$500 Million Win for Beck Redden Client in Landmark Reversal

  • July 18, 2017

On July 18, a Texas appeals court reversed a 2014 trial court’s landmark jury verdict of $535 million dollars, this time ruling in favor of Beck Redden client, Enterprise Products Partners LP.  The initial ruling of the case, Enterprise Products Partners LP et al. v. Energy Transfer Partners LP et al., favoring Energy Transfer Partners (ETP), legally established a business version of common law marriage and resulted in a judgment against Houston-based Enterprise Products Partners.

In the unanimous 20-page opinion (click here for the opinion), the three-judge panel ruled that Dallas-based pipeline company ETP “did not prove as a matter of law” that Enterprise had waived prior agreements between the two companies that they had no actual business partnership.

Justice Lana Myers, writing for the unanimous appeals court panel, said unfulfilled conditions precedent, which describes what had to occur before a partnership between the two was formed, supported Enterprise’s conclusion that it had no formal partnership with ETP and so no duty of loyalty. The conditions precedent were never met or waived and without those provisions being fulfilled, the trial court’s judgment in favor of ETP had to be reversed, the panel said.

In 2014, the trial court found that Enterprise had breached its duty of loyalty to ETP, which was given a favorable judgment of more than a half billion dollars. The dispute is over whether ETP was unfairly cut out of a valuable pipeline deal by Enterprise, which went on to build a crude oil line with another company instead.

“ETP either had the burden to plead and prove compliance with the conditions precedent … or it had the burden to prove an excuse for nonperformance,” Justice Myers wrote. “ETP did not plead that the two conditions precedent were performed or that they were excused by waiver.”

The opinion adds that ETP did not do enough to prove the necessary points.

“It is undisputed that the conditions precedent were not performed,” the opinion said, adding that they were not waived, either.  A letter agreement between the two parties said they had no binding obligation to each other “unless and until the parties have received their respective board approvals and definitive agreements ….” These conditions were never met, Enterprise said, and therefore ETP’s claims should have been dismissed.

Enterprise was working with ETP on a planned crude oil pipeline from Cushing, Oklahoma, to refineries near the Gulf of Mexico. Plans for the pipeline were publicized, and the two companies spent months in open season in the summer of 2011 trying to land enough customers to make the line economically viable. Interest was thin, however, and Enterprise moved to join forces with Enbridge Inc. to build a separate pair of pipelines along a similar route.

The Beck Redden team included David J. Beck, David M. Gunn, Russell S. Post, Jeff M. Golub, Michael E. Richardson, John Adcock, B.D. Daniel, and Jim Taylor.  Co-counsel on the case included David Keltner and Marianne Auld of Kelly Hart & Hallman LLP; Michael Jung of Strasburger & Price LLP; and Wallace B. Jefferson and Rachel Ekery of Alexander Dubose Jefferson & Townsend LLP.