In a unanimous decision, the Supreme Court of Texas on Friday, May 23, 2025, reversed a judgment against American Midstream and provided important guidance for future energy litigation, contract interpretation, and lost profits damages. Today’s decision also reinstates American Midstream’s counterclaim.

Case Background

The case arose from a 2017 lawsuit filed by Rainbow Energy Marketing against American Midstream, the owner of the Magnolia natural gas pipeline. Rainbow, a natural gas trading company, alleged fraud, negligent misrepresentation, repudiation, and breach of contract related to a pipeline balancing services agreement. The dispute centered on American Midstream’s obligation to provide balancing services and the contract’s express exemptions to performance.

Jackson Walker represented American Midstream and tried the case, which occurred in 2019, and was responsible for the record relied on for the appellate process.

Key Holdings

• The Supreme Court of Texas held that the contract, as unambiguously drafted, excused American Midstream from providing balancing services “any time that Transco required American Midstream or Rainbow to limit scheduled or physical imbalances attributable to Rainbow.”
• The Court rendered judgment that Rainbow take nothing on its tort claims because there was “no falsity in AMID’s representation that it could provide balancing services of 20,000 MMBtu, subject to the express limitation found in Section 9.1 of the MAG-0005” contract.
• The Court also rendered judgment against Rainbow on its repudiation claim, holding that “AMID did not unequivocally refuse to perform” and “AMID did no more than describe its obligations under the MAG-0005.”
• Finally, the Court ruled that Rainbow’s lost profit model was speculative.

These holdings reinforce the principles that contracts will be enforced as written and that clear contractual exceptions to performance also must be enforced as written, reaffirming certainty for parties in the energy and other sectors that rely on carefully negotiated terms.

Jackson Walker’s Energy Litigation Experience

The case was handled at trial by Jackson Walker partners Tré Fischer, Richard A. Howell, Luke Gilman, and Jennifer Caughey, prior to her return to the bench. On appeal, American Midstream was represented by Polly Fohn, Mark Trachtenberg, and Kaylen Strench of Haynes Boone LLP as well as the Jackson Walker team.

This victory highlights Jackson Walker’s depth of experience in representing clients in natural gas pipeline disputes and other complex energy litigation and our successful teamwork and collaboration with other law firms.

For more information about the case, see the Texas Lawyer article “Texas High Court Reverses $6M Judgment in Favor of American Midstream.” To explore the firm’s experience in similar matters, view the Energy and Trial & Appellate Litigation practice pages.