Silverthorne Seismic, LLC v. Sterling Seismic Services, Ltd.
4:20-cv-02543
S.D. Tex.Jun 1, 2021Background:
- Silverthorne conducted a South Scoop 3D seismic survey (2018–19); Casillas licensed 166.5 sq mi of that data and financed part of the survey.
- Silverthorne delivered raw field data and an ESRI shape file (defining licensed boundaries) to Sterling for reprocessing under agreements (License/Participation, an NDA, and a Reprocessing Agreement between Casillas and Sterling).
- Sterling signed an NDA limiting disclosure and use of Silverthorne’s confidential seismic data and was to reprocess only the area in the shape file.
- In late 2019–early 2020 Sterling delivered reprocessed data to Casillas without Silverthorne’s written consent and without providing Silverthorne copies; Silverthorne later discovered Sterling supplied an extra 15.06 sq mi of unlicensed data, which Casillas showed to at least 15 third parties.
- Silverthorne sued Sterling for breach of contract (several theories), negligence, and federal trade-secret misappropriation (DTSA); Sterling moved to dismiss. The court dismissed negligence but allowed contract and DTSA claims to proceed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of breach-of-contract pleading (trilateral / multi-document contract) | Silverthorne: License Agreement, NDA, Reprocessing Agreement, shape file and Participation Agreement form a single transaction and contract; Sterling breached by delivering unlicensed data. | Sterling: No valid contract or breach; merger clause and separate instruments preclude reading them together. | Court: Agreements can be construed together as parts of one transaction; Silverthorne plausibly alleged breach. |
| Parol-evidence / merger clause and collateral agreement to use shape file | Silverthorne: Sterling made a collateral, consistent agreement to use the shape file and reprocess only licensed area (industry practice). | Sterling: NDA is integrated and permits disclosure to Casillas; collateral agreement is barred. | Court: NDA is only partially integrated; collateral-agreement exception applies; collateral obligation plausibly pleaded. |
| Negligence claim (economic loss rule) | Silverthorne: Sterling owed an independent common-law duty to protect trade-secret seismic data, separate from the NDA. | Sterling: Any duty arose from the NDA/contract; injury is economic loss of contractual expectancy. | Court: Negligence claim barred by economic-loss rule because alleged harm is purely contractual economic loss; negligence dismissed. |
| DTSA trade-secret misappropriation (trade secret + misappropriation) | Silverthorne: seismic data is a trade secret (protected, licensed under NDAs); Sterling disclosed unlicensed data without consent and breached duty to limit use. | Sterling: Data not a trade secret; NDA allowed disclosure to Casillas. | Court: Seismic data plausibly pleaded as a trade secret and misappropriation plausibly alleged; DTSA claim survives. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must allege plausible facts raising right to relief above speculative level)
- In re Bass, 113 S.W.3d 735 (Tex. 2003) (seismic data may constitute trade secrets in oil-and-gas industry)
- Rieder v. Woods, 603 S.W.3d 86 (Tex. 2020) (when separate instruments may be construed together as one transaction)
- West v. Quintanilla, 573 S.W.3d 237 (Tex. 2019) (parol evidence rule and collateral-agreement exception)
- Sw. Bell Telephone Co. v. DeLanney, 809 S.W.2d 493 (Tex. 1991) (economic-loss rule limits tort recovery for contract-based duties)
- LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234 (Tex. 2014) (economic-loss rule applied in construction context)
- GlobeRanger Corp. v. Software AG U.S. of Am., Inc., 836 F.3d 477 (5th Cir. 2016) (existence of trade secret is a question of fact)
- Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882 (Tex. 2019) (elements of breach of contract under Texas law)