   IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

THE WILLIAMS COMPANIES, INC.,            )
                                         )
              Plaintiff and              )
              Counterclaim Defendant,    )
                                         )
      v.                                 ) C.A. No. 12168-VCG
                                         )
ENERGY TRANSFER EQUITY, L.P.             )
and LE GP, LLC,                          )
                                         )
              Defendants and             )
              Counterclaim Plaintiffs.   )
                                         )
                                         )
THE WILLIAMS COMPANIES, INC.,            )
                                         )
              Plaintiff and              )
              Counterclaim Defendant,    )
                                         )
      v.                                 ) C.A. No. 12337-VCG
                                         )
ENERGY TRANSFER EQUITY, L.P.,            )
ENERGY TRANSFER CORP LP, ETE             )
CORP GP, LLC, LE GP, LLC, and            )
ENERGY TRANSFER EQUITY GP,               )
LLC,                                     )
                                         )
              Defendants and             )
              Counterclaim Plaintiffs.   )

                       MEMORANDUM OPINION

                     Date Submitted: August 29, 2017
                     Date Decided: December 1, 2017

Kenneth J. Nachbar and Zi-Xiang Shen, of MORRIS, NICHOLS, ARSHT &
TUNNELL LLP, Wilmington, DE; OF COUNSEL: Sandra C. Goldstein, Antony L.
Ryan, and Kevin J. Orsini, of CRAVATH, SWAINE & MOORE LLP, New York,
NY, Attorneys for the Plaintiff and Counterclaim Defendant.

Rolin P. Bissell, Tammy L. Mercer, and James M. Yoch, Jr., of YOUNG
CONAWAY STARGATT & TAYLOR LLP, Wilmington, DE; OF COUNSEL:
Michael C. Holmes, John C. Wander, Michael L. Charlson, and Craig E. Zieminski,
of VINSON & ELKINS LLP, Dallas, TX, Attorneys for the Defendants and
Counterclaim Plaintiffs.




GLASSCOCK, Vice Chancellor
         What, Langston Hughes asked, becomes of a dream deferred?1 When the

dream is a multi-billion-dollar merger that changing market conditions no longer

favor, it seems, it becomes a carcass that, like those of millions of turkeys featured

in the holiday feasts just past, is diligently picked over. The carcass here is the

remnant of the dreamed-of merger of The Williams Companies, Inc. (“Williams”)

and Energy Transfer Equity, L.P. (“ETE” or the “Partnership”). The matter came

before me just before its demise, as Williams unsuccessfully fought for injunctive

relief to force consummation, a result vigorously opposed by ETE. Thereafter, the

parties pursued actions against one another for contractual damages under the

merger agreement.         Before me now is Williams’ Motion to Dismiss ETE’s

counterclaims.       ETE, having successfully resisted Williams’ attempt to force

consummation of the merger, is in the unlikely position of arguing that it is also

entitled to a billion-dollar breakup fee under the merger agreement. ETE, however,

was able to walk away from the merger based on the failure of a condition precedent:

the inability of its counsel to opine that the merger “should” trigger favorable tax

treatment. Since none of the allegations of breach supporting ETE’s entitlement to

the breakup fee caused, or even relate to, ETE’s exercise of its right to avoid the

merger, and, fundamentally, because the contract language it relies on is not



1
    Harlem, Langston Hughes, Collected Poems (1994).



                                              1
supportive, I find ETE’s counterclaim seeking the breakup fee not viable. My

analysis of ETE’s remaining counterclaims is mixed. My reasoning follows.

                                  I. BACKGROUND

       This Memorandum Opinion assumes familiarity with the facts outlined in the

previous Opinions of both this Court and the Supreme Court. “The reader is

forewarned that this case involves a maze of corporate entities and an alphabet soup

of corporate names.”2 This Opinion includes only those facts necessary to my

analysis.

       A. The Merger Agreement and Failure of a Condition

       The parties are significant players in the energy pipeline business.3

Counterclaim Plaintiffs ETE and its affiliate Energy Transfer Corp LP (“ETC”) are

Delaware limited liability partnerships.4 Counterclaim Defendant Williams is a

Delaware corporation.5

       Williams and ETE negotiated a merger as set out in an Agreement and Plan




2
  Chester Cty. Emps.' Ret. Fund v. New Residential Inv. Corp., 2017 WL 4461131, at *1 (Del.
Ch. Oct. 6, 2017) (quoting Veloric v. J.G. Wentworth, Inc., 2014 WL 4639217, at *2 (Del. Ch.
Sept. 18, 2014)).
3
  Williams Cos., Inc. v. Energy Transfer Equity, L.P. (Williams’ Second Action), 2016 WL
3576682, at *1 (Del. Ch. June 24, 2016).
4
  In addition, Counterclaim Plaintiffs LE GP, LLC (“LE GP”), ETE Corp GP, LLC (“ETE Corp”),
and Energy Transfer Equity GP, LLC (“ETE GP”) are Delaware limited liability companies.
Defs.’ and Countercl. Pls.’ Second Am. & Supplemental Affirm. Defenses & Verified Countercl.
(the “Countercl.” or the “Counterclaim Complaint”) ¶¶ 41–45.
5
  Id. ¶ 46.



