Target Strike, Inc. v. Marston & Marston, Inc. et al

Filing 315

FIFTEENTH REPORT AND RECOMMENDATIONS recommending to GRANT 198 Sealed Motion. Signed by Judge Nancy Stein Nowak. (mailed on 8/15/11, by certified mail or forwarded electronically) (rf)

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION

TARGET STRIKE, INC.,

§
§
Plaintiff,
§
§
v.
§
§
MARSTON & MARSTON, INC.;
§
MARSTON ENVIRONMENTAL, INC.; §
CLIFFORD R. “KIP” WILLIAMS;
§
GOLD REEF INTERNATIONAL, INC.; §
GOLD REEF OF NEVADA, INC.;
§
CRANDELL ADDINGTON;
§
SADIK AL-BASSAM;
§
RICHARD CRISSMAN CAPPS;
§
LOU B. KOST, JR.;
§
PAUL STROBEL;
§
PANTHER RESOURCES, INC.;
§
PANTHER RESOURCES
§
PARTNERS LLLP;
§
MEXIVADA MINING CORPORATION; §
& OTHER UNKNOWN DEFENDANTS §
ACTING IN CONCERT WITH THE §
ABOVE NAMED DEFENDANTS,
§
§
Defendants.
§
§
§
***************************************

CIVIL ACTION NO.
SA-10-CV-0188-OLG (NN)

CLIFFORD R. “KIP” WILLIAMS;
RICHARD CRISSMAN CAPPS; and
PAUL STROBEL;

§
§
§
§
Counter-Plaintiffs,
§
§
v.
§
§
TARGET STRIKE, INC.; and
§
GOLD RESOURCES OF
§
NEVADA, LLC (GRN I).
§
§
Counter-Defendants. §
§
§
***************************************
§
CRANDALL ADDINGTON;
§
SADIK AL-BASSAM;
§
LOU B. KOST, JR.;
§
LOU KOST HOLDINGS, LTD.;
§
RESURRECTION CANYON, INC., f/k/a §
PANTHER RESOURCES, INC.;
§
RESURRECTION CANYON, LLLP, f/k/a §
PANTHER RESOURCES
§
PARTNERS, LLLP; ADDKO, INC.;
§
TEXAS RESEARCH, LLC; and
§
L.K. & C.A., INC.,
§
§
Counter-Plaintiffs,
§
§
v.
§
§
TARGET STRIKE, INC, and
§
GOLD RESOURCES OF
§
NEVADA, LLC (GRN I),
§
§
Counter-Defendants. §
2

***************************************
RESURRECTION CANYON, LLLP, f/k/a §
PANTHER RESOURCES
§
PARTNERS, LLLP,
§
§
Counter-Plaintiff,
§
v.
§
§
TARGET STRIKE, INC. and
§
GOLD RESOURCES OF
§
NEVADA, LLC (GRN I),
§
§
Counter-Defendants. §
§
***************************************
CLIFFORD R. “KIP” WILLIAMS,
§
RICHARD CRISSMAN CAPPS, and
§
PAUL STROBEL,
§
§
Counter-Plaintiffs,
§
v.
§
§
TARGET STRIKE, INC. and
§
GOLD RESOURCES OF
§
NEVADA, LLC (GRN I),
§
§
Counter-Defendants. §

FIFTEENTH REPORT AND RECOMMENDATION
TO:

Honorable Orlando Garcia
United States District Judge
This report and recommendation addresses the motion for summary judgment

filed by defendants Marston & Marston, Inc., and Marston Environmental, Inc.

