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Jack J. Grynberg, Grynberg Production Corporation (Texas), Inc v. Bp

March 30, 2011

JACK J. GRYNBERG, GRYNBERG PRODUCTION CORPORATION (TEXAS), INC., GRYNBERG PRODUCTION CORPORATION (COLORADO), INC., AND PRICASPIAN DEVELOPMENT CORPORATION (TEXAS), PLAINTIFFS,
v.
BP, P.L.C., D/B/A BP CORPORATION NORTH AMERICA, INC., A FOREIGN CORPORATION, INDIVIDUALLY AND AS THE SUCCESSOR IN INTEREST TO ARCO INTERNATIONAL OIL AND GAS COMPANY, DEFENDANT.



The opinion of the court was delivered by: Richard J. Holwell, District Judge:

MEMORANDUM OPINION AND ORDER

Plaintiff Jack J. Grynberg,*fn1 an oil and gas expert, has sued defendant ARCO,*fn2 an oil company, for breach of fiduciary duty and unjust enrichment. Grynberg contends that he shared secret Russian and Kazakh oil data with ARCO in 1990, and that ARCO later used that data to its own benefit despite a fiduciary obligation not to. The parties have had discovery, and ARCO has moved for summary judgment on several grounds. Among them are the arguments that: (1) there is no genuine issue of fact as to whether ARCO actually used Grynberg's information, and (2) there is no genuine issue of fact as to whether the alleged use of Grynberg's information caused any benefit to ARCO.*fn3 For the foregoing reasons, defendant's motion for summary judgment is GRANTED.

BACKGROUND

Taken in the light most favorable to plaintiff, as the party against whom summary judgment is sought, the record, which includes depositions, declarations, and documentary exhibits from both plaintiff and defendant, indicates the following.

A.1990-1992

Soviet natural resources, including those in Kazakhstan, were unavailable to Western development during the cold war, a situation that began to change in 1990 and 1991 as that conflict drew to its blessedly anticlimactic close. Western oil interests were eager to capitalize on the geopolitical shift, since the immense natural resources in former Soviet territories presented great investment potential. The path was by no means clear however: the emerging political systems were in evolution, Westerners had few connections with the new ruling class of the former Soviet bloc, and little geological data had passed through the iron curtain. Westerners did not know where to deal or who to deal with. It was amidst this backdrop that a potential development deal between Jack J. Grynberg and ARCO would develop.

Jack J. Grynberg is an oil and gas expert of some renown: he has several advanced degrees related to resource development, has published significantly in the field, and has personally made major discoveries at Powder Wash Basin, in the Nitchie Gulf Field, and in the Tallahala Creek Oil Field, among several others. (Pltfs. 56.1 Stmt. ¶¶ 1-2.) He also speaks, reads, and writes fluent Russian. (Id. at ¶ 4.) In September of 1989, this latter skill led him into a serendipitous situation.

While attending the American Mining Congress' 1989 annual meeting in San Francisco, Mr. Grynberg "noticed two burly gentlemen who he assessed to be Russian and who sounded lost." (Id.) Thanks to his fluency in Russian, Mr. Grynberg was able to help them find their way and, what's more, went on to befriend them over the next few days. (Id.) As it happened, one of those men was Professor Doctor Eugency Ivanovich Shemyakin, the Chairman of the Soviet Supreme Attestation Commission. (Id.) In gratitude for all of Grynberg's help, Shemyakin rewarded him with a unique opportunity-an invitation to travel to the Soviet Union to see the seismic data on the Caspian Sea and on the area around the Caspian Sea known as the Pri-Caspian Basin. Accepting that invitation, Grynberg became "the first Western scientist allowed to analyze and interpret [Soviet seismic data on the Pri-Caspian Basin]." (Id. at ¶ 5.)