                                             2
of Merger dated September 28, 2015 (the “Merger Agreement” or “Agreement”).6

Under the Merger Agreement, Williams would merge into ETC (the “Merger”) in

exchange for ETC stock, $6.05 billion in cash, and certain other rights.7 Post-Merger

ownership of ETC would be split, with 19% held by the Partnership and 81% by

former Williams stockholders.8

       After ETE and Williams signed the Merger Agreement, the energy

industry―and particularly the outlook for ETE and Williams―declined

substantially.9 In reaction to this decline—although its precise motives are in

dispute—ETE issued new units to certain large ETE equity holders after signing the

Merger Agreement (the “Special Issuance”).10 Ultimately, ETE’s tax counsel,

Latham & Watkins LLP (“Latham”), decided that it could not issue a tax-related

opinion with the required confidence level to satisfy a condition precedent for the

Merger to close.11 Relying on the failure of this condition precedent, ETE exercised

its right to terminate the Agreement on June 29, 2016.12




6
  Id. ¶ 48 (including a Letter Agreement dated May 24, 2016 and noting that the Merger Agreement
was amended on May 1, 2016); Williams’ Second Action, 2016 WL 3576682 at *1.
7
  Countercl. ¶ 48; Williams’ Second Action, 2016 WL 3576682 at *3.
8
  Williams’ Second Action, 2016 WL 3576682 at *3, 6.
9
  Countercl. ¶ 3.
10
   Id. ¶¶ 143–46, 149–50, 158–59; Williams’ Second Action, 2016 WL 3576682 at *4.
11
   Countercl. ¶¶ 171–77; Merger Agreement § 6.01(h).
12
   Countercl. ¶ 7; Williams Cos., Inc. v. Energy Transfer Equity, L.P., 159 A.3d 264, 275 (Del.
2017) (denying Williams’ request to enjoin ETE from terminating the Merger Agreement).



                                               3
       B. Procedural History

       The parties quickly became entangled in litigation. Williams challenged the

Special Issuance and filed its first Verified Complaint against the Partnership and

LE GP on April 6, 2016 (the “First Action”), arguing that equitable relief was

necessary to preserve the Merger Agreement.13 Williams filed a Verified Amended

Complaint on April 19, 2016 (the “Second Action”) against the Defendants to

specifically enforce the Agreement and compel ETE to comply.14 I found that ETE

was entitled to terminate the Agreement because Latham’s inability to issue the tax

opinion was a failure of a condition precedent under that Agreement.15 Williams

appealed to the Supreme Court, which affirmed, in pertinent part, the Opinion

below.16 Williams also filed suit against ETE CEO and Chairman Kelcy Warren in

Texas state court for tortious interference with contract, but the suit was dismissed

as incompatible with the forum selection clause in the Merger Agreement.17

       Williams seeks contract damages in the current litigation. ETE brought

counterclaims and alleges that Williams breached provisions of the Agreement



13
   Williams Cos., Inc. v. Energy Transfer Equity, L.P., C.A. No. 12168-VCG (Del. Ch. Apr. 6,
2016); a separate challenge to ETE’s issuance is also proceeding before me. In re Energy Transfer
Equity L.P. Unitholder Litig. (ETE Unitholder Litig.), 2017 WL 782495, at *1 (Del. Ch. Feb. 28,
2017).
14
   The actions are now combined in the present matter. Williams Cos., Inc. v. Energy Transfer
Equity, L.P., C.A. No. 12337-VCG (Del. Ch. Nov. 30, 2016).
15
   Williams’ Second Action, 2016 WL 3576682 at *21.
16
   Williams Cos., 159 A.3d at 275.
17
   Countercl. ¶¶ 72, 168–69.



                                               4
pertaining to (i) the board recommendation requirement, (ii) the forum selection

clause, and (iii) the reasonable best efforts, disclosure, and financing cooperation

requirements. ETE contends that, as a result of these breaches, Williams owes ETE

$1.48 billion (the “Termination Fee”) and other damages.18 Currently before me is

Williams’ Motion to Dismiss those counterclaims. Because these alleged breaches

largely rely on my interpretation of the Merger Agreement, I include significant

portions of that Agreement below.

