REAL PARTIES IN INTEREST'S RESPONSE TO BRIEF ON THE

Document Sample
REAL PARTIES IN INTEREST'S RESPONSE TO BRIEF ON THE Powered By Docstoc
					                                NO. 02-0071


                                IN THE
                        SUPREME COURT OF TEXAS


  IN RE: LEE M. BASS, LEE M. BASS, INC. & PALLADIAN CORPORATION,
                              RELATORS


  Original Proceeding from the 105th District Court of Kenedy County, Texas
                 The Honorable J. Manuel Bañales Presiding


      REAL PARTIES IN INTEREST’S RESPONSE TO BRIEF ON THE
         MERITS FOR PETITION FOR WRIT OF MANDAMUS


Roger S. Braugh, Jr.
State Bar No. 00796244
Juan Enrique Mejia
State Bar No. 00784588
WATTS & HEARD L.L.P.
555 N. Carancahua, Suite 1400
Corpus Christi, Texas 78478
Telephone (361) 887-0500
Telecopier (361) 887-0055

OF COUNSEL:

Jane M. Braugh                           David T. Bright
State Bar No. 00790360                   State Bar No. 02991490
555 N. Carancahua, Suite 1400            WATTS & HEARD L.L.P.
Corpus Christi, Texas 78478              555 N. Carancahua, Suite 1400
Telephone (361) 887-0500                 Corpus Christi, Texas 78478
Telecopier (361) 887-0055                Telephone (361) 887-0500
                                         Telecopier (361) 887-0055
Jacobo G. Muñoz
State Bar No. 14670200             ATTORNEYS FOR REAL PARTIES IN
HILLIARD & MUÑOZ                   INTEREST, KATHLEEN MCGILL
719 S. Shoreline, Suite 600        ENYART AND SCOTT MCGILL, JR.
Corpus Christi, Texas 78401
                       IDENTITY OF PARTIES AND COUNSEL

      The identity of parties and counsel made by Relators in their Brief on the

Merits for Petition for Writ of Mandamus omits the following counsel for Real

Parties in Interest:


3.    ADDITIONAL ATTORNEYS FOR REAL PARTIES IN INTEREST:

Jane M. Braugh                              David T. Bright
State Bar No. 00790360                      State Bar No. 02991490
555 N. Carancahua, Suite 1400               WATTS & HEARD L.L.P.
Corpus Christi, Texas 78478                 555 N. Carancahua, Suite 1400
Telephone (361) 887-0500                    Corpus Christi, Texas 78478
Telecopier (361) 887-0055                   Telephone (361) 887-0500
                                            Telecopier (361) 887-0055

Juan Enrique Mejia
State Bar No. 00784588
WATTS & HEARD L.L.P.
555 N. Carancahua, Suite 1400
Corpus Christi, Texas 78478
Telephone (361) 887-0500
Telecopier (361) 887-0055




                                        i
                                         TABLE OF CONTENTS


IDENTITY OF PARTIES AND COUNSEL ............................................................ i

TABLE OF CONTENTS ............................................................................................ ii

TABLE OF AUTHORITIES ..................................................................................... vi

SUPPLEMENTAL RECORD .................................................................................. xii

I.      STATEMENT OF THE CASE ........................................................................ 1

II.     ISSUES PRESENTED .................................................................................... 3

III.    STATEMENT OF FACTS................................................................................ 4

IV.     SUMMARY OF THE ARGUMENT ............................................................... 7

V.      ARGUMENT AND AUTHORITIES ............................................................. 8

        A.       Applicable Law ....................................................................................... 8

                 1.       Mandamus is severely limited in the discovery context.................... 8

                 2.       The trial court’s order must be upheld on any basis supported
                          by the record ................................................................................... 9

                 3.       Reviewing court cannot substitute its judgment on disputed
                          questions of fact ............................................................................... 9

                 4.       Relators’ burdens........................................................................... 10

        B.       Court Did Not Abuse its Discretion by Concluding
                 That There Was No Trade Secret ........................................................ 10

                 1.       Not all confidential or proprietary information is a trade secret, and
                          there is no precedent for the proposition that geological information
                          is a trade secret .............................................................................. 12

                 2.       Applicable Law .............................................................................. 14




                                                           ii
     3.      Authority cited by Bass does not support blanket extension
             of trade secret protection to raw seismic data ................................. 16

             (a)      Phillips v. Stryker, 723 So.2d 585 (Ala. 1998) ................... 17

             (b)      Musser Davis Land Co. v. Union Pac. Resources, Inc., 201
                      F.3d 561 (5th Cir 2000)....................................................... 17

             (c)      Amoco Prod. V. Laird, 622 N.E. 912, 921 (Ind. 1993)........ 18

             (d)      Pennzoil v. Federal Power Comm’n, 534 F.2d 627,
                      631-632 n.2 (5th Cir. 1976) ................................................. 19

             (e)      Ashland Oil Co. v. F.T.C., 409 F. Supp. 297
                      (D.D.C. 1976)..................................................................... 19

             (f)      Other Cases ....................................................................... 19

     4.      Application of six-factor test to the facts ........................................ 20

             (a)      The extent to which the information is known outside
                      of the holder’s business ................................................... 21

             (b)      The extent to which it is known by employees and
                      others involved in the holder's business ........................ 22

             (c)      The extent of the measures taken by the holder to
                      guard the secrecy of the information.............................. 23

             (d)      The value of the information to the holder and its
                      competitors ....................................................................... 26

             (e)      The amount of effort or money expended by the
                      holder in developing the information ............................ 28

             (f)      The ease or difficulty with which the information
                      could be properly acquired or duplicated by others..... 29

C.   Relators Have Waived Their Right To Mandamus Relief By
     Failing to Assign Error Or Provide Argument And Authorities
     Justifying Mandamus........................................................................... 31




                                            iii
D.   Relators Cannot Establish Entitlement To Mandamus
     Relief Because the Discovery Ordered Was Not Patently
     Irrelevant Or Extremely Burdensome In Comparison To
     Plaintiffs’ Need For The Seismic Data............................................... 33

     1.     The evidence sought is not patently irrelevant ............................... 33

     2.     The court should not decide the merits of Plaintiffs’ claims under
            the guise of judging the relevance of the discovery sought ............. 35

     3.     Texas law imposes a duty between an executive mineral owner and
            nonparticipating royalty interest owners ...................................... 36

            (a)      Pickens v. Hope, 764 S.W.2d 256 (Tex. App.—San
                     Antonio 1988, writ denied).............................................. 39

            (b)      Eternal Cemetery Corp. v. Tammen, 324 S.W.2d 562 (Tex.
                     Civ. App.—Fort Worth 1959, writ ref’d n.r.e.)............... 39

            (c)      Portwood v. Buckalew, 521 S.W.2d 904 (Tex. Civ.
                     App.—Tyler 1975, writ ref’d n.r.e).................................. 40

            (d)      Kimsey v. Fore, 593 S.W.2d 107 (Tex. Civ.
                     App.—Beaumont 1979, writ ref’d n.r.e.) ........................ 40

            (e)      Comanche Land & Cattle Co. v. Adams, 688 S.W.2d 914
                     (Tex. App.—Eastland 1985, no writ)............................... 41

            (f)      Dearing, Inc. v. Spiller, 824 S.W.2d 728 (Tex. App.—
                     Fort Worth 1992, writ denied)......................................... 41

            (g)      Winslow v. Acker, 781 S.W.2d 322 (Tex. App.—San
                     Antonio 1989, writ denied).............................................. 42

            (h)      Marathon Oil Co. v. Moye, 893 S.W.2d 585 (Tex.
                     App.— Dallas 1994, no writ) ........................................... 42

     4.     Requiring production of the Erck seismic data is not
             extremely burdensome in comparison to Plaintiffs’ need for
            the seismic data.............................................................................. 45

E.   Even If Relators Proved Trade Secret, Judge Bañales Did
     Not Clearly Abuse His Discretion In Weighing Substantial
     Need Versus The Non-Existent Harm To Relators .......................... 46



                                            iv
VI. PRAYER ............................................................................................................... 50

VII. CERTIFICATE OF SERVICE .......................................................................... 51




                                                             v
                                     TABLE OF AUTHORITIES

CASES:

Abbott v. U.S.,
      239 F.2d 310 (5th Cir. 1956) ......................................................................... 19, 20

American Derringer Corp. v. Bond,
      924 S.W.2d 773 (Tex. App.—Waco 1996, no pet.) .......................................... 11

American Indus. Life Ins. Co. v. Ruvalcaba,
      64 S.W.3d 126 (Tex. App.—Houston [14th Dist.] 2001, n.p.h.) ..................... 12

Amoco Prod. v. Laird,
     622 N.E.2d 912 (Ind. 1993) ............................................................................... 18

Ashland Oil, Inc. v. FTC,
      409 F. Supp. 297 (D.D.C. 1976) ........................................................................ 19

Barnes v. Whittington,
      751 S.W.2d 493 (Tex. 1998) (orig. proceeding) ............................................... 11

Beaumont Bank, N.A. v. Buller,
     806 S.W.2d 223 (Tex.1991)...................................................................... 9, 31, 47

Brentwood Financial Corp. v. Lamprecht,
      736 S.W.2d 836 (Tex. App.—San Antonio 1987, writ ref’d n.r.e.)................. 32

Carson Prods. Co. v. Califano,
      594 F.2d 453 (5th Cir. 1979) ............................................................................. 24

Chapa v. Garcia,
      848 S.W.2d 667 (Tex. 1992) (orig. proceeding) ............................................... 47

Comanche Land & Cattle Co. v. Adams,
     688 S.W.2d 914 (Tex. App.—Eastland 1985, no writ) .................................... 41

Computer Assocs. Int’l, Inc. v. Altai, Inc.,
     918 S.W.2d 453 (Tex. 1996)......................................................................... 12, 15

Dearing, Inc. v. Spiller,
      824 S.W.2d 728 (Tex. App.—Fort Worth 1992, writ denied)................... 41, 42

Eternal Cemetery Corp. v. Tammen,
      324 S.W.2d 5622 (Tex. Civ. App.—Fort Worth 1959, writ ref’d n.r.e.)... 39, 40


                                                        vi
Expo Chem Co., Inc. v. Brooks,
      572 S.W.2d 8 (Tex. App.—Houston [1st Dist.] 1978),
      rev’d on other grounds, 576 S.W.2d 369 (Tex. 1979) ......................................... 16

Federal Land Bank of Houston v. United States,
      168 F. Supp. 788 (Ct. Cl. 1958) ......................................................................... 37

Furr’s, Inc. v. United Specialty Adver. Co.,
       385 S.W.2d 456 (Tex. Civ. App.—El Paso 1964,
       writ ref’d n.r.e.), cert. denied, 382 U.S. 824 (1965) ........................................... 23

Gonzales v. Zamora,
      791 S.W.2d 258 (Tex. App.—Corpus Christi 1990, no writ).......................... 24

Guaranty County Mut. Ins. Co. v. Reyna,
     709 S.W.2d 647 (Tex. 1986)..................................................................... 9, 31, 47

Hancock v. Walker,
     873 S.W.2d 422 (Tex. App.—Ft. Worth 1994, orig. proceeding) ................... 32

H.E. Butt Grocery Co. v. Moody’s Quality Meats, Inc.,
      951 S.W.2d 33 (Tex. App.—Corpus Christi 1997, writ denied) .............. 10, 15

Hicks v. Humble Oil & Refining Co.,
      970 S.W.2d 90 (Tex. App.—Houston [14th Dist.] 1998, pet. denied)............. 12

Humphreys v. Caldwell,
    888 S.W.2d 469 (Tex. 1994) (orig. proceeding) ............................................... 35

Humphreys v. Caldwell,
    881 S.W.2d 940 (Tex. App.—Corpus Christi 1994, orig. proceeding) .......... 35

In re Alford Chevrolet-Geo,
       997 S.W.2d 173 (Tex. 1999) (orig. proceeding) ............................................... 11

In re Aubin,
       29 S.W.3d 199 (Tex. App.—Beaumont 2000, orig. proceeding).................... 10

In re City of Georgetown,
       53 S.W.3d 328 (Tex. 2001)................................................................................. 13

In re Continental Gen. Tire,
       979 S.W.2d 609 (Tex. 1998) (orig. proceeding) ................................... 16, 30, 46



