Free Response to Motion - District Court of Colorado - Colorado

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 1 of 12

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-cv-00413-JLK-BNB M.D. MARK, INC. Plaintiff, v. KERR-MCGEE CORPORATION and ORYX ENERGY COMPANY, Defendants.

PLAINTIFF'S RESPONSE TO DEFENDANTS' MOTION FOR DISCOVERY SANCTION OF "ADVERSE INFERENCE" JURY INSTRUCTION AGAINST PLAINTIFF M.D. MARK

COMES NOW the Plaintiff, M.D. Mark, by and through its attorneys, Pelz, Bonifazi & Inderwish, P.C., and hereby responds to Defendants' Motion for Discovery Sanction of "Adverse Inference" Jury Instruction Against Plaintiff M.D. Mark as follows: I. Factual Background.

As the Court is aware, this is a complex commercial litigation case involving, among other things, the rights of licensees, (Oryx Energy Company and Kerr-McGee Corporation) to have access to seismic data upon a merger of the two companies and a right to access to the PGI seismic data by subsidiary entities. This seismic data was originally owned by a company called Professional Geophysical, Inc. ("PGI"). The PGI data was considered a trade secret of PGI and is still considered a trade secret today. As it pertains to Defendants' Motion, Plaintiff claims the Defendants misappropriated these trade secrets by Oryx transferring the data in 1985 to a company owned by it known as Sun Energy Partners; by Oryx and Kerr-McGee wrongfully

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 2 of 12

transferring the data licensed to Oryx Energy Company to Kerr-McGee Oil & Gas Corporation in 1999; by Kerr-McGee Corporation wrongfully gaining access to and possessing 3,191.15 miles of PGI seismic data which it did not license or have the right to possess, and which KerrMcGee Corporation has certified (F.R.C.P. 26(g)) that it does not have any licenses agreements, letters of transmittal, financial documents for the acquisition of this data, or any other documents in Kerr-McGee Corporation's possession relating to the acquisition of this PGI seismic data; by Oryx Energy Company and Kerr-McGee Corporation losing control of thousands of miles of PGI seismic data which they licensed from PGI and Plaintiff and by Kerr-McGee Corporation refusing to return the PGI data upon their merger and subsequent corporate reorganizations. Plaintiff as a licensor of the PGI seismic data and its predecessor required that each entity wishing to have access to the PGI seismic data sign a license agreement. These license agreements varied over the years using different language to restrict the use and transfer of the data by the licensee to other entities. There are over 50 license agreements at issue. The Defendants claim that there was no transfer of the PGI data because Oryx Energy Company merged with Kerr-McGee Corporation. The Defendants admit the PGI data was transferred to a subsidiary corporation of Kerr-McGee Corporation, Kerr-McGee Oil & Gas Corporation but that transfer was not a breach of the license agreements. In or about late 2001 during Discovery, Plaintiff invited Defendant Kerr-McGee Corporation to come to Houston, Texas and review 8 file cabinet drawers of documentation Plaintiff had obtained from the bankruptcy file of PGI. These documents were not produced to Defendant Kerr-McGee Corporation as they were not relevant nor responsive to any discovery requests. Not expecting that Defendant Kerr-McGee Corporation would take Plaintiff's word,

2

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 3 of 12

Plaintiff invited Defendant Kerr-McGee Corporation to come and see for itself that these documents had nothing to do with this case. This invitation stood open for over 3 years with Defendant Kerr-McGee Corporation never accepting this invitation. Eventually, these

documents were destroyed by Plaintiff as they related to a former wholly owned subsidiary of PGI dating back to the 1980's. This company, Sies Pro, had nothing to do with the PGI data base which is at issue in this case. Indeed, Seis Pro had no involvement with either Kerr-McGee Corporation, Oryx, or the Plaintiff. As the testimony below details, Plaintiff never had notice that these documents were relevant because they were not relevant to this case, nor did Plaintiff act in bad faith when out of necessity, these documents were destroyed. II. Legal Standard Relied Upon By Defendant Kerr-McGee Corporation Is Misplaced.

Each of the cases cited by Defendant Kerr-McGee Corporation in its Motion involves the destruction of "relevant" and "discoverable" information which the party "knew or should have known to be relevant to pending ...litigation". Telecom International v. A.T. & T. Corp., D.C.N.Y.1999, 189 F.R.D. 76, 81 (no duty in federal civil cases to preserve evidence unless one has notice of its relevance as evidence in litigation). As the testimony detail below establishes, the documents destroyed were from a wholly owned subsidiary of PGI back in the 1980's, which had no relation to the PGI data base at issue in this case. In order for any of the legal authority to be applicable to this case, Defendant KerrMcGee Corporation must establish its burden that the documents destroyed were in fact relevant and discoverable. Defendant Kerr-McGee Corporation cannot meet its burden that these

documents were either relevant or discoverable nor can it be proved that Plaintiff acted in bad faith. Arizona v. Youngblood, 488 U.S. 51, 109 S. Ct. 333 (U.S. Ariz., 1988) 3

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 4 of 12

III.