          C. The Board Recommendation Claim

          ETE alleges that Williams breached the board recommendation and

reasonable best efforts provisions of the Agreement by making negative comments

about Warren in press releases, public filings, pleadings in a lawsuit against Warren

in Texas state court, and by “failing to reconsider the recommendation” of the

Merger in light of changes “described in [Williams’] Form S-4” that “gutted the

foundations for the original recommendation.”19 The required “Company Board

Recommendation” (or the “Recommendation”) was defined in Section 3.01(d) of

the Merger Agreement:

          The Board of Directors of the Company duly and validly adopted
          resolutions (A) approving and declaring advisable this Agreement, the
          Merger and the other Transactions, (B) declaring that it is in the best
          interests of the stockholders of the Company that the Company enter
          into this Agreement and consummate the Merger and the other

18
     Countercl. ¶ 8.
19
     Id. ¶ 23.



                                            5
       Transactions on the terms and subject to the conditions set forth herein,
       (C) directing that the adoption of this Agreement be submitted to a vote
       at a meeting of the stockholders of the Company and (D)
       recommending that the stockholders of the Company adopt this
       Agreement ((A), (B), (C) and (D) being referred to herein as the
       “Company Board Recommendation”), which resolutions, as of the date
       of this Agreement, have not been rescinded, modified or withdrawn in
       any way.20

       ETE’s contention relies on interpreting the Agreement to mean that the public

statements made by Williams, or Williams’ Board of Directors (the “Directors” or

the “Board”), constitute a withdrawal of the Company Board Recommendation or

designation as a “Company Adverse Recommendation Change” under Section

4.02.21 Williams argues that a proper construction of Section 4.02 allows for a

“Company Adverse Recommendation Change” only in the context of a formal board

resolution and that no such board resolution was enacted.22 Section 4.02 reads in

relevant part:

       (d) Neither the Board of Directors of the Company nor any committee
       thereof shall (i)(A) withdraw (or modify or qualify in a manner adverse
       to [ETE]), or publicly propose to withdraw (or modify or qualify in a
       manner adverse to [ETE]), the Company Board Recommendation or
       (B) recommend the approval or adoption of, or approve or adopt,
       declare advisable or publicly propose to recommend, approve, adopt or
       declare advisable, any Company Takeover Proposal (any action
       described in this clause (i) being referred to as a “Company Adverse
       Recommendation Change”) or (ii) approve or recommend, or publicly

20
   Merger Agreement § 3.01(d) (emphases added).
21
   For ease of reference, any citation to a “section” refers to a section in the Merger Agreement,
unless otherwise noted.
22
   Pl.’s Br. in Supp. of Its Mot. to Dismiss & to Strike Defs. & Countercl. Pls.’ Second Am. &
Supplemental Affirmative Defenses & Verified Countercl. (“Pl. Op. Br.”) at 23–30; Nov. 30,
2016 Oral Arg. Tr. at 8:14–9:14.



                                                6
         propose to approve or recommend, or cause or permit the Company or
         any of its Subsidiaries to execute or enter into any Company
         Acquisition Agreement.

         (f) Nothing contained in this Section 4.02 or elsewhere in this
         Agreement shall prohibit the Company or any of its Subsidiaries from
         (i) taking and disclosing to its stockholders a position contemplated by
         Rule 14d-9, Rule 14e-2(a) or Item 1012(a) of Regulation M-A
         promulgated under the Exchange Act or (ii) making any disclosure to
         its stockholders if the Board of Directors of the Company or any of its
         Subsidiaries determines in good faith (after consultation with and
         receiving advice of its outside legal counsel) that the failure to do so
         would reasonably be likely to constitute a breach of its fiduciary duties
         to its stockholders under applicable Law; provided, however, that any
         such action or statement or disclosure made pursuant to clause (i) or
         clause (ii) shall be deemed to be a Company Adverse Recommendation
         Change unless the Board of Directors of the Company reaffirms its
         recommendation in favor of the Merger in such statement or disclosure
         or in connection with such action.23

ETE contends that violations of the Company Adverse Recommendation provision

in Section 4.02(d), which fall outside of the safe harbor in Section 4.02(f), are

necessarily a violation of the reasonable best efforts provision in Section 5.03, and

that Williams―by breaching Section 4.02(d)―is also in breach of Section 5.03.24

ETE also contends that violations of portions of Section 5.03 are “untethered to

consummation of the Merger” and that such claims should remain even if the Merger




23
     Merger Agreement § 4.02(f) (emphases added).
24
     Countercl. ¶¶ 9, 32.



                                               7
failed.25 As a result of these and other breaches, ETE seeks unspecified damages.26

       ETE also argues that Williams’ breach of the Company Adverse

Recommendation provision in Section 4.02(d) allowed ETE to terminate the

Agreement under Section 7.01(e), which permits termination by ETE “in the event

that a Company Adverse Recommendation Change shall have occurred.”27

Therefore, Williams became immediately liable for a $1.48 billion fee (the

“Company Termination Fee”) under Section 5.06(d)(iii).28 Section 5.06(d)(iii) states

that if the “Agreement is terminated by [ETE] pursuant to Section 7.01(e) [a

Company Adverse Recommendation change], then . . . [Williams] shall pay [ETE] .

