Texas Supreme Court Clears Beck Redden Client of $535 Million Judgment

  • January 31, 2020

On Friday, January 31, 2020, the Texas Supreme Court issued a unanimous ruling that vindicated a Beck Redden client and will have a large impact on disputes about partnership formation. In an opinion authored by Chief Justice Nathan Hecht, the court agreed with the Dallas court of appeals in rejecting a trial court's $535 million judgment against Enterprise Products Partners LP.

The plaintiff Energy Transfer Partners LP sued Enterprise on allegations that the two companies had formed a partnership to develop a pipeline that would have transported oil from Cushing, Oklahoma to the Gulf Coast.

Enterprise defended by pointing to several contracts where the parties had repeatedly agreed that they would not have a partnership unless and until two conditions were met: (1) the companies executed definitive agreements, and (2) each company's board of directors gave its approval.

It was undisputed that neither condition had been met, so Enterprise urged the trial court to reject the case by summary judgment, but to no avail. After Energy Transfer insisted that the parties had "waived" the two conditions, the trial court refused to grant summary judgment, forcing the parties to litigate the case before a jury for weeks in early 2014.

A Dallas County jury found a partnership, and the trial court awarded Energy Transfer a judgment for approximately $535 million.

The Dallas court of appeals overturned that judgment in 2017. It ruled that the two conditions meant what they said, and that if Energy Transfer wanted to overcome the conditions, the way to do that was to get a jury finding of waiver.

The Texas Supreme Court unanimously agreed with the Dallas court of appeals in rejecting Energy Transfer's effort to get around the two conditions that it had agreed to. According to the Supreme Court, the parties bargained for those two conditions, the conditions meant what they said, and nothing in the parties' conduct showed evidence of waiver.

The Beck Redden team included David J. BeckDavid M. Gunn, Russell S. Post, and Jeff M. Golub, with collaboration along the way from Michael Richardson, B.D. Daniel, Jim Taylor, and John Adcock. Co-counsel at trial included Dallas attorney Dick Sayles. Co-counsel on appeal included David Keltner and Marianne Auld of Kelly Hart & Hallman LLP; P. Michael Jung of Clark Hill Strasburger; and Wallace B. Jefferson and Rachel Ekery of Alexander Dubose & Jefferson LLP.

The ruling was covered by Law360 in an article that can be found by clicking here.

To read the opinion, click here.