Free Trial Brief - 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-K-0413 M.D. MARK, INC., Plaintiff, vs. KERR-McGEE CORPORATION and ORYX ENERGY COMPANY, Defendants.

D EFENDANT ' S C ITATIONS TO R ELEVANT C ASE L AW AND T RIAL B RIEF
Pursuant to the Court's Instructions Concerning Preparation for the Final Trial Preparation Conference, Defendant Kerr-McGee Corp. 1 submits its Citations to Relevant Case Law and Trial Brief. I. RELEVANT CASE LAW CITATIONS

Defendant submits the following case law citations as controlling on the issue of whether the Defendant was permitted, without payment of a transfer fee, to retain seismic data licensed by Professional Geophysics, Inc. ("PGI") to Oryx Energy Company after the February 26, 1999 merger between Defendant and Oryx. 1. 2. TXO Prod. Co. v. M.D. Mark, Inc., 999 S.W.2d 137 (Tex. App. 1999). M.D. Mark, Inc. v. Nuevo Energy Co., 988 S.W.2d 463 (Tex. App. 1999).

1

Oryx Energy Co. ceased to exist on February 26, 1999, at which time it became KerrMcGee as a result of a statutory corporate merger.

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II.
A. Introduction

DEFENDANT'S TRIAL BRIEF

Defendant highlights two legal issues of which the Court should be aware during the course of the trial. First, Plaintiff has not endorsed an expert witness on the issues of its alleged damages or the value of the seismic data at issue in this case (the "PGI Data"). This means that Plaintiff may not offer testimony, through Marilyn Davies or any other witness, on these issues that require scientific, technical or specialized knowledge. Second, the dispute over the majority of the PGI Data centers primarily on interpretation of the applicable license agreements, which is a legal issue for the Court. While evidence of industry custom and practice may be admissible, such evidence should not override direct evidence of the intention of the parties to the agreements or the language of the agreements themselves. B. Plaintiff May Not Present Opinion Evidence Regarding Alleged Damages or Value of the Seismic Data at Issue.

On December 15, 2003, Plaintiff endorsed its President, Marilyn Davies, as an expert witness who would testify regarding, among other issues, the Plaintiff's alleged damages and value of the Data. (Plaintiff's Third Supplemental Disclosure Pursuant to F.R.C.P. 26(a)(2).) Pursuant to Defendant's motion, and the recommendation of Special Master Peter J. Bjork, the Court struck large portions of Davies' proposed expert testimony. (Order on January 20, 2004 Recommendation of Special Master dated January 25, 2004.) Five days later, Plaintiff withdrew its endorsement of Davies as an

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expert witness. (Notice of Withdrawal of Expert Witness dated January 29, 2004). With the entirety of Davies' expert report either stricken or voluntarily withdrawn, Plaintiff should be prohibited from presenting any of the opinions expressed in that report. Specifically, Davies should be precluded from expressing opinions on the following: (1) "[T]he economics of the licensing of speculative seismic data within the seismic data industry which will also include an opinion concerning economic damages caused by the unlawful use of seismic data and/or attempt to transfer data without the consent of the owner"; (2) "[T]he economic damages suffered by M.D. Mark, Inc. as a result of the merger between Oryx Energy Company"; (3) "[T]he merger of oil companies and the merger of Oryx Energy Company and Kerr-McGee Corporation"; and (4) "The standard in the industry regarding the price per mile of two dimensional data." See [Withdrawn] Expert Opinion of Marilyn Davies. C. Evidence of Industry Custom & Practice is Secondary to Direct Evidence of the Contracting Parties' Intent.

