Opinion ID: 808041
Heading Depth: 2
Heading Rank: 1

Heading: The UK Litigation

Text: In the UK Litigation, Excalibur Ventures LLC (“Excalibur”) has asserted several contractual and related claims against Texas Keystone, as well as several other defendants (collectively “Defendants”). Excalibur is not a party to the appeal before this Court. The UK Litigation arises, in part, from disputes over agreements related to the exploration, development, and operation of oil blocks in Kurdistan, Iraq, including: (1) Texas Keystone and Defendants’ alleged failure to comply with a collaboration agreement between Excalibur and Texas Keystone; and (2) Texas Keystone and Defendants’ failure to recognize Excalibur’s alleged interests in certain production sharing contracts (“PSCs”) between, inter alia, the Defendants and the Kurdistan Regional Government (“KRG”). On February 16, 2006, Texas Keystone and Excalibur entered into a collaboration agreement in which the parties agreed, inter alia, to act in consortium to present “Consortium Bids,” or joint bids, to the KRG for “Concessions” relating to petroleum blocks in Kurdistan (the “Collaboration Agreement”). The Collaboration Agreement defines “Concessions” as a license, 2 Case: 12-20515 Document: 00511977189 Page: 3 Date Filed: 09/06/2012 No. 12-20515 production sharing agreement, buy back, or any other similar concession. The Collaboration Agreement provides that, if Texas Keystone and Excalibur both were awarded a Concession, they would enter into a “Joint Operating Agreement” relating to the petroleum block. Texas Keystone and Excalibur agreed that they would bear their share of the costs and expenses under the Joint Operating Agreement and the Collaboration Agreement. The Collaboration Agreement also states that Excalibur and Texas Keystone “shall conduct operations in compliance with all relevant laws and regulations of all jurisdictions having jurisdiction over the Parties and/or the Transactions contemplated by this Agreement,” including the United States and Iraq. The Collaboration Agreement releases the parties from its obligations under the contract in the case of a “Force Majeure” event, which includes a situation where the award of the concession is precluded by “any laws, rules regulations or orders of national or other governmental agencies or bodies having jurisdiction in or in respect of Iraqi Kurdistan.” Following their execution of the Collaboration Agreement, Texas Keystone and Excalibur together attempted to obtain a Concession from the KRG to explore, develop, and operate an oil field known as the Shaikan Block in Kurdistan. On August 6, 2007, the KRG passed the Oil and Gas Law of the Kurdistan Region, Law No (22) 2007 (the “Oil and Gas Law”). Because of Texas Keystone’s view that Excalibur was unable to qualify to participate in oil exploration or production ventures in Kurdistan under the new Oil and Gas Law, Excalibur was not a party to a concession with the KRG relating to the Shaikan Block or any other oil fields in Kurdistan. On November 6, 2007, the KRG granted a PSC for the Shaikan Block to Texas Keystone and others, but not to Excalibur (the “Shaikan PSC”). On December 17, 2010, Excalibur brought suit against Texas Keystone and others in the UK Litigation, alleging that it had been excluded unjustly from 3 Case: 12-20515 Document: 00511977189 Page: 4 Date Filed: 09/06/2012 No. 12-20515 the Shaikan PSC and that it was entitled to an interest in the PSC, even if it was not a party to the PSC. Excalibur has asserted various contractual and tort claims, as well as other claims under English law. Texas Keystone has raised several defenses to Excalibur’s claims, two of which are relevant to the instant appeal. Texas Keystone’s first relevant defense in the UK Litigation is that, under Article 24 of the Oil and Gas Law, Excalibur could not qualify to participate in oil exploration because, according to Texas Keystone, Excalibur: (1) was not a foreign petroleum company; (2) did not have the financing capability, technical knowledge, and technical ability to carry out petroleum operations and had not submitted reliable documents to prove the same; and (3) did not have a record of compliance with principles of good corporate citizenship. Excalibur disputes these assertions but claims that it is entitled to its interest in the PSC even if it could not be a party to the PSC. Accordingly, Texas Keystone seeks discovery that would illuminate these contentions. Texas Keystone’s second relevant defense in the UK Litigation is that Excalibur did not have the necessary financing to meet its obligations under the Collaboration Agreement for participation in the Shaikan PSC. While there is a dispute as to exactly what financing Excalibur claimed it had, most germane here is Excalibur’s repeated assertion that Appellee Prime Natural Resources Incorporated (“Prime”) was willing to provide the necessary funding. However, Excalibur also asserts that it was unable to secure financing definitively because of Texas Keystone’s refusal to recognize Excalibur’s rights to the Shaikan PSC. Thus, another one of the discovery issues from Texas Keystone’s perspective is the veracity of Excalibur’s claim that it had this offer of financing from Prime and the reasons why Excalibur was unable to secure it. 4 Case: 12-20515 Document: 00511977189 Page: 5 Date Filed: 09/06/2012 No. 12-20515 B. The Litigation in the Southern District of Texas In an effort to obtain discovery to support its defenses in the UK Litigation, Texas Keystone filed an application in the Southern District of Texas on June 8, 2012, in which it sought authorization to subpoena documents and testimony from Prime, pursuant to 28 U.S.C. § 1782. Section 1782 allows interested persons access to discovery orders for the purpose of obtaining evidence for use in foreign proceedings. In support of its Section 1782 application, Texas Keystone filed a nineteen-page memorandum of law and exhibits indicating why the subpoenas were relevant to the UK Litigation. Texas Keystone principally seeks discovery from Prime relating to Prime’s financing negotiations and decision-making process with respect to Excalibur and the Shaikan PSC, as well as other oil fields. The district court granted Texas Keystone’s application to seek discovery on June 8, 2012, the same day Texas Keystone filed the application. As a result, Texas Keystone was authorized to issue discovery subpoenas to Prime. Prime accepted service of the subpoenas on June 21, 2012, and the subpoenas were returnable on July 10, 2012. On July 9, 2012, Texas Keystone agreed to give Prime until July 13, 2012 to produce documents pursuant to the subpoenas and to postpone depositions until Texas Keystone had an opportunity to review the documents Prime produced. Instead of producing the documents, however, Prime filed a Motion to Quash on July 11, 2012. In the Motion to Quash, Prime argues that the requests contained in the subpoenas are invasive, unduly burdensome, and irrelevant. The next day, on July 12, 2012, the district court issued a written order granting the Motion to Quash without providing Texas Keystone an opportunity to respond to the motion. The clerk did not enter the order until July 16, 2012. The full text of the district court’s order states, “[t]he subpoenas by Texas Keystone to Prime Natural Resources, Inc., and Jan 5 Case: 12-20515 Document: 00511977189 Page: 6 Date Filed: 09/06/2012 No. 12-20515 Veldwijk1 issued in claim 2010 Folio 1517 in the High Court of Justice in London, England, are quashed.” Texas Keystone timely filed its notice of appeal with this court on July 26, 2012. On August 2, 2012, we entered an order expediting the appeal due to the upcoming trial date of October 8, 2012 in the UK Litigation, with the first opening brief due September 21, 2012. Briefing was completed on August 21, 2012, and the record on appeal was filed on August 23, 2012. Texas Keystone seeks reversal of the district court’s order and requests that we not remand, but rather decide the merits of the discovery dispute because of the impending trial date. Texas Keystone also has filed a Motion to Supplement the Record in order to assist us in reaching the merits.