In In re Energy Transfer Equity, L.P. Unitholder Litigation, C.A. No. 12197-VCG, the partnership agreement at issue included a provision relating to the use of a conflicts committee to establish the fairness and reasonableness of a conflicted transaction. When the partnership raised the safe harbor as a defense against a partner’s challenge to the conflicted transaction, it was discovered that members of the committee were directors or officers of the general partners’ affiliates and the committee was never reconstituted properly. As a result, the protections of the safe harbor provision were not available.
BOTTOM LINE: Do not establish safe harbor provisions if the procedures necessary to benefit from them cannot be met or will be ignored.