                                                        vii
Jampole v. Touchy,
      673 S.W.2d 569 (Tex. 1994)............................................................................... 14

J.M. Huber Corp. v. Square Enters., Inc.,
      645 S.W.2d 410 (Tenn. App. 1982)............................................................. 43, 44

Jordan v. Fourth Court of Appeals,
      701 S.W.2d 644 (Tex. 1985) (orig. proceeding) ............................................... 10

Kavanaugh v. Perkins,
     838 S.W.2d 616 (Tex. App.—Dallas 1992, orig. proceeding)......................... 11

Kent v. U.S.,
      608 F.2d 542 (5th Cir. 1979)........................................................................ 19, 20

Kimsey v. Fore,
      593 S.W.2d 107 (Tex. Civ. App.—Beaumont 1979, writ ref’d n.r.e.) ............ 40

Kirkpatrick v. Harris,
      716 S.W.2d 124 (Tex. App.—Dallas 1986, orig. proceeding)......................... 32

Lawfinders Assocs., Inc. v. Legal Research Ctr., Inc.,
      65 F. Supp. 2d 414 (N.D. Tex. 1998) ................................................................ 24

Luccous v. J.C. Kinley Co.,
      376 S.W.2d 336 (Tex. 1964)............................................................................... 22

Luxenberg v. Marshall,
     835 S.W.2d 136 (Tex. App.—Dallas 1992, orig. proceeding)............... 9, 31, 47

Manges v. Guerra,
     673 S.W.2d 180 (Tex. 1984)........................................................................... 5, 38

Marathon Oil Co. v. Moye,
     893 S.W.2d 585 (Tex. App.—Dallas 1994, no writ) ........................................ 42

McGowan v. State,
    938 S.W.2d 732 (Tex. App.—Houston [14th Dist.] 1996), aff’d sub nom.
    Weightman v. State, 975 S.W.2d 621 (Tex. Crim. App. 1998) ................... 23, 24

Memorial Hospital – The Woodlands v. McGowan,
     927 S.W.2d 1 (Tex. 1996) (orig. proceeding) ................................................... 11

Morris v. First Nat’l Bank of Mission,
      249 S.W.2d 269 (Tex. Civ. App.—San Antonio 1952, writ ref’d n.r.e.)......... 38


                                                      viii
Musser Davis Land Co. v. Union Pac. Resources, Inc.,
     201 F.3d 561 (5th Cir. 2000) ............................................................................... 17

Ogburn v. Blackburn,
     697 S.W.2d 822 (Tex. App.—Amarillo 1985, no writ).................................... 36

Pennzoil v. FPC,
     534 F.2d 627 (5th Cir. 1976) ............................................................................... 19

Phillips v. Stryker,
       723 So. 2d 585 (Ala. 1998)................................................................................. 17

Pickens v. Hope,
      764 S.W.2d 256 (Tex. App.—San Antonio 1988, writ denied) ................ 38, 39

Portwood v. Buckaleew,
      521 S.W.2d 904 (Tex. Civ. App.—Tyler 1975, writ ref’d n.r.e.)..................... 40

Prather v. Brandt,
      981 S.W.2d 801 (Tex. App.—Houston [1st Dist.] 1998, pet. denied) ............. 12

Prather v. McNally,
      757 S.W.2d 124 (Tex. App.—Dallas 1988, no writ) .............................. 9, 31, 47

Schlittler v. Smith,
       128 Tex. 628, 101 S.W.2d 543 (Tex. Comm’n App. 1937,
       opinion adopted) ........................................................................................ 38, 39

Schroeder v. Schroeder,
      479 N.E.2d 391 (Ill. App. 1985) ........................................................................ 37

Secure Comm, Inc. v. Anderson,
      31 S.W.3d 428 (Tex. App.—Austin 2000, no writ) ......................................... 10

Shafer v. Bedard,
       761 S.W.2d 126 (Tex. App.---Dallas 1988, orig. proceeding)................... 32, 47

Shell Western E&P, Inc. v. Oliver,
       751 S.W.2d 195 (Tex. App.—Dallas 1988, orig. proceeding) .................. 10, 32

State Oil & Gas Bd. v. Mississippi Mineral & Royalty Owners Ass’n,
       258 So. 2d 767 (Miss. 1971) .............................................................................. 44




                                                          ix
Stewart & Stevenson Servs., Inc. v. Serv-Tech,
      879 S.W.2d 89 (Tex. App.—Houston [14th Dist.]
      1994, writ denied) ............................................................................12, 23, 28, 30

TXO Prod. Co. v. M.D. Mark, Inc.,
     999 S.W.2d 137 (Tex. App.—Houston [14th Dist.] 1999,
     pet. denied) ........................................................................................... 15, 16, 22

Victoria Bank & Trust Co. v. Brady,
       811 S.W.2d 931 (Tex. 1991)............................................................................... 10

Walker v. Packer,
      827 S.W.2d 833 (Tex. 1992) (orig. proceeding) ................................9, 14, 33, 46

Welles v. Berry,
      434 So. 2d 982 (Fla. App. Ct. 1983) ............................................................ 43, 44

West v. Solito,
      563 S.W.2d 240 (Tex. 1978) (orig. proceeding) ............................................... 10

Wike v. Dagget,
      696 S.W.2d 79 (Tex. App.—Houston [14th Dist.] 1985, no writ).................... 36

Winslow v. Acker,
      781 S.W.2d 322 (Tex. App.—San Antonio 1989, writ denied) ...................... 42

Wintermann v. McDonald,
      102 S.W.2d 167 (Tex. 1937)............................................................................... 39

Wissman v. Boucher,
     150 Tex. 356, 240 S.W.2d 278 (1951) ................................................................ 30


STATUTES:

5 U.S.C. § 552(b)(4) ...................................................................................................... 13

5 U.S.C. § 552(b)(9) ...................................................................................................... 13


RULES:

TEX. R. APP. P. 52.3(h) ................................................................................................. 32

TEX. R. CIV. P. 13.......................................................................................................... 49


                                                              x
TEX. R. EVID. 507 .................................................................................................... 15, 47

TEX. GOV’T CODE ANN. § 552.110 ............................................................................... 13


OTHER:

Restatement (Second) Torts § 757 .............................................................................. 12

Restatement (Third), Unfair Competition § 39, cmt. d ............................................ 11

Merrill, Covenants Implied in Oil and Gas Leases, §§ 218, 221 (2d Ed. 1940) ............. 44

2 Williams & Meyers, Oil and Gas Law 338 –339.3 (1981)......................................... 44

1 Williams & Meyers, Oil and Gas Law 205.1 (1981) ................................................. 44

C. Randal Hill, Protecting the Rights of Non-Participating Mineral Owner,
20 TULSA L.J. 433 (1985)............................................................................................... 38

Ernest E. Smith, Implications of a Fiduciary Standard of Conduct for Holder
Of the Executive Right, 64 TEX. L. REV. 371 (Oct. 1985).............................................. 38

Mack K. McCollum, Manges v. Guerra: The Executive Right Holder Undergoes
Close Scrutiny, 38 BAYLOR L. REV. 189 (Winter 1986)................................................ 38




                                                             xi
                          SUPPLEMENTAL RECORD

      Filed concurrently with the Real Parties in Interest’s Response to Petition

for Writ of Mandamus was Real Parties in Interest’s Supplemental Record. This

supplemental record was provided in accordance with Tex. R. App. P. 52.7(b) to

provide complete copies of two incomplete documents in found in the Original

Record submitted by Relators and supporting documents that were not

contained in the Original Record.

      Filed concurrently with this brief, Real Parties In Interest’s Response to

Brief on the Merits for Petition for Writ of Mandamus is a brief appendix as

permitted by the Rules of Appellate Procedure.

      Citations to the record, supplemental record, and appendix in this

Response to Brief on Merits for Petition for Writ of Mandamus are made as

follows:

      Citation to Bass’s Original Record:        R., Tab         at         .

      Citation to Supplemental Record:           Supp. R., Tab             at       .

      Citation to Appendix to Response:          App. Tab             at        .




                                         xii
                                   NO. 02-0071



                                  IN THE
                          SUPREME COURT OF TEXAS


  IN RE: LEE M. BASS, LEE M. BASS, INC. & PALLADIAN CORPORATION,
                              RELATORS


   Original Proceeding from the 105th District Court of Kenedy County, Texas
                  The Honorable J. Manuel Bañales Presiding


          REAL PARTIES IN INTEREST’S RESPONSE TO BRIEF ON THE
           MERITS FOR PETITION FOR WRIT OF MANDAMUS



      Real Parties In Interest, Kathleen McGill Enyart and Scott McGill, Jr.

(“Plaintiffs”), file their Response to Brief on the Merits for Petition for Writ of

Mandamus of Relators Lee M. Bass, Lee M. Bass, Inc. and Palladian Corporation

(collectively “Bass”).

                         I. STATEMENT OF THE CASE

      The underlying proceeding. To the extent that Bass’s statement of the case

suggests that Plaintiffs only “recently” made claims concerning the 20,000-acre

Erck Property, this suggestion is patently false. That this complaint is incessantly

repeated makes it no less false or misleading. Claims concerning the Erck

Property were included in Plaintiffs’ Fourth Amended Petition, which was active

at the time the original order granting the motion compel was signed.

Subsequently, defendants requested, by special exceptions, that Plaintiffs specify
which causes of action pled related to Erck Property and which related only to

the Former Weakly Property. Plaintiffs complied by filing their Fifth Amended

Petition, which was the active pleading at the time the October 23, 2001

discovery order complained of in this mandamus proceeding was signed.

      Petition in the Court of Appeals. Bass’s suggestion that the October 23,

2001 discovery order required the production “of even more seismic data (at the

urging of Plaintiffs’ counsel)” than the previous order is false. The modified

order substantially reduced the discovery sought. Compare R., Tab 1 (October 23,

2001 Order) with R., Tab 2 (September 7, 2001 Order). Notably, the modified

order was entered for the express purpose of addressing some complaints as to

the breadth of the September 7, 2001 Order that were first raised in Relators’

Petition for Writ of Mandamus in the Thirteenth Court of Appeals. See generally

Supp. R., Tab 7 (transcript of hearing on modification of September 7 order).

      Current Posture of the Case. Although Plaintiffs originally sought to

compel production of Bass’s seismic interpretations, Plaintiffs withdrew their

requests for interpretations of seismic data in exchange for relators’ agreement

not to make offensive use of the interpretations in the litigation. Therefore, the

only issues properly before the Supreme Court of Texas relate to a discovery

order compelling the production of seismic data.




                                        2
                    II. ISSUES PRESENTED

1.   Whether a trial court clearly abuses its discretion by

     overruling a claim of trade secret when there is conflicting

     evidence, including uncontroverted evidence that the party

     resisting discovery contractually waived any secrecy

     protection for the information and voluntarily disclosed it to

     third parties without protecting its secrecy?

2.   Whether a trial court clearly abuses its discretion by

     compelling production of information that is reasonably

     calculated to lead to the discovery of evidence admissible to

     prove claims asserted in the underlying litigation?

3.   Whether a trial court clearly abuses its discretion merely

     because it resolves conflicting evidence about the need to

     discover potential trade secrets and the harm that will result

     from disclosure of those potential trade secrets?

4.   Whether a discovery mandamus may be used as a mechanism

     for summary disposition of a cause of action, which has not

     been ruled upon by the trial or appellate courts?




                                 3
                            III. STATEMENT OF FACTS

       This dispute concerns a total of approximately 27,000 aces of ranch land in

Kleberg County and Kenedy County, Texas currently owned by Lee M. Bass, Inc.

See Supp. R., Tab 1 (plat depicting the 7,000 acre “Former Weakly Property” in

blue and the 20,000 acre “Erck Property” in red). Plaintiffs are mineral owners

under the Weakly property and royalty interest owners under the Erck Property.

Lee M. Bass, Inc. now owns and has consolidated these properties into the “La

Paloma Vieja Ranch.”

       The genesis of the dispute on the 7,000-acre Former Weakly Property is a

1982 Partition Deed that partitioned the original 17,000-acre Santa Rosa Viejo

Ranch into separate tracts owned by three siblings, Kathleen McGill Enyart, Scott

McGill, Jr., and Jane McGill Weakly. See R., Tab 15 (“the 1982 Partition Deed”).

