US judge dismisses fracking trade secrets suit
A water tracking company is unable to pursue its trade secrets lawsuit because of an earlier agreement that any dispute between the parties is arbitrated out of court, according to a US court.
District Judge Robert Kelly dismissed the complaint at the US District Court for the Eastern District of Pennsylvania on Friday, June 22.
H20 Resources uses its proprietary WaterTRAC platform and database to track the amount of water needed for fracking operations.
In March 2018, H20 filed a suit (pdf) against competitor Oilfield Tracking Services and energy company Carrizo Oil & Gas, accusing Oilfield and Carrizo of “fraud and deceit” which has “destroyed” H20’s business.
Carrizo first used H20’s services in 2011. The contract between the parties contained confidentiality clauses which specified that while Carrizo owns all the raw data related to the water tracking, it does not own any rights to H20’s WaterTRAC database or associated software.
In 2013, Carrizo allegedly presented Oilfield’s vice president Drew Gladulich as an employee of Carrizo to H20. The complaint alleged that Carrizo did not disclose Gladulich’s real role with Oilfield.
H20 was instructed to allow Gladulich “full access” to the WaterTRAC database, which the suit said was “one of the first steps” in the companies’ “defrauding” scheme.
In 2014, H20 claimed that Carrizo began to “feign problems” with the water data. In response, H20 said it was “pressured into providing confidential and proprietary details” about its system and database.
The complaint said Carrizo stopped using H20’s system in 2016, as it claimed to be developing an in-house water tracking system. As Carrizo reassured H20 that it was not being replaced by a third party, H20 agreed to sell Carrizo some of its equipment.
H20 claimed that Carrizo replaced the company with Oilfield as part of a longstanding plan to “fraudulently obtain access” to H20’s proprietary IP and develop a competing tracking system.
Multiple H20 employees were also “hired away” by the defendants, the suit alleged.
The contract between H20 and Carrizo contained a clause stipulating that the parties should submit to arbitration if there was a dispute. However, H20 argued that the allegations in the suit do not “fall within the type of disputes that the parties consent to submit to arbitration”.
H20 sought to recover damages as a result of the “scheme” and the misappropriation of its trade secrets, proprietary data, and confidential information.
In response, Carrizo submitted a motion to dismiss the complaint and asked the court to compel arbitration.
On Friday, Kelly said that H20 remains bound by the contract it entered into with Carrizo, and this includes arbitrating any disputes outside of court.
He granted Carrizo’s motion and dismissed H20’s complaint without prejudice, and “ordered that all parties shall engage in the alternative dispute resolution” as contractually stipulated.
Did you enjoy reading this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
Today's top stories
EU court issues Norwegian Cruise Line decision
OECD: Counterfeit Italian goods cause €25bn lost sales annually
