Free Pretrial Order - 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-0413-JLK-BNB M.D. MARK, INC., Plaintiff, v. KERR-McGEE CORPORATION and ORYX ENERGY COMPANY, Defendants. ______________________________________________________________________________ PRETRIAL ORDER ______________________________________________________________________________ I. DATE AND APPEARANCES The Pretrial Conference is presently scheduled for November 16, 2006 at 2:00 p.m. with counsel for Plaintiff, Harlan P. Pelz and Dan W. Bonifazi, and for Defendants, Scott S. Barker, Gregory E. Goldberg, and M. Antonio Gallegos, being present. II. JURISDICTION The United States District Court for the District of Colorado has jurisdiction over this matter pursuant to 29 U.S.C. § 1332 because there is complete diversity of citizenship among the parties and the amount in controversy, excluding interest and costs, exceeds the sum of $75,000. III. STATEMENT OF CLAIMS AND DEFENSES 1. Plaintiff' statement: s

The Plaintiff, M.D. Mark, Inc. is the party that brings this lawsuit which includes five claims for relief: First Claim for Relief: Misappropriation of Trade Secrets Against Oryx; Second Claim for Relief: Corporation; Misappropriation of Trade Secrets Against Kerr-McGee

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Third Claim for Relief: Breach of Contract against Oryx and Kerr-McGee Corporation; Fourth Claim for Relief: Tortious Interference with Contract; and Fifth Claim for Relief: Civil Conspiracy. In this case, the Plaintiff is M.D. Mark, Inc. and the named Defendants are Oryx Energy Company (" Oryx" and Kerr-McGee Corporation (" ) Kerr-McGee Corp." M.D. Mark has sued Oryx ) and Kerr-McGee Corp. for breach of contract, misappropriation of trade secrets, interference (that is, improper interference) with a contract and civil conspiracy. Oryx was formerly known as Sun Exploration & Production Company until it changed its name in 1989. Oryx no longer exists because it merged into Kerr-McGee Corp. in 1999. The Plaintiff claims some of the acts of the Defendants arose before the merger between the two companies. As a result of the merger between Oryx and Kerr-McGee Corp., all claims are now against Kerr-McGee Corp. M.D. Mark has ownership rights to geophysical surveys used in oil and gas exploration. The geophysical surveys at issue in this case were originally acquired and owned by a company called Professional Geophysics, Inc. (" PGI" Plaintiff asserts that these geophysical surveys (the " ). PGI Data" are " ) trade secrets." (Add) The PGI Data are trade secrets of M.D. Mark. PGI originally licensed the PGI Data to oil and gas exploration companies to use in oil and gas exploration. M.D. Mark continues to license the PGI Data to oil and gas exploration companies to use in oil and gas exploration. M.D. Mark has asserted several claims against Oryx and Kerr-McGee Corporation relating to the PGI Data. According to M.D. Mark, Oryx breached the license agreements by: a. b. wrongfully transferring the PGI Data to its wholly owned subsidiary named Sun Operating Limited Partnership in 1985. wrongfully transferring the PGI Data to Kerr-McGee Oil & Gas Corporation, as subsidiary of Kerr-McGee Corp. in 1999. 2

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c.

losing thousands of miles of PGI Data which Kerr-McGee Corp. can not account for.

According to M.D. Mark, Kerr-McGee Corp. breached the license agreements by: a. b. refusing to return all the PGI Data licensed to it after receiving notice of a breach of the license agreements. losing hundreds of miles of PGI Data which Kerr-McGee Corp. can not account for.

According to M.D. Mark, Kerr-McGee Corp. misappropriated M.D. Mark' trade secrets by: s a. b. c. wrongfully gaining access to and possessing 3191.15 miles of PGI Data which Kerr-McGee Corp. never licensed or had the right to possess; Oryx and Kerr-McGee Corp. losing thousands of miles of PGI Data which they licensed from PGI and M.D. Mark. Oryx wrongfully transferring the PGI Data to Kerr-McGee Oil & Gas Corporation, a subsidiary of Kerr-McGee Corp.

