In 2022, the Delaware Supreme Court decided Boardwalk Pipeline Partners, LP v. Bandera Master Fund LP, 288 A.3d 1083 (Del. 2022), allowing a limited partnership entity to conclusively establish good faith by relying on a legal opinion that merely stated it would be reasonable to rely on another firm’s opinion—one that had been deemed an inadequate “sham Opinion” by the Court of Chancery.
This Comment argues that the Boardwalk decision is a new high-water mark in the Delaware Court’s “contractual flexibility” jurisprudence. Despite being framed as adherence to a contractually defined standard of conduct, the Boardwalk opinion signals Delaware courts’ increasing willingness to abdicate their role as arbiters of reasonableness in implied covenant disputes. Courts instead allow parties to pay lip service to the requirement of good faith and fair dealing through contractual provisions that practically eliminate it. This outcome creates a fundamental conflict of values between Delaware Supreme Court precedent and provisions of the Delaware Revised Uniform Limited Partnership Act disallowing elimination of the implied covenant of good faith and fair dealing.
As alternative entities like limited partnerships grow in prominence, protections for investors in these entities have rarely been more important. Yet in pursuing a jurisprudence that makes alternative entities more attractive to managers looking to customize (and minimize) their duties, Delaware courts risk undermining the alternative entity’s usefulness by making it excessively risky for investors. The newly condoned practice of whitewashing an inadequate opinion with a second opinion in order to manufacture good faith has the potential to eviscerate a layer of protection that investors have traditionally enjoyed—and the Boardwalk decision’s ratification of a lowered good-faith standard could apply beyond the limited partnership context.