Free Motion for Attorney Fees - 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. ______________________________________________________________________________ PLAINTIFF'S RE-NEWED MOTION FOR ATTORNEYS' FEES ______________________________________________________________________________ COMES NOW, the Plaintiff, M.D. Mark, Inc., by and through its attorneys, Pelz, Bonifazi & Inderwish, P.C., and respectfully submits the following Re-Newed Motion for Attorneys Fees. As grounds therefore, Plaintiff states as follows: CERTIFICATION PURSUANT TO LOCAL RULE 7.1A Counsel for Plaintiff has conferred with counsel for Defendants, Marie Yates, regarding the filing of this motion. Counsel for Defendants objects to the relief requested herein. SUMMARY OF THE CASE Plaintiff prevailed on its claims against Kerr-McGee Corporation and Oryx Energy Company on its claim for breach of contract and misappropriation of Trade Secrets.

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MOTION FOR ATTORNEYS' FEES I. Plaintiff M.D. Mark Is Entitled To Its Attorneys Fees As A Result Of The Defendant Kerr-McGee Corporation's Misappropriation Of Trade Secrets. A. 1. Basis upon which Fees are Sought. C.R.S § 7-74-105

C.R.S. § 7-74-105 provides that: "if a claim of misappropriation is made in bad faith, a motion to terminate an injunction is made or resisted in bad faith, or willful and malicious misappropriation exists, the court may award reasonable attorney fees to the prevailing party." Colorado law has defined "willful and malicious" in the case of Weibler v. Universal Technologies, Inc. 2002 WL 119267, C.A.10 (Colo., 2002). In that case the court defined willful and malicious as involving some "element of meaningful control and deliberate action which is normally associated with willful acts." When considering the totality of the circumstances surrounding Kerr-McGee's refusal to return Plaintiff's Trade Secrets, it becomes clear that Kerr-McGee acted willfully and with malice in orchestrating an elaborate scheme of excuses and false reliance on Texas case law intentionally to use and benefit from Plaintiff's Trade Secrets. Upon scrutiny of 4 specific acts by Defendant Kerr-McGee, it becomes clear that it acted willfully and maliciously. First, Kerr-McGee's attorneys could not have reasonably relied "in good faith" on the Texas cases, as the facts are so obviously different from the facts in this case. Second, KerrMcGee entered into a license agreement in 1994 that specifically provided that if Kerr-McGee merged or reorganized all license agreements to use PGI data terminated, yet Kerr-McGee willfully refused to return all the Category II and III PGI Seismic Data when it merged with 2

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Oryx and, most blatantly, after it received notice of termination from M.D. Mark, Inc. in 2004. Kerr-McGee knew that the intent of the 1994 agreement was to apply to, replace and/or supersede all previous license agreements relating to the PGI seismic data, which, at worst, put Kerr-McGee on notice that the PGI seismic data was not to be transferred via merger. Third, Kerr-McGee refused to return all of the Category III bootlegged data that it admits it cannot prove it lawfully acquired. Fourth, Kerr-McGee had to know that the 3178 miles of the North Louisiana/Southern Arkansas survey it had in its possession was bootlegged seismic data. 1. Kerr-McGee Corporation's Reliance on the Texas Cases Was In "Bad Faith", Therefore, Refusal to Return Plaintiff's Trade Secrets Was Willful and Malicious.

During trial, undisputed evidence was presented that on February 11, 1999, Defendant Kerr-McGee wrote to M.D. Mark explaining that its "records will need to be changed to reflect the name change of the Licensee...from Oryx Energy Company to Kerr-McGee Oil & Gas Corporation, a subsidiary of Kerr-McGee". [See Tr. Exhibit 132]. M.D. Mark responded explaining that the PGI Seismic Data is not transferable, citing the language of the license agreements. [See Tr. Exhibit 117]. Defendant Kerr-McGee's attorney Carlos Salazar promises to return all PGI seismic data. [See Tr. Exhibit 122]. In establishing the willfulness and maliciousness of Defendant Kerr-McGee's conduct, it must be pointed out at this juncture that Defendant Kerr-McGee did believe that the PGI license agreements addressed the issue of merger, otherwise why agree to return the data? Then, Defendant Kerr-McGee completely reverses course, refusing to return the PGI data, claiming to have relied on the cited Texas cases. [See Tr. Exhibit 124]. Upon review of Exhibit 127, counsel for Kerr-McGee states that "[t]he facts in our present situation are identical to those 3

