Court Opinion

ID: 5139250
Source: CourtListenerOpinion
Date Created: 2021-12-21 18:01:33.73806+00
Date Added: 2024-06-11T08:24:16.293395
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

BLADEROOM GROUP LIMITED;               No. 19-16583
BRIPCO (UK) LIMITED,
               Plaintiffs-Appellees,      D.C. No.
                                       5:15-cv-01370-
                 v.                         EJD

EMERSON ELECTRIC CO.,
            Defendant-Appellant,

                and

FACEBOOK, INC.; EMERSON
NETWORK POWER SOLUTIONS, INC.;
LIEBERT CORPORATION,
                      Defendants.
2   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

BLADEROOM GROUP LIMITED;               No. 19-16584
BRIPCO (UK) LIMITED,
               Plaintiffs-Appellees,      D.C. No.
                                       5:15-cv-01370-
                 v.                         EJD

EMERSON NETWORK POWER
SOLUTIONS, INC.,
              Defendant-Appellant,

                and

FACEBOOK, INC.; EMERSON
ELECTRIC CO.; LIEBERT
CORPORATION,
                      Defendants.

BLADEROOM GROUP LIMITED;               No. 19-16585
BRIPCO (UK) LIMITED,
               Plaintiffs-Appellees,      D.C. No.
                                       5:15-cv-01370-
                 v.                         EJD

LIEBERT CORPORATION,
             Defendant-Appellant,

                and

FACEBOOK, INC.; EMERSON
ELECTRIC CO.; EMERSON NETWORK
POWER SOLUTIONS, INC.,
                       Defendants.
    BLADEROOM GROUP LTD. V. EMERSON ELECTRIC            3

BLADEROOM GROUP LIMITED;               No. 19-16730
BRIPCO (UK) LIMITED,
              Plaintiffs-Appellants,      D.C. No.
                                       5:15-cv-01370-
                  v.                        EJD

FACEBOOK, INC.,
                         Defendant,

                  and

EMERSON ELECTRIC CO.; EMERSON
NETWORK POWER SOLUTIONS, INC.;
LIEBERT CORPORATION,
            Defendants-Appellees.

BLADEROOM GROUP LIMITED;               No. 20-15758
BRIPCO (UK) LIMITED,
               Plaintiffs-Appellees,      D.C. No.
                                       5:15-cv-01370-
                  v.                        EJD

EMERSON ELECTRIC CO.,
            Defendant-Appellant,

                  and

EMERSON NETWORK POWER
SOLUTIONS, INC.; LIEBERT
CORPORATION,
                       Defendants.
4   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

BLADEROOM GROUP LIMITED;               No. 20-15759
BRIPCO (UK) LIMITED,
               Plaintiffs-Appellees,      D.C. No.
                                       5:15-cv-01370-
                 v.                         EJD

EMERSON NETWORK POWER
SOLUTIONS, INC.,
              Defendant-Appellant,

                and

EMERSON ELECTRIC CO.; LIEBERT
CORPORATION,
                      Defendants.

BLADEROOM GROUP LIMITED;               No. 20-15760
BRIPCO (UK) LIMITED,
               Plaintiffs-Appellees,      D.C. No.
                                       5:15-cv-01370-
                 v.                         EJD

LIEBERT CORPORATION,
             Defendant-Appellant,      ORDER AND
                                        AMENDED
                and                      OPINION

EMERSON ELECTRIC CO.; EMERSON
NETWORK POWER SOLUTIONS, INC.,
                      Defendants.
        BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                     5

         Appeals from the United States District Court
            for the Northern District of California
          Edward J. Davila, District Judge, Presiding

           Argued and Submitted February 4, 2021
                 San Francisco, California

                   Filed August 30, 2021
                 Amended December 21, 2021

  Before: Johnnie B. Rawlinson and Patrick J. Bumatay,
Circuit Judges, and Stephen J. Murphy, III, * District Judge.

                           Order;
                 Opinion by Judge Murphy;
               Concurrence by Judge Rawlinson

                          SUMMARY **

  Non-Disclosure Agreements / Damages and Interest

    The panel amended the Opinion and Concurrence filed
on August 30, 2021, denied a petition for panel rehearing,
and denied on behalf of the court a petition for rehearing en
banc. Holding that the district court erroneously interpreted
a non-disclosure agreement (“NDA”), the panel (1) reversed
the district court’s order granting a motion in limine as it

    *
      The Honorable Stephen J. Murphy, III, United States District
Judge for the Eastern District of Michigan, sitting by designation.
    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
6    BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

related to the twelfth paragraph of the NDA; (2) vacated the
district court’s judgment and post-verdict orders; and
(3) vacated the orders awarding attorneys’ and expert
witness fees.

    BladeRoom Group Limited and Emerson Electric Co.
were competitors that began negotiating a sale of
BladeRoom to Emerson, and they signed an NDA. The
negotiations fell through. Facebook selected Emerson’s
proposal for a data center, and BladeRoom sued Facebook
and Emerson. Halfway through a jury trial, BladeRoom
settled with Facebook, and the case continued against
Emerson. Emerson proposed a jury instruction that would
have excluded information disclosed or used after
August 17, 2013, from its liability for breach of contract,
which Emerson argued was the date of the contract’s
expiration. The district court denied the instruction but
allowed Emerson to make the legal argument to the jury.
BladeRoom moved in limine to overturn that ruling. The
district court granted the motion and agreed that the NDA’s
confidentiality obligations did not expire under paragraph
twelve of the NDA. The jury found that Emerson breached
the NDA and willfully and maliciously misappropriated
BladeRoom’s trade secrets. The jury found that BladeRoom
sustained $10 million in lost profits and $20 million in unjust
enrichment. The district court later awarded BladeRoom
$30 million in punitive damages.

