Sasol North America, Inc., et al v. GTLpetrol, L.L.C.

Filing

UNPUBLISHED OPINION FILED. [16-20122 Affirmed] Judge: PEH, Judge: EHJ, Judge: CH. Mandate pull date is 04/10/2017 [16-20122]

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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit

FILED
No. 16-20122

March 20, 2017
Lyle W. Cayce
Clerk

SASOL NORTH AMERICA, INCORPORATED; SASOL TECHNOLOGY
(PTY) LIMITED; SASOL ENERGY (USA), L.L.C.,
Plaintiffs - Appellants
v.
GTLPETROL, L.L.C.,
Defendant - Appellee

Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:13-CV-2918
Before HIGGINBOTHAM, JONES, and HAYNES, Circuit Judges.
EDITH H. JONES, Circuit Judge:*
Sasol North America, Inc., Sasol Technology Limited, and Sasol Energy,
L.L.C. (“Sasol”) and GTLPetrol, L.L.C. (“Petrol”) at one point pursued working
together and discussed information concerning Petrol’s developments in the
area of gas-to-liquid (GTL) conversion technology. The relationship fell apart
and both companies continued to pursue their separate business interests.
Sasol announced plans for a GTL plant in Louisiana. Petrol threatened legal

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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action for patent infringement, misappropriation of Petrol’s trade secrets, and
breach of the parties’ confidentiality agreement. Sasol used the threats to seek
a declaratory judgment, but its claims became moot when Sasol put the
Louisiana GTL plant’s development on hold and the patent was due to expire
before the plant could be built. The district court dismissed the case without
prejudice. Sasol challenges the dismissal, arguing that claims unrelated to the
Louisiana plant survive as live controversies under the Declaratory Judgment
Act (“DJA”). We affirm. The district court correctly determined that this
declaratory judgment action does not present a live controversy.
I
Sasol and Petrol both participate in the GTL conversion industry. Sasol
operated plants in South Africa, Qatar, and Nigeria, and was considering
expanding into the United States. During Sasol’s expansion process it met
with Petrol (in 2010 and 2011) and signed confidentiality agreements
stemming from their discussions of GTL technology owned by Petrol. Six
weeks after the initial meeting between the companies the conversations were
terminated. In December 2012, Sasol announced that it would be building a
GTL plant in Louisiana. In January 2013, Sasol made a presentation at the
World GTL Congress in Qatar. Shortly thereafter, Petrol sent an initial ceaseand-desist letter to Sasol. The letter indicated that Petrol was concerned about
patent infringement, misappropriation of trade secrets, and breach of
confidentiality, and that these concerns related to both the 2013 presentation
and the development of the new facility in Louisiana. The parties were unable
informally to resolve their dispute.
Petrol threatened possible litigation—“we will have no other option than
to pursue GTLpetrol’s legal remedies in appropriate forums.”

Sasol

determined instead to file for a declaratory judgment in October 2013 claiming
that: it did not violate the confidentiality agreement, misappropriate trade
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secrets, or infringe on the patent, and the patent was invalid. After the court
rejected Petrol’s motion to dismiss, Petrol filed mandatory counterclaims for
recovery.
Then the price of oil fell by more than half. In January 2015, Sasol
notified Petrol and the district court that the Louisiana plant’s development
was on “indefinite hold.” As a result of the indefinite hold, Sasol stated that
the Louisiana plant would not come on-line until after Petrol’s patent
expired—effectively mooting counts 3 and 4 of Sasol’s complaint and the
corresponding mandatory counterclaims. Sasol and Petrol agreed that the
patent claims should therefore be dismissed.
Sasol still sought declaratory relief on the state law claims for
misappropriation of trade secrets and breach of confidentiality. Petrol moved
to dismiss the case as no longer ripe. The district court initially denied Petrol’s
motion to dismiss, but two days later reconsidered its order in a conference
with the parties and soon after issued an amended order dismissing all of the
claims for lack of subject matter jurisdiction.
The amended order relied on the fact that “counsel for Defendant [Petrol]
advised the Court that it did not intend to pursue claims relating to past”
misappropriations or breaches.

