        IN THE SUPREME COURT OF THE STATE OF DELAWARE

THE WILLIAMS COMPANIES, INC., §
                              §               No.   330, 2016
        Plaintiff Below-      §
        Appellant,            §               Court Below: - Court of Chancery
                              §               of the State of Delaware
        v.                    §
                              §               C.A. Nos. 12168 & 12337
ENERGY TRANSFER EQUITY, L.P., §
et al.,                       §
                              §
        Defendants Below-     §
        Appellees.            §

                           Submitted: January 11, 2017
                           Decided: March 23, 2017

Before STRINE, Chief Justice; HOLLAND, VALIHURA, VAUGHN, and
SEITZ, Justices, constituting the Court en Banc.

Upon appeal from the Court of Chancery: AFFIRMED.

Kenneth J. Nachbar, Esquire and Zi-Xiang Shen, Esquire, Morris, Nichols, Arsht &
Tunnel LLP, Wilmington, Delaware; Sandra C. Goldstein, Esquire (argued), Antony
L. Ryan, Esquire, and Kevin J. Orsini, Esquire, Cravath, Swaine & Moore LLP, New
York, New York, for Plaintiff Below, Appellant, The Williams Companies, Inc.

Rolin P. Bissell, Esquire, Elena C. Norman, Esquire, Tammy L. Mercer, Esquire,
and Benjamin M. Potts, Esquire, Young Conaway Stargatt & Taylor, LLP,
Wilmington, Delaware; Michael C. Holmes, Esquire (argued), John C. Wander,
Esquire, Jennifer B. Poppe, Esquire, Jeremy C. Marwell, Esquire, Andrew E.
Jackson, Esquire, Craig E. Zieminski, Esquire, Joshua S. Johnson, Esquire, and
Gregory F. Miller, Esquire, Vinson & Elkins LLP, Dallas, Texas, for Defendants
Below, Appellees, Energy Transfer Equity, L.P., Energy Transfer Corp LP, ETE
Corp GP, LLC, LE GP, LLC, and Energy Transfer Equity GP, LLC.


VAUGHN, Justice, for the Majority:
                                  I.   INTRODUCTION

       This appeal arises from a merger agreement under which Energy Transfer

Equity, L.P. (“ETE”), a Delaware limited partnership, agreed to acquire the assets

of The Williams Companies, Inc., (“Williams”), a Delaware corporation. Both

Williams and ETE are involved in the gas pipeline business. The Agreement and

Plan of Merger (the “Merger Agreement” or “the Agreement”) signed by Williams

and ETE contemplated two steps. In the first step, Williams would merge into a

new entity, Energy Transfer Corp LP (“ETC”), a Delaware limited partnership

taxable as a corporation. ETE would transfer $6.05 billion in cash to ETC in

exchange for 19% of ETC’s stock.1 The $6.05 billion and 81% of ETC’s stock

would be distributed to the Williams stockholders in exchange for their Williams

stock. In step two, ETC would transfer the Williams assets to ETE in exchange for

newly issued ETE Class E partnership units.                The number of Class E units

transferred and ETC shares issued would be the same number and the two were

expected to be similar in value. The result would be that the Williams shareholders


1
  While ETE and ETC are the primary defendants discussed in this opinion, the relationship of the
remaining defendants is as follows: ETE Corp GP, LLC is a Delaware limited liability company
and the general partner of ETC; LE GP, LLC is a Delaware limited liability company and the
general partner of ETE; Energy Transfer Equity GP, LLC is a Delaware limited liability company
that, pursuant to the Merger Agreement, would merge with LE GP, LLC and be the surviving
entity and general partner of ETE. Following the merger, ETC was to become the managing
member of Energy Transfer Equity GP, LLC.

                                               1
would receive $6.05 billion plus 81% of ETC’s stock, ETE would receive the

Williams assets and 19% of ETC’s stock, and ETC would own ETE Class E

partnership units equal in number to the shares issued by ETC. The merger was

conditioned upon the issuance of an opinion by ETE’s tax counsel, Latham &

Watkins LLP (“Latham”), that the second step of the transaction, the transfer of

Williams’ assets to ETE in exchange for the Class E partnership units, “should” be

a tax-free exchange of a partnership interest for assets under Section 721(a) of the

Internal Revenue Code 2 (the “721 opinion”).                The Agreement also contained

provisions that required the parties to use “commercially reasonable efforts” to

obtain the 721 opinion 3 and to use “reasonable best efforts” to consummate the

transaction.4

       After the parties entered into the Agreement, the energy market suffered a

severe decline which caused a significant loss in the value of assets of the type held

by Williams and ETE.             This caused the transaction to become financially

undesirable to ETE. It also led to ETE raising an issue as to whether the IRS might

view a portion of the $6.05 billion not as payment only for the ETC stock, but as


2
  “No gain or loss shall be recognized to a partnership or to any of its partners in the case of a
contribution of property to the partnership in exchange for an interest in the partnership.” I.R.C.
§ 721(a).
3
  App. to Appellant’s Opening Br. at 680 (Merger Agreement, § 5.07(b)).
4
  Id. at 671 (Merger Agreement, § 5.03(a)).

                                                2
payment in part for the Williams assets, thus rendering the second step of the merger

taxable. This issue ultimately led to Latham being unwilling to issue the 721

opinion. Since the 721 opinion was a condition of the transaction, ETE indicated

that it would not proceed with the merger.

      Williams then sought to enjoin ETE from terminating the Merger Agreement,

arguing that ETE breached the Agreement by failing to “use commercially

reasonable efforts” to obtain the 721 opinion and “reasonable best efforts” to

consummate the transaction. Williams also argued that ETE was estopped from

terminating the Agreement by a representation it made in the Agreement that it knew

of no facts that would prevent the second step of the transaction from being treated

as tax-free at the time the parties entered into the agreement.

      The Court of Chancery rejected Williams’ arguments. Williams argues on

appeal that the Court of Chancery erred by interpreting “commercially reasonable

efforts” and “reasonable best efforts” as imposing on ETE only a negative duty not

to obstruct performance of the Agreement. The Court should, Williams contends,

have interpreted the covenants as creating affirmative obligations on the part of ETE

to work to ensure performance of the Agreement. Williams also argues that the

Court of Chancery should have recognized that ETE’s acts and omissions failed to

comply with its affirmative obligations to try to obtain the 721 opinion. Williams

                                          3
further argues that the Court of Chancery erred by placing upon it the burden of

proving that ETE’s breach of covenants materially contributed to the failure of the

closing condition and that it should have shifted that burden to ETE. Finally, it

argues that ETE should be estopped from terminating the Agreement because it

represented in the Agreement that it did not “know[] of the existence of any fact that

would reasonably be expected to prevent [the transaction] from qualifying as an

exchange to which Section 721(a) of the Code applies.”5

       In rejecting Williams’ arguments, the Court of Chancery concluded that ETE

did not breach its covenants. For the reasons which follow, we find that the Court

adopted an unduly narrow view of the obligations imposed by the covenants. We

also agree with Williams that if a proper analysis of ETE’s covenants led to a

conclusion that ETE breached those covenants, the burden would shift to ETE to

prove that its breaches did not materially contribute to the failure of the closing

condition.

       The Court of Chancery concluded that Latham’s determination that it could

not issue the 721 opinion was a good faith determination made by it independent of

any conduct by ETE. This finding of fact is not challenged on appeal.6 Since the


5
 Id. at 652 (Merger Agreement at § 3.02(n)(i)).
6
 At oral argument, counsel for Williams acknowledged that Williams was not challenging the
Court of Chancery’s finding that Latham’s determination was made in good faith.

