The Williams Companies Wins Judgment for $410 Million Contractual Breakup Fee
January 05, 2022
On December 29, 2021, the Delaware Court of Chancery granted judgment in favor of Cravath client The Williams Companies, Inc. (“Williams”) in a dispute with Energy Transfer, LP (“ETE”) over a contractual termination fee following the parties’ unconsummated $37.7 billion combination. Following a six‑day trial held in May 2021, and subsequent post‑trial briefing and oral argument, the Court issued its decision ordering ETE to pay Williams a $410 million termination fee, plus interest and reasonable attorneys’ fees and expenses.
The genesis of the litigation was in September 2015, when ETE agreed to acquire Williams, an industry‑leading, investment‑grade C‑Corp with operations across the natural gas value chain including gathering, processing, interstate transportation and storage of natural gas and natural liquids. In June 2016, ETE determined to terminate the deal due to the failure of a condition precedent under the merger agreement when ETE’s tax counsel declined to provide a tax opinion as a result of shifts in the energy markets. The parties had negotiated a $410 million breakup fee that ETE would be required to pay Williams in the event the merger failed, and ETE was out of compliance with certain covenants and representations on the closing date.
While the Court had previously found that ETE had an exit right under the circumstances, with this decision it determined that ETE is contractually obligated to pay the breakup fee to Williams, noting that “[h]aving called a dirge for the Merger, ETE must pay the piper.” The Court found that ETE’s issuance of convertible preferred units in March 2016 caused ETE to fail to comply in all material respects with several operating covenants and also rendered its capital structure representation inaccurate. The Court additionally held that ETE failed to prove each of its affirmative defenses and counterclaims.
The Cravath team included partners Antony L. Ryan, Kevin J. Orsini, Michael P. Addis and David H. Korn and associates John I. Karin, Jonathan D. Mooney, Alexander L. Mills and Tyler D. Purinton.
The case is The Williams Companies, Inc. v. Energy Transfer, LP, et al., Nos. 12168‑CG, 12337‑VCG (Del. Ch.).
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