what EnCap can do; it

does not expand what EnCap can do.

       2.     EnCap’s Authority Under The IPO Facilitation Clause

       To support their position that EnCap can effectuate the proposed Up-C IPO, the

defendants rely most heavily on the IPO Facilitation Clause. To reiterate, that clause states:

       Notwithstanding anything to the contrary in this Agreement, at any time after
       the approval of a Qualified IPO in accordance with this Agreement, [EnCap]
       shall be entitled . . . to take all such other actions as are required or necessary
       to facilitate the Qualified IPO . . . without the consent or approval of any
       other person (including any Member).

JX 1, § 9.5(b).

       Under the plain language of the IPO Facilitation Clause, EnCap is entitled to take

all such actions as are “required or necessary to facilitate the Qualified IPO.” “Something

                                               46
required is necessary or essential, and a requirement is something that must take place.”

CompoSecure, L.L.C. v. CardUX, LLC, 2019 WL 2371954, at *2 (Del. Ch. June 5, 2019),

aff’d, --- A.3d ---, 2019 WL 3311949 (Del. July 24, 2019). The term “necessary” is thus a

synonym for “required.” Its inclusion is an example of “the law’s hoary tradition of

deploying joint terms, such as ‘indemnify and hold harmless,’ where technically one term

would suffice.” See Quadrant Structured Prods. Co. v. Vertin, 106 A.3d 992, 1024 (Del.

2014).10 The word “facilitate” means “to make easier” or “help bring about.”11

       Here, the object of facilitation is a “Qualified IPO.” The Caiman LLC Agreement

defines that term as

       any [1] underwritten initial public offering by the IPO Issuer of equity
       securities




       10
          See, e.g., Majkowski v. Am. Imaging Mgmt. Servs., LLC, 913 A.2d 572, 588 (Del.
Ch. 2006) (declining to give separate meaning to the phrase “hold harmless”; noting that
“[t]he terms ‘indemnify’ and ‘hold harmless’ have a long history of joint use throughout
the lexicon of Anglo-American legal practice”); see also Amalgamated Bank v. Yahoo!
Inc., 132 A.3d 752, 788 (Del. Ch. 2016) (discussing functional equivalence of the terms
“necessary” and “essential”), abrogated on other grounds by Tiger v. Boast Apparel, Inc.,
--- A.3d ---, 2019 WL 3683525 (Del. Aug. 7, 2019); Sanders v. Ohmite Hldgs., LLC, 17
A.3d 1186, 1194 n.2 (Del. Ch. 2011) (same). See generally Bryan A. Garner, The Redbook:
A Manual on Legal Style § 11.2 at 192 (2d ed. 2006) (“The doublet and triplet phrasing
common in Middle English still survives in legal writing, especially contracts, wills, and
trusts. That’s probably the worst possible soil for it to grow in because those who interpret
legal writing are impelled to strain for distinctions so that no word is rendered surplusage.
Yet that is exactly [what] all but one word . . . is [in these phrases].”).
       11
             See,    e.g.,    Facilitate,      Merriam-Webster,         https://www.merriam-
webster.com/dictionary/facilitate (last visited Sept. 20, 2019) (“: to make easier : help bring
about”); see also Facilitate, BLACK’S LAW DICTIONARY (11th ed. 2019) (“To make the
occurrence of (something) easier; to render less difficult.”); Facilitate, Bryan A. Garner, A
DICTIONARY OF MODERN ENGLISH USAGE 373 (4th ed. 2016) (“to aid, help, ease”).

                                              47
       [2] pursuant to an effective registration statement under the Securities Act

       [3] for which aggregate cash proceeds to be received by the IPO Issuer from
       such offering (without deducting underwriting discounts, expenses and
       commissions) are at least $75,000,000;

       [4] provided that a Qualified IPO shall not include an offering made in
       connection with a business acquisition or combination pursuant to a
       registration statement on Form S-4 or any similar form, or an employee
       benefit plan pursuant to a registration statement on Form S-8 or any similar
       form.

JX 1 at 14 (formatting altered) (enumeration added).

       Under the plain meaning of the IPO Facilitation Clause, EnCap is entitled to take

actions that are “necessary or required to facilitate a Qualified IPO.” In other words, EnCap

is entitled to take actions that are necessary or required to facilitate an IPO having the

characteristics of a Qualified IPO as described in the Caiman LLC Agreement. Most

obviously, EnCap can hire an underwriter, retain securities counsel, and take other actions

required or necessary to facilitate an unwritten offering of equity securities pursuant to an

effective registration statement, such as conducting due diligence and making filings with

the SEC. More broadly, EnCap is empowered to take actions required or necessary to

facilitate an offering that raises cash proceeds of at least $75 million, which is the amount

targeted in the definition of a Qualified IPO. EnCap is not empowered to take actions to

facilitate an IPO that would raise less than $75 million.

       A more difficult question is whether the IPO Facilitation Provision gives EnCap the

power to disregard otherwise mandatory provisions of the Caiman LLC Agreement, such

as the Caiman Interest Requirement, the Same Securities Requirement, and the Waterfall

Distribution Requirement. This question can be answered by recognizing that when EnCap

                                             48
takes action under the IPO Facilitation Provision, EnCap is acting on behalf of the Board.

