Free Motion for 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-00413-JLK-BNB M.D. MARK, INC., Plaintiff, vs. KERR-McGEE CORPORATION and ORYX ENERGY COMPANY, Defendants. MOTION AND BRIEF IN SUPPORT OF DEFENDANT'S PROPOSED JURY INSTRUCTIONS AND REQUEST FOR CLARIFICATION OF RULING ON DEFENDANT'S RULE 50 MOTION Defendant Kerr-McGee Corporation1 ("Kerr-McGee") respectfully submits this Motion and Brief in Support of Defendant's Proposed Jury Instructions and Request for Clarification of Ruling on Defendant's Rule 50 Motion. Kerr-McGee submits with this motion proposed jury instructions regarding: (1) the limited application of the May 13, 1994 Kerr-McGee-M.D. Mark contract ("1994 Contract"); (2) the legal effect of the Kerr-McGee-Oryx merger; (3) consideration of the two Texas Court of Appeals decisions regarding M.D. Mark; and (4) the relevant time period for assessing damages. Kerr-McGee also requests that the Court clarify its ruling on Defendant's Rule 50 Motion regarding the applicable state law and the impact of the 1994 Contract.
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Oryx Energy Company ("Oryx") ceased to exist on February 26, 1999, at which time it became Kerr-McGee as a result of a statutory corporate merger.

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I.

THE 1994 CONTRACT DOES NOT APPLY TO LICENSE AGREEMENTS BETWEEN ORYX AND PGI MADE BEFORE THE KERR-MCGEE-ORYX MERGER Kerr-McGee requests that the Court clarify how its ruling on Kerr-McGee's Rule 50

Motion impacts the May 13, 1994 Contract between Kerr-McGee and M.D. Mark. See Trial Exhibit 60. Kerr-McGee also submits a proposed jury instruction on the limited applicability of the 1994 Contract. See Exhibit A, p. 1 (attached). As the Court stated in its ruling, after "a merger between two corporation, the surviving corporation holds the rights and is obligated under the contracts of the prior corporation." Tr. 902:17-19; see also 15 WILLIAM MEADE FLETCHER, FLETCHER CYCLOPEDIA OF THE LAW OF PRIVATE CORPORATIONS § 7090, at 144 (1999) ("[T]he rule that the consolidated corporation acquires all the contract rights of the consolidating corporations only applies to rights acquired by the latter before the consolidation."). Accordingly, Kerr-McGee inherited Oryx's pre-merger rights and obligations under its license agreements with PGI. Kerr-McGee acquired Oryx's rights and obligations through the merger, independently from any rights and obligations Kerr-McGee already held. Thus, the license agreements that Oryx entered into with PGI prior to the 1999 merger are unaffected by Kerr-McGee's prior rights and obligations under its own, separate agreements with PGI and M.D. Mark. II. AS A MATTER OF LAW, THE KERR-MCGEE-ORYX MERGER WAS NOT AN IMPROPER TRANSFER. The Court should accept Kerr-McGee's proposed jury instruction that, as a matter of law, the Kerr-McGee-Oryx merger did not constitute an improper transfer of data. See Exhibit A, p. 2 (attached). Conveyance of corporate property during mergers or corporate reorganizations does not constitute a "transfer" or "conveyance" of property, and therefore does not give rise to causes

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of action based upon non-assignment or non-transfer clauses. See, e.g., Imperial Enters., Inc. v. Fireman's Fund Ins. Co., 535 F.2d 287 (5th Cir. 1976) (transfer during subsidiary's merger with parent corporation occurred by operation of law); Paxton & Vierling Steel Co. v. Great Am. Ins. Co., 497 F. Supp. 573 (D. Neb. 1980) (same). This makes sense, as a corporate reorganization involves a change that is "merely one of corporate form . . . [and therefore does] not involve an increased risk to the non-merging party." TXO Prod. Co. v. M.D. Mark, Inc., 999 S.W.2d 137, 141 (Tex. Ct. App. 1999) ("M.D. Mark I").2 M.D. Mark's own expert witness agreed with this statement of the law, and also agreed that the applicable license agreements did not prohibit Kerr-McGee's retention of PGI data, previously licensed by Oryx, after the Oryx-Kerr-McGee merger in1999. III. THE JURY SHOULD BE INSTRUCTED REGARDING THE FACTUAL, RATHER THAN LEGAL, SIGNIFICANCE THE TWO TEXAS COURT OF APPEALS CASES INVOLVING M.D. MARK . As the Court requested, Kerr-McGee submits its proposed jury instruction regarding the two Texas Court of Appeals cases involving M.D. Mark that were admitted into evidence. See Exhibit A, p. 3 (attached). The appeals process is complete and the decisions are legally binding on the parties to those lawsuits. The jury should be instructed as to how the Texas decisions may help them resolve questions of fact in this lawsuit between M.D. Mark and Kerr-McGee. M.D. Mark, has suggested to undersigned counsel that the instruction should explain what precedent the Texas decisions set for this Court. However, precedent, is a legal issue that is irrelevant to the jury's duty to decide factual issues. In proposing this jury instruction, Kerr-McGee does not waive, but expressly reserves its argument that, as a matter of law, a transfer of a seismic license to a wholly-owned subsidiary is not precluded by law, or by the license agreements or at issue. See Defendant's Motion for Judgment as a Matter of Law, 6-8 (Sept. 21, 2007).
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IV.

