M.D. Mark, Inc. v. Kerr-Mcgee Corp.
| Decision Date | 11 May 2009 |
| Docket Number | No. 08-1040.,No. 08-1236.,No. 08-1047.,08-1040.,08-1047.,08-1236. |
| Citation | 565 F.3d 753 |
| Parties | M.D. MARK, INC., Plaintiff-Appellee-Cross-Appellant, v. KERR-McGEE CORPORATION; Oryx Energy Company, Defendants-Appellants-Cross-Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Marie R. Yeates of Vinson & Elkins L.L.P., Houston, TX, (Penelope E. Nicholson, Gwendolyn J. Samora, Abigail W. Giraud, Robert R. Russell of Vinson & Elkins L.L.P., Houston, TX; Scott S. Barker, Marcy G. Glenn, Gregory E. Goldberg, M. Antonio Gallegos of Holland & Hart LLP, Denver, CO, with her on the briefs), for Defendants-Appellants-Cross-Appellees.
Bradley A. Levin of Roberts Levin Rosenberg PC, Denver, CO, (Thomas L. Roberts of Roberts Levin Rosenberg PC; Harlan P. Pelz, Susan F. Fisher, Kieran A. Lasater, of Fairfield and Woods, P.C., Denver, CO; Daniele W. Bonifazi of Bonifazi & Associates, LLC, Centennial, CO, with him on the briefs), for Plaintiff-Appellee-Cross-Appellant.
Before BRISCOE, SEYMOUR, and LUCERO, Circuit Judges.
Plaintiff M.D. Mark, Inc. (Mark) filed this action alleging that defendants Kerr-McGee Corporation (Kerr-McGee) and Oryx Energy Company breached the terms of seismic data license agreements and also misappropriated seismic data owned by Mark. Mark prevailed on its claims at trial and was awarded $25,266,381.00 in compensatory damages. Kerr-McGee now appeals, attacking each aspect of the jury's liability findings, as well as the amount of the damage award. Mark has filed two cross-appeals, the first of which challenges, on a provisional basis, three of the district court's rulings at trial, and the second of which challenges the district court's denial of its motion for attorney fees. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm the district court's judgment in all respects.
PGI, Mark and the seismic data
In the 1970's and 1980's, a Texas-based company called Professional Geophysics, Inc. (PGI) developed, at substantial expense, a collection of geophysical information called seismic data. PGI in turn licensed that data, for a fee, to members of the oil and gas industry for exploration purposes. In 1991, PGI declared bankruptcy and Mark, a Texas-based company, purchased PGI's database for $1.4 million, or approximately $53 per mile for approximately 26,000 miles of data. Mark then began, and continues to this day, to license that data.
In the early 1980's, the Sun Exploration & Production Company (Sun), a Delaware corporation headquartered in Houston, Texas, entered into a series of license agreements with PGI covering approximately 16,000 miles of seismic data. In December 1985, Sun created a subsidiary called Sun Operating Limited Partnership (SOLP) and transferred to it a group of assets, including the seismic data licensed from PGI. In doing so, however, Sun apparently did not transfer to SOLP any of the underlying license agreements. In May 1989, Sun changed its name to Oryx Energy Company (Oryx).
Between 1984 and 1994, Kerr-McGee, an Oklahoma-based corporation, entered into a series of license agreements in its own name with PGI and Mark covering approximately 775 miles of seismic data. Kerr-McGee itself, however, did not engage in any oil or gas exploration. Instead, all such exploration was conducted by its subsidiaries, including Kerr-McGee Oil and Gas Corporation (KMOG).
Merger between Kerr-McGee and Oryx and subsequent changes
On October 14, 1998, Kerr-McGee and Oryx entered into a written agreement pursuant to which Oryx would merge into Kerr-McGee. That merger was approved by the companies' shareholders on February 26, 1999.
Communications between Oryx/Kerr-McGee and Mark re merger
On October 16, 1998, Mark, aware of the pending merger between Kerr-McGee and Oryx, sent a letter to Oryx reminding it that Oryx had licensed "certain PGI . . . seismic data" and that "[t]hose licenses [we]re not transferable, as stated in the agreements." App. at 1936. The letter went on to state:
However, M.D. Mark will allow the data to be transferred and licensed to Kerr-McGee upon the payment of a transfer fee and the execution of a current M.D. Mark license agreement. This offer to transfer the data is valid for thirty (30) days from the date of this letter. If, however, Kerr-McGee does not wish to transfer the data, then M.D. Mark is requesting the immediate return of its data within thirty (30) days.
Id. Oryx apparently responded to the letter by telephoning Mark and asking additional questions about the proposed transfer fee. Id. at 1919.