According to M.D. Mark, Kerr-McGee Corp interfered with license agreements between PGI and Oryx by transferring the PGI Data licensed to Oryx to Kerr-McGee Oil & Gas Corporation when it knew or should have known the PGI Data could not be transferred. According to M.D. Mark, Kerr-McGee and Oryx conspired with each other to deprive M.D. Mark of the PGI Data by refusing to return the PGI Data to M.D. Mark when they knew or should have known that they did not have the right to maintain possession of it. 2. Defendants'statement:1

On behalf of itself and the company formerly known as Oryx Energy Company (" Oryx" ), Kerr-McGee Corporation denies M.D. Mark' claims and allegations and further assert that they do s not state a claim for relief upon which relief can be granted. Oryx merged with Kerr-McGee Corporation on February 26, 1999 (the " Merger" at which time Oryx ceased to exist as a matter of ), law and fact. Oryx cannot be held liable under any legal theory for acts and omissions after the
1

The defined terms used in this section apply only to this section. 3

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Merger. Rather, Kerr-McGee Corporation, as the surviving entity of the Merger, stands in the shoes of Oryx for purposes of liability. Kerr-McGee Corporation asserts the following defenses: As a threshold matter, the PGI seismic data (" PGI Data" is not a trade secret for several ) reasons, including but not limited to: (i) the license agreements pursuant to which the PGI Data was licenses to Oryx and Kerr-McGee (" Agreements" do not use the term " PGI ) trade secrets"or require the licensee to take any special or even reasonable measures to guard the secrecy of the PGI Data; and (ii) M.D. Mark did not maintain, store, or keep the PGI Data under circumstances that were reasonable to maintain its alleged secrecy or trade secret status. To the contrary, M.D. Mark found the data and related documentation in boxes in the basement of a bankruptcy court ready to be discarded. Moreover, M.D. Mark shredded vast amounts of documentation during the pendency of this litigation pertaining to the PGI Data. Even assuming the PGI Data constitute trade secrets, Kerr-McGee Corporation never misappropriated them. The sole basis for M.D. Mark' claim is that Oryx made unauthorized " s transfers"of certain PGI Data that had been licensed to Oryx when the data passed to Kerr-McGee Corporation as part of the Merger. This does not constitute an unauthorized disclosure or transfer under the law that governs corporate mergers or the PGI Agreements themselves. Moreover, several of the PGI Agreements specifically permitted Oryx to disclose and provide copies of the PGI Data to " surviving company in the event of a the complete merger by Licensee [Oryx],"such as Kerr-McGee Corporation. For this same reason, Kerr-McGee Corporation never tortiously interfered with the PGI Agreements. The sole basis for this claim by M.D. Mark is that Kerr-McGee Corporation intentionally caused Oryx to " transfer"the PGI Data to Kerr-McGee during Merger. However, KerrMcGee Corporation did not " tortiously interfere"with the PGI Agreements by reason of the Merger. Tortious interference means " intentional conduct that causes another to terminate or not to perform 4

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a contract." C.J.I. 4th 24:4; RESTATEMENT (SECOND) OF TORTS § 766, comment m. There was no transfer or unauthorized disclosure of PGI Data by Oryx to Kerr-McGee Corporation as a result of the Merger. Oryx did not terminate or breach any of its obligations under the PGI Agreements, but rather merged with Kerr-McGee Corporation. Further, M.D. Mark cannot prove misappropriation by Kerr-McGee Corporation simply because Kerr-McGee Corporation possesses certain PGI Data for which neither it nor M.D. Mark can produce corresponding license agreements. A vast quantity of documents pertaining to the PGI Data were destroyed when PGI began shutting down its operations. Moreover, during the pendency of this lawsuit, Davies destroyed 487 pounds of tapes and documents relating to the PGI Data. With regard to its misappropriation claim concerning certain PGI Data labeled " Torch,"M.D. Mark admits that this claim merely is an assumption. Indeed, Darren Helm (" Helm" an outside data ), storage manager hired by Kerr-McGee to store the PGI Data, contradicts M.D. Mark' claim by s stating that he arbitrarily assigned and labeled this data " Torch"as a means of keeping it separate from another database of seismic data that Kerr-McGee may have licensed. Helm testifies that no PGI Data was improperly transferred to Kerr-McGee. Nor did Kerr-McGee Corporation breach any of the PGI Agreements. None of the PGI Agreements between Kerr-McGee Corporation and M.D. Mark or between Kerr-McGee Corporation and PGI require Kerr-McGee Corporation to account for the physical location of the data, which is the sole basis for M.D. Mark' breach of contract claim against Kerr-McGee Corporation. s M.D. Mark' claim for civil conspiracy is premised upon an assertion that Kerr-McGee s Corporation and Oryx unlawfully conspired to misappropriate the PGI Data, which M.D. Mark claims constitute trade secrets. This claim fails, however, because the PGI Data were not trade secrets. Even assuming they were, the Merger was not an unlawful act. In other words, the Merger was a lawful statutory merger that permitted Kerr-McGee Corporation to acquire all things owned by Oryx, 5

