     Case: 15-20320      Document: 00513624279         Page: 1    Date Filed: 08/04/2016




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                            United States Court of Appeals
                                                                                     Fifth Circuit
                                      No. 15-20320                                 FILED
                                                                              August 4, 2016

DERRICK PETROLEUM SERVICES,
                                                                              Lyle W. Cayce
                                                                                   Clerk

              Plaintiff - Appellee

v.

PLS, INCORPORATED,

              Defendant - Appellant



                   Appeal from the United States District Court
                       for the Southern District Of Texas
                             USDC No. 4:14-CV-1520


Before KING, JOLLY, and ELROD, Circuit Judges.
PER CURIAM:*
       After their business relationship deteriorated, Plaintiff–Appellee
Derrick Petroleum Services and Defendant–Appellant PLS, Inc., disputed the
nature of their relationship and which of them owned a jointly branded
database of oil and gas transactions. After a four-day bench trial, the district
court concluded that the parties did not form a partnership and that Derrick
was the sole owner of the jointly branded database. We AFFIRM the judgment
of the district court.


       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                 No. 15-20320
             I. FACTUAL AND PROCEDURAL BACKGROUND
      This appeal involves a dispute between Plaintiff–Appellee Derrick
Petroleum Services (Derrick) and Defendant–Appellant PLS, Inc. (PLS) over
which party owns the jointly branded Derrick/PLS Oil & Gas Mergers &
Acquisitions Database (Derrick/PLS Database). The Derrick/PLS Database—
compiled from thousands of sources—contains data on over 16,000 past deals
and over 3,000 current deals in the oil and gas industry. Prior to the formation
of the relationship at issue here, Derrick had created a database (Derrick
Database) that formed the basis of the jointly branded Derrick/PLS Database.
      In a Memorandum of Understanding (MOU) dated October 3, 2009,
Derrick and PLS agreed to work together in a joint venture to develop and
market database products for North America. Derrick’s primary role was
developing and maintaining the Derrick/PLS Database, while PLS’s primary
role was marketing and selling subscriptions to the database. In the MOU,
Derrick and PLS each agreed to provide certain resources toward the joint
venture, but the MOU failed to expressly specify which party owned the jointly
branded Derrick/PLS Database. The parties agreed that the MOU represented
their intent to form a long-term relationship and to form a separate limited
liability company once the revenues from the joint venture met a specific
threshold.    By 2013, however, the parties’ business relationship had
deteriorated substantially. They failed to negotiate successfully the formation
of an LLC, and each party claimed that the other had breached the MOU,
potentially triggering penalties that affected who owned the Derrick/PLS
Database.
      On June 2, 2014, Derrick sued PLS, seeking a declaratory judgment that
it owned the jointly branded Derrick/PLS Database, that the parties had no
further obligations under the MOU, and that it was entitled to sell the
database in the North American market. PLS disagreed and asserted that the
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parties had formed a partnership, that PLS had a 50% ownership interest in
the Derrick/PLS Database, and that Derrick had exited the partnership
prematurely, giving PLS certain unrestricted rights to the database. The
parties agreed to bifurcate the litigation, with the first phase constituting a
bench trial on two issues: (1) ownership of the Derrick/PLS Database and
(2) whether the MOU was terminated when its initial term expired. 1 The
district court conducted a four-day bench trial in which it heard testimony from
several witnesses and considered numerous exhibits.                 After the trial, the
district court concluded that, inter alia, Derrick and PLS did not form a
partnership, that Derrick was the sole owner of the Derrick/PLS Database, and
that the MOU ended when its initial term expired. See generally Derrick
Petroleum Servs. v. PLS, Inc., No. H-14-1520, 2014 WL 7447229 (S.D. Tex. Dec.
31, 2014).
       Relevant to this appeal, the district court first concluded that the parties
did not form a partnership under Texas law.                   Considering five factors
indicating the existence of a partnership, the district court found limited
support for only two of the factors: the expressions of intent to form a
partnership and parties’ contribution of property. However, because of “[t]he
limited extent to which the two factors are present, and the absence of the
other factors,” the district court concluded that Derrick and PLS did not enter
into a partnership.      Furthermore, the court found that the MOU did not
explicitly address ownership of the Derrick/PLS Database and that the MOU’s
language was consistent with credible witness testimony and other evidence
indicating that Derrick did not intend to transfer any ownership interest in the
database.    The court therefore concluded “that Derrick retained exclusive


