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 LP, formerly )known as 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 LP, formerly ) known as 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. ) )

DEFENDANTS’ AND COUNTERCLAIM PLAINTIFFS’ RESPONSE TO PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT

PUBLIC VERSION - Filed: February 18, 2020

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TABLE OF CONTENTS

PRELIMINARY STATEMENT ..................................................................... 1

STATEMENT OF FACTS.............................................................................. 5

Armstrong seeks to prevent the Merger. ............................................... 5

Armstrong colludes with Bumgarner to stop the Merger. .......... 6

Armstrong conceals his interactions with Bumgarner. .............15

Armstrong testifies falsely about his interactions with Bumgarner, then destroys evidence of their communications. .......................................................................18

Williams begins evaluating standalone options and then obstructs the Merger however possible. ..............................................21

Armstrong conceals ETE’s offer and attempts to prevent Williams from entering the Merger Agreement. ......................23

Williams begins looking at standalone options a month before ETE approached it about restructuring. .........................25

Management, led by Armstrong, pressures the Board to get out of the Merger. ................................................................27

Williams begins to treat the Merger Agreement as a “valuable asset” and positions itself for a walk away payment. ....................................................................................32

Williams obstructs ETE from publicly issuing equity securities. ...................................................................................38

ARGUMENT AND AUTHORITIES ...........................................................41

Williams’ claims fail as a matter of law because Latham could not deliver the 721 Opinion. ................................................................41

Williams’ claims fail as a matter of law because any violations were immaterial to Williams. ..............................................................42

iii

Williams’ CPU claims fail as a matter of law.....................................44

The plain language of the Merger Agreement states that §4.01(b) is subject to ETE’s right to issue up to $1 billion in equity.....................................................................................45

The plain language of §4.01(b) of the Merger Agreement incorporates all §4.01(b) of the Parent Disclosure Letter. ............................................................45

Term No. 4 of the Parent Disclosure Letter does not displace the Merger Agreement’s provisions. ................48

Even under Term No. 4’s standard, §4.01(b)(v) of the Parent Disclosure Letter applies to all the relevant provisions of §4.01(b) of the Merger Agreement.......................................................................50

Similarly, §4.01(b)(v) modifies the Capital Structure Representation. ................................................52

Extrinsic evidence is not appropriate to interpret the Merger Agreement, and even if it were, the evidence Williams cites supports ETE’s interpretation. ..........................54

Williams cannot prove a breach of the Ordinary Course covenant based on an alleged breach of the Limited Partnership Agreement. .............................................................60

Williams’ Tax Representation claim fails as a matter of law. ............62

The Court has already rejected Williams’ incorrect interpretation of the Tax Representation. ................................. 62

Any purported breach of the Tax Representation did not cause a Parent Material Adverse Effect. ...................................65

Even if any of Williams’ claims were legally meritorious, it has not proved it substantially complied with its duties under the Merger Agreement. .............................................................................67

CONCLUSION ..............................................................................................70

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TABLE OF AUTHORITIES

Cases

Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347 (Del. Ch. Oct. 1, 2018), aff’d, 198 A.3d 724 (Del. 2018) ....43

Allen v. Encore Energy Partners, LP,72 A.3d 93 (Del. 2013) .........................................................................................43

Brace Indus. Contracting, Inc. v. Peterson Enterprises, Inc.,2016 WL 6426398 (Del. Ch. Oct. 31, 2016), aff’d, 2020 WL 57156 (Del. Jan. 6, 2020) ...........................................................55

Bumgarner v. The Williams Companies, et al.,No. 16-cv-26-GFK-TLW (N.D. Ok. Jan. 14, 2016) ............................................10

DCV Holdings, Inc. v. Conagra, Inc.,2005 WL 698133 (Del. Super. Ct. Mar. 24, 2005), aff’d, 889 A.2d 954 (Del. 2005) ...........................................................................55

DeMartino v. Comm’r,51 T.C.M. (CCH) 1278 (1986) .............................................................................66

Frunzi v. Paoli Services, Inc.,CIV.A. N11A-08001MMJ, 2012 WL 2691164 (Del. Super. Ct. July 6, 2012) ...68

Hexion v. Huntsman,965 A.2d 715 (Del. Ch. 2008) ..............................................................................67

In re Energy Transfer Equity, L.P. Unitholder Litig.,No. CV 12197-VCG, 2018 WL 2254706 (Del. Ch. May 17, 2018), aff’d sub nom. Levine v. Energy Transfer L.P., No. 238, 2019, 2019 WL 6320457 (Del. Nov. 26, 2019) ....................................................................... 41, 61

Katell v. Morgan Stanley Grp., Inc.,1993 WL 205033 (Del. Ch. June 8, 1993) ...........................................................58

Lechliter v. Delaware Dep't of Nat. Res. Div. of Parks & Recreation,No. CV 10430-VCG, 2015 WL 7720277 (Del. Ch. Nov. 30, 2015) ...................60

Lorillard Tobacco v. American Legacy,903 A.2d 728 (Del. 2006) .....................................................................................43

MicroStrategy Inc. v. Acacia Research Corp.,2010 WL 5550455 (Del. Ch. Dec. 30, 2010) .......................................................50

v

O’Brien v. Progressive N. Ins. Co.,785 A.2d 281 (Del. 2001) .....................................................................................54

SLMSoft.com, Inc. v. Cross Country Bank, 2003 WL 1769770 (Del. Super. Ct. Apr. 2, 2003) ...............................................68

Williams Companies, Inc. v. Energy Transfer Equity, L.P. (ETE I), No. CV 12168-VCG, 2016 WL 3576682 (Del. Ch. June 24, 2016) ....... 62, 63, 64

Williams Companies, Inc. v. Energy Transfer Equity, L.P. (ETE II),159 A.3d 264, 275 (Del. 2017). ............................................................................63

Williams v. Warren,No. DC-1603941 (Apr. 6, 2016 Tex. Dist. Ct.) ....................................................36

Zayo Grp., LLC v. Latisys Holdings, LLC,2018 WL 6177174 (Del. Ch. Nov. 26, 2018) ................................................ 54, 55

Other Authorities

Alison Sider & Anne Steele, Williams Sues Merger Partner Energy Transfer,WALL ST. JOURNAL (Apr. 6, 2016) .......................................................................37

Jeffrey Weiss, Details emerge in new suit featuring Kelcy Warren, Energy Transfer, and Williams Companies,DALLAS MORNING NEWS (Apr. 6, 2016) ..............................................................37

Jim Polson & Erik Larson, Williams Accuses Its Would-Be Leader of Malicious Unit Offering,BLOOMBERG (Apr. 6, 2016) ..................................................................................37

Material, Black's Law Dictionary (11th ed. 2019) ..................................................43Sandeep Singh, How to Delete Gmail Account Permanently,

YOUTUBE (Jan. 16, 2016), https://www.youtube.com/watch?v=F3EKC5mDOlU ........................................20

1

PRELIMINARY STATEMENT

Williams’ Motion for Partial Summary Judgment should be denied because

Williams’ claims contravene the plain and unambiguous language of the Merger

Agreement.1 ETE’s MSJ Brief fully explains the Merger Agreement and the reasons

it compels summary judgment for ETE. ETE respectfully refers the Court to its

discussion in that Brief. Williams’ MSJ Brief further underscores why summary

judgment is appropriate for ETE.

While Williams’ MSJ Brief spends several pages listing the various

provisions of the interim operating covenants (§4.01(b)) and the capital structure

representation (§3.02) that the Issuance allegedly breached, Williams fails to

acknowledge until page 41 that these sections exempt actions permitted by the Parent

Disclosure Letter, which expressly allowed ETE to issue up to $1 billion in equity

securities. Williams cannot credibly argue that the Issuance failed to satisfy the

Parent Disclosure Letter’s requirements, and Williams cannot overcome the

1 ETE refers to Williams’ Brief in Support of Plaintiff’s and Counterclaim-Defendant’s Motion for Partial Summary Judgment as “Williams’ MSJ Brief.” ETE’s Opening Brief in Support of Their Motion for Summary Judgment will be referred to as “ETE’s MSJ Brief.” Exhibits to ETE’s MSJ Brief are designated “ETE’s MSJ Ex.” Exhibits filed with this brief will be cited as “Ex.” Terms capitalized in this brief have the same meaning as in ETE’s MSJ Brief.

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exemption’s plain language by pointing to section headings or unhelpful extrinsic

evidence.

Williams’ Tax Representation claim fails for several reasons, including for

the same reason the Court rejected it in June 2016: Latham’s good-faith

determination that it could not provide the 721 Opinion was not a “fact” requiring

disclosure under the Merger Agreement—either at signing or before closing.

Williams cannot overcome this law-of-the-case by focusing on the individual

components of Latham’s conclusion; this is a distinction without a difference. The

Court should reject Williams’ latest attempt to transform the Tax Representation into

a guarantee that the Merger would qualify as tax-free under Section 721.

There is no need for a week-long trial on these issues or Williams’ other

allegations; ETE should prevail on summary judgment. Moreover, other reasons

also preclude summary judgment for Williams.

First, while Williams paints itself as the victim and ETE as the party who

wanted out of the Merger, discovery has revealed robust evidence to the contrary.

As soon as the ink dried on the Merger Agreement, Williams’ CEO Alan Armstrong

and his loyalists on the Board took overt steps to scuttle the Merger in contravention

of the Merger Agreement. Most notably, Armstrong conspired with John

Bumgarner, a Williams stockholder and former officer, to stop the Merger. Williams

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passingly mentions Armstrong and Bumgarner in its brief, portraying their

relationship as innocuous. The reality is much different. Armstrong helped

Bumgarner file a lawsuit to enjoin the Merger in January 2016, conduct a PR

campaign against the Merger, and attempt to persuade Williams’ directors to

reconsider the Merger. Williams mentions none of these events in its brief.

At the time of the parties’ 2016 trial and Bumgarner’s lawsuit, no one knew

that Armstrong was feeding Bumgarner inside information to support his effort. It

was discovered only after intensive non-party discovery. Armstrong communicated

with Bumgarner in person or through Armstrong’s personal email account.

Armstrong did not share his communications with anyone at Williams (not even its

General Counsel). Worse yet, Armstrong deleted his personal account two days after

his June 9, 2016 deposition in this lawsuit, during which he testified that he could

recall no such communications with Bumgarner. These documents would never

have come to light had ETE not subpoenaed Bumgarner and persisted in seeking

discovery despite Bumgarner’s obstinance. Armstrong’s conduct is shocking and

beyond the pale. In fact, after learning of this conduct, a Williams director expressed

that Armstrong should not engaged in such communications and his behavior was

“unbecoming of an officer of a public corporation.” Armstrong’s behavior precludes

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Williams from pursuing the Termination Fee because it demonstrates that Williams

failed to substantially comply with the Merger Agreement.2

Second, Williams’ claims fail because, as it recognizes, the Merger was

terminated due to the lack of a 721 Opinion: “[T]he only reason the transaction did

not close was Latham’s failure to deliver the tax opinion that was a condition

precedent to closing.”3 Williams omits, however, that the 721 Opinion condition is

not one of the conditions precedent entitling it to the Termination Fee.

Third, Williams’ claims fail because Williams concedes that it was “ready,

willing and able to close the proposed transaction” at closing.4 But Williams does

not explain why any supposed shortcomings by ETE would be considered material

when Williams wanted to consummate the Merger despite those shortcomings and

2 In addition to assisting Bumgarner’s efforts, Armstrong led a campaign to undermine and escape the Merger after execution of the Merger Agreement. Armstrong inflated projections of Williams’ standalone performance, while understating ETE’s prospects, all in effort to make the Merger appear less attractive to the Williams Board. Armstrong also consistently shared his negative views on the Merger with Williams investors and employees. Armstrong pressured members of Williams management to join in these efforts. 3 Williams’ MSJ Br. 6. 4 Id. at 22.

5

even told ETE it would waive any supposed breach by ETE. The Merger Agreement

requires that breaches be material to justify the Termination Fee.