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including the PGI Data and PGI Agreement. Parties cannot be held liable for " conspiring"to do a lawful act, i.e., the Merger. IV. STIPULATIONS 1. Plaintiff M.D. Mark is a Texas corporation having a regular and established place of

business at 11767 Katy Freeway, Suite 410, Houston, Texas, and is the successor in interest to Professional Geophysics, Inc. (" PGI" ). 2. At all times relevant to this lawsuit, Kerr-McGee Corporation was a Delaware

corporation having a regularly established place of business at Kerr-McGee Center, Oklahoma City, Oklahoma. 3. Oryx Energy Company (" Oryx" formerly known as Sun Exploration & Production ),

Company, was a Delaware corporation headquartered in Houston, Texas until it merged with KerrMcGee Corporation on February 26, 1999 (the " Merger" at which time Oryx ceased to exist. ), 4. On or about November 1991, as part of the bankruptcy of Professional Geophysics,

Inc. (" PGI" M.D. Mark acquired all ownership rights to certain seismic data previously owned by ), PGI (the " PGI Data" ). 5. 6. Seismic data is scientific geophysical information used in oil and gas exploration. Prior to the Merger, Oryx and PGI entered into various agreements for the licensing

of approximately 16,000 miles of the PGI Data. 7. On or about October 16, 1998, M.D. Mark requested that Kerr-McGee Corporation

return all PGI Data that had been previously licensed to Oryx unless Kerr-McGee agreed to pay a transfer fee. 8. On or about August 8, 2002, after M.D. Mark filed this lawsuit, Kerr-McGee

Corporation returned to M.D. Mark the PGI Data that PGI had licensed to Oryx. 9. From 1979 to 1991, Kerr-McGee Corporation likewise licensed copies of certain PGI 6

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Data from PGI, and continued to license copies from M.D. Mark after it acquired the PGI Data out of PGI' bankruptcy in 1991. s 10. companies. 11. Discussions regarding other facts that may be stipulated to remain ongoing. V. PENDING MOTIONS Currently, there are not any Motions pending. VI. WITNESSES 1. Plaintiff' list of witnesses who will be present and may be present at trial: See s M.D. Mark retains the original PGI Data and may license copies of it to other

Plaintiff' Witness list attached as Exhibit A. Plaintiff reserves the right call any witness identified in s Defendants' witness list. 2. Defendants'list of witnesses who will be present and may be present at trial: See

Defendants'Witness list attached as Exhibit B. Defendants reserve the right call any witness identified in Plaintiff' witness list. s VII. EXHIBITS 1. Plaintiff' Exhibit List: See Plaintiff' Exhibit List attached as Exhibit C. Plaintiff s s

reserves the right to use any exhibit identified in Defendants'Exhibit List 2. Defendants Exhibit List: See Defendants' Exhibit List attached Exhibit D. Defendants

reserve the right to use any exhibit identified in Plaintiff' Exhibit List. s Copies of listed exhibits must be provided to opposing counsel no later than five days before the Final Pretrial Preparation Conference. The objections contemplated by FED. R. CIV. P. 26(a)(3) shall be filed with the clerk and served (by hand delivery or facsimile) no later than eleven days after the exhibits are provided. VIII. DISCOVERY 7