Attorneys at Fulbright & Jaworski drafted this deed on behalf of the Plaintiffs.

See Supp. R., Tab 2 at 1-2 (Affidavit of Thomas B. Campbell). The Former

Weakly Property is, for the most part, that portion of the Santa Rosa Viejo Ranch

partitioned to Jane McGill Weakly. The principal dispute as to the Former

Weakly Property is whether, under the partition deed, Jane McGill Weakly’s

executive rights (including the right to bonus) reverted to the Plaintiffs when she

sold all of her mineral interests to Bass in 1991. See, e.g., id at 2-7.

       Although Bass contends that Plaintiffs’ claims are meritless (Pet. at 3 & fn.

5), the Fulbright & Jaworski lawyer who drafted the deed has testified that




                                            4
Plaintiffs are correct in their construction and interpretation of the deed and its

original intent.1 See Supp. R., Tab 2.

         As to the Former Weakly Property, the dispute began when Bass

unilaterally granted Exxon Mobil a seismic permit and lease option encumbering

one hundred percent of the Former Weakly Property in exchange for substantial

cash consideration and free access to seismic information. See R., Tab 16 at 6

(Geophysical/Lease Option Agreement between Bass and Exxon). Bass has

never accounted to Plaintiffs for any of these benefits, including the gratuitous

seismic.2 Exxon subsequently released the option in its entirety, which Plaintiffs

allege has effectively condemned the property. See Supp. R., Tab 4 (Exxon

Release of Option).

         Although relators continue to assert, as they did in the court of appeals,

that Plaintiffs’ claims are limited to the Former Weakly Property, this is

inaccurate. Plaintiffs own royalty interests under the 20,000 acre Erck Property

and allege that Bass, as the mineral owner, breached fiduciary duties, committed

fraud and slander of title, and engaged in a civil conspiracy to their detriment.

See R., Tab 4 at ¶¶ 22, 25, 30, 31-33 (Plaintiffs’ Fifth Amended Petition).



     1
      Perhaps more tellingly, the Bass defendants have made numerous attempts since 1990 to purchase
the very “reversionary executive rights,” that they now contend do not exist. See, e.g., Supp. R., Tab 3 at
7-9 (one of several written offers by Palladian Corporation in 1990 to purchase the now-disputed
reversionary executive rights).
     2
       Notably, even if the Bass defendants prevail on the title issue, a substantial issue is raised by virtue
of Lee M. Bass, Inc.’s receipt of the seismic data, a non-cash, non-bonus benefit, that was not shared with
the Plaintiffs, whom Bass alleges are his nonexecutive mineral cotenants. See Manges v. Guerra, 673
S.W.2d 180, 183 (Tex. 1984) (holding that the duty of utmost good faith and fair dealing requires the
executive to obtain for the nonexecutive mineral owners “every benefit that he exacts for himself”)
(emphasis added).


                                                      5
       For the first time in these mandamus proceedings, Bass provides briefing

on the issue of what exact percentage of royalty interests the plaintiffs own in the

Erck Property, and also attach in a supplemental record various deeds that have

heretofore never been presented to any court below. Although no briefing is

contained on the value or significance of these 1.38% royalty interests, plaintiffs

dispute any suggestion that these interests are insignificant or worthless. The

combined 2.76% royalty interests of the plaintiffs has the potential, if properly

leased, explored and produced, to generate hundreds of thousands of dollars in

revenue per year for the plaintiffs. To a billionaire, such amounts may seem

paltry, but the protection of such interests has been and is of vital concern to the

plaintiffs.

       Plaintiffs originally requested 3D seismic data and interpretive

information on the Erck Property, the Former Weakly Property, and lands

adjoining these properties to the south and east. See R., Tab 5 at Request Nos. 75-

78 (Plaintiffs’ First Set of Discovery to Bass). Bass refused to produce any of the

information, relying primarily on the trade secret privilege and relevance

objections. Plaintiffs were forced to file a motion to compel. See Supp. R., Tab 5

(Plaintiffs’ Motion to Compel). At the hearing, Plaintiffs presented testimony

from a qualified and knowledgeable expert witness. Plaintiffs also briefed and

argued extensively the relevance and trade secret issues. See id.; see also generally

Supp. R., Tab 6 (Transcript of Motion to Compel Hearing).

       Thereafter, the trial court signed the original order compelling discovery of

seismic information on September 7, 2001. See R., Tab 2 (September 7, 2001

                                          6
Order). Ten days later, Bass and Exxon initiated mandamus proceedings in the

Thirteenth Court of Appeals challenging the order. During the mandamus

proceedings, the trial court narrowed the scope of the information to be

produced and clarified some language in the prior order that had provoked

objection for the first time in the petition for writ of mandamus. See R., Tab 1

(October 23, 2001 Order); see also Supp. R., Tab 7 at 16-17, 19-21, 24 (hearing

transcript relating to modification of September 7, 2001 order). The Thirteenth

Court of Appeals denied mandamus relief on January 15, 2002 by unpublished,

per curiam order. See R., Tab 20.

      Plaintiffs and Exxon had agreed to settle their controversy just a few days

before the court of appeals entered its order. As a result of the Exxon settlement,

and Bass’s stipulation at the Court of Appeals concerning seismic interpretations

(see Supp. R., Tab 8 at 12-13), the only portion of the October 23, 2001 discovery

order in issue is Bass’s obligation to produce seismic data concerning the 20,000

acre Erck Property.

                      IV. SUMMARY OF THE ARGUMENT

      In the oil and gas industry, raw seismic data, as opposed to interpretations

of that data, is gathered and held for sale on the open market to exploration

companies. Accordingly, in structuring its business dealings with Exxon, Bass

never treated the raw seismic data that Exxon gave to it as a trade secret.

Instead, Bass negotiated for the unconditional right to sell and disclose the

seismic data to Exxon’s competitors and granted the reciprocal right to Exxon.

Given this conclusive evidence, the trial court correctly followed the law and

                                         7
rejected Bass’s legally and factually unsupported claim that the raw seismic data

it possesses constitutes a trade secret.

      The trial court also correctly concluded that relators waived any secrecy

rights in the data. Even if this conclusive evidence could be disregarded, the trial

court’s resolution of conflicting evidence on the elements of trade secret does not

constitute an abuse of discretion.

      Furthermore, Bass’s novel change of position eight months into mandamus

proceedings, by which it argues for the first time that the court can conduct a

searching inquiry into the “viability” of a plaintiff’s causes of action in

mandamus proceedings, should be rejected. Permitting creative mandamus uses

that will interfere in the trial courts’ management of their dockets is bad policy.

Furthermore, Bass fails to recognize that the disputed seismic data is relevant to

claims that it does not challenge.

      Finally, even if relators were somehow able to prove that the seismic data

constitutes a “trade secret,” the trial court did not abuse its discretion in finding

that the fair adjudication of plaintiffs’ claims justified compelling production of

the data under protective order.


                      V. ARGUMENT AND AUTHORITIES

A.    Applicable Law

      1.     Mandamus is severely limited in the discovery context

      This court has severely limited mandamus in the context of orders

permitting discovery, restricting it to only two circumstances: (1) when the court


                                           8
wrongly compels production of privileged information or (2) when the

“discovery order compels the production of patently irrelevant or duplicative

documents, such that it clearly constitutes harassment or imposes a burden on

the producing party far out of proportion to any benefit that may obtain to the

requesting party.” Walker v. Packer, 827 S.W.2d 833, 843 (Tex. 1992) (orig.

proceeding). Other errors in compelling discovery can be remedied on appeal.

Id.

      2.    The trial court’s order must be upheld on any basis supported by the record

      The law is settled that a trial court does not clearly abuse its discretion if

the record contains any basis upon which its action can be upheld:

      We focus on the result reached by the trial court, rather than the
      reasons stated in the order. This approach is even more compelling
      in a mandamus proceeding where the issue is abuse of discretion. A
      trial court cannot abuse its discretion if it reaches the right result,
      even for the wrong reasons.

Luxenberg v. Marshall, 835 S.W.2d 136, 141-42 (Tex. App.—Dallas 1992, orig.

proceeding); Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991);

Guaranty County Mut. Ins. Co. v. Reyna, 709 S.W.2d 647, 648 (Tex. 1986); Prather v.

McNally, 757 S.W.2d 124, 126 (Tex. App.—Dallas 1988, orig. proceeding)).

      3.    Reviewing court cannot substitute its judgment on disputed questions of
            fact

      A trial court abuses its discretion in reaching a factual conclusion only

when the evidence is so one-sided that the “trial court could reasonably have

reached only one decision.” Walker, 827 S.W.2d at 840. Thus, to the extent that

the petition depends upon the resolution of disputed fact questions, it must be


                                          9
denied. West v. Solito, 563 S.W.2d 240, 245 (Tex. 1978) (orig. proceeding) (“[A]n

appellate court may not deal with disputed areas of fact in a mandamus

proceeding.”); In re Aubin, 29 S.W.3d 199, 203 (Tex. App.—Beaumont 2000, orig.

proceeding) (“[W]e cannot resolve a factual dispute in a mandamus proceeding).

         4.    Relators’ burdens

         Relators bear the burden to establish each element of a trade secret. See

H.E. Butt Grocery Co. v. Moody’s Quality Meats, Inc., 951 S.W.2d 33, 35-36 (Tex.

App.—Corpus Christi 1997, writ denied). In addition, relators bear the burden to

prove that they did not waive that privilege. Shell Western E&P, Inc. v. Oliver, 751

S.W.2d 195, 196 (Tex. App.—Dallas 1988, orig. proceeding) (citing Jordan v. Fourth

Court of Appeals, 701 S.W.2d 644, 649 (Tex. 1985) (orig. proceeding)). Given

established limitations on resolution of fact issues and the extremely limited

scope of discovery mandamus, relators should also bear the burden of proof to

establish: (1) that there is no evidence supporting the court’s decision and (2)

that they established trade secret as a matter of law.                 See, e.g., Victoria Bank &

Trust v. Brady, 811 S.W.2d 931, 940 (Tex. 1991).

B.       Court Did Not Abuse its Discretion by Concluding That There Was No
         Trade Secret

         As noted, Judge Bañales could have concluded that Bass failed to meet its

burden to prove that the seismic data constituted a trade secret.3 Secure Comm,

Inc. v. Anderson, 31 S.W.3d 428, 430-31 (Tex. App.—Austin 2000, no writ).


     3
       The mere issuance of a protective order is not evidence that Judge Bañales made any trade secret
finding. As demonstrated elsewhere in this response, information can be confidential without
constituting a trade secret.


                                                  10
Despite its burden to prove that the evidence before Judge Bañales was so

indisputably clear that he could have reached only one conclusion, Bass devotes a

scant three pages to discussion of the actual evidence contained in this record

under the applicable legal standard. A party resisting discovery cannot simply

make conclusory allegations that the requested discovery is inappropriate. In re

Alford Chevrolet-Geo, 997 S.W.2d 173, 181 (Tex. 1999) (orig. proceeding). In

addition, it cannot rely on global allegations in an affidavit—these constitute no

evidence to support a claim of privilege. See Barnes v. Whittington, 751 S.W.2d

493, 495 (Tex. 1988) (orig. proceeding) (no evidence is presented by mere global

allegations in affidavits that documents come within the privilege), superceded by

statute on other grounds, Memorial Hospital—The Woodlands v. McCowan, 927

S.W.2d 1, 9 (Tex. 1996) (orig. proceeding); see also Kavanaugh v. Perkins, 838

S.W.2d 616, 620 (Tex. App.—Dallas 1992, orig. proceeding) (noting affidavit

stating legal conclusions not sufficient to support claimed privilege).    Bass’s

effort to gloss over the dispositive question in this mandamus proceeding is

telling and the discussion below clearly demonstrates that Judge Bañales ruled

correctly.

