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McDonald Oilfield Operations, LLC v. 3B Inspection, LLC

Court of Appeals of Texas, First District

July 25, 2019


          On Appeal from the 268th District Court Fort Bend County, Texas Trial Court Case No. 17-DCV-247216

          Panel consists of Justices Keyes, Lloyd, and Kelly.


          Evelyn V. Keyes Justice.

         Appellees-3B Inspection, LLC and its principal Robert Beall (collectively, 3B Inspection), and individual employees of 3B Inspection: Chris Myrand, Kyle Grant, Patrick Bage, and Dylan Rogge (collectively, individual employees)-filed suit against appellant, McDonald Oilfield Operations, LLC. McDonald Oilfield moved to dismiss the suit pursuant to the Texas Citizens Participation Act (TCPA), and the trial court denied the motion. In three issues, McDonald Oilfield argues that it successfully demonstrated that the TCPA applies here because 3B Inspection and the individual employees filed this lawsuit in response to its exercise of its right to petition, or, alternatively, that the lawsuit was based on, related to, or was filed in response to its speech on matters of public concern. McDonald Oilfield also argues that 3B Inspection and the individual employees failed to present clear and specific evidence on each essential element of their claims.

         A panel of this Court issued an opinion on December 6, 2018, and McDonald Oilfield subsequently moved for rehearing of the case. We granted the motion. We now withdraw our opinion and judgment issued on December 6, 2018, and issue the following opinion and judgment in their place. We reverse and remand.


         3B Inspection and McDonald Oilfield are competitors in the pipeline monitoring business. Since 2008, McDonald Oilfield has used "pipeline pigs," which perform pipeline monitoring and maintenance operations without having to stop the flow of product within the pipeline, and other equipment to perform external pipeline monitoring and to maintain pipeline integrity.

         The individual employees-Myrand, Grant, Bage, and Rogge-worked for McDonald Oilfield as independent contractors. Under standards set by the federal government, McDonald Oilfield sponsored and maintained "Operator Qualifications" demonstrating that the individual employees were properly trained to perform pipeline monitoring tasks. In the declaration of McDonald Oilfield's office manager, Latischia McDonald, the company provided further information regarding Operator Qualifications:

Due to the type of work McDonald Oilfield specializes in, McDonald Oilfield must maintain Operator Qualifications for the individuals who perform work for it. Operator Qualifications are an industry standard imposed by federal law and the U.S. Department of Transportation, and having those qualifications are required for those workers to perform work on pipelines. To receive Operator Qualifications, pipeline workers receive training and subsequent evaluations in order to determine whether he or she is qualified. Once qualified, the Operator Qualification, which is sponsored by the employer, is filed in a database that the United States Department of Transportation or other operator companies can review to determine if a pipeline has workers with Operator Qualifications. The database we use is called Verisource which is itself an Operator Qualification compliance company. McDonald Oilfield paid for [the individual employees] to receive their Operator Qualifications and McDonald Oilfield sponsored the Operator Qualifications. Operator companies and the United States Department of Transportation can search Verisource, or other databases maintained by other compliance companies, to verify that workers possess the necessary Operator Qualifications to perform the agreed upon scope of work.

         In addition to maintaining Operator Qualifications for its pipeline workers, McDonald Oilfield required background checks and drug testing, and it made internal policies and procedures to ensure that its operators were properly trained and qualified to perform their duties. McDonald Oilfield stated, through Latischia McDonald's declaration, that this was important for several reasons:

[I]f [McDonald Oilfield] does not follow these policies and procedures, there can be catastrophic and deadly accidents out in the field. For example, if a line locater is not correctly calibrated by an experienced and trained user, a pipeline that contains oil, gas, natural gas, or other hazardous substances, may be marked incorrectly. If a pipeline carrying such hazardous substances at high pressure is marked incorrectly by an improperly calibrated line locator and is then hit by construction equipment, a massive explosion, including the loss of life and release of environmental contaminants, can occur.

         Latischia McDonald further declared that "[p]ipeline pigging can also be very dangerous if not performed properly by qualified workers and with proper equipment" because

when launching a pig into the pipeline, it is sometimes pushed with nitrogen or the same substance that is being transported through the pipeline. This means the pressure of the pipeline must be known and could require valves on the pipeline to have to be turned in order to steer the pig in the correct direction. One must have an Operator Qualification to turn those valves. If a valve is not turned correctly and the pig goes in the wrong direction or into a valve, it could shut the entire pipeline down. Also, if the valves are not turned correctly, it can cause the substance the pipelines are carrying to mix. When certain substances mix, there is also the potential for a deadly explosion and release of environmental contaminants.

