793 F.3d 926
8th Cir.2015Background
- In 2004 Knickel (controller of Lexar entities) provided confidential seismic, reserves, and geologic data to Macquarie Bank as collateral for loans to LexMac and Novus; Lexar later assigned its related interests to LexMac/Novus. Macquarie took mortgage and security interests in the leases and the confidential information.
- LexMac and Novus defaulted; Macquarie foreclosed, obtained a judgment, assigned it to Macquarie LLC, and purchased the leases at sheriff’s sale by credit bid. Many original collateral leases had expired and Lexar held new leases on the acreage.
- Macquarie LLC used LexMac/Novus’s confidential information (via Macquarie Bank) to engage consultants and a management company, solicited bids, and sold the leases to Kodiak for $8.5 million.
- Litigation: Macquarie Bank sued asserting deceit, fraud, promissory estoppel, and sought veil-piercing; Lexar Group counterclaimed for trade-secret misappropriation and unlawful interference. After summary judgment and a bench trial, the district court found Macquarie misappropriated trade secrets from LexMac/Novus and awarded actual loss, unjust enrichment, interest, costs, and attorney’s fees for willful and malicious misappropriation.
- On appeal the Eighth Circuit affirmed: it rejected Macquarie’s contract interpretation and its deceit/promissory-estoppel claims, upheld summary judgment dismissing Lexar’s separate misappropriation/unlawful-interference claims, and affirmed liability, damages, and fee awards for LexMac/Novus’s misappropriation claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Credit Agreement/Mortgage required LexMac/Novus to renew leases as collateral | Macquarie: contract provisions obligated LexMac/Novus to preserve/renew leases so new Lexar leases would be collateral | Lexar Group: provisions prohibit alienation but do not require renewal when leases naturally expire | Court: No contractual duty to renew; new Lexar leases are not extensions or renewals; provisions do not compel active renewal |
| Deceit/fraud (did Knickel’s oral promise cause damages?) | Macquarie: Knickel promised to renew; Macquarie forbearance caused damages | Lexar Group: brokers could not have forced Knickel to renew; no proximate damage from promise | Court: Summary judgment for defendants; Macquarie failed to show damages caused by the promise |
| Ownership and standing for misappropriation (Lexar vs LexMac/Novus) | Lexar: initially provided some trade-secret info and had a plan to develop leases, so has claim | Macquarie: Lexar assigned its interest; Lexar was not owner at time of misappropriation | Court: Lexar’s claim fails because misappropriation remedy belongs to the party from whom information was misappropriated (LexMac/Novus), not Lexar |
| Whether Macquarie’s use/disclosure of trade secrets was permitted by loan documents | Macquarie: express contractual provisions permitted use/disclosure after default and in sale | Lexar Group: Macquarie’s use occurred after enforcement was complete and debt satisfied; provisions no longer applied | Court: Use/disclosure exceeded consent; provisions inapplicable when Macquarie used the information; misappropriation established |
Key Cases Cited
- In re Racing Servs., 744 F.3d 543 (8th Cir. 2014) (de novo review of contract interpretation)
- Jetton v. McDonnell Douglas Corp., 121 F.3d 423 (8th Cir. 1997) (summary judgment standard on appeal)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (district courts may enter summary judgment sua sponte with notice)
- Erickson v. Brown, 747 N.W.2d 34 (N.D. 2008) (deceit/fraud proof and clear-and-convincing standard under ND law)
- DTM Research, L.L.C. v. AT & T Corp., 245 F.3d 327 (4th Cir. 2001) (discussion whether ownership/fee-simple is required element under a UTSA claim)