       1 The MOU contained an initial term of five years, but the parties disputed whether
the provision regarding the formation of a separate LLC after surpassing a revenue threshold
extended that term.
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                                  No. 15-20320
ownership of the Derrick Database, expanded and marketed as the jointly
branded Derrick/PLS Database.”
      The district court entered a partial final judgment on May 12, 2015. PLS
filed several motions challenging the district court’s findings of fact and
conclusions of law, and the district court denied those motions, essentially for
the reasons presented in its opinion. See generally Derrick Petroleum Servs. v.
PLS, Inc., No. H-14-1520, 2015 WL 4715071 (S.D. Tex. Aug. 7, 2015). PLS
timely appeals.
                         II. STANDARD OF REVIEW
      “The standard of review for a bench trial is well established: findings of
fact are reviewed for clear error and legal issues are reviewed de novo.” Becker
v. Tidewater, Inc., 586 F.3d 358, 365 (5th Cir. 2009) (quoting In re Mid-South
Towing Co., 418 F.3d 526, 531 (5th Cir. 2005)). “A finding is clearly erroneous
if it is without substantial evidence to support it, the court misinterpreted the
effect of the evidence, or this court is convinced that the findings are against
the preponderance of credible testimony.” Bd. of Trs. New Orleans Emp’rs Int’l
Longshoremen’s Ass’n v. Gabriel, Roeder, Smith & Co., 529 F.3d 506, 509 (5th
Cir. 2008). Accordingly, a factfinder’s choice between two permissible views of
the evidence cannot be clearly erroneous. Guzman v. Hacienda Records &
Recording Studio, Inc., 808 F.3d 1031, 1036 (5th Cir. 2015).             However,
“[d]espite this court’s typical deference to a district court’s factual findings, ‘a
judgment based on a factual finding derived from an incorrect understanding
of substantive law must be reversed.’” Barto v. Shore Const., L.L.C., 801 F.3d
465, 471 (5th Cir. 2015) (quoting Mobil Expl. & Producing U.S., Inc. v. Cajun
Const. Servs., Inc., 45 F.3d 96, 99 (5th Cir. 1995)).




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                                  No. 15-20320
                  III. EXISTENCE OF A PARTNERSHIP
      PLS first argues that the district court erred in concluding that Derrick
and PLS did not form a partnership. Whether a partnership exists under
Texas law is a question of fact. Allison v. Campbell, 298 S.W. 523, 525 (Tex.
1927); accord 57 Tex. Jur. 3d Partnership § 143 (2016). Under Texas law, a
court considers five factors to determine whether a partnership exists:
      (1) receipt or right to receive a share of profits of the business;
      (2) expression of an intent to be partners in the business;
      (3) participation or right to participate in control of the business;
      (4) agreement to share or sharing:
             (A) losses of the business; or
             (B) liability for claims by third parties against the
                 business; and
      (5) agreement to contribute or contributing money or property to
          the business.

Tex. Bus. Org. Code Ann. § 152.052(a). Proof of all factors is not required, but
there must be sufficient evidence showing that, based on the totality of the
circumstances, the factors indicate that a partnership was created. See Ingram
v. Deere, 288 S.W.3d 886, 896–98 (Tex. 2009). Reviewing the record on appeal
and the relevant Texas caselaw, we find that the district court correctly applied
Texas law and did not clearly err in making material fact findings when it
concluded that only two of the five factors—expression of an intent to form a
partnership and contribution of property—were present to only a limited
extent. See Guzman, 808 F.3d at 1036 (stating that the factfinder’s choice
between two permissible views of the evidence cannot be clearly erroneous).
Because the district court found that only two of the five factors provided
limited indications of a partnership, the district court did not clearly err in
concluding that Derrick and PLS did not enter into a partnership. See id. at
898 (“Even conclusive evidence of only one factor normally will be insufficient
to establish the existence of a partnership.”).