For these reasons, the Court should deny Williams’ motion for partial

summary judgment.

STATEMENT OF FACTS5

Armstrong seeks to prevent the Merger.

As Williams acknowledges, Armstrong opposed the Merger from the outset

and sought to prevent its consummation both before and after signing.6 He worked

covertly to stop the Merger and to remain Williams’ CEO. To accomplish that,

Armstrong secretly provided information to a Williams stockholder (Bumgarner) for

use in litigation to enjoin the Merger; Armstrong assisted Bumgarner’s public-

information campaign encouraging regulators to stop the Merger and Williams’

stockholders to vote it down; and Armstrong testified falsely about his interactions

with Bumgarner, before destroying evidence of those interactions two days later.

5 ETE incorporates the statement of facts in ETE’s MSJ Brief and focuses on facts pertinent to Williams’ MSJ Brief. 6 Williams’ MSJ Br. 6.

6

Armstrong colludes with Bumgarner to stop the Merger.

Armstrong communicated extensively with, and actively aided, Bumgarner

and his group of like-minded associates in the prosecution of Bumgarner’s lawsuit

seeking to enjoin the Merger. From December 2015 to July 2016, Armstrong and

Bumgarner exchanged numerous emails, often using Armstrong’s personal Gmail

account or a Cox Communications account that he shared with his wife.7 The two

also met in person to discuss the Merger two to three times per month.8 Litigation-

focused communications between Armstrong and Bumgarner took place both before

and after Bumgarner filed suit against Williams and ETE, and Armstrong never

revealed the existence of these communications to the Williams Board,9 did not

forward any of Bumgarner’s communications to internal or outside counsel,10 and

never informed ETE of these communications.

7 Ex. 1, Bumgarner Dep. 72:2-73:15. 8 Id. at 73:10-15.

9 Ex. 2, Meister Dep. 309:8-16, 327:17-23; Ex. 3, Sugg (2019) Dep. 36:23-37:2. 10 Ex. 4, Armstrong (2019) Dep. 186:22-187:3, 242:22-243:1, 270:16-24, 273:15-24. The Privilege Logs that Williams provided in this case contained no entries suggesting that Armstrong forwarded any communications with Bumgarner to counsel.

7

Bumgarner was a former officer and director within Williams’ family of

companies.11 After the Merger was announced, Bumgarner believed that the deal

was not in the best interests of Williams’ stockholders and embarked on a campaign

to convince Williams’ stockholders to oppose it.12 On November 6, 2015,

Bumgarner sent Alison Sider, a Wall Street Journal energy reporter, a series of

documents setting out concerns about the Merger and promising her more “board

room stories to be told about threats.”13 The material Bumgarner sent to Sider

contained information that was not publicly available in early-November 2015. For

instance, Bumgarner criticized Williams’ investment bankers for certain

assumptions used in their analyses, even though the preliminary proxy had not yet

been published and no public information was available regarding these analyses.14

Large portions of Bumgarner’s communication to the Wall Street Journal

were nearly identical to a set of internal, personal notes that Armstrong had prepared

11 Ex. 1, Bumgarner Dep. 35:1-23.

12 Id. 118:2-22. 13 Ex. 5, JB-005689. 14 Id. at ‘691; Ex. 4, Armstrong (2019) Dep. 155:20-156:22 (conceding this information should not have been publicly known at time of Bumgarner’s email).

8

over a month earlier.15 While Armstrong admitted the plagiaristic resemblances, he

refused to confess that he sent Bumgarner his notes. The most he would admit was

that it was “odd” and “implausible that Mr. Bumgarner could come up with almost

the exact same language.”16

In late November 2015, Bumgarner began discussing the possibility of filing

a lawsuit challenging the Merger with his attorney.17 On December 6, 2015,

Bumgarner sent Armstrong a document at his personal email address, explaining

“here is where we are so far” and asking Armstrong for “edits and corrections.”18

The attachment contained serious allegations against Williams and ETE, stating in

the opening paragraph that the Williams Board was engaged “in a deliberate attempt

to deceive public investors,” including (among other accusations) that the publicly

15 Compare, e.g., Ex. 5 at ‘689 (“Investment bankers ‘conveniently’ did a dividend analysis in the 3 year time frame and ignored dividend depletion risk at ETE by not evaluating their increased debt load and debt rating. This effectively ignored the risk of covering the dividends in the future and in the relative valuation comparisons.”) with Ex. 6, WMB00772814 (Armstrong “Thoughts for S-4” document) (“Dividend analysis was done in short term period and ignored coverage depletion at ETE to increase dividend without adjustment for coverage or debt rating in yield. Effectively ignoring the risk of covering the dividend in the valuation.”). 16 Ex. 4, Armstrong (2019) Dep. 160:24-161:7. 17 Ex. 1, Bumgarner Dep. 166:6-9.18 Ex. 7, JB-006690.

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disclosed $2 billion commercial synergies estimate to be achieved in the Merger was

“materially overstated.”19 The cover email explains that “the WMB directors and

their advisors are vulnerable to a lawsuit,” and the document contained “two sections

to support [this] claim.”20 Rather than forward this accusatory memorandum to

Williams’ counsel, Armstrong told Bumgarner that he could “stop by at 5:15

tomorrow” to discuss.21 The two met in person and discussed the document.22

Armstrong encouraged Bumgarner and told him his claims had merit.23 Armstrong

went so far as to share with Bumgarner that one of Williams’ financial advisors had

assumed only $200 million in synergies. This fact was non-public information,

unknown even to ETE and highly relevant to Bumgarner’s allegations regarding the

$2 billion synergy disclosure.24 Bumgarner used this document as the starting point

19 Id. at ‘693, ‘696 (emphasis added).20 Id. at ‘691, ‘693.21 Ex. 8, JB-006718; Ex. 17, JB-006764. 22 Ex. 1, Bumgarner Dep. 178:2-13.23 Id. at 83:9-20 (“He basically said that, you know, that – my claims may have merit.”).24 Id. at 88:7-12, 179:13-180:4, 188:4-18. Bumgarner later attempted to backtrack to protect Armstrong and claimed he obtained the $200 million synergies assumption from the proxy, but this information was never publicly disclosed in the proxy or elsewhere.

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for his Complaint, and much of Bumgarner’s original complaint matches the

document.25

Armstrong continued to help Bumgarner support the allegations contained in

this document throughout December 2015. On December 14, 2015, Bumgarner

emailed Armstrong at his Gmail account to ask him for a “data source for certain

statistics we are using; and the return of the last document I left with you,” among a

series of other questions.26 Bumgarner noted that he was “mindful of [Armstrong’s]

forthcoming vacation” and “want[ed] to get the ducks lined up.”27 In an effort to

25 Compare, e.g., Ex. 7 at ‘696, JB-006690 (“Of the 22 bullet points listed above as potential benefits of the merger, several derive their value from projected commercial synergies of $2 billion.... These estimates are materially overstated. When the projected commercial synergies and cost savings are adjusted lower to account for factual errors, the WMB shareholders are likely to be substantially worse off from the proposed merger…”) with Ex. 9, Compl., Bumgarner v. The Williams Companies, et al., No. 16-cv-26-GFK-TLW (N.D. Ok. Jan. 14, 2016) at ¶ 17 (“Of the 22 bullet points listed above as potential benefits of the merger, several derive their value from the projected commercial synergies said to be in excess of $2 billion.This estimate is materially overstated, and known by Defendants to be such. When the projected commercial synergies are eliminated or adjusted lower to account for factual errors, the suggested value to Williams’ shareholders is materially overstated.”). 26 Ex. 10, JB-002980. 27 Id.

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minimize a paper trail, Armstrong and Bumgarner again met in person to discuss the

information requested by Bumgarner.28

Between December 19 and December 26, 2015, Armstrong and Bumgarner

exchanged at least eight emails.29 Even while vacationing in Australia, Armstrong

continued to provide Bumgarner with information to assist him in putting together

his lawsuit.30

Armstrong fully understood that the information he was providing to

Bumgarner would be used in a lawsuit opposing the Merger.31 As discussed above,

Bumgarner sent a document in early December to Armstrong regarding the “WMB

directors and their advisors [being] vulnerable to a lawsuit.”32 On December 17,

2015, Bumgarner even blind-carbon-copied Armstrong on an email to his attorney.33

The email (like the earlier memorandum) set out allegations about the misleading

28 Ex. 1, Bumgarner Dep. 195:3-19, 198:19-199:5. 29 See Ex. 11, JB-008575; Ex. 12, JB-008596; Ex. 13, JB-008617; Ex. 7 at ‘697, JB-006690. 30 Ex. 4, Armstrong (2019) Dep. 243:2-245:10. 31 Ex. 1, Bumgarner Dep. 64:19-21. 32 Ex. 8 at ‘718, JB-006718. 33 Ex. 14, JB-008518.

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nature of Williams and ETE’s Form S-4 document (the “Proxy”) and asked “[w]hen

can we file ? how can we also join/help the Delaware cases ?”34 This email also

discussed the banker’s non-public $200 million synergy estimate, which Armstrong

fed to Bumgarner when they met to discuss Bumgarner’s earlier memorandum.35

On January 14, 2016, Bumgarner sued Williams and ETE, asserting a claim

for violation of Section 14 of the Securities Exchange Act based on purported

material misrepresentations and omissions in the Proxy and other public

statements.36 Bumgarner sought an injunction enjoining Williams and ETE from

proceeding with the Merger.37 Bumgarner filed an Amended Complaint on February

1, 2016.38

Armstrong continued secretly communicating with and providing information

to Bumgarner even after he filed his lawsuit. Conveniently, Armstrong does not

recall what other assistance he gave Bumgarner through their regular meetings and

34 Id. at ‘520.

35 Id. 36 See Ex. 9, Bumgarner Compl. at ¶¶ 1, 46. 37 Id. at ¶ 46. 38 Ex. 27, Amended Compl.

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calls.39 But the evidence shows he provided further assistance. For example,

Armstrong printed an internal email from his Williams email account and provided

it to Bumgarner.40 Bumgarner attached the email as Exhibit 10 to his Second

Amended Complaint.41 He removed the top portion of the document showing

Armstrong’s name and the email’s to/from fields, but the fact that it is the same email

is made clear by the recognizable signature block and confidentiality notice that

remains below.42

Armstrong, of course, knows how to forward emails from his @williams.com

email address. Here, he chose to print the email and hand-deliver it to Bumgarner.43

Notably, this document was not an exhibit to Bumgarner’s first two complaints,

suggesting that Armstrong provided it after Bumgarner’s lawsuit was pending.

39 Ex. 4, Armstrong (2019) Dep. 158:15-159:21; 174:10-175:13. 40 Ex. 28, JB-006807. Bumgarner’s production of documents contained the email. Above a bold black line at the top is the name “Armstrong, Alan,” which reflects the mailbox from which an email is printed. 41 Ex. 29, Second Amend. Compl. 42 Compare id. with JB-006807. 43 Ex. 30, WMB01380893.

14

Similarly, on February 13, 2016, Bumgarner sent Armstrong more questions,

seeking information that might be “spoon-fe[d] to the analyst community.”44

Armstrong provided hand-written responses to Bumgarner’s questions on a print-

out of the email,45 and this information was incorporated directly into an analyst

report opposing the Merger.46

Bumgarner’s group also sought to communicate directly with Williams

stockholders to convince them to vote down the Merger47 and to convince regulators

to block it.48 Armstrong was well aware of these efforts. For example, on April 4,

2016, Bumgarner forwarded Armstrong a draft letter to the SEC regarding the Proxy,

asking, “any errors ? omissions ?”49

44 Ex. 18, JB-004051. 45 Ex. 4, Armstrong (2019) Dep. 263:25-264:4. 46 Compare Ex. 18, JB-004051 with Ex. 31 at ‘581-‘583, JB026567.

47 Ex. 32, Letter to All Stockholders of the Williams Companies dated June 2, 2016.

48 See, e.g., Ex. 33 at ‘590, JB-008589 (discussing using “[o]ur ex Congressman [John] Sullivan [who] is helping to stir ... up” antitrust issues as an implausible, but potential, “deal killer hope”).49 Ex. 21, JB-014810.

