Litigation Update: Recent Developments Affecting Oilfield ...‒ Eighty of these were oilfield service companies. ‒ The Houston Chronicle characterized oil service companies plight
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
In Re: Sabine Oil & Gas U.S. Bankruptcy Court (SDNY) May 3, 2016
‒ Debtor permitted to reject gas-gathering and related agreements with two midstream companies.
‒ Agreements drafted with intention of creating a property right known as a “real covenant” that “runs with the land” which cannot (supposedly) be invalidated by the bankruptcy courts.
‒ Bankruptcy court held Texas property law requirements for creating real covenants were not satisfied by the contracts in question.
2016 Department of Labor Changes to FLSA Overtime Rules Key changes ‒ Salary Thresholds Increased ‒ Automatic Updates to Salary Requirements ‒ Bonuses and Incentives/Commissions can satisfy up to
10% of standard salary level ‒ No Changes to Duties Tests Set to take effect December 1, 2016
Energy Transfer Partners v. Enterprise Products Partners ‒ Background Develop and build a crude pipeline Parties signed a letter of intent that could terminate
project at any time, no obligation unless signed definitive documents
2014 Dallas jury: conduct formed de facto partnership Jointly marketed product, referred to one another as JV
partners ETP awarded $535M, including $150M in disgorgement
De Facto Partnership ‒ TBOC §152.052 – Factors Indicating Partnership
Receipt or right to receive a share of profits of the business Expression of an intent to be partners in the business Participation or right to participate in control of the business Agreement to share or sharing of (a) losses or (2) liability for claims
by third parties against the business Agreement to contribute or contributing money or property to the
business ‒ Ingram v. Deere (Tex. 2009): Partnership does not require every
statutory factor and parties’ conduct may form a partnership – regardless of whether parties intended to create a partnership
DTSA Notice Requirement ‒ “An employer shall provide notice of the [civil and
criminal immunity provisions] in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.”
‒ Alternatively, cross-reference “a policy document provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law.”
‒ Failure to comply with the notice requirement precludes exemplary damages and attorney fees.
Remedies Under DTSA ‒ The DTSA’s remedies include: Damages for actual loss and unjust enrichment; Reasonable royalty; Increased criminal penalties; Injunctive relief across all states; Ex parte property seizure; Exemplary damages; Attorneys’ fees.
Secrecy Preservation Under TX UTSA ‒ “[A] court shall preserve the secrecy of an alleged
trade secret by reasonable means. There is a presumption in favor of granting protective orders to preserve the secrecy of trade secrets. Protective orders may include provisions limiting access to confidential information to only the attorneys and their experts, holding in camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.”
Remedies Under TX UTSA ‒ The TX UTSA’s remedies include: Damages for actual loss and unjust enrichment; Reasonable royalty; Injunctive relief; Exemplary damages; Attorneys’ fees.
Southwestern Energy Production Company v. Toby Berry-Helfand And Gery Muncey, 491 S.W.3d 699 (Tex. 2016) ‒ Trade secret misappropriation case – jury found oil and gas
operator misused proprietary information acquired under a confidentiality agreement.
‒ Jury valued trade secrets at $11.445 million and awarded $23.89 million in equitable disgorgement of past profits.
‒ Court of Appeals affirmed actual damages for misappropriation, but reversed on breach of contract and disgorgement awards.
‒ Supreme Court reversed and remanded the breach of contract and misappropriation of trade secret claims for new trial (did not alter equitable disgorgement claim).
Post-Macondo Indemnity Provisions ‒ In Re Deepwater Horizon, Texas Supreme Court, Cause
No. 13-0670 (Tex. Feb. 13, 2015) BP made claim as additional insured seeking coverage under
Transocean’s policy Transocean argued that BP not entitled to coverage broader
than Transocean’s limited indemnity obligations Court held:
Parties’ external drilling contract was incorporated into the insuring agreement, limiting BP’s coverage as an additional insured to above-surface pollution
Transocean only required to extend additional insured coverage for liabilities assumed by Transocean
Impact on Indemnity Considerations Other Cases: Ironshore Specialty Ins. Co. v. Aspen Underwriting Ltd., 788 F.3d 456 (5th Cir. 2015) ‒ Review risk allocation from global viewpoint (MSA’s)! ‒ Is there really anything new?
Increased Trend to Seek Interim Relief in Arbitration Domestic: JAMS, CPR, and AAA all adopted rules allowing parties to seek relief from specially designated arbitrations. ‒ To what extent does this impinge on rights of courts to
award injunctive or other interim relief? ‒ Yahoo, Inc. v. Microsoft Corp., 983 F.Supp. 2d 310
(S.D.N.Y. 2013) (court confirmed mandatory injunction by arbitration compelling performance of a contract). General Rule: Courts can provide injunctive/interim relief
‒ Benihana, Inc. v. Benihana of Tokyo, LLC, 784 F. 3d 887 (2d Cir. 2015) (Injunction limited to preserving status quo, not determination of merits). Where are the lines of demarcation drawn re: authority
Local Developments: Another Nail In The Coffin for Manifest Disregard Hoskins v. Hoskins, 2016 Tex. LEXIS 386 ‒ Key issue: Can a party seeking to vacate an arbitration
award under the Texas General Arbitration Act invoke extra-statutory, common law vacation grounds? Party sought to vacate award because arbitrator manifestly
disregarded the law. Court of Appeals held TAA’s vacation grounds are exclusive
and did not consider manifest disregard arguments. Supreme Court affirmed
– Arbitration agreement contained no restriction on arbitrator’s authority to issue a decision unsupported by the law.
“Commercial Disputes” ‒ M&A Deals Gone Bad June 24, 2016, Delaware Court of Chancery ruled it
would not compel Energy Transfer Equity LP to complete its proposed acquisition of the Williams Cos., Inc. (failure of conditions precedent re: “Section 721” opinion).
June 6, 2016, Department of Justice lawsuit led to subsequent termination of Halliburton/Baker Hughes merger agreement.
‒ Purchase price adjustment and indemnity claims. ‒ Partnership disputes and divorce.
‒ Suits Involving Operators, Suppliers and Service Companies Breach of contract. Default and delay claims. Force majeure claims. Indemnity claims. Product liability.
Fraudulent Misrepresentation Samson Lone Star Ltd Partnership v. Hooks, 2016 Tex. App. LEXIS 2661 Court of Appeals reversed/remanded concluding that an imprecise calculation of a well’s location can be actionable as a fraudulent misrepresentation. The Court also concluded that individual protections to a lessor in a specific lease do not extend to an entire pooled unit.
Procedural Alert: Mandamus Relief In Re: J.B. Hunt Transport, Inc., 05-15-00808-CV (Tex. App. 2015) New ‘rules” re: availability of mandamus relief. In context of forum dispute court set out sliding scale balancing test where there had previously been a bright line rule.
National Pump Holdings L.P. v. Westergreen, 453 S.W.3d 419 (Tex. 2015) Court affirmed that a party to a written contract cannot justifiably rely on an oral representations regarding the contracts unambiguous terms.