3

(together, the Marston defendants) and recommends summary judgment in favor of the
Marston defendants. The relevant pleadings are sealed, but I did not seal this report
because it does not specifically refer to confidential matters.
Nature of the case as to the Marston defendants. Marston & Marston, Inc.
described itself as a “[m]ining engineering and consulting company that primarily
provides coal and oil sands mining services.”1 Marston Environmental, Inc. described
itself as an “[e]nvironmental services and civil engineering company that provides field
services, such as onsite geological investigations….”2 In 1996, plaintiff Target Strike
contracted with Marston Environmental for gold mining consulting services.3 Target
Strike has never had a business relationship with Marston and Marston.
Target Strike is a corporation formed by three individuals — Alex Weinberg;
Alex’s father, Naum; and Emil Ostrovsky — to promote a technology called Target
Forecasting. Ostrovsky invented Target Forecasting. Alex Weinberg has been the only
real player in this lawsuit. Target Strike maintains Target Forecasting can identify the
locations of minerals without the time and expense of conventional methods of
discovery. The reliability of Target Forecasting has not been proven.
Although Target Strike’s relationship with Marston Environmental ended in

1

Docket entry # 198, p. 2.

2

Id.

3

Docket entry # 198, ex. B (consulting agreement).
4

1997, Target Strike sued Marston Environmental, Marston and Marston, and 20 other
defendants on February 10, 2010. Target Strike sued the defendants for 10 causes of
action. Central to each claim is Target Strike’s allegation that Marston Environmental
¯ through defendant Clifford “Kip” Williams” ¯ shared Target Strike’s trade secrets
with the named defendants. Target Strike’s trade secrets are locations of minerals as
identified by Target Forecasting. Target Strike refers to an identified location as an
anomaly. Target Strike’s claims are based on purported identicalness of TargetForecasting-identified locations and mineral claims staked on behalf of the Gold Reef
defendants.4
The Marston defendants’ motion. The following matrix summarizes the
Marston defendants’ motion and Target Strike’s response:
The Marston defendants’ grounds
for summary judgment

Target Strike’s response

Target Strike’s claims are barred by
limitations. Target Strike did not plead
the discovery rule.

Target Strike did not know, or should not
have discovered, the defendants’
wrongful acts until February 16, 2008.

There is no evidence the Marston
defendants wrongfully disclosed

The defendants fraudulently concealed
their bad acts; summary-judgment

4

The Gold Reef defendants are Williams, Richard Crissman Capps, William J.
Hartley, William Shaffer, Gold Reef International, Inc., and Gold Reef of Nevada, Inc.
The court granted summary judgment in favor of Hartley and Shaffer. See docket entry
# 258. The motion for summary judgment filed by Williams and Capps is pending. See
docket entry # 180. The motion for summary judgment filed by Gold Reef International,
Inc., and Gold Reef of Nevada, Inc. is the subject of the Fourteenth Report and
Recommendation. See docket entry # 306.
5

confidential information.

evidence raises a fact question about
fraudulent concealment.

There is no evidence Target Strike
suffered any damages or that the
Marston defendants received any benefit.

The Marston defendants benefitted from
knowledge of Target-Forecastingidentified locations of minerals.

There is no evidence to pierce the
corporate veil to hold Marston &
Marston liable for Marston
Environmental’s conduct.

Evidence exists to pierce the corporate
veil at to Marston & Marston.

Applicable standards. “The court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” In reviewing a summary-judgment motion, the
“standard…is not merely whether there is a sufficient factual dispute to permit the case
to go forward, but whether a rational trier of fact could find for the non-moving party
based upon the record evidence before the court.”5 “Where the record taken as a whole
could not lead a rational trier of fact to find for the non-moving party, there is no
‘genuine issue for trial.’”6 Taking the record as a whole in this case, a rational trier of
fact cannot find for Target Strike; there is no genuine issue of material fact for trial.
Limitations. The Marston defendants maintained Target Strike’s claims are
barred by limitations. “Statutes of limitation operate to prevent the litigation of stale
claims; they ‘afford plaintiffs what the legislature deems a reasonable time to present

5

James by James v. Sadler, 909 F.2d 834, 837 (5th Cir. 1990).

