Logic is the beginning of wisdom, not the end.

— Dr. Spock, Star Trek, Starfleet Officer

The long-running legal saga between Enterprise Products Partners (“Enterprise”) and Energy Transfer Partners (“ETP”) may finally be nearing its end after the Texas Supreme Court issued a unanimous decision last Friday, January 31, 2020, holding that no partnership ever arose between the parties. (Read more) This dispute between two of the major players in the energy industry focused on the legal standard for determining when a partnership is formed. ETP argued that the test for partnership formation should be based on the parties’ conduct, while Enterprise maintained that specific conditions the parties agreed to include in their contracts had to be established before a partnership was created, and it contended that those conditions had never been met.

The Supreme Court’s opinion may be the final chapter in eight years of hard-fought litigation between Enterprise and ETP, although ETP will have the right to file a petition for rehearing of the Court’s decision. We will share our third blog post about the case and also review some important lessons for business owners gleaned from this lengthy legal conflict. ¹
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Following Supreme Court arguments last month, the final chapter in the long-running legal battle between Energy Transfer Partners LP (“ETP”) and Enterprise Products Partners (“Enterprise”) is finally coming to an end. ETP is requesting the Texas high court to reinstate the $535 million judgment it obtained after a jury trial against Enterprise in 2014. The case presents critical issues regarding the manner in which a Texas partnership can be formed, and the importance of these questions for business owners and the size of the judgment have made this a closely watched legal conflict since the jury issued its verdict more than 5 years ago.

This post reviews the issues at stake in the ETP litigation and explains our prediction that the Supreme Court will not reverse the decision issued by the Dallas Court of Appeals in 2017, which unanimously overturned the jury’s verdict and held that no partnership ever arose between ETP and Enterprise.  We expect the Court to rule that in light of the written conditions the parties had expressly agreed in writing must be met before a partnership would be formed between them, the contention that a partnership arose by their conduct is a dog that won’t hunt.

In the Beginning – A Brief Case Summary

The ETP case against Enterprise stems from a dispute over a highly profitable pipeline, which the parties considered pursuing together as a joint venture.  The dispute and claims arose when Enterprise changed course and signed on to do the pipeline deal with Enbridge, based in Canada.  ETP claimed that it had been jilted by its business “partner” in breach of Enterprise’s fiduciary duties, argued successfully to the jury that the parties had entered into a partnership agreement based on their conduct and oral statements.  The jury agreed and awarded damages of more than $300 million to ETP, but the figure grew to $535 million figure by the time that the final judgment was entered in the case.
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