Free Response to Motion - District Court of Colorado - Colorado

Case 1:01-cv-00413-JLK-BNB

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-cv-00413-JLK-BNB M.D. MARK, INC., Plaintiff, v. KERR-McGEE CORPORATION and ORYX ENERGY COMPANY, Defendants.

DEFENDANTS' RESPONSE IN OPPOSITION TO PLAINTIFF'S RENEWED MOTION FOR ATTORNEYS' FEES

Defendants Kerr-McGee Corporation and Oryx Energy Company1 (collectively "KerrMcGee") submit this Response in Opposition to Plaintiff M.D. Mark's "Re-Newed Motion for Attorneys' Fees." Mark first moved for attorneys' fees on October 12, 2007. See Case 1:01-cv00413-JLK-BNB Document 277 ("Docket 277"). Kerr-McGee responded on November 1, 2007. Docket 287. That same day, this Court dismissed Mark's motion without prejudice to re-file. Docket 289. Mark filed its renewed motion on February 12, 2008. Docket 308. ARGUMENT Mark's renewed motion offers no new grounds for imposition of attorneys' fees. KerrMcGee, therefore, first generally reasserts and incorporates by reference the law and argument presented in its response to Mark's prior motion. Docket 287. Kerr-McGee supplements its prior argument by showing the Court as follows:

1

Oryx Energy Company ceased to exist on February 26, 1999, at which time it became KerrMcGee as a result of a statutory corporate merger. 1

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1.

Mark Seeks Attorneys' Fees Under the Colorado Uniform Trade Secrets Act (CUTSA), But That Statute Requires That Misappropriation Be "Willful And Malicious." The Colorado Uniform Trade Secrets Act (CUTSA), the statute on which Mark relies for

its attorneys' fee claim, permits an award of reasonable attorneys' fees only if "willful and malicious misappropriation exists[.]" COLO. REV. STAT. ANN. § 7-74-105 (emphasis added).2 In renewing its request for attorneys' fees, Mark implicitly urges the Court to read the "malicious" component out of CUTSA's "willful and malicious" standard. The definition of "willful and malicious" that Mark proposes focuses exclusively on the "willful" aspect of the statutory standard. Mark's definition -- "involving some `element of meaningful control and deliberate action which is normally associated with willful acts,'" Renewed Motion at 2 -- quotes the unpublished opinion in Weibler v. Universal Technologies, Inc. 29 F. Appx. 551, 554 (10th Cir. 2002) (Not Designated for Publication). The quoted language is attributed to the district court in that case, and refers only to the word "willful." Id. The case provides no clear definition of "malicious."3 By urging its truncated definition, Mark would have the Court eliminate the word "malicious" from CUTSA entirely.

2

Kerr-McGee does not waive its arguments that this case should be analyzed under Texas law, but rather applies the Court's prior ruling that Colorado law controls. Further, because Mark's motion invokes Colorado law, Defendants will address the question of attorney's fees under that same body of law.
3

Mark also relies on dictionary definitions in an attempt to explain the meaning of "willful and malicious" as used in CUTSA. As noted in Kerr-McGee's response to Mark's previous motion for attorneys' fees, this Court has recognized that dictionaries are not reliable statements of the law. See Docket 287 at 4-5, Transcript at 13-14. Furthermore, the Merriam-Webster definition offered by Mark is the second definition included in that dictionary; the first is "desire to cause pain, injury, or distress to another." See http://www.merriam-webster.com/dictionary/ malice. Its synonyms include "malevolence" and "ill will." Id. 2

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2.

The Court Has Already Ruled, as a Matter of Law, That Kerr-McGee's Actions Were Not Willful And Malicious. The Court has already recognized that Mark's evidence is insufficient as a matter of law

to support a finding that Kerr-McGee's conduct was willful and malicious, and Mark has offered no new reasons for the Court to revisit its prior ruling. In its ruling on Kerr-McGee's Rule 50 motion, the Court refused to submit Mark's claim for punitive damages to the jury: . . . I think that the plaintiffs have failed entirely to establish willful and wanton conduct or reckless conduct. There was reliance, however foolish, on the part of Kerr-McGee and its various corporate iterations to rely upon those Texas cases. But it is in my view a reliance that belies the possibility of willful and wanton conduct or recklessness or fraud. And so I'm granting the motion for judgment at this time with regard to the punitive damage claims, and it will be out. Transcript at 903. Just as an award of punitive damages was precluded by the Court's finding that there was no evidence of willful and wanton conduct, so also is an award of attorneys' fees under CUTSA precluded by that same finding. See Cartel Asset Mgmt. v. Ocwen Fin. Corp., Nos. 04-1502, 041517, 2007 WL 2733725 at *18 (10th Cir. 2007) (under CUTSA, jury's predicate finding for punitive damage award held to be applicable to question of attorneys' fees). Based on its prior ruling, the Court should deny Mark's Renewed Motion for Attorneys' Fees because Mark has not established willful and malicious conduct to support an award of attorneys' fees pursuant to CUTSA. See COLO. REV. STAT. ANN. § 7-74-105. 3. Mark Failed to Secure a Jury Finding That Kerr-McGee's Conduct Was Willful and Malicious As Required By CUTSA. Mark's claim for attorneys' fees is also precluded by Mark's failure to obtain a jury finding that Kerr-McGee's conduct was willful and malicious. Thus, even if, for purposes of recoverability of attorneys' fees, the Court were to set aside its prior ruling that Kerr-McGee did 3

