The Oklahoma Supreme Court has upheld the $30 million verdict against two Enterprise Products Partners LP units arising from the 2010 Texas pipeline explosion that led to the demise of a power line company whose worker was killed and that ruined the company’s potential sale. Enterprise had urged the high court to overturn the 2013 jury verdict that the company’s negligence – the failure to mark an active gas pipeline – led to the explosion that killed C&H Power Line Construction Co. employee James Neece and caused the $33 million sale of C&H to fall through. The sale took place later, but at a much lesser price. Enterprise argued, among other things, that Neece’s death should not have impacted C&H’s value.
However, the state Supreme Court said in a unanimous opinion that C&H was not bringing a wrongful death claim and that the damages the company sought were based on how much a buyer would pay immediately before and after the pipeline accident. The opinion stated:
Loss of a key, highly skilled employee, whether through death or disability, affects the value, but the damage is not the same as that for wrongful death. Even if a company cannot recover separate damages for emotional distress, nor for changes in workers’ compensation ratings, the emotional outlook and ratings barriers to acquiring new jobs still have an impact on the value of a company to a prospective buyer, who is entitled to consider these items in making an offer for the purchase of the business.
The testimony of C&H’s expert witness on the value of the company before and after the accident reasonably supported the jury’s verdict, according to the high court. The opinion stated:
The verdict was within the range of his evaluation of the value of the company immediately before the accident, and within the amount paid for the company when it was subsequently sold.
The appeals court also blasted Enterprise’s argument that the lower court wrongly excluded evidence that C&H was mismanaged and that its funds were used on “frivolous items” such as gambling and boats. The justices agreed with C&H that such evidence is irrelevant as to the company’s financial condition. The opinion stated:
The only purpose we can see is to prejudice the jury by placing the owner in a bad light. The owner took certain amounts out of the company, whether he took them for frivolous spending or to give it all to charity does not change the amount taken out, nor the impact it has on the company.
Neece had been drilling a hole for a power line tower in June 2010 when he struck an unmarked gas pipeline. The resulting rupture and explosion killed Neece and severely burned another C&H employee. Before drilling, C&H called Texas’ excavation notification system to have companies within its work area mark their pipelines. While other pipeline companies marked their pipelines, Enterprise failed to do so. C&H claimed that at the time of the blast, the company had a letter-of-intent offering to buy C&H for $33 million up front, plus a $10 million earn-out provision.
A state court jury in May 2013 awarded C&H $26 million in actual damages and $1 million in punitive damages. The addition of prejudgment interest brought the amount up to $30 million. The case is C&H Power Line Construction Co. v. Enterprise Products Operating LLC et al. in the Supreme Court of the State of Oklahoma.
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