Grynberg v. Shell Exploration B.V.

• Decision Date: 06 June 2006
• Docket Number: Civil No. 03-CV-01212-LTB-PAC.
• Citation: 433 F.Supp.2d 1229
• Parties: Jack J. GRYNBERG and Grynberg Production Corporation and its successors, Grynberg Petroleum Company and its successors, Plaintiffs, v. SHELL EXPLORATION B.V., and Shell International Exploration and Production B.V. f/k/a Shell International Petroleum Maatschappij B.V., Defendants.
• Court: U.S. District Court — District of Colorado

433 F.Supp.2d 1229

Jack J. GRYNBERG and Grynberg Production Corporation and its successors, Grynberg Petroleum Company and its successors, Plaintiffs, v. SHELL EXPLORATION B.V., and Shell International Exploration and Production B.V. f/k/a Shell International Petroleum Maatschappij B.V., Defendants.

Civil No. 03-CV-01212-LTB-PAC.

United States District Court, D. Colorado.

June 6, 2006.

Roger Allan Jatko, Linda Ann Battalora, Greenwood Village, CO, Michael S. Porter, Attorney at Law, Wheat Ridge, CO, for Plaintiffs.

Graham Kerin Blair, Baker & McKenzie, Phillip B. Dye, Jr., Vinson & Elkins, LLP, Houston, TX, John Frederic Shepherd, Holland & Hart, LLP, Denver, CO, for Defendants.

MEMORANDUM OPINION AND ORDER

BABCOCK, Chief Judge.

The defendants, Shell Exploration B.V. ("Shell Exploration") and Shell International Exploration and Production B.V. f/k/a Shell International Petroleum Maatschappij B.V. ("Shell International"), and the plaintiffs, Jack J. Grynberg ("Grynberg"), Grynberg Production Corporation ("Grynberg Production"), and Grynberg Petroleum Company ("Grynberg Petroleum"), have filed cross motions for summary judgment on the questions whether the plaintiffs' claims — unjust enrichment and breach of fiduciary duty — are barred by the statute of limitations and the doctrine of laches. The motions are adequately briefed and oral argument would not materially aid their resolution. For the reasons stated below, I DENY the plaintiffs' motion and GRANT the defendants' motion.

The plaintiffs initiated this action on July 3, 2003. The parties agree that the applicable period of limitation — under the statute and the correlating laches doctrine — is three years, but disagree on when the limitations period commenced. The parties also agree that Colorado law governs the plaintiffs' claims. The material facts are undisputed; only their legal significance remains to be determined.

I. Facts

In July, 1990, Mr. Grynberg met with Yorck H. de Heer, legal counsel to Shell International and Shell Exploration, to discuss exploration and possible exploitation of the Kashagan Field, a potential oil field in the Caspian Sea within the jurisdiction of Kazakhstan. (Mr. Grynberg also claims to have discussed the project with P.E.R. Lovelock, a former geological advisor for Shell International, but Mr. Lovelock denies it.) Mr. Grynberg was acquainted with Nursultan A. Nazarbaev, President of Kazakhstan and former First Secretary of the Communist Party of Kazakhstan SSR ("Nazarbaev") and intended to assemble a consortium of enterprises to render the Kashagan Field profitable in cooperation with the Kazak government. He anticipated that the defendants would be interested in the venture and communicated to Mr. De Heer geological and seismic data concerning the Kashagan Field, which he had obtained from Kazak sources. In exchange, Mr. Grynberg expected to receive a "carried interest," which would consist of 20% of the defendants' earnings from the Kashagan Field less costs and expenses. No written agreement embodying these terms appears in the record, but Mr. Grynberg maintains that the defendants assented "in principle."

On June 9, 1993, Kazakhstan and several oil companies, including Shell Exploration, entered into a Preliminary Consortium Agreement ("PCA"). The plaintiffs were not parties to the PCA. The parties agreed in the PCA to negotiate the terms of a consortium agreement, which would govern environmental and seismic research, prerequisite to exploration for oil in the Kashagan Field. The PCA contained no provision for exploratory drilling or production of hydrocarbon products. The PCA did not grant to Shell Exploration or the other oil companies rights to develop the Kashagan Field for commercial purposes.

The PCA received contemporary press in the Los Angeles Times, The New York Times, and Financial Times (of London). Though the press did not mention the Kashagan Field by name, the articles disclosed that participants, including the defendants, would survey an area "in the Caspian Sea," the "Caspian Shelf," and "Kazakhstan's entire shelf in the North Caspian." Financial Times reported, "No matter what is found, no oil is expected from the shelf before the turn of the century."