                                             4
facts as found by the Court of Chancery are that ETE’s conduct, or lack of conduct,

did not contribute to Latham’s decision not to issue the 721 opinion, we are satisfied

that when the burden of proving that ETE’s alleged breach of covenants is properly

placed on it, ETE did meet its burden of proving that any alleged breach of covenant

did not materially contribute to the failure of the Latham condition.

      We also agree with the Court of Chancery’s finding that ETE was not

estopped from terminating the Agreement. Accordingly, the judgment of the Court

of Chancery will be affirmed.

                 II.   FACTS AND PROCEDURAL HISTORY

      Williams, a Delaware corporation, is an energy infrastructure company which

owns and operates midstream assets and interstate natural gas pipelines.     ETE is a

Delaware limited partnership which, along with its family of companies, owns and

operates tens of thousands of miles of pipelines which transport natural gas, natural

gas liquids, refined products, and crude oil.   Williams and ETE entered into the

above-described Merger Agreement in September, 2015.

      As mentioned, the parties agreed that a condition precedent to the merger was

that ETE’s tax counsel, Latham, issue an opinion that the second step of the




                                          5
transaction, ETC’s transfer of Williams’ assets to ETE in exchange for partnership

units of ETE, “should” qualify as tax free under Section 721(a) of the Internal

Revenue Code. 7      Section 721 provides that “[n]o gain or loss shall be recognized

to a partnership or to any of its partners in the case of a contribution of property to

the partnership in exchange for an interest in the partnership.” 8        In addition to

agreeing that the parties would use “commercially reasonable efforts” to obtain this

tax opinion,9 the parties broadly agreed that they would use their “reasonable best

efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and

to assist and cooperate with the other parties in doing, all things necessary, proper

or advisable to consummate and make effective, in the most expeditious manner

practicable” the merger. 10    At the time that the parties entered into the Agreement,

the parties and their tax advisors all believed that the second step of the transaction

would qualify as tax free under § 721(a).

       After the energy market went into a severe decline, ETE’s publicly traded

partnership units dwindled to between a third and half of their value as compared to

their value at the time the Agreement was signed, leaving ETE concerned about the



7
   I.R.C. § 721(a).
8
   Id.
9
   App. to Appellant’s Opening Br. at 680 (Merger Agreement § 5.07(b)).
10
    Id. at 671 (Merger Agreement § 5.03(a)).

                                              6
effect of fulfilling its $6.05 billion cash obligation to ETC.   The parties discussed

restructuring or terminating the Agreement, but were unable to reach an alternative

arrangement.     The record is quite clear that ETE strongly desired that the

transaction not go forward.

      ETE explored financing alternatives and ultimately decided to issue a new

class of equity units that would reduce its cash distributions in the short term.   ETE

pursued a potential public offering of those units. Williams, however, refused to

disclose financial information that was required for ETE to complete the necessary

filings with the Securities and Exchange Commission.         On March 8, 2016, ETE

completed a private offering of convertible units instead.

      In March 2016, while evaluating what steps ETE might take to respond to the

down turn in the energy market, Brad Whitehurst, ETE’s Head of Tax, according to

his testimony, discovered an aspect of the second step of the transaction which he

had not previously considered.    He testified that he originally thought that the $6.05

billion was to be exchanged for a floating number of ETC shares.          In March, he

realized that it was to be exchanged for a fixed number of shares.     Whitehurst then

realized that the decline in ETE’s unit price caused the 19% of ETC shares, which

ETE was to receive in the merger, to be worth substantially less than the $6.05 billion

ETE was obligated to pay for those shares.     He testified that the ETC shares which

                                           7
ETE was to receive would be worth only about $2 billion.     He was concerned that

the IRS might attribute a portion of the $6.05 billion to the acquisition of the

Williams assets, causing the second step in the merger to become a taxable event.

      Whitehurst notified ETE’s chairman of his concern and on March 29, 2016,

Whitehurst contacted Latham and asked it to consider whether the difference in

value between the $6.05 billion and the 19% of ETC shares would cause a tax

problem.   Prior to this, Latham was fully prepared to issue the 721 opinion and had

not considered how a change in ETE’s unit price would affect its opinion.        The

attorneys at Latham extensively analyzed the transaction.     After consulting with

Wachtell, Lipton, Rosen & Katz, ETE’s deal counsel, and Vinson & Elkins LLP,

ETE’s litigation counsel, Latham indicated to ETE that it was likely unable to issue

the 721 opinion.

      On April 7, 2016, Whitehurst contacted Morgan, Lewis & Bockius (“Morgan

Lewis”), ETE’s specially retained tax counsel, and asked that firm to analyze the tax

consequences of the Merger Agreement, specifically expressing his concern about

the decreased value of ETE’s partnership units.

      On April 11, 2016, Latham informed ETE that it had conclusively determined

that it would be unable to issue the 721 opinion as of that date.       Latham was

concerned that the IRS could attribute the amount by which the $6.05 billion

                                         8
exceeded the value of the ETC stock to the Williams assets under the disguised sale

rules in Section 707 of the Internal Revenue Code.    It communicated its position to

Cravath, Swaine & Moore LLP (“Cravath”), Williams’ tax and deal counsel, the

next day.

      In the meantime, Morgan Lewis—independent of and without consulting

Latham—concluded that it could not issue a 721 opinion if asked.      Morgan Lewis

was concerned that the IRS might conclude that the parties had specifically allocated

the cash to the ETC stock (and not to the Williams assets) for tax purposes, and that

the second step was likely taxable as a disguised sale.

      Cravath disagreed with Latham’s conclusion, but on April 14, 2016 it offered

two proposals that it thought would potentially fix the issue with the 721 opinion.

Latham reviewed the proposals and determined that neither would result in its

issuance of the 721 opinion.

      In an April 18, 2016 amendment to ETC’s proxy statement, ETE disclosed

that Latham had advised that as of that time it would not be able to deliver a 721

opinion.

      In late April, Cravath then had Gibson, Dunn & Cruther, LLP, Williams’ other

deal counsel, review the issue.   It ultimately determined that it could give a “weak-

should” opinion if asked, but initially acknowledged that it would be difficult to

                                          9
reach such a conclusion. 11 At the time of the proceedings below, Latham held the

position that it would be unable to issue the 721 opinion and anticipated that it would

be unable to do so by the closing date.

       Williams filed its first complaint against ETE and LE GP, LLC on April 6,

2016, challenging ETE’s private offering of convertible partnership units.           While

the parties were engaged in discovery on that matter, Williams filed its second

complaint against ETE, ETE Corp GP, LLC, and Energy Transfer Equity GP, LLC

on May 13, 2016, challenging the defendants’ actions with regard to obtaining the

721 opinion from Latham.          The Court of Chancery ordered that the issues be

litigated together and held a trial for both actions on June 20 and 21, 2016.          This

appeal concerns only Williams’ claims regarding the 721 opinion.

       In its second complaint, Williams asserted its claims that ETE breached the

Agreement by failing to use “commercially reasonable efforts” to obtain the 721

opinion from Latham and “reasonable best efforts” to complete the transaction and,

therefore, could not rely on the failure of the 721 opinion condition to terminate the

agreement; and that ETE misrepresented that it knew of no facts that would

reasonably prevent the second step of the transaction from being treated as tax-free,



11
  Williams Companies, Inc. v. Energy Transfer Equity, L.P., 2016 WL 3576682, at *8 (Del. Ch.
June 24, 2016).

                                             10
which estopped ETE from terminating the Agreement.                Williams sought a

declaration that the defendants had committed material breaches of the Agreement

and a permanent injunction to enjoin the defendants from terminating the

Agreement.

