Myklatun v. Halliburton Energy Services
734 F.3d 1230
10th Cir.2013Background
- Myklatun and Oil Innovation were exclusive regional distributors (Norway/Denmark/North Sea option) for CESI microemulsion products under a distributorship agreement; they focused on product MAD-4.
- CESI (and parent Flotek) developed a separate microemulsion, GasPerm 1000, for Halliburton; GasPerm sales did not occur in Norway/Denmark and only appeared in the U.K. sector of the North Sea in 2008.
- Plaintiffs sued alleging tortious interference, two theories of fraud (one based on allowing Plaintiffs to incur expenses; the other based on concealing development of GasPerm 1000), and civil conspiracy; some claims were time-barred and narrowed before trial.
- After a nine-day trial, the jury found for Plaintiffs on fraud against CESI/Flotek, awarding actual and punitive damages, but the district court granted Defendants’ Rule 50(b) JMOL, entering judgment for all Defendants; Plaintiffs appealed.
- The Tenth Circuit reviewed de novo whether sufficient evidence supported fraud by omission (constructive fraud) under Oklahoma law — specifically whether Defendants had a duty to disclose development/approval efforts for GasPerm 1000.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Defendants’ Rule 50 motions preserved the right to seek JMOL for CESI | Rule 50(a) lacked specificity as to CESI; thus CESI could not be dismissed by later Rule 50(b) grounds not argued at trial | Rule 50(a) and 50(b) were made on behalf of all defendants; Plaintiffs waived specificity challenge by not objecting in their Rule 50(b) response | Court held Rule 50 motions covered CESI and Plaintiffs waived specificity objection; JMOL properly considered for all defendants |
| Whether there was evidence of an affirmative misrepresentation supporting fraud | Myklatun did not rely on affirmative misrepresentations; claimed omissions/half-truths created duty to disclose | No affirmative misrepresentations; absent duty to disclose, silence cannot be fraud under Oklahoma law | Court held Plaintiffs presented no evidence of affirmative misrepresentation; claim rests on omissions only |
| Whether contractual exclusivity or parties’ relationship imposed a duty to disclose manufacturer’s development of a potentially competing global product | Exclusivity and defendants’ knowledge of Plaintiffs’ impression of exclusivity created a duty to disclose development/approval efforts for GasPerm 1000 | Agreement expressly stated arms-length buyer-seller relationship and no agency/fiduciary status; no special circumstances imposed a disclosure duty | Court held exclusivity did not create fiduciary duty or legal obligation to disclose; failure to disclose potential future competition is a contract remedy, not fraud |
| Whether partial disclosures or ‘‘half-truths’’ (e.g., statements about seeking approval for MAD-4) imposed a duty to reveal GasPerm development | Statements that CESI sought approval of MAD-4 for Plaintiffs were half-truths because defendants secretly sought GasPerm approval too | No evidence supports that MAD-4 approval statements were false or that GasPerm approval was tied; any link was attenuated and not a partial disclosure creating a duty | Court held Plaintiffs failed to show any actionable partial disclosure or half-truth that would impose a duty to disclose under Oklahoma law |
Key Cases Cited
- Wolfgang v. Mid-Am. Motorsports, Inc., 111 F.3d 1515 (10th Cir.) (standard for reviewing JMOL)
- Specialty Beverages, LLC v. Pabst Brewing Co., 537 F.3d 1165 (10th Cir. 2008) (definition and elements of constructive fraud under Oklahoma law)
- Barry v. Orahood, 132 P.2d 645 (Okla. 1942) (duty to disclose depends on parties’ situation and subject matter)
- S.E.C. v. Cochran, 214 F.3d 1261 (10th Cir.) (fiduciary/agency relationships can create disclosure duties)
- Varn v. Maloney, 516 P.2d 1328 (Okla. 1973) (partial disclosure/half-truths may give rise to duty to reveal whole truth)
- Devery Implement Co. v. JI Case Co., 944 F.2d 724 (10th Cir. 1991) (dealership agreements do not automatically create fiduciary duties)
- AKA Distributing Co. v. Whirlpool Corp., 137 F.3d 1083 (8th Cir.) (no duty to disclose manufacturer’s unrelated plans to market competing products to arms-length distributors)
- Marfia v. T.C. Ziraat Bankasi, 147 F.3d 83 (2d Cir.) (specificity requirement for JMOL; nonmoving party must object to preserve issue)