Defendant Kerr-McGee Corporation Cannot Prove That Plaintiff Was Ever On Notice That These Documents Were Relevant

Defendant Kerr-McGee Corporation is yet again grasping at straws trying mightily to manufacture a defense to the indefensible fact that it is in possession of Bootlegged data worth several million dollars. Defendant Kerr-McGee Corporation's desperation seems to know no bounds, now claiming that Plaintiff destroyed "PGI accounting records" which were relevant and needed to be produced in discovery. This statement is exposed as being completely untrue and based upon the following deposition testimony, confirms that Defendant Kerr-McGee Corporation knows this statement is untrue. These documents were no more relevant than the

global inventory of all seismic data in Defendant Kerr-McGee Corporation's possession, which this Court ruled was not relevant and where this Court awarded attorneys fees and costs against Plaintiff for persisting to convince this Court otherwise. Defendant Kerr-McGee Corporation fails to inform this Court that Plaintiff, as early as December 27, 2001, invited Defendant Kerr-McGee Corporation to come to its Houston office and go through 8 file cabinet drawers of documents which contained all types of documents from the "PGI Period". 1 Plaintiff disclosed the fact that much of this documentation did not relate in any way to Defendant Kerr-McGee Corporation or Oryx Energy Corporation licensing of the PGI data. The only similarity was the fact that these documents were also generated during the 1980's, i.e., the "PGI period".

1

See letters from Dan Bonifazi to counsel for Defendants David Hammond dated December 27, 2001 and January 3, 2002 attached hereto as Exhibit 1.

4

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 5 of 12

As the following testimony confirms, this documentation related to another separate company owned by PGI, Seis Pro Inc. constituting Seis Pros' field acquisition accounting records from approximately 1980 to 1986, hence the reference to the "PGI Period". Regardless, for over three years, while discovery in this case was ongoing, including depositions occurring in Houston, Texas, counsel for Defendant Kerr-McGee Corporation never accepted Plaintiff's open written invitations to view these documents and confirming for themselves that these records were not relevant just as Plaintiff had stated. The truth is that no relevant "PGI accounting records" were destroyed by Plaintiff evidenced by the following testimony:
Page 5 Marilyn Davies deposition April 23, 2004. 11 12 13 14 15 16 17 18 19 20 Q: Okay. I'd like to direct your attention to the second sentence in the text where it says: "For the last two years, I have offered Kerr-McGee the opportunity to come --" I think there's a missing word there "-- to come to -to come the office of my client and go through any boxes that relate to the issues relating to this case --" Do you see that? Yes.

A:

. . . Page 22 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Q: -- "For the last two years, I have offered Kerr-McGee the opportunity to come to the office of my client and go through any boxes that relate to the issues relating to this case --" He was wrong? No, he was not wrong. Why not? Because what he says is true. I had boxes that I offered to Kerr-McGee very early on, if they wanted to look in the boxes and see what was in there -- they were welcome to do that. They chose not to do that. I needed the space. I shredded them. In my opinion, they had nothing to do with the lawsuit. I tried to explain that over and over

A: Q: A:

5

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 6 of 12

22 23 24 25

Q:

again -- it was not relevant, but I understand why you wanted to come down and look at them. All right. I think you answered my question.

. . . Page 23 1 2 3 4 5 6 7 8 Did you keep any inventories of what was contained in the boxes that were shredded? No. Why not? Because they were Seis Pros' field acquisition accounting records from approximately 1980 to 1986 -- Seis Pros was a separate company. It was eventually part of PGI.

A: Q: A:

. . . Page 24 5 6 7 8 9 10 11 12 13 14 15 I pulled those boxes from the bankruptcy court. I did not have time to look at them -- when I was in the warehouse, I took them with me. When I brought them to the office; went through them, I realized that they had acquisition records in them -- had to do with per diems, hotel bills, lunch bills; survey information that was relevant only to specific acquisition with specific oil companies -- it did not relate to me at all. And that's what I had destroyed.