          The Court of Chancery began its analysis by deciding whether Latham’s

conclusion that it could not issue the 721 opinion was made in good faith.           It

carefully and extensively considered the facts and circumstances surrounding

Latham’s decision not to issue the 721 opinion.      The Court noted that the parties

deliberately conditioned the merger on Latham’s subjective opinion that the

transaction “should” be tax free under § 721(a), meaning that “it is quite likely that

the [tax] decision will be upheld.” 12

          The Court of Chancery realized that Latham had competing interests with

regard to its issuance of the 721 opinion: while Latham’s client, ETE, would benefit

substantially from its refusal to issue the 721 opinion, Latham also had an interest in

maintaining its reputation by delivering an opinion that was consistent with its

preliminary assessment from the time that the parties entered into the Agreement.

The Court concluded that Latham’s ultimate refusal to issue the 721 opinion went




12
     Id. at *11.

                                          11
against its reputational interests.     After reviewing the testimony, the Court found

that “Latham took this responsibility [to deliver the 721 opinion] seriously.” 13   The

Court noted that there were a variety of opinions reached regarding the tax

consequences of the transaction which indicated “the closeness of the issue and the

unusual nature of the transaction here.” 14        The Court came to the conclusion that

Latham acted independently and in good faith in determining that it could not issue

the 721 opinion.       The Court therefore found that as of the date of its opinion, the

721 opinion condition had not been satisfied.

         The Court of Chancery next considered Williams’ claim that ETE breached

its contractual obligation to use commercially reasonable efforts to obtain the 721

opinion.      It began by noting that the term “commercially reasonable efforts” was

not defined in the Agreement and there is no case law clearly defining the phrase.

It then examined the discussion of “reasonable best efforts” which appears in the

Court of Chancery case of Hexion Specialty Chemicals, Inc. v. Huntsman Corp.15

The Court found that Hexion equated “reasonable best efforts” with good faith, and

that “reasonable best efforts” was similar to “commercially reasonable efforts.”16



13
     Id. at *13.
14
     Id. at *14.
15
     965 A.2d 715 (Del. Ch. 2008).
16
     Williams Companies, Inc., 2016 WL 3576682, at *16.

                                              12
From this, it concluded that ETE was “bound . . . to do those things objectively

reasonable to produce the desired 721 Opinion.” 17

         The Court observed that Williams could not point to any commercially

reasonable efforts, or objectively reasonable actions, that ETE could have taken to

secure the 721 opinion from Latham.         The Court also found that Whitehurst did not

breach the “commercially reasonable efforts” covenant merely by bringing the § 721

issue to Latham’s attention because, as the Vice Chancellor had already determined,

Latham made its determination independently and in good faith.             The Court also

addressed Williams’ heavy reliance on the Hexion18 case by distinguishing the case

from the facts before him.       It noted that in Hexion, the company hired an advisor

and “knowingly fed the advisor misleading or inaccurate information” to receive an

opinion that would allow it to avoid a merger. 19         In the current case, the Court of

Chancery observed that the record did not reflect any affirmative acts taken by ETE

to mislead Latham and prevent the issuance of the 721 opinion.

         Finally, the Court of Chancery addressed Williams’ claim that ETE falsely

represented that it knew of nothing that would indicate that the 721 opinion could

not be issued as of the date the Agreement was signed.             It noted that Latham’s


17
     Id.
18
     965 A.2d 715 (Del. Ch. 2008).
19
     Williams Companies, Inc., 2016 WL 3576682, at *18.

                                              13
analysis was not a “fact” that required disclosure and was instead a theory of tax

liability that was not developed at the time of signing the Agreement.20             The Court

concluded that ETE did not breach its representations and warranties regarding the

721 opinion.

         Based on its analysis, the Court of Chancery denied Williams’ request to

enjoin ETE from terminating the merger based on the failure to obtain the 721

opinion from Latham.         This appeal followed.

                             III.   STANDARD OF REVIEW

         “We review the Court of Chancery’s conclusions of law de novo and its

factual findings with deference.”21

                                     IV.    DISCUSSION

                                                A.

         Williams first claims that the Court of Chancery erred by improperly deciding

that ETE did not breach its efforts obligations because it interpreted “commercially

reasonable efforts” and “reasonable best efforts” as imposing only a negative duty

not to thwart or obstruct performance of the Agreement, rather than             an affirmative

duty to help ensure performance.           It argues that the Court of Chancery should have



20
     Id. at *19.
21
     SV Inv. Partners, LLC v. ThoughtWorks, Inc., 37 A.3d 205, 209-10 (Del. 2011).

                                                14
recognized that ETE’s acts and omissions constituted a breach of its covenants

because those acts and omissions were a failure by ETE to comply with its

affirmative obligations to try to obtain the 721 opinion.

         Pertinent findings by the Vice Chancellor on this issue are as follows:

                Williams has not pointed to other facts which [ETE]
                withheld from or misrepresented to Latham that have
                caused it to withhold the 721 Opinion. There is simply
                nothing that indicates to me that [ETE] has manipulated
                the knowledge or ability of Latham to render the 721
                Opinion, or failed to fully inform Latham, or do anything
                else, whether or not commercially reasonable, to obstruct
                Latham’s issuance of the condition-precedent 721
                Opinion, or that had a material effect on Latham’s
                decision. Therefore, I have no basis to find that [ETE] is
                in material breach of the commercially reasonable efforts
                requirement.22

         The Vice Chancellor distinguished Hexion from the present case:

                Unlike the record in this case, in Hexion the buyer actively
                and affirmatively torpedoed its ability to finance. If the
                record here reflected affirmative acts by [ETE] to coerce
                or mislead Latham, by which actions it prevented the
                issuance of the [721 Opinion], the facts here would more
                resemble Hexion, and the outcome here would likely be
                different.23




22
     Williams Companies, Inc., 2016 WL 3576682, at *17 (emphasis added).
23
     Id. at *18.

                                              15
         The Court of Chancery in this case took an unduly narrow view of Hexion.

The buyer in Hexion required financing to complete the transaction. 24      With respect

to the financing requirement, the court there observed that “to the extent that an act

was both commercially reasonable and advisable to enhance the likelihood of

consummation of the financing, the onus was on [the buyer] to take that act.” 25

After the buyer developed concerns about the solvency of the combined entity, the

court in Hexion observed that “a reasonable response to such concerns might have

been to approach the [seller’s] management to discuss the issue and potential

resolutions of it.”26      Later, after the buyer consulted with advisors and developed a

more substantial solvency concern, the court observed that the buyer “was then

clearly obligated to approach [the seller’s] management to discuss the appropriate

course to take to mitigate” the solvency concerns. 27          The buyer chose not to

approach the seller’s management, and the court reasoned “[that] choice alone would

be sufficient to find that [the buyer] had knowingly and intentionally breached its

covenants under the merger agreement.” 28              Hexion, with which we agree,




24
     Hexion, 965 A.2d at 724.
25
     Id. at 749 (emphasis added).
26
     Id. (emphasis added).
27
     Id. at 750.
28
     Id.

