The Law Office of Lynnette Ariathurai A Professional Corporation

Enterprise Products Partners wins big in contract dispute appeal

The California business and commercial law system protects those who enter written agreements with other parties from breaches of the terms contained in their contracts. It's not uncommon for a contract dispute to arise if one party believes another has failed to fulfill his or her responsibilities and obligations set forth in a particular agreement. That's what happened when Energy Transfer Partners (ETP) signed a prospective pipeline deal with Enterprise Products Partners (EPP).

EPP decided there wasn't enough customer support regarding its proposed deal with the other company. In fact, those negotiating the deal said as much to representatives from ETP before walking away and entering an agreement with a Canadian company instead. ETP didn't like that, and filed a contract dispute lawsuit against EPP in federal court, alleging that EPP breached the agreement to do business together.

A lower court initially ruled in favor of ETP, handing down a $536 million judgment against EPP. The latter immediately filed an appeal, and the appellate court ruled in its favor. The original judgment (which would have exceeded $600 million with interest) was overturned. The appellate court paid close attention to the wording of the signed agreement between the two companies, which clearly stated that the deal was not definitive unless approved by the board and finalized project documents were signed.

An attorney for EPP stated how pleased it is with the appellate court ruling. He said it would have set a disastrous precedent in the business world if the court had ruled otherwise since that would mean businesses could be ambushed into partnerships with others. This case shows how important the wording of a contract is; that's why many California business owners choose to have their proposed written agreements reviewed by experienced attorneys before signing.

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