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Lexar Energy, Inc.; Novus Operating Company, Lp; and Lexmac Energy, L.P v. Macquarie Bank Limited

December 17, 2010

LEXAR ENERGY, INC.; NOVUS OPERATING COMPANY, LP; AND LEXMAC ENERGY, L.P., COUNTER CLAIMANTS AND THIRD-PARTY PLAINTIFFS,
v.
MACQUARIE BANK LIMITED, COUNTER DEFENDANT, AND MACQUARIE BARNETT LLC, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Daniel L. Hovland, District Judge United States District Court

ORDER

Before the Court is the Counter Claimants and Third-Party Plaintiffs' (collectively " Lexar") "Motion to Determine Admissibility of Damages Testimony, and in the Alternative, Motion for Leave to Designate Non-Retained Testifying Experts," filed on August 20, 2010. See Docket No. 148. The counter defendant, Macquarie Bank Limited, and third-party defendant, Macquarie Barnett, LLC (collectively "Macquarie") filed a "Motion for Further Summary Judgment Ruling" and their response in opposition to Lexar's motion on September 13, 2010. See Docket Nos. 152 and 156. On October 4, 2010, Lexar filed a response and a motion to strike Macquarie's motion. See Docket Nos. 159 and 166. Macquarie filed a reply brief in support of its motion and a response in opposition to Lexar's motion to strike on October 21, 2010. See Docket Nos. 161 and 167. Oral argument on the motions was held in Bismarck, North Dakota on December 6, 2010. For the reasons set forth below, the Court grants in part and denies in part Lexar's "Motion to Determine Admissibility of Damages Testimony, and in the Alternative, Motion for Leave to Designate Non-Retained Testifying Experts," denies Macquarie's "Motion for Further Summary Judgment Ruling," and denies Lexar's motion to strike.

I. BACKGROUND

Macquarie Bank Limited, an Australian Bank doing business in the United States through Macquarie Americas Corp., provided funding to LexMac Energy, L.P. ("LexMac") and Novus Operating Company, L.P. ("Novus") to develop oil and gas leases in McKenzie County, North Dakota in what became known as the "Cedar Butte Project." In 2005, Macquarie Bank agreed to loan LexMac and Novus up to $20,000,000 for the project, with LexMac's and Novus's oil and gas leases serving as collateral. Problems arose and Macquarie Bank stopped funding the project.

On July 31, 2007, Macquarie Bank issued a "Notice of Default and Notice of Intent to Accelerate." See Docket No. 1-7. On October 22, 2007, Macquarie Bank filed a complaint in McKenzie County District Court to foreclose on LexMac's and Novus's rights, title, and interest in real property pursuant to the oil and gas leases that were pledged as collateral. See Docket No. 1-8. LexMac and Novus took efforts to renew leases that could be renewed, but Lexar Energy, Inc. ("Lexar") signed new leases with landowners whose leases with LexMac and Novus had expired. On April 7, 2008, a sheriff's sale was held at the McKenzie County Courthouse and Macquarie Barnett, a wholly-owned subsidiary of Macquarie Bank, purchased LexMac's and Novus's rights, title, and interest in the original collateral, for the sum of $5,400,000. See Docket No. 101-7. LexMac's and Novus's interest had already expired in a majority of the leases that formed the original collateral. Macquarie Bank filed a "Notice of Lis Pendens," dated May 27, 2008, with the McKenzie County Recorder asserting, "The action involves the title to and/or seeks to enforce a lien, charge or encumbrance against Lexar Energy, Inc.'s interest, as lessee" in a number of the leases owned by Lexar. See Docket No. 75-2. Folllowing the filing of the lis pendens, Macquarie Barnett top leased*fn1 the acreage leased by Lexar. Then, Macquarie Barnett filed an amended lis pendens that did not list Lexar's leases, but did reference the expired leases.

Macquarie Bank and Macquarie Barnett were the original plaintiffs in this action. They filed their complaint in McKenzie County state district court on March 31, 2008. See Docket No. 1-3. The case was removed to federal district court on April 30, 2008. See Docket No. 1. The Plaintiffs' second amended complaint included claims of fraud, conversion, promissory estoppel, breach of the conveyance, and piercing the corporate veil. See Docket No. 78. Lexar filed an amended counterclaim that included claims for declaratory judgment, to quiet title and remove the lis pendens, misappropriation and misuse of confidential and proprietary information, tortious interference, conspiracy, breach of duty of good faith and fair dealing, alter-ego, and unfair lending practices and lender liability. See Docket No. 75. All parties filed motions for summary judgment. See Docket Nos. 99 and 104. After the Court's Order of June 30, 2010, the only claims remaining are Lexar's claims for misappropriation and misuse of confidential and proprietary information, conspiracy, breach of duty of good faith and fair dealing, and alter-ego. See Docket No. 137.