         In 2016, Robert Beall-who had many years of experience within the oil and gas industry-formed 3B Inspection. Beall is the principal of 3B Inspection, and his associate, Greg Simko, is the "Co-President" of 3B Inspection. 3B Inspection hired Myrand, Grant, Bage, and Rogge in August 2017.

         According to Latischia McDonald's declaration, McDonald Oilfield was not initially aware that the individual employees had begun working for 3B Inspection. Rather, Latischia McDonald believed that Myrand was out of town visiting family. McDonald Oilfield asserted that it did not learn that Myrand and the other individual employees had become employees of 3B Inspection until the end of September 2017. McDonald Oilfield asserted that, despite the change in employers, the individual employees nevertheless continued using McDonald Oilfield's equipment and accessing McDonald Oilfield's proprietary software and databases.

         Upon learning of the change in employers, McDonald Oilfield contacted the individual employees-its former contractors-"to remind them of their confidentiality obligations." Specifically, on October 1, 2017, Latischia McDonald texted Myrand, stating, "Hey Chris. This is just a follow up from my voicemail to remind you that any equipment belonging to McDonald Oilfield Operations or Otis & Sons must be returned today or theft of property charges will be filed." The text message also asked Myrand to "refrain from speaking ill about McDonald Oilfield Operations" and informed him that false statements he had made could result in McDonald Oilfield's being able to file defamation claims against him. Latischia McDonald also declared that she had verbally relayed the same message to the other three individual employees on the same day.

         On October 2, 2017, McDonald Oilfield suspended the Operator Qualifications it was sponsoring for the individual employees. Latischia McDonald declared:

While McDonald Oilfield can agree to make Operator Qualifications portable, we were never asked to. Rather, we were coming to learn that the individual Plaintiffs were acting in concert, behind our back, and had taken and were using our property. As to that last point, we had absolutely no way to know whether these individuals (or others to whom they passed off our equipment) were properly maintaining the equipment, or were following industry standards or safety protocols. All we knew was that they had stolen our equipment and confidential and proprietary business information and were trying to hide the fact that they were working for 3B Inspection and Beall. Moreover, had there been any accidents involving Myrand, Grant, Bage, and Rogge, the Operator Qualifications would have tracked back to McDonald Oilfield and not their actual employer, 3B Inspection. These were all concerns Beall and 3B Inspection should certainly have been aware of. As such, in an effort to comply with industry standards and practices and because of our safety concerns, McDonald Oilfield suspended the Operator Qualifications. We felt we had no choice in this matter, since we had no way of knowing who was using our equipment, let alone how it was being maintained. Notably, our decision did not and does not prevent 3B Inspection from sponsoring Operator Qualifications for the same individuals.

         McDonald Oilfield further asserted that it could have made the Operator Qualifications "portable" but did not because "i) it was not asked; ii) the individual plaintiffs seemed to be acting deceptively and in concert behind its back; and iii) since the individual plaintiffs had completely severed their relationship with McDonald Oilfield, it was no longer in any position to monitor or supervise their performance or adherence to safety-related standards."

         On October 3, 2017, Latischia McDonald talked to Rogge's mother, Tammy Rogge, on the phone, warning her that Rogge was in breach of his employment agreement with McDonald Oilfield because he had retained some proprietary software and that she did not want Rogge "involved in anything that could cause 'legal problems.'" Later that same day, McDonald Oilfield contacted the Fort Bend County Sheriff's Office to report stolen property. Rogge arrived later that afternoon at the McDonald Oilfield facility to return the mapping software and observed a sheriff's deputy arrive to prepare a police report for the stolen property.

         Also on October 3, McDonald Oilfield received a cease and desist letter from 3B Inspection's lawyer. The letter stated:

McDonald Oilfield is making false and disparaging comments about 3B Inspection to clients of 3B Inspection in order to unlawfully interfere with [its] business relationships. McDonald Oilfield has also been contacting, threatening, and making defamatory statements towards 3B Inspection's employees Chris Myrand, Kyle Grant, Patrick Bage, and Dylan Rogge. Finally, 3B Inspection believes that McDonald Oilfield is also engaging in further unlawful conduct with the intention of harming the company's business, operations, and relationships with its current and prospective clients of 3B Inspection.

         The letter requested that McDonald Oilfield cease and desist from engaging in the listed behavior. Beall also called McDonald Oilfield and spoke with Kelly McDonald, the owner. Beall expressed a desire for the two companies to work things out between them.

