Southwestern Energy Production Co. v. Berry-Helfand
491 S.W.3d 699
| Tex. | 2016Background
- Helfand developed a proprietary “sweet-spot” methodology and maps identifying ten localized high‑value areas in the James Lime and stacked-pay formations in East Texas after years of data analysis and paid development costs.
- Team Works (Helfand and Wells) presented detailed, confidential materials about the Pearson prospects and the broader play to SEPCO under a confidentiality and one‑year noncompete agreement that limited SEPCO’s use to evaluating the prospects and required return/destruction of materials on request.
- SEPCO returned most materials but retained some; within years it acquired ~1,888 leases and drilled 140+ wells (88 James Lime horizontal wells) clustered in Helfand’s sweet spots, generating $381.5 million in past production revenue.
- Helfand sold the Pearson prospects to Petrohawk under a Prospect Identification Agreement that provided consulting fees plus prospect fees, a sliding overriding‑royalty formula, and a 6.25% back‑in working interest; Helfand testified she averaged a 3% overriding royalty under that deal.
- Helfand sued SEPCO for trade‑secret misappropriation, breach of the confidentiality agreement, and other claims; a jury found liability and awarded $11,445,000 as the “value of the trade secret” (equal to 3% of $381.5M) and the trial court ordered $23.89M equitable disgorgement; the court of appeals affirmed the misappropriation award but rendered take‑nothing on contract and disgorgement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of damages for trade‑secret misappropriation | Helfand: evidence (Petrohawk deal terms, expert Selinger, production revenue, leases) shows a reasonable royalty/value supporting the $11.445M award (3% of $381.5M). | SEPCO: Selinger’s inputs and methodology unreliable (included wrong wells, no basis for flat 3% vs sliding scale, improper deep‑rights valuation), so no legally sufficient evidence supports $11.445M. | Some evidence supports actual damages (trade‑secret value exists) but the jury award was overstated; remand for new trial on damages. |
| Statute of limitations (3‑year discovery rule) | Helfand: she did not discover and could not have discovered SEPCO’s misuse before Jan. 2009; earlier suspicions concerned only missing documents and did not conclusively show misuse. | SEPCO: Helfand’s May 2005 emails and knowledge of SEPCO activity put her on notice well before Feb. 2006, so claim is time‑barred. | SEPCO failed to show accrual as a matter of law; the jury finding of Jan. 2009 discovery is not conclusively rebutted. |
| Measure of contract damages for breach of the confidentiality agreement | Helfand: the jury’s “value of the trade secret” reasonable‑royalty measure (same as misappropriation) is an appropriate way to assess contract damages. | SEPCO/court of appeals: contract damages should be plaintiff’s actual loss (not defendant’s gain or trade‑secret value); no evidence Helfand sustained contract losses. | Court of appeals erred to render take‑nothing; evidence supports some contract damages under the submitted measure, but amount was overstated — remand for new trial. |
| Equitable disgorgement (availability absent fiduciary duty) | Helfand: disgorgement of SEPCO profits is equitable relief for misappropriation/breach of confidence even without a fiduciary relationship. | SEPCO/court of appeals: disgorgement is limited to breaches by fiduciaries; no fiduciary duty exists, so disgorgement improper. | Court declines to decide on availability of disgorgement now; remands for retrial where equities and remedy can be reconsidered. |
Key Cases Cited
- Univ. Computing Co. v. Lykes‑Youngstown Corp., 504 F.2d 518 (5th Cir. 1974) (flexible measures of trade‑secret damages and reasonable‑royalty framework)
- Bohnsack v. Varco, L.P., 668 F.3d 262 (5th Cir. 2012) (damages measures in trade‑secret cases include lost profits, defendant’s profits, reasonable royalty)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standards for legal‑sufficiency review of evidence)
- ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) (unsegregated damages that are supported in part require remand rather than rendition)
- PPG Indus., Inc. v. JMB/Houston Ctrs. Partners Ltd. P’ship, 146 S.W.3d 79 (Tex. 2004) (discovery rule accrual where objective facts would prompt further inquiry)
- Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194 (Tex. 2011) (limitations accrual where plaintiffs had actual knowledge outside limitations period)