6

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
6

their claims and protect defendants and the courts from having to deal with cases in
which the search for truth may be seriously impaired by the loss of evidence, whether
by death or disappearance of witnesses, fading memories, disappearance of documents
or otherwise.’”7 The summary-judgment record reflects stale claims.
Target Strike’s relationship with Marston Environmental began in 1996. At that
time, Williams was president of Marston Environmental. Target Strike and Marston
Environmental entered into a consulting agreement to assess anomalies identified using
Target Forecasting. Target Strike hoped the anomalies represented gold deposits.
Target Strike provided Marston Environmental with information about the locations.
Marston Environmental created a map reflecting the anomalies. The parties dispute
what happened to information about the locations on the original map, but that dispute
has no bearing on the question of limitations.
The limitations periods for Target Strike’s claims range from two to four years.8

7

Kerlin v. Sauceda, 263 S.W.3d 920, 925 (Tex. 2008).

8

The limitations period for Target Strike’s claims for breach of contract and
breach of fiduciary duty is four years. See Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002)
(breach of contract);Tex. Civ. Prac. & Rem. Code § 16.051 (“Every action for which there
is no express limitations period, except an action for the recovery of real property, must
be brought not later than four years after the day the cause of action accrues.”); Tex.
Civ. Prac. & Rem. Code § 16.004(a)(5) (breach of fiduciary duty). The limitations period
for Target Strike’s claims for negligence, conversion, conspiracy, and unjust enrichment
is two years. See Tex. Civ. Prac. & Rem. Code § 16.003 (“[A] person must bring suit for
…conversion of personal property, taking or detaining the personal property of
another…not later than two years after the day the cause of action accrues.”); Elledge v.
Friberg-Cooper Water Supply Corp., 240 S.W.3d 869, 871 (Tex. 2007) (“Unjust enrichment
7

Under Texas’s legal injury rule,“a cause of action accrues and limitations begins to run
when ‘the wrongful act effects an injury.’”9 Under this rule, the limitations period for
Target Strike’s claims began to run on the date of the alleged disclosure because all of
Target Strike’s claims are based on wrongful disclosure of its trade secrets.10 Target
Strike maintained that Williams wrongfully disclosed the locations of the anomalies to
defendants Crandell Addington and Lou B. Kost on January 28, 2002 during a meeting
with nonparty D.L. Neese. Target Strike’s relationship with Marston Environmental

claims are governed by the two-year statute of limitations in section 16.003 of the Civil
Practice and Remedies Code.”); Cathey v. First City Bank of Aransas Pass, 758 S.W.2d 818,
822 (Tex. App.—Corpus Christi 1988, writ denied) (“Civil conspiracy is governed by the
two year statute of limitations.”); Valverde v. Biela’s Glass & Aluminum Products, 293
S.W.3d 751, 753 (Tex. App.—San Antonio 2009, pet. denied) (negligence). The
limitations period for the claim for misappropriation of trade secrets and proprietary
information is three years. See Tex. Civ. Prac. & Rem. Code § 16.010.
9

Lubbock County, Tex. v. Trammel’s Lubbock Bail Bonds, 80 S.W.3d 580, 585 (Tex.
2002) (citation omitted). “The date the cause of action accrues for purposes of limitations
is a question of law. In most circumstances, ‘a cause of action accrues when a wrongful
act causes a legal injury, regardless of when the plaintiff learns of that injury or if all
resulting damages have yet to occur.’” Dernick Resources v. Wilstein, 312 S.W.3d 864, 878
(Tex. App.—Houston [1 Dist.] 2009, no pet.) (citations omitted).
10

