A recent jury finding in Energy Transfer Partners LP v. Enterprise Products Partners LP may have far-reaching effects in how relationships formed through nonbinding letters of intent are interpreted, specifically regarding whether conduct can negate a previous agreement between parties.

In numerous documents, including a letter of intent, executed by Energy Transfer Partners LP (ETP) and Enterprise Products Partners LP (Enterprise) the companies agreed that neither party had a legal obligation to pursue a pipeline project until both parties signed a definitive agreement stating their intent to be bound to the venture. Enterprise later abandoned the project citing a lack of concrete interest from shippers and ETP filed suit after learning that Enterprise entered into a similar project with a third party. ETP argued that the parties’ conduct formed a state law partnership under Texas law and alleged that Enterprise breached its fiduciary duties.

In reaching its conclusion, the Dallas jury weighed five factors set forth by the Texas Business Organizations Code:

• The right to share in profits;

• The parties’ intent to be bound;

• The right to participate in or control the business;

• The obligation to share losses or liabilities; and

• An agreement to contribute money or assets to the business.

The jury found for ETP not because the company could prove all five factors, but because the parties behaved in ways that belied their written intent to not form a joint venture.

Although appeals are sure to follow, the result of this case provides a cautionary tale to those relying solely on nonbinding language in a letter of intent to override their actions.