. . an aggregate fee equal to $1.48 billion.”29 Thus, according to ETE, Williams’

breach of the Company Adverse Recommendation Change provision in Section

4.02(b) allowed ETE to terminate the Agreement under the permissible termination

provision in Section 7.01(e), but then required Williams to pay a $1.48 billion

Company Termination Fee under Section 5.06(d)(iii).30


25
   Defs. & Countercl. Pls.’ Br. in Opp’n to Pl. and Countercl. Def.’s Mot. to Dismiss & to Strike
Defs. and Countercl. Pls.’ Second Amended & Supplemental Affirmative Defenses & Verified
Countercl. (“Defs. Ans. Br.”) 47–48.
26
   The damages sought other than the $1.48 billion Company Termination Fee are left unclear in
the Counterclaim Complaint. See Countercl. ¶¶ 32 (“By taking these actions, Williams breached
Sections 4.01(b), 5.03, and 5.14 of the Merger Agreement, is not entitled to any post-termination
relief, and is liable for damages.”), 86 (“Williams has, therefore, violated Sections 4.02 and 5.03
of the Merger Agreement, owes ETE $1.48 billion, and is not entitled to any relief.”).
27
   Merger Agreement § 7.01(e).
28
   Id. § 5.06(d)(iii).
29
   Id. § 5.06(d)(iii).
30
   Countercl. ¶ 51.



                                                8
       According to Williams, ETE could receive the $1.48 billion Termination Fee

only if ETE “validly terminated the Agreement under Section 7.01(e) because the

Williams Board effected a Company Adverse Recommendation Change.”31 Thus,

Williams contends, to the extent that ETE maintains that violations of the reasonable

best efforts clause in Section 5.01—or any other violations besides those under

Section 7.01(e) and Section 5.06(d)(iii)—could lead to Williams paying the

Company Termination Fee, those contentions are based on an inaccurate reading of

the Merger Agreement.32 Sections 5.06(b) and (c) specify the fees and expenses

owed to the parties when the Agreement is terminated under other circumstances.33

Williams argues that it does not owe ETE the $1.48 billion Termination Fee because

it did not effect a Company Adverse Recommendation Change under the

Agreement,34 which is, according to Williams, the only way for Williams to owe

ETE the $1.48 billion Termination Fee.

       D. The Forum Selection Clause

       ETE alleges that Williams’ lawsuit against Warren in Texas for tortious

interference with the Agreement (the “Texas Merger Action”) violates the forum

selection clause in Section 8.10(b) of the Merger Agreement.35 Section 8.10(b)


31
   Pl.’s Reply Br. in Further Supp. of Its Mot. to Dismiss & to Strike Defs. and Countercl. Pls.’
Second Am. & Supplemental Affirmative Defenses & Verified Countercl. at 6.
32
   Nov. 30, 2016 Oral Arg. 16:22–17:5.
33
   Merger Agreement §§ 5.06(b)–(c).
34
   Nov. 30, 2016 Oral Arg. Tr. 15:9–17:5.
35
   Countercl. ¶ 33.



                                               9
states that:

       Each of the parties hereto irrevocably submits to the exclusive
       jurisdiction of the Court of Chancery of the State of Delaware for the
       purposes of any suit, action or other proceeding arising out of or relating
       to this Agreement and the rights and obligations hereunder or the
       Transactions or for the recognition and enforcement of any judgment
       in respect of this Agreement and the rights and obligations arising
       hereunder or the Transactions.36

Williams contends that it did not breach the clause because it sued Warren in his

personal capacity and Warren is not a party to the Merger Agreement.37 Regardless,

argues Williams, any such breach was immaterial and therefore not subject to

liability because Section 7.02 limits post-termination liability for everything except

“willful and material breach[es] of any of its representations, warranties, covenants

or agreements.”38 Even if a breach were material, according to Williams, ETE

suffered no cognizable damages.39 Alternatively, if there were damages, then

Williams argues that recovery would be prohibited because Section 5.02(a) of the

Agreement states that “all fees and expenses incurred in connection with this

Agreement and the Transactions shall be paid by the party incurring such fees or

expenses, whether or not the Transactions are consummated.”40




36
   Merger Agreement § 8.10(b) (emphasis added).
37
   Pl. Op. Br. at 52–53.
38
   Merger Agreement § 7.02 (emphases added).
39
   Pl. Op. Br. at 52.
40
   Merger Agreement § 5.06(a).