    The panel held that the district court erred in interpreting
the NDA. The panel applied English law, which interprets
contracts to discern the contracting parties’ intent and
balances textual and contextual analyses. The panel held
that paragraph twelve’s natural meaning unambiguously
terminated the NDA and its confidentiality obligations two
years after it was signed. The district court therefore erred as
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                7

a matter of law when it granted BladeRoom’s motion in
limine.

    The panel treated the district court’s error as an error of
jury instruction. First, BladeRoom’s motion in limine was a
clear attempt to stymie the district court’s jury instruction
ruling that allowed Emerson to argue any exclusion from
liability it believed should apply.

    Second, the district court’s order lacked basic findings
necessary for the panel to construe it as a denial of a motion
for judgment as a matter of law. Jury instruction error in a
civil trial is reviewed for harmless error, and the panel
presumed prejudice pursuant to Clem v. Lomeli, 566 F.3d
1177, 1182 (9th Cir. 2009). Thus, the burden shifted to
BladeRoom to demonstrate that it was more probable than
not that the jury would have reached the same verdict had it
been properly instructed. The panel applied Clem’s burden
shifting standard because Ninth Circuit precedent so
instructed given the abnormal jury instruction error in these
appeals. In contrast, for the ordinary civil appeal, the party
seeking reversal bears the burden of persuasion, pursuant to
Shinseki v. Sanders, 556 U.S. 396, 410 (2009). The panel
held that Shinseki’s harmless error review did not apply to
these appeals. The panel held further that several Ninth
Circuit cases applied Shinseki’s harmless error review
instead of Chen’s, but those cases differed greatly from the
present appeals.

   The panel held that the district court prejudiced Emerson
when the jury made its breach of contract, misappropriation,
and damage findings. First, the panel vacated the jury’s
breach of contract findings. The jury answered only whether
a breach of contract occurred, but not when the breach
occurred; and, therefore, there was no way to determine
whether the jury would have found that Emerson breached
8    BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

the NDA if the jury had known that Emerson’s
confidentiality obligations ended after only two years. The
holding in Clem required a finding of prejudice in the district
court’s error here. Second, the panel vacated the jury’s
misappropriation findings because there was no way to know
whether the jury found that Emerson misappropriated trade
secrets during or after the NDA’s initial two-year period.
Without that finding, there was no way to know whether the
jury would have found that Emerson acted willfully and
maliciously. Finally, the same reasons supported vacating
the jury’s damages findings. The jury awarded damages in
two lump sums that did not separate damages for breach of
contract from misappropriation, and there was no way to
know how much damages the jury intended to allocate for
each claim. Because it is not known whether the jury would
have found Emerson liable under breach of contract or
misappropriation, the panel could not tell whether the
damages findings would be the same. The panel vacated
these jury findings; and remanded for a new trial on those
issues.

    Given the panel’s order to vacate the judgment and
remand for a new trial, the panel vacated the district court’s
post-verdict orders on appeal. The panel also vacated the
district court’s awards of attorneys’ and expert witness fees.

    The panel addressed a number of issues for consideration
on the awards of damages and prejudgment interest should
they be determined after a new trial.

    Under California law, a party cannot collect punitive
damages for breach of contract awards. Because the jury
awarded a lump sum for breach of contract and
misappropriation damages, Emerson correctly argued that
the district court could not assume that the whole award went
to misappropriation. In awarding punitive damages, the
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                   9

district court abused its discretion by changing its reasoning
without explaining why, and the inconsistency visibly
benefited BladeRoom. On remand, the district court must
take several steps to allocate damages: the district court
should consider adopting a more-detailed special verdict
form; and if the jury cannot allocate damages, then the
district court should take another step to explain why it
allocated damages.

    California Civil Code § 3288 allows the award of
prejudgment interest for the breach of an obligation not
arising from a contract, whereas California Civil Code
§ 3287(b) allows an award of prejudgment interest only for
breach of contract claims. Awarding prejudgment interest
under one section rather than the other can make a sizable
difference. The panel held that the district court erred in
awarding prejudgment interest on the full compensatory
damages award under § 3288, not § 3287(b); and erred in
finding that prejudgment interest should run from
October 30, 2012. On remand, if the district court awards
§ 3288 prejudgment interest for BladeRoom’s lost profits, it
would have to find when the lost profits began, and the
award must run from when the lost profits began. Should
the district court be called on to award § 3288 prejudgment
interest for unjust enrichment after a new trial, the district
court should find whether § 3288 allowed prejudgment
interest for unjust enrichment damages; and, if so, the district
court should apply the same standard that it applied for lost
profits – it should find when the unjust enrichment began.

