How do you win over a jury in a $100 million case centered on the world of natural gas pipelines?
Just ask V&E partners Jim Thompson and Phillip Dye. Last summer, Thompson and Dye notched an impressive victory on behalf of longtime and significant V&E client Antero Resources in a contract dispute case against gas utility company Washington Gas Light Co. and its sister company WGL Midstream, an investor in natural gas pipelines.
“We were consistent in our story and consistent in our theme. We revealed inconsistencies not only in WGL’s witness testimony but also in the theme of their case. I think that was critically important in earning the jury’s trust.”
At the end of a two-week trial, a six-person jury in Colorado State District Court decided that the two divisions of WGL Holdings had breached their agreements with Antero by failing to purchase large volumes of natural gas, and that Antero was entitled to $96 million in damages.
The jury also rejected WGL’s claim in which WGL had sought approximately $37 million in damages for Antero’s alleged failure to deliver gas with certain “transportation rights.”
The V&E team faced significant obstacles. In order to win, Antero’s lawyers had to bring the jury up to speed on the intricacies of natural gas pipelines and the complex contracts at the heart of the case. That effort was made all the more challenging by the apparent attempts by WGL’s lawyers to confuse the jury in WGL’s favor.
Demonstrating to a jury of laypeople that Antero was entitled to sizable damages of $100 million was also a tall order. Nonetheless, the V&E litigators mastered the facts and presented them convincingly.
“We were consistent in our story and consistent in our theme,” Thompson said. “We revealed inconsistencies not only in WGL’s witness testimony but also in the theme of their case. I think that was critically important in earning the jury’s trust.”
Deals are struck – and the trouble begins
The origin of the dispute between Antero and WGL dates back to 2014, when Antero was seeking a pipeline partner to transport its natural gas to customers.
A number of companies reached out to Antero with pipeline proposals. One of them was WGL Midstream, which approached Antero with a plan to build the Stonewall Gas Gathering System. Stonewall would move natural gas from Antero’s production points in the Marcellus Shale in West Virginia to Braxton County, West Virginia.
Stonewall, in turn, would connect at Braxton with the Columbia Gas Pipeline, a larger interstate pipeline that reaches markets across the mid-Atlantic region. Better still, WGL had a ready and willing buyer for Antero’s natural gas – its affiliate Washington Gas Light Co., which supplies gas to Washington D.C. and the surrounding areas.
Antero and WGL struck two 15-year agreements. One contract committed Antero to use the Stonewall pipeline. In the second, WGL agreed to purchase significant volumes of natural gas from Antero, striking one of the largest natural gas purchase contracts ever signed in the U.S.
But no sooner did WGL sign on the dotted line, than the company started to attempt to wiggle out of its commitments.
“Before a single molecule of gas flowed down the new pipeline system, they were already disputing the price they had to pay under the contract,” Thompson said.
WGL initiated an arbitration claiming Antero was required to adjust the price paid under the contract due to changes in the way the Columbia pipeline operated – and lost.
For WGL, the Antero deals were turning out to be less lucrative than expected. The Columbia pipeline was becoming highly congested, and WGL could not secure sufficient space on Columbia to take the gas it had purchased from Antero to better markets. At the same time, demand for natural gas in Braxton, West Virginia – the point where Stonewall connected to the Columbia pipeline – was weak, leaving WGL with scant takers for Antero’s gas.
WGL filed a second legal proceeding against Antero, this time in Colorado State District Court. The allegation: Antero breached the contract when it failed to deliver “TCO Pool” gas, which they described as gas with special rights of transportation on the Columbia pipeline system.
By April 2017, WGL began falling significantly short of its natural gas purchase commitments.
“Over the course of the next several months, we were incurring tens of millions of dollars in losses because they weren’t taking our gas, and we had to sell it to others at a loss,” Dye said.
Antero filed a counterclaim against WGL in October 2017. The energy company asserted that WGL was at fault for failing to secure firm access on the Columbia line, and sought damages to cover its losses. By the time the case went to trial in the summer of 2019, those damages had reached about $100 million.
The V&E litigators throw darts at a force majeure defense
Winning would require the diligence and skill of each member of the V&E team.
Dye, for one, played a key role in attacking a critical theme of WGL’s defense. WGL claimed Columbia had changed the way it operated the pipeline. This action, WGL asserted, amounted to a force majeure – an unforeseeable circumstance that relieved the company from having to fulfill its contractual obligations.
Dye took the lead in mastering the Columbia pipeline “tariff,” which lays out the rates, terms and conditions of its services.
“Phillip, to his great credit, immersed himself in Columbia, particularly in the tariff, to a point where Phillip knew the tariff and the operation of the Columbia system better than nearly anybody who worked for Columbia,” Thompson said. “They were saying ‘Columbia changed the game. We can’t move our gas. We’re excused.’ It fell on Phillip, our experts, and our witnesses to show – this is what the tariff says, and this is why the game didn’t change.”
Thompson cross-examines WGL’s negotiators
Another key element to winning the case for Antero: convincing the jury that the natural gas sales contract signed by Antero and WGL specifically designated Braxton as the delivery point.
Thompson, a former petroleum engineer who heads V&E’s global litigation practice, was able to do just that, with a highly effective cross-examination of WGL’s principal contract negotiators.
“Jim really pinned them down,” Dye said. “They were trying to convince the jury that there was a type of gas that had transportation rights attached to it, but it became apparent to the jury that there was no such thing.”
“Jim and the trial team were able to convey something that was very factually complex to the jury in a way that they understood it,” Dye added. “And by the end of the trial, they completely got it.”
It took the jury just two hours to decide in Antero’s favor.
Looking back, Thompson and Dye credit the entire V&E team, which included partner Nick Shum, counsel Kathleen Spangler, senior associate Stephanie Noble, and associates Page Robinson and Brooke Noble. The V&E lawyers also noted their client’s role in winning the case.
“We’ve got a terrific client that trusts us and trusts our ability to tell their story,” Thompson said. “But even more important than that, we’ve got a client that is just extraordinarily good at what they do. Every one of our witnesses performed exceedingly well.”
Lessons flowing from a pipelines case
What lessons would the V&E litigators impart to others facing similarly complex cases?
“Details are critical,” Dye said. “You’ve got to dig in and completely understand your case so that any curve ball that’s thrown at you, you are ready to respond to it.”
“You have to maintain your credibility throughout the trial,” Thompson added. “And to the extent you can reveal inconsistency or lack of credibility in the other side, that goes a long way toward winning.”