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not act maliciously, Mark's renewed motion must fail for lack of the necessary jury finding on the issue. Mark did not ask for a separate finding on the issue for purposes of attorneys' fees. The Court did not give any instruction or submit any question to the jury applying this elevated "willful and malicious" standard. The Court should not permit Mark's attempted evasion of Kerr-McGee's right to a jury trial on the factual predicate for attorneys' fees. Generally, under Colorado law, attorneys' fees are a hybrid of costs (which are for the court to determine) and damages (which are for the fact-finder). Ferrell v. Glenwood Brokers, Ltd., 848 P.2d 936, 941 (Colo. 1993).4 The determination of which aspect predominates is generally a fact-sensitive and context-sensitive question, and lies within the discretion of the court. Id. But in Cartel Asset Management, the Tenth Circuit addressed the specific issue whether the "willful and malicious" standard was to be applied by the jury or the court, and concluded that for CUTSA purposes it was matter for the jury. Cartel Asset Mgmt., 2007 WL 2733725 at *18. The court was clear: "Willful and malicious" is an "underlying factual

finding[]" to be given to the jury. Id. at 18-19. While the Cartel Asset Management court remanded the award of attorney's fees to the district court for a proper application of Colorado law, that court never questioned the jury's role in determining the underlying fact issue. 5 See id. at *18-*19.

The paradigmatic case in which fees are to be taxed as costs by the trial court is one in which the fees are to be awarded under a contractual fee-shifting arrangement. Chartier v. Weinland Homes, Inc., 25 P.3d 1279, 1281 (Colo. App. 2001). As Kerr-McGee established in its response to Mark's previous motion for attorney's fees, there is no contractual right to attorneys' fees in the 1994 agreement between Kerr-McGee and Mark. See section 5 infra and Docket 287 at 6-8.
5

4

Notably, in Weibler, the Tenth Circuit does not address the proper roles of judge and jury in determining attorneys' fees under CUTSA because the district court in Weibler was sitting as finder of fact -- there was no jury. Id. at *1. 4

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Other federal courts have similarly recognized the jury's role in determining willfulness and maliciousness under various state versions of the Uniform Trade Secrets Act. See, e.g., CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099, 1112 (9th Cir. 2007); Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, (7th Cir. 2003) (citing Medow v. Flavin, 336 Ill.App.3d 20, 270 Ill. Dec. 174, 782 N.E.2d 733, 746 (App. Illinois, First Division 2002)) ("willful and malicious" clause under exemplary damage section of Illinois trade secret statute was jury issue); X-IT Products, L.L.C. v. Walter Kidde Portable Equipment, Inc., 155 F.Supp.2d 577, 648 (E.D. Va. 2001) ("willful and malicious" a jury question for both exemplary damages and attorneys' fees in trade secret litigation). In its renewed motion, Mark implicitly acknowledges that the matter of "willful and malicious" misappropriation presents fact questions that must be resolved by the fact-finder. For example, Mark asks the Court to examine the "totality of the circumstances" and scrutinize "four specific acts." Renewed Motion at 2. Mark additionally asks the Court to usurp the role of the jury by determining a party's intent, suggesting that the Court should deduce that the loss of certain data was no accident, but that Kerr-McGee "intentionally forfeited" the missing miles. Id. at 7. These and other points in Mark's renewed motion constitute unresolved fact questions that should have been given to the jury. Mark had its opportunity to have these issues presented to the jury. It never requested that the Court do so. Therefore, Mark failed to obtain the required finding by the jury that Kerr-McGee's alleged misappropriation was "willful and malicious," a predicate fact for an award of attorneys' fees under CUTSA. 6 COLO. REV. STAT. ANN. § 7-74105.