    Judge Rawlinson concurred fully in the majority
opinion, and wrote separately to bring two additional matters
to the district court’s attention. First, in the event the jury on
retrial imposes liability on Emerson for unjust enrichment, it
would be BladeRoom’s burden to prove the amount of
10   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

damages. BladeRoom will not be entitled to future profits
absent definitive evidence of a future contract that was lost
due to Emerson’s misappropriation of BladeRoom’s trade
secret.     Second, because BladeRoom conceded that
Facebook and Emerson were joint tortfeasors and conspired
to misappropriate BladeRoom’s trade secrets, California law
required an offset. If the retrial results in the imposition of
damages against Emerson, the district court should apply an
offset for the amount of the settlement between BladeRoom
and Facebook. Correspondingly, Emerson would be entitled
to discovery of the settlement terms.
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC           11

                       COUNSEL

Carter G. Phillips (argued), Sidley Austin LLP, Washington,
D.C.; Christopher M. Egleson, Sidley Austin LLP, Los
Angeles, California; Constantine L. Trela Jr., Jillian S.
Stonecipher, Taurean K. Brown, and Jason G. Marsico,
Sidley Austin LLP, Chicago, Illinois; for Defendant-
Appellant/Cross-Appellee Emerson Electric Co.

Rudolph A. Telscher Jr., Steven E. Holtshouser, Kara R.
Fussner, and Michael C. Martinich-Sauter, Husch Blackwell
LLP, St. Louis, Missouri, for Defendants-Appellants/Cross-
Appellees Emerson Network Power Solutions Inc., and
Liebert Corporation.

Stephanie P. Skaff (argued), Jeffrey M. Fisher, Carly O.
Alameda, Erik C. Olson, Alex Reese, Nadia C. Arid, and
Ashley Roybal-Reid, Farella Braun & Martel LLP, San
Francisco, California, for Plaintiffs-Appellees/Cross-
Appellants BladeRoom Group Limited and Bripco (UK)
Limited.
12   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

                         ORDER

   The Opinion and Concurrence filed on August 30, 2021
and reported at 11 F.4th 1010 is amended by the Opinion and
Concurrence filed concurrently with this Order.

    With these amendments, the full court has been advised
of the petitions for rehearing en banc, and no judge of the
court has requested a vote on the petitions. Fed. R. App.
P. 35. The panel unanimously votes to deny the petitions for
panel rehearing. Judges Rawlinson and Bumatay vote to
deny the petitions for rehearing en banc, and Judge Murphy
so recommends. The petitions for panel rehearing and
rehearing en banc are DENIED. No further petitions for
panel rehearing or rehearing en banc will be accepted.

                        OPINION

S. MURPHY, III, District Judge:

    In these appeals, we consider how English law interprets
a non-disclosure agreement (“NDA”). The district court’s
interpretation misapplied English law because it conflicts
with the NDA’s natural reading. We therefore vacate the
district court’s judgment and remand for a new trial.

                             I.

    BladeRoom and Emerson are competitors in modular
data center design and building industry. In August 2011,
the two began negotiating a sale of BladeRoom to Emerson.
To start the process, BladeRoom drafted an NDA and both
parties signed it. The parties agreed that English law
governed the NDA.
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC             13

     The NDA’s second paragraph included a dozen
subparagraphs that detailed Emerson’s confidentiality
obligations.    One subparagraph, for example, barred
Emerson from disclosing information about BladeRoom that
it shared with Emerson “at any time.” Another subparagraph
stressed that any disclosed information “shall remain the
property of” BladeRoom and “shall not confer” “any rights
or license whatsoever” to Emerson. The NDA’s third
paragraph stated that the confidentiality obligations did not
apply to information that was in “or hereafter comes into[]
the public domain, otherwise than by reason of breach of”
the NDA. With all that in mind, the NDA’s twelfth
paragraph is most pertinent to our review.

   Paragraph twelve says:

       The parties acknowledge and agree that their
       respective obligations under this agreement
       shall be continuing and, in particular, they
       shall survive the termination of any
       discussions or negotiations between you and
       [BladeRoom] regarding the Transaction,
       provided that this agreement shall terminate
       on the date 2 years from the date hereof.

(emphasis added).

    Eventually, the acquisition fell through. And around the
same time that the deal fell through, Facebook began plans
to build a large data center in Northern Sweden. BladeRoom
hoped its technology would catch Facebook’s eye, so
BladeRoom pitched a design for the data center in July 2012.
Several months later, Emerson also pitched a data center
design to Facebook.
14       BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

    On October 30, 2012, Facebook verbally approved
Emerson’s design. At the time, Emerson’s design was only
ten percent done. Despite the approval, Facebook contacted
BladeRoom almost a year later to ask about updates to
BladeRoom’s proposal.

    In the end, only BladeRoom and Emerson competed to
design and build the data center. In November 2013,
Facebook selected Emerson’s proposal and the two signed a
design-build contract in March 2014.

    Meanwhile, BladeRoom knew nothing until March 2014
about the data center’s design Emerson pitched. A year later,
BladeRoom sued Facebook and alleged that the data center’s
design copied BladeRoom technology. BladeRoom ended
up filing an amended complaint that asserted claims against
Emerson and its subsidiaries. 1 The second amended
complaint lodged several claims against Emerson, notably,
breach of contract and trade secret misappropriation. In
2018, the parties tried the case before a jury.

    Halfway through the trial, BladeRoom settled with
Facebook; its case against Emerson went on. Before closing
arguments, Emerson proposed a jury instruction that would
have excluded any information disclosed or used after
August 17, 2013 from its liability for breach of contract—
which was, as Emerson argued, the date of the contract’s
expiration. 2 The district court denied the instruction but
allowed Emerson to make the same legal argument to the
jury.

     1
         We call the defendants “Emerson” collectively.
     2
         August 17, 2013 was exactly two years after the NDA took effect.
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                15

    The next day, BladeRoom moved in limine to overturn
that ruling. BladeRoom specifically moved to prohibit
Emerson from arguing that, as a matter of law, the NDA’s
twelfth paragraph allowed Emerson to use BladeRoom’s
confidential information two years after signing the NDA.