Breach of contract and breach of fiduciary duty by failing to maintain the
confidentiality of information provided by Target Strike; negligent misrepresentation by
agreeing to safeguard Target Strike’s information; misappropriation of proprietary
information by using Target Strike’s proprietary information; negligence by failing to
exercise ordinary care in protecting Target Strike’s information from disclosure; unfair
competition by misappropriating proprietary information; conversion and unjust
enrichment by assuming and exercising dominion and control over Target Strike’s
confidential information; conspiracy by conspiring with other defendants to
misappropriate trade secrets.
8

had ended at that time. Using the date of the alleged disclosure as Target Strike’s legal
injury, the limitations periods for all claims ran on January 27, 2006. Target Strike filed
this case four years after that date — on February 10, 2010. The Marston defendants are
entitled to summary judgment unless Target Strike can raise a fact question about
limitations.
Discovery rule. Target Strike relied on the discovery rule to overcome
limitations. “In some types of cases, the discovery rule may defer accrual of a cause of
action until the plaintiff knew or, by exercising reasonable diligence, should have
known of the facts giving rise to a cause of action.”11 To rely on the discovery rule,
Target Strike must have pleaded sufficient facts to put the defendants on notice of its
reliance on the discovery rule.12
The only factual allegations implicating the discovery rule are:
(1) “[The defendants] also disclosed [Target Strike’s]…confidential and
proprietary information to third parties without [Target Strike’s]…
authorization, knowledge or consent.“
(2) “The defendants have also fraudulently concealed their wrongdoing,
including the timing of it.”13
The first allegation supported Target Strike’s claim for breach of fiduciary duty. The

11

Barker v. Eckman, 213 S.W.3d 306, 311-12 (Tex. 2006).

12

See Wellborn v. Sears, Roebuck & Co., 970 F.2d 1420, 1425 (5th Cir. 1992).

13

Docket entry # docket entry # 119, ¶¶ 51 & 56.
9

second allegation supported Target Strike’s claim for misappropriation of trade secrets.
The complaint did not include the factual allegations included in Target Strike’s
response to the limitations argument. Considering Target Strike’s complaint consists of
31 pages, the two quoted factual allegations were insufficient to put the defendants on
notice of its reliance on the discovery rule. Target Strike cannot rely on the discovery
rule because the complaint did not put the defendants on notice about reliance on the
discovery rule.
Even if the defendants were placed on notice, the Marston defendants presented
summary-judgment evidence showing that Target Strike should have known about the
facts of its case earlier. The Marston defendants presented evidence showing that
knowledge of the Gold Reef claims was available before the expiration of the latest
limitations period. Target Strike’s explanation about why it did not know, or should
have known, the facts giving rise to its claims earlier does not overcome that evidence.
Target Strike maintained the limitations period began to run six years after the
latest limitations period ran, on February 16, 2008, when Weinberg read an article in The
San Antonio Business Journal.14 Weinberg testified that the article caused him to
investigate Addington’s activities and ultimately conclude that the named defendants
stole Target Strike’s confidential information. Target Strike maintained it did not know

14

Docket entry # 222, ex. 14, p. 166 (Weinberg’s testimony about reading the
journal article).
10

about the alleged wrongful disclosure until Weinberg learned that defendant William
Shaffer staked five claims on behalf of the Gold Reef defendants. Shaffer filed those
claims with the Bureau of Land Management on August 8, 2005.15 Even using that date
as the legal injury date, the limitations periods for all claims ran before Target Strike
filed this case.
Target Strike’s reliance on the article in The San Antonio Business Journal does not
defer the accrual of limitations because Target Strike should have known about the facts
giving rise to this case earlier. Central to Target Strike’s claims is the allegation of
identicalness of Target-Forecasting-identified anomalies and the Gold Reef claims.
Considering Target Strike’s insistence about the value of Target-Forecasting-identified
anomalies — last estimated at $161 million — Target Strike should have monitored
activities implicating the anomalies all along. A reasonable owner of assets valued at
$161 million would have vigilantly monitored publicly-available information for
potential compromises, without waiting to become suspicious. Any claim staked in
close proximity of an anomaly should have been enough to trigger an investigation.
Had Target Strike monitored activities implicating its anomalies, it would have known
about the Gold Reef claims earlier. Weinberg’s explanation about how he learned about
the Gold Reef claims illustrates this point.
Weinberg explained that after he read the article, he “monitored the Gold Reef

