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Texas trial will look at business partnership issues

A trial is taking place in Dallas that involves three oil and gas companies and a dispute that involves billions of dollars of potential revenue. The outcome of the business dispute may have an impact on how partnerships are defined.

The case stems from an allegation by Energy Transfer Partners that Enterprise Products Partners breached a partnership agreement between the two companies that involved building a pipeline that would run from Oklahoma to Texas. According to ETP, both Enterprise and Enbridge Inc., a Canadian company, worked together to keep Energy Transfer Partners from benefiting from the deal. Both Enterprise and Enbridge are asserting that the case has no merit because a partnership between ETP and Enterprise was never finalized.

What is agreed upon is that ETP and Enterprise were in partnership discussions in 2011 and that they also signed a nonbinding agreement. The two companies also signed an agreement with Chesapeake Energy and named their venture Double E Pipeline. A month later, Enterprise announced that it was ending its partnership with ETP and entering into one with Enbridge. Enterprise alleges that a formal partnership with ETP was never formed and that their original deal was never finalized. ETP is seeking $1.2 billion in compensatory and punitive damages.

While Enterprise is claiming that the agreement in principle that it had entered into with ETP amounted to no more than a simple non-binding memorandum of understanding, it appears that subsequent actions by the parties may have served to solidify and formalize the relationship between the two parties. It is unclear why a more formal document was not prepared and executed before the two companies entered into the Chesapeake Energy agreement.

Source: My SA, "Trial will tackle question of what makes a business partnership", Mark Curriden, January 28, 2014