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On July 6, 2016, after this Court issued its Opinion and ETE terminated the

Merger, Armstrong and Bumgarner met in person for happy hour.50 Bumgarner

followed up with an email to Armstrong two days later, referring to their “‘team’

efforts during the past 6 months.”51

Armstrong conceals his interactions with Bumgarner.

Reflecting his knowledge that it was improper, Armstrong concealed his

collusion with Bumgarner from Williams and ETE. On January 11, 2016,

Bumgarner emailed the Chairman of the Williams Board, Frank MacInnis, copying

Armstrong at his Williams email account.52 In the email, Bumgarner criticized the

Merger and highlighted issues with the $2 billion synergies estimate.53 Armstrong

responded to MacInnis, asking “[d]o you think we should call him? Or just let this

run its course[?]”54 Armstrong consciously omitted that he had been in close contact

with Bumgarner for over a month, provided information to Bumgarner regarding the

50 Ex. 16, WMB00796541. 51 Ex. 34, WMB00796632. 52 Ex. 23, WMB00786647. 53 Id. at ‘647. 54 Id.

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Merger, met with Bumgarner in person multiple times,55 and communicated

extensively with Bumgarner via Armstrong’s personal email accounts.56

The deliberate use of Armstrong’s personal email accounts and the blind-

carbon-copy feature further demonstrate that Armstrong and Bumgarner intended to

conceal their communications. Before the Merger was announced and after it was

terminated, Armstrong and Bumgarner corresponded using Armstrong’s official

Williams email account.57 During the Merger period, the two communicated using

Armstrong’s personal email,58 except when Bumgarner emailed the Chairman of the

Williams Board and copied Armstrong at his official Williams address.59 Despite

Bumgarner’s very public effort to stop the Merger,60 both Bumgarner and Armstrong

55 See Ex. 1, Bumgarner Dep. 251:15-25. 56 See, e.g., Ex. 7, JB-006690; Ex. 11, JB-008575; Ex. 12, JB-008596; Ex. 13, JB-008617; Ex. 10, JB-002980; Ex. 4, Armstrong (2019) Dep. 20:18-21:7, 254:16-255:7; Ex. 1, Bumgarner Dep. 250:20-251:25. 57 See, e.g., Ex. 15, WMB00772152; Ex. 16, WMB00796541. 58 See, e.g., Ex. 7, JB-006690; Ex. 17, JB-006764; Ex. 8, JB-006718; Ex. 10, JB-002980; Ex. 11, JB-008575; Ex. 12, JB-008596; Ex. 13, JB-008617; Ex. 18, JB-004051; Ex. 19, JB-013611; Ex. 20, JB-014636; Ex. 21, JB-014810; Ex. 22, JB-014819. 59 Ex. 23, WMB00786647. 60 Ex. 1, Bumgarner Dep. 26:2-10.

17

sought to conceal their improper communications and did not tell anyone (including

Bumgarner’s attorney and cohorts) about Armstrong’s involvement.61 By contrast,

when another member of the Williams Board, Stephen Nance, received similar

communications from one of Bumgarner’s associates, he disclosed those

communications to the Williams Board and General Counsel62 and told the

stockholder “[e]very time you call or email me I have to notify the attorneys.”63

Armstrong never told the Williams Board about his communications with

Bumgarner.64 When confronted with details of Armstrong and Bumgarner’s

interactions at their depositions, Williams’ directors acknowledged that Armstrong’s

actions were improper, “unbecoming of an officer of a public corporation,” and that

they did not help to get the Merger across the finish line.65

61 See, e.g., Ex. 14, JB-008518; Ex. 4, Armstrong (2019) Dep. 185:14-22.

62 Ex. 3, Sugg (2019) Dep. 17:3-22:2; see also Ex. 24, Nance00000006; Ex. 25, Nance00000241. 63 Ex. 26, Nance00000032. 64 Ex. 2, Meister Dep. 309:8-16, 327:17-23. 65 Id. at 306:8-14, 309:17-310:2, 335:6-11; Ex. 3, Sugg (2019) Dep. 49:16-50:24.

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Armstrong testifies falsely about his interactions with Bumgarner, then destroys evidence of their communications.

Armstrong hid his communications with Bumgarner from discovery in this

litigation. He failed to turn over the emails in the initial discovery to his counsel,

testified falsely about interactions with Bumgarner, and then permanently destroyed

the evidence of their interactions.

On June 9, 2016, Armstrong was first deposed in this action.66 At that time,

Williams had not produced Armstrong’s communications with Bumgarner via his

personal email accounts. This testimony is notable for its deception.

When asked about his communications with Bumgarner, Armstrong testified

that they belonged to the “same golf club” and saw each other there about once a

week.67 Asked if he recalled any email communications with Bumgarner,

Armstrong testified: “I don’t recall any, no.”68 Instead, Armstrong testified that he

and Bumgarner had “probably mostly oral” conversations, that Bumgarner asked

him about the synergies figure in the Proxy, and that Armstrong had “been pretty

66 Ex. 35, Armstrong (2016) Dep. 1. 67 Id. at 136:3-8.68 Id. at 141:18-19.

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careful to just point [Bumgarner] to the S-4.”69 When asked if he was “concerned

that somebody within Williams had provided Mr. Bumgarner with information

regarding the synergies estimate,” Armstrong testified, “No.”70 As evidenced by

later discovery, which ETE only obtained via third-party subpoena on Bumgarner,

Armstrong’s testimony was false: Armstrong provided Bumgarner with non-public

information, including about the synergies estimate, and had extensive email

communications and in person meetings with Bumgarner to assist his lawsuit and

publicity campaign against the Merger.

On June 11, 2016, just two days after the deposition and two weeks before the

2016 trial, Armstrong deleted his personal Gmail account that contained most of his

email communications with Bumgarner.71 Armstrong did this despite being aware

of no less than three litigation holds in this matter.72

69 Id. at 141:12-16; 138:8-15; 140:5-15.

70 Id. at 142:13-16.

71 Ex. 36, Responses of Plaintiff The Williams Companies, Inc. to Defendants’ First Set of Requests for Admissions at 8; Ex. 4 Armstrong (2019) Dep. 279:20-22. 72 Ex. 36, Responses of Plaintiff The Williams Companies, Inc. to Defendants’ First Set of Requests for Admissions at 6-7.

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Deleting the Gmail account was not easy, and the fact that it would result in

permanent deletion of emails was clear. To delete a Gmail account in 2016, a user

first had to navigate a complicated menu of account options and select the option to

delete the account.73 The user was then required to check a box certifying that he

understood, among other things, that “all of the [account’s] contents will be

permanently deleted.”74 The user was also given an option to preserve the account’s

contents by downloading them to their computer.75

The user was then required to re-enter their Gmail password and a different

email address, to which Google sent an email to confirm that the user truly wished

to delete the Gmail account.76 The user was then required to click a link in the email

sent to the other email account, again enter their Gmail password, and click a button

to finally confirm deletion of the Gmail account.77 The emails contained in

73 See Sandeep Singh, How to Delete Gmail Account Permanently, YOUTUBE (Jan. 16, 2016), https://www.youtube.com/watch?v=F3EKC5mDOlU. 74 Id. (emphasis added). 75 Id.76 Id.77 Id.

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Armstrong’s Gmail account—as the notices in the deletion process made clear—

were permanently deleted when he closed his account on June 11, 2016.78

Armstrong has offered no credible explanation for why he intentionally

deleted the Gmail account just two days after his deposition other than that he had

been “heavily attacked with all kinds of spam.”79 There is no evidence supporting

Armstrong’s remarkable claim that he took the time out of his busy schedule to

delete a private account due to increased “spam” two weeks before his company had

an expedited trial and stockholder vote on a $38 billion merger that would end the

existence of his 100-year old company.80

Williams begins evaluating standalone options and then obstructs the Merger however possible.

Armstrong’s assistance with Bumgarner’s campaign against the Merger was

not the only way that Armstrong and Williams tried to block the Merger. It was well

known within Williams that, after execution of the Merger Agreement, Armstrong

was (according to a fellow director) “working exclusively on finding ways to break

78 Ex. 36, Responses of Plaintiff The Williams Companies, Inc. to Defendants’ First Set of Requests for Admissions at 8-9.79 Ex. 4, Armstrong (2019) Dep. 281:5-17. 80 Id. at 278:16-279:19.

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the deal instead of ways to complete the deal.”81 During this time, Armstrong

(according to his CFO) “certainly worked the [B]oard to dissuade them” and led the

effort to “look[] back, as to whether or not [Williams] had an opportunity to

terminate” the Merger.82 One Williams director summarized Armstrong’s actions

as follows:

-[A]lan lied to the bod about ete’s interest in acquiring wmb, including not telling us about a dinner he had with kw 6 days before our snowcap vote ...

-[S]ince the merger announcement, [Armstrong has] outright attempt[ed] to sabotage the transaction by working exclusively on finding ways to break the deal .... This includes all but forcing the leadership team ex[cept] [D]on and [S]arah to align with him or else ...

-[Armstrong has been] going behind the special [committee’s] back and against counsels[’] advice by presenting a flawed view of the standalone value of wmb to our board in feb16 and opening the co[mpany] to further legal liability

-[Armstrong has been] going off script many times with investors,pre and post the ete deal, despite being told not to (slandering ete deal synergies and pushing our standalone plan)

81 Ex. 37 at ‘862-‘863, WMB00819862; Ex. 2, Meister Dep. 169:3-17; Ex. 38, Chappel Dep. 88:8-17. 82 Ex. 38, Chappel Dep. 39:8-17, 22:18-23:2.

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-[Armstrong has been] working behind the scenes with dissident directors to fan the deal break flames. And keeping non dissident directors in the dark about it ....83

Williams also wrongfully blocked ETE’s proposed Public Offering despite

previously agreeing to such an equity issuance in the Merger Agreement. Williams

and Armstrong’s actions were part of a negotiating strategy to pressure ETE and

extract as large a walk-away payment as possible.

Each of these transgressions is discussed below.

Armstrong conceals ETE’s offer and attempts to prevent Williams from entering the Merger Agreement.

In early May 2015, Armstrong and Williams’ CFO, Don Chappel, had dinner

with ETE’s Chairman, Kelcy Warren, and Group CFO, Jamie Welch, at Warren’s

home in Dallas.84 At that dinner, Warren and Welch expressed interest in a

combination with Williams and the group discussed the potential structure of a

merger.85

83 Ex. 39, SOROBAN-00006640. 84 Ex. 40, Warren (2016) Dep. 34:2-18; Ex. 38 Chappel Dep. 261:23-262:9. 85 Ex. 40, Warren (2016) Dep. 34:2-18; Ex. 38 Chappel Dep. 44:1-5, 262:6-9.

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Armstrong, however, did not inform the Williams Board about this dinner or

ETE’s interest in Williams.86 To the contrary, Armstrong continued to allow the

Williams Board to believe, as he had informed it in March 2015, that ETE was not

interested in a transaction with Williams.87 Laboring under this misunderstanding,

the Williams Board approved a combination transaction between Williams and its

affiliate, WPZ, on May 12, 2015—just seven days after the dinner.88 The Williams-

WPZ transaction was an attempted poison-pill against a potential transaction with

ETE,89 and the announcement of the transaction blindsided ETE.90

After ETE’s interest in merging with Williams became known to the Williams

Board, the Board decided to pursue a transaction with ETE rather than complete the

WPZ transaction.91 As a result, Williams became liable for hundreds of millions of

dollars in termination fees owed to WPZ—fees that Williams now seeks to recover

86 Ex. 38 Chappel Dep. 43:8-20; Ex. 41, Mandelblatt Dep. 72:3-23. 87 Ex. 41, Mandelblatt Dep. 73:2-17; Ex. 2, Meister Dep. 141:20-142:7.