15

Docket entry # 198, ex. H (certificates of location signed by Shaffer as locator).
11

website for press releases, and also SEDAR, the website for the Vancouver stock
exchange on which Gold Reef was listed, for public filings.”16 Weinberg stated that he
“learned how to use the mining claims reporting capacity offered by the Bureau of Land
Management website” and he found that claims had been staked in locations proximate
to Target-Forecasting-identified anomalies. Weinberg explained that he “continued to
review Gold Reef’s website, and eventually learned that in 2009 a company called
Panther was proposing to acquire all of the assets and liabilities of Gold Reef.”17
Weinberg’s explanation shows that Target Strike could have learned about the
Gold Reef claims before February 16, 2008. That Weinberg would not have become
suspicious about the alleged disclosure had he not read the article does not negate
Target Strike’s estimation of the value of its anomalies or the availability of public
information about the claims. It does not matter that the claims were staked in Shaffer’s
name rather than Gold Reef’s name because the potential for compromise was the same.
Reading the article triggered Weinberg’s curiosity about Addington’s activities, but it
did not preclude Target Strike from discovering the Gold Reef claims earlier. The
Marston defendants are entitled to summary judgment based on limitations unless
Target Strike has an affirmative defense.
Fraudulent concealment. Target Strike also relied on fraudulent concealment.

16

Docket entry # 222, ex. 1, ¶ 14.

17

Id.
12

“A defendant’s fraudulent concealment of wrongdoing may toll the running of
limitations. Fraudulent concealment will not, however, bar limitations when the
plaintiff discovers the wrong or could have discovered it through the exercise of
reasonable diligence.”18 The discussion about Target Strike’s reliance on the discovery
rule explains why Target Strike failed to exercise reasonable diligence in discovering the
alleged wrongful disclosure. The reasonable owner of assets valued at $161 million
would have vigilantly monitored activities implicating a compromise of the anomalies.
Target Strike did not monitor activities implicating the anomalies until after Weinberg
read the article. Waiting to become suspicious before monitoring activity implicating a
compromise of valuable assets does not constitute reasonable diligence.
Even if Target Strike’s explanation constituted reasonable diligence, Target
Strike’s reliance on fraudulent disclosure still fails.
The elements of fraudulent concealment are (1) the existence of the
underlying tort; (2) the defendant’s knowledge of the tort; (3) the
defendant’s use of deception to conceal the tort; and (4) the plaintiff’s
reasonable reliance on the deception. A party asserting fraudulent
concealment as an affirmative defense to the statute of limitations has the
burden to raise it in response to the summary judgment motion and to
come forward with summary judgment evidence raising a fact issue with
regard to each of the four elements.19
As with other summary-judgment motions in this case, Target Strike did not raise a fact

18

Kerlin v. Sauceda, 263 S.W.3d 920, 925 (Tex. 2008) (citation omitted).

19

Jones v. Thompson, 338 S.W.3d 573, 583 (Tex. App.—El Paso 2010, pet. denied)
(citations omitted).
13

question about underlying tort; specifically, about whether the Marston defendants
wrongfully disclosed the locations of Target Strike’s anomalies. I explained in my
Eighth Report and Recommendation that Target Strike insisted that Williams shared
Target Strike information during the January meeting with Addington and Kost. After
reviewing the summary-judgment record, I concluded that no summary-judgment
evidence showed Target-Strike information was presented at the meeting.
Target Strike complained that Williams testified he shared maps of 51 anomalies
with Addington and Kost, but Williams explained that the information he shared
belonged to Gold Resources of Nevada, not Target Strike. Target Strike also
complained that it was not consulted prior to the meeting, but the summary-judgment
evidence indicates that non-party D.L. Neese controlled Gold Resources of Nevada, not
Target Strike. The background discussed in the relied-upon business plans for LK & CA
and Gold Reef of Nevada20 does not raise a fact question about whether a defendant
stole Target Strike’s information;21 the discussion set forth in the documents is consistent
with the defendants’ testimony about the events underlying this case. Target Strike
presented no evidence raising a fact question about whether the “targets” referred to in
the documents are the alleged stolen anomalies. Kost’s testimony about investing $1

20

Docket entry # 222, exs. 10 & 16.

