Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_15-cv-01370/USCOURTS-cand-5_15-cv-01370-42/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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Case No.: 5:15-cv-01370-EJD

ORDER DENYING DEFENDANT’S MOTION TO COMPEL SETTLEMENT AGREEMENT

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

BLADEROOM GROUP LIMITED, et al.,

Plaintiffs,

v.

EMERSON ELECTRIC CO, et al.,

Defendants.

Case No. 5:15-cv-01370-EJD 

ORDER DENYING DEFENDANT’S 

MOTION TO COMPEL PRODUCTION 

OF SETTLEMENT AGREEMENT

Re: Dkt. No. 891

I. INTRODUCTION

This action for misappropriation of trade secrets and breach of contract was tried to a jury. 

When the trial commenced, all parties named in the complaint were involved: specifically, 

Plaintiffs BladeRoom Group Ltd. and Bripco (UK) Ltd. (collectively, “BladeRoom”) on the one 

hand, and Defendants Facebook, Inc., Emerson Electric Co., Emerson Network Power Solutions, 

Inc. and Liebert Corporation (collectively, “Emerson”) on the other. But when the trial ended, the 

only remaining defendant was Emerson because BladeRoom and Facebook entered into a 

confidential settlement before the case went to verdict. Dkt. No. 771. The jury ultimately 

awarded BladeRoom $10 million in lost profits damages and $20 million in unjust enrichment 

damages for both of its claims against Emerson. 

Believing there exists an opportunity to offset Facebook’s settlement payment against the 

jury’s damages verdict, Emerson now moves to compel production of the confidential agreement 

between Facebook and BladeRoom. Dkt. No. 891. BladeRoom and Facebook oppose the motion. 

Having carefully considered the parties’ positions in conjunction with the trial record, the court 

concludes an offset of damages is impossible under these circumstances. Accordingly, Emerson’s 

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Case No.: 5:15-cv-01370-EJD

ORDER DENYING DEFENDANT’S MOTION TO COMPEL SETTLEMENT AGREEMENT

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motion will be denied for the reasons explained below. 

II. LEGAL STANDARD

“[F]ederal courts sitting in diversity apply state substantive law and federal procedural 

law.” Cty. of Orange v. U.S. Dist. Ct. (In re Cty. of Orange), 784 F.3d 520, 523-24 (9th Cir. 

2015). “The task of a federal court in a diversity action is to approximate state law as closely as 

possible in order to make sure that the vindication of the state right is without discrimination 

because of the federal forum.” Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir. 1980).

The state law relevant to this motion is California Civil Code § 877, which provides in 

relevant part:

Where a release, dismissal with or without prejudice, or a covenant 

not to sue or not to enforce judgment is given in good faith before 

verdict or judgment to one or more of a number of tortfeasors 

claimed to be liable for the same tort, or to one or more other coobligors mutually subject to contribution rights, it shall have the 

following effect:

(a) It shall not discharge any other such party from liability unless 

its terms so provide, but it shall reduce the claims against the others 

in the amount stipulated by the release, the dismissal or the 

covenant, or in the amount of the consideration paid for it, 

whichever is the greater. . . . 

Civil Code § 877 “is designed to provide for equitable sharing of damages, and assure that 

‘a plaintiff will not be enriched unjustly by a double recovery, collecting part of his total claim 

from one joint tortfeasor and all of his claim from another.’” Cty. of San Bernardino v. Walsh, 

158 Cal. App. 4th 533, 544 (2008) (quoting Reed v. Wilson, 73 Cal. App. 4th 439, 444 (1999)). 

To accomplish this purpose, a settlement agreement between a plaintiff and one defendant can be 

discoverable by a non-settling defendant. See, e.g., Harrison v. Bankers Standard Ins. Co., No. 

13cv1682 BAS (JLB), 2015 WL 3617108 (S.D. Cal. June 9, 2015). 

III. DISCUSSION

Emerson’s position for this motion is a narrow one. As stated in its reply, “[t]he only issue 

raised by Emerson’s Motion is whether the Court should compel [BladeRoom] to produce their 

settlement agreement with Facebook.” To Emerson, the resolution is simple: the court need only 

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Case No.: 5:15-cv-01370-EJD

ORDER DENYING DEFENDANT’S MOTION TO COMPEL SETTLEMENT AGREEMENT

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look to one statute, Civil Code § 877, and one rule, Federal Rule of Civil Procedure 26(b)(1), the 

latter of which permits discovery of any nonprivileged matter that is relevant to any party’s claim

and proportional to the needs of the case. 

But the issue is not a standard discovery matter, and the court is not convinced that 

examining only the moment and ignoring the future is the proper approach. California law, on 

which Emerson’s request is based, “neither does nor requires idle acts.” Cal. Civ. Code § 3532.1 

Moreover, federal courts do not compel parties to produce information when doing so can neither 

contribute to a resolution nor result in a benefit outweighing the burden of production. Fed. R. 

Civ. P. 26(b)(1). 

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 production of the agreement. 

A. The Scope of § 877

More specific observations about § 877 are important to resolving this motion. 

