Texas Appeals Court Sides With Oil & Gas Prospector in $14.3M Trade Secret Theft Case

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A Texas appeals court affirmed a jury’s verdict in favor of Shale Exploration, LLC in the amount of $14.3 million for lost profits resulting from the theft of Shale’s trade secrets in a Montana oil and gas development project. Shale was represented at trial and in the court of appeals by Matthew Pearson and Valerie Cantu of Gravely & Pearson, LLP, and Brendan McBride from San Antonio.

In an opinion released April 19, 2018 in Eagle Oil & Gas Co. et al. v. Shale Exploration LLC (case #01-15-00888-CV), the First District Court of Appeals in Houston rejected arguments from the defendants, Eagle Oil & Gas Co. and Eagle Wes-Tex, LLP, challenging a Houston jury’s determination that Eagle had misappropriated trade secrets belonging to Shale, and that in so doing had caused Shale to lose $14.3 million in profits from Shale’s “Jawhawk” oil & gas prospect in Daniels County, Montana.

The justices agreed the evidence was sufficient to demonstrate Shale owned a valuable trade secret in its compilation of data identifying mineral owners within the Jayhawk prospect and its plans for developing and leasing mineral rights in the prospect. Eagle had the opportunity to see the trade secrets during negotiations between Shale and Eagle to develop the Jawhawk prospect together. However, the companies never reached an agreement. Instead, Eagle kept Shale’s trade secrets, using them to conduct its own leasing activities in the heart of Shale’s Jawhawk prospect almost immediately after learning Shale had agreed to develop the Jayhawk prospect with a different oil company, Apache.

“Viewing all of this evidence in a neutral light, we cannot say that the jury’s implicit finding that Eagle made unauthorized use of Shale’s trade secrets was so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust,” the court wrote. “Accordingly, we hold that factually sufficient proof of Eagle’s unauthorized use supports the verdict.”

The court of appeals upheld the two categories of lost profits awarded by the jury. Those damages consisted of $4 million in lost profits resulting from leases acquired by Eagle instead of Shale, but that would have been sold at a profit to Apache, and $10.3 million in lost profits because Eagle used the trade secrets to compete with Shale for leases in the Jayhawk prospect, driving up the prices. Reviewing the evidence, the court of appeals found that sufficient, admissible evidence supported the jury’s damages findings.

Eagle Wes-Tex countersued Shale for “tortious interference” and business disparagement, but the jury rejected all of those counterclaims. The court of appeals upheld that portion of the jury’s verdict as well, concluding, “the same evidence that the jury credited in finding liability for misappropriation of trade secrets undercuts the argument that the jury’s rejection of Wes-Tex’s counterclaims was against the great weight of the evidence.”

Brendan McBride, who handled the appeal on behalf of Shale, stated: “The Court of Appeals saw as easily as the jury did that Eagle stole the oil and gas play from my clients, and that they should pay for it.”

Eagle is represented by Bruce Bowman Jr. and Ira Bowman of Godwin Bowman & Martinez and Elaine A. Carlson from Houston.

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