New York Court Denies $150 Million Fraud and Contract Claims by Goldman Sachs in Pipeline Deal

'Take nothing' bench ruling sides with Energy Transfer affiliate

After a three-week trial, a New York trial court has dismissed fraud and breach of contract claims brought by Goldman Sachs and Canadian investors, who sought $150M in damages plus millions more in interest against an affiliate of Dallas-based Energy Transfer.

Goldman alleged that Energy Transfer personnel misrepresented the status of the development, construction, and completion of the Revolution gas pipeline in western Pennsylvania at an August 2017 meeting and in three project status notices, which allegedly caused Goldman Sachs to lose its investment in a gas production company.

During the 12-day trial before Justice Joel M. Cohen of the commercial division of the New York Supreme Court, the attorneys for Goldman Sachs argued that alleged construction defects and other issues with the pipeline delayed completion and ultimately led to a rupture, criminal investigation, and large regulatory fines against the Energy Transfer affiliate.

The court found, however, that Energy Transfer accurately reported the status of its project during the contract period and commercial negotiations and rejected the efforts of Goldman Sachs and co-investor Ontario Teachers’ Pension Plan to transform the completed contract into an all-risk guarantee of pipeline performance.

“This is a great win for Energy Transfer and fully supported by the evidence we were able to present,” says Mike Lynn of Dallas-based Lynn Pinker Hurst & Schwegmann, the law firm representing Energy Transfer. “Goldman overreached in an effort to recover its investment through unsupported allegations, because clearly there was no fraud or delay for a project that was actually completed ahead of schedule.”

In rejecting Plaintiffs’ fraud claim, the Court found Energy Transfer’s witness testimony to be credible and persuasive and found that Plaintiffs failed to prove any false representation, intent to mislead, or even reliance by the Plaintiffs. Energy Transfer also argued, and the court agreed, that the letter agreements produced at trial said the plaintiffs’ “sole and exclusive remedy” for any alleged breach was to either terminate or withhold funding, which would not include suing to recover the lost investment.

The case is GSCP VI EdgeMarc Holdings LLC, et al., v. ETC Northeast Pipeline LLC, No. 652906-2019, in the Supreme Court of New York, New York County, Commercial Division.

In addition to Mr. Lynn, members of Energy Transfer’s trial team included lead counsel Chris Patton as well as Andrés Correa, Clint Cowan, Joshua Lang, Chloe Teeter, and Shane Simms.

Goldman Sachs was represented at trial by Wachtell Lipton Rosen & Katz.

Lynn Pinker Hurst & Schwegmann is a nationally recognized commercial litigation firm and has been ranked among the top five commercial litigation firms in Texas by the highly respected Chambers USA Guide to the Legal Profession for the past three years. The firm has received accolades from The Best Lawyers in America, Texas Super Lawyers, D Magazine and Texas Lawyer and was twice awarded “Defense Win of the Year” in the U.S. by The National Law Journal, the only firm to receive that recognition twice.

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