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Myklatun v. Flotek Industries, Inc.

United States Court of Appeals, Tenth Circuit

November 5, 2013

Bjorn MYKLATUN, an individual residing in Oslo, Norway; Oil Innovation, as, a Norwegian company, Plaintiffs-Appellants,
FLOTEK INDUSTRIES, INC., a Delaware corporation; Chemical and Equipment Specialties, Inc., an Oklahoma Corporation; Jerry D. Dumas, Sr., an individual residing in Houston, Texas; John Todd Sanner, an individual residing in Duncan, Oklahoma, Defendants-Appellees. and Halliburton Energy Services, Inc., a foreign corporation, Defendant.

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David R. Keesling (Heidi L. Shadid with him on the briefs) of Richardson Richardson Boudreaux Keesling, Tulsa, OK, for Plaintiffs-Appellants.

Richard C. Ford (Anton J. Rupert and Geren T. Steiner with him on the brief) of Crowe & Dunlevy, Oklahoma City, OK, for Defendants-Appellees.

Before KELLY, McKAY, and MATHESON, Circuit Judges.

McKAY, Circuit Judge.

Plaintiff Bjorn Myklatun and his company, Plaintiff Oil Innovation, brought claims of tortious interference, fraud, and civil conspiracy against the four Defendants involved in this appeal: Chemical Equipment and Specialties, Inc. (CESI); its parent company, Flotek Industries; Flotek president Todd Sanner; and former Flotek CEO Jerry Dumas.[1] The district court granted partial summary judgment in favor of Defendants on the claim of tortious interference and one of Plaintiffs' two theories of fraud. Following a nine-day trial, the jury entered a verdict in favor of all Defendants on the civil conspiracy claim. The jury also found in favor of Mr. Sanner and Mr. Dumas on the narrowed claim of fraud, but it found for Plaintiffs on the fraud claim against CESI and Flotek. On this claim, the jury entered an actual damages verdict of $107,000 and a punitive damages award of an additional $107,000. However, the district court granted Defendants' renewed motion for judgment as a matter of law

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under Rule 50(b) and entered a superceding judgment in favor of all Defendants on all claims. Plaintiffs appeal this decision. They also raise various evidentiary and other challenges relating to their damages on the fraud claim, and they contend the jury's verdict on the civil conspiracy and fraud claims was facially inconsistent and requires a new trial. Because we agree with the district court that Defendants were entitled to judgment as a matter of law, we need not address these other arguments.


Defendant CESI manufactures specialty chemicals used in oil and gas production, including microemulsion products used in the water-pressure fracturing (" fracking" ) process. In December 2004, CESI and Mr. Myklatun entered into a distributorship agreement. Among other things, CESI agreed it " w[ould] not during the period of this Agreement enter into any agreement of a similar nature with any other concern or party to market, sell, distribute, provide or otherwise deal in the sale or provision of Product(s) competing with DISTRIBUTOR in the Territory, except with the prior written consent of DISTRIBUTOR." (Appellants' App. at 3207.) " The intent of the foregoing is that DISTRIBUTOR shall have the exclusive right to sell Product(s) to Purchasers in the Territory." ( Id. ) " Territory" is defined as " Norway, Denmark and their continental shelves. It also applies to the Norwegian Oil companies when they are conducting business outside of Norway. The territory may be extended also to include the whole North Sea and Barents Sea, if the sales in Norway is [sic] successful." ( Id. at 3209.) An appendix to the agreement defines the covered products: " Initially, this agreement covers the products related to the CESI Chemical Microemulsion Additive (MA) series. This includes [five specified products.] This agreement also applies to any MA products that are formulated and/or renamed for drilling applications." ( Id. at 3211.) A 2005 amendment to the agreement changes the definition of " Territory" somewhat:

The Territory is oil companies active in Norway, Denmark and their Continental Shelves. It also applies to Norwegian and Danish Oil companies conducting business outside the Territory.* The Distributor has an option to extend the Territory to include other Oil companies active in the North Sea, the Barents Region and the Irish Sea if the 2 first commercial years are successful. *with the prior written approval of CESI Chemical.

( Id. at 3213.)

Although the distributorship agreement covered more than one microemulsion product, CESI and/or Mr. Myklatun decided that Plaintiffs' efforts would be focused, at least initially, on a product called MAD-4. Plaintiffs began marketing and seeking environmental approval of MAD-4 in Norway and Denmark. Although Defendants dispute whether Plaintiffs obtained valid environmental approval, the facts taken in the light most favorable to Plaintiffs indicate they were successful, at least in Norway. However, Plaintiffs had made no sales of MAD-4 by October 2006, when Defendants informed them they were terminating and/or not renewing the distributorship agreement.

While the distributorship agreement with Mr. Myklatun was in force, CESI began developing a proprietary microemulsion product for Haliburton Energy Services. Although the Halliburton microemulsion, GasPerm 1000, was specifically designed to meet United States drinking water standards, Halliburton's master purchase agreement with CESI had a ...

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