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. ______________________________________________________________________________ PLAINTIFF'S RESPONSE TO DEFENDANTS' MOTION TO EXCLUDE LEGAL CONCLUSIONS FROM THE TESTIMONY OF PLAINTIFF M.D. MARK'S EXPERT WITNESSES ______________________________________________________________________________ COMES NOW the Plaintiff, M.D. Mark, inc., by and through its attorneys, Pelz, Bonifazi & Inderwish, P.C., and hereby submits this response to Defendants' Motion To Exclude Legal Conclusions From The Testimony of Plaintiff M.D. Mark's Expert Witnesses. In support of Plaintiff's opposition to Defendants' Motion, Plaintiff submits the following. I. FACTUAL BACKGROUND

As the Court is aware, this is a complex commercial litigation case involving, among other things, the rights of licensees, (Oryx Energy Company and Kerr-McGee Corporation) to have access to seismic data upon a merger of the two companies and a right to access to the PGI seismic data by subsidiary entities. This seismic data was originally owned by a company called Professional Geophysical, Inc. ("PGI"). The PGI data was considered a trade secret of PGI and is

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still considered a trade secret today. As it pertains to Defendants' Motion, Plaintiff claims the Defendants misappropriated these trade secrets by Oryx transferring the data in 1985 to a company owned by it known as Sun Energy Partners; by Oryx and Kerr-McGee wrongfully transferring the data licensed to Oryx Energy Company to Kerr-McGee Oil & Gas Corporation in 1999; by Kerr-McGee Corporation wrongfully gaining access to and possessing 3,191.15 miles of PGI seismic data which it did not license or have the right to possess, and which KerrMcGee Corporation has certified (F.R.C.P. 26(g)) that it does not have any licenses agreements, letters of transmittal, financial documents for the acquisition of this data, or any other documents in Kerr-McGee Corporation's possession relating to the acquisition of this PGI seismic data; by Oryx Energy Company and Kerr-McGee Corporation losing control of thousands of miles of PGI seismic data which they licensed from PGI and Plaintiff and by Kerr-McGee Corporation refusing to return the PGI data upon their merger and subsequent corporate reorganizations. Plaintiff as a licensor of the PGI seismic data and its predecessor required that each entity wishing to have access to the PGI seismic data sign a license agreement. These license agreements varied over the years using different language to restrict the use and transfer of the data by the licensee to other entities. There are over 50 license agreements at issue. The Defendants claim that there was no transfer of the PGI data because Oryx Energy Company merged with Kerr-McGee Corporation. The Defendants admit the PGI data was transferred to a subsidiary corporation of Kerr-McGee Corporation, Kerr-McGee Oil & Gas Corporation but that transfer was not a breach of the license agreements. As such, the case involves complex areas of corporate law involving the Model Business Corporation Act (MBCA") and the business corporation act of the State of Delaware. The issues of constituent entities, merging entities, 2

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surviving entities, plans of merger and asset transfers among corporations, subsidiary corporations, acquired entities and merger of corporations, among other corporation and contract law are in issue as are explanation of license agreements, custom and practice in the oil & gas industry and damages. As the Court can see, this is a complex set of facts that can be confusing to an attorney and certainly to a lay jury. In an effort to further confuse the issue, Defendant Kerr-McGee Corporation has repeatedly, throughout the proceedings, referred to Kerr-McGee Corporation and its subsidiary, Kerr-McGee Oil & Gas Corporation, as interchangeable terms. This is inaccurate as they are separate corporations. See Plaintiff's First Motion in Limine. Mr. Moye was retained by Plaintiff to explain to the jury the concepts of corporate structure, license agreement contractual obligations, asset transfer, acquired entity, acquiring entity, corporate reorganization, corporate merger, constituent entity in a corporate merger, surviving entity in a corporate merger and the effect such reorganization of a corporation has on the issue of the transfer of seismic data licensed and trade secrets of Plaintiff. This evidence can only come from a witness at trial. Mr. Gray was retained to opine on the industry standards relating to the transferability of seismic data when a licensee merges, the licensees duties relating to the seismic data while in licensee's possession and damages. II. LAW AND ARGUMENT

Rule 702 Federal Rules of Evidence governs the admission of expert testimony: "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based on sufficient facts or data, (2) the 3

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testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case." Rule 704 (a) of the Federal Rules of Evidence states: "Except as provided in subsection (b), testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact." The advisory notes to Rule 704 Federal Rules of Evidence states: "The basic approach to opinions lay or expert, in these rules is to admit them when helpful to the trier of fact." On page 3 of the Defendants' brief, they set forth the opinions of Mr. Moye to which they object. A review of these opinions makes clear that Mr. Moye is not instructing the jury to find that the Defendants violated trade secret law or breached its contract with Plaintiff. To the contrary, Mr. Moye merely explains the obligations of the parties pursuant to the contract and the entities to which the contracts permit the transfer of data following a corporate merger. The jury is free to decide whether the transfers by the Defendants breached any of the multiple contracts. Mr. Moye is not instructing the jury on any legal standards to be followed by them. The jury must decide that issue based on this Court's instructions on the law. Moreover, any potential issue involving Mr. Moye's testimony could be alleviated by admitting the expert testimony with a contemporaneous appropriate instruction Weinsteins Evidence Sec. 704[02] page 704-14. Defendants cite Specht v. Jensen, 853 F.2d 805 (10th Cir. 2005), in support of their argument. This reliance is misplaced. In Specht, the witness was asked to opine on a

hypothetical set of facts as to whether a search was unreasonable. The Court would not permit the witness to testify to "his belief of what law should govern the case..." page 808. This is not the case here. Mr. Moye will explain the contracts and the rights and obligations of the parties to 4