     The district court granted the motion and agreed that the
NDA’s confidentiality obligations did not expire under
paragraph twelve. To interpret the NDA, the district court
first examined its “purpose and context.” Because “the
purpose of the contract [was] to protect information, not
provide for its release after 2 years,” the district court found
that “a reasonable businessperson in either party’s position
would not have contemplated Emerson’s [reading].” And
because “Emerson’s [reading] would lead to an absurd result
and would create some inconsistency with the rest of the
[NDA,]” the district court found that the NDA’s
confidentiality obligations survived beyond two years.

    After the trial evidence closed, the jury issued a special
verdict. The jury found that Emerson breached the NDA and
willfully and maliciously misappropriated BladeRoom’s
trade secrets. The jury also found that both actions harmed
BladeRoom or unjustly enriched Emerson. For damages, the
jury found that BladeRoom sustained $10 million in lost
profits and $20 million in unjust enrichment. But the jury’s
verdict did not separate damages for breach of contract from
misappropriation of trade secrets or future lost profits from
past lost profits.

    The district court later awarded BladeRoom $30 million
in punitive damages. The district court chose $30 million
because “[t]he trial evidence show[ed] that either [the breach
of contract or misappropriation] claim for which the jury
found liability could support the [full] amount of
compensatory damages.” Yet, in two post-verdict orders,
16   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

the district court admitted that “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.”

    The district court also awarded BladeRoom prejudgment
interest starting from October 30, 2012, the date when the
district court found that BladeRoom suffered its “injury . . .
[and] its loss.” The district court chose the date because it
was then that BladeRoom “was notified” that “it had lost the
opportunity to obtain Facebook’s data center contract.” And
last, the district court awarded BladeRoom roughly
$18 million in attorneys’ and expert witness’ fees. On
appeal, Emerson challenged the orders discussed above,
along with several other district court orders that do not
affect our holding. 3

                               II.

    We review de novo the district court’s order interpreting
the NDA. Trs. of S. Cal. IBEW-NECA Pension Tr. Fund v.
Flores, 519 F.3d 1045, 1047 (9th Cir. 2008). We first
explain why the district court’s interpretation erred. After,
we explain why the legal error prejudiced Emerson and why
we remand for a new trial.

                               A.

    English courts interpret contracts to discern the
contracting parties’ intent. Arnold v. Britton [2015] UKSC
36, 2015 WL 3555408, [15]. English courts determine intent
based on “what a reasonable person having all the

    3
      Emerson appealed the orders related to attorneys’ and expert
witness’ fees in 20-15758, 20-15759, and 20-15760.
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                 17

background knowledge which would have been available to
the parties would have understood” the contract’s terms to
have meant. Id. (quotation omitted); see also Rainy Sky S.A.
v. Kookmin Bank [2011] UKSC 50, 2011 WL 5077782, [14].
English courts therefore “focus[] on the meaning of the
relevant [contractual] words . . . in their documentary,
factual, and commercial context.” Arnold v. Britton [2015]
UKSC 36, [15].

    The focus is a “unitary exercise” that “balance[s]”
textual and contextual analyses. Wood v. Capita Ins. Servs.
Ltd. [2017] UKSC 24, 2017 WL 01084489, [12]. To analyze
text, English courts read contract terms as a whole, and in
their “natural and ordinary meaning.” Arnold v. Britton
[2015] UKSC 36, [15]. To analyze context, English courts
examine “the overall purpose” of a contract and its clauses.
Id. They also look at “the factual background known to the
parties at or before the date of the contract.” Wood v. Capita
Ins. Servs. Ltd. [2017] UKSC 24, [10]; see also Arnold v.
Britton [2015] UKSC 36, [15]. English courts also consider
the commercial effects of proposed interpretations using
“commercial common sense.” Arnold v. Britton [2015]
UKSC 36, [15]. And last, English courts “disregard[]
subjective evidence of any party’s intentions.” Id.

    English contract interpretation “is not a literalist exercise
focused solely on a parsing of the wording of the particular
clause.” Wood v. Capita Ins. Servs. Ltd. [2017] UKSC 24,
[10].    Rather, some contracts “may be successfully
interpreted principally by textual analysis,” but some
contracts may require a deeper focus on the facts known to
the parties. Id. at [13]. Thus, we interpret the NDA mainly
through a textual analysis because when “parties have used
unambiguous language, the court must apply it.” Rainy Sky
S.A. v. Kookmin Bank [2011] UKSC 50, [23].
18   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

   The parties’ narrow dispute focuses on the proviso in
paragraph twelve. We hold that paragraph twelve’s natural
meaning unambiguously terminated the NDA and its
confidentiality obligations two years after it was signed.
Paragraph 12 says:

       The parties acknowledge and agree that their
       respective obligations under this agreement
       shall be continuing and, in particular, they
       shall survive the termination of any
       discussions or negotiations between you and
       the Company regarding the Transaction,
       provided that this agreement shall terminate
       on the date 2 years from the date hereof.

(emphasis added).

