Smart Sand, Inc. v. US Well Services LLC

CourtSuperior Court of Delaware
DecidedJune 11, 2021
DocketN19C-01-144 PRW CCLD
StatusPublished

This text of Smart Sand, Inc. v. US Well Services LLC (Smart Sand, Inc. v. US Well Services LLC) is published on Counsel Stack Legal Research, covering Superior Court of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smart Sand, Inc. v. US Well Services LLC, (Del. Ct. App. 2021).

Opinion

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE

SMART SAND, INC., ) Plaintiff, ) ) ) v. ) C.A. No. N19C-01-144 ) PRW CCLD US WELL SERVICES LLC, ) Defendant. )

Submitted: May 7, 2021 Decided: June 1, 2021 Issued: June 11, 2021

ORDER ON THE PARTIES’ TRIAL MOTIONS TO EXCLUDE EXPERT OPINION TESTIMONY AND CERTAIN OTHER TESTIMONY AND EXHIBITS

Upon Smart Sand, Inc.’s Trial Motion to Exclude Expert Opinion Testimony and Certain Other Testimony and Exhibits, DENIED.

Upon US Well Services LLC’s Trial Motion to Exclude Expert Opinion Testimony and Certain Other Testimony and Exhibits, DENIED, in part, and GRANTED, in part.

This 11th day of June, 2021, upon consideration of the parties’ mid- and

post-trial evidentiary motions (D.I. 331, 333), their subsequent responses (D.I. 337,

341), and the complete record in this matter, it appears to the Court that:

(1) On November 6, 2015, Smart Sand, Inc., and US Well Services LLC,

entered into a Master Product Purchase Agreement (together with its amendment executed on May 1, 2016, the “PPA”) through which Smart Sand supplied frac sand

to US Well.1 The PPA required US Well to pay Smart Sand a monthly

non-refundable capacity reservation charge, regardless of whether US Well actually

purchased and took any frac sand (the “Reservation Charge”).2

(2) Contemporaneously with the PPA, the parties also entered into a

Railcar Usage Agreement (the “RUA” and together with the PPA, the

“Agreements”).3 Under the RUA, US Well borrowed railcars from Smart Sand for

the delivery of sand purchased under the PPA in exchange for a monthly fee of $650

per railcar.4 The RUA’s term continued until the termination or expiration of the

PPA.5

1 Compl. ¶¶ 3, 7, Jan. 14, 2019 (D.I. 1); First Am. Countercls. ¶ 3, Apr. 18, 2019 (D.I. 17); see generally Hobart M. King, What is Frac Sand?, GEOLOGY.COM—GEOSCIENCE NEWS AND INFORMATION, https://geology.com/articles/frac-sand/ (last visited May 27, 2021) (“‘Frac sand’ is a high-purity quartz sand with very durable and very round grains. It is a crush-resistant material produced for use by the petroleum industry. It is used in the hydraulic fracturing process (known as ‘fracking’) to produce petroleum fluids, such as oil, natural gas, and natural gas liquids from rock units that lack adequate pore space for these fluids to flow to a well.”). 2 Compl. ¶ 10. 3 Compl. ¶¶ 3, 7; First Am. Countercls. ¶ 6. 4 Joint Exhibit (“JX”) 4 (the RUA) (D.I. 338 – letter from Seth Niederman enclosing the electronic media containing the Joint Trial Exhibits; D.I. 339 – Joint Exhibits List). 5 Id.

-2- (3) In the fall of 2018, US Well stopped purchasing/taking sand from Smart

Sand and also stopped making payments.6 In January 2019, US Well purported to

terminate the Agreements, retroactively from September 1, 2018, claiming that

Smart Sand had breached the PPA.7 At the time of the PPA’s calculated expiration,

April 30, 2020,8 US Well had purchased 793,176.47 tons of sand, leaving a reported

shortfall of 1,206,823.53 tons.9

(4) On January 14, 2019, Smart Sand filed its Complaint alleging

non-payment under the Agreements.10 US Well answered and asserted

counterclaims.11 During the pre-trial stage of this case, the Court considered myriad

motions filed by both parties. And on December 14, 2020, a trial commenced on the

factual issues left to be decided.12

(5) As part of the Court’s ruling on the earlier dispositive motions, it denied

6 JX-268 (Oct. 24, 2018 email correspondence re: Smart Sand Prepayment), JX-278 (Nov. 1, 2018 email correspondence re: Smart Sand Oct. Railcar Usage Invoice), JX-373 (Final Invoice). 7 JX-333 (Jan. 11, 2019 US Well Termination Letter). 8 Trial Tr., Dec. 14, 2020, at 104 (Lee Beckelman) (D.I. 347). 9 JX-373 (Final Invoice). 10 Compl. 11 First Am. Countercls. 12 Trial Worksheet, Jan. 4, 2021 (D.I. 327).

