Co-defendant not allowed to see Facebook's trade-secrets settlement with plaintiff

By Charmaine Little | Dec 5, 2018

SAN JOSE — A company ordered to pay $30 million in damages following a jury trial over trade secrets will not receive access to Facebook’s settlement agreement with the same plaintiff, the U.S. District Court for the Northern District of California, San Jose Division, ruled on Nov. 26.

The BladeRoom Group sued Facebook, Emerson Electric, Emerson Network Power Solutions and Liebert Corporation for breach of contract and misappropriation of trade secrets.

By the end of the trial, Emerson was the only defendant standing after BladeRoom and Facebook reached a private settlement agreement before the verdict was announced.

The jury then awarded BladeRoom $30 million ($10 million for lost-profits damages and $20 million in unjust-enrichment damages).

Emerson asked the court for Facebook and BladeRoom’s settlement, but the court denied the request on U.S. District Judge Edward J. Davila's ruling.

“Because ordering BladeRoom to disclose its confidential settlement agreement with Facebook is an idle act which cannot result in an offset, and because disclosure would significantly burden the confidentiality of the settlement between BladeRoom and Facebook, the court will not compel the production of the agreement,” it said.

The court observed Civil Code section 877, which was created to make sure a plaintiff wouldn’t be awarded double recovery by getting a portion of their claim from one joint tortfeasor and the total amount for their claim from another joint tortfeasor. Under the statute, Emerson is the one that has to prove not only if an offset is possible, but that it’s entitled to one. The court made it clear that Emerson failed to do so considering Facebook and Emerson were not co-obligors under the same contract with BladeRoom.

Instead, in its lawsuit, BladeRoom accused Facebook and Emerson of both breaching their distinct non-disclosure agreements.

The court determined there was no way for Emerson to prove it was entitled to the production of Facebook and BladeRoom’s agreement.

It was also noted that Section 877 only applies to joint tortfeasors and to at least one of the co-obligors that are under the same contract. It does not exist to offset damages in cases dealing with more than one offender, the court ruling said.

The statute also cannot apply to restoration reimbursements when the amounts awarded to different defendants are a result of “the individualized benefits realized by those defendants,” according to the court’s opinion.

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