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under which you have twice previously sued and lost at the appellate court level in Texas." [Emphasis Added]. This reliance is absolutely not made in "good faith", exposed by the first few sentences of each case describing which entities had merged. The willfulness and maliciousness of Defendant Kerr-McGee began when making such a completely false and recklessly untrue statement regarding the law. Just as each and everyone of the Kerr-McGee attorneys testified at trial, the difference between the Texas cases and the Oryx/Kerr-McGee merger was as simple to figure out as a circle is not a triangle. At trial, this Court questioned the reasonableness of Defendant Kerr-McGee's reliance on these cases, considering "its various corporate iterations". [Tr: page 903]. Taking the Court's concerns further, the legitimacy of this reliance is exposed as a manufactured defense which Defendant Kerr-McGee hoped would hide its true intentions to use the PGI Seismic Data as long as it could. The undisputed evidence at trial, including testimony of each of Kerr-McGee's attorneys, confirmed that each of the Texas cases did not involve the transfer of seismic data from the surviving entity in a merger to a wholly owned subsidiary which was not a part of the merger. When each of the Kerr-McGee attorneys were questioned on the issue, each agreed that a wholly owned subsidiary was absolutely separate and distinct from its parent corporation. Each attorney further testified that the Texas cases did not involve the transfer of seismic data to as many as three other separate and distinct legal entities, as occurred in this case when the PGI Data went to Kerr-McGee Oil and Gas Onshore LLC, Kerr-McGee Oil and Gas Onshore LP, Sun Operating Limited Partnership. [See Tr. Exhibit 186]. Based upon this undisputed testimony, which everyone knew at the time Exhibit 127 was written, the statement that "[t]he facts in our present situation are identical to those under which 4

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you have twice previously sued and lost at the appellate court level in Texas", is clearly a willful and malicious falsehood. At the very least, Defendant Kerr-McGee's reliance most certainly was not in "good faith", the opposite of which establishes the maliciousness of Mr. Salazar's attempt as a sophisticated attorney to bamboozle Ms. Davies into abandoning her claims. It should not be lost on this Court that at the exact time these false and untrue statements were being made to M.D. Mark, Defendant Kerr-McGee had 3178 miles of M.D. Mark's North Louisiana/Southern Arkansas Survey, the Category III bootlegged data, in its possession. Defendant Kerr-McGee knew that it possessed not one document, not one shred of evidence whatsoever to prove that this 3,178 miles of bootlegged data was lawfully acquired. Indeed, Defendant Kerr-McGee knew that this 3,178 miles of bootlegged consisted of copies of copies, a clear sign that the seismic data was bootlegged. Therefore, Defendant Kerr-McGee's real

intention was to hopefully fool M.D. Mark into dropping its claims, thus hiding forever the truth that it had stolen M.D. Mark's valuable Trade Secrets. This conduct by Defendant Kerr-McGee, accompanied by a very deliberate purpose, which was to use this bootlegged data, in pursuit of oil and gas exploration. Put another way, Defendant Kerr-McGee hoped to profit through this elaborate scheme of lies and deception at the direct expense of M.D. Mark. This is exactly the type of conduct the Uniform Trade Secrets Act was intended to punish. Based upon the aforementioned deliberate conduct of Defendant Kerr-McGee, the legal definition of willful and malicious, as stated in Weibler, is more than satisfied. Specifically, the 10th Circuit has held that when misappropriation is accompanied with an "element of meaningful control and deliberate action, such conduct is most certainly willful and malicious. Id. Applying this standard to these facts, Defendant Kerr-McGee deliberately attempted to mislead M.D. Mark 5