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Discovery has been completed. IX. SPECIAL ISSUES Plaintiff objects with Kerr-McGee Corporation' position that this Court did not find as a s matter of law that Plaintiff' PGI Seismic Data is a Trade Secret based upon Colorado' Trade Secret s s Act. On page 31, lines 20-21, this Court found " think it is clear and I find as a matter of law these I [Plaintiff' seismic data] are trade secrets." See Transcript of oral argument on Defendants' s partial motions for summary judgment occurring on September 14, 2006 attached as Exhibit E. Plaintiff further objects to Defendants recent assertion of a statute of limitations defense relating to Plaintiff' s claim that the 1985 transfer of PGI data by Oryx to Sun Operating Limited Partnership is a breach of the license agreement, as this affirmative defense was not asserted within a timely fashion. Kerr-McGee Corporation' statement on these issues: Kerr-McGee is aware of the quoted s statement by the Court at the summary judgment hearing and will seek clarification of the Court' s intent at the Pretrial Conference. As the Court will recall, the statement was made in the context of a motion for summary judgment on the pre-emption issue. In context, Kerr-McGee did not understand the Court' ruling as a bar to factual defenses Kerr-McGee may have at trial that would s bear on whether and to what extent plaintiff' conduct may have altered the trade secret status of the s seismic data at issue. The Pretrial Order and jury instructions can be adjusted, as necessary, based on rulings by the Court at the Pretrial Conference. As to the statute of limitations defense, it was asserted as the Tenth Defense on page 8 of the Answer to the Third Amended Complaint filed July 29, 2003. Kerr-McGee Corporation objects to the proposed testimony of M.D. Mark' expert witness, s John Moye because it contains conclusory opinions on ultimate legal issues in this case, including corporate law, the law of mergers, and contract interpretation. Such testimony is prohibited. Specht v. Jensen, 853 F.2d 805, 809-10 (10th Cir. 1988). cert. denied, 488 U.S. 1008 (1989)(" no [i]n 8

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instance can a witness be permitted to define the law of the case" ); Questar Pipeline Co. v. Grynberg, 201 F.3d 1277, 1288 (10th Cir. 2000) (expert' contradicting s " plain language"of contract " should not have been allowed" Defendants will file a motion to ). exclude Mr. Moye' testimony within the timeframe prescribed by this Court' standard procedures. s s X. EFFECT OF PRETRIAL ORDER Hereafter, this Pretrial Order will control the subsequent course of this action and the trial, and may not be amended except by consent of the parties and approval by the court or by order of the court to prevent manifest injustice. The pleadings are deemed merged herein. This Pretrial Order supersedes the Scheduling and Discovery Order. In the event of ambiguity in any provision of this Pretrial Order, reference may be made to the record of the Pretrial Conference to the extent reported by stenographic notes and to the pleadings. XI. TRIAL AND ESTIMATED TRIAL TIME/ TRIAL PREPARATION CONFERENCE 1. The trial is to a jury for a period of 10 days. The location of the trial will be at the

United States District Court, Alfred A. Arraj United States Courthouse, Room A105 901 19th Street, Denver, Colorado 80294-3589 2. 3. Trial Date: September 17, 2007 through September 28, 2007. Final Trial Preparation Conference: September 5, 2007 at 10:00 a.m..

In advance of this conference, the parties shall comply with the Instructions Concerning Preparation for Final Trial Preparation Conference. See Pretrial and Trial Procedures Memorandum, § V, from Senior Judge John L. Kane to Counsel.

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DATED this 22nd day of November, 2006. BY THE COURT: S/John L. Kane JOHN L. KANE, Senior Judge United States District Court PRETRIAL ORDER APPROVED:

_________________________________ Harlan P. Pelz Dan W. Bonifazi PELZ, BONIFAZI & INDERWISH, PC 1873 South Bellaire St., Suite 1401 Denver, CO 80222 (303) 691-5600 Attorneys for Plaintiff

________________________________ Scott S. Barker Gregory Goldberg M. Antonio Gallegos HOLLAND & HART LLP 555 17th Street, Suite 3200 Denver, CO 80202 Attorneys for Defendants

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