    A proviso is “[a] clause in a legal or formal document,
making some condition, stipulation, exception, or
limitation.” Proviso, Oxford English Dictionary (3d ed.
2007). Both BladeRoom and the district court reasoned that
the proviso in paragraph twelve limited only the “discussions
or negotiations” clause. Under that reasoning, paragraph
twelve therefore deemed “information disclosed [by
BladeRoom] during the 2-year lifespan” as “confidential and
subject to a continuing obligation against [] disclosure or
use, but any information disclosed by [BladeRoom] after
2 years [was] not subject to th[e] restriction.” By contrast,
Emerson argued that the proviso limited all of paragraph
twelve. Under Emerson’s reading, although the parties’
obligations under the NDA continued through any
negotiations, their obligations ended after two years. We
find Emerson’s reading best follows the plain text and the
whole contract’s natural meaning for several reasons.
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC              19

    First, the term “provided” naturally means “on the
condition, supposition, or understanding (that).” Provided,
Oxford English Dictionary (3d ed. 2007). Thus, the proviso
means: on the condition that this agreement terminates in
two years. Preceding the proviso is the statement that the
parties’ “obligations under this agreement shall be
continuing” and “shall survive the termination of any
discussions or negotiations.” Altogether, paragraph twelve
plainly mandated that the parties’ obligations created by the
agreement were continuing and did not terminate just
because negotiations ended—with the condition that the
agreement terminated in two years.

    What is more, paragraph twelve’s mandate is textually
sound. The conjunctive “and” separates the first and second
clauses in paragraph twelve. The two clauses are therefore
read “side by side.” And, Oxford English Dictionary (3d ed.
2008). In turn, the proviso modifies both clauses. Simply
put, paragraph twelve mandated that “this agreement shall
terminate”—not that only the “discussions or negotiations”
“shall terminate[.]”

    The NDA’s other paragraphs also bolster the plain
mandate of paragraph twelve. For one, the NDA used the
phrase “this agreement” several times and each time the
phrase referenced the entire NDA. Thus, the phrase has a
fixed natural meaning. It would therefore be unnatural to
assume that “this agreement” in paragraph twelve refers to
anything but the whole NDA. See Bank of Credit & Comm.
Int. S.A. v. Ali [2001] UKHL 8, 2001 WL 171941, [8]
(“[T]he [C]ourt reads the terms of the contract as a whole,
giving the words used their natural and ordinary meaning in
the context of the agreement[.]”).

    Likewise, the various confidentiality obligations detailed
in subparagraphs of paragraph two do not alter or contradict
20   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

paragraph twelve’s mandate that “this agreement shall
terminate on the date 2 years from the date hereof.” No
subparagraphs in paragraph two refer to or limit paragraph
twelve. And BladeRoom formatted the NDA so that
paragraph twelve is in a different section (and on a different
page) than the confidentiality subparagraphs. Thus, a
reasonable person reading the NDA would find that the
subparagraphs in paragraph two do not affect paragraph
twelve’s command, unless it is explicitly stated somewhere
else. See Wood v. Capita Ins. Servs. Ltd. [2017] UKSC 24,
[12] (“[O]ne [must] read the language in dispute and the
relevant parts of the contract that provide its context.”). On
the whole, a textual analysis supports Emerson’s position.

    In contrast, BladeRoom’s textual analysis not only
twisted the ordinary meaning of words, but it also spawned
absurdity. BladeRoom proposed that paragraph twelve
mandated only the actual “discussions or negotiations”
between it and Emerson terminated after two years—not
Emerson’s confidentiality obligations. Yet the proposal
passes over the clear phrase that “this agreement shall
terminate”—not that “discussions or negotiations” “shall
terminate.” And ignoring that phrase creates bizarre
outcomes. If, for example, either party stopped negotiating
within two years, then the party would have breached the
NDA. Similarly, if the parties kept negotiating after two
years, then both parties would have breached the NDA.
Either way, BladeRoom’s textual analysis is inapposite.

    Beyond the textual flaws, BladeRoom’s reliance on two
English cases that interpreted different NDA provisions also
lacked merit. One case interpreted a provision that plainly
stated, “[t]he terms and conditions contained in this
Agreement shall continue to apply whether or not the Parties
conclude an agreement for joint participation in the
        BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                       21

Business.” Pers. Hygiene Servs. Ltd & Ors v. Rentokil Initial
UK Ltd. [2014] EWCA Civ 29, 2014 WL 287664, [9]
(emphasis added). And the natural reading of that specific
provision is a far cry from the clause in BladeRoom’s NDA.
In the second case, the English court relied on equitable
principles to create a confidentiality duty. BBC v.
HarperCollins Publishers Ltd. [2010] EWHC 2424 (Ch),
[2011] E.M.L.R. 6, [47–50]. Yet BladeRoom never asserted
an equitable argument below. In each case, BladeRoom
failed to persuasively connect its textual analysis with
English case law.

     The district court’s reasoning also failed to save
BladeRoom’s analysis. First, the district court never
analyzed paragraph twelve’s natural and ordinary meaning.
Instead, the district court relied on three contextual factors:
“the purpose and context of the [NDA,]” “evidence in the
trial record[,]” and whether Emerson’s construction would
“create some inconsistency with the rest of the [NDA.]” 4
Although “[t]extualism and contextualism are not
conflicting paradigms” under English contract law, the
district court must “balance[] the indications given by”
closely examining the relevant text and the factual
background. Wood v. Capita Ins. Servs. Ltd. [2017] UKSC
24, [12–13] (emphasis added). Thus, the district court’s sole
reliance on contextual reasoning was insufficient.

