The Delaware Court of Chancery on Tuesday ruled that a challenge to natural gas company Regency GP's 2015 merger with Energy Transfer Partners had cleared a preliminary hurdle to show that Regency's board may have approved a deal that it knew was not in the firm's best interest.

The ruling, from Chancellor Andre G. Bouchard, left just one claim standing after a second attempt by Regency and ETP to extinguish the case, which centers on protections for master limited partnerships. The suit's other three counts were dismissed as inconsistent with state law governing limited partnerships.

But Bouchard said in a 14-page order that Regency investor Adrian Dieckman had provided sufficient support for his allegations that the Regency directors had created a conflicted panel to recommend a transaction that, Dieckman said, would only benefit ETP.

Bouchard had tossed the suit in March 2016, finding that Regency's limited partnership agreement eliminated all fiduciary duties and replaced them with a contractual governance scheme that shielded the deal from judicial scrutiny. The board, Bouchard said, had met contractual “safe harbor” mechanisms to address potential conflicts of interest by establishing a special conflicts committee and securing the majority support of unaffiliated unitholders.

However, the Supreme Court reversed that decision last January, saying there was reason to believe the safe harbor provisions were not available to Regency because it may have used a conflicted conflicts committee and made false and misleading statements in order to obtain unitholder approval for the merger.

The unitholders, the high court said, could expect the committee to be made up of independent directors, with no ties to ETP.

In his amended complaint, Dieckman attacked the “halfhearted and perfunctory” merger talks and the “musical chairs” composition of the conflicts committee, which cast doubts on its independence.

He also pointed to one of the two conflicts committee members, Richard Brannon, who left the board of Sunoco, which had a general partner interest in ETP, to review the transaction. After the deal closed, Brannon and the other committee member, James Bryant, both joined the Sunoco board.

“Here, plaintiff has pleaded sufficient facts from which, when viewed collectively, it is reasonably conceivable that the general partner and Regency GP did not subjectively believe that the merger was in the best interests of the partnership,” Bouchard wrote.

Bouchard, however, dismissed Dieckman's remaining counts for breach of implied covenant, aiding and abetting and tortious interference.

Attorneys from both sides did not immediately respond Wednesday to requests for comment.

Dieckman is represented by Stuart M. Grant and James J. Sabella of Grant & Eisenhofer; Mark Lebovitch, Jeroen van Kwawegen and Alla Zayenchik of Bernstein Litowitz Berger & Grossman and Mark C. Gardy and James S. Notis of Gardy & Notis.

The Regency defendants were represented by Michael Holmes, Manuel Berrelez and Craig Zieminski of Vinson & Elkins and Rolin P. Bissell and Tammy L. Mercer of Young Conaway Stargatt & Taylor.

The case is captioned Dieckman v. Regency.