                                              16
recognized that covenants like the ones involved here impose obligations to take all

reasonable steps to solve problems and consummate the transaction.29

       Section 5.03 of the Agreement in this case states:

               [The parties] shall use [their] reasonable best efforts to,
               and shall cause their respective Affiliates to use
               reasonable best efforts to, take, or cause to be taken, all
               actions, and to do, or cause to be done, and to assist and
               cooperate with the other parties in doing, all things
               necessary, proper, or advisable to consummate and make
               effect, in the most expeditious manner practicable, the
               [merger] . . .30

This language not only prohibited the parties from preventing the merger, but

obligated the parties to take all reasonable actions to complete the merger.             Section

5.03 also provides that the parties will “us[e] reasonable best efforts to accomplish

the following: (i) the taking of all acts necessary to cause the conditions to Closing

to be satisfied as promptly as practicable.” 31

       Section 5.07 states that “[the parties] shall cooperate and each use its

commercially reasonable efforts to cause (i) the Merger to qualify for [tax free




29
    See id. at 755-56. “[The buyer’s] utter failure to make any attempt to confer with [the seller]
when [the buyer] first became concerned with the potential issue of insolvency, both constitutes a
failure to use reasonable best efforts to consummate the merger and shows a lack of good faith.”
Id.
30
    App. to Appellant’s Opening Br. at 671 (Merger Agreement § 5.03(a)) (emphasis added).
31
    Id. (emphasis added).

                                                17
treatment under Section 721].” 32              These provisions placed an affirmative

obligation on the parties to take all reasonable steps to obtain the 721 opinion and

otherwise complete the transaction.         The Court of Chancery erred here by focusing

on the absence of any evidence to show that ETE caused Latham to withhold the

721 opinion.

         There was evidence, recognized by the Court of Chancery, from which it

could have concluded that ETE did breach its covenants, including evidence that

ETE “did not direct Latham to engage earlier or more fully with Williams’ counsel,

failed itself to negotiate the issue directly with Williams, failed to coordinate a

response among the various players, went public with the information that Latham

had declined to issue the 721 Opinion, and generally did not act like an enthusiastic

partner in pursuit of consummation of the [Merger Agreement].” 33               For the

foregoing reasons, the Court of Chancery did not properly analyze whether or not

ETE breached its covenants.

                                               B.

         Williams next contends that, after finding that ETE breached its covenants,

the Court of Chancery should have shifted the burden to ETE to prove that its breach



32
     Id. at 680 (Merger Agreement § 5.07(b)) (emphasis added).
33
     Williams Companies, Inc., 2016 WL 3576682, at *17.

                                               18
did not materially contribute to the failure of the closing condition.           We agree that

once a breach of a covenant is established, the burden is on the breaching party to

show that the breach did not materially contribute to the failure of the transaction. 34

The plaintiff has no obligation to show what steps the breaching party could have

taken to consummate the transaction. 35              To the extent the Vice Chancellor

discusses the burden of proof on causation in the text of his opinion, he appears to

improperly place that burden upon Williams with comments such as this:

“Williams can point to no commercially reasonable efforts that [ETE] could have

taken to consummate the [merger]; specifically, in this context, actions available to

[ETE] that would have caused Latham, acting in good faith, to issue the 721

Opinion.”36

       This quotation appears in the section of the Court of Chancery’s opinion in

which it analyzes whether ETE breached its covenants.             Since the Court concluded

that ETE did not breach its covenants, it did not separately analyze in the text of its

opinion whether a breach of covenant materially contributed to the failure of the




34
   RESTATEMENT (SECOND) OF CONTRACTS § 245 cmt. B (1981).
35
   Bloor v. Falstaff Brewing Corp., 601 F.2d 609 (2d. Cir. 1979). “Plaintiff was not obliged to
show just what steps [the defendant] could reasonably have taken” to facilitate the agreement. Id.
at 614.
36
   Williams Companies, Inc., 2016 WL 3576682, at *16.

                                               19
transaction.       It did, however, acknowledge and address the burden of proof issue

in a footnote:

                  Williams appears, in post-trial briefing to argue that the
                  burden is on [ETE] to demonstrate a negative – that its lack
                  of more forceful action after discovering the Section
                  721(a) problem did not cause Latham’s inability to render
                  the 721 Opinion. Williams cites this Court’s decision in
                  WaveDivision Holdings, LLC v. Millennium Digital Media
                  Sys., LLC for the proposition that “[i]t is an established
                  principle of contract law that where a party’s breach by
                  nonperformance contributes materially to the non-
                  occurrence of a condition of one of his duties, the non-
                  occurrence is excused,” and that “once it has been
                  determined that [a defendant] breached [the contract], the
                  burden of showing that breach did not materially
                  contribute to [failure of the condition] is properly placed
                  on [the defendant].” This is unremarkable; once a
                  plaintiff has demonstrated a breach leading to adverse
                  consequences, it is an affirmative defense that the
                  consequences were otherwise unavoidable. The problem
                  for Williams is that the record is barren of any indication
                  that the action or inaction of the Partnership (other than
                  simply drawing Latham’s attention to the problem)
                  contributed materially to Latham’s inability to issue the
                  721 Opinion. This is true regardless of whether [ETE’s]
                  actions were commercially reasonable. In other words,
                  no matter how I allocate the burden of proof, the result is
                  the same.37

          This footnote demonstrates that the Court of Chancery considered the result it

would reach if it found that ETE breached its covenants as alleged by Williams and


37
     Id. at *16 n.130. (internal citations omitted).

                                                       20
shifted the burden to ETE to show that such breach did not materially contribute to

the failure of the 721 opinion condition.            The Court finds in its footnote that when

so analyzed, ETE met its burden by showing “that the record is barren of any

indication that the action or inaction of the Partnership (other than simply drawing

Latham’s attention to the problem) contributed materially to Latham’s inability to

issue the 721 Opinion.”38        This determination is based on findings of fact which are

not clearly erroneous.       For this reason, we have concluded that Williams’ argument

that the Court of Chancery should be reversed because it improperly placed the

burden of proving causation upon it, must fail.

                                                C.

         Finally, Williams claims that ETE is equitably estopped from terminating the

Merger Agreement because at the time the agreement was entered into, ETE

represented that it did not “know[] of the existence of any fact that would reasonably

be expected to prevent [the transaction] from qualifying as an exchange to which

Section 721(a) of the Code applies.”39

                The doctrine of equitable estoppel may be invoked “when
                a party by his conduct intentionally or unintentionally
                leads another, in reliance upon that conduct, to change
                position to his detriment.” To establish estoppel it must
                be shown that the party claiming estoppel lacked
38
     Id.
39
     App. to Appellant’s Opening Br. at 652 (Merger Agreement § 3.02(n)(i)).

                                                21
              knowledge or the means of obtaining knowledge of the
              truth of the facts in question; relied on the conduct of the
              party against whom estoppel is claimed; and suffered a
              prejudicial change of position as a result of his reliance. 40

       Williams claims that it relied on ETE’s above-quoted representation when it

agreed to enter into the particular transaction structure contained within the Merger

Agreement, including the 721 opinion condition.            Williams contends that when

ETE ultimately became concerned about the 721 opinion, the facts and law

surrounding the transaction had not changed, and Latham should have considered

the possibility that the value of ETE’s partnership units could decline when it

initially represented that the transaction would qualify as tax free.

       However, ETE did not fail to disclose any facts known to it at the time the

agreement was signed.         What changed was Latham’s theory of tax liability.