That provision therefore only gives EnCap the power to take action that the Board

otherwise would have authority to take. Put differently, EnCap cannot take actions that the

Caiman LLC Agreement does not empower the Board to take.12 For similar reasons, EnCap

cannot take actions that the Caiman LLC Agreement has empowered specific members to

take, such as designating or removing particular managers. See Part II.B, supra (listing

examples of mandatory provisions and members’ rights).

       The fact that EnCap is acting on behalf of the Board also means that the IPO

Facilitation Provision does not empower EnCap to act unilaterally to amend the terms of

the Caiman LLC Agreement. The scope of the Board’s authority over various matters and

the votes required for the Board to take valid action are set forth in Sections 6.8(a), (b), and

(c). Under Section 6.8(e), the Board’s exercise of authority under Sections 6.8(a), (b), and




       12
          This reading results from the distinction between (i) action that the entity either
cannot take or must take under its governing statute or constitutive documents, and (ii) the
discretionary authority of the appropriate decision-maker to cause the entity to take or not
to take action that falls within the entity’s powers. In traditional corporate parlance, the
former deals with the issue of whether the corporation has the capacity to take a particular
action; the latter deals with the question of the approvals necessary for the action to be
validly taken. See Carsanaro v. Bloodhound Tech., Inc., 65 A.3d 618, 648–54 (Del. Ch.
2013) (discussing historical distinction between “capacity and power” and ability of
particular constituencies, including the board, to exercise “capacity or power” on behalf of
the corporation), abrogated on other grounds by El Paso Pipeline GP Co. v. Brinckerhoff,
152 A.3d 1248, 1264 (Del. 2016); 1 David A. Drexler et al., Delaware Corporation Law
and Practice §§ 11.01, 11.05 (2018) (same); 1 R. Franklin Balotti & Jesse A. Finkelstein,
The Delaware Law of Corporations and Business Organizations §§ 2.1, 2.3 (3d ed. Supp.
2019-2) (same); see also Model Bus. Corp. Act. §§ 3.02, 3.04 (2016) (discussing parallel
distinction under MBCA).

                                              49
(c) is subject to Section 12.2, which governs amendments to the Caiman LLC Agreement.

The Board cannot amend the Caiman LLC Agreement by invoking its authority under

Section 6.8(a), (b), or (c); the Board must comply with the requirements of Section 12.2.

      By the same token, EnCap does not have the power under the IPO Facilitation

Provision to amend the Caiman LLC Agreement. The IPO Facilitation Clause gives EnCap

the power to carry out a Qualified IPO that the Board (through EnCap) has approved under

Section 6.8(c). The fact that the Board (through EnCap) cannot amend the Caiman LLC

Agreement under Section 6.8(c) when approving the Qualified IPO means that EnCap

cannot amend the Caiman LLC Agreement when effectuating the Qualified IPO.

Otherwise, EnCap would be able to approve a Qualified IPO, and then use the ensuing

authority to amend the very sections that specify what a Qualified IPO means and entails,

such as the definition of a Qualified IPO and the parameters for the IPO Exchange.

      The defendants argue that because the IPO Facilitation Clause begins with the

phrase “[n]otwithstanding anything to the contrary in this Agreement,” EnCap can ignore

mandatory provisions in the Caiman LLC Agreement and act unilaterally to amend those

provisions. Although that reading might be plausible when the IPO Facilitation Clause is

read in isolation, it does not take into account the Caiman LLC Agreement as a whole,

which contemplates EnCap effectuating a Qualified IPO that has been approved under

Section 6.8(c) and is carried out in compliance with the Qualified IPO Section. The

limitations in Section 6.8(e) and EnCap’s role in exercising the Board’s authority for

purposes of the Qualified IPO Section mean that EnCap can take action that the Board

otherwise could take, but cannot disregard mandatory requirements or amend them such

                                            50
that they are no longer meaningful. The IPO Facilitation Clause empowers EnCap to make

all discretionary decisions “[n]otwithstanding anything to the contrary in this Agreement.”

It does not empower EnCap to override or amend the Caiman LLC Agreement.

D.       The Application Of The Provisions To Six Disputed Steps In The Up-C IPO

         Having construed the plain meaning of the various provisions in the Caiman LLC

Agreement, the next task is to apply those provisions to six disputed steps in the proposed

Up-C IPO. Williams contends that EnCap lacks the authority to implement the disputed

steps.

         Before the Up-C IPO, in simplified form, the ownership structure for Caiman II and

Blue Racer can be depicted as follows:




This diagram does not reflect the fact that Caiman II holds its 50% interest in Blue Racer

through Ohio Midstream.

                                             51
      After the Up-C IPO that EnCap intends to carry out, the same business will have the

following ownership structure:




      To get from point A to point B, EnCap will take numerous actions, which can be

grouped together in varying combinations. Williams has disputes EnCap’s ability to

implement six of the steps:

    Disputed Step One: Form PubCo and HoldCo.

    Disputed Step Two: Amend the Caiman LLC Agreement.

    Disputed Step Three: Amend the Blue Racer LLC Agreement.

    Disputed Step Four: Distribute the Blue Racer units held by Caiman II to Caiman
     II’s members.

    Disputed Step Five: Form a subsidiary of HoldCo, merge it into Blue Racer, and
     convert the Blue Racer units into HoldCo units and Class B shares of PubCo.

