A Delaware Court of Chancery judge on Friday dealt a major blow to Energy Transfer Equity's bid to recover a breakup fee from a failed merger with The Williams Cos. Inc., saying the pipeline company's decision to walk away from the once-promising deal wiped out most of its claims to the $1 billion payment.

ETE had argued that the Williams board quietly tried to sabotage the deal by negotiating a lucrative termination fee on the deal and then working to make sure that it was never consummated. In court documents, the company pointed to negative statements board members made regarding the merger, once valued at $33 billion, as well as litigation that Williams brought against ETE chairman Kelcy Warren in Texas state court.

But Vice Chancellor Sam Glasscock III said that most of the claims conflicted with the reality that it was ETE that successfully petitioned the Chancery Court last year to allow it to terminate the deal over a tax issue. And he gave little credence to ETE's reading of key contractual provisions to support its “unlikely position” that it was now entitled to post-termination damages.

“Since none of the allegations of breach supporting ETE's entitlement to the breakup fee caused, or even relate to, ETE's exercise of its right to avoid the merger, and, fundamentally, because the contract language it relies on is not supportive, I find ETE's counterclaim seeking the breakup fee not viable,” Glasscock wrote in a 24-page memorandum opinion.

In June 2016, Glasscock ruled in the high-stakes, expedited litigation that ETE did not violate a merger agreement by invoking a tax flaw that ultimately sunk the deal, despite the fact that the company's lawyers had previously approved the transaction.

The Delaware Supreme Court affirmed Glasscock's decision by a 4-1 vote in March over the strong dissent of the court's chief justice, who questioned ETE's motives for scuttling the deal.

Friday's ruling came amid a heated court battle in Georgetown, as both sides try to lay claim to $1.48 billion in breakup fees and other damages. Williams, which had asked Glasscock to enforce the merger agreement, filed for damages in September 2016, sparking a flurry of counterclaims from ETE.

ETE's most serious charge came on its assertions that the Williams board had launched a public campaign to undermine the deal and investor confidence in ETE and Warren in order to claim the termination fee.

However, Glasscock said that ETE's argument ignored the fact Williams had sued to consummate the deal and adhered to the terms of the merger agreement. The board, he said, never formally withdrew from the companies' merger agreement and actually affirmed several times its recommendation that the process move forward. The company's shareholders voted overwhelmingly to approve the merger.

“ETE, therefore, received what it bargained for,” Glasscock wrote.

The vice chancellor on Friday did let stand for now ETE's claim that Williams had failed to cooperate with a $1 billion public offering that ETE planned to use to partially finance the transaction and whether it used its best efforts to see the deal to completion. However, Glasscock said he doubted that the company could recover damages, since it was ETE that terminated the deal.

“While I am dubious that ETE will ultimately prevail in demonstrating that Williams breached the agreement in this regard, and that damages flowed as a result, such an outcome is reasonably conceivable,” he said. “Therefore, resolution of these issues awaits a developed record and the motion to dismiss this claim is denied.”

An attorney for Williams declined to comment on the ruling and an attorney for ETE did not return a call Friday seeking comment.

Williams is represented by Sandra C. Goldstein, Antony L. Ryan and Kevin J. Orsini of Cravath, Swaine & Moore and Kenneth J. Nachbar and Zi-Xiang Shen of Morris, Nichols, Arsht & Tunnell.

ETE is represented by Michael C. Holmes, John C. Wander, Michael L. Charlson and Craig E. Zieminski of Vinson & Elkins and Rolin P. Bissell, Tammy L. Mercer and James M. Yoch of Young Conaway Stargatt & Taylor.

The case is captioned Williams v. Energy Transfer Equity.

A Delaware Court of Chancery judge on Friday dealt a major blow to Energy Transfer Equity's bid to recover a breakup fee from a failed merger with The Williams Cos. Inc., saying the pipeline company's decision to walk away from the once-promising deal wiped out most of its claims to the $1 billion payment.

ETE had argued that the Williams board quietly tried to sabotage the deal by negotiating a lucrative termination fee on the deal and then working to make sure that it was never consummated. In court documents, the company pointed to negative statements board members made regarding the merger, once valued at $33 billion, as well as litigation that Williams brought against ETE chairman Kelcy Warren in Texas state court.

But Vice Chancellor Sam Glasscock III said that most of the claims conflicted with the reality that it was ETE that successfully petitioned the Chancery Court last year to allow it to terminate the deal over a tax issue. And he gave little credence to ETE's reading of key contractual provisions to support its “unlikely position” that it was now entitled to post-termination damages.

“Since none of the allegations of breach supporting ETE's entitlement to the breakup fee caused, or even relate to, ETE's exercise of its right to avoid the merger, and, fundamentally, because the contract language it relies on is not supportive, I find ETE's counterclaim seeking the breakup fee not viable,” Glasscock wrote in a 24-page memorandum opinion.

In June 2016, Glasscock ruled in the high-stakes, expedited litigation that ETE did not violate a merger agreement by invoking a tax flaw that ultimately sunk the deal, despite the fact that the company's lawyers had previously approved the transaction.

The Delaware Supreme Court affirmed Glasscock's decision by a 4-1 vote in March over the strong dissent of the court's chief justice, who questioned ETE's motives for scuttling the deal.

Friday's ruling came amid a heated court battle in Georgetown, as both sides try to lay claim to $1.48 billion in breakup fees and other damages. Williams, which had asked Glasscock to enforce the merger agreement, filed for damages in September 2016, sparking a flurry of counterclaims from ETE.

ETE's most serious charge came on its assertions that the Williams board had launched a public campaign to undermine the deal and investor confidence in ETE and Warren in order to claim the termination fee.

However, Glasscock said that ETE's argument ignored the fact Williams had sued to consummate the deal and adhered to the terms of the merger agreement. The board, he said, never formally withdrew from the companies' merger agreement and actually affirmed several times its recommendation that the process move forward. The company's shareholders voted overwhelmingly to approve the merger.

“ETE, therefore, received what it bargained for,” Glasscock wrote.

The vice chancellor on Friday did let stand for now ETE's claim that Williams had failed to cooperate with a $1 billion public offering that ETE planned to use to partially finance the transaction and whether it used its best efforts to see the deal to completion. However, Glasscock said he doubted that the company could recover damages, since it was ETE that terminated the deal.

“While I am dubious that ETE will ultimately prevail in demonstrating that Williams breached the agreement in this regard, and that damages flowed as a result, such an outcome is reasonably conceivable,” he said. “Therefore, resolution of these issues awaits a developed record and the motion to dismiss this claim is denied.”

An attorney for Williams declined to comment on the ruling and an attorney for ETE did not return a call Friday seeking comment.

Williams is represented by Sandra C. Goldstein, Antony L. Ryan and Kevin J. Orsini of Cravath, Swaine & Moore and Kenneth J. Nachbar and Zi-Xiang Shen of Morris, Nichols, Arsht & Tunnell.

ETE is represented by Michael C. Holmes, John C. Wander, Michael L. Charlson and Craig E. Zieminski of Vinson & Elkins and Rolin P. Bissell, Tammy L. Mercer and James M. Yoch of Young Conaway Stargatt & Taylor.

The case is captioned Williams v. Energy Transfer Equity.