      Before moving to that discussion, it is also important to emphasize that

Bass is attempting to avoid settled Texas law regarding trade secrets by relying

on the Restatement (Third), Unfair Competition § 39, comment d, which has

never been adopted by any court in the State of Texas. The ALI approved this

provision in 1993 and published it in 1995. See American Derringer Corp. v. Bond,

924 S.W.2d 773, 776 n.1 (Tex. App.—Waco 1996, no pet.). Nevertheless, this court

                                        11
confirmed in 1996 that Texas courts follow the six-factor test set forth in § 757 of

the Restatement (Second) Torts. Computer Assocs. Int'l, Inc. v. Altai, Inc., 918

S.W.2d 453, 455 (Tex. 1996).           Of course, Restatement provisions are not

controlling authority, unless adopted by this court or a governing intermediate

court of appeals. See American Indus. Life Ins. Co. v. Ruvalcaba, 64 S.W.3d 126, 134

n.5, 138 (Tex. App.—Houston [14th Dist.] 2001, n.p.h.); Prather v. Brandt, 981

S.W.2d 801, 804 (Tex. App.—Houston. [1st Dist.] 1998, pet. denied); Hicks v.

Humble Oil & Refining Co., 970 S.W.2d 90, 93 n.1 (Tex. App.—Houston [14th Dist.]

1998, pet. denied).

      1.       Not all confidential or proprietary information is a trade secret, and there is
               no precedent for the proposition that geological information is a trade secret

      Before beginning the more detailed discussion of trade secret law, it is also

instructive to consider the distinction between privileged information and

confidential information. Although Bass assumes that privileged information and

confidential information are synonymous, they are not. See Stewart & Stevenson

Servs., Inc. v. Serv-Tech, 879 S.W.2d 89, 98-99 (Tex. App.—Houston [14th Dist.]

1994, writ denied) (distinguishing confidential business information from trade

secrets). In a slightly different context, former Justice Abbott also explained the

distinction:

      “[P]rivileged” is not the same as “confidential.” . . . . That the
      Legislature does not consider the terms "privileged" and
      "confidential" synonymous is further evidenced by the terms' use
      within the Act. For example, in section 552.110, the exception for
      trade secrets, the Legislature made an express distinction between
      “privileged” and “confidential.” . . . . And in section 552.131, the
      Legislature again used privileged and confidential in the disjunctive:


                                              12
      “This section does not affect whether information is considered
      confidential or privileged under Section 508.313.”

In re City of Georgetown, 53 S.W.3d 328, 338, 340 (Tex. 2001) (Abbott, J, dissenting).

The provisions of § 552.110, which form part of the Open Records Act, also draw

a clear distinction between trade secrets and confidential information:

      (a) A trade secret obtained from a person and privileged or
      confidential by statute or judicial decision is excepted from the
      requirements of Section 552.021.

      (b) Commercial or financial information for which it is demonstrated
      based on specific factual evidence that disclosure would cause
      substantial competitive harm to the person from whom the
      information was obtained is excepted from the requirements of
      Section 552.021.

TEX. GOV’T CODE ANN. § 552.110. Texas is not alone in drawing this distinction.

In fact, the Freedom of Information Act expressly draws a distinction between

trade secrets and proprietary seismic information. Compare 5 U.S.C. § 552(b)(4)

(exempting trade secrets) with 5 U.S.C. § 552(b)(9) (exempting geophysical

information).

      In other words, it is not sufficient for relators to say that the information is

“valuable” or “confidential” or even “proprietary.”           Without proof, at a

minimum, that the elements of a trade secret exist, this mandamus petition must

be denied. Even if a trade secret exists, Bass must still show that the trial court

clearly abused its discretion in applying the balancing test. Relators scarcely

make any effort to prove that they established a trade secret. For this reason

alone, the Supreme Court should find that relators waived their right to

complain or that the court appropriately exercised its discretion to protect the


                                          13
confidential information that it ordered produced. See Jampole v. Touchy, 673

S.W.2d 569, 574 (Tex. 1994) (holding that court abused its discretion when

limiting discovery of proprietary information when the requestor was not a

direct competitor and competitive value of information could be protected by

protective order), overruled in part on other grounds sub nom. Walker v. Packer, 827

S.W.2d 833, 842 (Tex. 1992).

        Interestingly, relators do not provide this court with citation to even a

single decision (reported or unreported) actually holding that raw seismic data is

a trade secret.4 It bears repeating that even though seismic data forms the basis

for a majority of oil and gas exploration in the United States, relators have zero

cases to support their position. Furthermore, relators did not provide the trial

court or this court with evidence sufficient to establish this novel proposition. In

fact, the evidence and common sense counsel that the raw seismic data in this

case is not a trade secret, but is in fact a commodity available for purchase on the

open market. That is, while proprietary and confidential, raw seismic data is not

a trade secret under the facts of this case.

        2.     Applicable law

        The trade secret privilege rule states that:

        A person has a privilege, which may be claimed by the person or the
        person's agent or employee, to refuse to disclose and to prevent
        other persons from disclosing a trade secret owned by the person, if
        the allowance of the privilege will not tend to conceal fraud or


    4
      Relators cite a number of cases in their most recent brief, but none of the cases deals with raw
seismic data and none actually decided the question whether the information constituted a trade secret.
Section V.B.3. of this brief discusses each of those cases in some detail.


                                                  14
       otherwise work injustice. When disclosure is directed, the judge
       shall take such protective measure as the interests of the holder of
       the privilege and of the parties and the furtherance of justice may
       require.

TEX. R. EVID. 507. The rule itself does not define trade secret, but that term has

long been defined by Texas law as “any formula, pattern, device or compilation

of information which is used in one's business and presents an opportunity to

obtain an advantage over competitors who do not know or use it.” Computer

Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996).

       In further refining this definition, Texas follows the Restatement of Torts,

which incorporates the following six-factor test:

       (1)    The extent to which the information is known outside of the holder's
              business.
       (2)    The extent to which it is known by employees and others involved
              in the holder's business.
       (3)    The extent of the measures taken by the holder to guard the secrecy
              of the information.
       (4)    The value of the information to the holder and its competitors.
       (5)    The amount of effort or money expended by the holder in
              developing the information.
       (6)    The ease or difficulty with which the information could be properly
              acquired or duplicated by others.

In order to establish the existence of a trade secret, the proponent must introduce

evidence on each of these essential elements. TXO Prod. Co. v. M.D. Mark, Inc.,

999 S.W.2d 137, 142 n. 4 (Tex. App.—Houston [14th Dist.] 1999, pet. denied); see

also H.E. Butt Grocery Co. v. Moody's, 951 S.W.2d 33, 35-36 (Tex. App.—Corpus

Christi 1997, writ denied).

       Failing introduction of evidence to support each of the elements, the

alleged privilege is not preserved and no relief is appropriate:


                                            15
      Mark has failed to make this showing, simply making the
      conclusory determination that the seismic data is a trade secret.
      Further, in its motion for summary judgment, Mark failed to
      establish the extent to which employees and others in the business
      know the information and the ease with which others could acquire
      or duplicate the information, necessary elements to establish a trade
      secret. See Expo Chem. Co., Inc. v. Brooks, 572 S.W.2d 8, 11, 12 (Tex.
      App.—Houston [1st Dist.] 1978), rev'd on other grounds, 576 S.W.2d
      369 (Tex. 1979). Accordingly, we will not consider whether the
      seismic data constituted a trade secret.

TXO Prod. Co., 999 S.W.2d at 142 n. 4. Against this clear legal standard, the trial

court’s exercise of discretion was appropriate, not abusive.

      3.     Authority cited by Bass does not support blanket extension of trade secret
             protection to raw seismic data

      Fully two of the scant five pages that relators devote to trade secret

briefing merely discuss cases from other jurisdictions, which Bass contends have

universally assumed a trade secret privilege for seismic data. Even if it were

true, which it is not, that other cases have found a trade secret to exist in a

particular business arena, such cases would be irrelevant to determining whether

relators have proved that a trade secret exists in this particular case. For

example, the secret formula in In re Continental General Tire would certainly not

be a trade secret had the evidence shown that the tire company disclosed the

formula to competitors without restrictions on its dissemination.                Global

characterization of whether certain data is a trade secret cannot be made without

reference to the particular factual circumstances presented in each case as

applied to the six-factor test.




                                           16
      In any event, although Bass cites a number of cases for the proposition that

raw seismic data is a trade secret, there is not a holding to this effect in any of

those cases.

               (a)   Phillips v. Stryker, 723 So.2d 585 (Ala. 1998)

      Perhaps most telling of Bass’s weakness is its citation to this case. The only

mention of trade secret was an offhand remark in the factual recitation that an oil

company had once refused to share its “seismic research,” not seismic data, with

a competitor. The court mentioned that such “research” is usually treated as a

trade secret. This remark is not a holding, the issue was not raised in the case,

and it is impossible to deduce from the opinion that the remark applied to

seismic data, as opposed to interpretations. The holding in this case is actually a

state administrative law holding that landowners cannot collaterally attack board

orders creating oil and gas units by filing civil litigation against the oil company.

               (b)   Musser Davis Land Co. v. Union Pac. Resources, Inc., 201 F.3d 561
                     (5th Cir. 2000)

      This case addressed two issues: (1) whether, under Louisiana law, an oil

and gas lease implies the right to conduct seismic operations and (2) whether the

resulting data belongs to the lessor or lessee. The court relied on a line of cases

noting that seismic interpretations are confidential and proprietary. As noted

elsewhere, the confidential or proprietary nature of information does not

necessarily render it a trade secret, absent proof of the elements of a trade secret.

See supra, Section IV.B.1.




                                           17
             (c)   Amoco Prod. v. Laird, 622 N.E.2d 912, 921 (Ind. 1993)

       This case involved an Amoco employee who gave maps showing likely

crude oil deposits to Amoco’s competitor, who in turn used the maps to take

competing leases in the area where Amoco believed the oil reserves could be

found. The case did not involve raw seismic data. Rather, the information at

issue consisted of interpretations in the form of a map depicting specific areas

suspected to contain significant crude oil reserves derived from aerial microwave

surveys.

       Even if this case did stand for the proposition that raw data is a trade

secret under Indiana law, the result cannot be imported into Texas law. The

governing legal standard in Indiana is the Uniform Trade Secrets Act, which the

Indiana Supreme Court held defines trade secrets as information that “is [not]

readily ascertainable . . . in trade journals, reference books, or other published

materials.” Id. at 917. Thus, the result does not depend on the Restatement

elements, which this court has repeatedly held govern trade secret under Texas

law.

       Even more importantly, the Laird court recognized that:

       Because a determination of a trade secret is so heavily fact-specific,
       “the same information that qualifies as a trade secret under one set
       of facts may not be afforded protection under a different set of
       facts.”

Id. at 916 (citations omitted). In other words, rather than dictating the result in

every “seismic data” case, Laird leaves open even the question as to whether




                                         18
interpretations from microwave surveys are generally trade secrets under Indiana

law. In short, this case does nothing to advance Bass’s arguments.

             (d)   Pennzoil v. Federal Power Comm’n, 534 F.2d 627, 631-32
                   n.2 (5th Cir. 1976)

      This case discusses in dicta the FOIA provisions distinguishing between

trade secret and seismic information cited above. The parties agreed that the

natural gas reserves estimates at issue qualified as both and were exempt from

disclosure under FOIA. Insofar as this case treats trade secrets as distinct from

geophysical information, it supports plaintiffs’ contention that the seismic data

can be confidential, but still not be subject to protection as a trade secret. In any

event, the case only deals with reserves estimates, which are an entirely distinct

category of information not comparable with raw seismic data, and more akin to

interpretations.

             (e)   Ashland Oil, Inc. v. F.T.C., 409 F. Supp. 297 (D.D.C. 1976)

      This case also involves the question of whether reserves estimates

compiled through “hundreds of thousands of man-hours and millions of dollars”

constitute a trade secret. This question is not presented by Bass’s petition.

Plaintiffs are not seeking the production of Bass’s interpretations of the seismic

data, but merely the raw seismic data that Bass received for free and in addition to

substantial cash payment.

             (f)   Other cases

      The remaining cases cited by Bass, Abbott v. U.S. and Kent v. U.S. stand not

for the proposition that seismic data is a trade secret, but for the proposition that


                                         19
interpretations of that data have economic value that is reduced by their

disclosure. Abbott v. U.S., 239 F.2d 310, 312-313 (5th Cir. 1956); Kent v. U.S., 608

F.2d 542 (5th Cir. 1979). Although plaintiffs disagree with the idea that this

information has any legitimate economic value to Bass and that Bass carried its

burden to prove the value of the information to Bass, plaintiffs concede that

interpretations of seismic data have some proprietary value to their producer.

Again, these cases are no authority for the proposition Bass is attempting to

advance.