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the contracts as it applies to transfer of data. The jury will decide whether the contracts were breached based on the law as instructed by this Court. The Defendants also rely on Marx v. Diner's Club, 550 F.2d 505 (2d Cir. 1977) to support their position. In Marx, the Court stated that the expert witness was qualified to explain to the jury the step by step practices ordinarily followed by lawyers and corporations in shepherding a registration statement through the SEC. Pages 508-509. His testimony was only objectionable as it pertained to his belief as to the legal standards which should've governed Diner's Club's conduct. Page 509. Again, the witness was testifying to his opinion of the law. Mr. Moye's testimony does not set forth any opinion of law but rather explains the transfers permitted by these contracts, the fact that each corporation is separate under the law, that each corporation has separate standing under the law, and the effect of transfer of assets as it relates to the license agreements. The jury decides whether the contracts were breached by the transfers based on the Court's instructions of law. Of great importance to the Court in Marx, in prohibiting the testimony of the expert, was that the case involved securities litigation. The Court stated at page 511, "With the growth of securities litigation over the past forty years, we must be especially careful not to allow trials before juries to become battles of paid advocates posing as experts on the respective sides concerning matters of domestic law." However, in a more recent securities case, from the same circuit as Marx, United States v. Bilzerian, 926 F.2d 1285 ( 2d Cir. 1991), the Court reached the opposite conclusion. There, the expert Coffee explained background information on federal securities law and answered hypotheticals applying law to fact. The trial judge permitted the jury to review specific legal instructions as the witness testified concerning them to clarify any ambiguities between the law 5

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and the witness's testimony and gave a limiting instruction. The Appellate Court stated that, with respect to the admission or exclusion of expert testimony, they would defer to the trial judge's broad discretion unless his decision is clearly wrong. The Court found no abuse of discretion in the admission of the testimony. With regard to courts permitting experts to express opinion as to the ultimate conclusion of breach of legal duty, courts have permitted experts to testify that certain conduct constituted negligence. In Hines v. The Denver and Rio Grande Railroad Company, 829 P.2d 419 (Ct. App 1991) the court permitted plaintiff's expert to opine that the conduct in the operation of a train that resulted in a collision with a car was negligence. The court first pointed out that CRE 704 was identical to the Federal Rule of Evidence 704. The court stated that an expert witness should be appropriately qualified and that the expert opinion should assist the trier of fact to find a solid path through an unfamiliar and esoteric field. Here, Mr. Moye is a qualified expert and the field does concern an unfamiliar and esoteric field. In admitting the testimony the trial judge held "In this case it appears that the operation of the train is something outside the knowledge of the ordinary person and there would be the need for some understanding of that, and that the testimony of an expert could be helpful to the jury. I'm ... permit the witness to express an opinion on this, and recognize it is going to be largely a matter of the weight the jury may wish to give or not give to the opinion of the expert." The Court of Appeals found this evaluation of the expert testimony to be correct in view of applicable law. Mr. Moye's testimony does not rise to this level but merely informs the jury under what circumstances and corporate restructuring the contracts permit transfer of data. The jury decides if the contracts were breached.

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With regard to Mr. Gray's testimony the Defendants complain that he should not be permitted to testify to the propriety of transfers based on the custom and practice in the oil and gas industry. First, no objection is made to his qualifications to testify as an expert. With regard to the substance of Defendants' argument the case of First State Bank of New Jersey v. Reliance Electric Company, 669 F.2d 725 ( 3rd Cir 1981) is illustrative. There, the court permitted an expert in the UCC to testify as to trade usage "in light of the clear ambiguous nature of the documents". The witness was called to inform the jury of bank customs and to assist it in determining the pivotal issue of whether the bank was entitled to claim benefits of a holder in due course. The admission of the testimony on the key issue in the case was held not to be error because it provided the jury information on bank customs, information on the bank's status as a holder in due course based on banking practices and the defendant used its own expert. In the case before this Court, Mr. Gray has substantial knowledge of the custom and practice in the oil and gas business as it pertains to the licensing of seismic data and the licensee's duties in relation to that data and will assist the jury in determining whether the Defendants' transfer were in accordance with the industry practice. The proffered testimony does not infringe on the Court's rule in determining the law of the case.

III.

CONCLUSION

The testimony of experts Moye and Gray is important to permit the jury to understand the complex and esoteric fields of corporate reorganizations, merger, transfers of licensed data within a merger and the custom and practice in the oil and gas fields as they pertain to the licensing and transfer of seismic data. Mr. Moye must be permitted to explain to the jury the 7

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contractual obligations of the Defendants and how they failed to comply with those obligations. Any issues concerning this testimony can be mitigated by limiting instructions. Respectfully submitted this 31st day of January, 2007. PELZ, BONIFAZI & INDERWISH, P.C.

s/ Harlan P. Pelz_______________ Harlan P. Pelz Daniele W. Bonifazi John H. Inderwish 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 the 31st day of January, 2007, a true and correct copy of the foregoing PLAINTIFF'S RESPONSE TO DEFENDANTS' MOTION TO EXCLUDE LEGAL CONCLUSIONS FROM THE TESTIMONY OF PLAINTIFF M.D. MARK'S EXPERT WITNESSES was placed in the United States Mail, postage prepaid, addressed as follows: Scott S. Barker, Esq. Gregory E. Goldberg, Esq. Antonio Gallegos, Esq. HOLLAND & HART, LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, CO 80201-8749

s/ Dee A. Shaffer______________ Dee A. Shaffer

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