Congratulations to the great team at Vinson & Elkins LLP as Antero Wins a $60M Verdict In Natural Gas Pricing Suit
~Law360, New York (May 10, 2017, 5:56 PM EDT) — A Colorado federal jury has awarded just over $60 million to Antero Resources Corp. stemming from its allegations that a New Jersey company and its affiliate breached the terms of natural gas contracts by unilaterally deciding to change the price they paid.
The jury on Monday granted Antero approximately the entire amount it said it was underpaid, awarding $16.2 million against South Jersey Gas Co. and nearly $44 million against its affiliate South Jersey Resources Group, according to the verdict form. The jury also rejected breach of contract counterclaims levied by the South Jersey defendants.
In prior filings, Antero argued that contracts with each affiliate established a pricing structure for natural gas, but that in 2014 the South Jersey defendants decided that they no longer wanted to honor the contracts’ requirements. The South Jersey affiliates filed counterclaims suggesting that a market disruption event occurred, which they said meant that Antero should have renegotiated the contracts’ rates.
But in a summary judgment motion from February, Antero argued that the stipulated facts “conclusively” establish “that there were contracts containing an agreed price, that Antero performed the contract by delivering the gas, that defendants breached the contract and damaged Antero by failing to pay the agreed price.”
Antero alleged in its 2015 complaint that it entered into contracts with the defendants for the purchase of natural gas, which would come mostly from Antero’s wells connected to the Columbia Gas Transmission Line in West Virginia.
The contracts provided price benchmarks based on the Columbia Appalachia price index. Each side adhered to the terms of the contract until October 2014, when, Antero alleged, the defendants began to underpay. Specifically, Antero claimed, the defendants began to apply a different price index, the TETCO Inside price, to calculate how much they owed.
“In other words, despite receiving monthly invoices form Antero calculated based on the contractually selected Columbia Appalachia price, the SJ defendants recalculated those invoices based on the TETCO index (a separate index unilaterally chosen by them without any contractual basis to do so), and began withholding a portion of the payments due to Antero,” the complaint said.
The South Jersey affiliates said they were justified in making the change because a market disruption event had occurred. They claimed the original index price began excluding certain gas trades in April 2014. That change meant Antero had an obligation to enter into negotiations for a replacement price, they said, but Antero refused.
“Antero’s refusal to agree that there was a change in the formula and methodology of calculating the Columbia Appalachia Index is indicative of its bad faith, and reflective of its desire to receive payments beyond the legitimate and reasonable expectation of the parties,” the defendants’ February motion for summary judgment said.
Antero disagreed, saying it found no material changes in the formula or the method used for the original index, and that there was no market disruption event.
“Simply because the SJ defendants no longer view the Columbia Appalachia as favorable to them does not provide grounds to set aside the plain language of the contracts,” the complaint said.
Representatives for Antero declined to comment.
Representatives for the defendants did not return a request for comment.
Antero is represented by James D. Thompson III, Kathleen B. Spangler, Nicholas N. Shum, Phillip Dye, Page Robinson and Conor P. McEvily of Vinson & Elkins LLP and Michael J. Gallagher of Davis Graham & Stubbs LLP.
The defendants are represented by Winstol D. Carter Jr. and William R. Peterson of Morgan Lewis & Bockius LLP and Christopher Raleigh of Cozen O’Connor PC.
The case is Antero Resources Corp. v. South Jersey Resources Group LLC et al., case number 1:15-cv-00656, in the U.S. District Court for the District of Colorado.
–LAW 360 ~Editing by Mark Lebetkin.