88 Ex. 41, Mandelblatt Dep. 72:11-73:17; Ex. 42 at ‘995, WMB00052994.

89 Ex. 41, Mandelblatt Dep. 273:21-274:25, 322:6-14; Ex. 2, Meister Dep. 142:15-143:2. 90 Ex. 40, Warren (2019) Dep. 136:20-137:13. 91 Ex. 42, WMB00052994.

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in this action.92 Multiple Williams directors testified that they would have voted

differently on the WPZ transaction had Armstrong revealed the true nature of ETE’s

interest in a deal with Williams.93

Williams begins looking at standalone options a month before ETE approached it about restructuring.

For months after the Merger Agreement was signed, Williams stopped

creating projections for a standalone company.94 Then in December 2015—after

Armstrong had begun feeding information to Bumgarner and before ETE

approached Williams about restructuring the Merger—Williams requested that its

financial advisor resume looking at standalone options.95 ETE did not approach

Williams regarding a potential restructuring of the Merger Agreement until January

14, 2016.96

92 Williams’ MSJ Br. 7.93 Ex. 41, Mandelblatt Dep. 74:14-20 (Q: “[H]ad you known about the meeting with Energy Transfer, would that have changed your vote?” A: “Absolutely.”); Ex. 2, Meister Dep. 143:16-22 (Q: “Would you have voted the same way had you been informed of ETE’s interest prior to the vote?” A: “No.”). 94 Ex. 43, LAZARD_0067819. 95 Id. 96 Ex. 44, WMB00665859.

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Prior to the Board executing the Merger Agreement, Armstrong had led

management in unsuccessfully pushing optimistic projections of Williams’

standalone case (and pessimistic views of ETE’s projections) to convince the Board

to reject ETE’s offer.97 After the execution of the Merger Agreement, Armstrong

continued his efforts to convince the Board that Williams’ standalone prospects

outweighed any benefits from the Merger.98 Armstrong also questioned Williams’

financial advisors’ projections, including by attacking such advisors’

independence.99 After execution of the Merger Agreement, Armstrong and

management also reopened the Merger analysis. Armstrong inputted fanciful

estimates and assumptions into Williams’ base-case management projections100 and

asked management to produce documents and forecasts that supported his negative

view of the Merger.101 In fact, the Board found it necessary to attempt to put

processes in place to protect its projections and communications with investors from

97 Ex. 38, Chappel Dep. 41:4-17; Ex. 45, BARC_00187133. 98 Ex. 2, Meister Dep. 171:6-12; Ex. 46 WMB00873387. 99 Ex. 47, WMB00804844. 100 Ex. 46, WMB00873387; Ex. 38, Chappel Dep. 238:13-241:16. 101 Ex. 38, Chappel Dep. 52:15-21.

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management’s malfeasance.102 However, these efforts were to no avail as

Armstrong continued to “go[] off script many times with investors”103 and “present[]

a flawed view of the standalone value of wmb to [the Williams] board in feb16.”104

Management, led by Armstrong, pressures the Board to get out of the Merger.

Management and Armstrong, along with certain directors, also continued to

push their view in favor of a standalone Williams on other management and

directors. Williams’ CFO testified that “certainly there was pressure to accept

forecast assumptions for Williams and less than optimistic or more pessimistic

forecast assumptions for ETE that would be going to the [B]oard.”105

In addition to pressuring management, the dissident directors and Armstrong

began pressuring the two swing voters on the vote to approve the Merger (Janice

Stoney and Joe Cleveland) to change their minds. When the Williams Board first

considered the Merger, on September 24, 2015, Stoney and Cleveland voted against

102 Ex. 48, Hagg Dep. 71:4-21; Ex. 2, Meister Dep. 135:10-136:3.

103 Ex. 37, WMB00819862; Ex. 2, Meister Dep. 171:16-172:5. 104 Ex. 39, SOROBAN-00006640; Ex. 46, WMB00873387; Ex. 38, Chappel Dep. 167:2-15, 238:13-241:16. 105 Ex. 38, Chappel Dep. 52:17-21.

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it.106 Four days later, however, the two changed their votes and the Board approved

the deal in an 8-to-5 vote on September 28, 2015.107 There was no substantive

change to the merger proposal between these two votes. Instead, Stoney and

Cleveland were influenced by threats of a potential proxy contest (or consent

solicitation) from two activist investors on the Williams Board, Meister and

Mandelblatt.108

Stoney testified the Board was “advised that the certainty of a consent

resolution was [] very great,” that it would be aimed at “remov[ing] the directors

who were not in favor of the transaction,” and that this possibility influenced her

decision to vote in favor of the Merger.109 Cooper, one of the five directors who

voted against the Merger,110 confirmed that “board members [thought] they were

being threatened by Mr. Meister and Mr. Mandelblatt.”111 The Williams Board

106 Ex. 49 at ‘005, WMB00671001.107 Ex. 42 at ‘996, WMB00052994.

108 Ex. 50, Stoney (2016) Dep. 32:24-33:23; Ex. 51, Cooper (2016) Dep. 31:11-33:18. 109 Ex. 50, Stoney (2016) Dep. 33:9-10, 35:21-36:1, 32:24-33:23. 110 Ex. 42 at ‘996, WMB00052994.111 Ex. 51, Cooper (2016) Dep. 33:1-7.

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minutes from the September 24, 2015 meeting show that the very first item in a list

of “factors” “influencing [the Board’s] analysis in favor of a transaction” was

“appreciation of the practical consequences of a rejection of the ETE Proposal,”112

which the minutes explained meant “the likelihood of a consent solicitation to

replace all or certain directors.”113 In fact, while this discussion was occurring,

Meister and Mandelblatt left the Board meeting so that the remaining directors could

discuss Meister’s and Mandelblatt’s likely response to a vote against the Merger.114

After the Merger vote, the five directors who voted against the deal continued

to oppose it.115 These dissenters, including Armstrong, Cooper, Murray Smith, John

Hagg, and Juanita Hinshaw, frequently had separate communications in which they

pushed for additional analyses that demonstrated Williams’ strength as a standalone

112 Ex. 49 at ‘004, WMB00671001.

113 Id.114 Id.115 Ex. 52 at 129, Amendment No. 8 to Form S-4 Registration Statement (May 24, 2016).

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entity, while also expressing skepticism about the Merger’s benefits.116 Stoney and

Cleveland were often involved in these communications.117

The dissident directors’ contemporaneous communications made clear that

they hoped to “reopen[] ... the ETE merger analysis.”118 They sent multiple emails

to Stoney and Cleveland discussing their support of Armstrong’s projections and

critiquing the projections prepared by Barclays and Lazard, which portrayed the

Merger favorably.119 The group circulated, discussed, and touted an analysis

prepared by one of Armstrong’s analysts, Mike Fonk, that strongly criticized the

Merger.120 The Fonk analysis noted that “sometimes the best defense is a good

offense” and encouraged “[m]ak[ing] the advocates defend the merger” by showing

that the pro-forma, combined entity would be stronger than Williams standalone.121

This defense, the analysis concluded, would be “nearly impossible” for the Merger’s

116 See, e.g., Ex. 47, WMB0080484; Ex. 53, WMB00789179; Ex. 54, WMB01592877.

117 See supra note 116.118 Ex. 55, SOROBAN-00006658. 119 Ex. 47, WMB00804844; Ex. 53, WMB00789179. 120 Ex. 54, WMB01592877. 121 Id.

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advocates.122 The communications between this group consistently excluded the six

Board members who had supported the Merger without showing a willingness to

switch sides.

These discussions culminated in calls to change the Board’s recommendation

regarding the deal. On March 24, 2016, Armstrong emailed the dissenters, plus

Stoney and Cleveland.123 Armstrong argued against “continuing to press forward”

with the Merger and encouraged his fellow directors not to “hide behind the fact that

the stockholders can decide for themselves,” suggesting that the Board change its

recommendation rather than “just hold the course.”124 Hinshaw and Hagg responded

in agreement, with Hinshaw stating that she was “ready and willing to help in any

way.”125 Cooper also responded in agreement and suggested that “a board call

should be organized asap.”126 Smith, on April 21, 2016, recommended to a group of

these directors to “poll the will of the board to determine where we stand on support

122 Id.123 Ex. 56, WMB00789293. 124 Id.125 Id. 126 Ex. 57, WMB00798238.

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of original deal.”127 Then, on May 17, 2016, Armstrong drafted an email to

Cleveland and Stoney explaining that he didn’t “know where either of [them] stand

relative to your vote ‘for’ or ‘against’ the proposed merger at this point.”128

Williams begins to treat the Merger Agreement as a “valuable asset” and positions itself for a walk away payment.

While Armstrong “fought tirelessly and recklessly” against the Merger, the

Williams Board sought to use the Merger Agreement to extract as large of a

walkaway payment as possible from ETE.129

During a Board meeting on January 15, 2016, the Williams Board “recognized

the merger agreement as a valuable asset of the Company,” i.e., a bargaining chip.130

Williams’ directors determined to have “the Board communicat[e] to ETE its strong

support for the current Merger” through “a press release” declaring “the Board’s

unanimous commitment to completing the Merger.”131 On January 15, 2016, the

Williams Board publicly announced:

127 Ex. 92, WMB00971542.128 Ex. 93, WMB00795561.129 Ex. 58, SOROBAN-00013071; Ex. 41, Mandelblatt Dep. 270:18-271:3. 130 Ex. 59, WMB01944111. 131 Id.

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The [Williams Board] is unanimously committed to completing the transaction with Energy Transfer Equity, L.P. (NYSE: ETE) per the merger agreement executed on September 28, 2015 as expeditiously as possible and delivering the benefits of the transaction to Williams’ stockholders.132

But this purported unanimity had more to do with a potential break-up fee than actual

support for the Proposed Transaction. When the Merger Agreement was executed,

the Williams Board was highly fractured, voting 8-5 to approve the Merger

Agreement. The Williams Board had not suddenly gone from being divided 8-5 to

being unanimous. In fact, none of the five directors that voted against the Merger

Agreement in September 2015 had changed their minds about the Merger.133 In

truth, as a major investor aptly explained, Williams was beginning to play “a

dangerous game of chicken” by “positioning itself for as large a breakup fee [as]

possible.”134 One Williams director privately expressed her “concern with saying

‘unanimous’ [was] that it represent[ed] more trickery.”135 Another Williams director

132 Ex. 60, WMB00543388. 133 See Ex. 52 at 129. 134 Ex. 61, WMB00069046. 135 Ex. 62, WMB00167054.

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privately declared that the “[b]enefits to shareholders” of the Merger were “now

much diminished, if not gone.”136

Williams’ advisors even warned against issuing a unilateral press release

without coordinating with ETE: “Without a similar comment from our merger

partner, I believe the board involvement may heighten investor concerns” that the

Merger would not close.137 However, the Williams Board did not heed this advice

as the “unanimously” language was being used “for the benefit of negotiating

tactics.”138 It was meant to create a “tactical advantage” of “hold[ing] the course,

forcing Kelcy to the alt[a]r.”139 Armstrong referred pejoratively to the “notion” that

“has been put out that we are in unanimous agreement to support the execution of

the agreement,” which constituted “games and confusion.”140

Just as Williams began emphasizing its supposed unanimous support for the

Merger, the Williams Board privately discussed a “dollar amount for an ETE

136 Id.137 Ex. 63, SOROBAN-00006538. 138 Ex. 64, WMB00956227. 139 Ex. 56, WMB00789293. 140 Id.

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breakup fee” with its financial advisors during the February 1, 2016 Board

Meeting—the same meeting that Armstrong “present[ed] a flawed view of the

standalone value of wmb.”141 During that meeting, “Barclays presented [a range]

for a breakup fee [of] $6 to $11 billion.”142 Lazard also presented a similar

analysis.143 By March, members of the Board were discussing mutually terminating

the Merger in exchange for a “deal breakup” fee “somewhere between $1–3 BN,

payable by ETE to WMS.”144 The Board continued to look at materials evaluating a

potential breakup fee from ETE in April and May 2016.145

Although Williams did not create any analyses looking for ways to improve

the post-merger entity for its stockholders, it did create an internal analysis—

prepared for Armstrong—which concluded that the Merger would be “catastrophic”

for ETE (and, in turn, Williams’ stockholders) and that “ETE would be better off

without the merger... even with a $2 billion payment to WMB to terminate the

141 Ex. 39, SOROBAN-00006640.

142 Ex. 65, WMB00789177.

143 Id.144 Ex. 53, WMB00789179. 145 Ex. 66 at ‘189, WMB00650175; Ex. 94 at ‘348, BARC_00020307; Ex. 95 at ‘406, BARC_00020366.