                                            10
       E. The Additional Breach of Contract Claims

       ETE argues that Williams breached Section 5.01 of the Agreement by failing

to disclose: (i) information about an internal proxy contest that may have influenced

Williams’ vote in approving the Agreement and for failing to promptly notify ETE

of the same,41 (ii) “the self-interests of the Williams Board and/or beliefs concerning

those self-interests,”42 and (iii) the “material fact that members of [Williams’]

[B]oard considered the possibility of a board-member-led proxy contest when voting

in favor of the [Merger]” in the Form S-4.43 Williams argues that it disclosed the

relevant facts and that, in any case, ETE “has pleaded (and can plead) no injury”

from any disclosure violations.44

       Section 5.01 pertains to the preparation of the Form S-4 and the proxy

statement and states in pertinent part:

       (a) If at any time prior to receipt of the Company Stockholder Approval
       any information relating to [ETE] or the Company, or any of their
       respective Affiliates, directors or officers, should be discovered by
       [ETE] or the Company which is required to be set forth in an
       amendment or supplement to either the Form S-4 or the Proxy
       Statement, so that either such document would not include any
       misstatement of a material fact or omit to state any material fact
       necessary to make the statements therein, in light of the circumstances
       under which they are made, not misleading, the party that discovers
       such information shall promptly notify the other parties hereto and an
       appropriate amendment or supplement describing such information

41
   Countercl. ¶ 29.
42
   Id. ¶ 130.
43
   Id. ¶ 112.
44
   Pl. Op. Br. at 42–48.



                                          11
       shall be promptly filed with the SEC and, to the extent required by Law,
       disseminated to the stockholders of the Company.45

The success of ETE’s allegations rest on whether I find that these omissions are

material and, if material, resulted in compensable damages.

       ETE further alleges that Williams breached Sections 4.01(b) (carrying on

business in the ordinary course), 5.03 (reasonable best efforts), and 5.14 (reasonable

cooperation in financing arrangements) of the Agreement by refusing to provide the

information required―including certain financial information and a consent from

Williams’ auditor to include its audit reports related to that financial

information―for ETE to file a Form S-3 and complete a public equity offering.46

ETE’s contention is that Williams’ obligation to not unreasonably withhold consent

for ETE to “carry on its business in the ordinary course” under Section 4.01(b),

combined with the Letter Agreement’s allowance for “issuances of equity securities

with a value of up to $1.0 billion in the aggregate,”47 should be read together to mean

that a proposed issuance, by which ETE intended to finance the Merger in part, was

allowable. Williams’ consent was improperly withheld, placing Williams in breach

of Section 4.01(b).48 ETE alleges that this violation also breaches the reasonable

best efforts provision in Section 5.03 and a provision requiring cooperation in



45
   Merger Agreement § 5.01(a) (emphasis added).
46
   Countercl. ¶¶ 31–32.
47
   Id. ¶ 154.
48
   Id. ¶¶ 148–56.



                                            12
financing arrangements in Section 5.14.49 Williams argues that Section 5.14 was not

triggered because its consent was not unreasonably withheld.50 Section 5.14 states

in relevant part:

       Prior to the Effective Time, the Company shall, and shall cause its
       Subsidiaries and their respective Representatives to, provide
       cooperation reasonably requested by [ETE] that is necessary or
       reasonably required in connection with the Financing or any other
       financing that may be arranged by [ETE].51

       The viability of these contentions depends on my finding that Williams’

consent was withheld improperly and that any such withholding of consent caused

injury to ETE.

       In addition, Williams argues that alleged violations of Section 5.01(b)―which

pertains to preparing the Form S-4 and the proxy statement―did not result in

damages to ETE. Section 5.06 states in pertinent part:

       (b) If this Agreement is terminated (i) by either the Company or [ETE]
       pursuant to Section 7.01(b)(iii) or (ii) by [ETE] pursuant to Section
       7.01(c), then in each case of clauses (i) and (ii) the Company shall
       promptly upon written demand by [ETE] (and in any event no later than
       two business days after such written demand is delivered to the
       Company) reimburse [ETE], by wire transfer of same day federal funds
       to the account specified by [ETE], for all out-of-pocket fees and
       expenses incurred or paid by or on behalf of [ETE] or their respective
       Subsidiaries and Affiliates in connection with the Merger or related to
       the preparation, negotiation, execution and performance of this
       Agreement, the Commitment Letter, the Fee Letter and related
       transaction documents, including all fees and expenses of counsel,

49
   Id. ¶¶ 32, 136; Merger Agreement §§ 4.01(b), 5.03, 5.14.
50
   Pl. Op. Br. at 48–52.
51
   Merger Agreement § 5.14 (emphases added).



                                               13
       financial advisors, accountants, experts and consultants retained by
       [ETE] or their respective Subsidiaries and Affiliates, such amount not
       to exceed $50.0 million in the case of clause (i) and $100.0 million in
       the case of clause (ii).