      4.     Application of six-factor test to the facts

      As far as the record in this case reflects, Lee M. Bass, Inc. is a mineral

owner and a company that owns and operates a cattle ranch. As a mineral

interest owner, there is no evidence that it has any competitors, while, as a cattle

ranch, its competitors are presumably other cattle ranches. Mr. Lee M. Bass has

testified that he does not consider the plaintiffs to be competitors of Lee M. Bass,

Inc. See App. Tab 1, at 150 (Deposition of Lee M. Bass). There is no conceivable

basis in this record upon which the trial court could have found that the Bass

defendants used seismic information to gain a competitive advantage in the

cattle business. In fact, there is no evidentiary basis to conclude that Lee M. Bass,

Inc. even has any competitors, or how seismic data could give it an advantage

over those imaginary competitors. To the extent that Bass’s counsel argued that

Lee M. Bass, Inc. owned part of a separate corporation, Bass Enterprises

Production Company (“BEPCO”), there is absolutely no evidence on this point in

the record. Argument of counsel is not evidence.

                                             20
             (a)   The extent to which the information is known outside of the
                   holder's business

      The evidence before the trial court unequivocally demonstrated that Bass

shared the seismic data with BEPCO, a third party. See Supp. R., Tab 6 at 66-67

(testimony of BEPCO employee to whom the data was shown). Furthermore, the

evidence proved conclusively that Bass gave Exxon an unrestricted right to

disseminate the seismic data acquired. Bass states on page 15 of its brief that it

and Exxon merely have the right to furnish portions of the seismic data to

designated licensees who are contractually bound to keep it secret. Contrary to

this blatant misrepresentation, there is no evidence that the data may only be

furnished to licensees and there is no evidence that a license would require any

measure of secrecy. Under the plain and unambiguous terms of the parties’

“Geophysical Lease/Option Agreement,” there is no contractual requirement

that “the viewing party will be contractually bound to keep it secret,” as stated

by Bass. To the contrary, the contractual provision, in its entirety, provides the

following:

      All geophysical data provided to Bass hereunder shall remain the
      proprietary data of Exxon without restriction upon Exxon’s use
      thereof; provided, however, that upon the expiration of the Option
      Term or the expiration of the Oil and Gas Lease, if applicable, such
      geophysical data will become the jointly-owned property of Exxon
      and Bass, with each party having the right to disclose, sell, trade,
      or make other disposition of the data without the consent or
      approval of the other party.

R., Tab 16 at 8, ¶ 7 (emphasis supplied). The evidence also conclusively

established that Exxon, pursuant to the permission granted to it by Lee M. Bass,

Inc., showed the seismic information to “other designated licensees.” See Supp.

                                        21
R., Tab 9 at ¶ 4 (Affidavit of Exxon’s J.A. Jones). In light of undisputed evidence

that the information was known outside Bass’s and Exxon’s businesses, Judge

Bañales committed no error, much less a clear abuse of discretion, when he

found that the seismic was not a trade secret. Luccous v. J.C. Kinley Co., 376

S.W.2d 336, 338 (Tex. 1964) (“It is self-evident that the subject matter of a trade

secret must be kept secret.”). The evidence on this point alone is insurmountable

and renders mandamus inappropriate.

             (b)   The extent to which it is known by employees and others
                   involved in the holder's business

      Although Bass had the burden of proof and clear control over the relevant

witnesses, the affidavit submitted in support of its privilege claim is completely

devoid of evidence demonstrating how Bass restricted dissemination of seismic

information among its employees. This failure is fatal. TXO Prod. Co. v. M.D.

Mark, Inc., 999 S.W.2d 137, 141 n.4 (Tex. App.—Houston [14th Dist.] 1999, pet.

denied) (appellate court refused to consider whether seismic data constituted

trade secret where entity seeking to protect information failed to introduce

evidence of this element in summary judgment motion). The only evidence

introduced at the motion to compel hearing involved steps taken by BEPCO after

it received the information from the Bass defendants. This is no evidence that

the Bass defendants, the relators in this matter and alleged holders of the trade

secret, did anything at all to limit access to the information by their employees.




                                         22
             (c)   The extent of the measures taken by the holder to guard the
                   secrecy of the information

      The relators cannot prevail in establishing that significant secrecy

measures were taken with respect to the seismic data. In fact, as previously

shown, the contract demonstrates conclusively that relators surrendered any right

to control the dissemination of seismic data by Exxon, BEPCO’s direct

competitor. The relevant terms of the Geophysical/Lease Option Agreement,

bear a little redundancy:

      [U]pon the expiration of the Option Term or the expiration of the Oil
      and Gas Lease, if applicable, such geophysical data will become the
      jointly-owned property of Exxon and Bass, with each party having
      the right to disclose, sell, trade, or make other disposition of the data
      without the consent or approval of the other party.

R., Tab 16 at 8, ¶ 7. This evidence conclusively defeats the right to mandamus

because the holder of a trade secret, must, at a minimum, preclude access to all,

“except those selected by the owner for limited purposes.” McGowan v. State, 938

S.W.2d 732, 738 (Tex. App.—Houston [14th Dist.] 1996), aff’d sub nom. Weightman

v. State, 975 S.W.2d 621 (Tex. Crim. App. 1998); see Stewart & Stevenson Servs., Inc.

v. Serv-Tech, 879 S.W.2d 89, 95 (Tex. App.—Houston [14th Dist.] 1994, writ

denied).   Relators cannot carry this burden because they gave up not only the

right to control the persons and entities that saw the data, but also the potential

uses that those competitors make of the data. In the context of mandamus

review, the evidence on this point is simply insurmountable.

      Again, secrecy and steps taken to preserve secrecy are the lynchpin of a

trade secret. Furr's, Inc. v. United Specialty Adver. Co., 385 S.W.2d 456, 459 (Tex.


                                         23
Civ. App.—El Paso 1964, writ ref'd n.r.e.) (“He will lose his secret by its

disclosure unless it is done in some manner by which he creates a duty and

places it on the other party not to further disclose or use it in violation of that

duty.”); see also Carson Prods. Co. v. Califano, 594 F.2d 453, 461 (5th Cir. 1979)

(holding that however strong other indicia of trade secret status may be, subject

matter must be secret, such that acquiring information would be difficult except

by improper means) (applying Georgia law); Gonzales v. Zamora, 791 S.W.2d 258,

264 (Tex. App.—Corpus Christi 1990, no writ); McGowan, 938 S.W.2d at 737

(noting that secrecy is required, and that owner must have taken measures to

prevent trade secret from becoming available to persons other than those

selected by owner to have access for limited purposes). An evidentiary failure on

this point is fatal because a trade secret simply must be a secret. Lawfinders

Assocs., Inc. v. Legal Research Ctr., Inc., 65 F. Supp. 2d 414, 418 (N.D. Tex. 1998).

Relators make no effort to attack the implied finding that they took inadequate

steps to protect their alleged trade secrets. Accordingly, their request for

mandamus relief fails as a matter of law.

      Furthermore, far from presenting unequivocal evidence that relators took

steps to preserve their alleged trade secret, the sworn testimony proved the

contrary proposition. Lee M. Bass, Inc. not only allowed Exxon, BEPCO’s direct

competitor, to obtain the seismic information, but it also allowed Exxon to

disseminate that information to third parties. See R., Tab 16 at 8, ¶ 7; Supp. R.,

Tab 9 at ¶ 4. Although BEPCO had no contractual rights to the seismic data, the



                                         24
disclosure is significant in that BEPCO is a direct competitor of the other

unidentified “designated licensees” who have already seen the data.

      In other words, despite the fact that the fundament of trade secret is

secrecy and its maintenance, both Bass and Exxon freely disclosed the seismic

information to each other without making any provision whatsoever to restrict

the other’s ability to share that information with competitors. As this court

reviews this case, Exxon is completely free to share the seismic data and its

interpretations with any of relators’ alleged competitors, which it in fact has

already done. Supp. R., Tab 9 at ¶ 4.

      At best, relators rely on evidence that BEPCO guarded the data, but this is

irrelevant to relators’ efforts. Furthermore, the evidence suggested that BEPCO

is jointly owned by other Bass family members having no legal relationship to

Lee M. Bass, Inc., the owner of the relevant seismic data. See Supp. R., Tab 6 at

79. Nonetheless, relators offered no evidence as to whether and on what terms

other principles in BEPCO would have access to the data it acquired from Lee M.

Bass, Inc.

      Aside from conclusory assertions, then, there is nothing to suggest that

relators took any reasonable steps to maintain the alleged secrecy of the

information.    Furthermore, the conclusory allegations about secrecy are

demonstrably false, because relators contractually waived the right to maintain

the secrecy of this information. As far as the record shows, BEPCO and Exxon

had and have unfettered rights to disclose, barter, sell or donate the data at their

election to anyone.

                                         25
            (d)    The value of the information to the holder and its competitors

      The only evidence of “value” submitted by Bass consisted of testimony

regarding the market value of a seismic data set. If relators could carry their

burden to prove this element simply by showing the information has some

market value, then virtually every extant piece of business information or any

licensed information would be a trade secret. The existence of market value is

not the appropriate measure. Rather, the party resisting discovery must prove

the particularized value attributable to the secrecy of the information in the

context of the competitive business arena.        Bass submitted no conclusive

evidence of the value of the seismic data or interpretations, either to it or to its

alleged competitors.     Basically, Bass’s claims boil down to the incredible

assertion that data upon which it decided NOT to explore will give its

competitors some advantage. Therefore, the trial court could not have abused its

discretion by impliedly finding that this element was not satisfied.

      Indeed, relators’ scarce evidence on this point conflicted. Initially, Mr.

Keith Potter testified that that seismic data has an asking price of one-third the

acquisition cost on the open market. Supp. R., Tab 6, at 78-79 (“And if you sell it,

they call it trade data, you ask about one-third of the cost.”). Although there is

evidence of an asking price, there is no evidence that that price can be or ever has

been obtained in an arms-length sale. In addition, Mr. Potter testified that once

an oil and gas company sees the seismic data it has no value. Id. Notably, as

extensively discussed above, this has already occurred. Taking Mr. Potter at his

word would suggest that the data has no present value. This evidence also

                                         26
points to two other significant reasons why the Bass relators failed to carry their

burden.

      First, accepting for argument’s sake Potter’s method of calculating the

market value of the data, the evidence of value was disputed. While Mr. Potter

testified that the value of the seismic was approximately $2,000,000 based on this

“one-third” rule, the predicate for that opinion was that the cost of acquisition

was $60,000 to $70,000 per square mile. This predicate was controverted by Mr.

Brown’s testimony that the actual cost of acquiring that data is only $25,000 per

square mile. Id. at 60. In addition, Mr. Potter references 92 square miles or 58,800

acres of data—not even half of which is actually in dispute. Therefore, in the

context of multibillion dollar oil and gas companies, there was no conclusive

evidence that this data had any significant value to these companies. In fact,

both have disclaimed any intention to explore the property, see, e.g., Supp. R.,

Tab 4 (Exxon’s Release of Option), and it is difficult to imagine any

particularized value to the data.

      Finally, Mr. Potter’s testimony that the data has a market value only a

fraction of the cost of acquisition is in fundamental conflict with his testimony that

the data loses all its value once disclosed. No rational economic actor could ever

be expected to offer a product to the marketplace at less than the cost of

production if any single sale rendered its remaining inventory of that product

valueless. In other words, if the disclosure of seismic data really makes it

valueless, then a rational economic actor would be expected to recoup the entire

cost of production and a profit on the first sale. Similarly, the fact that the

                                          27
marketplace does not place a price premium on the information, but rather

discounts it from its cost of production, tends to show that it is not a trade secret,

but rather a commodity held in inventory for sale. See Serv-Tech, 879 S.W.2d at

95. The trial court properly could have concluded from this evidence alone that

the seismic information is not a trade secret.

                (e)     The amount of effort or money expended by the holder in
                        developing the information

        The undisputed evidence in this case is that relators received the seismic

data as additional consideration for permitting the seismic shoot. Relators

received the data and a substantial amount of cash to reward them for granting

the seismic permit. See Supp. R., Tab 6 at 81 (relator’s only witness testifying at

the motion to compel hearing that he has no knowledge of whether any money

was actually expended by relators to acquire the data); R., Tab 11 (Affidavit of

Frank McCreight). Frank McCreight’s conclusory affidavit, read carefully, makes

reference not to money expended by relators, but to monies expended by Exxon.5

Nonetheless, Bass disingenuously argues on page 14 of its brief that the data was

acquired at its “considerable expense and effort” and insinuates that Bass

somehow was involved in orchestrating equipment and personnel, surveying,

and actually collecting data. These statements are entirely untrue and not

supported by a single shred of evidence.