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merger.”146 Williams’ attorneys at Cravath, Swaine & Moore LLP (“Cravath”)

similarly concluded that Williams might get “much more than a $4 billion break-up

fee.”147

Around the same time, Williams publicly campaigned against the Merger in

other ways. It sued Warren, ETE’s Chairman, in Dallas, Texas, for tortious

interference with the Merger Agreement in connection with the Issuance. Williams

accused Warren of tortious acts and referred to him as “exploit[ing]” and

“malicious” multiple times, thereby informing its stockholders of the Williams

Board’s belief that Warren—who, as Williams repeatedly alleged in the lawsuit,

would “control” ETC if the Proposed Transaction were to close—is an unsuitable

and untrustworthy leader.148

Williams’ public campaign worked, and the media took note. One portfolio

manager told the Wall Street Journal that “I’ve never seen anything like this—a

board [i.e., Williams’] that hates what the management team is doing enough to sue,

146 Ex. 67, WMB00069169. 147 Ex. 68, WMB00467599. 148 Ex. 69, Williams v. Warren, No. DC-1603941 (Apr. 6, 2016 Tex. Dist. Ct.).

37

but still wants to do the deal.”149 Bloomberg also noticed the disconnect, leading its

article on the lawsuit with the statement that Williams “is accusing its would-be

leader of ‘maliciously orchestrating’ [an allegedly self-dealing transaction].”150 On

the day Williams filed the first of its lawsuits against ETE and Warren, The Dallas

Morning News referred to the Merger as a “contested Kardashian divorce” and stated

that the litigation was “grinding the gears” of the Proposed Transaction.151 The only

way to reconcile Williams’ behavior with a recommendation to vote for the Merger

is to understand that Williams’ true motivation was to pressure ETE into paying

Williams a walk-away fee.

Williams’ scheme became transparent on May 24, 2016. In the prior Form S-

4 filed on May 4, 2016, Williams stated in its “Recommendation of the WMB Board

and Its Reasons for the Merger” that the Board

After careful consideration, on September 28, 2015, the WMB Board (a) approved and declared advisable and resolved to recommend to its stockholders the adoption of the merger agreement, the merger and the other merger

149 Ex. 70, Alison Sider & Anne Steele, Williams Sues Merger Partner Energy Transfer, WALL ST. JOURNAL (Apr. 6, 2016).

150 Ex. 71, Jim Polson & Erik Larson, Williams Accuses Its Would-Be Leader of Malicious Unit Offering, BLOOMBERG (Apr. 6, 2016). 151 Ex. 72, Jeffrey Weiss, Details emerge in new suit featuring Kelcy Warren, Energy Transfer, and Williams Companies, DALLAS MORNING NEWS (Apr. 6, 2016).

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transactions and (b) declared that it is in the best interests of the WMB stockholders for WMB to enter into the merger agreement and consummate the merger and the other merger transactions. Accordingly, the WMB Board recommends a vote “FOR” the Merger Proposal.152

However, on May 24, 2016, Williams modified its recommendation to its

stockholders in the Form S-4 to state, “Certain members of the WMB Board voted

on September 28, 2015 against entering into the merger agreement and continue as

of the date of this proxy statement/prospectus to disagree with the recommendation

of a majority of the WMB Board that WMB stockholders adopt the merger

agreement.”153 This modification to its recommendation to stockholders shows that

the Williams Board was never unanimous in wanting to close the Merger.

Williams obstructs ETE from publicly issuing equity securities.

As part of its “negotiating strategy” to lock ETE into a deal Williams itself no

longer believed in, Williams blocked the Public Issuance despite previously agreeing

to such an issuance as part of the Merger Agreement. The Merger Agreement and

the Parent Disclosure Letter permitted ETE to issue up to $1 billion in new equity

152 See Ex. 73 at 6, 95, Amendment No. 5 to Form S-4 Registration Statement (May 4, 2016). 153 See Ex. 52 at 6, 99.

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securities while the Merger Agreement was executory.154 This right was a key carve-

out from ETE’s Interim Operating Covenants and was specifically negotiated by

ETE. Indeed, the ability to raise up to $1 billion in new equity was one of the only

Parent Disclosure Letter-permitted exceptions to the Interim Operating Covenants

specifically communicated by ETE’s CFO to Williams.155 Consistent with this

authority under the Parent Disclosure Letter and pursuant to it, ETE, in February

2016, attempted to offer a series of Convertible Preferred Units (“CPUs”) to the

public.

The Public Offering was “intended to strengthen the credit profile of [ETE]”

in light of the substantial additional debt load that ETE would have to shoulder to

complete the Merger,156 and was necessary to avoid a credit-rating downgrade,

which would have negatively affected the combined entity.157 The Public Offering

154 ETE’s MSJ Ex. 1, MA §4.01(b).

155 Ex. 74, WMB00028644. 156 Ex. 96, WMB00000925; Ex. 35, Armstrong (2016) Dep. 207:12-22; Ex. 38, Chappel Dep. 200:12-201:2; Ex. 75, Long (2019) Dep. 29:2-19. 157 Ex. 75, Long (2019) Dep. 29:9-19, 59:16-19.

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was expected to save ETE about $1 billion in cash through foregone distributions by

common unitholders who elected to participate in the Public Offering.158

For ETE to proceed with the Public Offering, however, it needed Williams to

provide certain financial information. ETE also needed Williams’ auditors to

consent to inclusion of the financial material and provide their opinion on that

information in ETE’s registration statement covering the CPUs.159 Williams

refused. It instructed its auditors to withhold consent despite its obligations under

the Merger Agreement to permit issuances of equity securities valued under $1.0

billion and to cooperate with that effort.160

Williams also refused to offer any potential alternatives that could be executed

prior to closing of the Merger. As the Williams Board minutes note, ETE reached

out to Williams in January to coordinate navigating the difficult economic times and

reduce the possibility of a post-merger credit ratings downgrade.161 Rather than

158 See Ex. 76, ETEe-WMB-00022159 (Perella estimate of $1 billion); ETE’s MSJ Ex. 8, Atkins Report at 17-19.159 Ex. 77, ETEe-WMB-00022307. 160 Ex. 38, Chappel Dep. 217:7-218:5. 161 See Ex. 59 at 1-2, WMB01944111.

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explore options, Williams took a negotiating position162 and refused to allow ETE to

talk with directors and officers at Williams about any restructuring of the merger.163

Williams’ obstruction left ETE in a tight spot. A credit ratings downgrade

continued to loom. ETE had to act to avoid that downgrade. While a distribution

cut would conserve cash, it was a “disastrous” proposition, “the option of last resort,

the kind of nuclear option.” In re Energy Transfer Equity, L.P. Unitholder Litig.

(“Unitholder Litigation”), No. CV 12197-VCG, 2018 WL 2254706, at *1, 5 (Del.

Ch. May 17, 2018), aff’d sub nom. Levine v. Energy Transfer L.P., No. 238, 2019,

2019 WL 6320457 (Del. Nov. 26, 2019). Rather than simply acquiesce to a worst-

case option, ETE decided to retool the Public Offering as a private offering—the

Issuance—even though the benefits of the Issuance were less significant than those

projected from the Public Offering.

ARGUMENT AND AUTHORITIES

Williams’ claims fail as a matter of law because Latham could notdeliver the 721 Opinion.

As Williams puts it, “the only reason the transaction did not close was

Latham’s failure to deliver the tax opinion [i.e., the 721 Opinion] that was a

162 See supra §II.B.3.163 See Ex. 78 at 1-2, WMB01944124.

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condition precedent to closing.”164 The failure of the 721 Opinion condition is not

one of the conditions precedent that entitles Williams to the Termination Fee.165 As

explained more fully in ETE’s MSJ Brief, Williams cannot recover the Termination

Fee when an independent condition precedent unrelated to the termination fails. See

ETE’s MSJ Brief § III.B. The failure of the 721 Opinion, by itself, warrants denying

Williams’ motion and entering summary judgment in favor of ETE.

Williams’ claims fail as a matter of law because any violations were immaterial to Williams.

Williams’ claims depend on §6.03(a) and (b), which both include materiality

components.166 Under any measure of materiality,167 the undisputed facts show that

any breaches were immaterial as a matter of law.

164 Williams’ MSJ Br. 6.

165 See ETE’s MSJ Ex. 1, MA §5.06(f). 166 Section 6.03(a)(i) is a bring-down provision that requires ETE to represent at the time of closing that its Capital Structure Representation is true except for any “immaterial inaccuracies.” Section 6.03(a)(iv) is qualified by a “Parent Material Adverse Effect.” Section 6.03(b) requires ETE to have “performed or complied with all obligations required by the time of Closing” “in all material respects.” See ETE’s MSJ Ex. 1.

167 Williams contends that the appropriate standard for materiality is the standard for assessing whether a disclosure is material to an investor, which it recognizes is “more than the standard for a claim for damages for an immaterial breach.” SeeWilliams’ MSJ Br. 39-40. But a standard that focuses on investors and the “total mix of information” makes little sense for analyzing the materiality of an alleged

43

Williams was willing to close the Merger despite any alleged breaches by

ETE, proving that the breaches were not material. Violation of a condition or

covenant that does not affect the counter-party’s willingness to consummate a

merger cannot be material.168 See Material, Black’s Law Dictionary (11th ed. 2019)

(“Of such a nature that knowledge of the item would affect a person’s decision-

making; significant; essential.”).169 Williams has conceded at every step that it was

“[a]t all times, including on the scheduled closing date, ready willing and able to

close.”170 Further, on the day of closing, Williams was ready to “waive” any alleged

“failure of the conditions in Sections 6.03(a) and 6.03(b) and close.”171 This case is

breach of contract; indeed, one of the few courts to invoke this standard has acknowledged that it is an “oddity.” See Akorn, Inc. v. Fresenius Kabi AG, 2018 WL 4719347, at *86 (Del. Ch. Oct. 1, 2018), aff’d, 198 A.3d 724 (Del. 2018). There is no indication that the parties intended for stockholder disclosure standards to apply to a provision requiring compliance with a contract “in all material respects.” Lorillard Tobacco v. American Legacy, 903 A.2d 728, 738 (Del. 2006) (“When interpreting a contract, the role of a court is to effectuate the parties’ intent. In doing so, we are constrained by a combination of the parties’ words and the plain meaning of those words where no special meaning is intended.”).

168 ETE’s MSJ Br. At 20.169 Delaware courts routinely look to Black’s Law Dictionary to interpret undefined terms in contracts. Allen v. Encore Energy Partners, LP, 72 A.3d 93, 104 (Del. 2013); Lorillard, 903 A.2d at 738. 170 Williams’ MSJ Br. 5; see also Ex. 3, Sugg (2019) Dep. 73:19-23.171 ETE’s MSJ Ex. 24 (letter from Sarah Miller to Tom Mason, dated June 29, 2016).

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thus not one where a court must speculate about whether a contractual violation

would assume actual significance in a party’s mind. Here, we have direct and

undisputed evidence that Williams still wanted to close the Merger despite any

alleged breaches. Thus, all of Williams’ arguments for recovery of the termination

fee pursuant to §§6.03(a) and (b) cannot be material as a matter of law regardless of

the specific materiality standard that applies.

Williams’ CPU claims fail as a matter of law.

