Williams Companies Lawsuits: Merger, ERISA, and Pipeline Cases

The Williams Companies, Inc., the Tulsa-based natural gas infrastructure operator behind the Transco interstate pipeline system, has faced a long line of major lawsuits and regulatory penalties. The Williams Companies lawsuits worth knowing about include a seven-year fight with Energy Transfer over a collapsed $37.7 billion merger that ended in a $495 million Delaware judgment for Williams, a settlement of more than $400 million with California, Oregon, and Washington over the 2000–2001 energy crisis, a $20 million Commodity Futures Trading Commission penalty for false price reporting, a $12 million antitrust class action settlement, a $55 million ERISA settlement with 401(k) plan participants, and a 2023 Clean Air Act settlement covering 11 natural gas processing plants. Across all categories since 2000, Williams and its subsidiaries have accumulated 121 recorded enforcement actions totaling more than $162 million in penalties.¹

The Energy Transfer Merger Case

The largest and most recent piece of litigation is Williams’ seven-year dispute with Energy Transfer LP. The two companies signed a $37.7 billion merger agreement in September 2015. When energy prices fell the following year, Energy Transfer CEO Kelcy Warren looked for a way out. In early 2016, Energy Transfer issued convertible preferred securities to insiders. Delaware courts later found that offering breached the merger agreement’s operating covenants.²

Energy Transfer terminated the deal on June 29, 2016, citing the inability of its tax counsel, Latham & Watkins, to deliver a required tax opinion. Williams stockholders had approved the merger two days earlier.³ Williams sued in the Delaware Court of Chancery.

Chancery Rulings

Vice Chancellor Glasscock declined to force the merger to close, finding that the failed tax opinion was a legitimate condition precedent giving Energy Transfer a valid exit even though Warren had been looking for one. As the Vice Chancellor put it, “Even a desperate man can be an honest winner of the lottery.”⁴

The court did find that the preferred securities offering breached the merger agreement’s ordinary course and interim operating covenants, characterizing it as “a hedge meant to protect insiders” from the deal’s effects.² That breach triggered a $410 million contractual reimbursement to Williams. In December 2017, the court dismissed Energy Transfer’s counterclaim for a $1.48 billion termination fee.³ After a six-day trial in May 2021, the court issued its final post-trial opinion on December 29, 2021, ordering Energy Transfer to pay the $410 million reimbursement and $85 million in attorney’s fees.⁵

Supreme Court Affirmance

On October 10, 2023, the Delaware Supreme Court issued a 58-page opinion by Justice Griffiths affirming the full $495 million award and declaring that the litigation “has now come to an end.”⁶ The ruling also settled a point of Delaware law: once a breach of an efforts covenant is shown, the breaching party carries the burden of proving its conduct did not materially contribute to the failure of the closing condition.⁷

The California Energy Crisis Settlement

Williams was one of several energy suppliers accused of manipulating wholesale electricity prices during California’s 2000–2001 energy crisis. California, Oregon, and Washington each sued over price manipulation and overcharging.

On November 11, 2002, Williams settled the three states’ claims for a combined value exceeding $400 million. The California portion alone included $150 million in cash paid over eight years, six turbine generators, increased power supply commitments through 2010, and a long-term natural gas sales agreement. Williams also restructured a 10-year, $4.3 billion power contract signed during the crisis, a change that California officials estimated would save the state more than $1 billion.⁸ Oregon and Washington each received $15 million, paid over three years.⁹ Williams admitted no wrongdoing.¹⁰

The California Public Utilities Commission separately filed a Section 206 complaint with the Federal Energy Regulatory Commission targeting long-term contracts signed with the California Department of Water Resources; the CPUC contended the challenged contracts across all respondents were overpriced by roughly $14 billion.¹¹

CFTC False Reporting Penalty and the Antitrust Class Action

In July 2003, Williams and its subsidiary Williams Energy Marketing and Trading settled charges brought by the Commodity Futures Trading Commission for attempted manipulation and false reporting of natural gas trading data. The CFTC found that from at least January 2000 through June 2002, the companies knowingly submitted false price and volume information to energy reporting firms whose data fed published natural gas price indexes. Williams paid a $20 million civil penalty and agreed to cease and desist, neither admitting nor denying the findings.¹²¹³

The same conduct produced private antitrust litigation. In Arandell Corp., et al. v. Xcel Energy Inc., et al., commercial and industrial natural gas consumers in Wisconsin alleged Williams conspired with CenterPoint, Xcel Energy, and other utilities to raise and fix natural gas prices through false submissions to trade publications.¹⁴ The class covered entities that purchased natural gas for industrial or commercial purposes between January 2000 and October 2002. Williams settled for $12 million in 2023 without admitting wrongdoing, with final approval from the U.S. District Court for the Western District of Wisconsin.¹⁵

The $55 Million ERISA Settlement

In 2002, former employees who participated in Williams’ 401(k) retirement plan filed a class action under the Employee Retirement Income Security Act. The plaintiffs alleged that Williams and members of its investment and benefits committees breached their fiduciary duties by making material misrepresentations that inflated the stock price of Williams and its former subsidiary, Williams Communications Group. They also alleged the spin-off of the communications division was designed to shore up the parent’s balance sheet rather than serve stockholders.¹⁶

Williams settled for $55 million in September 2005, with insurance covering $50 million of that amount.¹⁷ The U.S. Department of Labor was still investigating the plan at the time of settlement.