    Disputed Step Six: Form a subsidiary of Blue Racer and merge it with Caiman II.

                                          52
       1.     Disputed Step One: Form PubCo And HoldCo.

       EnCap has already completed the first disputed step in the Up-C IPO, which

involved creating the entities that it regards as necessary to facilitate the Up-C IPO. EnCap

did not include provisions analogous to the Purpose Clauses in the governing documents

of those entities. Williams claims that EnCap could not form entities that lacked analogous

provisions, but under the IPO Facilitation Clause and the Entity Formation Clause, EnCap

had the authority to omit those provisions from the new entities’ governing documents.

       On April 24, 2019, EnCap formed PubCo, the Delaware corporation that EnCap

intends to use as the IPO Issuer. EnCap also formed HoldCo, the Delaware limited liability

company that will serve as a pivotal intermediate entity in the post-Up-C IPO structure. If

the Up-C IPO is completed, then PubCo’s only material asset will be membership interests

in HoldCo, and HoldCo will own 100% of Blue Racer. JX 184 at ‘729.

       To effectuate the Up-C IPO, PubCo will issue two classes of shares. Class A shares

will have one vote per share and carry economic rights, including the right to dividends.

Class B shares will also have one vote, but will not have any economic rights. Public

investors will purchase Class A shares in the Up-C IPO. Legacy members of Caiman II

will receive Class B shares and member interests in HoldCo as a result of a merger between

an acquisition subsidiary of HoldCo and Blue Racer. Each Class B share will be paired on

a one-for-one basis with a member interest in HoldCo, with the latter carrying the economic

rights that the former lacks. See id. at ‘71617.

       As noted, the governing documents of PubCo and HoldCo do not contain provisions

analogous to the Purpose Clauses. The defendants seek a declaration that EnCap has the

                                             53
authority under the Entity Formation Clause to form entities to effectuate the Qualified IPO

whose governing documents do not contain provisions analogous to the Purpose Clauses.

At times, Williams does not seem to contend otherwise, arguing only that other steps in the

Up-C IPO require Williams’ consent, and that “Williams will not consent to these steps”

unless PubCo’s certificate of incorporation contains a clause analogous to the Purpose

Clauses. Dkt. 159 at 5. At other times, Williams appears to contend that PubCo’s certificate

of incorporation must contain such a clause.

       The IPO Facilitation Clause gives EnCap the power to form entities that are required

or necessary to facilitate the Qualified IPO. The Entity Formation Clause expressly grants

that power by providing that the authority conferred by the IPO Facilitation Clause

“includ[es] forming any entities required or necessary in connection with the Qualified

IPO.” JX 1, § 9.5(b). Nothing in the IPO Facilitation Clause or the Entity Formation Clause

establishes any requirements for the contents of the governing documents of the entities

that EnCap forms.

       Although the Caiman LLC Agreement contemplates that either Caiman II or Blue

Racer could serve as the IPO Issuer, in which case the IPO Issuer’s governing documents

would contain a Purpose Clause, the IPO Issuer can be another entity that is an “Affiliate”

of Caiman II. The Caiman LLC Agreement defines an “Affiliate” as “any person directly

or indirectly Controlling, Controlled By, or Under Common Control with such person.” Id.

at 3. The Caiman LLC Agreement defines “Controlling, Controlled By, or Under Common

Control” as “the possession, directly or indirectly, of the power to direct or cause the

direction of management or policies (whether through ownership of securities or any

                                            54
partnership or other ownership interest, by contract or otherwise) of a person.” Id. at 6. The

Caiman LLC Agreement thus recognizes that the IPO Issuer could be any entity that

controls, is controlled by, or is under common control with Caiman II. When the definition

of “Affiliate” is read together with the Entity Formation Clause, the IPO Issuer could be a

newly formed entity that controls, is controlled by, or is under common control with

Caiman II. There is nothing in the Caiman LLC Agreement that requires the governing

documents of the Affiliate to have a provision analogous to the Purpose Clauses.

       Williams argues that because the IPO Issuer must be either Caiman II or an Affiliate

of Caiman II, the governing documents of the IPO Issuer must contain a Purpose Clause.

In support of this argument, Williams cites Section 12.8 of the Caiman LLC Agreement,

which states that “[w]here any provision of this Agreement refers to action to be taken by

any person, or which such person is prohibited from taking, such provision shall be

applicable whether such action is taken directly or indirectly by such person, including

actions taken by or on behalf of any Affiliate of such person.” This provision does not say

that the governing document of an Affiliate must contain a Purpose Clause. It rather implies

the opposite by saying that if Caiman II is required to act or prohibited from acting under

the Caiman LLC Agreement, then Caiman II cannot achieve the same result by acting

through an Affiliate. This suggests that the Affiliate is not under the same restriction

because if it were, it already would be unable to take the specified action, and Section 12.8

would not add anything.