There is nothing in the record to suggest that Latham’s ultimate tax theory, which

took into account ETE’s devalued partnership units, existed at the time the

agreement was signed and was withheld from Williams.              Williams contends that

ETE conveniently pointed out the potential tax issue to Latham as a way to terminate

the agreement once it became financially undesirable to ETE.          However, the Court

of Chancery accepted Whitehurst’s testimony that he only realized the potential

40
  Waggoner v. Laster, 581 A.2d 1127, 1136 (Del. 1990) (quoting Wilson v. American Ins. Co.,
209 A.2d 902, 903-04 (Del. 1965)) (internal citation omitted).

                                             22
issue when he was considering the tax implications of potential actions for ETE to

take in response to the decline in the energy market.   Therefore, there is nothing to

indicate that ETE knew of this potentially problematic theory of tax liability at the

time it made its representations and chose not to disclose it to Williams.     At the

time ETE entered into the agreement, it desired the consummation of the Merger

Agreement and likely would have wanted to address any problem that could result

in either party terminating the agreement.       Therefore, ETE did not breach its

representations and warranties and Williams’ estoppel argument fails.

                                 V.   CONCLUSION

         For the foregoing reasons, the judgment of the Court of Chancery is affirmed.

The time for filing a motion for reargument is shortened to seven days. 41




41
     Supr. Ct. R. 18.

                                           23
STRINE, Chief Justice, dissenting:

         The world can look much different depending on the lens through which you

view it. That is certainly the case when you are a judge or a jury. And the lens that

a judge uses when he determines whether a party has breached a contract and caused

harm is supposed to influence how he assesses the evidence before him. In the

parlance of judges, the terms “burden of proof” and “standard of review” refer to the

pair of glasses you wear to decide a case.

         In this case, there is no doubt that the Court of Chancery acted with its historic

diligence in addressing expedited litigation involving a huge record with rapid speed

and issuing a thoughtful, careful decision. My friends in the Majority affirm the

outcome of that decision, even though they concede that the Court of Chancery did

not view the case through the appropriate lens.42 The Court of Chancery’s decision

focuses intently on one issue, whether the person I will call the “Latham Tax

Lawyer” was honest when he said he could not give the required tax opinion. But,

that was not the relevant issue. The fact that the Latham Tax Lawyer did not give

the required tax opinion was not contested. If it had been the central issue, there

would not have been a case. The question was why the Latham Tax Lawyer did not




42
     Majority Op. at 18.

                                             24
give the required opinion, and that was not a question centrally dependent on his

state of mind, as if he was the defendant in a fraud trial.

       The Majority admits that the Court of Chancery did not analyze that question

of why the Latham Tax Lawyer did not give the required opinion in the appropriate

manner.43 The need for the opinion came about when an oil and natural gas pipeline

operator, ETE, agreed to buy another pipeline operator, Williams. They signed a

merger agreement on September 28, 2015.                 Like the Majority, I refer to that

agreement as the “Merger Agreement.” I also use “721 opinion” the way the

Majority does, to refer to an opinion by the Latham Tax Lawyer, required by the

Merger Agreement as a condition to closing, that the transfer of Williams’ assets in

exchange for partnership units “should” be a tax-free exchange under Section 721(a)

of the Internal Revenue Code.

       The Merger Agreement imposed a specific duty on ETE in connection with

the 721 opinion, which was to use “commercially reasonable” efforts to obtain the

opinion. 44    That is an affirmative covenant and a comparatively strong one. 45


43
   Id.
44
   App. to Appellant’s Opening Br. at 680 (Merger Agreement, § 5.07(b)). The Majority also
rightly notes that ETE was obligated to use “reasonable best efforts” to consummate the transaction
as a whole. Id. at 671 (Merger Agreement, § 5.03(a)).
45
    See LOU R. KLING & EILEEN T. NUGENT, NEGOTIATED ACQUISITIONS OF COMPANIES,
SUBSIDIARIES AND DIVISIONS § 13.06 (2001) (observing that “best efforts” standards can
potentially lead to the party making the promise having to take extreme measures to fulfill it and

                                               25
Instead of determining whether ETE in fact used commercially reasonable efforts to

obtain the 721 opinion, the Court of Chancery focused on whether ETE had

somehow prevented the Latham Tax Lawyer from giving the 721 opinion,46 and

concluded that, although ETE had certainly not desired the 721 opinion because it

wished to get out of the deal, ETE had not coerced or misled Latham to prevent the

issuance of that opinion.47

       The Court of Chancery, applying an understandable reluctance to call the

Latham Tax Lawyer dishonest or a bad man, accepted his testimony, that he just

could not get to the point where he could give the opinion. 48 That was so even in a

context where Latham had indicated at the time the Merger Agreement was signed—

indeed for the six months up until the moment ETE contacted it—that it was ready,

based on what it knew, to give the required 721 opinion.49 That in a context where

the most central consideration terms in the Merger Agreement used an exchange

ratio trading a fixed amount of cash for a fixed amount of stock—stock that tracked




that “commercially reasonable efforts” is a strong, but slightly more limited, alternative).
46
   E.g., Williams Companies, Inc., 2016 WL 3576682, at *18 (“Unlike the record in this case, in
Hexion the buyer actively and affirmatively torpedoed its ability to finance. If the record here
reflected affirmative acts by [ETE] to coerce or mislead Latham, by which actions it prevent
issuance of the 721 Opinion . . . the outcome here would likely be different.”).
47
   Id. at *18.
48
   Id. at *15.
49
   Id. at *7.

                                              26
the performance of ETE, the value of which could obviously move based on

evolving economic conditions, including the market’s assessment of the transaction

itself. The consideration portion of a definitive acquisition agreement like the

Merger Agreement here is about as fundamental as it gets, 50 and Latham never

claimed not to know the amount of shares to be exchanged for cash was fixed. And

the public disclosures of the deal described this structure. 51 As the Majority52 and

the Court of Chancery53 acknowledge, ETE itself also represented and warranted

that it knew of nothing that would prevent Latham from issuing the 721 opinion.54

Fairly read, this means that ETE had no reason to believe that the structure of the

deal’s exchange provisions would give rise to a challenge to its tax-free treatment.

So, if, as ultimately happened, the Latham Tax Lawyer was unable to issue the 721

opinion based on his post-signing recognition of facts known pre-signing, a


50
   JAMES C. FREUND, ANATOMY OF A MERGER: STRATEGIES & TECHNIQUES FOR NEGOTIATING
CORPORATE ACQUISITIONS 56 (1975) (“[T]he subject of purchase price [is] obviously the single
most important aspect of any acquisition transaction.”); id. at 175 (“In spite of all the legalistic
paraphernalia of modern acquisitions . . . the purchase price remains the most venerable indicium
of a gratifying deal.”); KLING & NUGENT, supra note 45, at § 1.01 (describing price and form of
consideration as two of the “threshold questions” of an acquisition); id. at § 1.05[1] (describing
the terms of a merger agreement specifying price and form of consideration as potentially “the
most important in the entire agreement”).
51
   Appellees’ App. to Answering Br. at B0020-22 (Form 8-K/A, the Williams Companies, Inc.
with corrected Merger Agreement, Oct. 1, 2015).
52
   Majority Op. at 21.
53
   Williams Companies, Inc., 2016 WL 3576682, at *6.
54
   App. to Appellant’s Opening Br. at A636-37 (Agreement and Plan of Merger, dated Sept. 28,
2015 § 3.01(n)(i)).

                                                27
condition would have failed, quite unexpectedly and with more than the whiff of

either a lack of care or less innocent causal factors, including improper client

pressure. Stuff like this happens in complex mergers. But, what also typically

happens then is that both parties work together to resolve those problems in good

faith. If one party does not, and that party also committed to a particular level of

effort to fulfill such conditions, that may constitute a covenant breach.

