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Frye v. Anadarko Petroleum Corp.

United States Court of Appeals, Fifth Circuit

November 4, 2019

LEA S. FRYE, Plaintiff - Appellant
v.
ANADARKO PETROLEUM CORPORATION, Defendant-Appellee

          Appeal from the United States District Court for the Southern District of Texas

          Before CLEMENT, HIGGINSON, and DUNCAN, Circuit Judges.

          STEPHEN A. HIGGINSON, CIRCUIT JUDGE.

         Lea Frye seeks review of the district court's dismissal of her claims against her former employer, Anadarko Petroleum Corporation. Frye alleges that Anadarko retaliated against her in violation of the Dodd-Frank Act's whistleblower protections. She also seeks a declaratory judgment stating that her non-disclosure agreement with Anadarko does not cover a letter she wrote to the SEC detailing Anadarko's alleged misconduct. Because Frye failed to present her whistleblower retaliation claim as a continuing violation to the district court, we hold that she has waived this argument. We affirm the district court on the issue as it was presented to that court. However, we reverse the district court's determination that Frye's claim under the Declaratory Judgment Act is nonjusticiable, and we thus remand for further proceedings on that claim.

         I.

         A. Frye's Whistleblower Complaints and Retaliation

         Frye worked as an engineer for Anadarko Petroleum Corporation (Anadarko) from 2005 to 2016. Her job involved evaluating the size of oil fields and developing economic models related to the viability of drilling and production projects. Frye has alleged that she received consistently positive performance evaluations.

         According to Frye, Anadarko fraudulently overstated the economic prospects of its Shenandoah oil field in the Gulf of Mexico and then retaliated against her for objecting to these misrepresentations. Frye was a Senior Reservoir Engineer and team lead for the Shenandoah project. In March 2014, Frye alleges that Anadarko "knowingly published inflated information about its 2013 exploration successes during an investor conference." Further, after drilling began on the Shenandoah 3 (Shen 3) appraisal well, Anadarko allegedly concealed bad reports about this well from the public. In a February 2015 call with investors, an Anadarko executive allegedly "described Shen 3 in glowing terms, claiming there was over 1, 500 feet of 'quality sand, '" even though "well data revealed that Shen 3 was actually a dry hole." Finally, in an October 2015 earnings call, Anadarko allegedly exaggerated findings from the Shenandoah 4 appraisal, repeating past optimistic projections without revealing new data indicating that the potential of the well "was vastly overstated." Frye alleges that, although Anadarko "knew the Shenandoah resource was less than half the size Defendant had originally claimed in March 2014," it "made no corrections to its original projections."

         Between 2014 and 2015, Frye contends that she made clear she was uncomfortable with Anadarko's "false, misleading statements about Shenandoah and the misleading way faults were being mapped" to "justify resource projections that it knew were flimsy and unscientific." In a February 2014 meeting with Anadarko executives, Frye alleges that she presented an economic analysis stating "that the Shenandoah project value was likely much smaller than Defendant's exploration team had previously claimed." An Anadarko vice president, Ernie Leyendecker, allegedly responded angrily to Frye's conclusions and berated her economic analysis. Frye further alleges that, in August 2014 emails, Leyendecker was "adamant" that she and others conceal maps revealing the existence of faulting and instead use false maps of Shenandoah.

         According to Frye, after she "repeatedly vocalized her opposition to the fraudulent acts and omissions she observed during her work on the Shenandoah project, Defendant began to exclude her from the weekly partner drilling update meetings" that were critical to her job. Anadarko also denied Frye access to Anadarko's partners and to the data she needed to do her job. In January 2016, Frye told her supervisor that she would not be a party to overstating the Shenandoah prospects. But she "saw no indication that anything was being done to stop the fraud from continuing."

         Around the same time, Frye asked to be included in a planned reduction in force (RIF) that would have allowed her to receive over $300, 000 in severance pay and benefits. Anadarko allegedly failed to respond to Frye's request and did not include her in the reduction, despite "a custom and practice of honoring most, if not all, employees' requests to be included in a RIF," including those of other similarly situated engineers. Frye asserts that, by spring 2016, her work environment became intolerable because she was badgered and humiliated by Leyendecker and others, some of her job duties had been taken away, and she was ordered to continue using false maps. As a result, Frye suffered from depression and anxiety and decided to take leave under the Family and Medical Leave Act (FMLA).

         On May 9, 2016, while on FMLA leave, Frye submitted a letter to the SEC detailing alleged violations of federal securities laws by Anadarko. Frye alleges that Anadarko learned of the SEC letter, and that it continued to retaliate against her based on her decision to report this conduct. For example, Frye alleges that Anadarko instructed her coworkers not to speak to her. She also alleges that she suspected Anadarko of outing her as a whistleblower to her coworkers. Frye resigned on May 19, 2016, while still on FMLA leave. Frye alleges that she was constructively discharged because "it was now clear from recent events" that her "work environment was going to be even more intolerable than it had been before she submitted the SEC letter."

         After her resignation, Anadarko retroactively shortened Frye's FMLA leave, retroactively cancelled her and her family's health insurance, and delayed her COBRA health insurance coverage. Anadarko also allegedly withheld payment for Frye's accrued but unused vacation time. After Frye retained counsel in June 2016, Anadarko reinstated her health benefits and paid her accrued vacation time. Frye alleges she experienced stress and anxiety because of Anadarko's actions.

         B. Non-Disclosure Agreement

         In May 2017, about a year after Frye's resignation, Anadarko abandoned the Shenandoah project and wrote off its losses. At this time, Frye decided to reveal to Anadarko shareholders the alleged fraud she had reported to the SEC. As part of her employment with Anadarko, however, Frye had signed a Proprietary Information and Inventions Agreement (PIIA) prohibiting the disclosure of proprietary information. In June 2017, Frye's counsel contacted Anadarko requesting its position on whether the PIIA prohibited Frye from disclosing the SEC letter. Anadarko responded on June 21, 2017, stating its position that the SEC letter fell within the PIIA and that it reserved its rights if protected information was disclosed in any manner.

         On June 22, 2017, Frye sought permission from the district court to reveal the SEC letter to plaintiffs in a securities fraud lawsuit against Anadarko. On July 6, 2017, Anadarko sent Frye's counsel a second letter stating, in relevant part:

To be clear, the information in the SEC Letter is "Proprietary Information" as defined in the Proprietary Information and Invention Agreement ("PIIA") that your client signed on October 18, 2005. Any disclosure of Anadarko's proprietary information contained in the SEC Letter to third parties (except as may be permitted by any applicable whistleblower or other laws) . . . is prohibited by that agreement. The Company is not waiving any of its rights under the PIIA, and will specifically enforce the protections ...

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