A jury in the Third Division of the new Texas Business Court in Austin late Tuesday returned a verdict of at least $50 million in favor of ES3 Minerals, and in support of its claim that several former employees conspired to steal proprietary information and software to start their own competing businesses.
ES3 Minerals, named for its founder Edward Stanton III, sued Nicholas Kreines and David Ryan, their companies — Liberty Mineral Partners, Nak Resources and CGR Oil and Gas — and several family trusts for theft of trade secrets, breach of fiduciary responsibility and breach of non-compete clauses in their employment contracts.
The case was originally filed in a Travis County District Court but was transferred to the Texas Business Court in Austin in December 2024. The jury verdict is only the second in a business court since the courts began operations in September 2024.
The lawsuit alleged that Ryan resigned in August 2023 as vice president of ES3 to form Liberty Mineral Partners to compete with ES3 using the company’s business processes. To do so, he hired away the company’s chief analyst, Jettie Rangel, who is also a defendant in the case.
Kreines, a vice president of business development, did not resign from ES3 but began sharing ES3 buyer lists and pricing information, along with specific business opportunities to Ryan and Liberty Minerals while still employed by ES3.
The company alleged that Kreines assisted Ryan, Rangel and LMP with closing their first deal at LMP with an ES3 buyer, and with signing up another ES3 buyer for future deals. The lawsuit also accuses Kreines, while still employed by ES3, of delivering proprietary software and other key documents and trade secrets to a private Dropbox account for the benefit of Liberty Minerals and the other defendants.
The company claimed that the defendants, using ES3’s proprietary methodology, had generated $20.3 million in revenue and more than $6 million in net profit by October 2024.
Ryan, on the other hand, claimed that he did not resign from ES3, but was fired for refusing to steal trade secrets from a consultant hired by the firm. And in his defense, Kreines, who resigned from ES3 in January 2024, says that upon his leaving, the company had pocketed commissions he’d earned when he refused to waive his own legal claims against the company.
Ryan argues that he briefly left the company in 2021 but was rehired shortly thereafter. Ryan said he had not signed the company’s standard non-compete agreement when he returned — mooting any claim by the company that he had violated the non-compete agreement.
The jury, after about three hours of deliberation, disagreed.
First, the jury declared that ES3’s software, sales techniques, buyer directory and archive and historical pricing data were, in fact, trade secrets and that they were misappropriated by each of the defendants.
Their verdict, rendered across 27 separate questions valued the company’s integrated sales software called “Rainmaker” at more than $10 million, and the value of the misappropriated trade secrets as a whole — the Rainmaker software, the buyer lists and pricing data — at $40,425,470.
The jury spread responsibility for 93 percent of the misappropriation among four defendants: LMP/Liberty (24 percent), Ryan (24 percent), Kreines (23 percent) and NAK (22 percent). The jury said Rangel and Jennings should be liable for the remaining 7 percent.
The jury added an additional $9 million in exemplary damages for the misappropriation count, but they also assessed another $13,573,616 for the other claims of conspiracy, contract, damages, tortious interference and fiduciary responsibility. Whether those will be counted in final judgment is a matter of post-verdict dispute.
ES3 was represented by Austin attorney Michael Marin of Boulette Golden & Marin. Marin said he was pleased both by the verdict and the expedited process presented by the new Texas Business Court system.
“The business court operated exactly the way it was designed to act,” said Marin Thursday. “It was efficient. It was almost like being in federal court. They’ve got a law clerk, and you’ve got somebody reading the papers and issuing decisions on the merits of the disputes that went along the way.”
“In a matter of 15 months from removal (from the Travis County district court), we had tried the case and received a verdict. So, it was super-efficient.”
“And it was a hard-fought case. There were more than 15 motions to compel. There were lots of discovery disputes, complex disputes involving forensic examination of computers and e-discovery experts, people that look through computers to see when things happened and what they reveal.”
Other lawyers involved in the case from Boulette Golden included: Jason Boulette, Tori Bell, Steven Garrett, and Taylor Graham. Ryan Clinton and Laine Weatherford of Hunton Andrews Kurth in Austin served as appellate counsel.
Ryan, Kreines and the other defendants were represented by James Parker, Gabrielle Smith and Sydney Sadler of Lloyd Gosselink Rochelle & Townsend.
Contacted by email, Parker had no comment other than to note that the verdict was “complicated.”
The case is No. 24-BC03B-0005 ES3 Minerals LLC v. Nicolas Kreines, et al. Judge Patrick Sweeten presided.