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about the Texas cases. Defendant Kerr-McGee will no doubt claim, as this court noted, that Mr. Salazar's reliance on these cases, while negligent, was not intentional. But, as the evidence at trial demonstrated, the difference between the facts of the Texas cases and this case is as obvious as the difference between a circle and a triangle. Again, if this was not the case, then each of Kerr-McGee's attorneys would have been able to explain the difference to the Court. In other words, each of these attorneys admitted understanding the most fundamental aspects of corporate law which cannot be ignored when making the statement that the facts of the Texas cases were "identical" to the facts of this case. This statements reeks of willful and malicious intent, especially when considering that Defendant Kerr-McGee never disclosed that it was in possession of the bootlegged data. M.D Mark only learned of this fact when deposing Mr. Darren Helm of Mid-Con Data Services, over two years into this case. In re S & D Foods, Inc., 144 B.R. 121 (Bankr. D. Colo. 1992), one of the key determinative facts that justified the award of attorneys' fees was the fact that the Plaintiff's Trade Secrets were disclosed to multiple customers. The best evidence that Defendant KerrMcGee exercised meaningful control is the undisputed fact that Defendant Kerr-McGee shared M.D. Mark's Trade Secrets with multiple entities, each of whom was potential customers of M.D. Mark. Each time one of these separate companies was provided the PGI Seismic; this caused M.D. Mark to lose one more reasonable license fee. At trial in this case this Court

instructed the jury that each corporation, even wholly owned subsidiaries, were separate and distinct entities, no different than individual people. It is here that Defendant Kerr-McGee's decision to share M.D. Mark's Trade Secrets with its subsidiaries cannot be excused away by reliance on these Texas cases. This was a very willful, albeit arrogant, plan to dare Ms. Davies 6

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into suing Defendant Kerr-McGee during which time her PGI Seismic Data would be made available to every separate wholly owned subsidiary conducting oil and gas exploration. Thousands of miles of M.D. Mark, Inc.'s Trade Secrets were lost. Again, each of KerrMcGee's attorneys testified that these Trade Secrets required "special protection" and that Defendant Kerr-McGee owed M.D. Mark the duty to safeguard its Trade Secrets. Therefore, when Defendant Kerr-McGee lost approximately five thousand miles of the PGI data Oryx had licensed, and lost 226 miles of the PGI data it licensed, it intentionally forfeited "meaningful control" of the PGI Seismic Data. Defendant Kerr-McGee lost control of this data knowing that the loss of control was in direct conflict of its duty to safe guard these Trade Secrets. Testimony presented at trial unanimously established that the only way to safe guard seismic data is to exercise a rigorous check in/check out policy of individualized bar coded seismic data, which is under lock and key. Kerr-McGee willfully ignored such safe guards evidenced by the losing of this data and making no effort whatsoever to locate this data. 2. Kerr-McGee Willfully and Maliciously Breached the 1994 License Agreement By Refusing to Return the Category II Kerr-McGee PGI Seismic Data.

By the License Agreement dated May 13, 1994 between M.D. Mark, Inc. and KerrMcGee Corporation, which governs the licensing of the Category II PGI Seismic licensed to Kerr-McGee prior to the merger with Oryx, the license expressly states that: "in the event of a of a corporate reorganization, a third party acquisition, or merger, and no disclosure, other than pursuant to the terms of this section, may be made to any parties involved in such actions, even if such parties are the surviving entities after such corporate reorganization, third party acquisition, or merger." [Emphasis added].

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Kerr-McGee's in-house attorney, Marilyn Young, admitted at trial that subsequent to the 1999 merger with Oryx, Defendant Kerr-McGee engaged in various corporate reorganizations and mergers. [Tr: pages 1069- 1071]. Based upon the clear and unambiguous language of the 1994 license, Defendant Kerr-McGee's right to all the Category II and Category III PGI Data terminated. At no point has Defendant Kerr-McGee claimed that it relied upon the Texas cases in refusing to return this data. Indeed, no legal justification for refusing to return this data has ever been provided, even after Defendant Kerr-McGee admitted engaging in the various corporate reorganizations and mergers. Consequently, the Jury found that Defendant KerrMcGee breached this agreement. The only remaining question is whether this "misappropriation is accompanied with an "element of meaningful control and deliberate action". Weibler v. Universal Technologies, Inc. 2002 WL 119267, C.A.10 (Colo., 2002). There is no doubt that this refusal to return the Category II and III PGI Data exemplifies meaningful control over M.D. Mark's Trade Secrets. The decision to refuse to return this data is clearly willful, especially given the admission made by Ms. Young at trial. The malicious element is also satisfied, as argued above, evidenced by the fact that this PGI Data has also been shared with other separate corporate entities, each of whom represented a potential customer of M.D. Mark. This License agreement also provides that: "...licensee shall indemnify and hold M.D. Mark harmless from and against any loss to M.D. Mark which is resulting from or relating to any breach by licensee of its obligations provided for in this Section IV." The jury found that Kerr-McGee Corporation breached this License Agreement which replaced all prior License Agreements between Kerr-McGee Corporation and M.D. Mark, Inc. or 8