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                                   No. 15-20320
                   IV. OWNERSHIP OF THE DATABASE
      PLS also argues that the district court erred in concluding that Derrick
had exclusive ownership of the jointly branded Derrick/PLS Database.
Because the district court found that Derrick possessed the Derrick Database
prior to the joint venture, the jointly branded Derrick/PLS Database is
presumed to be Derrick’s property, “regardless of whether the property is used
for partnership purposes.” Tex. Bus. Org. Code Ann. § 152.102(c); see also
Chapman Custom Homes, Inc. v. Dall. Plumbing Co., 446 S.W.3d 29, 34 (Tex.
App.—Dallas 2013, pet. granted), overruled on other grounds, 445 S.W.3d 716
(Tex. 2014) (“[S]uch property is presumed to be the property of the partner that
purchased the property with its own funds.”). Moreover, only Derrick had
ultimate control over the content of the Derrick/PLS Database. See Rex-Tech
Int’l, Inc., v. Rollings (In re Rollings), 451 F. App’x 340, 346 (5th Cir. 2011) (per
curiam) (unpublished) (“Under Texas law, ‘[o]ne in possession (or control) of
property is presumed to be the owner of it.’” (quoting Smith v. Briggs, 168
S.W.2d 528, 531 (Tex. App.—San Antonio 1943, writ ref’d w.o.m.))).
      PLS contends that the MOU established that PLS had an ownership
interest in the jointly branded Derrick/PLS Database and that the district
court erred by considering parol evidence to determine the parties’ intent. In
construing a written agreement, a court must examine the entire agreement
to “ascertain the true intentions of the parties as expressed in the instrument.”
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).                “A[n
agreement] is unambiguous if it can be given a definite or certain legal
meaning.” Id. “But if the agreement is susceptible to more than one reasonable
interpretation, the agreement is ambiguous, creating a fact issue on the
parties’ intent.” Milner v. Milner, 361 S.W.3d 615, 619 (Tex. 2012).
      In the present matter, the MOU does not contain any provision expressly
describing ownership of the jointly branded Derrick/PLS Database or expressly
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                                  No. 15-20320
stating that Derrick transferred ownership of the Derrick Database to the joint
venture.   The MOU only states that Derrick would “provide” the Derrick
Database to the joint venture. See Provide, American Heritage Dictionary (4th
ed. 2000) (defining “provide” as “to furnish; supply,” but not as to transfer).
And the parties promised to “provide” other services in the MOU that are
incompatible with a transfer of an ownership interest. Moreover, while PLS
contends that the MOU clearly articulates the parties’ intent “to develop and
market . . . database products,” the MOU lacks any language clearly indicating
the parties’ intent to transfer the ownership of the database to the joint venture
or PLS. Thus, the district court did not err in considering other evidence
showing that the parties did not intend to convey ownership of the database.
See Lenape Res. Corp. v. Tenn. Gas Pipeline Co., 925 S.W.2d 565, 574 (Tex.
1996) (“If the written instrument is ambiguous, the trier of fact may look to
parol evidence to determine the parties’ intent.”).
      Alternatively, PLS contends that numerous documents—including the
MOU, subscription contracts approved by Derrick, and several emails—
showed that Derrick transferred at least part ownership of the jointly branded
Derrick/PLS Database to PLS. However, the district court, in concluding that
Derrick did not intend to convey all or part ownership of the database and that
Derrick was the sole owner of the database, relied on its credibility
determinations regarding the testimony of several witnesses. See Canal Barge
Co., Inc. v. Torco Oil Co., 220 F.3d 370, 375 (5th Cir. 2000) (“We cannot second
guess the district court’s decision to believe one witness’ testimony over
another’s or to discount a witness’ testimony.”). Furthermore, the district court
relied on unrebutted expert witness testimony that explained that the jointly
branded Derrick/PLS Database was only a continuation and expansion of the
original Derrick Database and that Derrick had added content to the database
based on suggestions from PLS and other companies.           PLS has, at most,
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presented an alternative view of the evidence in the record and has failed to
show any clear error by the district court. See Guzman, 808 F.3d at 1036. The
district court therefore did not clearly err in concluding that Derrick never
intended to transfer ownership of the database and that Derrick retained
exclusive ownership of the jointly branded Derrick/PLS Database. 2
                                    V. CONCLUSION
       For the foregoing reasons, we AFFIRM the judgment of the district court.




       2 PLS’s “joint work” claim similarly fails because of the district court’s factual finding
that Derrick did not intend to convey the database to the joint venture or PLS. See Batiste
v. Island Records, Inc., 179 F.3d 217, 222 n.7 (5th Cir. 1999) (noting that a “joint work” under
17 U.S.C. § 101 “requires that each author intended the merger at the time the author
prepares his or her contribution” (emphasis added)); Thomson v. Larson, 147 F.3d 195, 199–
200 (2d Cir. 1998) (stating that all alleged co-authors must fully intend to become co-authors
when the joint work was prepared).
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