21

Docket entry # 217, pp. 5-6 & 17 (arguing that defendants’ business plans
confirm Target Strike’s information was wrongfully disclosed).
14

million22 in gold exploration does not raise a fact question about exploring for gold
using on Target Strike’s anomalies.23 The parties’ disputes over why mineral claims are
staked in an individual’s name rather than a company name, whether information
about staked claims is publically-available so as to place a person on notice about a
staked claim, the perpetuality of confidentiality agreements, whether Williams held
himself out as vice-president of Marston and Marston do not matter unless Target
Strike raises a fact question about wrongful disclosure. That, Target Strike has not
done. Insisting that Gold Reef’s claims stemmed from Target Strike’s trade secrets do
not make it so.
In addition, there is no summary-judgment evidence raising a fact question about
the use of deception or Target Strike’s reliance on deception. To the extent Target Strike
relied on its expert to opine that mining companies stake claims in the names of
individuals to conceal the owners of claims, that evidence was previously excluded.24
To the extent, Target Strike maintained that Williams was negligent about the
information he shared with Addington and Kost,25 “[a] showing that the defendant was

22

Docket entry # 222, ex. 13, p. 266 (Kost testified that he and his partners
invested $1 million for gold exploration in Nevada).
23

Docket entry # 217, p. 6 (relying on testimony to support its argument that the
Gold Reef defendants drilled for gold using Target Strike’s anomalies)
24

Docket entry # 270.

25

Docket entry # 119, # 27.
15

merely negligent in what it did is not sufficient to establish the affirmative defense [of
fraudulent concealment].”26 Target Strike did not raise a fact question about fraudulent
concealment so as to toll the running of limitations.
Recommendation. Target Strike’s claims are barred by limitations. For this
reason, I recommend GRANTING the Marston defendants’ motion for summary
judgment (docket entry #198) and ENTERING summary judgment in favor of Marston
& Marston, Inc., and Marston Environmental, Inc.
Instructions for Service and Notice of Right to Object/Appeal. The
United States District Clerk shall serve a copy of this report and recommendation on all
parties by either (1) electronic transmittal to all parties represented by attorneys
registered as a “filing user” with the clerk of court, or (2) by mailing a copy to those not
registered by certified mail, return receipt requested. Written objections to this report
and recommendation must be filed within 14 days after being served with a copy of
same, unless this time period is modified by the district court.27 Such party shall file the
objections with the clerk of the court, and serve the objections on all other parties and
the magistrate judge. A party filing objections must specifically identify those findings,
conclusions or recommendations to which objections are being made and the basis for

26

Lozada v. Farrall & Blackwell Agency, 323 S.W.3d 278, 290 (Tex. App.—El Paso
2010, no pet.).
27

28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).
16

such objections; the district court need not consider frivolous, conclusive or general
objections. A party’s failure to file written objections to the proposed findings,
conclusions and recommendations contained in this report shall bar the party from a de
novo determination by the district court.28 Additionally, failure to file timely written
objections to the proposed findings, conclusions and recommendations contained in this
report and recommendation shall bar the aggrieved party, except upon grounds of
plain error, from attacking on appeal the unobjected-to proposed factual findings and
legal conclusions accepted by the district court.29
SIGNED on August 15, 2011.

_____________________________________
NANCY STEIN NOWAK
UNITED STATES MAGISTRATE JUDGE

28

Thomas v. Arn, 474 U.S. 140, 149-52 (1985); Acuña v. Brown & Root, 200 F.3d 335,
340 (5th Cir. 2000).
29

Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996).
17