    5
       The affidavit also, on its face, fails to establish that Mr. McCreight has any personal knowledge as
to the actual amount of money that Exxon expended.


                                                    28
      Accordingly, when one actually examines the evidence, there is no

evidence that relators expended any sum of money to create or develop the

information. Exxon, which is no longer a party, but presumably had the ability

to introduce evidence to establish the amount of money spent on the shoot, did

not do so before the trial court. Faced with no credible evidence that relators

incurred any expense or effort to “develop” the seismic data, uncontroverted

evidence that Bass was in fact paid money to permit the seismic, and

uncontroverted evidence that Bass was given the seismic for free, the trial court

did not make a clearly erroneous ruling.

            (f)    The ease or difficulty with which the information could be
                   properly acquired or duplicated by others

      As relators acknowledge, seismic data is a “three-dimensional ‘picture’ of

the underground structural geology of the property.” (Pet. at 7.) Neither Bass,

nor Exxon before it, introduced any evidence that the “picture” is unique from

the “picture” that any competitor can acquire. A competitor can “acquire or

duplicate” that “picture” by obtaining a permit from a mineral owner and hiring

a seismic contractor to place sources and receivers on the ground. Thus, the data

set is closely analogous to the contents of a film or musical recording, which

although proprietary and protected by copyright, cannot be considered a “trade

secret“ by any stretch of that definition. Alternatively, the relators’ competitors,

if any, can legitimately acquire unrestricted use of the seismic data from Exxon

because Bass agreed to let Exxon sell that data without limitation. As noted, at




                                         29
this time, Exxon has the absolute right to sell, trade or donate the information

(with or without restrictive licenses for the information) to whomever it chooses.

      Based on this information, the trial court was entitled to find that the data,

while proprietary like any other business inventory, was not a trade secret. In

other words, the trial court could properly have found, based on the testimony,

that a set of seismic data is readily distinguishable from the secret formula in In

re Continental Gen. Tire, 979 S.W.2d 609 (Tex. 1998) (orig. proceeding). In contrast

to seismic data, which is available for purchase on the open market, a tire

competitor cannot simply purchase secret formulas in a legitimate market.

Furthermore, if Mr. Potter testified truthfully when he claimed that the value of

seismic data disappears when it is disclosed, then the claim of trade secret fails as

a matter of law for another reason, as discussed below.

      This additional reason is that “[m]atters which are completely disclosed by

the goods which one markets cannot be his secret.” Stewart & Stevenson Servs.,

Inc. v. Serv-Tech, 879 S.W.2d 89, 95 (Tex. App.—Houston [14th Dist.] 1994, writ

denied). This fundamental tenet of Texas trade secret law dates back more than

five decades to Wissman v. Boucher, 150 Tex. 326, 330, 240 S.W.2d 278, 280 (1951).

Based on Potter’s testimony that seismic data loses all value when it is disclosed,

the court could properly have concluded that the alleged “trade secret” is really

just a product available to a customer in the general public and that it had lost its

all its value when Exxon disclosed it to third parties. This fact reinforces the

conclusion that the raw seismic data, while proprietary, is not a trade secret.



                                         30
C.    Relators Have Waived Their Right To Mandamus Relief By Failing To
      Assign Error Or Provide Argument And Authorities Justifying
      Mandamus

      Even assuming that relators could demonstrate some error in Judge

Bañales’ order, they would be required to properly preserve and raise reasons

that defeat every possible basis for upholding the ruling. This is true because the

law is settled that a trial court does not clearly abuse its discretion if the record

contains any grounds on which the trial court's order can be upheld. See

Luxenberg v. Marshall, 835 S.W.2d 136, 141-42 (Tex. App.—Dallas 1992, orig.

proceeding) (citing Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991);

Guaranty County Mut. Ins. Co. v. Reyna, 709 S.W.2d 647, 648 (Tex. 1986); Prather v.

McNally, 757 S.W.2d 124, 126 (Tex. App.—Dallas 1988, orig. proceeding)).

      Plaintiffs raised the issue of waiver before the trial court by claiming that

relators voluntarily disclosed the allegedly secret information by virtue of the

contract that entitled Exxon to make free use of the seismic information without

adverse consequences. Plaintiffs also proved that Lee M. Bass, Inc. voluntarily

disclosed the seismic information to another oil company, BEPCO, without

placing any contractual limitations on BEPCO’s use or disclosure of the data.

      Relators’ Brief on the Merits does not include any argument or authorities

attacking the implied finding of waiver or the implied rejection of the trade

secret privilege, and contains only several conclusory paragraphs of arguments

on some of the elements of trade secret. (See Relators’ Brief on Merits at 14-16).

Because (a) no mention of any of these implied bases for decision appears

anywhere in the petition for mandamus, (b) relators failed to adequately brief all

                                         31
trade secret elements, and (c) relators failed to assign or argue these potential

grounds for decision, relators have waived any error by the trial court. Shell

Western E&P, Inc. v. Oliver, 751 S.W.2d 195, 196 (Tex. App.—Dallas 1988, orig.

proceeding) (holding that relators bear the burden to prove that they did not

waive privilege); Hancock v. Walker, 873 S.W.2d 422, 424 (Tex. App.—Ft. Worth,

1994, orig. proceeding) (grounds for mandamus may not be added in reply brief);

c.f. Brentwood Financial Corp. v. Lamprecht, 736 S.W.2d 836, 846 n.2 (Tex.

App.—San Antonio 1987, writ ref’d n.r.e.). This rule applies in a mandamus

proceeding because a party may not receive relief via mandamus that it would be

deemed to have waived on direct appeal. See, e.g., Shafer v. Bedard, 761 S.W.2d

126, 129 (Tex. App.—Dallas 1988, orig. proceeding) (“It follows, then, that a party

is not entitled to relief in mandamus when, had she raised the same point on

appeal, she would be deemed to have waived the point.”); Kirkpatrick v. Harris,

716 S.W.2d 124, 126 (Tex. App.—Dallas 1986, orig. proceeding) (mandamus not

available when rule or statute would prevent appellate relief).

      The same result is independently required by TEX . R. APP . P. 52.3(h),

which states that the “the petition must contain a clear and concise argument for

the contentions made, with appropriate citations to authorities.” TEX. R. APP. P.

52.3(h) (emphasis supplied). Likewise, any other arguments that counsel may

have failed to predict, but which will undoubtedly be contained in the

forthcoming reply brief based upon any other documents or arguments should

also be deemed waived and not considered.



                                        32
D.    Relators Cannot Establish Entitlement To Mandamus Relief Because
      The Discovery Ordered Was Not Patently Irrelevant Or Extremely
      Burdensome In Comparison To Plaintiffs’ Need For The Seismic Data

      Setting aside the privilege issue treated above, relators cannot obtain relief

by mandamus unless they prove that seismic data pertaining to the Erck

Property is both patently irrelevant and extremely burdensome. Walker v. Packer,

827 S.W.2d 833, 843 (Tex. 1992) (orig. proceeding). The evidence concerning both

relevance and burden is conclusive.

      1.     The evidence sought is not patently irrelevant

      Plaintiffs assert claims for devaluation of property interests and lost

revenues as a result of Bass’s tortious conduct with respect to both the Erck and

Weakly tracts. Seismic data on both tracts can provide critical information

regarding the existence of viable oil and gas reserves under the Erck and Weakly

properties. Such evidence would contradict Bass’s contention that portions of

the properties remain unleased and unexplored due to limited potential, as

opposed to Bass’s tortious conduct. Also, a reliable determination of the value of

Plaintiffs’ mineral and royalty interests, and the amount of damages, is difficult

to obtain without the data. See Supp. R., Tab 6 at 45-47, 51-52. Indeed, Bass’s

own expert indicated that he needed the seismic data to form expert opinions

about damages in the case. Id. at 42-43; see also R., Tab 13. Finally, Plaintiffs’

expert testified in detail concerning the need for seismic data from the Erck

property. See Supp. R., Tab 6 at 43-44, 54-56.

      Regardless of whether Plaintiffs’ claims on the Erck Property will

ultimately prove meritorious, seismic data from the adjoining Erck Property is

                                           33
relevant to Plaintiffs’ claims on the Former Weakly Property. This is true

because geologic trends do not respect arbitrary and imaginary property

boundaries. In the context of this very lawsuit, in fact, seismic data from the

7,000 acre Weakly tract shows important, significant geologic trends that simply

cannot be accurately interpreted without reference to seismic and other geologic

data from the adjoining Erck tract. See App. Tab 2 (Affidavit of Tim Brown and

attached structure map). At various depths on the Weakly tract (only one

example is provided for the court’s review), promising trends begin on the

Weakly tract, but due to the lack of data from the Erck tract, the true structure

cannot be conclusively established. In plain terms, if plaintiffs wish to establish

that a certain feature shown on the Weakly tract is definitively prospective, it

becomes necessary to review Erck data to confirm that the prospect exists and

what its likely value may be. Due to the existing protective order, Plaintiffs feel

it imprudent to discuss the technical details of the particular prospect shown on

the structure map in this brief, but will instead refer the court to Mr. Brown’s

affidavit and structure map, which are filed under seal and attached to this brief

as App. Tab 2.

        Concededly, this particular evidence (i.e., the affidavit and structure map)

was not before the trial court when the October 23, 2001 discovery order was

signed.6 Nonetheless, Plaintiffs presented this very argument, supported by




    6
        The documents Bass has submitted in its Supplemental Appendix were not before the trial or
appellate court either. For example, “proof” that seismic data is “an important and expensive exploration
and development” technique and that it can create a three dimensional “picture” of the subsurface is

                                                   34
expert testimony, at the motion to compel hearing—that data from the Erck tract

is relevant to the Former Weakly Property. See Supp. R., Tab 6 at 8, 40, 42-45, 54-

56, 86 (discussing how the Erck data is relevant to the Former Weakly Property).

In any event, whether Mr. Brown’s affidavit and structure map are to be

considered as evidence, or merely demonstrative of Plaintiffs’ arguments about

the relevance of the Erck data, the indisputable facts remain—seismic data

pertaining to the Erck Property is not patently irrelevant, Plaintiffs have a

substantial need for the data, and Judge Bañales’ decision was correct and not a

clear abuse of discretion.

       2.      The court should not decide the merits of Plaintiffs’ claims under the guise
               of judging the relevance of the discovery sought

       Because relators cannot establish that the discovery is patently irrelevant to

the claims asserted, they expend considerable effort insinuating that Plaintiffs’

claims are not well founded. However, it is improper to attack the underlying

validity of Plaintiffs’ claims in a mandamus proceeding in an effort to avoid

discovery. Humphreys v. Caldwell, 888 S.W.2d 469, 470 (Tex. 1994) (orig.

proceeding) (“Essentially, State Farm is attempting to appeal the denial of its

motion for summary judgment. We refuse to consider this argument since the

denial of a summary judgment is interlocutory and not appealable.”); see also

Humphreys v. Caldwell, 881 S.W.2d 940, 942-43 (Tex. App.—Corpus Christi 1994,



provided for the first time in this court by means of unsworn publications attached to Bass’s
Supplemental Appendix at Tab 5. The arguments contained on pages 20-25 of Bass’s Brief on the Merits
are also based upon new documents, which no court but this one has seen or reviewed in connection with
the October 23, 2001 order or any mandamus proceedings. In fact, these documents were not even
attached to Bass’s Original Petition for Writ of Mandamus in this court.


                                                 35
orig. proceeding) (“[W]e cannot condone mandamus relief in the present case to

review the propriety of the underlying cause of action under the guise of judging

the relevance of the discovery sought.”); Ogburn v. Blackburn, 697 S.W.2d 822,

823-24 (Tex. App.—Amarillo 1985, no writ) (“[A] writ of mandamus cannot be

used to accomplish the very interlocutory appeal prohibited by statute or rule.”);

cf. Wike v. Dagget, 696 S.W.2d 79, 82 (Tex. App.—Houston [14th Dist.] 1985, no

writ) (lack of right to appeal from interlocutory order no justification for

mandamus).