       EnCap thus had the authority under the IPO Facilitation Clause and the Entity

Formation Clause to form PubCo to serve as the IPO Issuer without including a Purpose

                                             55
Clause in its certificate of incorporation. That does not mean that the formation of PubCo

is without difficulties. The IPO Facilitation Clause and the Entity Formation Clause

authorize EnCap to take actions required or necessary to facilitate a Qualified IPO, and as

discussed in later sections, the Up-C IPO does not meet the requirements for a Qualified

IPO because it does not comply with the Caiman Interests Requirement or the Same

Securities Requirement. Because of these problems, the defendants failed to prove that

forming PubCo was required or necessary to facilitate a Qualified IPO. But the defendants

did prove that EnCap had the authority not to include a Purpose Clause in PubCo’s

certificate of incorporation.

       The same is true for HoldCo. That entity’s role in the Up-C structure depends on

the viability of PubCo issuing two different classes of stock and the legacy members of

Caiman II initially owning different securities than the public holders will receive. Because

these features do not conform to the requirements for a Qualified IPO, the defendants failed

to prove that forming HoldCo was required or necessary to facilitate a Qualified IPO. But

the defendants did prove EnCap had the authority not to include a Purpose Clause in

HoldCo’s limited liability company agreement.

       2.     Disputed Step Two: Amend The Caiman LLC Agreement.

       Williams next disputes EnCap ability to amend and restate the Caiman LLC

Agreement. Williams is correct that EnCap lacks the authority to effectuate these

amendments unilaterally.

       EnCap proposes to make extensive changes to the Caiman LLC Agreement to

enable the Up-C IPO to take place. The changes include, but are not limited to:

                                             56
 Altering the definition of “Available Cash” to include cash generated “with respect
  to any operations of [Caiman II] other than those conducted by Blue Racer . . . .” JX
  232 at ‘896.

 Altering the definition of “Qualified IPO” so that proceeds generated in secondary
  public offerings can be credited against the $75 million threshold. Id. at ‘908.

 Adding new defined terms including “Blue Racer Members,” “BRM Additional
  Capital Contribution,” “Class A Common Stock,” “Class B Common Stock,”
  “Company Level Taxes,” “Company Representative,” “Covered Audit
  Adjustment,” “Holdco,” “Holdco Units,” “Incentive Award,” “IPO Value,” “LTIP,”
  “Partnership Tax Audit Rules,” “Secondary Public Offering,” “Up-C,” “Allocated
  Securities,” “Approved BRM Expenditure,” “Excess Tax Amount,” “Existing
  Agreement,” “Final Launch Notice,” “Final Participation Notice,” “Participation
  Notice,” “Preliminary Launch Notice,” “Preliminary Participation Notice,”
  “Retained Available Cash,” “Tax Contribution Obligation,” and “Tax Offset.” See
  id. at ‘895 to ‘912.

 Deleting the term “Pre-IPO Value.” Id. at ‘907.

 Altering the provisions of Section 5.1, which govern Capital Account Allocations.
  See id. at ‘918 to ‘921.

 Altering the provisions of Section 5.4, which specifies the waterfall for distributions
  to unitholders, to treat Incentive Awards under the newly defined LTIP as advances
  of distributions to holders of Class D Units. See id. at ‘922 to ‘923.

 Altering the provisions of Section 5.4(c) and introducing a new Section 5.4(d) to
  alter the requirement to distribute Available Cash and provide for the automatic
  retention of cash under particular circumstances. See id. at ‘923 to ‘924.

 Altering the provisions governing payment of distributions (Section 5.5) and tax
  distributions (Section 5.6). See id. at ‘924 to ‘927.

 Adding two new items requiring Majority Board Approval: the determination of the
  amount of Available Cash to be distributed (Section 6.8(a)(xvii)) and the
  determination of the amount of Available Cash to be reinvested (Section
  6.8(a)(xxi)). See id. at ‘934 to ‘935.

 Altering a Special Voting Item addressing a limitation on funding for Blue Racer
  (Section 6.8(b)(ii)). See id. at ‘935 to ‘936.

 Amending the Qualified IPO Section to eliminate the Same Securities Requirement
  in Section 9.5(a) and add language to authorize the Up-C IPO. Id. at ‘952 to ‘953.

                                         57
    Amending the Qualified IPO Section to provide that if EnCap determines to engage
     in an Up-C IPO and pursue an exchange in the manner EnCap contemplates, then
     “each holder of Units agrees to participate in such an exchange.” Id. at ‘953.

    Amending the Qualified IPO Section to add an entirely new subsection with five
     lengthy subparts addressing the ability of members to participate in a secondary
     public offering. Id. at ‘954 to ‘955.

       The only contractual basis for EnCap to effectuate these amendments unilaterally is

through the IPO Facilitation Clause. For the reasons discussed previously, EnCap’s power

under that provision, like its approval power under Section 6.8(c), is subject to Section

12.2, which governs amendments to the Caiman LLC Agreement. Assuming for the sake

of argument that the defendants could satisfy the general requirements to amend the

Caiman LLC Agreement, they still must confront Section 12.2(a)(v), which provides that

the terms of the Caiman LLC Agreement “may not be amended in a way that adversely

affects the rights or obligations of [Williams] without the approval of [Williams].” JX 1, §

12.2(a)(v).

