On July 18, 2017, the Dallas Court of Appeals (the “Court”) reversed the more than $535 million jury verdict against Enterprise Products Partners L.P. (“Enterprise”), leaving Energy Transfer Partners, L.P. (“ETP”) empty-handed. That sound you just heard was contract lawyers and many would-be midstream joint venturers breathing a collective sigh of relief. Since 2014, companies doing business in Texas have worried that binding partnerships may have been inadvertently formed, despite express language to the contrary. The Court affirmed this week what many practitioners believed to be the law of the land when it reversed the jury verdict and upheld the parties’ letter agreement that there could be no binding or enforceable obligations because their respective boards did not approve the partnership and definitive agreements had not been negotiated or executed.
BACKGROUND -
In early 2011, ETP and Enterprise, both builders and operators of oil and gas pipelines, began discussing a pipeline to transport crude oil from Cushing, Oklahoma to Houston, Texas. The parties agreed to explore the viability of such a pipeline and, to this end, negotiated and executed three written agreements, including a Nonbinding Term Sheet and Letter Agreement (the “Letter Agreement”). The Letter Agreement provided that “no binding or enforceable obligations shall exist between the Parties with respect to the Transaction unless and until the Parties have received their respective board approvals and definitive agreements...have been executed. ”Thereafter, representatives of each of ETP and Enterprise participated in an “open season” to attract long-term shipping commitments on their potential pipeline. The commitments obtained during open season ultimately fell short of the parties’ agreed minimum commitment requirement. Shortly after open season closed, Enterprise contacted ETP and terminated its participation in the project.
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