The court then held that “there is no

substantial controversy of sufficient immediacy to warrant declaratory
judgment on the remaining claims.”
Excluding the patent and state law claims relating to the Louisiana
plant, two remain. Count 1 of Sasol’s amended complaint alleges that Petrol
threatened breach of confidentiality actions based on generic “alleged misuse
and disclosure of Petrol information” aside from any breach concerning the
Louisiana plant.

Petrol’s mandatory counterclaim asserts a breach of

confidentiality relating to the January 2013 presentation in Qatar and the
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development of the “Lake Charles Facility (and other proposed GTL facilities
throughout the world).”
In Count 2, Sasol argues that Petrol has threatened action for trade
secret misappropriation based on the January 2013 trade show presentation.
Petrol’s mandatory counterclaim confines the alleged misappropriation to
“design and construction of the Lake Charles Facility (and possibly other
facilities throughout the world).”
Sasol challenges on appeal the district court’s dismissal of the remaining
non-Louisiana plant-related allegations as non-justiciable.
II
“A federal court may not issue a declaratory judgment unless there exists
an actual controversy.” Am. States Ins. Co. v. Bailey, 133 F.3d 363, 368 (5th
Cir. 1998) (quotation omitted). “The Supreme Court directs that the dispute
must be definite and concrete, real and substantial, and admit of specific relief
through a decree of a conclusive character.” Vantage Trailers, Inc. v. Beall
Corp., 567 F.3d 745, 748 (5th Cir. 2009). Further, the Supreme Court has
“repeatedly held that an actual controversy must exist not only at the time the
complaint is filed, but through all stages of the litigation.” Already, LLC v.
Nike, Inc., 133 S.Ct. 721, 726 (2013) (quotations omitted).
District courts engage in a three-step analysis when determining
whether a declaratory judgment action should proceed. Orix Credit All., Inc.
v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000). “First, the court must determine
whether the declaratory action is justiciable . . . . A court's finding that a
controversy exists such that it has subject matter jurisdiction is a question of
law that we review de novo.”

Id. (citation omitted).

“Second, if it has

jurisdiction, then the district court must resolve whether it has the ‘authority’
to grant declaratory relief in the case presented” Id. (citation omitted). “Third,
the court has to determine how to exercise its broad discretion to decide or
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dismiss a declaratory judgment action.” Id. (citation omitted). This third step
is reviewed for abuse of discretion. Id. In this case, the district court dismissed
the claims for lack of subject matter jurisdiction, a question of justiciability,
therefore, it is appropriate to apply a de novo standard of review.
III
In the declaratory judgement context, “the question in each case is
whether the facts alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a declaratory
judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127, 127 S.Ct.
764, 771 (2007). What remains of counts 1 and 2 of the appellant’s amended
complaint are allegations not related to the suspended Louisiana GTL plant.
Sasol focuses first on the mandatory counterclaim’s discussion of the
hypothetical (and parenthetical) unauthorized use of Petrol’s trade secrets in
other facilities throughout the world. Based on the record developed in the
court below, any such misappropriation is nothing more than theoretical at
this time and cannot be the basis for a controversy of sufficient reality. The
counterclaims do not specify any other particular plants where Sasol may be
using or planning to use Petrol’s technology, nor does Sasol identify another
facility where it is using or contemplating use of the same types of technology
that spawned the Louisiana plant dispute. In the absence of any concrete
allegation of misuse, the court had no reason to suspect that these claims are
of sufficient immediacy or reality to justify litigating a declaratory judgment
proceeding.
Next up on Sasol’s list of disputes is its exposure for a misappropriation
of trade secrets claim based on the January 2013 presentation and the generic
threat of breach of confidentiality alleged in Count 1 of the amended complaint.
Louisiana law requires that “[a]n action for misappropriation must be brought
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within three years after the misappropriation is discovered or by the exercise
of reasonable diligence should have been discovered.” La. Stat. Ann. § 51:1436.
It bears noting that the claim relating to the January 2013 presentation is
likely time-barred. Even if it is not, however, ripeness requires a substantial
controversy of sufficient immediacy and a purely inconsequential, severalyear-old disclosure claim clearly is not such a claim.