Grynberg's serendipity did not end there. Several weeks later he befriended Nursultan Abisevich Nazarbaev, the First Secretary of the Communist Party of Kazakhstan, under similarly unusual circumstances. (Pltfs. 56.1 Stmt. ¶ 6.) As an investment, Grynberg was feeding 40,000 steers in Fort Morgan Colorado, and the U.S. State Department called him up and asked him to host a Kazakh delegation that was coming to Denver to examine cattle feeding operations. (Id.) As it happened, Nazarbaev was in the delegation, and "hit it off" with Grynberg over the course of the trip. (Id.) Grynberg was subsequently invited to Kazakhstan, where over the course of several trips he analyzed substantial technical information regarding Kazakh oil fields, and developed a relationship with the Kazakhs to the point that he was authorized to form an international resource development consortium. (Id. at ¶¶ 6-14.)

In the hopes of developing the consortium authorized by the Kazakhs, Grynberg contacted several Western oil companies. Among the numerous companies that he contacted and shared his information with was ARCO. In September of 1990 Grynberg approached ARCO about potential projects in the Kazakh portion of the Pri-Caspian Basin. In the course of those early dealings with ARCO, Grynberg provided the company with assertedly confidential information that he had garnered from the Kazakhs and Soviets, as well as with his economic evaluations as to a number of potential projects in the region. Grynberg provided ARCO with "packages of various confidential, technical data including maps, geologic maps showing structures, seismic lines, seismic cross sections and reservoir engineering." (Pltfs 56.1 Stmt. ¶ 17.) Several major potential projects were discussed, including as relevant here: (1) the giant oil field of Tengiz, one of the world's 10 largest oil fields, (2) other oil fields in Kashagan and Karachaganak, and (3) the need for a new oil pipeline to service the Pri-Caspian Basin. (Grynberg Dep. 756:4-9; Pltfs 56.1 Stmt. ¶¶ 16, 17, 21.)

The parties dispute whether the information Grynberg provided to ARCO was particularly useful in light of materials that were publically available at the time. (Pltfs. 56.1 Stmt. ¶ 43.) However plaintiff's expert, Mr. Grynberg himself, advises that aspects of his information were superior to the sources publically available in 1990. (Abrams Decl. Ex. B-3, 3.) Grynberg notes in particular that the publically available sources did not, as did his information, focus on the presence of mercaptans in the Tengiz oil. (Id.) Mercaptans were a toxin in the oil that posed a substantial barrier to its profitable sale.

Grynberg also notes that he had more accurate data regarding the Devonian layer of the Tengiz field, which he projected would contain significant mercaptan-free oil. Since the publically available sources did not discuss the mercaptan problem or the mercaptan-free oil in the Devonian, "these articles [did] not mention the feasibility of developing and producing the Tengiz Devonian oil if the mercaptan removal issue was not readily solved." (Id.) Furthermore Grynberg contends that his information was of greater accuracy and quality to that which was available to the public at the time.

In October 1990, after several meetings between ARCO and Grynberg, ARCO entered into an agreement with Grynberg, the "Letter Agreement." (Rhodes Decl. Ex. 26.) The Letter Agreement established an "area of mutual interest" between ARCO and Grynberg roughly corresponding to the Kazakh portions of the Pri-Caspian basin (which includes Tengiz). (Id.) Briefly described, the Letter Agreement provided for a consortium of oil companies to work together with Grynberg towards eventually developing resources in the area of mutual interest. Among other things, the agreement provided for Grynberg to receive a portion of any jointly developed opportunity. (Id. ¶ 5.) The agreement was not open ended however, it provided that "[t]his agreement and all obligations contained herein will expire on June 30, 1993." (Id. ¶ 11.)

Unfortunately for Grynberg, ARCO, and the other prospective members of their consortium, there was another Western player vying for Kazakh oil rights. In the late 1980s, Chevron had begun negotiations with the Soviet Union to develop the Tengiz field, and in the spring of 1990 Chevron was given access to all of the same data regarding Tengiz that Grynberg had seen. (Rhodes Decl. Ex. 29, Rhodes Decl. Ex. 9, Grynberg Dep. at 39:8-40:13.) In 1993, the Kazakh government and Chevron formed the TengizChevroil partnership, focused on exploiting the Tengiz field. Rights to another field in the area of mutual interest, Karachaganak, were won by British Gas ...


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