On June 10, 1993, The Wall Street Journal reported the execution of the PCA. The article mentioned that Royal Dutch/ Shell Group, among others, was participating in formation of the proposed consortium and quoted oil executives as stressing that the field's potential was not yet estimated and that the agreement was only for "exploration." Mr. Grynberg read the article, from which he surmised that the signatories to the PCA had agreed to assemble a "study consortium" for the purpose of conducting geological and environmental surveys, and would agree to the terms of production if any oil was found. He wrote a letter to the Vice President of British Gas Corporation, a signatory to the PCA, expressing his congratulations and his expectation that he would participate in any profit. He wrote, "I am delighted it has finally come through for all of us. Based on the article in today's Wall Street Journal let's hope this effort will result in the discovery of the world's greatest oil accumulation."

On December 3, 1993, the parties to the PCA, including Shell Exploration, executed a Consortium Agreement, finalizing the terms on which the seismic survey and other research would proceed. Like the PCA, the Consortium Agreement contained no license to exploit the territory for commercial ends. The New York Times reported that the signors had agreed "to explore for oil in the northern part of the Caspian Sea shelf." Lloyd's List reported that exploration would occur in the "Kazakhstan sector of the Caspian Sea" and referred to the PCA governing studies "on the Caspian shelf." The correspondent speculated that development and production would "possibly" commence "after the year 2000."

On November 18, 1997, after completion of the requisite surveys and studies, the parties to the Consortium Agreement entered into a Production Sharing Agreement ("PSA"), settling the terms by which they would exploit the resources of the Kashagan Field. By the PSA, Kazakhstan granted to Shell Kazakhstan Development B.V. and other energy companies a license to "use underground resources for exploration and production of hydrocarbons" within the designated territory for specified, renewable periods of time. The oil companies assented to minimum expenditures on drilling and exploration. The PSA delineates the boundaries of the areas to be explored, specified to the latitudinal and longitudinal minute.

Over the ensuing days, reports of the PSA appeared in periodicals, including Financial Times, Lloyd's List, and Oil & Gas Journal. On November 18, 1997, The New York Times reported that President Nazarbaev was in Washington, D.C. to approve two "long-awaited energy deals." One of the deals, the paper proclaimed, covered "the Kashagan field in the Caspian Sea, part of a vast offshore tract that seismic studies indicate may be the largest single oil deposit so far found in the Caspian Sea Basin." The article cautioned that, while geologic features of the field offered promise, the oil companies would "not know precisely what is contained beneath Kazakhstan's north Caspian shelf until drilling begins." The report identified the signatories to the deal, including "Shell." Other periodicals also mentioned the Kashagan Field by name or gave the `approximate location of the exploration. The participants in the deal were widely announced.

On November 24, 1997, Oil & Gas Journal disclosed that participants in the venture had completed a seismic survey and were prepared to begin drilling exploratory wells. It quoted a participant's prediction that the first well would be drilled in 1998 and that development and production would occur some time later.

Mr. Grynberg concedes that he knew as early as June, 1993 that the defendants and others were venturing in the Caspian Sea. Though he insists that he did not know specifically where the exploration was occurring, he admits that the Kashagan Field was the only possibility located in the Caspian Sea. Over the months following execution of the PSA, Mr. Grynberg made unsuccessful efforts to obtain information about the project and the terms on which it was proceeding. He contacted representatives of Kazakhstan, Chevron, and British Petroleum, whom his entreaties failed to move. He suspected that the defendants had appropriated his allegedly confidential information, but did not attempt to contact anyone at Shell Exploration, Shell International, or affiliated Shell entities.

Following execution of the PSA, Mr. Grynberg attempted for several months without success to access the document. He obtained a copy in January, 2002 from the Barrows Company, which had published it. From the PSA, Mr. Grynberg confirmed that Shell Exploration and other petroleum companies were exploring in the Kashagan Field and that they had discovered oil in the middle of the territory he had years earlier identified. He then filed lawsuits against these defendants and other entities with which he had purportedly shared confidential information.

II. Discussion

It is beyond dispute that the claims accrued, and the three-year limitations period commenced, when Mr. Grynberg and the plaintiffs knew or had reason to know of the existence and cause of the injury which is the basis of their action. Colo. Rev.Stat. § 13-80-108(1); Anderson v. Somatogen, Inc., 940 P.2d 1079, 1083 (Colo. Ct.App.1996), cert. denied, (1997); Alexander v. Oklahoma, 382 F.3d 1206, 1215 (10th Cir.2004), cert. denied, 544 U.S. 1044, 125 S.Ct. 2257, 161 L.Ed.2d 1080 (2005). The plaintiffs had reason to know of their injury when they should have discovered it through the exercise of reasonable diligence. Anderson, 940 P.2d at 1083; Industrial Constructors Corp. v. United States Bureau of...