Each of the remaining claims is premised on Macquarie's alleged misappropriation and misuse of confidential and proprietary information. Lexar asserts it presented confidential and proprietary information including, but not limited to, "land production maps, seismic data and interpretations, structure and isoporosity maps, log displays, petrophysical reports, reserve projections, well histories, casing designs, and log evaluations" and "various expert analyses and interpretations of this data" to Macquarie Bank "for the express purpose of facilitating the lending of money for drilling and operations." See Docket No. 75, p. 4. They contend Macquarie Bank then created Macquarie Barnett for the sole purpose of acquiring and developing oil and gas leases in the Cedar Butte Project area using the confidential and proprietary information it obtained from Lexar.

On August 20, 2010, Lexar filed a "Motion to Determine Admissibility of Damages Testimony, and in the Alternative, Motion for Leave to Designate Non-Retained Testifying Experts." See Docket No. 148. Lexar requests that the Court determine whether Bradley D. Knickel will be allowed to testify as a lay witness regarding damages and rely on a report prepared by Sproule Associates Inc. ("the Sproule Report"). Lexar requests that the Sproule Report be admitted into evidence. In the alternative, Lexar requests that the Court allow it to designate Knickel as an expert witness. On September 13, 2010, Macquarie filed a "Motion for Further Summary Judgment Ruling" and a response to Lexar's motion. See Docket Nos. 152 and 156. Macquarie contends Lexar cannot prove any damages related to their remaining claims and requests that the Court dismiss Lexar's claims. On October 4, 2010, Lexar filed a response and moved to strike Macquarie's "Motion for Further Summary Judgment Ruling" because it was filed after the deadline for dispositive motions. See Docket Nos. 159 and 166.

II. LEGAL DISCUSSION

A. TESTIMONY OF BRADLEY KNICKEL

Lexar requests that the Court allow Bradley Knickel to offer lay opinion testimony concerning the damages sustained in this case. Rule 701 of the Federal Rules of Evidence provides for opinion testimony by a lay witness:

If the witness is not testifying as an expert, the witness' testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702. "A witness may provide lay opinion testimony 'about facts within his or her range of generalized knowledge, experience, and perception.'" US Salt, Inc. v. Broken Arrow, Inc., 563 F.3d 687, 690 (8th Cir. 2009) (quoting United States v. Espino, 317 F.3d 788, 797 (8th Cir. 2003)). "While the ordinary rule confines the testimony of a lay witness to concrete facts within his knowledge or observation, the court may rightly exercise a certain amount of latitude in permitting a witness to state his conclusions based upon common knowledge or experience." Espino, 317 F.3d at 797 (quoting United States v. Oliver, 908 F.2d 260, 264 (8th Cir. 1990)). "Lay opinion testimony is admissible only to help the jury or the court to understand the facts about which the witness is testifying and not to provide specialized explanations or interpretations that an untrained layman could not make if perceiving the same acts or events." United States v. Peoples, 250 F.3d 630, 641 (8th Cir. 2001). However, the Advisory Committee's notes to Rule 701 provide:

[M]ost courts have permitted the owner or officer of a business to testify to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert. See, e.g., Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153 (3d Cir. 1993) (no abuse of discretion in permitting the plaintiff's owner to give lay opinion testimony as to damages, as it was based on his knowledge and participation in the day-to-day affairs of the business). Such opinion testimony is admitted not because of experience, training or specialized knowledge within the realm of an expert, but because of the particularized knowledge that the witness has by virtue of his or her position in the business.

In Allied Sys. Ltd. v. Teamsters Auto. Transp. Chauffeurs, Demonstrators & Helpers, Local 604, 304 F.3d 785 (8th Cir. 2002), the Teamsters argued Allied's Vice President of Internal Audit should not have been allowed to offer his lay opinion regarding damages because his opinion was based on specialized knowledge and he was not disclosed as an expert. Allied, 304 F.3d at 792. The Eighth Circuit Court of Appeals ...


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