Case
& Trial Expertise
Heritage Propane Partners,
Tulsa, OK
Case
Overview
Heritage Propane Partners, based in Tulsa, OK, sued SCANA,
South Carolina’s largest utility company, in 2003, over a contract dispute
arising over the bidding process and ultimate sale of SCANA’s propane businesses.
The
offer to sell
Heritage, now known as Energy Transfer Partners, was
approached by SCANA through a SCANA subsidiary, Cornerstone Ventures, in July
of 1999 about purchasing five of SCANA’s propane companies. As part of the
solicitation, Heritage and Cornerstone signed a confidentiality agreement that
all information connected with the bid process was to be kept confidential. On
August 10, 1999, after spending many hours at SCANA companies evaluating data
-- a lengthy and expensive process – Heritage told Cornerstone it wished
to buy the companies and offered an initial bid.
"We
have a deal"
On August 27, Heritage asked about the status of
its bid and was told there were no problems with the bid and that Heritage would
be the only company to receive a draft contract. On Sept. 1, Heritage received
a draft contract, which it returned two days later with comments. This was followed
by an invitation for Heritage officials to fly to Columbia, SC to meet with SCANA
officials to review a purchase agreement. At this meeting, the two sides came
to agreement on all outstanding issues and shook hands. The SCANA senior management
team told Heritage, "We have a deal." On Sept.
22 and 23, the two sides continued to work on finalizing the written documents,
agreeing that Heritage would meet with propane employees prior to announcing the
agreement publicly Sept. 24. On Sept. 23, SCANA asked Heritage to delay the signing
and employee meeting until Sept. 27, saying it needed to go over some attachments
and verify their accuracy. Meanwhile, Heritage and SCANA lawyers worked through
the weekend preparing exhibits and schedules and finalizing paperwork prior to
the public announcement. Over the weekend, SCANA asked that the employee meeting
be postponed until Sept. 28, assured Heritage officials, however, that the papers
would be signed as scheduled on Sept. 27. Heritage officials flew to Columbia
the evening of Sunday, Sept. 26.
TOP What
deal?
The next day, Monday, Sept. 27, Heritage officials went to the
office of SCANA’s lawyers. When they arrived they were told they needed
to wait until a senior SCANA official arrived. Heritage officials cooled their
heels until 6 p.m., SCANA management came to the room where Heritage officials
were waiting and informed them for the first time that SCANA had entered into
an agreement with another buyer to sell all of its propane assets. It was at this
point that that Heritage learned that it had been used only as a “stalking
horse” to garner a higher bid from another buyer. All the time, expense
and expertise that Heritage had expended had only been used to facilitate transactions
with a second bidder, enriching the bidder and SCANA at Heritage’s expense.
Later, Heritage learned the new buyer was Suburban Propane. The Suburban bid was
more than the Heritage offer.
Breach
of contract award--Multi-million
Heritage filed suit in 2003, in the
Court of Common Please of Richland County, SC, against SCANA, Cornerstone, and
Suburban for breach of contract, fraud and conspiracy, among other things. In
the trial, SCANA had argued that it never entered into a “final definitive
agreement” with Heritage because the contract had not been signed. On Oct.
22, 2004, a jury ruled against SCANA, and Heritage was awarded millions.
Questions
for the business decision-maker - When does a contract
become a contract?
- What is the test for a legal contract?
- What about oral contracts?
- What
should Heritage have done in the beginning to assure it would not have been used
as a stalking horse?
- What could SCANA have done to
keep from getting sued?
- How often does this thing
happen?
- What else did SCANA argue?
- What
are some simple things businesses can do to made contract negotiations simpler,
easier, safer?
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