First, as the party moving for relief, it is Emerson’s burden to prove the entitlement to an 

offset, or at this stage, that an offset is possible. Textron Fin. Corp. v. Nat’l Union Fire Ins. Co of 

Pittsburgh, 118 Cal. App. 4th 1061, 1077 (2004)

Second, the plain language of § 877 reveals its provisions apply only to joint tortfeasors 

and to “one or more other co-obligors” on the same contract. The statute does not generally 

operate to offset damages in cases involving multiple wrongdoers. See Balfour Beatty 

Infrastructure, Inc. v. PB&A, Inc., No. 16-cv-01152-WHO, 2017 WL 1739101, at *8 (N.D. Cal. 

May 4, 2017). “Where a plaintiff brings claims only for breach of contract and the defendant is 

not a co-obligor, section 877 does not apply.” Id. 

Third, the court finds based on the nature of the unjust enrichment remedy in the context of 

 

1 Federal law is in accord. See Ohio v. Roberts, 448 U.S. 56, 74 (1980) (“The law does not 

require the doing of a futile act.”). 

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trade secret misappropriation that § 877 cannot apply to restitutionary damages when the amounts 

awarded against separate defendants are based on the individualized benefits realized by those 

defendants. See BladeRoom Grp. Ltd. v. Facebook, Inc., No. 5:15-cv-01370-EJD, 2018 WL 

1611835, at *2 (N.D. Cal. Apr. 3, 2018) (“The prevailing plaintiff in an action for the 

misappropriation of trade secrets may recover for the ‘actual loss caused by misappropriation,’ and 

may also recover ‘for the unjust enrichment caused by misappropriation that is not taken into 

account in computing damages for actual loss.’”). Because the measure of unjust enrichment is 

specific to each defendant, based on “the defendant’s profits on sales attributable to the use of the 

trade secret” (Restatement (Third) of Unfair Competition § 45 cmt. f (1995)), there can be no 

offset of one defendant’s profits with those of another defendant. 

B. Authority Governing Disclosure of Confidential Settlement Agreements

The “strong public policy favoring settlement of disputed claims” is also important to note 

because that policy overlays Emerson’s request. Thomasian v. Wells Fargo Bank, N.A., No. 

03:12-cv-01435-HU, 2013 WL 4498667, at *2 (D. Or. Aug. 22, 2013); accord Fed. R. Civ. P. 408 

advisory committee’s note (explaining the “more consistently impressive ground” for the 

evidentiary rule barring the use of offers of compromise and settlement negotiations “is promotion 

of the public policy favoring the compromise and settlement of disputes”); Advanced 

Cardiovascular Sys. Inc. v. Medtronic, Inc., 265 F.3d 1294, 1308 (Fed. Cir. 2001) (“[W]e are 

mindful . . . of the policy in favor protecting settlement negotiations from being admitted as 

evidence, this serving to encourage settlements.”). Indeed, “[t]he law . . . favors settlement of 

litigation which reduces the burden on courts and counsel and mitigates the antagonism and 

hostility that protracted litigation leading to judgment may cause.” 3 Michael H. Graham, 

Handbook of Federal Evidence § 408:1 n.6 (7th ed. 2012). 

The “strong public policy” is not served to its fullest extent if confidential settlements are 

subject to the same unqualified standard which governs civil discovery. Thus, while the scope of 

pretrial discovery is admittedly broad (Shoen v. Shoen, 5 F.3d 1289, 1292 (9th Cir. 1993)), courts 

have found it less so when examining the potential disclosure of confidential terms because such 

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agreements should not be “lightly abrogated.” Thomasian, 2013 WL 4498667, at *2 (quoting 

Flynn v. Portland Gen. Elec. Corp., No. 88-455-FR, 1989 WL 112802, at *2 (D. Or. Sept. 21, 

1989); see also Phillips ex rel. Estates of Byrd v. Gen. Motors Corp., 307 F.3d 1206, 1212 (9th 

Cir. 2002) (recognizing that “courts have granted protective orders to protect confidential 

settlement agreements”); see also Kalinauskas v. Wong, 151 F.R.D. 363, 365 (D. Nev. 1993) 

(“Confidential settlements benefit society and the parties involved by resolving disputes relatively 

quickly, with slight judicial intervention, and presumably result in greater satisfaction to the 

parties. Sound judicial policy fosters and protects this form of alternative dispute resolution . . . . 

The secrecy of a settlement agreement and the contractual rights of the parties thereunder deserve 

court protection.”); see also FireClean LLC v. Tuohy, No. CV-16-00604-TUC-JAS, 2018 WL 

1811712, at *11 (D. Ariz. Apr. 17, 2018) (“[T]he Court notes that there are strong public policy 

and judicial reasons that support keeping settlement agreements confidential.”); see also Abbott 

Diabetes Care Inc. v. Roche Diagnostics Corp., No. C05-03117 MJJ, 2007 WL 4166030, at *4 

(N.D. Cal. Nov. 19, 2007) (noting the “federal policy of encouraging settlements by safeguarding 

the confidentiality of settlement agreements”). To that end, some courts require a “particularized 

showing of a likelihood that admissible evidence will be generated by the dissemination of the 

terms of a settlement agreement.” Abbot Diabetes Care, 2007 WL 4166030, at *2 (citing Doe v. 