THE RELEVANT TIME FOR ASSESSING DAMAGES IS THE TIME OF THE ALLEGED BREACH OR MISAPPROPRIATION. The jury has heard a significant amount of evidence regarding the license fees for and

value of seismic data in today's market. As discussed below, this evidence is irrelevant to the issue of M.D. Mark's alleged damages because the relevant time period is the date of the alleged breach and misappropriation. The jury should be specifically instructed on this aspect of the law in order to avoid confusion. Defendant's proposed instruction is attached as Exhibit A, p. 4. The law is clear that the relevant time for assessing damages for breach of contact is the time of the breach. Smith v. Herco, Inc., 900 S.W.2d 852, 861 (Tex. Ct. App. 1995); see also McCoy v. Riley, 771 P.2d 25, 27 (Colo. App. 1989) citing 5 A. Corbin, Contracts § 1005 at 52 ("[P]ost-breach market fluctuations [are] irrelevant on the issue of damages because damages are measured at the time of breach."). Likewise, the relevant time for assessing damages for a misappropriation of trade secrets is the time that the misappropriation took place. This Court has stated, "`Because the primary concern in most cases is to measure the value to the defendant of what he actually obtained from the plaintiff, the proper measure is to calculate what the parties would have agreed to as a fair price for licensing the defendant to put the trade secret to the use the defendant intended at the time the misappropriation took place.'" Computer Assocs. Int'l v. Am. Fundware, Inc., 831 F. Supp. 1516, 1526-27 (D. Colo. 1993) quoting Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 539 (5th Cir. 1974). Other Circuit Courts have agreed that damages in misappropriation cases should reflect market values at the time the misappropriation occurred. The Fifth Circuit has stated, "[T]he law looks to the time at which the misappropriation occurred to determine what the value of the

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misappropriated secret would be to a defendant who believes he can utilize it to his advantage, provided he does in fact put the idea to a commercial use." Univ. Computing Co., 504 F.2d at 536. Likewise, the Sixth Circuit has stated, "If the benefit to the defendant in terms of direct profits is not ascertainable, damages may be awarded based on the value to the defendant of the secret at the time of misappropriation, the value derived from savings because of increased productivity, or the value derived from savings in research costs." Avery Dennison Corp. v. Four Pillars Enter. Co., 45 Fed. Appx. 479, 486 (6th Cir. 2002). V. THE RECORD DOES NOT CLEARLY REFLECT WHAT LAW THE COURT APPLIED IN ITS RULING ON DEFENDANT'S RULE 50 MOTION. Kerr-McGee requests that the Court clarify what law it applied in making its ruling on Kerr-McGee's Rule 50 Motion, and submits that Texas law should apply, since Texas has the most significant relationship to the claims at hand. WHEREFORE, Defendant respectfully requests that this Court instruct the jury as proposed in Exhibit A to this Motion, and that the Court clarify what law it applied when in ruling on Defendant's Rule 50 Motion.

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Dated September 24, 2007. Respectfully submitted,

s/ M. Antonio Gallegos Scott S. Barker Gregory E. Goldberg M. Antonio Gallegos H OLLAND & H ART LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, Colorado 80201-8749 Phone: (303) 295-8361 Fax: (303) 295-8261 [email protected] [email protected] [email protected] A TTORNEYS F OR D EFENDANTS

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CERTIFICATE OF SERVICE
I hereby certify that on September 24, 2007, I electronically filed the foregoing document with the Clerk of Court using CM/ECF system, which will serve, via electronic mail, the following: PELZ, BONIFAZI & INDERWISH, P.C. Harlan P. Pelz Daniele W. Bonifazi [email protected] [email protected]

s/ Julie J. Winkler

3767101_2.DOC

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