» Multibillion-Dollar Dispute Between Texas Energy Companies to Go to Trial

Multibillion-Dollar Dispute Between Texas Energy Companies to Go to Trial

In Dallas, a trial is set to begin in a business dispute between two large Texas energy companies contesting whether a business partnership had been formed between them.

Dallas-based Energy Transfer Partners filed the lawsuit against Houston-based Enterprise Products Partners and Enbridge Inc. of Calgary, Alberta. Energy Transfer Partners claims that a business partnership had been created between itself and Enterprise to jointly construct a pipeline from Cushing, Oklahoma to Houston, but that Enterprise conspired with Enbridge to cut Energy Transfer out of the deal.

In a motion to dismiss the case, Enterprise and Enbridge claimed that no partnership or joint venture was actually created between Energy Transfer and Enterprise. The motion to dismiss was denied by Dallas County District Judge Emily Toblowsky, and jury selection has now begun.

The case is noteworthy because it involves important business litigation issues and pits prominent Texas trial attorneys against one other. The case is also expected to reveal information about the business strategies of three large, fast-growing oil companies. Testimony from executives of all three companies is expected to be given.

Energy Transfer Partners, which has approximately $50 billion in gas and oil assets, claims that Dan Duncan, the chairman and majority owner of Enterprise, approached Energy Transfer Partners about forming a joint venture before his death in 2010. Enterprise, which has about $38 billion in assets, signed a nonbinding agreement with Energy Transfer Partners in spring 2011.

Energy Transfer Partners claims that over the following few months, the two companies jointly made operational decisions, met with potential customers and marketed the partnership, calling the venture Double E Pipeline and even signing a deal with Chesapeake Energy in August 2011 to ship oil on the installation.

However, Enterprise announced that it was terminating the business relationship less than a month later. Allegedly, the company then started a similar venture with Enbridge, which has annual revenue of about $11 billion and assets of approximately $30 billion.

Energy Transfer Partners claims that Enterprise and Enbridge conspired to end the existing partnership and is suing for $1.2 billion in damages. Enterprise claims that no partnership had been finalized, pointing to language in an April 2011 letter that states that no obligations would exist between the two companies until the parties received approval from their respective boards. Energy Transfer Partners argues that Texas law has a liberal definition for the existence of a business partnership, even sometimes finding a partnership in cases in which the parties claim there is none.

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