6

Whether this Court characterizes Mark's Renewed Motion as a question of damages or of costs, U.S. Supreme Court caselaw dictates that the Amended Judgment entered on January 18, 2008, remains a final judgment for purposes of appeal. See Budinich v. Beckton Dickinson & Co., 486 5

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4.

In Any Event, There Is No Evidence That Kerr-McGee Engaged In Willful and Malicious Conduct. Even if the Court were inclined to sit as finder of fact on the issue of maliciousness under

CUTSA's attorneys' fee provision, Mark has presented no reason for the Court to depart from its previous holding that, as a matter of law, Mark "failed entirely to establish willful and wanton conduct or reckless conduct." Transcript at 903. Indeed, the evidence on which Mark relies cannot support a finding of maliciousness. a. The Court Has Already Specifically Held That Kerr-McGee's Reliance On the TXO and Nuevo Cases Was Not Willful and Malicious.

Mark completely misconstrues the Court's previous statements on the import of the TXO and Nuevo cases from the appellate courts of Texas. See M.D. Mark, Inc. v. Nuevo Energy Co., 988 S.W.2d 463 (Tex. App.--Houston [1st Dist.] 1999); TXO Production Co. v. M.D. Mark, Inc., 999 S.W.2d 137 (Tex. App.--Houston [14th Dist.] 1999). Far from viewing Kerr-McGee's reliance on those cases as evidence of willfulness and maliciousness, the Court concluded that such reliance negated willfulness and maliciousness. Mark contends that this Court "questioned the reasonableness of Defendant Kerr-McGee's reliance on these cases, considering `its various corporate iterations'." Renewed Motion at 4. But Mark takes the Court's comment out of context. The Court wrote: However, I admitted the evidence with regard to these Texas cases, perhaps unfairly to counsel, because I saw their relevance in terms of the claim for punitive damages. And I think that the plaintiffs have failed entirely to establish willful and wanton conduct or reckless conduct. There was reliance, however foolish, on the part of Kerr-McGee and its various corporate iterations to rely upon those Texas cases. U.S. 196, 202-03 (1988) (holding that a federal court judgment is final even if state law regards unresolved attorneys' fee issue as part of merits). 6

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But it is in my view a reliance that belies the possibility of willful and wanton conduct or recklessness or fraud. And so I'm granting the motion for judgment at this time with regard to the punitive damage claims, and it will be out. Transcript at 903 (emphasis added). Whatever the Court may have thought of the wisdom of relying on TXO and Nuevo, the Court clearly concluded that Kerr-McGee's reliance on those cases precluded a finding of maliciousness. As the Court put it, Kerr-McGee's reliance "belies the possibility of willful and wanton conduct or recklessness or fraud." Id. The Court's logic relating to punitive damages applies to attorneys' fees as well. See Cartel Asset Mgmt., 2007 WL 2733725 at *18-19. Kerr McGee's reliance on Texas precedent precludes any award of attorneys' fees.7 b. Mark's Efforts to Cast Kerr-McGee's Retention of Seismic Data As a Smokescreen For Theft Cannot Succeed.

Mark asserts, without any evidence, that by failing to return on demand the seismic data at issue, Kerr-McGee must have been acting to "hid[e] forever the truth that it had stolen M.D. Mark's valuable Trade Secrets." But Mark conceded at trial that theft was not at issue in this case, admitting that the conduct in question was "not theft.
7

We can't prove that they --

Mark asserts that In re. S & D Foods, Inc., 144 B.R. 121 (Bankr. D. Colo 1991), stands for the proposition that certain acts that Kerr-McGee took in reliance on TXO and Nuevo were necessarily willful and malicious in spite of those Texas cases. S & D Foods is not controlling. Mark states that "one of the key determinative facts that justified the award of attorneys' fees [in S & D Foods] was the fact that the Plaintiff's Trade Secrets were disclosed to multiple customers." Renewed Motion at 6. That is hardly a fair reading of a nearly 50-page opinion with nearly 25 pages of factual background describing evidence of complex machinations and breached fiduciary relationships behind a failed merger. See generally In re. S & D Foods, Inc., 144 B.R. at 129-54. Further, the court in S & D Foods awarded "attorney's fees, costs, and exemplary damages, because [that court found] that [the defendant's] revelations to others about [the plaintiff's] trade secrets were so malicious and wanton." Id. at 168. Here, this Court found insufficient evidence of any maliciousness to support an award of exemplary damages. Furthermore, without reciting the entire litany of evidence in S & D Foods, Kerr-McGee notes that, unlike the present case, the complained-of transfer in S & D Foods was not between related companies; and that, unlike the present case, the defendant in S & D Foods had not acted under a reasonable interpretation of relevant caselaw. Id. at 153, 168. 7

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somebody pulled out a gun and stole it. We can't prove that somebody ran out the front door of PGI or M.D. Mark." Transcript at 1328 (emphasis added). Having conceded at trial that KerrMcGee's misappropriation was not for this imagined nefarious purpose, see id., Mark has no evidence that can support a finding of maliciousness required for a successful attorneys' fee claim under CUTSA. c. Kerr-McGee's Inability to Locate License Agreements Is No Evidence of Maliciousness.

