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Last week the Texas Supreme Court granted review in Energy Transfer Partners, L.P. v. Enterprise Products Partners, L.P., a case concerning Texas partnership law.  Energy Transfer Partners has garnered significant amicus support on both sides of the “v.” and has been closely followed by the energy industry.

The dispute between ETP and Enterprise began in 2011, when Enterprise approached ETP about potentially building a crude oil pipeline together.  Before beginning work, the parties signed three agreements—a confidentiality agreement, a letter agreement with a term sheet, and a reimbursement agreement.  All three indicated that the proposed project was still in a preliminary phase, and all contained provisions purporting to limit the parties’ obligations to one another.  The letter agreement further provided that no binding or enforceable obligations would exist between the two companies until (i) their respective boards had approved the transaction; and (ii) both companies had negotiated and executed the terms and conditions of the transaction.  Months later, with these conditions precedent unmet, Enterprise terminated its participation in the project with ETP and instead partnered with Enbridge Inc. for the construction of the pipeline.

ETP sued Enterprise for breach of joint enterprise and breach of fiduciary duty in the 298th District Court.  At the end of a four-week trial held in 2014, the jury found that ETP and Enterprise created a partnership to market and pursue a pipeline project and that Enterprise had failed to prove that it complied with its duty of loyalty.  It awarded ETP approximately $500 million in damages.  In 2017, the Fifth Court of Appeals (Dallas) reversed the most significant jury finding: it rejected ETP’s argument that a partnership with Enterprise was formed through conduct and held instead that no partnership existed because the conditions precedent in the letter agreement were unmet and ETP did not request a jury finding that they had been waived.

Oral argument before the Texas Supreme Court is scheduled for October 8, 2019.

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