Energy companies in Texas may be affected by recent jury decision

March 25, 2014

A decision rendered by a jury in a lawsuit between pipeline companies in Houston and Dallas earlier this month has energy companies in the state reevaluating the way they do business. Business executives across the state are making changes to their public behavior in light of the $319 million verdict, a price tag that may later include additional amounts of restitution.

Briefly explained, representatives from Energy Transfer Partners (ETP) out of Dallas and Houston-based Enterprise Products Partners (Enterprise) were jointly seeking a business opportunity that involved constructing a pipeline from Oklahoma to the Gulf Coast. Enterprise later pulled out of its dealings with ETP and joined forces with a third company to own and operate a different pipeline. ETP sued Enterprise for business losses sustained.

Partnerships in Texas

To those outside of the energy business industry in Texas, the jury's decision may not appear to have much impact. However, joint ventures, partnerships and mergers are quite common within the oil and gas industry and, according to a recent Dallas Morning News article, Texas-based energy companies were involved in nearly $400 billion worth of merger and acquisition transactions in just the past four to five years.

A partnership indicates a formal relationship and businesses rely on the certainty and stability a partnership agreement creates. Typically, evidence of a partnership requires such actions as:
- Corporate board approval
- Execution of a written agreement

Although Enterprise and ETP executives allegedly spoke and acted publicly as if they were working together, the only document they signed was a non-binding letter of intent. Despite the lack of a formal partnership, the jury ruled in favor of ETP, holding Enterprise responsible for ETP's business losses after Enterprise left.

Effects on Texas businesses

Although the verdict will be appealed by Enterprise, the decision appears to turn Texas partnership law on its head, potentially opening the floodgates to more cases of business litigation. Some claim that the decision sets a dangerous precedent for budding relationships between Texas businesses.

If you own, operate or are involved in a company, partnership or joint venture in the energy industry in Texas, it is important to consult an experienced business attorney at every step of the way. Public remarks by a corporate executive or a letter of intent may now mean something other than what you intended. A lawyer knowledgeable about the rules and regulations -- and recent court decisions -- in the energy industry can help your business avoid and resolve business disputes that may arise.

Article provided by Brown, PC
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