Mark tries to read maliciousness into the fact that Kerr-McGee could not locate a license agreement for approximately 3,100 miles of seismic data dating from the early 1980s. But Mark fails to mention that Mark itself could not locate a license agreement for that data. Mark improperly attempts to twist the lack of evidence of a license agreement into affirmative evidence of maliciousness, hoping to shift the burden of proof on this issue to KerrMcGee. But the record contains no evidence whatsoever as to how Kerr-McGee came to possess the 3,100 miles of data, much less that Kerr-McGee did so with the malicious state of mind necessary to support an award of attorneys' fees. It is entirely possible that Kerr-McGee had a license agreement covering the 3,100 miles of seismic data, but lost that agreement -- just as Mark lost any agreement that covered that data. d. Kerr-McGee's Loss of Data Is No Evidence of Maliciousness.

Mark also tries to support its request for an award of attorneys' fees based on KerrMcGee's loss of certain seismic data. Without citation to authority, Mark argues that KerrMcGee's alleged loss of certain seismic miles was a forfeit of "meaningful control," and that Kerr-McGee willfully ignored proper safeguards. Renewed Motion at 7. In connection with this argument, Mark does not even contend that Kerr-McGee acted maliciously, or indeed even mention the word "malicious" at all. Here, as it does throughout its motion, Mark attempts to 8

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ignore half of the required predicate finding for attorneys' fees under CUTSA §7-74-105. Nowhere in its renewed motion does Mark point to any evidence that Kerr-McGee's conduct was "willful and malicious." 5. Kerr-McGee's Alleged Breach of the 1994 Agreement Between Mark and KerrMcGee Cannot Support an Award of Attorneys' Fees. Mark contends that an indemnification clause in the 1994 agreement between Mark and Kerr-McGee supports an award of attorneys' fees. This contention is substantively identical to a contention in Mark's original motion for attorneys' fees. Docket 277 at 3. Kerr-McGee,

therefore, specifically incorporates and reasserts by reference its argument in its prior response that the clause in question is not an express contractual fee-shifting provision, and therefore, does not qualify for an exception to the general rule that denies an award of attorneys' fees absent a statute or express contract language to the contrary. Docket 287 at 6-8. 6. Colorado Revised Statutes § 13-17-103 Is Inapplicable Mark reasserts verbatim its argument that section 13-17-103 of the Revised Colorado Statutes supports an award of attorneys' fees. See Docket 277 at 3-4. Kerr-McGee, therefore, specifically incorporates and reasserts by reference its argument in its prior response that the statute that Mark relies on relates only to "frivolous, groundless, or vexatious actions," see COLO. REV. STATE. ANN. § 13-17-102(4), and does not apply to the present case. Docket 287 at 9-10. CONCLUSION & PRAYER Mark already has a judgment on the verdict of more than $25 million in actual damages and more than $25 million in prejudgment interest. Kerr-McGee has filed a supersedeas bond for more than $53 million. This court should reject this attempt to further enhance Mark's recovery. 9

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Defendants respectfully request that M.D. Mark's Renewed Motion for Attorneys' Fees be DENIED. Defendants further request all such relief to which they may be entitled. Dated: February 15, 2008.

Respectfully submitted,

s/ Marie R. Yeates___________ Marie R. Yeates VINSON & ELKINS LLP 1001 Fannin Street, Suite 2500 Houston, Texas 77002-6760 Phone: 713.758.4576 Fax: 713.615.5544 [email protected] Scott S. Barker Gregory E. Goldberg M. Antonio Gallegos HOLLAND & HART LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, Colorado 80201-8749 Phone: (303) 295-8513 Fax: (303) 975-5416 [email protected] [email protected] [email protected] ATTORNEYS FOR DEFENDANTS

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CERTIFICATE OF SERVICE I hereby certify that, on February 15, 2008, I electronically filed a true and correct copy of the foregoing Defendants' Response in Opposition to Plaintiff's Renewed Motion for Attorneys' Fees with the Clerk of Court using CM/ECF system which will serve such filing by email to: Harlan P. Pelz Daniele W. Bonifazi Pelz, Bonifazi & Inderwish [email protected] [email protected]

s/ Marie R. Yeates___________

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Houston 3523606v.2