Remember the big fight to lead the Delaware shareholder litigation over Kinder Morgan's proposed $21.1 billion acquisition of El Paso Corporation? When that many birds of prey are circling, it's usually a good bet that the case has quite a bit of meat on its bones. And so it seems to be in the El Paso suit, according to the just-released public version of the plaintiffs' brief in support of enjoining the deal. On Thursday, Chancellor Leo Strine Jr. of Delaware Chancery Court will hear arguments on the injunction motion. Based on the plaintiffs' brief, that's going to be quite a hearing.

The single most intriguing piece of evidence turned up by lead plaintiffs' lawyers from Grant & Eisenhofer; Bernstein Litowitz Berger & Grossmann; and Labaton Sucharow is an email from Steve Munger of Morgan Stanley, who advised El Paso on Kinder Morgan's acquisition bid. But Morgan Stanley wasn't El Paso's only financial adviser. Goldman Sachs had been counseling El Paso's board on a potential spin-off of the company's exploration and production business when Kinder Morgan proposed acquiring the entire company. Goldman continued advising the El Paso board on its options -- even though Goldman Sachs also advised and underwrote Kinder Morgan's 2006 leveraged buyout and retains a 19 percent ownership stake (worth $4 billion) in Kinder Morgan.

Munger apparently thought that wasn't a good idea. "Over Wachtell's objections, GS got a letter signed which engaged them as an advisor in the sale of the company," he wrote, referring to El Paso's lawyers at Wachtell, Lipton, Rosen & Katz. "Between that fact and the enormous conflict as a 22 percent shareholder of Kinder...this is GS at its most shameless."

Juicy, right? (I should note that in the all-too-redacted public version of El Paso's response to the shareholders' brief, El Paso's Wachtell lawyers said the email is "misleadingly edited.") The plaintiffs claim that the entire sale process was tainted by Goldman's conflict of interest: Every dollar shaved off the price Kinder Morgan agreed to pay for El Paso saved Goldman $150 million as a Kinder Morgan owner, according to the shareholders' brief.

"Goldman and El Paso management undermined the board's willingness to hold out for the best deal," the brief said. "When [Kinder Morgan] refused to raise its price and instead threatened to take the offer public, Goldman encouraged the [El Paso] board to permit KMI to conduct due diligence. This struck the board as odd given the inadequacy of the offer, and caused them to question Goldman's motives. Yet, even faced with this evidence of Goldman's conflict influencing its advice, the board still did not exclude Goldman from the process. Instead it simply carved Goldman out of 'tactical' discussions -- i.e., discussions about specific negotiating tactics -- while permitting Goldman to continue providing analyses and advice that would influence the board's ultimate decision."

The shareholders also accuse Goldman and the El Paso board of encouraging Morgan Stanley to support the Kinder Morgan transaction via a fee agreement in which Morgan Stanley would only be paid if the acquisition went through. (That's a typical success-fee deal, regardless of the unusual circumstances of this case.)

Goldman Sachs maintains that El Paso's board knew from the outset of negotiations that Goldman is a part owner of Kinder Morgan, and took careful steps to assure that Goldman -- also El Paso's longtime financial adviser -- was able to offer untainted counsel. The shareholders' brief, wrote Goldman's lawyers at Sullivan & Cromwell and Richards, Layton & Finger, "is an exercise in assumption and innuendo. Every piece of Goldman Sachs's advice is painted in the most dastardly terms, allegedly motivated by rapacious and crude objectives," the Goldman response said. "But plaintiffs do not confront an inconvenient fact that undermines all their rhetoric: Every bit of Goldman Sachs's advice was being vetted by a sophisticated independent board, with whom Goldman Sachs had an eight-year relationship, and by an accomplished rival, Morgan Stanley, which had been retained by El Paso as a second advisor and ultimately became the sole advisor as to the KMI proposal." (In Kinder Morgan's reply brief, its lawyers at Weil, Gotshal & Manges pointed out that Goldman didn't provide any advice to its board on the El Paso acquisition.)

Delaware typically shows great deference to informed decisions by independent corporate directors, but Strine recently showed in the Southern Peru case that he won't give a free pass to conflicted boards. (In fact, Goldman took a beating in his Southern Peru ruling, which awarded shareholders $1.3 million from the company's majority owner, Grupo Mexico.) In another of 2011's most celebrated Delaware cases, Vice Chancellor Travis Laster enjoined Del Monte's leveraged buyout when Grant & Eisenhofer and Robbins Geller Rudman & Dowd exposed Barclays' dual role advising both Del Monte and the private equity buyout group.

Like I said, it should be a very interesting hearing Thursday.

(Reporting By Alison Frankel)