The US Court of Appeals for the Federal Circuit affirmed a California district court decision denying a trade secret defendant’s motion to compel arbitration based on a prior employment agreement between the plaintiff and an employee of the defendant, and rejected the arguments of a former director of the defendant that a third-party confidential report is protected from discovery solely because it may incriminate him. Waymo LLC v. Uber Technologies, Inc., Ottomotto LLC, Otto Trucking LLC, Case Nos. 17-2235; -2253; -2130 (Fed. Cir., Sept. 13, 2017) (Newman, J).

Google spin-off Waymo sued Uber and Ottomotto for violations of federal and state trade secret laws and patent infringement. The case centers on former Google employee Anthony Levandowski, who left Google to form Ottomotto in 2016. Uber subsequently purchased Ottomotto. Waymo alleges Levandowski stole 14,000 computer files on Waymo’s driverless vehicle technology prior to leaving the company and founding Ottomotto.

Arbitration

Uber argued that Waymo should be compelled to arbitrate its dispute with Uber and Ottomotto because of an arbitration clause in an employment agreement between Waymo and Levandowski. 

Although not a party to the agreement, Uber argued that the agreement should equitably apply since the complaint alleges that the misappropriation was conducted by virtue of Levandowski’s job at Waymo. However, Waymo represented that it expressly forswore reliance on its employment agreements with Levandowski to prove its claims. The district court agreed with Waymo and denied Uber’s motion to compel arbitration.

The Federal Circuit agreed, finding that under California contract law the arbitration clause does not apply to Uber. California law requires reliance on the contract bearing the arbitration clause as fundamental to compulsion by a non-party to arbitrate. Although courts have applied equitable estoppel to compel arbitration when necessary, that has been limited to narrow situations. Since Waymo expressly disclaimed any affirmative use of the employment contracts containing the clause, the Court determined that equitable estoppel does not apply.

The Secret Report

During document discovery, the district court granted Waymo’s motion to compel production of a report prepared by cybersecurity firm Stroz Friedberg LLC prior to Uber’s acquisition of Ottomotto. The report investigated Ottomotto employees who previously worked at Waymo, including Levandowski. Uber and Ottomotto attempted to quash the production, but the district court denied the motions. Levandowski intervened in the lawsuit for the limited purpose of opposing disclosure of the report. He argued that disclosure of the report would be “particularly injurious or novel.” Because the orders were not appealable final judgments, Levandowski presented his appeal as a writ of mandamus

The Federal Circuit determined that Levandowski failed to articulate any persuasive reasons why disclosure of the report should be barred, noting that the possibility of admissions against his interest is a valid function of civil discovery. The Court specifically pointed out that it is inappropriate to withhold relevant material in the civil action. Rejecting his petition, the Court held that Levandowski failed to meet any of the three requirements necessary to establish entitlement to a writ of mandamus: (1) that no other adequate means were available to achieve the desired relief; (2) that he had a clear and indisputable right to the writ; and (3) that, in the Court’s discretion, a writ of mandamus was warranted.

Practice Note: After the Federal Circuit ruling, the district court granted Waymo a delay in the trial, which is now set to start on December 4, 2017. Waymo had requested more time to review a recently unsealed report detailing Uber’s acquisition of Otto.