      Notwithstanding this unambiguous and controlling Texas Supreme Court

precedent, relators devote the majority of their mandamus briefing to whether

the Bass defendants have a duty to “explore” or “develop” the Erck mineral

estate. Plaintiffs have not pled that Bass has a duty to “explore” or “develop” the

Erck tract. Plaintiffs’ petition does use these terms, but only in their common,

non-technical sense in reciting factual background for the legal claims asserted.

Moreover, this language refers to Bass’s interference with other’s efforts to lease,

explore and develop minerals. See R., Tab 4 at ¶ 21. Causes of action against Bass

are pled in numbered paragraphs under the “Causes of Action” heading. See id.

¶¶ 22-38.

      3.    Texas law imposes a duty between an executive mineral owner and
            nonparticipating royalty interest owners

      Although Plaintiffs steadfastly maintain that the seismic data is relevant to

claims on the Former Weakly Property, and rely on existing precedent, which

prohibits consideration of the merits of their underlying claims in this


                                         36
proceeding, Plaintiffs provide the following in response to relators’ briefing on

the duty issue with respect to the Erck Property.

        Although many Texas cases touch upon the duties the executive owes to

nonparticipating royalty interest owners in various specific factual scenarios, the

seminal case7 discussing whether the executive owes a duty, under facts similar

to the present case, and under Texas law, is Federal Land Bank of Houston v. United

States, 168 F. Supp. 788 (Ct. Cl. 1958):

              It seems clear that the courts will not leave the royalty owners
        completely at the mercy of the holder of the exclusive leasing power;
        however, the Texas law is not clear as to what rights the owner of a
        royalty interest has in these circumstances.

        ....

               We believe as between the mineral fee owner and the royalty
        owner there is an implied covenant in the deed that the mineral fee
        owner will use the utmost fair dealing and diligence in obtaining
        lease agreements in order to protect the royalty owner's interest.

        ....

               What then would be “utmost fair dealing and diligence” in
        the circumstances of this case? We are of the opinion that the court
        should require the same degree of diligence and discretion on the
        part of the mineral fee holder as would be expected of the average
        land owner who because of self-interest is normally willing to take
        affirmative steps to cooperate with a prospective lessee.

168 F. Supp. at 790-91. Similarly, commentators have noted that imposition of

some reasonable duties upon the executive are necessary to address the inherent

conflicts of interest that arise between the mineral executive and


    7
      See Schroeder v. Schroeder, 479 N.E.2d 391, 398 (Ill. App. 1985) (“Perhaps the leading case defining
the duty owed by the holder of an executive interest to the owner of, in that case, a non-participating
royalty is Federal Land Bank of Houston v. United States . . . .”).


                                                   37
nonparticipating interest owners. See, e.g., Ernest E. Smith, Implications of a

Fiduciary Standard of Conduct for Holder of the Executive Right, 64 TEX. L. REV. 371,

383-84 (Oct. 1985); C. Randall Hill, Protecting the Rights of the Non Participating

Mineral Owner, 20 TULSA L. J. 433, 433 (1985).

      Despite Bass’s protestations to the contrary, Texas appellate decisions have

recognized the need for, and existence of, a duty owed by executive mineral

owners to nonparticipating royalty owners:

      Because, however, the non-participating royalty owner must depend
      upon the mineral fee owner for the enjoyment of his interest, the
      courts have implied a covenant of the utmost fair dealing in the
      exercise of the executive rights to lease or develop the minerals.

Pickens v. Hope, 764 S.W.2d 256, 263 (Tex. App.—San Antonio 1988, writ denied)

(citing Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543, 545 (Tex. Comm’n App.

1937, opinion adopted); Morris v. First Nat’l Bank of Mission, 249 S.W.2d 269, 276

(Tex. Civ. App.—San Antonio 1952, writ ref’d n.r.e.)); see also Mack K. McCollum,

Manges v. Guerra: The Executive Right Holder Undergoes Close Scrutiny, 38 BAYLOR

L. RE V . 189, 192 (Winter 1986) (“Because reaping the benefits of royalty

ownership and nonexecutive mineral ownership depends to such a great extent

on the executive, the courts unhesitantly recognize that the executive owes

certain duties to the nonexecutive interests in the exercise of his executive right.”)

      Similarly, the Texas Supreme Court has imposed a “duty of utmost good

faith and fair dealing” upon executive mineral owners in the context of an

executive’s conduct toward both nonparticipating mineral cotenants and

nonparticipating royalty interest owners. See Manges v. Guerra, 673 S.W.2d 180,


                                          38
183 (Tex. 1984) (holding that duty of utmost good faith and fair dealing, equated

with fiduciary duty, is owed to nonparticipating mineral cotenants); Schlittler,

101 S.W.2d at 545 (holding that executive owes duty of good faith to

nonparticipating royalty owners); Wintermann v. McDonald, 102 S.W.2d 167, 173

(Tex. 1937) (holding that executive owner owes to nonparticipating royalty

interest owner duty of “good faith and utmost fair dealing”).

      Admittedly, many Texas appellate decisions are seemingly in conflict.

Many of the cases wrestle with differentiating “fiduciary duties” from “duties of

good faith and fair dealing” or “prudent landowner” standards. Nonetheless,

without exception, Texas cases have recognized some form of implied duty in

favor of a nonparticipating royalty interest owner (hereinafter referred to as an

“NPRI”), as demonstrated below:

            (a)   Pickens v. Hope, 764 S.W.2d 256 (Tex. App.—San Antonio 1988,
                  writ denied)

      In this case, the court decides that since there was no special relationship

between the executive mineral owner and the term NPRI, no fiduciary duty

existed. The court, however, does imply a reasonably prudent landowner

standard, which requires the executive to lease the land to another for mineral

development. See 764 S.W.2d at 268-69. On the facts of the case, no breach is

found because the landowner took reasonable steps to lease the land.

            (b)   Eternal Cemetery Corp. v. Tammen, 324 S.W.2d 562 (Tex. Civ.
                  App.—Fort Worth 1959, writ ref’d n.r.e.)

      In Eternal Cemetery Corp., the court of appeals considered whether the

executive owed any duty to the NPRI such that he would be prohibited from

                                        39
making a use of the surface that would likely foreclose mineral leasing,

exploration and development. The court held that the executive must exercise

his rights “as to avoid injury to the rights of the [NPRI]” and that a permanent

injunction prohibiting the conduct was warranted. 324 S.W.2d at 564-65.

             (c)   Portwood v. Buckalew, 521 S.W.2d 904 (Tex. Civ. App.—Tyler
                   1975, writ ref’d n.r.e)

      Portwood involved a situation where an executive mineral owner sought

and obtained benefits for himself that were not shared with nonexecutive

mineral owners who had a contractual right to share in royalties and bonuses.

521 S.W.2d at 909. The court follows the Manges rationale and holds that the

executive owes a duty of utmost good faith and fair dealing, which requires him

to exact for the nonexecutive every benefit that he exacts for himself. Id. at 911.

             (d)   Kimsey v. Fore, 593 S.W.2d 107 (Tex. Civ. App.—Beaumont
                   1979, writ ref’d n.r.e.)

      In Kimsey, the Beaumont Court of Appeals considered the issue of whether

the executive mineral owner owed any duty to term NPRIs to execute leases for

their benefit. 593 S.W.2d at 108. The NPRIs complained that the executive

rejected a lease and delayed in drilling on the property in which they held

interests. The court held that an implied covenant arises from the royalty deed,

which is imposed upon the executive right owner. Id. at 111. Notably, the court

rejects the defendant’s contention that Freeport Sulphur and Danciger Oil preclude

the imposition of any implied duties on the executive. Id. at 112. So long as the

ultimate issue submitted to the jury was “failing to use utmost good faith and

fair dealing,” “the issue submitted the proper question.” Id.

                                          40
             (e)   Comanche Land & Cattle Co. v. Adams, 688 S.W.2d 914 (Tex.
                   App.—Eastland 1985, no writ)

      In Comanche, the Eastland Court of Appeals was called upon to decide

whether the executive mineral owner breach any duty to term NPRIs when it

entered a joint venture agreement for the exploration and production of gas that

provided for no royalty payments during a “payout period” in which drilling

expenses would be recouped. 688 S.W.2d at 915. Although acknowledging that

there was no lease, and hence no right to royalty that technically existed under

the royalty deed, the court nonetheless held that the executive owed the NPRIs a

duty of utmost good faith and fair dealing, which arises by virtue of the

relationship between the parties. Id. at 916.

             (f)   Dearing, Inc. v. Spiller, 824 S.W.2d 728 (Tex. App.—Fort Worth
                   1992, writ denied)

      In Dearing, the court considered whether an executive owed any duty to

nonexecutive mineral owners that would prohibit the executive from rejecting a

proposed lease on more favorable terms than the terms upon which he

subsequently leased to a closely-held family company. The court explained that

Texas has generally accepted the standard of “utmost good faith” to apply to one

who exercises executive rights to lease or develop minerals, because the NPRI

“must depend upon the mineral fee owner for the enjoyment of his interests.”

824 S.W.2d at 732. After proceeding through several pages of attempts to

reconcile Pickens, Manges, and Comanche (and attempts to distinguish between

fiduciary duties, duties of utmost good faith and fair dealing, and prudent

landowner standards), the court decides that since mineral cotenants are

                                         41
involved, the case is analogous to Manges and that a breach of the duty of utmost

good faith and fair dealing occurred. Id. at 734.

             (g)   Winslow v. Acker, 781 S.W.2d 322 (Tex. App.—San Antonio
                   1989, writ denied)

      Although cited as authority in relators’ brief, this cased stands for the

mundane proposition that an executive breaches no duty when he obtains for the

nonexecutive 100% of the maximum royalty reserved and also receives

additional overriding royalty interest for himself. 781 S.W. 2d at 328.

             (h)   Marathon Oil Co. v. Moye, 893 S.W.2d 585 (Tex. App.— Dallas
                   1994, no writ)

      Once again, although cited as authority in relators’ brief, this case has

absolutely nothing to do with the relevant issues in this case. Marathon involved

a situation wherein another corporation, St. Clair, assigned Columbian coal

licenses to Marathon under a binding letter of intent in exchange for a payment

and a nonparticipating royalty interest in future production. 893 S.W.2d at 588.

St. Clair sued Marathon when it failed to keep the licenses in good standing as

the Colombian government nationalized the coal industry. In an effort to obtain

attorney-client privileged documents in discovery, St. Clair argued that

Marathon owed it a fiduciary duty that prevented Marathon from asserting the

privilege to withhold documents. Citing Pickens, the court holds that the mere

reservation of a royalty interest will not create a fiduciary relationship

prohibiting the invocation of the attorney-client privilege. Id. at 591-92.

      To summarize, all relevant Texas cases that have been identified by the

parties to this proceeding lean in favor of imposing duties upon the executive in

                                         42
favor of nonparticipating interest owners.                            What Manges characterized

synonymously as “fiduciary duty” or “utmost good faith and fair dealing,” other

courts have distinguished as merely “good faith and fair dealing” or “prudent

landowner.” Setting aside semantics,8 it is clear that Plaintiffs may possess a

cause of action against Bass if they discover and ultimately prove that Bass acted

as an unreasonable landowner in discouraging or interfering with leasing,

exploration, or development of minerals on the Erck Property, which the

Plaintiffs have alleged. To hold otherwise would be to overturn more than 65

years of established case law, and would be contrary to sound public policy,

which should not only encourage leasing, exploration and production of

minerals, but also protect those who must depend on another to make fair

choices that materially affect such nonexecutive interests.

         Texas is not alone in its protection of nonparticipating interest owners:

              It seems clear that the courts will not leave the royalty owners
         completely at the mercy of the holder of the exclusive leasing power.

         ....

                We believe as between the mineral fee owner and the royalty
         owner, there is an implied covenant in the deed that the mineral fee
         owner will use the utmost fair dealing and diligence in obtaining
         lease agreements in order to protect the royalty owner’s interest.