    4
       Deciding whether a proposed reading aligns with the rest of the
NDA is a common textual tool used to interpret contracts. See Wood v.
Capita Ins. Servs. Ltd. [2017] UKSC 24, [12] (explaining that “read[ing]
the language in dispute and the relevant parts of the contract” is separate
from a contextual analysis focusing on the factual background). But the
district court never relied on the NDA’s words or structure to conclude
whether Emerson’s reading aligned with the rest of the NDA. The
district court’s reasoning therefore relied only on context.
22   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

     Admittedly, English courts may place “greater
emphasis” on contextual interpretations for more informal
contracts. Wood v. Capita Ins. Servs. Ltd. [2017] UKSC 24,
[13].     Those informal contracts often lack “skilled
professional assistance” or completeness. Id. But the NDA
is far from informal. Indeed, mature companies negotiating
a large international deal and prefacing their negotiations
with a detailed NDA exemplifies formality. The NDA
should therefore be “interpreted principally by textual
analysis, [] because of [its] sophistication and complexity
and because [it has] been negotiated and prepared with the
assistance of skilled professionals.” Id.

    After properly conducting both textual and contextual
analyses, BladeRoom’s proposed reading remains
unreasonable. As the district court found, the NDA’s
purpose was to “allow the exchange of confidential
information in connection with a possible acquisition.” And
the confidentiality obligations in paragraph two highlight
that purpose. But the NDA plainly limits its overall purpose
to only two years. If the purpose were to last beyond two
years, then the parties would have never agreed to the
straightforward proviso in paragraph twelve. Rather, the
parties would have rewritten it to reflect a different timespan.
In fact, the parties did just that in another paragraph that
barred Emerson from soliciting BladeRoom’s employees or
clients for “a period of 18 months.” (emphasis added). In
sum, although the NDA purported to protect BladeRoom’s
technology, paragraph twelve limited its overall purpose to
two years. See Arnold v. Britton [2015] UKSC 36, [15]
(assessing a contract’s meaning “in light of . . . the overall
purpose of the clause and the [contract]”) (emphasis added).

   The surrounding facts known to the parties also failed to
support BladeRoom’s reading of the NDA. Although few
        BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                 23

facts exist in the record from which we can draw inferences,
the district court noted that one party intended the NDA’s
confidentiality obligations to last beyond two years. That
evidence is irrelevant because English contract law
disregards a party’s subjective intent. Arnold v. Britton
[2015] UKSC 36, [15]. Instead, the relevant facts known to
the parties show that BladeRoom drafted the NDA, their
agent signed it, sent it to Emerson, whose agent then signed
it. English courts presume ambiguity in a commercial
contract against the drafting party. Persimmon Homes Ltd.
v. Ove Arup & Partners Ltd. [2017] EWCA Civ 373, 2017
WL 02212888, [52]. So, if paragraph twelve were
ambiguous, then the factual context would create a
presumption against BladeRoom. 5 But paragraph twelve’s
command is straightforward and thus the inferences or
presumptions that would arise from the factual context are
unhelpful.

    The last relevant presumption in English contract
interpretation is “commercial common sense.” Arnold v.
Britton [2015] UKSC 36, [15]. When faced with “two
possible constructions, the court is entitled to prefer the
construction which is consistent with business common
sense . . . .” Rainy Sky S.A. v. Kookmin Bank [2011] UKSC
50, [21]. But the presumption is also unhelpful here because
Emerson’s reading is the only sensible reading grounded in
textual and contextual analyses.

    Although the district court reasoned that Emerson’s
reading would create “an uncontemplated windfall[,]” our

    5
      At the same time, the presumption “has a very limited role” in
commercial contracts between parties with equal bargaining power.
Persimmon Homes Ltd. v. Ove Arup & Partners Ltd. [2017] EWCA Civ
373, [52].
24   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

analysis remains sound. In fact, English courts are “very
slow to reject the natural meaning of a provision as correct
simply because it appears to be a very imprudent term for
one of the parties to have agreed.” Arnold v. Britton [2015]
UKSC 36, [20]. It could very well be the case that
BladeRoom “may have agreed to something which with
hindsight did not serve [its] interest.” Wood v. Capita Ins.
Servs. Ltd. [2017] UKSC 24, [11] (citing Arnold v. Britton
[2015] UKSC 36, [20, 77]). Accordingly, we will not read
into whether the parties’ interpretations make commercial
common sense.

    In all, a reasonable person in the parties’ situation would
have read the NDA and understood that the confidentiality
obligations terminated after two years. The district court
therefore erred as a matter of law when it granted
BladeRoom’s motion in limine. We reverse the district
court’s order.

                              B.

    We also vacate the district court’s judgment and remand
for a new trial.

    At its core, the district court’s error prevented the jury
from hearing Emerson’s chief defense. Given the legal
error, the panel must “give judgment after an examination of
the record without regard to errors or defects which do not
affect the substantial rights of the parties.” 28 U.S.C.
§ 2111. Put differently, if the error is harmless, then we must
affirm the judgment.

    The parties disagree about how to label the district
court’s error and they disagree on our standard for reviewing
the error. Emerson compared the error to a jury instruction
error. But BladeRoom seemed to suggest that the error was
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                 25

like an incorrect denial of a motion for judgment as a matter
of law (“JMOL”). We treat the district court’s action as an
error of jury instruction for two reasons.