Methacton Sch. Dist., 164 F.R.D. 175, 1756 (E.D. Pa. 1995); Morse/Diesel, Inc. v. Fidelity and 

Deposit Co. of Maryland, 122 F.R.D. 447, 451 (S.D.N.Y. 1988)). 

Here, it is particularly appropriate to require that Emerson show something more than 

broad relevance before obtaining the confidential settlement agreement between BladeRoom and 

Facebook. As noted, Emerson’s request invokes the aforementioned federal policy promoting the 

settlement of litigation by preserving confidential resolutions. Moreover, the fact this request is 

framed as a discovery matter and appears post-verdict cannot be overlooked. Thus, in addition to 

overcoming the policy promoting settlement, Emerson must also convince the court there is a 

viable need for additional discovery at this late stage of the litigation. See California ex rel. 

California Dep’t of Toxic Substances Control v. Campbell, 138 F.3d 772, 779 (9th Cir. 1998) 

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(“District courts have wide latitude in controlling discovery . . . .”); see also Sheridan v. Reinke, 

611 Fed. Appx. 381, 384 (9th Cir. 2015) (applying a “good cause” standard to motions to reopen 

discovery). 

C. Emerson Has Not Justified Disclosure of the Confidential Settlement Agreement 

Applying the authorities recited above to this case, it becomes apparent why Emerson has 

not, and indeed cannot, identify a legitimate need for the agreement between BladeRoom and

Facebook which would justify ordering discovery and overcome the “strong public policy” in 

favor of informal resolution and against the disclosure of settlement terms. 

Only one of the two claims adjudicated by the jury could possibly qualify for an offset: the 

tort claim for misappropriation of trade secrets. Even assuming Facebook’s settlement agreement 

with BladeRoom assigned monetary amounts to particular claims, Emerson cannot offset any 

payment made by Facebook to BladeRoom for breach of contract because Facebook and Emerson 

were not co-obligors on the same contract. Second Am. Compl., Dkt. No. 107, at ¶¶ 35, 38. To 

the contrary, BladeRoom alleged that Facebook and Emerson breached their separate nondisclosure agreements. Thus, by the statute’s explicit terms, § 877 does not apply to the breach of 

contract claims asserted in this action. Cal. Civ. Code § 877; Balfour Beatty Infrastructure, 2017 

WL 1739101, at *8 (N.D. Cal. May 4, 2017). 

Moreover, only one category of damages could possibly qualify for an offset: the amount 

awarded to BladeRoom for lost profits. For reasons already explained, Emerson could not offset 

against the jury’s unjust enrichment award any amount Facebook paid to BladeRoom for its own 

unjust enrichment because the jury’s measure of those damages was based on Emerson’s profits, 

not on BladeRoom’s loss. See Restatement (Third) of Unfair Competition § 45 cmt. f (1995). Put 

differently, BladeRoom is not overcompensated by receiving two unjust enrichment awards 

because Facebook and Emerson separately benefitted from their improper uses of BladeRoom’s 

trade secrets, and therefore must make separate disgorgements of profit. As a consequence, there 

is no chance of a double recovery as to unjust enrichment damages and no need to apply § 877. 

See Vesey v. United States, 626 F.2d 627, 633 (9th Cir. 1980) (“[T]he fundamental purpose of § 

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877 of the California Code is to preclude a double recovery arising out of the same wrong.”). 

Once the claim for breach of contract and the damages for unjust enrichment are removed 

from consideration, the only path to a § 877 offset involves lost profits awarded to BladeRoom for 

misappropriation of trade secrets. But there is simply no way for Emerson to get on that path. 

The jury’s damages verdict, though differentiated between lost profits and unjust enrichment, is 

not apportioned between the two claims for which it found Emerson liable; that is, there is no way 

for the parties or the court to know how much was awarded for breach of contract and how much 

was awarded for misappropriation of trade secrets. In turn, there is simply no way to calculate an 

offset that applies only to the amount of lost profits awarded as tort damages. That number could 

be any amount between zero and $10 million, and only the jury knows the number. 

Even if the settlement agreement was ordered disclosed, and even if it provided some way 

to apportion any payment Facebook made to BladeRoom, Emerson could never meet its burden to 

prove the entitlement to an offset against the damages verdict as a matter of fact. Since Emerson 

has not shown that a § 877 offset is realistic rather than theoretical, its interest in the agreement 

between Facebook and BladeRoom is outweighed by the public policy protecting confidential 

settlement terms. The court will not order an idle act, and the motion to compel must therefore be 

denied. 

IV. ORDER

Emerson’s Motion to Compel Production of Settlement Agreement (Dkt. No. 891) is 

DENIED. 

IT IS SO ORDERED.

Dated: November 26, 2018

______________________________________

EDWARD J. DAVILA

United States District Judge

Case 5:15-cv-01370-EJD Document 945 Filed 11/26/18 Page 7 of 7