. . . Page 26 12 13 14 15 16 17 18 19 20 21 22 23 24 Q: Okay. And do you agree with the statement in Exhibit 136 2 by Mr. Pelz in that -- I think it's the next to the last sentence of the first paragraph: "It is my understanding that the documents that were finally destroyed related to a different subsidiary of PGI; namely, Seis Pros; and the documents were nothing more than per diem expense records for the field crews"? Yes. So, it's your testimony then that all the documents that were destroyed were nothing more than per diem expense records for the field crews? That were in those boxes, yes.

A: Q:

A:

. . . Page 47

2

Id.

6

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 7 of 12

25

Q:

Okay. This is the inventory of what was

. . . Page 48 1 2 3 4 5 6 7 8 9 10 destroyed pursuant to Exhibit 138. Is that correct? Yes. Okay. Can you just give me a -- a general description of what was destroyed? A client was returning the seismic data -Right --- I checked it back in -Right --- and I had it destroyed.

A: Q: A: Q: A: Q: A:

. . . Page 49 2 3 4 5 6 7 Q: Okay. What was the -- well, first of all, what was -- just by general description, what was the nature of the documents that were destroyed pursuant to Exhibit 138 and 139? All seismic sections -- seismic sections, tapes, shot -- (Inaudible.)

A:

. . . Page 55 20 21 22 23 24 25 Q: So, on this particular invoice which is for the January, I think, destruction event, there were 943 pounds of paper documents. Correct? Yes. And 902 pounds of tapes --

A: Q:

. . . Page 56 6 7 8 9 Q: (By Mr. Barker) What did the -- that's 902 pounds of -- what? Do you know? Seis Pros' seismic sections.

A:

. . . Page 62 4 5 6 7 8 9 10 11 12 13 14 Q: So, we just have to -- just have to go by your oral testimony -- that's the best we've got -right? Do you think I'm lying to you? I'm just -- I'm just asking the question. I'm asking you: All we have to go on is what you're saying orally -- right? You've asked me several times -Okay --- they're Seis Pros' accounting records -- there are luncheon tickets; there are

A: Q:

A: Q: A:

7

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 8 of 12

15

gasoline tickets --

As this testimony clearly states, the documents which Plaintiff repeatedly invited attorneys for Defendant Kerr-McGee Corporation to look through only related to a former wholly owned subsidiary of PGI. As this questioning also reveals, counsel for Defendant KerrMcGee Corporation questioned Ms. Davies over and over again attempting to blur the legal distinction between PGI and Seis Pro. During Ms. Davies' April 6, 2004 deposition which precedes the testimony above, counsel for Defendant Kerr-McGee Corporation succeeded in Ms. Davies misspeaking in referring to PGI when she intended to state Seis Pro. It is imperative to note that Ms. Davies not only corrected this misstatement on the correction sheet of this deposition, she again repeatedly clarified this point in her subsequent deposition which resulted following counsel for Defendant Kerr-McGee Corporation's request to explore this testimony at a later date. All smoke and mirrors aside, counsel for Defendant KerrMcGee Corporation questioned Ms. Davies extensively on this point as evidenced by the following testimony:
Page 85 13 14 15 16 17 18 19 20 Q: Are you saying that the -- the same -- that the eight file drawers that are referred to in this -- in this 141 through 142 and 143 and 144 are still in existence? (Indicating.) Yes. Okay. And they're still available for review by the lawyers for Kerr-McGee? I don't know that's the case.

A: Q: A:

. . . Page 93 13 14 15 16 17 18 19 Q: Okay. In your deposition on April the 6th, 2004, when you said PGI accounting data, what did you mean? Well, I worked for PGI -- PGI had bought many companies over the years. So, the name was PGI; however, you had different companies -- you had Seis Pros; you had

A:

8

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 9 of 12

20 21 22 . . . Page 102 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Q:

High Tech; you had Ex Mark; you had HouTex -- you had all those different companies, but I always referred to them as PGI.

A:

Q: A: Q:

Okay. How can you be sure that there aren't more accounting documents or other documents relevant to this case in documents that were destroyed, Ms. Davies? Because I've told you what those were. I've told you many times, it was Seis Pros' field records. And you know what? Let's make sure it's clear because they really weren't PGI accounting records. What they were were Seis Pros' accounting records from 1980 to 1986, and PGI did not know -own Seis Pros then -I understand --- so, I'm sorry if I confused you and called them PGI accounting records -All right ­

It is from this innocent vague response in which the instant Motion is born. What is so troubling about this Motion is that counsel for Defendant Kerr-McGee Corporation is well aware that the documents destroyed were not "PGI accounting records" as stated in their Motion. It was also during this deposition that counsel for Plaintiff began to see the true intent of this questioning. Specifically, it was at this time that it appeared that counsel for Defendant KerrMcGee Corporation was resolute in manufacturing a defense to the indefensible fact that it is in possession of 3,191.15 miles of Bootlegged PGI seismic data. Defendant Kerr-McGee

Corporation hopes to confuse this jury into believing that the Plaintiff destroyed license agreements or other documentation which proved that Defendant Kerr-McGee Corporation had lawfully licensed this Bootlegged data, even though Defendant Kerr-McGee Corporation cannot produce one shred of evidence on its own behalf.