       The extensive changes that EnCap intends to make to the Caiman LLC Agreement

are adverse to Williams. Without those changes, EnCap cannot implement the Up-C IPO

because the structure of the Up-C IPO would contravene mandatory provisions in the

Caiman LLC Agreement, such as the Caiman Interest Requirement, the Same Securities

Requirement, and the Waterfall Distribution Requirement. As a result, without the

amendments, EnCap cannot force Williams out of the current Caiman II structure and into

the post-Up-C IPO structure. At present, Williams is a majority investor in a privately held

entity that operates within a governance arrangement that provides Williams with

significant rights and protections. Through the Up-C IPO, EnCap wishes to transform

                                            58
Williams into a holder of two different securities: (i) units in a newly formed, privately

held entity, plus (ii) Class B common stock in a publicly traded entity. In those new entities,

Williams would be a minority investor without significant governance rights. The

amendments would also alter the distribution waterfall under Section 5.4 of the Caiman

LLC Agreement, which would change Williams’ financial rights. By amending the Caiman

LLC Agreement, EnCap would make the Up-C IPO possible. By doing so, EnCap would

radically alter Williams’ position, thereby affecting Williams adversely.

       To argue that the amendments are not adverse, the defendants compare Williams’

position under the Up-C IPO with Williams’ position under a non-Up-C IPO. They claim,

but have not established, that there would be no difference between the two for Williams

except that the Up-C IPO would carry tax advantages. Even assuming that the defendants

had proven that this was the only difference, it is still the wrong comparison. Section

12.2(a)(v) calls for comparing the situation Williams currently enjoys with its situation

under the proposed amendments. See id. § 12.2(a)(v) (requiring Williams’ approval for

“amendments to this Agreement” that adversely affect Williams’ rights and obligations)

(emphasis added)). Section 12.2(a)(v) does not call for comparing Williams’ situation

under one set of amendments with Williams’ situation under another set of amendments.

Compared to the situation that Williams currently enjoys under the Caiman LLC

Agreement, the amendments are adverse.

       The defendants also argue that if the amendments are viewed in isolation, nothing

about them is adverse to Williams. According to the defendants, any adversity results from

the follow-on Up-C IPO rather than from the amendments themselves. The defendants’

                                              59
overly simplified approach ignores the fact that the amendments are designed to authorize

and clear the path for the Up-C IPO, a transaction that adversely affects Williams. Without

the amendments, EnCap lacks the ability to implement the Up-C IPO. With the

amendments, EnCap has the ability to implement the Up-C IPO. The amendments load the

gun, which adversely affects the target of the gun. They adversely affect Williams by

eliminating the provisions that foreclose the Up-C IPO and exposing Williams to the threat

of the Up-C IPO.

       Regardless, the amendments are sufficiently intertwined with the other steps in the

Up-C IPO that they must be analyzed together for purposes of assessing adversity. “The

[step transaction] doctrine treats the ‘steps’ in a series of formally separate but related

transactions involving the transfer of property as a single transaction, if all the steps are

substantially linked. Rather than viewing each step as an isolated incident, the steps are

viewed together as components of an overall plan.” Noddings Inv. Gp., Inc. v. Capstar

Commc’ns, Inc., 1999 WL 182568, at *6 (Del. Ch. Mar. 24, 1999) (alteration in original)

(quoting Greene v. United States, 13 F.3d 577, 583 (2d Cir. 1994)). “The purpose of the

step transaction doctrine is to ensure the fulfillment of parties’ expectations

notwithstanding the technical formalities with which a transaction is accomplished.”

Coughlan v. NXP B.V., 2011 WL 5299491, at *7 (Del. Ch. Nov. 4, 2011).

       The step-transaction doctrine applies if the component transactions meet one of

three tests. See id. First, under the “end result test,” the doctrine will be invoked “if it

appears that a series of separate transactions were prearranged parts of what was a single

transaction, cast from the outset to achieve the ultimate result.” Noddings, 1999 WL

                                             60
182568, at *6 (internal quotation marks omitted). Second, under the “interdependence

test,” transactions will be treated as one if “the steps are so interdependent that the legal

relations created by one transaction would have been fruitless without a completion of the

series.” Id. (internal quotation marks omitted). The third and “most restrictive alternative

is the binding-commitment test under which a series of transactions are combined only if,

at the time the first step is entered into, there was a binding commitment to undertake the

later steps.” Id. (internal quotation omitted).

       The end result test and the interdependence test are both met here. EnCap designed

the amendments to clear the path for the intricate steps necessary to effectuate the Up-C

IPO, intending to achieve the end result contemplated of the post-Up-C IPO structure. But

for the Up-C IPO, EnCap would have had no reason to propose the amendments and no

basis on which to claim the power to implement them. Although EnCap has not bound

itself contractually to carry out the Up-C IPO, a series of transactions need only meet one

of the three tests to be treated as a single transaction. The satisfaction of the first two tests

provides a sufficient basis to treat the amendments to the Caiman LLC Agreement as an

integral part of the Up-C IPO for purposes of determining whether they are adverse to

Williams. They are, and so they cannot be implemented without Williams’ consent.

       The nature of the amendments that EnCap seeks to implement further underscores

how incongruous it would be to permit EnCap to rely on the IPO Facilitation Provision to

implement them. The IPO Facilitation Provision authorizes EnCap to take action required

or necessary to facilitate a Qualified IPO. Yet as part of that authority, EnCap claims the



                                               61
ability to amend the definition of a Qualified IPO such that EnCap can use that authority

to implement a different type of transaction.

