The Dallas Court of Appeals has declined to mandamus a trial court who realigned the parties to a gas gathering contract dispute three weeks before trial.

In re Energy Transfer LP (formerly known as Energy Transfer Operating, L.P.) and ETC Texas Pipeline, Ltd. (No. 05-23-00875-CV; denied October 10, 2023) stemmed from a breach of contract action filed by ETP and ETC against Culberson Midstream Equity, LLC, Moontower Resources Gathering, LLC, Culberson Midstream, LLC, Moontower Resources Operating, LLC, and Moontower Resources WI, LLC. The case involves two contracts. First, ETP entered into an option agreement with Culberson Midstream Equity, Moontower Resources Gathering, and Culberson Midstream, LLC. Second, ETC entered into a gas gathering contract with Culberson Midstream. According to ETP’s petition, under the gathering contract, Culberson “owed ETC all the ‘Committed Gas’ produced in a specified area, which ETC gathered and processed for sale.” Shortly thereafter, the parties to the option contract, Culberson and Moontower, exercised a “put” option under the contract. A week later, ETC sent a notice of default under the gathering contract to Culberson Midstream for failing to send all the committed gas. This alleged breach triggered termination rights under the option agreement, which ETP exercised by giving written notice to Culberson and Moontower.

Simultaneously with the notice of termination, ETP and ETC filed suit in Dallas County district court against Culberson Midstream on the gathering contract and against Culberson Midstream Equity and Moontower on the option contract. On the same day, Culberson and Moontower, the parties to the option agreement sued ETP in another Dallas County district court, which they later nonsuited. Culberson Midstream counterclaimed against ETC, as did Culberson and Moontower against ETP. ETP and ETC then added two new defendants to the case (Moontower Operating and Moontower WI). They also added a fraudulent inducement claim against all five defendants and an alter ego claim against the parties to the option contract. (If you’re not confused by now, you’re about to be.)

Three weeks before trial, the option contract defendants moved to realign the parties. Just three days before trial, the trial court entered an order realigning the parties. Under TRCP 266, the plaintiff has the right to open and conclude both in adducing evidence and in argument, “unless the burden or proof in the whole case under the pleadings rests upon the defendant.” Rule 269 provides further that “[t]he party having the burden of proof on the whole case, or on all matters which are submitted by the charge, shall be entitled to open and conclude the argument.” ETP and ETC argued that the trial court had no discretion to realign the parties because defendants did not bear the burden of proof on the whole case (citations omitted). The option contract defendants, however, argued that they bore the burden of proof on the “central claim” of the case, whether ETP breached the option contract and owed them $100 million as a consequence. The trial court went for the argument and flipped the parties: defendants became plaintiffs and ETP and ETC became defendants in their own lawsuit. What’s more, after the trial court’s order the case has two plaintiffs with a single claim against ETP, another defendant (ETC) with a single claim against one defendant, and two defendants (ETP and ETC) with a fraud claim against two plaintiffs and three co-defendants. ETP and ETC argued that it had no remedy to this mess on appeal and that mandamus was necessary to sort it out. Unfortunately, the court of appeals did not see it that way.

We don’t know whether ETP and ETC will take their mandamus petition to SCOTX, but it sure looks to us that realigning the parties puts them at a distinct disadvantage and is almost certainly an improper application of the rules. If there really is $100 million at stake, this need to get sorted out before the parties go to trial and waste and bunch of time and money with a heightened risk that the trial court’s erroneous ruling will lay the groundwork for more prejudicial and harmful rulings down the line.

Pin It on Pinterest

Share This