The dispute over the vast majority of PGI Data will center on whether the applicable license agreements permitted Defendant to retain seismic data licensed by Oryx after the two companies merged, without paying a transfer fee to Plaintiff. This question of contract interpretation is a legal issue for the Court, rather than a factual

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issue for jury. Carr Office Park, LLC v. Charles Schwab & Co., Inc., 2007 WL 1686741 at 5 (D. Colo. 2007)(citing Fibreglass Fabricators, Inc. v. Kylberg, 799 P.2d 362, 369 (Colo. 1990). A contract must be construed to ascertain and effectuate the intent of the parties, as determined primarily from the language of the contract. East Ridge of Fort Collins, LLC v. Larimer & Weld Irrigation Co., 109 P.3d 969, 974 (Colo. 2005). An unambiguous contract must be enforced as written. Kaiser v. Market Square Discount Liquors, 992 P.2d 636, 640 (Colo. App. 1999). If the language of contract is ambiguous, the court may consider extrinsic evidence concerning custom and practice in the industry to determine the intent of the parties. See Benham v. Pryke, 744 P.2d 67, 72 (Colo. 1987). However, such evidence cannot be used to supply terms that were never contemplated by the contracting parties. Id. Many of the license agreements, by their plain and unambiguous terms, permit Defendant to retain the PGI Data as a result of its merger with Oryx. The Court should, therefore, enforce these contracts as written. Kaiser, 992 P.2d at 640. Some of the license agreements are silent on the issue of merger. These agreements are also clear and unambiguous by not specifically requiring payment of transfer fees in the event of a merger. If, however, the Court views this set of agreements as ambiguous, the Court should bear in mind the strength of direct evidence of the contracting parties' intent, as compared to less direct evidence regarding custom and practice in the industry. A large part of Plaintiff's case appears to rely on the opinion of Plaintiff's expert witness, Robert Gray, that custom and practice in the oil and gas industry is for the

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surviving company to a merger to pay a transfer fee if it wants to retain seismic data that had been previously licensed by the non-surviving company. Gray was not involved in the negotiation, drafting or performance of the agreements at issue. By contrast, Defendant will offer deposition testimony of Thomas A. Russell, who was directly involved in drafting and negotiating many of the applicable agreements. Defendant provides the following example of Russell's testimony that no transfer fee is required. Q. Okay. I'm going to show you what I've marked as Exhibit Number 2. And it is a license agreement. Q. Okay. Mr. Russell, are you familiar with that particular form of license agreement? A. Yes, I am. Q. And did you have any involvement in the preparation of this license agreement? A. Yes, I did. Q. And tell me what involvement you had. A. I, along with general counsel, designed and manufactured this license agreement -- this general format. Q. Okay. And there's a paragraph IV that refers to who can have access to the seismic data. Do you see that?

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A. Uh-huh. Q. Can you tell me why that provision was put in this agreement? A. Primarily, to maintain the sanctity of the data. Q. Okay. And this Roman Numeral IV dealt with mergers, didn't it? A. The first part of it, I think, does. Yes. Yes, it does. Q. And was the intention of this license agreement that if the data were going to be given to a surviving company in a merger, that a -- a license fee would be paid? A. No. Q. Or that some fee would be paid? A. No. (Exhibit A ­ Thomas A. Russell Depo., 55:8-56:9 and Depo. Ex. 2.) This and other testimony by Russell, the license agreement to which it refers, and other license agreements serve as direct evidence of the contracting parties' intent. While it may be proper for the Court to hear the custom and practice testimony of Mr. Gray, such testimony should not be used to supplant (a) the content of the license agreements themselves, or (b) the evidence provided by one of the contracting parties.

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Dated: September 5, 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 (303) 295-8000 A TTORNEYS F OR D EFENDANTS

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C ERTIFICATE O F S ERVICE
I hereby certify that on September 5, 2007, I electronically filed Defendant's Citations to Relevant Case Law and Trial Brief with the Clerk of Court using CM/ECF system, which will serve, via electronic mail, the following: P ELZ , B ONIFAZI & I NDERWISCH , P.C. Harlan P. Pelz Daniele W. Bonifazi [email protected] [email protected]

s/Sally A. Walter

3756677_2.DOC

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