Texas Business Court Decision – March 4, 2026

No. 24-BC11B-0018  Mesquite Energy, Inc., etc. v. Sanchez Oil & Gas Corporation (Division 11B, Judge Barnard). 24-bc11b-0018-mesquite-energy-v-sanchez-oil-2026-tex-bus-10.pdf

Settlements. The parties sued  Terra Energy for misappropriation of  trade secrets and reached a settlement of their claims; this suit was brought to resolve a dispute over distribution of the settlement proceeds. As background, the parties had developed a cost-reduction project called “Zero Dark Forty,” and they alleged in the suit against Terra that some of their former employees, who were also named as defendants, had stolen proprietary files from the project and provided them to Terra. Mesquite brings the suit as successor to Sanchez Energy, (one of the plaintiffs in the Terra suit which went bankrupt and was reorganized as Mesquite in June 2020), and on behalf of Evolve Transition, formerly known as Sanchez Midstream Partners (SNMP).

Held: (1) with respect to whether SNMP/Evolve had an independent ownership interest in the trade secrets sufficient to support the allocation of a share of the proceeds through assignment, Mesquite did not prove SNMP had an independent ownership interest in the trade secrets or that it suffered a distinct injury arising from the misappropriation; the trial record shows that SNMP was only included in the litigation out of caution and expediency, and that its position as a co-plaintiff could not expand Mesquite’s  ownership interest or support allocation of a separate share of the settlement proceeds to SNMP/Evolve;

(2) the settlement proceeds should be divided equally between Mesquite and defendant as the trade secrets were jointly developed by Sanchez Energy, Mesquite’s predecessor, and defendant; the court rejects Mesquite’s request for a larger share based on the costs Sanchez Energy incurred; Sanchez and defendant had overlapping leadership, and the project was developed through coordinated contributions by the parties, with both sides making substantial and indispensable contributions to its success; there is no governing agreement assigning exclusive ownership of the trade secrets to either party, and since the project was a joint development, the parties are co-owners;

(3) Sanchez Energy paid all of the attorneys’ fees and litigation costs in the trade secret case (up until March, 2019, when the attorney retention agreement was converted from hourly billing to a contingent-fee arrangement), and to avoid unjust enrichment, defendant is legally and equitably required to bear half of the litigation costs incurred before March, 2019;

(4) a 2022 post-bankruptcy settlement agreement between Mesquite and defendant does not affect the parties’ entitlement to the proceeds of the trade secrets settlement or reimbursement for legal costs; and

(5) the proceeds from the trade secrets settlement shall be divided equally, and from its share, defendant shall reimburse Mesquite for half of the legal expenses incurred in the Terra suit prior to March, 2019, the date the contingent-fee arrangement took effect.