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Interstate Gas Pipeline Company Wins $32.9M Judgment

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A Minnesota federal court has ruled in favor of Great Lakes Gas Transmission LP in a contract dispute with an Indian conglomerate. The court entered a $32.9 million judgment on behalf of the Houston-based interstate natural gas pipeline company, finding that Mumbai-based Essar Steel Ltd. violated a contract to provide natural gas transmission services. The judgment was entered on Sept. 16 by U.S. District Judge Susan Richard Nelson, following a jury trial in Duluth.

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The dispute stemmed from Essar’s 2007 acquisition of Minnesota Steel Industries (MSI), which owned or controlled more than 1.4 billion tons of iron ore resources in the state’s Mesabi Iron Range. Essar is an international conglomerate operating in a number of manufacturing and services sectors, including the steel industry. Following the purchase, Essar and its subsidiaries announced plans to upgrade and build a major steel making facility in Itasca County, Minnesota using the former MSI holdings.

Great Lakes filed suit claiming breach of contract and anticipatory repudiation when Essar failed to honor MSI’s 15-year contract for natural gas capacity, which is essential for steel production. Essar asserted a number of defenses, including its contention that the global economic crisis excused its breach of contract. The court disposed of each of those defenses. The case also presented a precedential issue of federal jurisdiction based on interstate gas pipeline tariffs.

“This case has been resolved after more than six years of attempts by the defendants to avoid the simple principle of honoring a written contract,” said attorney David W. Elrod of Dallas-based Gruber Hurst Elrod Johansen Hail Shank, who represented Great Lakes throughout the litigation. “Given the issues involved and the size of this judgment, the case offers important precedents for determining an appropriate discount rate in future litigation involving long-term contracts, as well as federal court jurisdiction.”

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