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any of M.D. Mark's predecessors, including but not limited to PGI Houtex, ICS, and X MARK. Payment of attorneys' fees incurred by M.D. Mark, Inc. is a loss to M.D. Mark, Inc. "resulting from or relating to any breach by licensee of its obligations provided for in this Section IV." An award of attorneys' fees is fully contemplated and supported by this express language. 3. Kerr-McGee Willfully Refused To Return The 3,178 Miles Of The Category III Bootlegged Data That It Admitted It Did Not Have One Shred Of Documentation; Financial Or Otherwise, Evidencing That It Lawfully Licensed This Data.

As was apparent from testimony during the trial, Kerr-McGee Corporation gained access to 3,178 miles of the PGI Data for which it could provide no evidence of its right to have possession of this seismic data. Kerr McGee Corporation did not have a single witness, a single invoice, a single, financial entry, nothing to support their possession of the North Louisiana/ Southern Arkansas Survey. If Kerr-McGee Corporation actually had a license to this seismic data, ( which it did not) use and possession of the data would be governed by the May 13, 1994 license agreement. That was the last license agreement between M.D. Mark, Inc. and KerrMcGee Corporation and the license agreement, by its terms replaced all previous license agreements. To keep this data under these circumstances is clearly willful and malicious. KerrMcGee Corporation had no good faith basis to keep this data. Kerr-McGee Corporation had to acquire the bootlegged seismic data from some company unknown to the Plaintiff. The PGI Data could not have just dropped into Kerr-McGee's

possession by magic. There is no seismic data fairy that leaves seismic data in your possession unknowingly. The seismic sections were clearly second or third generation copies of the films and any competent geophysicist working for Kerr-McGee had to know that. 9 At trial, Kerr-

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McGee's witness, Thomas Schultz, brought samples of films of the bootlegged data for the Jury to view. It was undisputed that the quality of these films, which Kerr-McGee claimed were the best films, was very poor. At best, these films were copies of copies, which were confirmed when M.D. Mark presented first generation films of the exact same seismic data. As Ms. Davies testified at trial, no company that legitimately licensed seismic data would have accepted seismic data films in that condition. Therefore, there is no doubt that Kerr-McGee, via their

geophysicists, knew this data was bootlegged. Put another way, the first time one of these geophysicists saw this bootlegged data, they would have demanded better copies be provided by the Licensor. Of course this presupposes that the data had been lawfully acquired in the first place. Kerr-McGee intentionally did not make such a request because the powers that be knew that they did not have this bootlegged data lawfully. This is yet another example of a willful and malicious plan to hide the fact that Kerr-McGee had stolen M.D. Mark's Trade Secrets. The word "willful", as defined in Webster's Ninth New Collegiate Dictionary, means "obstinately and often perversely self-willed, done deliberately or intentional." The Plaintiff submits that Kerr-McGee Corporation could not have gained access to those 3,178 miles of seismic data through other than a deliberate and intentional act. From the same dictionary, the word "malicious" means "intent to commit an unlawful act or cause harm without legal justification or excuse. In this case, Kerr-McGee Corporation clearly acted with malice. Not only did it gain access to 3,178 miles of Plaintiff's seismic data for which it can produce no evidence of rightful possession, Kerr-McGee Corporation refused to return that seismic data when demand was made for its return in April of 2004 (Exhibit 142).

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4.