Beyond that, Sasol

furnishes no examples of disclosures by or on its behalf that could be considered
to have breached the confidentiality agreement.
Finally, Sasol cites Petrol’s references to the “possibl[e] other facilities
throughout the world” where technology misappropriation may have aided
Sasol’s design and construction, and Petrol’s generic potential threats of breach
of confidentiality.

Sasol offers no facts about further potential disclosure

violations, however, and such claims are either contingent on Petrol’s later
discovery of such facts, or they are hypothetical. Regardless, they are not ripe
for adjudication.

It is entirely possible they may never become ripe, and

Petrol’s claim to protecting trade secrets now almost a decade old has to
diminish over time.
The district court was correct to dismiss this case for lack of subject
matter jurisdiction, and dismissal can be justified on ripeness grounds.
Without the live claims relating to the Louisiana plant, all that remained were
Petrol’s claims for hypothetical and unspecified potential infringements in
other plant development projects and the appellant’s concerns about potential
disclosure claims stemming from the 2013 presentation. As discussed, these
claims do not compel continuation of the declaratory judgment action before
the district court.
The court tersely articulated its dismissal in terms of Petrol’s
representation, which this court takes as a judicial admission, that it has no
intention of pursuing litigation on these remaining claims, which does not
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present an issue. First, this court reviews the district court’s entire order,
which clearly references the full test for cognizance of declaratory judgment
actions. See MedImmune, supra, (cited by the district court). We presume that
the district court was aware that the remaining state law claims were either
hypothetical or inconsequential. Second, because of the deficiencies of the
remaining claims, this case does not raise the issues considered by the
Supreme Court in Already v Nike. Already, LLC v. Nike, Inc., 133 S. Ct. 721
(2013). Already concerned the parties’ interest in pursuing, or preventing,
further litigation over trademark infringement. The crux of the Petrol-Sasol
dispute, in contrast, was patent infringement, the claims for which were
mooted by Sasol’s unilateral decision to suspend development of the Louisiana
GTL plant. Whereas Nike just decided not to pursue trademark infringement
further and entered into a covenant not to sue that formed the basis for its
mootness claim, Petrol did not voluntarily cease defending its patent, and
Sasol’s suspension of the Louisiana plant actually ensured that no further
controversy could occur—because the patent would expire before that plant, if
ever revived, were built. Given the insubstantiality, likely time bars, and lack
of ripeness of the state law claims here, those claims would be the tail wagging
the dog if they were to prevent the district court from being able to properly
dismiss this declaratory judgment case.
Further, neither side is prejudiced by the dismissal because a new suit
can always be filed later, including a new declaratory judgment action, should
potential claims that present a “substantial controversy of sufficient
immediacy and reality” arise. Venator Grp. Specialty, Inc. v. Matthew/Muniot
Family, LLC., 322 F.3d 835, 838 (5th Cir. 2003).
Conclusion
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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HAYNES, Circuit Judge, concurring in the judgment only:
I do not agree that the district court lacked subject matter jurisdiction to
proceed.

However, I concur in the judgment of the court affirming the

dismissal of this case because the district court has broad discretion in deciding
whether to determine or dismiss a declaratory judgment action. Orix Credit
All., Inc. v. Wolfe, 212 F.3d 891, 895 (5th Cir. 2000); see also Travelers Ins. Co.
v. La. Farm Bureau Fed’n, Inc., 996 F.2d 774, 778 (5th Cir. 1993). The facts of
this case place it within that broad discretion.

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