Williams asserts that ETE violated various interim operating covenants found

in §4.01(b) of the Merger Agreement, as well as a representation found in §3.02(c)(i)

(“the Capital Structure Representation”), by issuing the CPUs. Williams’ MSJ Brief

buries the relevant discussion of its CPU claims deep in its brief: that §4.01(b) and

§3.02(c)(i) are both subject to the exception set forth in the Parent Disclosure Letter

that authorizes ETE to issue up to $1 billion in “equity securities.”172 Section 4.01(b)

of the Merger Agreement explicitly excepts from the interim operating covenants

any actions authorized by §4.01(b) of the Parent Disclosure Letter.173 Similarly, the

Capital Structure Representation also contains an exception for the Parent Disclosure

172 See ETE’s MSJ Ex. 2, Parent Disclosure Letter §4.01(b)(v).173 ETE’s MSJ Ex. 1, MA §4.01(b).

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Letter, if the application of the exception was “reasonably apparent on its face.”174

Williams misconstrues the plain language of §4.01(b)’s exception and does not even

discuss the exception to the Capital Structure Representation.

The plain language of the Merger Agreement states that §4.01(b) is subject to ETE’s right to issue up to $1 billion in equity.

The Merger Agreement and the Parent Disclosure Letter expressly provide to

ETE the right to issue up to $1 billion in equity securities. To evade the plain

reading, Williams focuses on the formatting of the documents, the text of other

provisions, and extrinsic evidence, all to support its tortured reading. But it never

grapples with the actual text of §4.01(b).

The plain language of §4.01(b) of the Merger Agreement incorporates all §4.01(b) of the Parent Disclosure Letter.

The plain text of §4.01(b) dooms Williams’ argument. The text does not say,

as Williams wishes it did, “Except as set forth in the corresponding provisions of

Section 4.01(b) of the Parent Disclosure Letter,” or contain a separate exception in

each subsection saying, “Except as set forth in Section 4.01(b)(i).” Rather, the first

clause of §4.01(b)—which qualifies all of §4.01(b), including the allegedly breached

174 Id. §3.02.

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Ordinary Course covenant—states, “Except as set forth in Section 4.01(b) of the

Parent Disclosure Letter.”175 The Merger Agreement makes the exact same

exception when it introduces specific interim operating covenants.176

The parties knew how to create a subsection-specific exception like the one

Williams wishes was in §4.01(b). In fact, they did it elsewhere in the Merger

Agreement. See id. §§3.01(n)(iii), 4.01(a)(xi), 4.01(b)(xi) (expressly tying carveouts

set forth in the Company Disclosure Letter or Parent Disclosure Letter to specific

subsections of the Company Disclosure Letter or Parent Disclosure Letter).

Additionally, when the parties wanted to point to a specific subsection of the Parent

Disclosure Letter in §4.01(b), they did so: “the amounts set forth in Section

4.01(b)(xi) of the Parent Disclosure Letter.”177 But in the critical clauses at issue

here, §4.01(b) uses broader language.

Williams’ strained reading of the Merger Agreement and the Parent

Disclosure Letter raises numerous concerns, some of which are highlighted in ETE’s

MSJ Brief §III.C.2. Among other things, if Williams’ subsection-by-subsection

interpretation is correct, then the Ordinary Course covenant would not be subject to

175 ETE’s MSJ Ex. 1, MA §4.01(b). 176 Id.177 ETE’s MSJ Ex. 1, MA §4.01(b)(xi).

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any of the exceptions in the Parent Disclosure Letter. After all, it does not have a

corresponding section in the Parent Disclosure Letter. But such an interpretation

would eviscerate the Parent Disclosure Letter’s exceptions because the exceptions

include activities that are not in the ordinary course. For example, ETE’s affiliates

were authorized to “abandon” (for no consideration) assets worth up to $3 billion.178

As Williams’ CFO admitted, “abandoning an asset of up to $100 million” would not

be “in the ordinary course of business for Williams,” but “Williams would have been

allowed to do that without ETE's consent” under the Company Disclosure Letter.179

This admission is fatal to Williams’ interpretation.

Williams points to the non-sequential numbering in the Parent Disclosure

Letter and the repetition of certain exceptions. The fact that the drafters organized

the exceptions (and repeated certain of them) does not mean that they intended to

limit the exceptions or overrule the unequivocal language at the beginning of Merger

Agreement §4.01(b). To the contrary, the Parent Disclosure Letter explains that

“[t]he headings contained in this Parent Disclosure Letter are for reference only and

shall not affect in any way the meaning or interpretation of this Parent Disclosure

178 See ETE’s MSJ Ex. 2, Parent Disclosure Letter §4.01(b)(ix).179 Ex. 38, Chappel Dep. 130:10-132:23.

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Letter.”180 The Merger Agreement has a similar disclaimer.181 Further, repeating

certain of the exceptions serves an important role: as explained earlier, there are

instances in which the Merger Agreement references a particular subsection of the

Parent Disclosure Letter. Those clauses benefit from repeated exceptions because

other subsections of the Parent Disclosure Letter cannot be invoked in those

instances. In fact, Parent Disclosure Letter §4.01(b)(xi), which is one of the

provisions Williams identifies as having an identical exception, is one of the

subsections that has a specific reference to it in the Merger Agreement.

Term No. 4 of the Parent Disclosure Letter does not displace the Merger Agreement’s provisions.

Williams also tries to supplant §4.01(b)’s exception clauses with the provision

in General Term Number 4 of the Parent Disclosure Letter (“Term No. 4”).182 That

provision—which does not limit any terms in the Merger Agreement—clarifies that

“any section” of the Parent Disclosure Letter “whose relevance to the information

180 See ETE’s MSJ Ex. 2, Parent Disclosure Letter General Term No. 7.181 ETE’s MSJ. Ex. 1, MA §8.04(a).182 See Williams’ MSJ Br. 44-45.

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called for by another section of this Parent Disclosure Letter is reasonably apparent

on its face” incorporates the same information.183

Williams’ invocation of Term No. 4 has two problems. First, Term No. 4 has

no work to do where there is already an express demarcation of which sections of

the Parent Disclosure Letter apply. Section 4.01(b) of the Merger Agreement

contains such a demarcation—which is to all of “Section 4.01(b) of the Parent

Disclosure Letter.” There is no reason to look to Term No. 4 for a “deemed” (i.e.,

implied) inclusion when the Merger Agreement already explicitly declares which

section of the Parent Disclosure Letter is in play. The Merger Agreement’s use of a

similar “reasonably apparent” clause in §3.02 is in accord because §3.02 references

the entire Parent Disclosure Letter: “as set forth in the Parent Disclosure Letter.”

Thus, in this situation (but not in §4.01(b)), there is a need for the “reasonably

apparent” clauses in Term No. 4 and §3.02.

Second, Term No. 4’s existence in the Parent Disclosure Letter completely

undercuts Plaintiffs’ entire premise that a Parent Disclosure Letter exception

“applies only” to its corresponding subsection in the Merger Agreement.184 Term

No. 4 conclusively shows that the parties did not intend for sections or subsections

183 See ETE’s MSJ Ex. 2 at 2.184 Williams’ MSJ Br. 42-43.

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of the Parent Disclosure Letter to be tied strictly to particular sections or subsections

of the Merger Agreement.

Even under Term No. 4’s standard, §4.01(b)(v) of the Parent Disclosure Letter applies to all the relevant provisions of §4.01(b) of the Merger Agreement.

Even if Term No. 4 imposes a “reasonably apparent” standard on §4.01(b),

ETE still prevails. Williams argues the opposite, but it again ignores the actual text

of Parent Disclosure Letter §4.01(b)(v).185

Section 4.01(b)(v) of the Parent Disclosure Letter permits issuances of “equity

securities.” Unlike Williams’ non-sensical argument, ETE was not limited to issuing

only common units or existing forms of equity securities. The parties could have

limited the issuance to certain types of equity but chose not to. See, e.g., ETE’s MSJ

Ex. 2, Parent Disclosure Letter §4.01(b)(i) (specifically referencing “Parent

Common Units,” “Parent Class D Units,” and “Parent General Partner Interest”); see

also MicroStrategy Inc. v. Acacia Research Corp., 2010 WL 5550455, at *7 (Del.

Ch. Dec. 30, 2010) (“use of different language in the two sections shows the parties

knew how to” distinguish between terms and that “[t]he absence of such broad

language” in one section suggests a different meaning was intended). Moreover,

185 See Williams’ MSJ Br. 44-45 (arguing, without any analysis, that the “readily apparent” standard is not satisfied).

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Williams’ witnesses acknowledged that the term equity securities was not restricted

to only a common unit issuance.186

The concept of an “equity securities” issuance is intertwined with each of the

three Merger Agreement provisions that Williams accuses ETE of violating:

� Section 4.01(b)(ii) prohibits ETE from “tak[ing] any action that would result in [ETE] ... becoming subject to any restriction ... to the payment of distributions or dividends.” Equity securities are generally accompanied by an entitlement to “distributions or dividends;” these concepts are clearly connected. Further, the ability to issue preferred securities, as the phrase “equity securities” undisputedly allowed, likely would involve restrictions to distributions.

� Section 4.01(b)(iii) prohibits ETE from “split[ting], combin[ing or reclassify[ing] any of its equity securities or issu[ing] or authoriz[ing] the issuance of any other securities in respect of, in lieu of or in substitution for equity securities....” Both this provision and §4.01(b)(v) of the Merger Agreement are intertwined as they both relate to the issuance of “equity securities.”187

� Section 4.01(b)(vi) prohibits ETE from amending its partnership agreement. However, the Parent Disclosure Letter allowed ETE to issue “equity securities,” which at a minimum would include different classes of equity, such as preferred units. And issuing equity securities of a different class of equity requires an amendment to the partnership

186 See, e.g., Ex. 38, Chappel Dep. 127:2-6, 137:17-138:1. 187 Additionally, this provision does not even apply to the circumstances of this case. This provision is narrowly concerned about splits or combinations of ETE’s existing equity securities and about similar issuances which would have the effect of a split or combination.

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agreement to set forth the terms of such equity, which is expressly contemplated by the partnership agreement.188

In short, there is a “reasonably apparent ... relevance” between an issuance of equity

securities and the securities-related subsections of Merger Agreement §4.01(b) at

issue here; thus, even if Term No. 4 applies, ETE prevails.

Similarly, §4.01(b)(v) modifies the Capital Structure Representation.

The same reasoning explains why ETE did not violate the Capital Structure

Representation. The representations and warranties in Merger Agreement §3.02

apply “except as set forth in the Parent Disclosure Letter.” Under Merger Agreement

§3.02,

any information set forth in one Section or subsection of the Parent Disclosure Letter shall be deemed to apply to and qualify the Section or subsection of this Agreement to which it corresponds in number and each other Section or subsection of this Agreement to the extent that it is reasonably apparent on its face in light of the context and content of the disclosure that such information is relevant to such other Section or subsection.189

It is “reasonably apparent” that §4.01(b)(v) of the Parent Disclosure Letter is

relevant to the Capital Structure Representation in §3.02(c)(i). As detailed above,

188 See Ex. 79, Third Amended and Restated Agreement of Limited Partnership of Energy Transfer Equity §13.1(g). 189 See ETE’s MSJ Ex. 1, MA §3.02.

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§4.01(b)(v) authorizes ETE to issue “equity securities”—a broad term encompassing

more than just existing forms of equity. The Capital Structure Representation would

thus be modified (pursuant to Parent Disclosure Letter §4.01(b)(v)) by the issuance

of any equity security not previously existing. Williams’ MSJ Brief does not even

mention the “reasonably apparent” language. Nor does it explain why a

representation about forms of equity securities would not be modified by an

authorization to issue equity securities.

Finally, Williams makes much of a supposed “economic equivalence”

purpose in the Merger Agreement. But the reality is that no provision in the Merger

Agreement guarantees economic equivalence. Quite the opposite, the Parent

Disclosure Letter authorized ETE to issue up to $1 billion in equity securities. No

matter how those securities are structured—even if they were common units—those

securities would dilute Williams’ share of the company as a whole. And Williams’

invocation of “economic equivalence” principles cannot override the plain language

of the relevant provisions of the Merger Agreement and the Parent Disclosure Letter.