       As the Majority notes, under our law if a party establishes a breach of a

covenant to bring about a condition at closing, the burden is on the breaching party

to show that the breach did not materially contribute to the failure of that closing

condition. 55     In this context, where the Merger Agreement’s “commercially

reasonable efforts” term obligated ETE to take affirmative steps to make sure the

721 opinion condition was satisfied and, instead, ETE did not, ETE must then prove

that the 721 opinion condition would not have been satisfied had it acted

appropriately. 56 In lieu of applying this framework, the Court of Chancery focused


55
   Majority Op. at 18-19.
56
   WaveDivision Holdings, LLC v. Millennium Digital Media Systems, L.L.C., 2010 WL 3706624,
at *15 (Del. Ch. Sept. 17, 2010) (breaching party required to demonstrate that breach did not
materially contribute to failure of condition); Hexion Specialty Chemicals, Inc. v. Huntsman Corp.,
965 A.2d 715, 755 (Del. Ch. 2008) (placing burden on breaching party to show “that there were
no viable options it could exercise to allow it to perform without disastrous financial
consequences”); see also Bloor v. Falstaff Brewing Corp., 601 F.2d 609, 614 (2d Cir. 1979)
(shifting burden to breaching party to “prove there was nothing significant it could have done to
[fulfill its contractual commitment] that would not have been financially disastrous”);
RESTATEMENT (SECOND) OF CONTRACTS 245 cmt. b (“[I]f it can be shown that the condition would

                                                28
on whether the Latham Tax Lawyer was honest in saying he could not give the 721

opinion. Admittedly, the Court of Chancery opinion contained a cursory paragraph,

consigned to a footnote, that said the record was “barren of any indication” that

ETE’s action or inaction materially contributed to the Latham Tax Lawyer’s

inability to issue the 721 opinion. 57

       But, I do not believe that the footnote saying that if the Court of Chancery had

properly placed this burden on ETE, then the case would have come out the same

way, is a substitute for a proper analysis. 58 The Latham Tax Lawyer was put in an

extremely awkward position by the manner in which the potential 721 opinion issue

was flagged by ETE itself and by ETE’s conduct after it asked the Latham Tax

Lawyer to rethink his position based on his client’s musings. By the time of trial,

ETE had put the Latham Tax Lawyer as far out on a professional tree limb as it could

without causing him to literally plummet to earth. But, this behavior of ETE and

its effect on the non-satisfaction of the condition was not viewed through the gimlet-

eyed lens that the appropriate standard of review required, one that required ETE to

prove that its own breaching conduct did not materially contribute to the Latham


not have occurred regardless of the lack of cooperation, the failure of performance did not
contribute materially to its non-occurrence and the rule does not apply. The burden of showing
this is properly thrown on the party in breach.” (emphasis added)).
57
   Williams Companies, Inc., 2016 WL 3576682, at *16 n.130.
58
   Id.

                                             29
Tax Lawyer’s inability to deliver the 721 opinion.

       ETE’s suspicious behavior really only got going several months after ETE

and Williams signed the deal, after the energy markets in which they both participate

materially deteriorated. 59 This market decline meant both ETE and Williams were

worth less. For ETE that raised concerns about its capacity to take on additional

debt to finance the cash component of the merger, 60 and some at ETE also believed

that Williams was more exposed to the downturn than ETE, thus also decreasing the

value of what ETE was buying. 61 Crucially, this also meant that, although at the

time the Merger Agreement was signed, ETE was paying about $6 billion in cash in

exchange for ETC stock worth roughly $6 billion, the ETC stock, which tracked

ETE’s market value, had declined to around $2 billion. Yet, because the amount of

stock and the dollar amount were both fixed, the exchange became unequal with

ETE giving, by some estimates, $4 billion more in cash than it was receiving in the

current value of ETC stock.62

       By January, ETE’s chairman’s preferred solution was terminating the Merger




59
   Id. at *4.
60
   Id.
61
   App. to Appellant’s Opening Br. at A2599-600 (Plaintiff’s Corrected Opening Pretrial Br.,
dated June 16, 2016).
62
   Williams Companies, Inc., 2016 WL 3576682, at *6.

                                            30
Agreement because of this economic deterioration. 63 Then, in late March, the

Latham Tax Lawyer received an unexpected call from Brad Whitehurst.

Whitehurst was ETE’s senior executive in charge of tax matters, among other things.

The call was unexpected in the sense that in the six months from signing up until

Whitehurst had what the Court of Chancery termed his “epiphany,” 64 Whitehurst

had never before raised a concern about the structure of the exchange.                       But,

Whitehurst’s epiphany was that he supposedly had believed that the number of ETC

shares, i.e., stock tracking ETE’s performance, exchanged for cash would float based

on their value, rather than the reality that both the cash consideration and number of

shares were fixed. 65 Whitehurst was supposedly concerned that, because the value

of the ETC shares had declined materially due to economic conditions, the cash (still

$6 billion) and the value of the shares (down from $6 billion to $2 billion) no longer

matched. Thus, on Whitehurst’s logic, the IRS might apply the “excess” $4 billion

to the leg of the transaction where ETC contributed Williams’ assets to ETE in



63
   Id. at *4.
64
   Id. at *12. Epiphany is an odd word for this spiritual revelation. Put aside the more general
concern about combining the sacred and the profane, Whitehurst’s epiphany did not inspire him to
selflessly give away his wealth and stock to devoting his life to helping the poor and lost come to
righteousness. His epiphany involved conjuring up a reason his employer could avoid buying a
company it once dearly desired and instead forsaking that partner. Less an epiphany, then, and
more like if Fezziwig had been visited by Marley and urged to change his ways and become like
pre-reform Scrooge!
65
   Williams Companies, Inc., 2016 WL 3576682, at *6.

                                                31
exchange for ETE units, triggering a taxable gain.66

       Whitehurst then communicated this concern with the Latham Tax Lawyer on

March 29, 2016 triggering a review by Latham of whether it could give the opinion.

Absent Whitehurst’s epiphany that required Latham to dig into this new issue, no

evidence in the record suggests that Latham would not have simply proceeded to

give the opinion it had always intended to give. 67 Indeed, at the time, as the Court

of Chancery found, “no one else shared [Whitehurst’s] view.” 68                 Whitehurst

testified that, despite ample opportunities to do so, including reviewing drafts of deal

documents describing the exchange ratio, he hadn’t understood that the amount of

stock was fixed. 69      Williams, unsurprisingly, contested the innocence of this

epiphany.

       Unlike the Majority, I see no part of the Court of Chancery’s decision where

it accepted Whitehurst’s story that he only realized that the amount of stock was

fixed six months after the agreement was signed. Rather than deciding whether

Whitehurst was telling the truth, the Court of Chancery just punted, assuming that it




66
   Id.
67
   Id. at *7 (“Before its conversation with Whitehurst, Latham was preparing to issue the 721
Opinion and had never considered that it would be unable to issue it.” (emphasis added)).
68
   Id. at *6.
69
   Id. at *7.

