El Paso Natural Gas Co. v. TransAmerican Natural Gas Corp., Nos. 243

• Court: United States State Supreme Court of Delaware
• Writing for the Court: HARTNETT
• Citation: 669 A.2d 36
• Parties: EL PASO NATURAL GAS COMPANY, et al., Plaintiffs Below, Appellants, v. TRANSAMERICAN NATURAL GAS CORPORATION, Defendant Below, Appellee. . Submitted:
• Decision Date: 06 July 1995
• Docket Number: 1994,244,1994 and 505,Nos. 243,504

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669 A.2d 36 EL PASO NATURAL GAS COMPANY, et al., Plaintiffs Below, Appellants,
v.
TRANSAMERICAN NATURAL GAS CORPORATION, Defendant Below, Appellee. Nos. 243, 1994, 244, 1994, 504, 1994 and 505, 1994. Supreme Court of Delaware. Submitted: July 6, 1995.
Decided: Sept. 20, 1995.
Revised: Sept. 21, 1995.
Revised: Oct. 6, 1995.

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Upon appeal from the Court of Chancery. AFFIRMED.

Robert K. Payson (argued), James F. Burnett and Stephen C. Norman, Potter Anderson & Corroon, Wilmington, for El Paso Natural Gas Company, Richard M. Bressler, Travis H. Petty and William A. Wise.

Lawrence C. Ashby (argued), Stephen E. Jenkins, Philip Trainer, Jr. and Amy Arnott Quinlan, Ashby & Geddes, Wilmington, for TransAmerican Natural Gas Company.

A. Gilchrist Sparks, III and Kenneth J. Nachbar, Morris Nichols Arsht & Tunnell, Wilmington, for El Paso Production Company, Meridian Oil Inc., Burlington Northern, Inc. and Burlington Resources, Inc.

Richard R. Wier, Jr., Wilmington, for TransAmerican Natural Gas Corporation.

Before WALSH, HOLLAND and HARTNETT, JJ.

HARTNETT, Justice.

In this appeal we find that the Court of Chancery does not have jurisdiction over this controversy because of the existence of an adequate remedy at law. The ruling of the Court of Chancery dismissing the suit is, therefore, affirmed.

I.

This lawsuit arises from a dispute over a December 24, 1989 settlement between Plaintiffs, Appellants, El Paso Natural Gas Company and El Paso Production Company (collectively, "El Paso") and Defendant, Appellee, TransAmerican Natural Gas Corporation ("TransAmerican").

El Paso (a Delaware corporation with its principal place of business in El Paso, Texas) is in the business of gathering and transporting natural gas through pipelines located throughout the United States. TransAmerican (a Texas corporation with its principal place of business in Houston, Texas) is engaged in the production and sale of natural gas in Texas and other states.

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During the 1970's and 1980's, El Paso and its affiliates entered into gas purchase and other agreements with TransAmerican's predecessors. Disputes arose as to the parties' respective rights and obligations, and these disputes resulted in litigation. In 1988, a Texas court entered a judgment of $480 million against El Paso in favor of TransAmerican.

During the pendency of the appeal of that judgment, the parties reached a settlement in which they agreed, inter alia: to, (1) terminate all pending litigation; (2) terminate the operating agreements that had been the subject of the litigation; (3) enter into new operative agreements; and (4) release all claims against each other. As part of that settlement, El Paso transferred to TransAmerican cash and assets valued at more than $437 million. Additionally, the parties executed a December 24, 1989 settlement document ("Settlement Agreement"), which contained a forum selection clause that provided: "All actions to enforce or seek damages, specific performance or other remedy for the alleged breach of this agreement or the operative agreements shall be brought in the Chancery Court of the State of Delaware."

On November 5, 1993, TransAmerican initiated a lawsuit in Texas against El Paso and others. The suit alleged that El Paso had created an "unlawful scheme to place TransAmerican under extreme financial difficulty in order to procure the December 24, 1989 agreement, prevent TransAmerican's reorganization in bankruptcy, obtain ownership of TransAmerican's outstanding debt, obtain certain TransAmerican mineral rights, and acquire certain litigation claims against TransAmerican." In its Texas complaint, TransAmerican asserted six causes of action: (1) fraud, fraudulent inducement and fraudulent concealment in connection with the execution of the Settlement Agreement; (2) tortious interference with existing and prospective business relationships; (3) economic duress and coercion that allegedly caused TransAmerican to enter into the Settlement Agreement; (4) breach of the Settlement Agreement; (5) civil conspiracy among various defendants; and (6) violation of the Texas Anti-Trust Act. TransAmerican initially prayed for compensatory and punitive damages as well as a declaratory judgment and a permanent injunction requiring the defendants to cease their unlawful conduct. The prayer for an injunction was later withdrawn.

On December 3, 1993, El Paso brought suit in the Delaware Court of Chancery in response to TransAmerican's filing of the Texas action. ¹ In the Delaware action, El Paso alleges that it is entitled to an injunction to prevent the irreparable harm it will suffer if it is forced to litigate claims relating to the Settlement Agreement in Texas rather than in the Delaware Court of Chancery. El Paso seeks: (1) specific performance of the forum selection clause in the Settlement Agreement through the issuance of an injunction restraining TransAmerican from litigating its claims in any forum other than the Delaware Court of Chancery; (2) a declaratory judgment that the Settlement Agreement is valid and enforceable and that El Paso has not breached it; and (3) monetary damages for injuries allegedly sustained as a result of TransAmerican bringing the Texas action.

II.

The Court of Chancery dismissed this action after concluding, inter alia, that the lawsuit fell outside the limited equitable jurisdiction of that court because El Paso had

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an adequate remedy at law. ² Because the Court of Chancery did not otherwise have jurisdiction over the controversy, it also did not have jurisdiction to consider the prayer for a declaratory judgment. City of Wilmington v. Delaware Coach Co., Del.Ch., 230 A.2d 762, 766 (1967).

El Paso...