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Pearl Energy Investment Management, LLC v. Gravitas Resources Corporation

Court of Appeals of Texas, Fifth District, Dallas

August 7, 2019

PEARL ENERGY INVESTMENT MANAGEMENT, LLC, PEARL ENERGY INVESTMENTS, L.P., WILLIAM QUINN, AND AVAD ENERGY PARTNERS, LLC, Appellants
v.
GRAVITAS RESOURCES CORPORATION AND ALAN PINTO, Appellees

          On Appeal from the 191st Judicial District Court Dallas County, Texas, Trial Court Cause No. DC-18-03007

          Before Justices Brown, Schenck, and Pedersen, III

          MEMORANDUM OPINION

          ADA BROWN, JUSTICE

         Appellees Gravitas Resources Corporation (Gravitas) and Alan Pinto sued appellants Pearl Energy Investment Management, LLC (Pearl Management), Pearl Energy Investments L.P. (Pearl Fund), and William Quinn (together, the Pearl defendants), and AVAD Energy Partners, LLC (AVAD) in this dispute concerning the purchase of oil and natural gas assets in Utah. Appellants filed motions to dismiss appellees' claims pursuant to the Texas Citizens Participation Act, Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001-.011 (the TCPA), which the trial court denied. In eleven issues, [1] appellants contend the trial court erred in denying their motions and not awarding them attorneys' fees, costs, and sanctions because (1) appellees' claims are based on, related to, or in response to appellants' TCPA rights of association and free speech, (2) appellees did not establish the TCPA's "commercial speech" exemption applied to its claims against Pearl Management and Pearl Fund; (3) appellees did not provide clear and specific evidence of a prima facie case for each element of each of its claims; and (4) AVAD proved its independent discovery defense by a preponderance of the evidence. We conclude appellants failed to carry their burden of establishing the TCPA applies to appellees' claims. Accordingly, we affirm the denial of appellants' motions to dismiss.

         Background

         Gravitas is an oil and natural gas production corporation. Pearl Management, founded by Quinn, is a private equity firm with a focus on oil and gas investments. Pearl Fund is an investment fund established by Pearl Management, and AVAD is a Pearl Management portfolio company. Quinn also is the founder, partner, and/or manager of Pearl Fund and sits on AVAD's board of managers. The following facts are drawn from appellees' petition.

         Gravitas spent years evaluating and attempting to purchase oil and natural gas assets in Utah's Helper and Drunkards Wash fields (the "Property") from Andarko Petroleum Corporation (Andarko). Working in natural gas fields adjacent to the Property, Gravitas Chief Executive Officer Jeffrey Clarke and Operations Vice President Douglas Endsley gained an "understanding of the Property's underlying natural gas field, reserve potential, operating-cost structure, and productive capacity." While assessing how to purchase the Property and other assets in the area, Gravitas learned the Property sat on substantial, underutilized natural gas reserves. It pieced together public and non-public data related to acreage abutting the Helper field and within the Drunkards Wash field that ConocoPhillips attempted to auction and confirmed the Property had significant additional reserves that could be extracted if approved, but undrilled, Infill Wells were drilled. "Through geologic and engineering studies and discussions with . . . field managers," Gravitas also gathered information about potential operational savings on the Property, learning about a "wealth of inefficiencies" in Andarko's operations, and estimated it could save a substantial amount in annual operating costs by cutting unnecessary expenses.

         In June 2016, Gravitas approached Anadarko about making an offer for the Property. Anadarko provided Gravitas with data, including Anadarko's reserve data, information about Anadarko's gathering and processing systems, and profit and loss statements. On July 19, 2016, Gravitas submitted an $88 million bid to purchase the Property. Anadarko decided to test the strength of the bid through an auction. Gravitas responded by making a preemptive $102 million bid, but Anadarko declined. Anadarko hired the Oil and Gas Asset Clearinghouse (OGC) to run the auction, and OGC set up a public data room for all potential bidders. The data room, however, contained no information on either the "substantial potential of undrilled Infill Wells or the potential for reduced operating costs."