       In this case, EnCap might claim that it is making a relatively minor change to the

definition of Qualified IPO by aggregating the primary and secondary offerings to

determine whether the threshold of $75 million is met. The effect of that change, however,

is not minor, as it would enable EnCap to invoke its authority to implement a Qualified

IPO, but to then redefine “Qualified IPO” to refer to a different type of transaction. Nor is

the change in this case actually minor. Under the original definition of “Qualified IPO,”

the IPO Issuer is entitled to receive proceeds of at least $75 million. The amendment would

enable EnCap to sell its own shares as part of the Qualified IPO, in effect allowing EnCap

to divert the proceeds of that sale to itself and yet credit those same proceeds against the

$75 million requirement. The IPO Facilitation Clause authorizes EnCap to facilitate a

Qualified IPO. It does not authorize EnCap to redefine Qualified IPO to refer to a different

transaction and then implement that different transaction.

       Absent Williams’ consent, EnCap lacks the authority to amend the Caiman LLC

Agreement in the manner contemplated for purposes of the Up-C IPO. EnCap therefore

cannot carry out what this decision has described as step two of that transaction.

       3.     Disputed Step Three: Amend The Blue Racer LLC Agreement.

       In the third disputed step of the Up-C IPO, EnCap intends to amend and restate the

Blue Racer LLC Agreement. In connection with a Qualified IPO, EnCap can act

unilaterally on behalf of Caiman II to amend the Blue Racer LLC Agreement. But because



                                             62
the defendants have not shown that the Up-C IPO is a Qualified IPO, they have not

established that EnCap could properly exercise this power.

       Under the IPO Facilitation Provision, EnCap has the power to take actions that the

Board could take to the extent that those actions are required or necessary to facilitate a

Qualified IPO. Section 6.8(b)(xii) gives the Board the power to amend the Blue Racer LLC

Agreement with the vote required for a Special Voting Item. In connection with a Qualified

IPO, EnCap can take action that the Board otherwise could take.

       Although EnCap has the authority to amend the Blue Racer LLC Agreement in

connection with a Qualified IPO, EnCap has failed to show that the Up-C IPO is a Qualified

IPO. Instead, Williams has shown that the Up-C IPO depends on amendments to the

Caiman LLC Agreement that EnCap lacks the power to make. Accordingly, in the context

of the Up-C IPO, EnCap lacks authority to amend the Blue Racer LLC Agreement.

       4.     Disputed Step Four: Distribute The Blue Racer Units To Caiman II’s
              Members.

       In the fourth disputed step of the Up-C IPO, EnCap intends to cause Caiman II to

distribute all of its Blue Racer units to Caiman II’s members. Under the IPO Facilitation

Clause, EnCap possesses the power to take this step if it is required or necessary to facilitate

a Qualified IPO. But because the defendants have not shown that the Up-C IPO is a

Qualified IPO, they have not established that EnCap could properly exercise this power.

       If EnCap could properly amend the Blue Racer LLC Agreement to create a single

class of units, then EnCap could effectuate a distribution of Caiman II’s Blue Racer units

in connection with a Qualified IPO. Section 6.8(a)(xvii) of the Caiman LLC Agreement


                                              63
gives the Board the authority “to make a distribution by [Caiman II] to [its] Members” with

a majority vote of the Board. To the extent that the distribution was necessary or required

to facilitate a Qualified IPO, EnCap would have the power under the IPO Facilitation

Clause to exercise that authority.

       Williams argues that because the distribution would involve Caiman II’s entire

ownership interest in its only operating asset, it amounts to an Exit Event over which

Williams would have a veto. To reiterate, an Exit Event is defined as

       the sale of [Caiman II], in one transaction or a series of related transactions,
       whether structured as

       (i) a sale or other transfer of all or substantially all of the Equity Securities
       (including by way of merger, consolidation, share exchange, or similar
       transaction),

       (ii) the sale or other transfer of all or substantially all of the assets of [Caiman
       II] promptly followed by a dissolution and liquidation of [Caiman II],

       (iii) any other dissolution or liquidation of [Caiman II], or

       (iv) a combination of any of the foregoing.

JX 1 at 8 (formatting altered). Williams reasons that by distributing the Blue Racer units,

Caiman II would be transferring substantially all of its assets to its members, resulting in

Caiman II’s members, rather than Caiman II itself, directly owning Blue Racer.

       Under Section 6.8(b)(xi), the Board can approve an Exit Event with the vote

required for a Special Voting Item. Characterizing the distribution as an Exit Event thus

changes the vote required for the Board to approve it outside of the context of a Qualified

IPO. Within the context of a Qualified IPO, EnCap would have the power to exercise the




                                               64
Board’s authority as long as the distribution was necessary or required to facilitate a

Qualified IPO.

       EnCap alternatively relies on the IPO Exchange Clause to provide it with the

authority to distribute Caiman II’s entire ownership interest in Blue Racer. The IPO

Exchange Clause contemplates that the members’ interests in Caiman II will be exchanged

for or converted into equity of the IPO Issuer. Under the Same Security Requirement, the

members must receive the same type of equity that the IPO Issuer’s public investors

receive. Although EnCap can achieve this outcome through one more or transactions, the

distribution of Caiman II’s entire ownership interest in Blue Racer is not a step toward that

end. After the distribution, the members of Caiman II would continue to hold their

membership interests in Caiman II, and they also would hold membership interests in Blue

Racer. Each type of interests would be converted subsequently into a different security,

neither of which would be the same security that the IPO Issuer’s public investors would

receive. EnCap is thus not relying on the requirements of the IPO Exchange Clause as

written; EnCap is relying on the amended requirements that it has sought to effectuate.