9

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 10 of 12

At this point counsel for Plaintiff sought to end this rouse once and for all and questioned Ms. Davies confirming that the documents that were destroyed had nothing whatsoever to do with this case. Questioning of Ms. Davies by Mr. Pelz is as follows:
Page 105 23 24 25 Q: (By Mr. Pelz) Okay. In the documents that you went through and the boxes that were shredded in August of 2003 -- were there any license agreements in there?

. . . Page 106 1 2 3 4 5 6 7 8 9 10 11 12 A: Q: A: Q: No -Were there any transmittals of seismic data? No. Were there any accounting records that in any way related to the seismic data that is at issue in this lawsuit? No. Were there any accounting records that related to any of the seismic database that is owned by Thumper? No.

A: Q:

A:

IV.

Defendant Kerr-McGee Corporation Cannot Claim Prejudice Relating To The Destruction Of Documents Which Only Occurred After Years Of Kerr-McGee Corporation's Failure And/Or Procrastination To Accept Plaintiff's Invitation To View These Documents. The best reason why Defendant Kerr-McGee Corporation must now take Plaintiff at its

word that these documents were neither relevant nor discoverable is because Defendant KerrMcGee Corporation had over three years in which to view these documents to determine otherwise. It is inexplicable as to why no effort was made by Defendant Kerr-McGee

Corporation to review these documents when given the chance. Indeed, counsel for Defendant Kerr-McGee Corporation was often in Houston, Texas conducting depositions during this three year period. Absent some explanation as to why it never accepted this invitation, it cannot be a coincidence that Defendant Kerr-McGee Corporation now presents its "reverse spoliation 10

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 11 of 12

theory" as defense to the indefensible fact that it is in possession of 3191.15 miles of Bootlegged PGI seismic data. This "reverse spoliation theory" is nothing more than civil litigation

gamesmanship which is lacking substantial justification under the law and it is well established that such gamesmanship has no place in this Court. As this Court has stated previously: "Despite the barriers of technicality and quiddities of procedure which infuse our legal system, at enormous cost, to insure that litigation constitutes a search for the truth, our ultimate reliance must be found in trust and decency. Though the conduct of Plaintiff's counsel and expert offer stark evidence to the contrary, litigation is not a game of hare and hounds where rules are easily bent, where truth is skirted by lies and evasion, and cheap victory is sought at the expense fairness and candor. Even if the cynics are correct in saying that such practices are endemic to the system, it is necessary to say in this case that they will not be tolerated." 3 WHEREFORE, Plaintiff requests that this Court deny Defendants' Motion for Discovery Sanction of "Adverse Inference" Jury Instruction Against Plaintiff M.D. Mark. DATED: January 31, 2007.

Respectfully submitted, PELZ, BONIFAZI & INDERWISH, P.C.

s/ Dan Bonifazi________ Harlan P. Pelz Daniele W. Bonifazi John H. Inderwish 1873 South Bellaire Street, Suite 1401 Denver, CO 80222 Telephone: 303-691-5600 Facsimile: 303-691-5606 ATTORNEYS FOR PLAINTIFF

3

As cited in People v. Haase, 781 P.2d 80, 83 n.2 (Colo. 1989)

11

Case 1:01-cv-00413-JLK-BNB

Document 211

Filed 01/31/2007

Page 12 of 12

CERTIFICATE OF SERVICE I hereby certify that on the 31st day of January, 2007, a true and correct copy of the foregoing PLAINTIFF'S RESPONSE TO DEFENDANTS' MOTION FOR DISCOVERY SANCTION OF "ADVERSE INFERENCE" JURY INSTRUCTION AGAINST PLAINTIFF M.D. MARK was placed in the United States Mail, postage prepaid, addressed as follows: Scott S. Barker, Esq. Gregory E. Goldberg, Esq. Antonio Gallegos, Esq. HOLLAND & HART, LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, CO 80201-8749

s/ Dee A. Shaffer___________ Dee A. Shaffer

12