                                             32
was not material to the ultimate issue. 70 Indeed, that punt illustrates the importance

of using the correct lens and the inadequacy of the Court of Chancery’s footnote

because, to my mind, it matters very much in determining whether ETE met its

burden to assess whether Whitehurst, a primary operative for ETE on this

transaction, was telling the truth when he said that he, the Executive Vice President

and Head of Tax of a publicly traded partnership that was a routine dealmaker, was

not aware that the value of only one side of a critical part of the merger consideration

floated with the valuation of ETE’s business and was thus subject to the vagaries of

the market price of oil and gas. If one does not believe that rather improbable claim,

it colors everything that Whitehurst says he did or didn’t do and of conduct in the

record that he cannot disclaim. 71


70
   The Vice Chancellor noted “I do not need to resolve the issue of Whitehurst’s motivation” when
dealing with Latham’s analysis, id. at *12, and that the question of if Whitehurst’s call to Latham
was “a veiled suggestion” that Latham assist ETE in avoiding the transaction was “an issue on
which I need not opine,” id. at *17. Indeed, the Vice Chancellor seemed to even express some
skepticism when he referred to “Whitehurst’s epiphany, if such it was.” Id. at *12.
71
   I respectfully disagree with my friends in the Majority on one key, related point. The Majority
says that Williams does not challenge that Latham’s “determination that it could not issue the 721
opinion was a good faith determination made by it independent of any conduct by ETE.” Id. at 4
(emphasis added). Although I agree that Williams does not challenge on appeal the Court of
Chancery’s finding that Latham acted in good faith in declining to give the 721 opinion, I do not
agree that Williams did not challenge the Court of Chancery’s terse conclusion that Latham’s
failure to issue the opinion was not influenced by the conduct of ETE and, in particular,
Whitehurst. In fact, the central focus of Williams’ appellate argument is that the Court of
Chancery failed to apply the appropriate prism on that question, and that it erred because it should
have required ETE to show that the 721 opinion condition would not have been satisfied had it
acted appropriately. See, e.g., Appellant’s Opening Br. at 23 (“Following Delaware law, the
Court of Chancery should have . . . [required] ETE to prove that [its] acts and omissions did not

                                                33
        Lawyers by nature tend to be loyal to their clients. This is sort of baked into

our professional rules. 72         When Whitehurst told the Latham Tax Lawyer his

concerns, it was rather obvious that ETE did not wish to go through with the deal.

If somehow a condition excused closing, that would have made ETE ecstatic.

When Whitehurst therefore started musing about the potential tax law implications

of a provision in the agreement that is kind of hard not to know about, it is difficult

to imagine that he was not putting implicit, but undeniably extant, pressure on the

Latham Tax Lawyer to have doubts about whether he could give the opinion. Now,

of course, ETE argues that this pressure was just of a legitimate legal nature, in the

sense of raising, in an innocent way, a potential legal problem to be solved.

        To assess if this were so, one would of course wish to consider whether

Whitehurst was credible in claiming that by gosh, the part-fixed, part-floating nature



materially contribute to the failure of the closing condition.”); id. at 28 (“ETE’s secrecy, its refusal
to permit Latham to engage with Cravath, its decision to box Latham in by quickly publishing
Latham’s views, its refusal to explore potential solutions to Latham’s concerns, its failure to
explore Williams’ proposed fixes or to ask its tax advisors to try to come up with their own and,
generally, its decision to place its own economic interest in terminating the Transaction ahead of
its contractual commitments all plainly breached ETE’s efforts obligations.”); id. at 36 (“We
simply do not know how Latham ultimately would have resolved the issues if, contrary to fact,
ETE had engaged meaningfully with Williams and otherwise complied with its efforts
obligations.”).
72
   E.g., Del. Lawyers’ Rules of Prof. Conduct R. 1.3 cmt. 1 (“A lawyer should pursue a matter on
behalf of a client despite opposition, obstruction or personal inconvenience to the lawyer, and take
whatever lawful and ethical measures are required to vindicate a client’s cause or endeavor. A
lawyer must also act with commitment and dedication to the interests of the client and with zeal in
advocacy upon the client’s behalf.”).

                                                  34
of the exchange just occurred to him when his employer no longer wished to do the

deal, and he had just became curious about its tax implications then. And that all

of this was true even though a core part of Whitehurst’s title suggests he was

supposed to think about the implications of the exchange ratio and the tax eligibility

of the deal before ETE signed the agreement. And, it is not as though Whitehurst

came off the back of the proverbial vegetable truck. Before ETE, he had a long tax

career73 and no doubt saw the effects of more than one boom and bust cycle in the

oil and gas industry. If his testimony that he did not know about the ratio until six

months after the deal was signed was not credible, Whitehurst’s legal curiosity

would tend to look like an attempt to influence the Latham Tax Lawyer not to give

the 721 opinion and it would also tend to suggest his communication with the

Latham Tax Lawyer conveyed client pressure to get to no. Given that ETE, and by

extension, Whitehurst, had exactly the opposite duty—to act in a commercially

reasonable fashion to obtain the 721 opinion                 74
                                                                  —this would be extremely

problematic.

       Compounding this curious beginning is how Whitehurst and the Latham Tax



73
   App. to Appellant’s Opening Br. at A2817 (Trial Tr., Vol. 1, dated June 20, 2016, Bradford
Whitehurst).
74
   See Majority Op. at 17 (“These provisions placed an affirmative obligation on the parties to take
all reasonable steps to obtain the 721 opinion and otherwise complete the transaction.”).

                                                35
Lawyer, and therefore ETE, approached its compliance with the covenant to act in a

commercially reasonable fashion.           The Majority seems to suggest that ETE

encouraged the Latham Tax Lawyer to come to the table with its transactional

counsel, Wachtell, and try to brainstorm about the tax issue and solve it. 75 That is

in fact the opposite of what the record suggests happened. When Wachtell was

approached by the Latham Tax Lawyer about the tax issue—nine days after the issue

was originally raised, a lifetime by deal standards—Wachtell’s reaction was that

there was no issue.76 Thus, Wachtell was well positioned to help ETE satisfy its

contractual duties by working with Latham to get to the point where the required

opinion could be given. Instead of encouraging this type of cooperation and making

absolutely clear to Latham that ETE wanted it to get to yes and to be supple and

open-minded about noodling with others about the issue, ETE did the opposite and

at no point was Wachtell asked to assist with the analysis. Rather, the record

suggests ETE took steps to keep Wachtell away from collaboration with Latham to

get to yes.77 Likewise, when ETE hired other tax lawyers, at Morgan Lewis, to

consult on the issue, it did not ask them to get in a room with Latham and Wachtell



75
   Id. at 8.
76
   App. to Appellant’s Opening Br. at A907 (Handwritten notes of April 7, 2016 conference call
(JX132)).
77
   Id. at A2865 (Trial Tr., Vol. 1, dated June 20, 2016, Alison Preiss Video Clips).

                                             36
and figure out a way to get to yes.78 In fact, ETE told Morgan Lewis that they were

not to talk to Latham. 79

       Even more important, Whitehurst and Latham kept the other side of the

transaction in the dark for a commercially unreasonable and thus highly suspect

period of time. It was a full two weeks after Whitehurst contacted the Latham Tax

Lawyer, before Latham informed Williams’ counsel, Cravath, that they were not in

a position to deliver the 721 opinion. This was the first time that Cravath, or, it

appears, any of Williams’ advisors or staff, had heard of the problem and it was only

once the Latham Tax Lawyer had come to a firm conclusion. Then, a mere six days

later, ETE filed an amended proxy statement that publicly disclosed Latham’s

position that it would not deliver the 721 opinion, in Whitehurst’s words

“poison[ing] the well.”80 There was no reason to amend the disclosure so urgently

nor is it obviously the case that Latham’s view necessarily had to be included at the

time.81




78
   A Cravath partner testified that a Wachtell partner told him that Wachtell “was not permitted
by” ETE to speak with Morgan Lewis. Id. at A2800 (Trial Tr., Vol. 1, dated June 20, 2016, Minh
Van Ngo).
79
   Id. at A2930 (Trial Tr., Vol. 2, dated June 21, 2016, William McKee).
80
   Id. at A2433 (Deposition of Brad Whitehurst taken on June 13, 2016).
81
   In fact, Cravath objected to including the disclosure—unsurprising because they had not heard
back from Latham on their proposed fixes, much less on their position that the issue was, in fact,
a nonissue. Id.