Because this decision has held that EnCap cannot effectuate those amendments, those

amendments cannot provide EnCap with the authority to cause Caiman II to distribute its

entire ownership interest in Blue Racer.

       Consequently, although EnCap has the authority to make the distribution in

connection with a Qualified IPO, EnCap has failed to show that the Up-C IPO is a Qualified

IPO that would give it the power to take this step. In the context of the Up-C IPO, EnCap



                                             65
lacks the authority to cause Caiman II to distribute its entire ownership interest in Blue

Racer to its members.

         5.     Disputed Step Five: Form An Acquisition Subsidiary Of HoldCo And
                Merge It With Blue Racer.

         In the fifth disputed step of the Up-C IPO, EnCap intends to form an acquisition

subsidiary of HoldCo and merge it with and into Blue Racer. As a result of the merger, the

membership interests in Blue Racer will be converted into a combination of HoldCo units

and Class B shares of PubCo. EnCap lacks the authority to effectuate this step of the Up-

C IPO.

         Under the Blue Racer LLC Agreement, the act of “commencing, initiating or

participating in any amalgamation, merger, or consolidation of [Blue Racer], or any

reconstruction, conversion, liquidation, dissolution, bankruptcy or similar proceedings,”

requires the “prior approval of Members who in the aggregate hold one hundred percent

(100%)” of its member interests. JX 34, § 7.11(b)(iv). At this point in the Up-C IPO, the

member interests in Blue Racer would have been distributed to the current members of

Caiman II, all of whom would have to vote in favor of the merger for it to be approved.

Under the terms of the Blue Racer LLC Agreement, EnCap cannot accomplish this step

unilaterally.

         EnCap contends that the IPO Facilitation Clause gives it the power to take this step

because the Up-C IPO must be viewed as a unitary transaction. As discussed previously,

the Up-C IPO is correctly viewed as a unitary transaction for certain purposes, such as




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when determining whether it has an adverse effect on Williams. That fact does not relieve

EnCap of its obligation to establish that it can validly carry out each step of the Up-C IPO.

       The IPO Facilitation Clause gives EnCap the authority to exercise power on behalf

of Caiman II that the Board otherwise could exercise. As long as Caiman II owned units in

Blue Racer and had corresponding rights under the Blue Racer LLC Agreement, EnCap

(rather than the Board) could cause Caiman II to exercise those rights to the extent required

or necessary to facilitate a Qualified IPO. The IPO Facilitation Clause does not give EnCap

the authority to exercise rights or powers that the Board could not exercise.

       Under the structure of the Up-C IPO that EnCap has proposed, at the point when it

would become necessary to approve the merger of the HoldCo merger subsidiary with and

into Blue Racer, Caiman II would no longer own Blue Racer units and would be unable to

vote those units in favor of the merger. At that point, Blue Racer would be a separate entity

under common ownership with Caiman II, rather than an entity partially owned by Caiman

II. Under the structure of the Up-C IPO that EnCap has proposed, EnCap would lack the

ability to approve the merger without the unanimous consent of the other members of Blue

Racer, including Williams.

       6.     Disputed Step Six: Form An Acquisition Subsidiary Of Blue Racer
              And Merge It With Caiman II

       In the last disputed step of the Up-C IPO, EnCap intends to form an acquisition

subsidiary of Blue Racer and merge it with and into Caiman II. The Up-C IPO cannot reach

this stage because of earlier problems. Assuming it did, then under the IPO Facilitation

Clause, EnCap would possess the power cause Caiman II to merge if it was required or


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necessary to facilitate a Qualified IPO. In connection with the Up-C IPO, however, EnCap

has not made the showing necessary to exercise this authority.

       Under the IPO Facilitation Provision, EnCap has the power to take actions that the

Board could take to the extent that those actions are required or necessary to facilitate a

Qualified IPO. Section 6.8(b)(iii) gave the Board the power “to merge, combine, or

consolidate [Caiman II] with any other entity” with the vote required for a Special Voting

Item. JX 1, § 6.8(b)(iii). If required or necessary to facilitate a Qualified IPO, then EnCap

can take the action that the Board otherwise could take, including merging Caiman II with

another entity.

       Although EnCap would have the authority to cause Caiman II to merge if required

or necessary to facilitate a Qualified IPO, EnCap has failed to show that the Up-C IPO is a

Qualified IPO that would give it the power to take this step. Instead, Williams has shown

that the Up-C IPO depends on steps that EnCap lacks the power to take. Accordingly, in

the context of the Up-C IPO, EnCap does not have authority to cause Caiman II to merge

with the Blue Racer acquisition subsidiary.

E.     The Post-IPO Application Of Section 12.8

       Williams argues that because Caiman II will survive the Qualified IPO, albeit as the

lowest-tier subsidiary in the entity stack, the Caiman Purpose Clause will continue to bind

PubCo, HoldCo, and Blue Racer under Section 12.8 of the Caiman LLC Agreement

because they will be Affiliates of Caiman II.