     First, parties are “entitled to an instruction about [their]
theory of the case if it is supported by law and has foundation
in the evidence.” Clem v. Lomeli, 566 F.3d 1177, 1181 (9th
Cir. 2009) (quotation omitted). Emerson therefore proposed
a jury instruction that would have excluded any information
disclosed or used after August 17, 2013 from its liability for
breach of contract. But the district court denied the proposal.
It reasoned that “the [NDA] is in evidence, [so] Emerson can
argue any exclusion from liability it believes should apply.”
BladeRoom then moved in limine the very next day to
preclude Emerson from arguing that it could use confidential
information after August 17, 2013. Thus, BladeRoom’s
motion in limine was a clear attempt to stymie the district
court’s jury instruction ruling that allowed Emerson to
“argue any exclusion from liability it believes should apply.”
And in turn the district court reversed its jury instruction
order as to Emerson’s ability to advocate by prohibiting
Emerson from arguing that the NDA’s twelfth paragraph
excluded it from breach of contract liability.

    Second, the district court’s order lacked basic findings
necessary for us to construe it as a denial of a motion for
JMOL. An order denying JMOL would have found that a
“reasonable jury would not have a legally sufficient
evidentiary basis to find” that Emerson did not breach the
NDA under either party’s proposed reading. Fed. R. Civ. P.
50(a)(1). Yet the district court never made that finding. For
those two reasons, we treat the district court’s error as an
error of jury instruction.

   And we review a jury instruction error in a civil trial for
harmless error. Clem, 566 F.3d at 1182. We first presume
26   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

prejudice. Id. Thus, “the burden shifts to [BladeRoom] to
demonstrate that it is more probable than not that the jury
would have reached the same verdict had it been properly
instructed.” Id. (internal quotations marks and citation
omitted).

    We apply Clem’s burden shifting standard because Ninth
Circuit precedent instructs us to do so given the abnormal
jury instruction error in these appeals. In contrast, for the
ordinary civil appeal, “the party seeking reversal” bears the
burden of persuasion. Shinseki v. Sanders, 556 U.S. 396,
410 (2009). But Shinseki’s harmless error review does not
apply to these appeals for several reasons.

    First, the Supreme Court said nothing in Shinseki about
the standard the panel must apply to determine whether there
was prejudice for a civil jury verdict. Shinseki involved
appellate review of administrative proceedings. Id. at 406.
Harmless error review in Shinseki therefore occurred under
38 U.S.C. § 7261(b)(2). Id. As the Court explained, the
§ 7261(b)(2) standard is merely “the same kind of ‘harmless-
error’ rule that courts ordinarily apply in civil cases.” Id.

    Second, Shinseki explained that what ordinarily happens
in civil appeals is “the party seeking reversal normally must
explain why the erroneous ruling caused harm.” Id. at 410.
Indeed, “it normally makes sense to ask the party seeking
reversal to provide an explanation, say, by marshaling the
facts and evidence showing the contrary.” Id. (emphasis
added). Shinseki explained that appellate courts should
avoid “mandatory presumptions and rigid rules” and favor a
“case-specific application of judgment,” id. at 407, and
courts can employ “generalizations about what kinds of
errors are likely” based on experience, id. at 411 (citing
Kotteakos v. United States, 328 U.S. 750, 760–61 (1946)).
So long as the generalizations “influence, though not control,
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                27

future determinations,” Shinseki allows courts to employ
different harmless error review frameworks. See id. In
short, Shinseki did not create a bright-line rule that precludes
us from applying Clem’s burden shifting provision.

   Admittedly, the Sixth Circuit recently held:

       In Shinseki, the Supreme Court expressly
       rejected the idea of placing the burden of
       proving harmlessness on the appellee in a
       civil case, announcing that “we have placed
       such a burden on the appellee only when the
       matter underlying review was criminal.”
       556 U.S. at 410–11. In other words, Shinseki
       holds that in a civil case, the tie goes to the
       verdict.

Kocher v. Durham Sch. Servs., L.P., 969 F.3d 625, 630 (6th
Cir. 2020) (citation truncated).

    But the Sixth Circuit’s reading instilled words into
Shinseki that the majority declined to use. See id. at 630 n.4
(detailing the so-called “tie-to-the-verdict” rule in civil
cases). For one, Shinseki never used the term “tie-to-the-
verdict.” For another, Shinseki never endorsed a rigid rule
in civil cases like the “tie-to-the-verdict” rule—it endorsed
the opposite. See 556 U.S. at 407 (“We have previously
warned against courts[] determining whether an error is
harmless through the use of mandatory presumptions.”).

   Even if Shinseki were to create the rule, the rule would
apply only in “the ordinary civil case.” Id. at 411 (emphasis
added). Because the Shinseki majority described only
harmless error review in a “normal” or “ordinary” civil
appeal, Shinseki did not create the bright-line “tie-to-the-
verdict” rule for all civil cases. See generally id. at 410–11.
28       BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

     At its core, Ninth Circuit precedent under Clem
addresses the abnormal civil cases when there is an errant
jury instruction. 566 F.3d at 1182. The jury instruction error
here, like in Clem, was abnormal because it affected
Emerson’s substantive rights. 566 F.3d at 1181 (“Each party
is . . . ‘entitled to an instruction about [their] theory of the
case if it is supported by law and has foundation in the
evidence.’”).       Likewise, Clem recognizes the unique
circumstances when “[p]rejudice is also generally more
likely than not if nothing about the jury’s verdict indicates
that the result would have been the same without the error.”
566 F.3d at 1183 (cleaned up). It follows that Clem’s
harmless error review adheres to Shinseki because it is a
generalized framework that does not “control[] future
determinations.” 556 U.S. at 411. And other Ninth Circuit
cases have employed Clem’s harmless error standard when
there is a substantive jury-instruction error without
controversy. See, e.g., Tekoh v. Cnty. of Los Angeles,
985 F.3d 713, 725 (9th Cir. 2021); Gantt v. City of Los
Angeles, 717 F.3d 702, 707 (9th Cir. 2013).

