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In 2016, Sanchez Oil and Gas Corporation, Sanchez Energy Corporation, and Sanchez Production Parts LP (collectively “Sanchez”) sued three former employees—B.J. Reynolds, Mark Mewsha, and Wes Hobbs—and their new employer, Terra Energy Partners, LLC (“Terra Energy”) (collectively “Defendants”) for misappropriation of trade secrets. For the past three years, the parties have been litigating whether Defendants could move to dismiss an amended petition. A recent decision by the Texas Supreme Court has again sent this case to the Texas Court of Appeals to review its December 2020 decision.

Sanchez has been in the business of oil and gas exploration in Texas, the Gulf Coast, and the Mid-Continent and Rocky Mountain regions for over 45 years. In March 2016, three employees left Sanchez and went to work for a competing startup, Terra Energy. Sanchez did an internal forensic investigation, which revealed that all three departing employees copied confidential and competitive information onto hard drives and sent confidential files to their personal email accounts shortly before going to work for Terra. After correspondence between the parties did not result in a return of the stolen information, Sanchez filed suit in Texas state district court.

Sanchez filed an initial petition in March 2006, a first amended petition in July 2016, and a second amended petition (“Second Petition”) in July 2018. Both the original and first amended petition asserted five causes of action, including misappropriation of trade secrets against all Defendants. Defendants did not move to dismiss the original or first amended petition. The Second Petition involved some notable differences, including adding or replacing several counts and adding several new factual allegations regarding Terra Energy’s role in soliciting the three employees and coordinating the employees’ misappropriation efforts. Altogether, Sanchez added four new causes of action to the Second Petition.

On September 7, 2018, Defendants moved to dismiss the new counts for aiding and assisting misappropriation of trade secrets, and Sanchez did not oppose the motion. It was granted September 25, 2018, and three counts were dismissed. A week after their first motion, Defendants filed an amended joint motion to dismiss all but one of the counts in the Second Petition. Sanchez contested this motion, arguing that it was untimely under the Texas Citizens Participation Act (“TCPA”).

The TCPA is an anti-SLAPP (Strategic Lawsuits Against Public Participation) statute that entitles defendants to file a motion to dismiss a legal action based on or in response to their exercise of free speech, petition, or association rights. Defendants, however, must file a motion to dismiss within 60 days after the date of service. The filing of an amended petition can reset the  60-day deadline if it is determined that the amended petition is a “new legal action.” Thus, the dispositive issue here was whether Sanchez’s Second Petition was a “new legal action.”

Both the Texas trial court and the Texas Court of Appeals determined that Sanchez’s Second Petition was not a new legal action because it did not assert new claims based upon new factual allegations. The courts reasoned that (1) all new counts in the Second Petition were based on factual allegations pleaded in the first two iterations of the petition; (2) new factual allegations were minor and only added detail to facts already pleaded in the first two versions of the petition; and (3) all facts previously pleaded in the first two versions of the petition put defendants on fair notice of additional factual allegations included in the Second Petition. Defendants petitioned the Texas Supreme Court for review.

Prior to review, the Texas Supreme Court decided Montelongo v. Abrea, 622 S.W.3d 290, 293–94 (Tex. 2021), in which the court determined the following circumstances would trigger a reset of the 60-day deadline to file a TCPA motion to dismiss: (1) adding a new party or parties; (2) alleging new essential facts to support previously asserted claims; or (3) asserting new legal claims or theories involving different elements than the claims or theories previously asserted. If an amended petition matches any one of these circumstances, then it is a “new legal action,” and the defendant has 60 days from the filing of that petition to file a TCPA motion to dismiss. The same day, the Texas Supreme Court also “reaffirmed that an earlier petition sufficiently pleads a legal action ‘only if the petition gives fair notice of the claim involved’” in Kinder Morgan SACROC, LP v. Scurry County, 622 S.W.3d 835, 849 (Tex. 2021).

On November 19, 2021, the Texas Supreme Court decided that the Texas Court of Appeals decision denying Defendants’ motion to dismiss as untimely was inconsistent with the holdings in Montelongo and Kinder Morgan. Thus, the court remanded the case back to the Texas Court of Appeals to reconsider the Defendants’ motion to dismiss and Sanchez’s Second Petition considering the changed definition of what constitutes a “new legal action.” The case is Reynolds v. Sanchez Oil and Gas Corp., No. 01-18-00940-CV, in the Court of Appeals for the First District of Texas.