Colorado Revised Statutes, Section 13-17-103

C.R.S. § 13-17-103(1) provides, in pertinent part, "In determining the amount of any attorney fee award, the court shall exercise its sound discretion." Such statute goes on to state that the court, when granting an award of attorney fees shall consider the following factors, among others, in determining whether to assess attorney fees and the amount of attorney fees to be assessed against any offending attorney or party: (a) The extent of any effort made after the commencement of an action to determine the validity of any action or claim before said action or claim was asserted. The testimony of Marilyn Davis was clear that she made several attempts to recover the seismic data from Kerr-McGee Corporation. However, Kerr-McGee Corporation chose to refuse to return the seismic data and the Plaintiff was required to file suit to attempt to recover damages. In addition, when part of the PGI Data was returned, thousands of miles of the PGI Data was unaccounted for, a reckless act against M.D. Mark, Inc.'s Trade Secrets. As set forth above, the outcome at trial supports a finding by this Court that the Plaintiff is entitled to an award of attorney fees. B. Amount of Fees Sought and Method by Which Fees Were Calculated

Plaintiff seeks an award for all attorneys fees incurred in prosecuting the case against Defendants plus interest on the payments made to counsel by Plaintiff. 1. Amount of Fees Sought

Plaintiffs incurred a total of $811,758.30 in attorneys' fees, paralegal fees and law clerk fees, plus interest in the amount of $171,130.43. Invoices evidencing these fees are attached Plaintiff's Affidavit for Attorney Fees (attached hereto as Exhibit 1) as Exhibit A. The interest 11

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calculation is attached to the Affidavit as Exhibit B. It is very likely that the hourly rates for each of M.D. Mark's attorneys detail in Exhibit 1 are below the market rates and if the Court is inclined to award attorneys' fees, in the interests of equity, the rates should be increased. In order to measure the appropriate adjustment, it is Plaintiff's position that Kerr-McGee disclose the amount of attorneys' fees it spent to date as well as the hourly rates for the army of attorneys that have worked on this case.

2.

Method by Which Fees Were Calculated

Attorneys' fees accrued by Pelz, Bonifazi and Inderwish, P.C. were submitted by invoice to Plaintiff on a monthly basis and paid by M.D. Mark, Inc. Each invoice contains a description of the tasks performed, the date the tasks were performed, the billing rate, and a summary of the total fees incurred. Total attorneys fees of Pelz, Bonifazi and Inderwish, P.C. for its prosecution of this action were calculated by totaling the fees charged on each invoice. C. Reasonableness of Attorneys Fees

Attached to hereto as Exhibit 1 is the Affidavit of Harlan P. Pelz, offered in Support of Attorneys Fees requested. Mr. Pelz's affidavit addresses the reasonableness of attorneys fees incurred with regard to the law firm of Pelz, Bonifazi and Inderwish, P.C. CONCLUSION Defendants' actions during the course of this litigation and at trial, and the final outcome of trial in favor of Plaintiff, warrants the award of attorney fees pursuant to the Contract and C.R.S. § 13-17-104.

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There being sufficient documentation herein as to the attorneys fees incurred by Plaintiff in the prosecution of this action, and there being detailed verification of the reasonableness of the attorneys fees incurred, and the method of calculation thereof, Plaintiff respectfully requests, pursuant to the authority cited herein, that the Court grant its reasonable attorneys fees in the amount of $811,758.30 plus interest of $171,130.43 to be paid by Defendants, Kerr-McGee Corporation and Oryx Energy Company.

WHEREFORE, Plaintiff respectfully moves this Court, pursuant to C.R.S. § 7-74-105, Contract and C.R.S. § 13-17-103 to grant its reasonable attorneys fees, plus interest, payable by Defendants, in the total amount of $188,758.30, plus interest of $171,130.43. DATED: February 12, 2008. Respectfully submitted, PELZ BONIFAZI & INDERWISH, P.C. s/ Harlan P. Pelz Harlan P. Pelz Daniele W. Bonifazi 1873 South Bellaire Street, Suite 1401 Denver, CO 80222 Telephone: 303-691-5600 Facsimile: 303-691-5606 ATTORNEYS FOR PLAINTIFF

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CERTIFICATE OF SERVICE I hereby certify that on February 12, 2008, a true and correct copy of the foregoing PLAINTIFF'S RE-NEWED MOTION FOR ATTORNEYS' FEES was electronically filed and served, addressed as follows: M. Antonio Gallegos, Esq. Scott S. Barker, Esq. Gregory E. Goldberg, Esq. HOLLAND & HART, LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, CO 80201-8749 Marie R. Yeates, Esq. Vinson & Elkins L.L.P. 1001 Fannin Street, Suite 2300 Houston, Texas 77002-6760

s/ Diane S. Parsons Diane S. Parsons

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