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Tenneco Inc. v. Enterprise Products Co.

Supreme Court of Texas
925 S.W.2d 640 (Tex. 1996)


Facts

Tenneco Oil Company (Tenneco Oil) (defendant) and Enterprise Products Co. and other mineral companies (plaintiffs) jointly owned a natural gas liquids fractional plant. The plant’s operating agreement contained a right of first refusal stating that if an owner wished to sell its ownership interest, it must make the offer available to the other owners before selling to a third party. There was an exception to this requirement for transfers to wholly owned subsidiaries. Tenneco Oil transferred its ownership to Tenneco Natural Gas Liquids (Tenneco Gas), a wholly owned subsidiary. This transfer did not invoke the right of first refusal. Tenneco Oil then sold all of Tenneco Gas’s stock to Enron Gas Processing Company (Enron). The plaintiffs brought suit against Tenneco Oil, claiming that Tenneco Oil’s failure to offer the stock sale to the plaintiffs violated the right of first refusal in the operating agreement. The trial court granted Tenneco summary judgment. The court of appeals reversed. Tenneco appealed.

Rule of Law

Issue

Holding and Reasoning (Abbott, J.)

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