       (c) If this Agreement is terminated by the Company pursuant to Section
       7.01(d), then [ETE] shall promptly upon written demand by the
       Company (and in any event no later than two business days after such
       written demand is delivered to [ETE]) reimburse the Company, by wire
       transfer of same day federal funds to the account specified by the
       Company, for all out-of-pocket fees and expenses incurred or paid by
       or on behalf of the Company or its Subsidiaries and Affiliates in
       connection with the Merger or related to the preparation, negotiation,
       execution and performance of this Agreement and related transaction
       documents, including all fees and expenses of counsel, financial
       advisors, accountants, experts and consultants retained by the Company
       or its Subsidiaries and Affiliates, such amount not to exceed $100.0
       million.52

                                      II. ANALYSIS

       The Counterclaim Defendants have moved to dismiss the counterclaims under

Court of Chancery Rule 12(b)(6). When reviewing such a motion,

       (i) all well-pleaded factual allegations are accepted as true; (ii) even
       vague allegations are well-pleaded if they give the opposing party
       notice of the claim; (iii) the Court must draw all reasonable inferences
       in favor of the non-moving party; and (iv) dismissal is inappropriate
       unless the plaintiff would not be entitled to recover under any
       reasonably conceivable set of circumstances susceptible of proof.53

I need not, however, “accept conclusory allegations unsupported by specific facts or

. . . draw unreasonable inferences in favor of the non-moving party.”54 In addition,


52
   Merger Agreement §§ 5.06(b)–(c).
53
   Savor, Inc. v. FMR Corp., 812 A.2d 894, 896–97 (Del. 2002) (footnotes and internal quotation
marks omitted).
54
   Price v. E.I. DuPont de Nemours & Co., 26 A.3d 162, 166 (Del. 2011).



                                              14
I refer to certain documents and public filings that are incorporated by reference in

the Counterclaim Complaint.55

         A. The Board Recommendation Claim

         The most serious contention in the ETE counterclaims―from a damages

perspective, at least―is that Williams violated its contractual obligations regarding

the Board Recommendation in favor of the Merger, after which ETE terminated the

Agreement, triggering an obligation on Williams’ part to pay ETE a $1.48 billion

Termination Fee. ETE seeks specific performance of this provision.

         The syllogism under which ETE seeks the Termination Fee is rather

complicated. First, ETE points out that under Section 3.01(d)(1), the Williams’

Board of Directors is required to cause the Company to adopt resolutions (a)

approving the Merger; (b) declaring that the Merger is in the best interest of its

stockholders; (c) directing a stockholder vote; and (d) recommending that the

stockholders adopt the Merger Agreement in that vote. Resolutions comprising (a),

(b), (c) and (d) are defined as the “Company Board Recommendation.”56 All parties

agree that the Williams’s Board initially complied with the Merger Agreement by

making this required Company Board Recommendation. Second, ETE points out

that Section 4.02(d)(i)(A) provides that neither Williams’ Board, “nor any



55
     See Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752, 797 (Del. Ch. 2016).
56
     Merger Agreement § 3.01(d).



                                               15
committee thereof,” shall “withdraw (or modify or qualify in a manner adverse to

[ETE], or publicly propose to withdraw, or modify or qualify in a manner adverse to

[Williams], the Company Board Recommendation.”57 ETE argues that, even though

the Williams Directors did not formally withdraw the Company Board

Recommendation, the Directors informally decided (in light of ETE’s perceived

disinclination to merge) that it was more lucrative to Williams to pursue negotiation

of a walk-away payment from ETE than to consummate the Merger. Third, ETE

contends that, in pursuit of the strategy just described, the Company took the

following actions during the pendency of the Merger: it (1) issued press releases

that signaled Williams’ pessimism about the Merger to the market; (2) sued ETE

CEO Kelcy Warren in Texas state court and used the pleadings to damage investor

confidence in Warren; (3) used the media to portray ETE in a negative light; and (4)

released a Form S-4 that undermined the financial projections used to initially

recommend the Merger to Williams’ stockholders. The actions described above,

according to ETE, amount to a de facto “withdrawal” of the Company Board

Recommendation sufficient to qualify as a breach of Section 4.02(d). Fourth, after

that breach, ETE exercised its right to terminate the Merger. Fifth, and finally, under

the remedies described in Section 5.06 of the Merger Agreement, termination in this

scenario entitles ETE to the Termination Fee.


57
     Id. § 4.02(d)(i)(A).



                                          16
      ETE presses this argument despite the following undisputed facts: 1) Williams

sued ETE to specifically enforce consummation of the Merger, which ETE

strenuously (and successfully) opposed; 2) notwithstanding the supposed de facto

withdrawal of the Company Board Recommendation in favor of the Merger,

Williams’ Directors never acted formally to withdraw the resolutions; 3) the Board

affirmed the Company Board Recommendation several times during the pendency

of the Merger; 4) an overwhelming majority of Williams’ stock was voted in favor

of the Merger, after which ETE—not Williams—terminated the Merger upon failure

of a condition precedent.

