» 2014 » September

Appeal Expected in Multi-Million Dollar Case Over Pipeline Partnership

After a March jury verdict of $319 million in damages, an appeal is expected in a Texas business litigation case that could lead to a $500 million final judgment against the defendant.

The case revolves around partnership status between companies. The courts who have tried it already have had to decide whether conduct that may have indicated a partnership (to build a pipeline) trumps a written agreement that allegedly precluded a partnership.

Energy Transfer Partners (ETP) alleged that it formed a legal partnership with Enterprise Product Partners in 2011 to jointly build an oil and gas pipeline. Enterprise then allegedly broke off the partnership to pursue similar plans with Enbridge Inc. 

ETP sued Enterprise and Enbridge, alleging tortious interference. ETP also alleged breach of contract and breach of fiduciary duties against Enterprise. Enterprise denied the allegations and argued that no partnership had been formed; the companies had not received approval from their boards for any joint venture.

A jury issued its $319 million verdict against Enterprise after a five-week trial and less than two days of deliberations. The jury rejected the claim of tortious interference against Enbridge.

An attorney representing Enterprise said that the company will move for a new trial, and that if the motion is not granted, Enterprise will appeal.

Observers said that the appeal is expected to be expensive for both sides because of the number of legal issues under consideration. The final ruling will most likely establish whether companies have a “safe zone” to explore business opportunities without inadvertently entering into a partnership or other legal commitment. 

With so much at stake, an attorney for Enbridge said he expects the case to reach the Texas Supreme Court.

Texas man alleges age discrimination in lawsuit against former employer

A Texas man has filed a lawsuit in Texas federal court against his former employer, alleging age discrimination.

Miguel Cortes filed the lawsuit against Brand Energy Solutions on July 28.

Cortes, who is over age 60, said that his supervisor at a Deer Park job site began harassing and humiliating him because of his age. Cortes claims that the supervisor made comments regarding Cortes’ age, and that he demanded that Cortes work faster than younger employees and perform tasks that were outside of his job description.

In the lawsuit, Cortes claims that he scheduled a meeting with the supervisor and the plant manager to discuss the issue, but the plant manager threatened both men with termination if they were not able to resolve the issue themselves.

According to the complaint, the supervisor’s behavior continued shortly after the meeting, and Cortes was told that he was being transferred to another shift and replaced by a younger worker. After contesting the transfer, Cortes claims that he was discharged or constructively discharged from employment.

The lawsuit accuses the employer of age discrimination and retaliation under the Texas Commission on Human Rights Act. Cortes claims he lost wages and benefits and suffered mental anguish and emotional distress. He is seeking actual, liquidated and exemplary damages as well as other relief.

Chesapeake Settles Lawsuit With City of Arlington Over Gas Royalties

Chesapeake Energy has agreed to pay $700,000 to the city of Arlington, Texas to settle a lawsuit that accused the energy company of underpaying royalties for gas pumped from under airports, parks and other public property.

The Arlington City Council approved the settlement August 19 by a vote of 8-0, with Mayor Robert Cluck absent while recovering from surgery. The deal was reached between the city, Chesapeake and Total E&P USA, a French company that owns a 25 percent share of Chesapeake’s holdings in the Barnett Shale.

The lawsuit had accused Chesapeake of improperly deducting post-production costs from royalties paid to the city and of basing payments on gas prices below the actual sales price. 

Chesapeake holds leases on approximately 1,900 acres of public property.

The settlement agreement provides that in the future, the royalty rate paid to the city will be based either on the highest sales price received by Chesapeake or on a price established by a formula. Also, post-production costs will no longer be subtracted from royalty payments.

Attorneys for the city initially said they thought damages would exceed $1 million, but the city settled for a lower payment. City Attorney Jay Doegey said that the settlement was fair and that it clarified the methodology for calculating royalties.

Chesapeake did not admit fault in the settlement, and it maintained, in court documents, that Texas law permits the deduction of post-production costs.

The settlement covers 25 separate leases of varying size. 

Chesapeake still faces numerous additional lawsuits filed by other property owners alleging underpayment of royalties. The Arlington school district, which joined the city’s lawsuit, is still negotiating with Chesapeake regarding its claims.

The lawsuit by the city of Arlington made claims similar to those made in other lawsuits against Chesapeake: that in addition to improperly deducting post-production costs from royalty payments, the company used a system of “sham transactions,” such as selling gas to its own affiliates, in order to calculate royalties based on a price lower than the actual sales price.

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