in Re: Houston Pipe Line Company, L.P. D/B/A Houston Pipe Line Company Energy Transfer Equity, L.P. Energy Transfer Partners, L.P. And La Grange Acquisition, L.P. D/B/A Energy Transfer Company

CourtCourt of Appeals of Texas
DecidedAugust 26, 2008
Docket13-07-00362-CV
StatusPublished

This text of in Re: Houston Pipe Line Company, L.P. D/B/A Houston Pipe Line Company Energy Transfer Equity, L.P. Energy Transfer Partners, L.P. And La Grange Acquisition, L.P. D/B/A Energy Transfer Company (in Re: Houston Pipe Line Company, L.P. D/B/A Houston Pipe Line Company Energy Transfer Equity, L.P. Energy Transfer Partners, L.P. And La Grange Acquisition, L.P. D/B/A Energy Transfer Company) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
in Re: Houston Pipe Line Company, L.P. D/B/A Houston Pipe Line Company Energy Transfer Equity, L.P. Energy Transfer Partners, L.P. And La Grange Acquisition, L.P. D/B/A Energy Transfer Company, (Tex. Ct. App. 2008).

Opinion

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

NUMBER 13-07-00299-CV

HOUSTON PIPE LINE COMPANY, L.P. D/B/A HOUSTON PIPE LINE COMPANY, ENERGY TRANSFER EQUITY, L.P., ENERGY TRANSFER PARTNERS, L.P., AND LA GRANGE ACQUISITION, L.P. D/B/A ENERGY TRANSFER COMPANY, Appellants,

v.

O’CONNOR & HEWITT, Ltd., Appellee.

On Appeal from the 377th District Court of Victoria County, Texas.

NUMBER 13-07-00362-CV

IN RE: HOUSTON PIPE LINE COMPANY, L.P. D/B/A HOUSTON PIPE LINE COMPANY, ENERGY TRANSFER EQUITY, L.P., ENERGY TRANSFER PARTNERS, L.P., AND LA GRANGE ACQUISITION, L.P. D/B/A ENERGY TRANSFER COMPANY

On Petition for Writ of Mandamus OPINION

Before Chief Justice Valdez and Justices Garza and Vela Opinion by Chief Justice Valdez

Appellee and real party in interest, O’Connor & Hewitt, Ltd., (“O’Connor”) brought

a lawsuit against appellants and relators, Houston Pipe Line Company L.P., Energy

Transfer Equity, L.P., Energy Transfer Partners, L.P., and La Grange Acquisition, L.P.

(collectively “Houston Pipe Line”), contending that they manipulated the Platts Index for the

Houston Ship Channel Hub downward, thus reducing the price paid to O’Connor for gas

it sold to these entities under a Gas Purchase Agreement.1 Through this consolidated

interlocutory appeal and petition for writ of mandamus, the defendants ask this Court to set

aside orders of the trial court granting pre-arbitration discovery and injunctive relief and

declining to summarily rule on Houston Pipe Line’s motion to compel arbitration “until there

is sufficient discovery and evidence developed to properly apply the scope of the arbitration

clause to the facts.” We affirm the orders of the trial court and deny the petition for writ of

mandamus for the reasons stated herein.

I. Background

Houston Pipe Line Company, L.P. d/b/a Houston Pipe Line Company, as buyer,

entered a Gas Purchase Agreement, effective January 1, 1998, with O’Connor and others,

as sellers, for the sale and purchase of natural gas. The Agreement contains an arbitration

provision, which reads in part, as follows:

Disputes to be Arbitrated. Except for matters within the jurisdiction of the Railroad Commission of Texas, any and all claims, demands, causes of action, disputes, controversies, and other matters in question arising out of

1 The Gas Purchase Agreem ent is between O’Connor and Houston Pipe Line Com pany. In 2005, the other appellants/relators acquired Houston Pipe Line Com pany.

2 or relating to this Agreement, any of its provisions, or the relationship between the Parties created by this Agreement, whether sounding in contract, tort, or otherwise, whether provided by statute or the common law, for damages or any other relief, including, without limitation, all Claims (all of which are referred to herein as “Disputes”), shall be resolved by binding arbitration pursuant to the Federal Arbitration Act. The arbitration may be initiated by either Party by providing to the other a written notice of arbitration specifying the Disputes to be arbitrated. If a Party refuses to honor its obligations to arbitrate, the other Party may seek to compel arbitration in either federal or state court.

