Partner Jonathan Baughman, Chair of the firm’s Oil and Gas Practice Group, shared his thoughts with Law360 Reporter Keith Goldberg in the article, “Texas Justices Say Contract is King in $535M Pipeline Fight,” published on January 31, 2020.
The Texas Supreme Court elevated written contracts between parties over the state’s partnership law when it declined to reinstate a $535 million judgment last week against Enterprise Products Partners LP over a pipeline development deal gone bad with Energy Transfer Partners LP.
In their decision, the court said the Texas partnership statute doesn’t supersede written agreements, setting a higher bar for parties to argue that certain contractual conditions were waived, which will likely mean that fewer similar disputes even make it to trial.
While the court didn’t clarify what constitutes a partnership under the Texas Business Organizations code, they did make clear what companies can do to avoid creating one. In a succinct 15-page opinion, Chief Justice Nathan L. Hecht wrote for the unanimous court that no partnership had been created between ETP and Enterprise because they never met the partnership-triggering conditions in an agreement between the two companies to market a crude oil pipeline.
“Regardless of what the Texas statute says, the court said when you have that in writing and it’s clear, that’s conclusive,” Baughman said.
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