                                               37
      Under the circumstances, disclosing Latham’s position easily could be read as

another tactic by ETE to pin the Latham Tax Lawyer down. In human terms, by

issuing a public statement that Latham could not deliver the 721 opinion, ETE put

the Latham Tax Lawyer in a position of having to publicly move off its previous

position after the world had been told what that was.       It does not take much

experience with human nature to realize how much more difficult it is to get

someone—say a judge—to reverse herself after making a ruling than it is to get that

person to remain open to multiple possibilities in advance of a ruling. Anyone who

consults statistics about the success rate of reargument motions would be convinced

of this obvious human reality. That reality must be taken into account with the stark

numbers: ETE concealed the issue from Williams for fourteen days, but took barely

six days to try to work the issue out with them.

      Somewhat trampled in ETE’s rush to file the good news were Cravath’s

proposals for addressing Latham’s concerns, which they delivered to Latham only

two days after hearing of the concerns for the first time. Latham didn’t get back to

Cravath on those proposals until well after the proxy was filed, fifteen days after

Cravath proposed them. Of course, we know Latham’s answer was that neither

proposal was workable, although there was testimony that some at Latham believed




                                         38
at least one proposal would help and that there was concern it “helps enough.” 82

Morgan Lewis also seemed to think that one of Cravath’s proposals might work. 83

But, by this time, Latham was in the public Klieg lights, its client ETE clearly did

not wish to get to yes, and Whitehurst was not arguing that everyone get in a room

and solve the problem. Rather, the Court of Chancery’s fact finding suggests the

conversation was rather one way:           “Latham conveyed its conclusion on the

proposed modifications to both Williams and Cravath.” 84 So, these suggestions,

which in a more collaborative environment shaped by good faith on the part of ETE

might have provided a complete solution, instead were given little consideration.

       The failure to get to yes is all the more questionable because of the number of

people who seemed to think Whitehurst’s theory was, at best, strained. Initially, no

one on either side shared Whitehurst’s view or that of the Latham Tax Lawyer who

adopted it.85 Lawyers from both Cravath and Wachtell thought there was either no

issue or potential solutions to the issue Whitehurst identified. Williams’ expert,

Professor Howard Abrams, testified no reasonable tax attorney would refuse to issue




82
   Id. at A928 (Email chain re: McKee & Structure Changes, dated Apr. 15, 2016 (JX151)).
83
   Id. at A1028 (Email chain re: Notes from Latham call, with attachment, dated May 23, 2016
(JX534)).
84
   Williams Companies, Inc., 2016 WL 3576682, at *8.
85
   Id. at *6.

                                            39
the 721 opinion, 86 and, indeed, ETE’s own experts, Abraham Shashy and Professor

Ethan Yale,87 didn’t buy into the Latham Tax Lawyer’s theory—they had their own

reasons for warning the transaction risked not receiving tax-free treatment, 88 and

those experts conceded that changing certain questionable factual assumptions

provided to them by ETE might reverse their conclusion entirely. 89

       Like the Court of Chancery, this recitation of the record leaves me

sympathetic with the Latham Tax Lawyer when he said he could not get to yes. But,

unlike the Court of Chancery, this record suggests to me the need for a view of the

evidence through the right lens, not to exculpate the very conduct that put Latham


86
    Id. at *14. Professor Abrams is the Warren Distinguished Professor and director of the tax
program at University of San Diego Law School. App. to Appellant’s Opening Br. at A2891
(Trial Tr., Vol. 2, dated June 21, 2016, Howard Abrams).
87
    Abraham N. M. Shashy, Jr. is the Tax Practice Group Leader at the law firm King & Spalding
LLP, id. at A1840-41 (Expert Affidavit of Abraham N. M. Shashy, Jr., dated June 3, 2016
(JX572)), and Professor Ethan Yale is a Professor of Law at the University of Virginia School of
Law, id. at A1890 (Expert Affidavit of Professor Ethan Yale, dated June 3, 2016 (JX573)).
88
    Id. at A1870 (Expert Affidavit of Abraham N. M. Shashy, Jr., dated June 3, 2016 (JX572))
(stating that “the risk is substantial” that the transaction would not receive tax-free treatment); id.
at A1911 (Expert Affidavit of Professor Ethan Yale, dated June 3, 2016 (JX573)) (stating “there
is serious doubt” that the transaction would receive tax-free treatment).
89
    Id. at A2244 (Deposition of Abraham N.M. Shashy, Jr. taken on June 11, 2016); id. at A2926
(Trial Tr., Vol. 2, dated June 21, 2016, Ethan Yale). The crux of the issue was that ETE told the
tax experts that there was no non-tax motive for the transfer of ETC shares to ETE, e.g., id. at
A2230 (Deposition of Abraham N.M. Shashy, Jr. taken on June 11, 2016), but, Williams argues
that the Court of Chancery’s finding that another reason for the transfer was that “it aligned
interests between [ETE] and ETC” so that “[a]ctions taken by [ETE after the consummation of the
merger], therefore, would likely be consistent with the interests of ETC and its stockholders as
well,” Williams Companies, Inc., 2016 WL 3576682, at *13, suggests ETE’s provided assumption
was inaccurate, and, thus, ETE’s experts would likely have come to a different view with a more
accurate picture of the transaction.

                                                 40
in such an awkward position. In other words, the Court of Chancery’s sympathy

toward the Latham Tax Lawyer had the effect of ignoring the covenant-breaching

behavior that put the Latham Tax Lawyer under undue professional pressure in the

first place.   The multiple forms of behavior that breached ETE’s affirmative

obligation are exactly the kind of conduct that compromised the ability of the Latham

Tax Lawyer to find a way to yes, and that foreclosed any meaningful consideration

of economically immaterial adjustments to the transaction that might have solved

any genuine tax concern.

      As to this, there is, of course, a final irony. Adjusting the manner in which

the agreed-upon consideration would pass, by a modest amendment of the merger

agreement, would have had no material economic effect on ETE from the terms of

the deal it clearly struck. That this would have simply required ETE to amend a

provision that the tax lawyer, Whitehurst, who was central to its contractually

improper behavior claimed he did not know about and that was the “inspiration” for

his tax concerns has a metallic taste to it, because if Whitehurst did not consider

those provisions important enough to understand, the modest amendment required

to fix the problem certainly would not have undermined any contractual expectation

central to ETE’s decision to bind itself to buy Williams.

      The Court of Chancery was of course right that “even a desperate man can be

                                         41
an honest winner of the lottery.” 90         But under settled contract law, when, in

desperation, you breach your obligation to help a condition come about, you do not

get credit for rigging the game. For these reasons, I would remand and require a

new trial at which ETE would be required to prove that its breach did not materially

contribute to the failure of the Latham Tax Lawyer to deliver the 721 opinion.




90
     Williams Companies, Inc., 2016 WL 3576682, at *2.

                                              42