      Williams notes that ETE did not purport to terminate the Merger based on

breach of the Company Board Recommendation provision; instead, it relied on the

failure of the tax opinion to avoid the deal. Williams then makes the common-sense

observation that it would be passing strange for two parties to a merger agreement

to structure the agreement so that a party which desired to exit the agreement could

do so, over the other party’s objections, and at the same time receive the windfall of

a substantial termination fee. ETE does not suggest that it is not seeking a windfall

in the form of the Termination Fee; it simply notes that Delaware is a contractarian

state that leaves parties to the benefits of their bargains, good, bad, and indifferent.

ETE argues that Williams breached its duty not to modify the Company Board

Recommendation, after which breach ETE terminated the Merger, thereby




                                          17
qualifying for the $1.48 billion Termination Fee. Accordingly, ETE asserts that if it

is entitled to the Termination Fee under the negotiated terms of the Agreement, our

Courts will enforce the contract, windfall or no. ETE is correct in noting that this is

a contractarian jurisdiction;58 however, I find the contract language, as written, fatal

to ETE’s contention here.

       That is because the Agreement itself carefully defines the Company Board

Recommendation as a series of four recommendations to be made, via board

resolution, by the Williams’ Directors. It is undisputed that the Williams Board

created,     via    resolutions,      a    contractually       compliant       Company        Board

Recommendation. There are no allegations in the Counterclaim Complaint that the

Directors, or any subcommittee thereof, ever formally modified (or expressed the

intent to so modify) the Recommendation. In fact, the Recommendation remained

in place through the vote on the Merger, which was overwhelmingly approved by

Williams’ stockholders. ETE, therefore, received what it bargained for. ETE has

not alleged facts which make it reasonably conceivable that the Board withdrew the

Recommendation.

       ETE’s argument is really that the Board adopted a strategy under which the



58
   Martin Marietta Materials, Inc. v. Vulcan Materials Co., 56 A.3d 1072, 1075 (Del.
Ch.), aff'd, 68 A.3d 1208 (Del. 2012), as corrected (July 12, 2012) (“I conclude that . . . consistent
with Delaware's pro-contractarian public policy, the parties' agreement . . . should be entitled to
specific performance and injunctive relief should be respected.”).



                                                 18
Company took a number of actions which ETE deems inimical to consummation of

the merger.    As will be discussed below, those efforts may be contractually

meaningful in terms of the “best efforts” requirement that the Merger Agreement

imposed on Williams.       However, the Agreement was careful to cabin ETE’s

entitlement to the Termination Fee to those situations in which Board (or

subcommittee) action modified (or proposed to modify) the required Company

Board Recommendation, after which ETE terminated the Merger.

      Because I find the Merger Agreement sections discussed to be clear on their

face, I will not discuss further the parties’ various attempts to construe those

provisions in light of other provisions in the Agreement. Suffice it to say that ETE’s

reference to other contract provisions, attempting to demonstrate that the plain

reading of the sections I have described above is incompatible with the balance of

the Merger Agreement, I find unconvincing.

      B. The Forum Selection Clause

      During the pendency of the Merger, Williams brought an action against Kelcy

Warren, ETE’s principal, in Texas. The parties dispute the motive behind the

litigation, which involved ETE’s issuance of equity in ETE to insiders. The purpose

for that issuance is itself disputed. Williams characterizes the Texas litigation as in

aid of consummation of the Merger; ETE characterizes it as posturing in favor of

Williams’ negotiating a payment from ETE in return for Williams’ consent to




                                          19
terminate the merger. In any event, ETE argues that the Texas litigation violated

Section 8.10(b), which provides that no party shall bring “actions relating to this

Agreement or the Transactions in any court other than the [Court of Chancery]” and

that each such party “irrevocably submits with regard to any such action or

proceeding . . . generally and unconditionally, to the personal jurisdiction of the

aforesaid courts.”59 According to ETE, the Texas court dismissed the suit for

violating the forum selection clause in Section 8.01(b) of the Merger Agreement.60

ETE seeks damages here, which it describes as the fees and costs of the Texas action,

arising from breach of the forum selection clause.

         The parties argue forcefully about whether Warren was a party to the Merger

Agreement, and thus whether Section 8.01(b) applied to the Texas action, and

whether this Court had jurisdiction over Warren under the terms of the Merger

Agreement. Even if I assume that ETE has the best of that argument, and that ETE

is the proper party to seek as damages fees and costs incurred in a suit against Warren

in his personal capacity, ETE cannot recover those fees and costs here, because

Section 5.06(a) of the Agreement is, in that case, dispositive. That Section provides

that “all fees and expenses incurred in connection with this Agreement and the

Transactions shall be paid by the party incurring such fees or expenses, whether or



59
     Merger Agreement § 8.10(b).
60
     Defs. Ans. Br. 16.



                                          20
not the Transactions are consummated.”61 In adopting that language, the parties

waived any right to receive fees and expenses for a breach of the Agreement—if a

breach it was—of the type ETE describes here.