Environmental and Pipeline Safety Penalties

The most significant recent environmental case is a Clean Air Act settlement announced in April 2023. Williams and its subsidiary Harvest Four Corners agreed to resolve allegations of federal and state air pollution violations at 11 natural gas processing plants. The allegations covered failures to control volatile organic compound and hazardous air pollutant emissions, noncompliance with leak detection requirements, and permit violations related to flare operations.¹⁸

Williams paid a $3.75 million civil penalty and committed more than $8.5 million to infrastructure upgrades and monitoring programs at 15 processing plants, plus additional leak monitoring at 80 compressor stations across six states. The EPA projected the settlement would cut volatile organic compound emissions by more than 696 tons per year and methane emissions by 1,174 tons per year.¹⁸

The Transco pipeline subsidiary has drawn repeated pipeline safety penalties from the Pipeline and Hazardous Materials Safety Administration, including a $952,500 fine in 2009 and a $736,294 penalty imposed by Pennsylvania in 2020.¹

FERC and FTC Actions

The Federal Energy Regulatory Commission has assessed two large penalties on Williams for energy market violations: $20 million against Transco in 2003 and $7.6 million against the parent company in 2005.¹

On the antitrust side, the Federal Trade Commission intervened in Williams’ 1997 acquisition of MAPCO Inc., alleging the deal would lessen competition in propane transportation in the upper Midwest and raw mix pipeline transportation from southern Wyoming. The FTC estimated the merger could raise propane costs by more than $2 million per year and raw mix costs by $8 million or more per year in the affected markets. Williams resolved the concerns through a consent order requiring pipeline access agreements with Kinder Morgan, restrictions on future propane asset acquisitions, and a decade of compliance reporting.¹⁹

Landowner Challenges to Pipeline Eminent Domain

Transco has faced legal challenges from landowners over its use of eminent domain to build new pipelines. For the Atlantic Sunrise project, Transco obtained a certificate of public convenience and necessity from FERC and then sought preliminary injunctions in federal court to take immediate possession of private land before compensation was determined. Homeowners Michelle and Gary Erb, along with neighbors, petitioned the U.S. Supreme Court in March 2019, arguing the practice violated their right to just compensation.²⁰

The U.S. Third Circuit Court of Appeals had ruled for Transco in October 2018, holding that the FERC certificate gave the company a substantive right to possession and that the preliminary injunctions simply hastened enforcement of that right. The case sits inside a circuit split: the Third, Sixth, and Eleventh Circuits have upheld this “quasi-quick take” approach for natural gas pipelines, while the Seventh Circuit has rejected it.²⁰

Securities Litigation From the Failed Merger

The Energy Transfer collapse also produced a securities class action. In Erber v. The Williams Companies, Inc., investors who purchased Williams Partners securities between May and June 2015 alleged they were misled into buying at inflated prices because Williams failed to disclose it was considering the Energy Transfer merger, which would have required terminating the Williams Partners acquisition. The U.S. District Court for the Northern District of Oklahoma dismissed the case with prejudice in March 2017, finding the complaint failed to adequately allege that the defendants’ statements were false or that they acted with the requisite intent.²¹

1
Violation Tracker. The Williams Companies – Violation Tracker
2
Justia. Energy Transfer, LP v. The Williams Companies, Inc.
3
Delaware Supreme Court. Energy Transfer, LP v. The Williams Companies, Inc., No. 391, 2022
4
Delaware Court of Chancery. The Williams Companies, Inc. v. Energy Transfer LP, C.A. No. 12168-VCG
5
Cravath. The Williams Companies Wins Judgment for $410 Million Contractual Breakup Fee
6
Morris Nichols. Williams Prevails in Busted Merger Fee Battle
7
FindLaw. The Williams Companies, Inc. v. Energy Transfer Equity, L.P.
8
The New York Times. A Big Victory by California in Energy Case
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The Oklahoman. Williams, California End Lawsuit; News Sparks Dramatic Stock Rally
10
Washington Attorney General. Attorney General’s Energy Investigation Nets First Settlement
11
CPUC. CPUC Section 206 Complaint
12
CFTC. CFTC Press Release 4824-03
13
Natural Gas Intelligence. Williams Follows EnCana in Settling CFTC Charges of Attempted Price Manipulation
14
Bloomberg Law. Williams Cos. Agrees to Pay $12 Million to Settle Antitrust Suit
15
Top Class Actions. Williams Natural Gas Antitrust $12M Class Action Settlement
16
Natural Gas Intelligence. Williams Pays $55M to Settle Class Action Litigation
17
MarketWatch. Williams Settles ERISA Litigation for $55M
18
EPA. 2023 Williams Companies, Inc. Clean Air Act Settlement Information Sheet
19
FTC. Williams Companies – MAPCO Inc. Consent Order
20
Forbes. Homeowners Take Fight Against Gas Pipeline Land Grab to U.S. Supreme Court
21
Cravath. The Williams Companies Wins Dismissal of Securities Class Action Lawsuit Over WPZ Merger