Delaware Court Holds TC Energy Liable for Fiduciary Duty Breaches in Columbia Pipeline Deal; Appeals Planned

[Editor's note: This story has been updated from a previous version posted on July 3 to include TC Energy's response.]

(P&GJ) — Bernstein Litowitz Berger & Grossmann announced that the Delaware Court of Chancery has held pipeline opeartor TC Energy Corp. liable for aiding and abetting breaches of fiduciary duty by former top executives of Columbia Pipeline Group Inc. This ruling follows TC Energy's acquisition of Columbia in 2016, making them accountable to former Columbia shareholders.

The court awarded former Columbia shareholders economic damages of $1.00 per share and disclosure damages of $0.50 per share. The final judgment amount is yet to be determined, pending further proceedings. Prior to this post-trial judgment, TC Energy settled for $79 million with retired Columbia executives. The award applies to approximately 400 million Columbia shares outstanding at the time of the acquisition, and statutory interest is not yet factored into the amount.

The verdict comes after years of litigation, including a trial, and marks the second judgment holding acquirers responsible for aiding and abetting breaches of fiduciary duties by corporate insiders in a corporate sale process. The law firm Bernstein Litowitz Berger & Grossmann LLP represents lead plaintiffs, including the Police & Fire Retirement System of the City of Detroit and the Public Employees’ Retirement System of Mississippi.

In response to the ruling, TC Energy issued a statement expressing their strong disagreement and their intention to appeal once the final judgment is entered. They highlighted the previous confirmation by the Delaware Chancery Court, after a trial in an appraisal rights action, that the price paid to Columbia shareholders was fair value.

"We strongly disagree with the Court's ruling and are evaluating our options for appeal once final judgment is entered," TC Energy said. "The same Delaware Chancery Court had previously confirmed that the $25.50 per share paid to Columbia shareholders was fair value."

The lawsuit, filed in 2018, alleged breaches of fiduciary duties by Columbia's former CEO and CFO, along with material omissions in Columbia's proxy statement. TC Energy disputed the allegations during the trial. The court concluded that the former Columbia executives breached their fiduciary duties, made material disclosure omissions, and determined that TC Energy was aware of and took advantage of those breaches.

TC Energy's proportionate share of the damages award will be determined in a subsequent proceeding, considering the prior settlement with Columbia's former executives. The company expects the allocation hearing and decision to occur later in 2023. TC Energy intends to appeal the ruling once the final allocation is determined, with the appeal process expected to take approximately one year.

Both TC Energy and its legal representatives from the firm Labaton Sucharow LLP are disappointed with the court's decision and dispute many of the findings of fact and law.

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