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Yetter Coleman Secures $25 Million Victory in Energy Contract Dispute

Yetter Coleman LLP has secured over $25 million for their client, DC Transco LLC, in the aftermath of the devastating Winter Storm Uri.

The case centered on a series of electricity price hedging deals that went awry during the chaos of Winter Storm Uri, which wreaked havoc on Texas in February 2021. DC Transco LLC, an electricity seller with transmission rights in Texas, had engaged Rainbow Energy Marketing Corp. to manage its power trading operations. However, just before the storm struck, Rainbow executed trades without DC Transco’s explicit consent, leading to over $20 million in losses as the Texas grid faltered and electricity prices soared.

Judge Pitman’s ruling followed a meticulous bench trial, where it was determined that Rainbow Energy had breached its contractual obligations by not obtaining prior approval for the trades. The court found that Rainbow could not pass on the derivative losses to DC Transco, resulting in a $20.8 million damages award, along with approximately $4.9 million in pre-judgment interest.

The court also dismissed Rainbow’s defense that DC Transco had failed to mitigate damages by not directing Rainbow to unwind the trades. Judge Pitman noted that DC Transco had acted reasonably and promptly upon learning of the unauthorized transactions. Furthermore, Rainbow was found to have breached the agreement by denying DC Transco the opportunity to audit the trading account books.

This case underscores the importance of clear communication and adherence to contractual agreements in the volatile energy market. Yetter Coleman LLP’s legal team was led by Jim Zucker, Liz Wyman, Reagan Simpson, Jane Ray, Chuck Matula, and Jason LaFond.

The case is Rainbow Energy Marketing Corp. v. DC Transco LLC, case number 1:21-cv-00313, in the U.S. District Court for the Western District of Texas.

Read the article at Law360 (paywall)