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Extrinsic evidence is not appropriate to interpret the Merger Agreement, and even if it were, the evidence Williams cites supports ETE’s interpretation.

Williams’ attempt to escape the Merger Agreement’s terms by resorting to

extrinsic evidence is inappropriate, and the minimal extrinsic evidence that does

exist supports ETE’s interpretation, not Williams’.

The Delaware Supreme Court has “held unequivocally that extrinsic evidence

is not to be used to interpret contract language where that language is plain and clear

on its face.” O’Brien v. Progressive N. Ins. Co., 785 A.2d 281, 289 (Del. 2001)

(internal quotation and brackets omitted). As discussed above, the meaning of the

Merger Agreement and Parent Disclosure Letter is unambiguous. The term “Section

4.01(b) of the Parent Disclosure Letter” at the beginning of Merger Agreement

§4.01(b) is not susceptible to multiple interpretations. Thus, the Court has no need

to consider extrinsic evidence to interpret the Merger Agreement.

The extrinsic evidence cited by Williams does not help its argument. In

Delaware, looking to the drafting history is relevant when it can reveal “the process

by which the parties reached a meeting of the minds and the ground on which that

meeting occurred.” Zayo Grp., LLC v. Latisys Holdings, LLC, 2018 WL 6177174,

at *12 (Del. Ch. Nov. 26, 2018). Courts consider drafting history relevant when they

can identify active negotiations between the parties which illuminate an ambiguous

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provision in the agreement. For example, in the Zayo Group decision, the Court

held that where one party “expressly declined to make that commitment when Zayo

proposed it during the course of negotiations” the subjective intent of the parties was

clear as to the meaning of the disputed contractual provision. Id.190

The drafting history relied on by Williams in no way reveals the subjective

intent of the parties or their contemporaneous understanding of the Merger

Agreement and Parent Disclosure Letter. There is no contemporaneous evidence

showing an understanding between the parties about the breadth of the exceptions

or the reasons the exceptions were moved to the Parent Disclosure Letter. Williams

merely acknowledges that, “[o]n the night before signing, these commercially

sensitive exceptions were moved to the Parent Disclosure Letter.”191 However, the

depositions of Williams’ directors and advisors have been consistent in that there

were no contemporaneous “communications concerning the parent disclosure letter

to the merger agreement.”192 Witnesses did not “recall discussing any specifics”

190 See also Brace Indus. Contracting, Inc. v. Peterson Enters., Inc., 2016 WL 6426398, at *9 (Del. Ch. Oct. 31, 2016), aff’d, 2020 WL 57156 (Del. Jan. 6, 2020); DCV Holdings, Inc. v. Conagra, Inc., 2005 WL 698133, at *10 (Del. Super. Ct. Mar. 24, 2005), aff’d, 889 A.2d 954 (Del. 2005). 191 Williams’ MSJ Br. 46. 192 Ex. 80, Izzo Dep. 243:9-10; see also Ex. 4, Armstrong (2019) Dep. 75:22-76:4;Ex. 38, Chappel Dep. 118:22-119:6; Ex. 81, Cooper (2019) Dep. 181:4-182:3; Ex.

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about “how the parent disclosure letter was intended to work with anyone at

[ETE].”193

In any event, the extrinsic evidence supports ETE’s interpretation.

First, Williams states that “[t]hroughout the drafting of the Merger

Agreement, each exception ultimately listed in the Parent Disclosure Letter was

included in the text of the corresponding interim operating covenant in the Merger

Agreement.”194 This statement is irrelevant to the general applicability of the

exceptions. Parties routinely number sections and track provisions for

organizational purposes. Furthermore, ETE would not have acted against its own

interest by moving these exceptions to the Parent Disclosure Letter for the purpose

of limiting their availability. Instead, if anything, they were moved to affirm their

applicability to the other provisions of §4.01(b).

82, Fonk Dep. 39:25-40:25; Ex. 83, Garner Dep. 56:14-57:5, 57:21-58:13; Ex. 48,Hagg Dep. 109:17-19, 117:16-118:9; Ex. 84, Hinshaw Dep. 58:8-23, 59:13-18, 102:8-12; Ex. 80, Izzo Dep. 88:6-12, 243:9-24; Ex. 41, Mandelblatt Dep. 117:19-25, 118:10-15, 162:1-5, 162:19-163:3; Ex. 2, Meister Dep. 354:18-25, 358:20-25, 359:19-360:6, 362:19-363:23; Ex. 85, Nance Dep. 24:3-23, 47:6-8, 147:10-13; Ex. 86, Posternack Dep. 84:3-85:1, 85:25-86:16; Ex. 87, Smith (2018) Dep. 104:16-105:3; Ex. 88, Stoney (2019) Dep. 163:9-164:11; Ex. 89, Sugg (2018) Dep. 67:18-68:12, 72:1-73:18; Ex. 90, Talley Dep. 13:9-19. 193 Ex. 38, Chappel Dep. 118:22-119:6; see also supra note 192. 194 See Williams’ MSJ Br. 46.

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Williams also ignores that the introductory language of Merger Agreement

§4.01(b) says “[e]xcept as set forth in Section 4.01(b) of the Parent Disclosure Letter

[or] expressly permitted by this Agreement….” Thus, whether an exception was

found in the Parent Disclosure Letter or in the Merger Agreement, the result would

be the same.

Second, Williams asserts that its general counsel created a chart lining up each

disclosure letter exception to its corresponding operating covenant and that ETE’s

failure to challenge this document means ETE accepted its conceptualization.195

However, this chart says nothing about whether the disclosure letter exceptions are

limited to their corresponding operating covenant. Further, Williams offers no proof

that anyone at ETE actually read this chart, let alone agreed with anything in it. This

chart, created well after the Merger Agreement was signed provides no insight on

the legal effect of the language of the documents. At most, it reveals why Williams

mistakenly believes that the Issuance violated the Merger Agreement.

Third, Williams contends ETE did not consent to a potential October 2015

transaction and that the lack of consent proves its interpretation of the Merger

195 See Williams’ MSJ Br. 47.

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Agreement.196 It does the opposite. As Williams portrays the facts—though it lacks

supporting evidence197—ETE denied Williams consent because §4.01(a)(x) of the

Merger Agreement prohibited IDR waivers.198 Section 4.01(a)(x) of the Merger

Agreement, however, contains a specific exception clause that permits IDR waivers

only under limited circumstances.199 This specific exception clause thus conflicted

with the more general exception clause granting exceptions under all of Company

Disclosure Letter §4.01(a).200 In such cases, the specific exception clause controls

over the general exception clause. See Katell v. Morgan Stanley Grp., Inc., 1993

WL 205033, at *4 (Del. Ch. June 8, 1993). In contrast, none of the restrictions that

Williams contends ETE violated contain specific exception clauses. They were thus

196 Williams’ MSJ Br. 47-48.197 In fact, Williams points to no evidence that ETE relied on any portion of the Merger Agreement or Company Disclosure Letter in discussing whether such IDR waivers should be included in any such transaction. 198 ETE’s MSJ Ex. 1.

199 Merger Agreement §4.01(a)(x) states “except with respect to any waiver of or subsidies relating to WPZ IDRs (A) ... and (B).” 200 The Company Disclosure Letter was a side letter that set out exceptions to the interim operating covenants governing Williams’ conduct. It is a counterpart to the Parent Disclosure Letter.

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subject to the general exception clause that made §4.01(b) of the Merger Agreement

subject to §4.01(b) of the Parent Disclosure Letter.

Finally, Williams ignores the most relevant extrinsic evidence regarding the

purpose of the interim operating covenants. Williams acknowledged that the

disclosure letters provided “a great deal of flexibility.”201 Among other things, the

parties wanted to ensure that they had “enough capital to ... operate the business

prudently and ... continue to operate it as needed.”202 And Williams’ own CFO has

confirmed ETE’s interpretation, stating, “Welch and I sat down and based on our

financial forecast that we had shared with each other, plus I’d say some room for

flexibility, came up with a list” of exceptions that provided “some flexibility in

dealing with the capital markets.”203

Thus, even though this Court does not need to and should not consider

extrinsic evidence, the evidence nonetheless favors ETE’s interpretation.

201 See ETE’s MSJ Ex. 4, WMB01190652; Ex. 38, Chappel Dep. 136:4-10, 142:5-11, 276:7-24. 202 See Ex. 97, Welch (May 20, 2016) Dep. 74:18-75:1-15; Ex. 38, Chappel Dep. 110:4-24, 111:6-23, 135:6-22. 203 Ex. 38, Chappel Dep. 115:4-24; 136:4-10.

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Williams cannot prove a breach of the Ordinary Course covenant based on an alleged breach of the Limited Partnership Agreement.

Williams argues that ETE violated the Ordinary Course covenant because the

Court found that ETE breached its duties under its Limited Partnership Agreement

in connection with the Issuance. Williams’ theory overreaches.

First, the Ordinary Course covenant begins with “[e]xcept as set forth in

Section 4.01(b) of the Parent Disclosure Letter.” Because the Issuance was

authorized by the Parent Disclosure letter (supra §III.C.1.a), it does not matter

whether the Issuance or its effects (e.g., breaching the LPA) were in the ordinary

course.

Second, Williams is not a party to the Limited Partnership Agreement, and it

cannot assert the rights of a third party. See Lechliter v. Delaware Dep’t of Nat. Res.

Div. of Parks & Recreation, No. CV 10430-VCG, 2015 WL 7720277, at *4 (Del.

Ch. Nov. 30, 2015) (concluding that even incidental beneficiaries—which Williams

is not—to a contract “generally do[] not have standing under Delaware law to

enforce the terms of an agreement to which it is not a party”). Williams points to no

cases where a party was held to have breached an “ordinary course” provision due

to a violation of a separate partnership agreement, despite the prevalence of such

provisions.

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Third, even if Williams could rely on the Unitholder Litigation case,204 it has

not proved that any breach was material. The Court held that the unitholders suffered

no harm as a result of any breach by ETE. 2018 WL 2254706, at *27. Without any

harm to ETE, its stockholders, or Williams, there is no material breach.

Finally, to the extent the Court agrees with Williams that a breach of duties to

ETE’s unitholders can constitute a violation of ETE’s ordinary course provision,

then by the same token, a breach of duties to Williams’ stockholders can constitute

a violation of Williams’ ordinary course provision.205 Accordingly, ETE will show

at trial that Armstrong breached his fiduciary duty of loyalty to the Williams

stockholders by attempting to sabotage the Merger due to his material self-interest

in, among other things, retaining his lucrative position as CEO of Williams. Supra

§II.A. As Williams will not be able to show that it substantially complied with the

Merger Agreement, it will be unable to recover under that agreement.

204 The only evidence that Williams cites to support its claim that ETE breached the Limited Partnership Agreement is this Court’s order in the Unitholder Litigation case. Williams’ MSJ Br. 33-34. The burden-shifting analysis that applied in Unitholder Litigation, where the burden was on ETE “to demonstrate the fairness of the transaction,” 2018 WL 2254706, at *2, does not apply here, where Williams is suing for the breach of a different contract. Williams thus cannot rely on the decision in Unitholder Litigation to satisfy its burden in this case. 205 See ETE’s MSJ Ex. 1, MA §4.01(a).

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Williams’ Tax Representation claim fails as a matter of law.

In addition to its CPU claims, Williams continues to rehash its same failed

theories about the Tax Representation from the 2016 trial. The Court and the

Delaware Supreme Court have already rejected these same claims. And even if

Williams’ theory could be accepted, any alleged breach does not meet the Material

Adverse Effect threshold required by §6.03(a)(iv).

The Court has already rejected Williams’ incorrect interpretation of the Tax Representation.

