475 In re EOG Res., Inc

Wednesday, September 2nd, 2015

Richard F. Brown

The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.
In re EOG Res., Inc., No. 02-13-00440-CV, 2014 WL 580178 (Tex. App.—Fort Worth Feb. 12, 2014, no pet.) held that Lessee’s geologic and seismic data was privileged trade secret information and not subject to pre-trial discovery by Lessor absent a showing that the information requested was necessary to prevent fraud or an injustice.  David and Shelly Richey (“Lessor”) filed suit alleging that their oil and gas lessee, EOG Resources, Inc. (“Lessee”), failed to include Lessor’s land in a pooled unit located near their property and that Lessee improperly drained oil and gas from their property.  In discovery, Lessor requested Lessee’s geologic and seismic data located within one mile of their property, which both parties agreed was privileged trade secret information.  Texas Rule of Evidence 507 establishes the privilege to refuse to disclose a trade secret, but only if the suppression of the trade secret information does not result in fraud or injustice.  When it is established that the information requested is a trade secret, the burden shifts to the party requesting production to establish that the information is necessary for a fair adjudication of the claims.
Lessor’s expert witness testified that the geologic and seismic data was “pertinent,” “helpful,” “essential,” and “necessary” to Lessor’s claim.  However, the expert failed to explain why the data was “necessary” and conceded that the Lessor could have obtained the same information themselves but for “cost and [lack of] expertise.”  The expert also testified that it “probably” would not do Lessor any good to spend Lessor’s own money on obtaining such information.  The court concluded that Lessor did not demonstrate that the “failure to obtain the trade secret information sought would so impair the presentation of the case that the result would be unjust.”  The court also noted that records about operations in a common reservoir are generally available from the Railroad Commission.  Therefore, the court held that Lessor failed to meet Lessor’s burden under Rule 507 and protected the trade secret data from discovery.
The opinion appears to apply existing law to exceptionally weak expert testimony.  The evidence was arguably discoverable if, for no other reason, to establish Lessee’s knowledge and intent.