On November 11, 1998, Marilyn Davies, the president of Mark, sent another letter to Oryx stating, in pertinent part:
As we discussed, M.D. Mark would authorize Kerr McGee to have access to this seismic data for about $200 per mile if all of the data was retained. The fee would go higher if Kerr McGee chose to retain only certain data sets instead of the entire volume. As you know, the current price for most of this data is $1200 per mile with discounts for volume deals. M.D. Mark's fee is just about 10% of the current fee. With the authorization of access, M.D. Mark would require Kerr McGee to execute a new license agreement in its name agreeing to protect the data of M.D. Mark.
Since the actual consummation of the [merger] deal won't take place until 1 st Quarter 1999, M.D. Mark will extend its offer to transfer the data until thirty (30) days after the merger/consolidation/control change date.
No further response was received from Oryx until February 11, 1999, when Patricia Horsfall, Oryx's manager of exploration, sent a letter (prepared for her by Kerr-McGee's in-house attorney Carlos Salazar) to Mark stating, in pertinent part:
Contingent upon approval of the merger by the companies' shareholders, your records will need to be changed to reflect the name change of the Licensee, under the referenced Seismic Data License Agreement(s), from Oryx Energy Company to Kerr-McGee Oil & Gas Corporation, a subsidiary of Kerr-McGee, located in Houston.
On February 17, 1999, Davies sent a letter to Horsfall stating that "the PGI seismic [data] is not transferable, assignable, etc. and cannot be made available to Kerr-McGee without prior written approval from M.D. Mark and the payment of an authorization or transfer fee." Id. at 1925 (emphasis in original). Davies' letter further stated that, in the absence of such authorization or transfer fee, "the licenses of all PGI seismic data in Oryx's possession w[ould] be automatically terminated" upon the closing of the merger, and all "data must be returned." Id.
On March 26, 1999, Salazar, Kerr-McGee's in-house counsel, sent a letter to Mark stating:
Please be advised that Kerr-McGee Corporation will not pay a transfer fee for any data subject to a license from PGI to Oryx Energy Company or any of its predecessors. We are in the process of packaging all data identified on our records as being subject to any such license and will be shipping it to you as soon as packaging is complete.
On March 31, 1999, Davies acknowledged Salazar's March 26, 1999 letter and requested that all data be "returned to [Mark's] storage facilities" in Houston, Texas. Id. at 1927. Davies' letter outlined all of the types of material that needed to be returned to Mark, and stated, in conclusion, "that any and all licenses to PGI seismic data re [sic] now terminated." Id. at 1928.
Shortly thereafter, however, Kerr-McGee changed its position. On April 8, 1999, Salazar sent Mark a letter stating:
We have just been made aware of the decision of the appellate court in your case, TXO Production Co. and Marathon Oil Co v. M.D. Mark, Inc.
Please be advised that Kerr-McGee has put on hold the return to you of any PGI data, pending final resolution of this case.
On July 26, 1999, Davies sent Salazar a letter stating, in pertinent part:
There is, of course, no provision in your contract which allows you to rely upon PGI or MDM's transactions with other parties. The issues involved in the Marathon matter were decided in MDM's favor in the trial court. However, as we all know, we are perhaps years away from a resolution in the appeals courts. Moreover, the issues and underlying facts are different than those of the Oryx transaction with PGI. Would you please tell me on what basis, Kerr-McGee has the right to hold the data previously licensed to Oryx?
Salazar responded to Davies' letter on August 13, 1999, stating:
Kerr-McGee Corporation disagrees with your interpretation of the recent decision of the Texas Court of Appeals in your case against TXO Production Company and Marathon Oil Company. In its decision, the Appeals Court reviewed the Texas merger statute and very clearly ruled that a provision prohibiting transfers to third parties does not apply in the case of a merger unless the provision specifically says so. Our agreements with PGI do not provide that a transfer is prohibited even in the event of a merger.
The facts in our case are in fact almost identical to those in your case with TXO and Marathon and our agreements with PGI contain the very same language which the Appeals Court interpreted. Therefore, as the surviving corporation in the statutory merger with Oryx, Kerr-McGee Corporation has the right to retain the Oryx PGI data without paying a transfer fee. We are also confident that the Texas Supreme Court will agree with the Appeals Court decision, if presented with the issue.
On August 16, 2000, Davies sent a letter to Salazar stating that "[t]he option of returning the data ha[d] been withdrawn," and enclosed an invoice in the amount of $3,000,000 "reflecting the charges based on the discount given to a volume license purchase." Id. at 1933. On August 29, 2000, Salazar sent a letter to Davies stating that it "remain[ed] [Kerr-McGee's] intention to retain the data . . . and to not pay a transfer fee." Id. at 1932 ...
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