The Agreement gave Houston Pipe Line one hundred percent of the sellers’ “Daily

Deliverability of Gas.” Relators, Energy Transfer Equity, L.P., Energy Transfer Partners,

L.P., and La Grange Acquisition, L.P. d/b/a Energy Transfer Company, are not signatories

to the agreement. Under the agreement, O’Connor is to be paid for natural gas sold to

Houston Pipe Line based on an index price published for the Houston Ship Channel Index.

This index is prepared by Platts, a division of the McGraw-Hill Companies, Inc., in its trade

journal publication, Inside FERC. The price for the purchase is based on the index price

for the Houston Ship Channel/Beaumont Texas, otherwise known as the Houston Ship

Channel hub, which is the “first of the month” index price, published monthly in Inside

FERC.2

On March 6, 2007, O’Connor filed suit against Houston Pipe Line through its

“Original Petition; Application for Pre-Arbitration Discovery; and Application for Temporary

Restraining Order and Temporary Injunction.” O’Connor alleged that the defendants

manipulated the Platts Index for the Houston Ship Channel Hub downward during all, or

part, of the period between August 2004 and December 2006, thus reducing the price paid

to O’Connor for gas it sold under the Agreement. O’Connor’s allegations are based on

2 Inside FERC is a weekly publication of the McGraw-Hill Com panies, Inc.. The publication covers the natural gas, gas pipeline, hydropower, and electric utility industries and the Federal Energy Regulatory Com m ission’s regulation of the sam e.

3 articles published in the trade publication Gas Daily questioning the timing and pricing of

sales through the Houston Ship Channel hub and suggesting an intent to manipulate

posted prices. Although O’Connor’s petition identifies various causes of action, including

fraud, unjust enrichment, and breach of the duty of good faith and fair dealing, the petition

seeks solely injunctive relief and pre-arbitration discovery.

O’Connor propounded requests for production of documents to each of the four

defendants. Houston Pipe Line moved to compel arbitration and to stay proceedings on

March 22. The trial court held a hearing on April 2, and on April 30, the trial court entered

a temporary injunction and order setting a hearing on arbitrability and a date for trial on the

merits. The trial court’s order reads, in part, as follows:

After considering all the evidence received and the argument of counsel, the Court finds that Plaintiff will probably prevail on the trial of this cause if the Platts article proves to be true and that there is sufficient evidence showing that harm is imminent to Plaintiff. The Court has considered the sixty-day time frame to complete the arbitration contained in the Gas Purchase Agreement’s Arbitration clause and finds that it will be virtually impossible to complete the necessary discovery within that time frame. The Court has determined that Plaintiff lacks sufficient information regarding the truth of the acts described in the Platts article and that discovery is needed so that the scope of the Arbitration clause in the Gas Purchase Agreement may be properly applied to the actual party responsible, if any. The Court finds that Plaintiff has shown a probable right to the pre-Arbitration relief it seeks under Texas Civil Practice and Remedies Code, Sections 171.084 and 171.086 and that the Court, in its discretion, may grant such relief. The Court has determined that, if it does not issue the Temporary Injunction, Plaintiff will be irreparably injured because if Defendants intentionally or for any other reason destroy, modify, or alter the documents requested by Plaintiff, those acts could prevent Plaintiff from learning the full nature and extent of the Defendants’ manipulation of the Houston Ship Channel Index and Plaintiff’s resulting damages. Plaintiff has no adequate remedy at law because its injury from the loss of the documents would be irreparable and its damages would be incalculable. Moreover, the documents sought by Plaintiff from Defendants:

(1) Would be needed before any Arbitration proceedings begin;

(2) Will permit any Arbitration to be conducted in an orderly manner;

4 (3) Will facilitate any Arbitration under Section 171.086 of the Texas Civil Practice and Remedies Code; and

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in Re: Houston Pipe Line Company, L.P. D/B/A Houston Pipe Line Company Energy Transfer Equity, L.P. Energy Transfer Partners, L.P. And La Grange Acquisition, L.P. D/B/A Energy Transfer Company, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-houston-pipe-line-company-lp-dba-houston-pipe-line-company-texapp-2008.