     8
        Similarly, relators’ dissertation on the technical “duty to develop” owed by a lessee that arises by
virtue of an oil and gas lease misses the point and confuses the real issue—whether an executive owes a
duty to nonparticipating royalty interest owners. Furthermore, relators’ statement that “no case, in any
jurisdiction” holds that reservation of a royalty interest may be sufficient to give rise to an implied duty
to develop may be erroneous. Courts in Florida and Tennessee apparently may entertain such a cause of
action. See Welles v. Berry, 434 So. 2d 982, 986 (Fla. App. Ct. 1983); J.M. Huber Corp. v. Square Enters., Inc.,
645 S.W.2d 410, 414-15 (Tenn. App. Ct. 1982).


                                                      43
See J.M. Huber Corp. v. Square Enters., Inc., 645 S.W.2d 410, 414-15 (Tenn. App.

1982). As more eloquently stated by Justice Patterson of the Mississippi Supreme

Court,

      [Implied covenants] are in essence the application of an old principle
      of American law, dating at least from 1837, that whenever a
      relationship exists between two parties in which compensation to
      one depends on the diligence of another, the law implies a duty on
      the latter to be diligent.

State Oil & Gas Bd. v. Mississippi Mineral & Royalty Owners Ass’n, 258 So. 2d 767,

785 (Miss. 1971) (Patterson, J., dissenting) (citing Merrill, Covenants Implied in Oil

and Gas Leases, §§ 218, 221 (2d Ed. 1940)); see also Welles v. Berry, 434 So. 2d 982,

986 (Fla. App. Ct. 1983) (“We believe as between the mineral fee owner and the

royalty owner there is an implied covenant in the deed that the mineral fee

owner will use the utmost fair dealing and diligence in obtaining lease

agreements in order to protect the royalty owner's interest.”); J.M. Huber Corp. v.

Square Enters., Inc., 645 S.W.2d 410, 414-15 (Tenn. App. Ct. 1982) (“While it is

somewhat analogous, the executive's duty should not be confused with the duty

existing between mineral lessors and lessees. See, 2 Williams and Meyers, Oil and

Gas Law 338-339.3 (1981); 1 Williams and Meyers, supra 205.1 (1981). . . . In the

absence of any prior decisions, we adopt the rule that there is a general or overall

duty to which the executive or mineral fee owner must conform in relation to the

owner of the NPR interest.     We are of the opinion that the "ordinary prudent

land owner" test as enunciated by Williams and Meyers is the standard to which

the executive or mineral fee owner must conform.”).



                                          44
      In conclusion, although Plaintiffs steadfastly contend that analysis of the

merits of their cause of action is not appropriate in this proceeding, should the

court entertain the issue, Texas law is replete with authority imposing a duty

upon Bass to exercise utmost good faith and fair dealing in its handling of oil and

gas leasing, exploration, and development. Certainly, Texas law would prohibit

Bass from affirmatively discouraging exploration and production of mineral

reserves, which is what the Plaintiffs have alleged.

      A duty is particularly important in this case considering Bass’s numerous

efforts to purchase the Plaintiffs’ outstanding royalty interests on the Erck

Property. See, e.g., Supp. R., Tab 3 at 6 (one of three offers to purchase Plaintiff’s

“La Paloma [Erck] Royalty Interests”). Accordingly, Bass possesses an inherent

conflict of interest: exploration and production of Erck reserves increases the

value of Plaintiffs’ interests, which he wishes to acquire for the cheapest possible

price. Failure to impose a duty upon Bass in his exercise of executive rights on

the Erck Property only invites the type of egregious self-dealing uniformly

condemned by Texas law. To hold otherwise would permit and condone

arbitrary, unreasonable, and malicious actions by executives against

nonparticipating royalty interest owners.

      4.     Requiring production of the Erck seismic data is not extremely burdensome
             in comparison to Plaintiffs’ need for the seismic data

      Finally, relators cannot establish that producing the data is physically or

financially burdensome. Bass actually conceded this point before the trial court.




                                          45
Supp. R., Tab 6 at 25. The trial court could not have clearly abused its discretion

by rejecting a claim of undue burden when the issue is conceded.

E.    Even If Relators Proved Trade Secret, Judge Bañales Did Not Clearly
      Abuse His Discretion In Weighing Substantial Need Versus The Non-
      Existent Harm To Relators

      Even assuming that a trade secret exists, mandamus is unavailable unless

relators establish that the court clearly abused its discretion in finding the data to

be “sufficiently relevant and necessary to [Plaintiffs’] case to outweigh the harm

disclosure would cause to [Bass].” In re Continental Gen. Tire, Inc., 979 S.W.2d

609, 611 (Tex. 1998) (orig. proceeding) (citations and internal quotations omitted).

The trial court’s determination should be upheld unless (1) there is no evidence

of need or (2) the evidence of harm so dramatically outweighs the need that no

reasonable court would ever permit discovery, even under protective order.

Walker, 827 S.W.2d at 840. Relators cannot meet this burden.

      Plaintiffs proved that the seismic data is critical proof needed for many of

their claims. Discovery of the seismic data is the only feasible way for Plaintiffs

to ascertain the value of the interests allegedly converted and devalued, to prove

damages, and to test the strength and veracity of Bass’s defenses. See Supp. R.,

Tab 6 at 42-47, 51-52, 54-56; App. Tab 2. Having the data will allow Plaintiffs’

experts to compare the actual geologic data with Defendants’ contentions.

Without the seismic data, Plaintiffs cannot refute the defenses.

      The trial court was also justified in concluding, under these circumstances,

that nondisclosure would conceal fraud or work injustice (see Supp. R., Tab 5 at

9-10), a valid basis for compelling disclosure of the data, even if it is a trade

                                          46
secret. See TEX. R. EVID. 507; Chapa v. Garcia, 848 S.W.2d 667, 670-71 (Tex. 1992)

(orig. proceeding). Notably, Bass has presented no argument on this subject,

despite Plaintiffs’ repeated briefing of this topic at all stages of the mandamus

proceedings.    Such failure, by itself, should be fatal to relators’ bid for

mandamus. Luxenberg v. Marshall, 835 S.W.2d 136, 141-42 (Tex. App.—Dallas

1992, orig. proceeding) (citing Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226

(Tex. 1991); Guaranty County Mut. Ins. Co. v. Reyna, 709 S.W.2d 647, 648 (Tex.

1986); Prather v. McNally, 757 S.W.2d 124, 126 (Tex. App.—Dallas 1988, orig.

proceeding)); Shafer v. Bedard, 761 S.W.2d 126 (Tex. App.—Dallas 1988, orig.

proceeding).

      In contrast, evidence of harm to the defendants was absolutely

nonexistent. Exxon had no interest left in the property to protect. See Supp. R.,

Tab 4. Lee M. Bass, Inc. is not even an oil and gas business entity, and expended

no money to obtain the seismic data. Limited disclosure of the seismic data to

Plaintiffs (who are neither active ranchers nor actively engaged in oil and gas

exploration) under protective order (see R., Tab 3) poses absolutely no potential

for competitive harm to Lee M. Bass, Inc., a ranching concern.

                        CONCLUSION OF ARGUMENT

      Although Bass goes to lengths to conjure issues of great importance in its

petition, these efforts are simply misleading. The proper question is not whether

3D seismic data is always a trade secret, but, rather, whether it has been proved

to be Bass’s trade secret in this particular case and under these specific facts. The

fundamental problem with Bass’s position on trade secret is that it did not treat

                                         47
the seismic data as a trade secret when it structured its business affairs. Rather,

Bass attempts to manipulate the trade secret privilege to avoid participating in

discovery. Whether or not seismic data is ever capable of being a “trade secret,”

the record before this court is bereft of evidence to support that claim and replete

with evidence that Bass waived any expectation of secrecy in that information. If

law is ever to be made as to whether 3D seismic data can be a trade secret,

Plaintiffs would respectfully suggest that question should wait for another day

and another case.

      In the context of Texas’ liberal discovery principles, trade secret is a limited

accommodation of a business’s legitimate interest in the continued secrecy of

certain information. This privilege is not meant to shield all confidential

information from discovery, but to protect matters that are legitimate trade

secrets vital to a company’s competitive business interests. On the other hand,

prohibiting discovery of the seismic data, under a protective order, will work a

substantial hardship and injustice on the Plaintiffs and their ability to effectively

discover and prosecute their case.

      Bass’s novel argument that mandamus can be used to challenge the

existence of a cause of action proceeds from the erroneous assumption that the

seismic data under the Erck Property is only discoverable if there are viable

claims arising specifically from the Erck Property. In truth, the seismic data at

issue in this mandamus proceeding is independently discoverable to prove

damages on claims related to the Former Weakly property, claims that do not



                                         48
arise under the Erck Property. Notably, Bass does not contest the “viability” of

claims related to the Former Weakly Property.

      Moreover, if accepted, Bass’s extensive arguments that plaintiffs do not

have a “substantial need” for the information because they have not pled a

“potentially viable claim” with respect to the Erck Property would create bad

precedent for several reasons.      First, and most important, the validity of

plaintiffs’ claims is appropriate for appellate resolution only after decision by a

trial court, final judgment, and presentation to the court of appeals. Bass’s

thinly-disguised strategy is to create interlocutory appellate jurisdiction that this

court has never exercised under circumstances even remotely similar to this case.

Second, the trial court has not even ruled on the pending motion for summary

judgment addressing this point, so there is no decision to review. Third, a rule

prohibiting discovery on all causes of action that are not yet expressly recognized

by the Texas Supreme Court would prohibit litigants from ever fairly presenting

to the courts a “good faith argument for the extension, modification or reversal of

existing law,” see TEX . R. CIV . P. 13, and would prohibit development of an

adequate record for thoughtful, considered appellate decisions in these

important cases. Fourth, this new species of mandamus undoubtedly will

greatly expand the mandamus jurisdiction of Texas appellate courts by

converting many discovery disputes into extraordinary appellate summary

judgment proceedings.




                                         49
                                  VI. PRAYER

      For the foregoing reasons, Real Parties in Interest pray that the Court deny

the Petition for Writ of Mandamus, and grant them all other and further relief to

which they may be justly entitled, including their attorneys fees and costs.



                                Respectfully submitted,

                                WATTS & HEARD, L.L.P.



                                Roger S. Braugh, Jr.
                                State Bar No. 00796244
                                Juan Enrique Mejia
                                State Bar No. 00784588
                                WATTS & HEARD L.L.P.
                                555 N. Carancahua, Suite 1400
                                Corpus Christi, Texas 78478
                                Telephone (361) 887-0500
                                Telecopier (361) 887-0055

                                ATTORNEYS FOR REAL PARTIES IN
                                INTEREST, KATHLEEN MCGILL ENYART
                                AND SCOTT MCGILL, JR.




                                        50
                          VII. CERTIFICATE OF SERVICE

      I certify that on May 13, 2002, a true and correct copy of the foregoing
instrument was served via certified mail, return receipt requested, to the
respondent and the following counsel of record:

The Honorable J. Manuel Bañales
Presiding Judge
105th Judicial District Court, Kenedy County, Texas
101 Mallory Street
Sarita, Texas 78385

RESPONDENT

Robert C. Grable
Bart A. Rue
Todd W. Spake
KELLY, HART & HALLMAN, P.C.
201 Main Street, Suite 2500
Fort Worth, Texas 76102

Michael J. Krueger
617 East Kleberg
P.O. Box 1538
Kingsville, Texas 78364

Brenda L. Clayton
KELLY, HART & HALLMAN, P.C.
301 Congress Avenue, Suite 2000
Austin, Texas 78701

COUNSEL FOR RELATORS



                                     Roger S. Braugh, Jr.




                                       51
                                   NO. 02-0071


                                 IN THE
                         SUPREME COURT OF TEXAS


  IN RE: LEE M. BASS, LEE M. BASS, INC. & PALLADIAN CORPORATION,
                              RELATORS


  Original Proceeding from the 105th District Court of Kenedy County, Texas
                 The Honorable J. Manuel Bañales Presiding


             APPENDIX TO RESPONSE TO BRIEF ON THE
           MERITS FOR PETITION FOR WRIT OF MANDAMUS



      1.    Deposition of Lee M. Bass

      2.    Affidavit of Tim Brown with attached curriculum vitae and seismic
            structure map*

      3.    Verification of Roger S. Braugh, Jr.




      * The affidavit of Tim Brown, with attached seismic structure map, is
being filed under seal, in a sealed envelope, in compliance with the protective
order entered in this case.


                                        52