       To reiterate, Section 12.8 states: “Where any provision of this Agreement refers to

action to be taken by any person, or which such person is prohibited from taking, such

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provision shall be applicable whether such action is taken directly or indirectly by such

person, including actions taken by or on behalf of any Affiliate of such person.” Id. § 12.8.

This provision seems most clearly applicable to a parent entity that acts through a

subsidiary, or a sibling entity that acts on behalf of another sibling entity when both entities

are wholly owned by the same parent. It seems unlikely that a lower-tier, wholly owned

subsidiary would be acting indirectly through a higher-tier entity, as opposed to the other

way around, but it would be premature to rule out a possible factual scenario in which that

might occur. Whether Caiman II could be found to be acting “indirectly” through PubCo,

HoldCo, Blue Racer, or any other Affiliate would be a fact-dependent question that cannot

be answered on the current record.

       The defendants have argued that because Williams will no longer own any

membership interest in Caiman II after the Up-C IPO, it will not have standing to assert a

claim under Section 12.8. It is premature to address questions of Williams’ standing, which

could involve a multi-level derivative action or the novel question of a Williams Manager

seeking to sue derivatively.

F.     The IPO Cooperation Clause

       The defendants contend that even if there are steps in the Up-C IPO that require

Williams’ consent, Williams is required to consent under the second sentence of Section

9.5(b). That provision states that if EnCap approves a Qualified IPO, then each of Caiman

II’s members shall:

        (i) take such actions as may be reasonably requested by [EnCap] in
       connection with consummating the IPO Exchange, including


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              (x) such actions as are required to transfer all of the issued and
       outstanding Membership Interests or the assets of [Caiman II] to an IPO
       Issuer or its general partner (including a Blocker Corporation) and

             (y) such actions as are required in order to merge or consolidate
       [Caiman II] into or with an IPO Issuer or its general partner and

       (ii) use commercially reasonable efforts to

              (x) cooperate with the other Members so that the IPO Exchange is
       undertaken in a tax-efficient manner and

               (y) if any Institutional Investor or its limited partners or investors has
       a structure involving ownership of all or a portion of its interests in [Caiman
       II], directly or indirectly, through one or more Blocker Corporations, at the
       request of such Institutional Investor, merge its Blocker Corporation into the
       IPO Issuer in a tax-free reorganization, utilize such Blocker Corporation as
       the IPO Issuer or otherwise structure the transaction so that the Blocker
       Corporation is not subject to a level of corporate tax on the Qualified IPO or
       subsequent dividend payments or sales of stock.

Id. § 9.5(b). This decision refers to this sentence as the “IPO Cooperation Clause.”

       Part (i) of the IPO Cooperation Clause obligates Williams to take such actions as

may be reasonably requested by EnCap in connection with consummating the IPO

Exchange. As discussed previously, EnCap is not carrying out the IPO Exchange. EnCap

instead proposes to amend the Caiman LLC Agreement to authorize a different type of

transaction. In the Up-C IPO that EnCap is seeking to implement, the membership interests

in or assets of Caiman II are not being transferred to the IPO Issuer, and Caiman II is not

merging or consolidating with the IPO Issuer. Part (i) of the IPO Cooperation Clause thus

does not aid the defendants.

       Part (ii)(x) of the IPO Cooperation Clause requires that Williams use commercially

reasonable efforts to assist EnCap in undertaking the IPO Exchange in a tax-efficient



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manner. Here again, EnCap is not undertaking the IPO Exchange. EnCap is trying to

implement a different structure.

       More generally, an obligation to take reasonable actions or use commercially

reasonable efforts obligates a party “to take all reasonable steps to solve problems and

consummate the transaction” on the terms set forth in the governing agreement. Akorn, Inc.

v. Fresenius Kabi AG, 2018 WL 4719347, at *91 (Del. Ch. Oct. 1, 2018) (quoting Williams

Cos. v. Energy Transfer Equity, L.P., 159 A.3d 264, 272 (Del. 2017)), aff’d, 198 A.3d 724

(Del. 2018) (TABLE). It does not require a party “to sacrifice its own contractual rights for

the benefit of its counterparty.” Id. To the extent that Williams has rights under the Caiman

LLC Agreement, such as a right to refuse to consent to amendments that are adverse to its

interests, then Williams can stand on that right. EnCap cannot rely on the IPO Cooperation

Clause to force Williams to waive or compromise its right.

G.     The Stockholders Agreement

       Blue Racer and First Reserve seek a declaration that they are not obligated to enter

into a stockholders agreement with Williams that would replicate certain governance

features of Caiman II in the context of PubCo. Nothing in the Caiman LLC Agreement

requires a stockholders agreement. The parties may negotiate one if they choose, but there

is no obligation to enter into one.

                                 III.    CONCLUSION

       This decision has construed the plain language of the Caiman LLC Agreement and

applied it to critical steps in the Up-C IPO. Because of the determinations made in this

decision, EnCap cannot proceed with the Up-C IPO as currently structured. The parties

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shall prepare a form of final order that implements the rulings made in this decision. If

there are additional matters that must be addressed before a final order can be entered, the

parties shall submit a joint letter within ten days that identifies the issues and proposes a

path for bringing this matter to conclusion at the trial level.




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