The case looked bad when it came across Chris Patton’s desk.
Images of fire spurting from a Pittsburgh-area pipeline headlined national news programs in September 2018.
Patton’s client, Dallas-based Energy Transfer, which owned the pipeline, had been pegged with a $30 million fine, one of the largest-ever civil penalties in Pennsylvania Department of Environmental Protection history.
The state attorney general charged Energy Transfer’s ETC Northeast Pipeline with nine counts of environmental crimes.
“This is going to be a challenge,” Patton remembers thinking of the lawsuit brought by investment funds associated with Goldman Sachs & Co. LLC and the Ontario Teachers’ Pension Plan Board seeking $150 million in damages. The investment funds, represented by Wachtell Lipton Rose & Katz, alleged breach of contract, fraud, unjust enrichment and negligent misrepresentation.
But an “ah-ha” moment came about seven months into the case, just before Patton was set to take the deposition of one of the technical fact witnesses. He popped into his colleague’s office at Lynn Pinker Hurst & Schwegmann in Dallas and connected the dots, which became the basis of his winning opening statement.
On Friday, Justice Joel M. Cohen of the New York Supreme Court delivered his verdict from the bench: Not liable on all counts, a complete defense win following a more than three-week bench trial.
“It’s rare for a law firm to go to New York and walk away with, what in essence is, a $200 million win,” said name partner Mike Lynn, who noted a loss could’ve also cost Energy Transfer about $50 million in pretrial interest. Lynn tried the case with Patton, fellow partner Andrés Correa and four other firm lawyers. “A law firm in Dallas, Texas, goes to New York and Wachtell Lipton is well-known and well established, one of the old, premier firms in New York, so we go into the lion’s den and we ended up being successful.”
Lawyers for the plaintiffs did not respond to The Texas Lawbook’s request for comment.
The plaintiffs, equity sponsors of the now-bankrupt gas driller EdgeMarc, alleged that Energy Transfer misrepresented the status of the development, construction, and completion of the Revolution gas pipeline at an August 2017 meeting and in three status notices. The plaintiffs had invested $150 million after reaching commitment agreements with Energy Transfer, under which Energy Transfer was required to notify plaintiffs of project delays.
The investment funds alleged construction defects and regulatory issues constituted delay and ultimately led to the explosion, claims that Energy Transfer denied.
“[Energy Transfer] got my clients to invest $150 million, built a pipeline that ruptured in the rain and now they have the audacity to maintain that they owe my clients nothing for their misrepresentations,” Wachtell Lipton partner Carrie Reilly told the judge in opening statements Nov. 4.
The plaintiff’s approach was a “wholesale attack” based on the fallout of the explosion, Correa said, but the case simply came down to the contract. Nevertheless, the defense had to litigate a wide variety of aspects including engineering, geography and regulation, he said.
“Even though we believed the relevant aspect of the case was a contract, we actually had to defend the entire process across all those layers,” Correa said.
“Sometimes the facts win,” Lynn added.
Patton, in his opening statement, tried to give the judge a roadmap for understanding facts that sounded bad but that he said were not relevant to the bottom line. Patton alleged the plaintiffs mischaracterized the plain language of the contract and misconstrued evidence of the pipeline’s status.
“What this case is about is a bespoke, time-limited contract with narrow obligations and narrow remedies among the parties,” Patton said in his opening statement. “As the Court is listening to the evidence, I want the Court to ask — is this evidence requiring me to understand whether Energy Transfer expected something in terms of delay for the pipeline or whether Energy Transfer built a good pipeline?”
In a case with thousands of exhibits and dozens of witnesses, Correa said Patton’s opening statement provided the judge with a way to process and organize the evidence. Patton, who said he enjoys walking, said he probably walked 10 miles along the New York City streets mentally rehearsing his opening statement.
Patton was quick to call the win a team effort and heaped praise on his colleagues. Correa and Lynn’s “excellent” cross-examinations of the plaintiffs’ commercial witnesses damaged their credibility, Patton said.
“From the outset, they set the tone for the rest of the trial in terms of being authoritative and aggressive, but also not overly aggressive,” Patton said.
The defense faced the challenge of refuting highly credentialed witnesses for the plaintiffs. One of their experts, for example, was a structural engineer from Stanford University who investigated the collapse of the World Trade Center, the Lynn Pinker lawyers noted.
Another strategy that proved to be energizing was delegating a speaking role to every lawyer on the team, Lynn said. Rounding out the trial team were Clint Cowan, of counsel, and associates Chloe Teeter, Joshua Lang and Shane Simms.
“The use of our associates was helpful because in a three-week trial, you get tired, and it’s valuable to have somebody competent and willing to assume the roles that they did throughout the trial,” Lynn said. “And frankly, it was fun to watch the young ones become trial lawyers.”
The trial began Nov. 4 and broke before Thanksgiving week, Lynn said. The lawyers had to return to court for closing arguments on Jan. 17, unsure of whether the judge would hand up his verdict the same day and, if he did, if they would make the trek back to Texas celebrating a win or nursing a loss.
“We basically said, ‘We’ll go up here and we’ll listen to the judgement. We’ll either win together or lose together but we’re going to do it together,’” Lynn said.
The firm, which has long represented the pipeline giant, praised its client for its willingness to fight.
“There are not many defendants who, faced with a possible $150 million liability, would roll the dice on a trial,” Correa said. “But this company will when they believe they are right and they should have the chance to prove it.”
The plaintiffs were also represented by Emil Kleinhaus and Stephen DiPrima of Wachtell Lipton.
The case number is 652906/2019, GSCP VI EdgeMarc Holdings LLC et al. v. ETC Northeast Pipeline LLC.