-3- each party’s respective motions in limine to exclude the other’s expert witnesses.13

(6) This Order resolves only the parties’ specific remaining mid- and

post-trial evidentiary cavils that could affect the Court’s final trial decision and

verdict.14

I. SMART SAND’S MOTION TO EXCLUDE15

A. SMART SAND’S MOTION TO EXCLUDE BRANDON SAVISKY’S EXPERT TESTIMONY.

(7) Smart Sand seeks to exclude the testimony of US Well’s expert,

Brandon Savisky, on the grounds that his Northern White Sand projections were

“not offered for any relevant purpose[,]” and therefore should be excluded under

Delaware Rule of Evidence (“D.R.E.”) 702.16 Smart Sand contends that Mr. Savisky

could not explain his methodology, and moreover that his projections did not

account for the “grade, volume, basin, or mine location” that affect pricing.17

13 Id. (allowing the parties to raise these issues in post-trial briefing). 14 And so, the Court assumes any reader of this document’s knowledge of the full procedural, evidentiary, and trial record developed over the life of this case. Anyone seeking a greater understanding of the underlying dispute and trial via a more fulsome factual recitation should refer to the Court’s post-trial decision and verdict that is being issued simultaneously herewith. 15 SSI’s Post-Trial Evid. Br. at 1, Jan. 29, 2021 (D.I. 333) (SSI seeks to exclude “(i) the trial testimony of Brandon Savisky, US Well’s (“USW”) market expert, (ii) certain opinions offered by Dana Trexler, USW’s damages expert, and (iii) the draft inventory valuation report prepared by Gordon Brothers[.]”). 16 Id. at 2. 17 Id. at 3-4, 6, and 8. -4- Further, Smart Sand claims the projections did not account for the negotiations that

altered these prices.18

(8) In response, US Well claims that Mr. Savisky’s data is based on reliable

sources used by the industry.19 Moreover, US Well contends that Mr. Savisky was

sought and presented expert testimony to give an overview of the historic market,

not compute the exact price of a specific type of frac sand at a particular time.20

(9) Mr. Savisky’s expert testimony provided estimated historic market

prices for frac sand. As stated by US Well, his role was not to compute data, but

rather to present it. As such, Mr. Savisky is not required to defend or explain every

methodology used in every citation within his sources. Instead, Mr. Savisky’s

testimony must be “based on sufficient facts or data” that “is the product of reliable

principles and methods[,]” which he, the “expert has reliably applied . . . to the

facts.”21 Here, Mr. Savisky based his conclusion on data sets relied on by the

industry (and Smart Sand’s expert does not doubt that data’s reliability 22), his

18 Id. at 8. 19 USW’s Post-Trial Evid. Resp. at 2-3, Feb. 12, 2021 (D.I. 337). 20 Id. at 1. 21 D.R.E. 702. 22 Trial Tr., Dec. 18, 2020, at 240 (Stephen Becker) (D.I. 346) (“Q: Do you believe the EIA report is unreliable because it relies on his Markit reports? A: No.”).

-5- analysis is summative (as opposed to computed), and Mr. Savisky has applied this

summation of frac sand data to the specific facts of this case. The fact that Mr.

Savisky’s analysis doesn’t account for granular detail of certain facts or data not

originally generated by him, doesn’t render his information wrong or unhelpful.23

And as our Supreme Court has observed, “[a] strong preference exists” for admitting

expert opinions “when they will assist the trier of fact in understanding the relevant

facts or the evidence.”24 Here the Court has determined Mr. Savisky’s testimony

does aid such understanding.25

(10) Thus, Smart Sand’s Motion to Exclude Mr.

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Smart Sand, Inc. v. US Well Services LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smart-sand-inc-v-us-well-services-llc-delsuperct-2021.