In an attempt to avoid this Court’s prior holdings, Williams alleges that

“Latham made ETE aware of two facts in a draft officer’s certificate:” (1) “the value

discrepancy on the hook stock leg,” and (2) the “value discrepancy on the asset leg,

offsetting the discrepancy on the hook stock leg.”206 However, these are the same

“facts” that Williams pointed to during the 2016 trial, which this Court rejected. See

Williams Companies, Inc. v. Energy Transfer Equity, L.P. (“ETE I”), No. CV

12168-VCG, 2016 WL 3576682, at *18-19 (Del. Ch. June 24, 2016) (stating that

both parties knew the details of the exchange and that what changed was “Latham’s

recently developed analysis of that transaction, made in light of an ever-fluctuating

market in Partnership units”). In other words, Williams is simply attempting to

206 Williams’ MSJ Br. 50.

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separate Latham’s “‘perfect hedge’ theory” into its components and even cites this

Court’s 2016 ruling as its support.207 Indeed, Williams concedes several times that

it was Latham’s “‘perfect hedge’ theory” that prevented Latham from issuing the

721 Opinion.208 The Court, however, has already found that Latham’s “theory of

tax liability” was “not a ‘fact’ requiring disclosure under the Merger Agreement.”

ETE I, 2016 WL 3576682, at *19.

Moreover, all of the underlying facts—not to mention Latham’s legal

theory—were fully known to Williams at closing. Williams’ “risk allocation” theory

is nonsensical given that Williams made the same Tax Representation as ETE and

knew the same facts.209 Indeed, the Court has already concluded that knowledge of

the facts that made the 721 Opinion undeliverable “were no more chargeable to

[ETE] than to Williams.” ETE I, 2016 WL 3576682, at *19. The Supreme Court

affirmed this Court’s ruling, holding that ETE “did not breach its representations and

warranties,” because it “did not fail to disclose any facts known to it at the time the

agreement was signed.” Williams Companies, Inc. v. Energy Transfer Equity, L.P.

(“ETE II”), 159 A.3d 264, 275 (Del. 2017). At closing, as at signing, there were no

207 Williams’ MSJ Br. 50.208 Id. at 50, 53 (emphasis added). 209 ETE’s MSJ Ex. 1, MA §3.01(n)(i).

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facts that ETE failed to disclose, and each party knew as much as the other about

Latham’s legal theory. Williams consequently has no justification for demanding

the Termination Fee under the law of the case.

As it did in 2016, Williams urges the Court to effectively turn the Tax

Representation into a guarantee of the 721 Opinion. Under Williams’ argument, if

the Merger Agreement were terminated due to the failure of the 721 Opinion

condition, then the Tax Representation would necessarily be breached at closing

(because Latham’s inability to issue the 721 Opinion would always result from

Latham’s application of law to some fact or facts). Nowhere is this more apparent

than when Williams argues that “the inaccuracy of ETE’s Tax Representation as of

the Closing Date is a necessary consequence of the Court’s prior ruling that ETE

was permitted to refuse to close based on the failure of the Section 721 Opinion

condition.”210 But this Court has, again, already rejected that argument. See ETE I,

2016 WL 3576682, at *19 (rejecting the view that the Tax Representation should be

treated as “a waiver of any subsequent reliance of a failure of the 721 Opinion

condition precedent”). As explained more fully in ETE’s MSJ Brief, these

conclusions are law of the case and dispose of Williams’ claim.211

210 Williams’ MSJ Br. 49 (emphasis added).211 ETE’s MSJ Br. 11, 15-18.

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Further, if the parties had intended the Merger Agreement to operate the way

Williams argues where any failure of the 721 Opinion condition would trigger the

Termination Fee, they would have simply included §6.01(h) (the Tax Opinion

condition) in the existing list of conditions precedent in §5.06(f) that automatically

trigger the Termination Fee. However, that list is limited to §§6.01(b), (c), (d), and

(e). It does not include §6.01(h)—showing that, contrary to Williams’ argument,

there was no intent to trigger the Termination Fee upon any failure of the Tax

Opinion condition.

Any purported breach of the Tax Representation did not cause a Parent Material Adverse Effect.

Even if Williams were correct that ETE breached the Tax Representation, it

still cannot recover the Termination Fee under the plain language of the Merger

Agreement. Pursuant to Merger Agreement §6.03(a)(iv), a breach of the Tax

Representation does not trigger the Termination Fee if that breach “would not

reasonably be expected to have ... a Parent Material Adverse Effect.”212 A Parent

Material Adverse Effect excludes anything “relating to” “the consummation of the

Transactions.”213 The potential tax to which Williams points as constituting the

212 ETE’s MSJ Ex. 1, MA §6.03(a)(iv).213 Id. §8.03.

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Parent Material Adverse Effect is a tax on the Transactions themselves, and thus is

a direct result of the consummation of the Transactions. Consequently, under

Merger Agreement §8.03, any alleged breach of the Tax Representation cannot have

a Parent Material Adverse Effect.

Even if a tax imposed on the Transactions somehow did not constitute a

circumstance “relating to” the consummation of the Transactions, ETE clearly did

not represent that the transaction actually qualified as tax-free under IRC §721(a).

Instead, ETE represented that it did not “know[] of the existence of any fact that

would reasonably be expected to prevent” tax-free treatment.214 The alleged falsity

of this representation—i.e., ETE’s alleged knowledge of such a fact—has no bearing

on the actual taxability of the transaction and the ultimate taxes owed.215 See

DeMartino v. Comm’r, 51 T.C.M. (CCH) 1278, 1290 n.19 (1986) (“The contention

by petitioner that they had no knowledge or reason to know of the defective nature

of their transactions is irrelevant [to their tax liability].”). In other words, if the

transaction was taxable, it was taxable regardless of ETE’s knowledge and thus

214 Id. §3.02(n)(i). 215 The Tax Representation is different from many other representations in this regard. For example, see Merger Agreement §3.02(n)(ii)(B), which is a representation that all taxes have been timely paid. Had this representation been false—i.e., had all taxes not been timely paid—this falsity certainly would bear on the ultimate taxes owed.

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regardless of the truth or falsity of the Tax Representation. Consequently, even if

the Tax Representation had been false as of the termination, its falsity would not

have a Parent Material Adverse Effect and thus would not trigger the Termination

Fee.

Finally, Williams cannot meet its burden to prove a Parent Material Adverse

Effect, even if a potential tax liability resulting from the consummation of the

Merger could serve as a basis for such a claim. Delaware law imposes an

extraordinarily high standard for establishing a Material Adverse Effect. Among

other things, for something to be a “material adverse effect,” it “must be expected to

persist significantly into the future”; thus, a one-time tax burden (even a significant

one) would not suffice. See Hexion v. Huntsman, 965 A.2d 715, 738 (Del. Ch. 2008).

Even if any of Williams’ claims were legally meritorious, it has not proved it substantially complied with its duties under the Merger Agreement.

In addition, Williams is not entitled to summary judgment because it cannot

show that it substantially complied with the Merger Agreement. ETE has presented

evidence that Williams did not fulfil its obligations under the Merger Agreement.

ETE is therefore entitled to summary judgment in its favor or, in the alternative, a

genuine dispute of material fact exists that bars summary judgment in favor of

Williams.

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Under Delaware law, to recover under a contract Williams must first show

that it “substantially complied with all of the provisions of the contract.” Preferred

Inv. Servs., Inc. v. T&H Bail Bonds, Inc., 2013 WL 3934992, at *10 (Del. Ch. July

24, 2013); Frunzi v. Paoli Services, Inc., CIV.A. N11A-08001MMJ, 2012 WL

2691164, at *7 (Del. Super. Ct. July 6, 2012) (“It is established Delaware law that

in order to recover damages for a breach of contract, the plaintiff must demonstrate

substantial compliance with all of the provisions of the contract.”). Thus, “[b]efore

a plaintiff can recover in contract, it must demonstrate substantial compliance with

all of the provisions of that contract.” SLMSoft.com, Inc. v. Cross Country Bank,

2003 WL 1769770, at *13 (Del. Super. Ct. Apr. 2, 2003).216

Williams breached the Merger Agreement. Most notably, as detailed above,

Williams’ CEO Armstrong colluded with Williams stockholder Bumgarner in a

deliberate effort to stop the Merger.217 Armstrong corresponded extensively with

216 This Court previously recognized—and Williams did not dispute—that to recover on its claims, Williams bears the burden to show substantial compliance with the Merger Agreement. See Ex. 91, Transcript of Teleconference Re Plaintiff/Counterclaim Defendant’s Motions to Dismiss and Strike and the Court’s Rulings (Oct. 30, 2018), at 7. During the Teleconference, ETE explained that “plaintiffs need to show that they substantively complied with the agreement in order to recover for breach of contract.” Id. at 7:1-3. The Court then agreed that ETE’s argument “doesn’t require [it] to bring an affirmative claim. That’s just a burden of proof [Williams] ha[s].” Id. at 7:4-6. 217 See supra §II.A.

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Bumgarner via Armstrong’s private email accounts and also met with Bumgarner in

person. Armstrong provided Bumgarner with information used by Bumgarner in his

lawsuit against Williams and ETE that sought to enjoin the Merger. Armstrong’s

communications with Bumgarner continued after the lawsuit was filed and long after

it had become clear that Bumgarner had embarked on a campaign to both encourage

courts, regulators, and stockholders to block the Merger. Armstrong never

mentioned his secret communications to Williams’ counsel, his Board, or ETE.

Instead, after being asked about Bumgarner at a deposition, Armstrong deleted the

Gmail account he used for the bulk of his written communications to Bumgarner.

As Williams directors have emphatically stated, Armstrong’s collaboration with

Bumgarner was inconsistent with Williams’ best efforts and ordinary course

obligations.

This was not Williams’ only effort to scuttle the Merger. As detailed above,

Armstrong and other directors also actively cajoled fellow directors into changing

their recommendations on the Merger. As one fellow director explained—in an

email that was not produced prior to the 2016 trial—“since the merger

announcement, [Armstrong has] outright attempt[ed] to sabotage the transaction by

working exclusively on finding ways to break the deal,” including “going off script

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many times with investor[s]” and “working behind the scenes with dissident

directors to fan the deal break flames.” 218

Consequently, Williams has not established that it complied the Merger

Agreement. At minimum, there are genuine issues of material fact on this question,

despite Williams’ attempt to brush aside Armstrong’s misconduct with a few stray

lines in a brief seeking summary judgment.

CONCLUSION

For the foregoing reasons, ETE requests this Court deny Williams’ motion for

partial summary judgment.

218 Moreover, with respect to the Tax Representation, it is clear that even if ETE breached the Tax Representation (as Williams argues), then Williams necessarily breached its own tax representation, precluding Williams’ ability to recover under its Tax Representation theory. See ETE’s MSJ Ex. 1, MA §3.01(n)(i).

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YOUNG CONAWAY STARGATT & TAYLOR, LLP

OF COUNSEL:Michael C. HolmesJohn C. WanderCraig E. ZieminskiAndy E. JacksonVINSON & ELKINS LLP2001 Ross AvenueSuite 3900Dallas, Texas 75201(214) 220-7700

/s/ Rolin P. Bissell Rolin P. Bissell (#4478)James M. Yoch, Jr. (#5251)Benjamin M. Potts (#6007)Rodney Square1000 North King StreetWilmington, Delaware 19801(302) 571-6600

Counsel for Defendants andCounterclaim Plaintiffs Energy Transfer LP, formerly EnergyTransfer Equity, L.P.; EnergyTransfer Corp LP; ET Corp GP,LLC; LE GP, LLC; and EnergyTransfer Equity GP, LLC

Words: 13,935

Dated: February 11, 2020

CERTIFICATE OF SERVICE

I, Benjamin M. Potts, Esquire, hereby certify that on February 18, 2020, I

caused to be served a true and correct copy of the foregoing document upon the

following counsel of record in the manner indicated below:

By File & ServeXpress

Kenneth J. Nachbar, Esquire

Zi-Xiang Shen, Esquire

Morris Nichols Arsht & Tunnell LLP

1201 North Market Street

P.O. Box 1347

Wilmington, DE 19899-1347

/s/ Benjamin M. Potts.

Benjamin M. Potts (No. 6007)