         3B Inspection and the individual employees filed suit on October 4, 2017. Ultimately, 3B Inspection alleged causes of action for business disparagement, defamation, and tortious interference with a contract. 3B Inspection alleged generally that McDonald Oilfield "has engaged in a course of unlawful and malicious conduct intended to interfere with and cause harm to the business relationship between 3B Inspection and one of its current clients." 3B Inspection did not identify the client, but it alleged that the client "is a former client of McDonald Oilfield." 3B Inspection also made general statements that McDonald Oilfield's conduct included "making defamatory and disparaging remarks regarding 3B Inspection to its client, contacting and making disparaging remarks regarding 3B Inspection to certain employees of 3B Inspection who had been former independent contractors of McDonald Oilfield," disrupting or "attempting to disrupt the business operations of 3B Inspection and hinder 3B Inspection's performance on a client project," and "attempting to harm the business and reputation of 3B Inspection."

         In its amended petition, 3B Inspection identified a single interaction that occurred, alleging that the unidentified client had informed 3B Inspection that Kelly McDonald had contacted the client and stated that 3B Inspection was "not a real company" and that Robert Beall "did not know what he was doing." 3B Inspection further alleged:

McDonald Oilfield intentionally caused the Operator Qualifications ('OQ') of certain Employees of 3B Inspection to be suspended. Without holding an appropriate and active OQ, 3B Inspection's Employees cannot perform their required duties on Plaintiff's projects. McDonald Oilfield caused the cancellation of these OQ's in order to hinder 3B Inspection's performance on a large project being performed for 3B Inspection's client (and a former client of McDonald Oilfield). This conduct by McDonald Oilfield was done with malicious intent to shut down the project and cause harm to 3B Inspection's business relationship with its client.

         On October 30, 2017, McDonald Oilfield filed a counterclaim alleging causes of action for violations of the Texas Uniform Trade Secrets Act and the Texas Theft Liability Act, breach of contract, conversion, and conspiracy. McDonald Oilfield alleged specific facts regarding its working relationship with Myrand and the other individual employees, including that they had all agreed to keep certain proprietary technology and information confidential and to return all of McDonald Oilfield's property upon termination of their employment. McDonald Oilfield asserted that Myrand "kept and did not return a substantial amount of equipment belonging to McDonald Oilfield." It also alleged that the other individual employees had used some of the equipment to benefit 3B Inspection. McDonald Oilfield identified approximately $60, 000 worth of property that was not returned as "including (but not necessarily limited to):

• 7 HANS (or L22) boxes, which are expensive pieces of technical equipment used to provide real-time tracking of a pig while being moved through a pipeline;
• 3 transmitters (two models CD42-T3, and one model SAP 102000);
• 1 Metrotech Line Locator with Backbox;
• 1 Pipeline Inspection Company Pig Tracker/Receiver
• 1 Wavetrack Receiver
• 1 Farwest pit gauge; and
• 1 set of custom-made pig-pulling poles."

         McDonald Oilfield also alleged that it had provided all of the individual employees with particular software-"DeLorme Atlas"-that "is now being used on 3B jobs by former McDonald Oilfield contractors" and that the individual employees were "continuing to access a database for site documentation that was built by McDonald Oilfield Operations" at a cost of more than $20, 000. McDonald Oilfield also alleged that "Beall colluded in, or aided and abetted 3B [Inspection], Myrand, Grant, Bage, and Rogge in their wrongful conduct alleged herein, including misappropriating McDonald Oilfield's trade secrets and equipment."

         On December 4, 2017, McDonald Oilfield moved to dismiss all of 3B Inspection and the individual employees' claims against it pursuant to the TCPA. McDonald Oilfield argued that 3B Inspection and the individual employees had filed suit because of and in response to McDonald Oilfield's exercise of its right to free speech and right to petition. The motion to dismiss pointed out that 3B Inspection filed its lawsuit just one day after Rogge learned that McDonald Oilfield had made a report of theft to local law enforcement. It also argued that the factual basis for 3B Inspection's suit-alleged statements disparaging 3B Inspection and McDonald Oilfield's suspension of the individual employees' Operator Qualifications-involved McDonald Oilfield's rights to free speech because all of the communications were on a matter of public concern, i.e., the operation and safety of oil and gas pipelines. McDonald Oilfield also sought attorney's fees, costs, and sanctions in the event it prevailed on its TCPA motion to dismiss. It provided an affidavit regarding attorney's fees.

         Along with its motion to dismiss, McDonald Oilfield also filed the declaration of Latischia McDonald, the office manager for McDonald Oilfield, which set out many of the facts stated above. In addition to the details regarding McDonald Oilfield's work and details of maintaining Operator Qualifications, Latischia McDonald declared:

to be a preferred vendor for the Department of Transportation, which McDonald Oilfield is, workers must have Operator Qualifications and be subject to drug testing policy. I am aware of no requirement that our company continue to sponsor or maintain Operator Qualifications for personnel who are no longer working with or for us. Rather, my understanding is that it is the obligation of whichever service ...

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