         Its $102 million bid was the highest of multiple bids, and Gravitas began negotiating a purchase and sale agreement for the Property. At the same time, Gravitas was seeking additional funding for the purchase. It commissioned Ryder Scott Company, L.P. (Ryder Scott) to prepare a reserve report on the Property. Reserve reports are typically confidential; Ryder Scott's report provided it "was prepared for the exclusive use and sole benefit of Gravitas and may not be put to other use without our prior written consent for such use." Gravitas also retained RMK Maritime Capital, LLC (RMK) to contact prospective financers. RMK managing director Alan Pinto "provided prospects with a basic outline of the investment opportunity in a 'gas asset in the Northern Rockies,' including explanations of Gravitas's optimistic production and cost projections, as well as the favorable topline numbers" from Ryder Scott's report.

         In February 2017, Pinto emailed Pearl Management associate William Dace and, without identifying the Property, provided a "high-level" description of the investment. Dace responded that the "deal looks like something we could be interested in." Pinto asked that Pearl Management sign a non-disclosure agreement (NDA); entering into a NDA was Gravitas's "standard process" before sharing its confidential and sensitive information. Dace forwarded a Pearl Management form NDA. The terms of the NDA provided that Pearl Management agreed not to disclose Gravitas's "Confidential Information"[2] to any third party or use such information for its own benefit. Gravitas executed the NDA, outlining the Property and attaching a map, and returned it to Dace. Pearl Management never countersigned the NDA upon its return.

         Gravitas and Pearl Management representatives, including Quinn, met on March 6, 2017. Pearl Management questions focused on the Property's potential. Gravitas "elaborated on the proprietary Ryder Scott Report's positive reserve and financial valuations" and provided significant information on its efforts to purchase the Property and the terms and structure of the proposed purchase; operating information about the Property, including information about pipeline infrastructure; Gravitas's plans to increase production and lower operating costs from the existing PDP Wells; Gravitas's plan, with regulatory approval, to drill more than 129 Infill Wells; Gravitas's assessment of the economic life of PDP and Infill Wells; and Gravitas's assessment of the Property's reserves based on its study of the Conoco assets. A few days after the meeting, however, Pearl Management advised Gravitas that the Property did not fit its "investment parameters."

         In April 2017, Gravitas advised Andarko it expected to have a financing commitment soon; Anadarko indicated it was considering a sale to other potential buyers. On May 14, 2017, Gravitas advised Anadarko that it "was ready to move forward with purchasing the Property." Anadarko replied that it recently signed a purchase and sale agreement with another group, which Gravitas learned was AVAD, the Pearl Management portfolio company.[3]

         Appellees allege the Pearl defendants disclosed Gravitas's private and confidential information about the Property to AVAD and "AVAD - armed with the information . . . - short-circuited Gravitas's years of study and assessment of the Property, and structured a bid for the Property using Gravitas's confidential and proprietary information." Gravitas asserted causes of action for breach of the NDA, violations of the Texas Uniform Trade Secrets Act, unfair competition by misappropriation, tortious interference with contractual relations, tortious interference with prospective business relations, common law fraud, aiding and abetting common law fraud, and unjust enrichment.[4] Pinto asserted common law fraud, aiding and abetting common law fraud, unjust enrichment, and tortious interference with contractual relations causes of action.

         Appellants filed motions to dismiss all of appellees' claims under the TCPA. Appellants contend all of the claims are based on allegations the Pearl defendants obtained confidential information from appellees and improperly communicated that information to AVAD. According to appellants, the TCPA applies because the communications were (1) an exercise of their right of association because appellees allege appellants joined together to pursue their common interests to the detriment of Gravitas, and (2) an exercise of their right of free speech because the purportedly confidential information related to matters of public concern. Appellants further contend the TCPA requires dismissal of the claims and an award of attorneys' fees, costs, and sanctions to ...


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