         I note that in addition to fees and costs, ETE argues that it suffered other

damages in connection with the representations made by Williams in the Texas

litigation, violating Merger Agreement provisions independent of the forum

selection clause. Those damages claims are incorporated in the discussion below.

         C. The Additional Breach of Contract Claims

         Aside from its arguments concerning the Termination Fee and breach of the

forum selection clause, ETE alleges other supposed breaches of the Agreement by

Williams.

         ETE argues that, as market conditions changed, the Williams’ Board failed to

obtain an updated fairness opinion from its financial advisors and failed to make

disclosures to its stockholders concerning changes in market conditions. In addition,

ETE contends that Williams’ disclosures were materially incomplete concerning its

reasons for agreeing to the Merger in the first instance. According to ETE, those

include the threat of a proxy fight or consent solicitation―which caused some

Williams Directors to change their vote to favor the Merger―that was inadequately

disclosed. ETE next alleges that Williams failed to disclose various self-interests of


61
     Merger Agreement § 5.06(a).



                                          21
Williams’ Directors. Also, ETE alleges that Williams failed to update its Form S-4

to reflect that at least one of the potential proxy contests could have been led by at a

sitting Williams’ Board member, which according to ETE, influenced the other

Directors’ votes in the Merger. These disclosures, according to ETE, would have

been material to stockholders in making an informed vote concerning the Merger.

The disclosures—in addition to being required under common law—were required

under Section 5.01 of the Agreement.

       Whether Williams’ Board breached duties to its stockholders either under

common law or the Agreement is a question of fact. Here, however, ETE seeks its

own damages under the Agreement. While failure of material disclosures may have

posed a threat of damages to the combined entity if the Merger had been

consummated, the Merger was in fact terminated by ETE. Damages are an element

of a breach of contract action.62 It is simply not reasonably conceivable that any

breach of the Williams Directors’ responsibility to obtain an updated fairness

opinion63 or make required disclosures to Williams stockholders could lead to

damages to ETE, in light of the failure of the Merger. Therefore, the Motion to

Dismiss must be granted with respect to this issue.


62
   H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140 (Del. Ch. 2003) (“Under Delaware law,
the elements of a breach of contract claim are: 1) a contractual obligation; 2) a breach of that
obligation by the defendant; and 3) a resulting damage to the plaintiff.”).
63
   I make no finding here that Williams was under a common law obligation to obtain an updated
fairness opinion, as a duty to its stockholders.



                                              22
         Next, ETE notes that Williams failed to consent to a nearly $1 billion public

offering, by which ETE intended to finance, in part, the Merger. ETE argues that

Williams had a responsibility to cooperate with this equity financing, which required

Williams to submit certain financial information and a consent from Williams’

auditor to include certain audit reports related to that financial information.

According to Williams, the public offering was discriminatory to Williams’

stockholders, and it had a proper business purpose for withholding its consent. As

noted above, I have another action pending64 concerning this Special Issuance and

its effect on other non-participating stockholders.        The contractual language

regarding Williams’ obligation in this situation is not clear to me, and my analysis

would benefit from extrinsic evidence regarding that obligation. A more serious

question is whether damages can flow from any breach, given that ETE terminated

the Agreement for failure of the unrelated condition precedent regarding tax

consequences.        ETE also argues that Williams failed to use best efforts to

consummate the Merger as required by the Merger Agreement. To the extent that

ETE can prove such, again, damages are problematic. However, we are at the

motion to dismiss phase of this litigation. ETE argues that its willingness to exercise

its option to terminate the Merger Agreement, based on the failure of the condition

precedent, was informed by the results of Williams’ breach of the obligation to


64
     See ETE Unitholder Litig., 2017 WL 782495, at *1.



                                               23
approve the equity offering and failure of best efforts. It seeks, at a minimum, to

offset Williams’ own damages claims accordingly. While I am dubious that ETE

will ultimately prevail in demonstrating that Williams breached the Agreement in

this regard, and that damages flowed as a result, such an outcome is reasonably

conceivable. Therefore, resolution of these issues awaits a developed record and the

Motion to Dismiss this claim is denied.

                               III. CONCLUSION

      For the foregoing reasons, the Plaintiff’s Motion to Dismiss the counterclaims

is granted in part and denied in part. I note that Williams has a motion outstanding

to strike ETE’s affirmative defenses, which rest on the same allegations as do the

counterclaims. The parties should consult and inform me whether any portion of

that Motion to Strike needs further judicial resolution. The parties should also

provide a Form of Order consistent with this Memorandum Opinion.




                                          24