    Although several Ninth Circuit cases have applied
Shinseki’s harmless error review instead of Clem’s, those
cases differ greatly from the present appeals. We have, for
example, applied Shinseki in cases that reviewed agency
adjudications—not civil jury trials like the present appeal. 6
Still, Shinseki’s analysis explained there is no “relevant
distinction between the manner in which reviewing courts

     6
       Al Haramain Islamic Found., Inc. v. U.S. Dep’t of Treasury,
686 F.3d 965, 989 (9th Cir. 2012) (reviewing the Office of Foreign
Assets Control designating an Islamic organization a ‘specially
designated global terrorist’); Ludwig v. Astrue, 681 F.3d 1047, 1054 (9th
Cir. 2012) (reviewing social security benefits denial); Molina v. Astrue,
674 F.3d 1104, 1118–21 (9th Cir. 2012) (same).
        BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                   29

treat civil and administrative cases.” 556 U.S. at 407. But
our cases applying Shinseki did not involve the abnormal
situation of jury instruction errors like the errors in Clem or
the present appeals. 7 And the Sixth Circuit’s Kocher
decision involved evidentiary errors. 969 F.3d at 628–29.
At bottom, Clem recognized the abnormality that arises from
jury instruction errors because the errors prevent the jury
from “determin[ing] the issues presented intelligently.”
566 F.3d at 1182 (quoting Fikes v. Cleghorn, 47 F.3d 1011,
1013 (9th Cir. 1995)). Our other case law, therefore, does
not conflict with Clem.

    In all, Shinseki cautions appellate courts to avoid
“mandatory presumptions and rigid rules.” 556 U.S. at 407.
Ninth Circuit case law has created a framework that properly
influences—not controls—how panels review abnormal jury
instruction errors. See, e.g., Tekoh, 985 F.3d at 725; Gantt,
717 F.3d at 707; Clem, 566 F.3d at 1182–83. With all that
in mind, BladeRoom failed to meet the burden outlined in
Clem.

     The district court’s error prejudiced Emerson when the
jury made its breach of contract, misappropriation, and
damages findings. Based on the special verdict, there is no
way to know whether the jury would return the same answers
if the district court had allowed Emerson to present its chief
defense. See id. at 1183 (“Prejudice is also generally more
likely than not if nothing about the jury’s verdict indicates
that the result would have been the same without the error.”)
(cleaned up). We therefore vacate the jury’s findings
relating to breach of contract, misappropriation, and

    7
     Al Haramain Islamic Found., Inc., 686 F.3d at 988 (procedural due
process issues); Ludwig, 681 F.3d at 1055 (ex parte communications);
Molina, 674 F.3d at 1122 (evidentiary-related issues).
30   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

damages and remand for a new trial on those issues. See
People v. Cepeda, 851 F.2d 1564, 1568 (9th Cir. 1988)
(“[An] appellate court has broad discretion to grant a new
trial on all or only some issues.”) (citations omitted). We
now address in turn why we must vacate each of those jury
findings.

    First, and most important, we vacate the jury’s breach of
contract findings. The jury answered only whether a breach
of contract occurred—not when the breach occurred.
Without the crucial finding of when the breach occurred,
there is no way to determine whether the jury would have
found that Emerson breached the NDA if the jury had known
that Emerson’s confidentiality obligations ended after only
two years. See Clem, 566 F.3d at 1182. In short, the jury
could have found breach under two theories—either during
the open-ended period after Emerson’s confidentiality
obligations end, or during the initial two-year period—but
we do not know which one the jury actually found. See Tex.
Advanced Optoelectronic Sols, Inc. v. Renesas Elecs. Am.,
Inc., 895 F.3d 1304, 1316 (Fed. Cir. 2018) (“The general rule
is that ‘if a jury could find liability according to multiple
theories, and one of them is [legally] erroneous, we reverse
unless we can tell that the jury came to its decision using
only correct legal theories.’”) (alterations in original)
(quoting Rodriguez v. Riddell Sports, Inc., 242 F.3d 567, 577
(5th Cir. 2001)).

    Our holding in Clem requires us to find prejudice in the
district court’s error here. In Clem, the district court
misinformed the jury that it could only find liability under
one theory, when, in reality, the jury could have found
liability under a second theory. See 566 F.3d at 1180–81
(explaining that the deliberate indifference instruction
misstated that the defendant must “act” even though “failure
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                 31

to act” could also establish liability). Because the jury’s
verdict failed to establish liability under the instructed theory
and because the jury may have found liability under the
uninstructed theory, we reversed and remanded. Id. at 1183.

    Admittedly, the errant instruction in Clem essentially
added an extra element to the plaintiff’s burden of proof, and
that did not happen here. Id. But the distinction does not
sway our overall analysis. The reversal in Clem was
grounded in two reasons, each of which was sufficient to
find prejudice. We first pointed out “that when the trial court
erroneously adds an extra element to the plaintiff’s burden
of proof, it is unlikely that the error would be harmless.” Id.
at 1182 (cleaned up). And second, we explained that
“prejudice is also generally more likely than not if nothing
about the jury’s verdict indicates that the result would have
been the same without the error.” Id. at 1183 (cleaned up).
Based on the second reason, it is clear that we must find
prejudice here.

    To be sure, the evidence on the timing of when breach
occurred is murky. Some evidence shows that breach could
have occurred during the NDA’s initial two-year span.
Other evidence shows that breach could have occurred after
the two years passed. Thus, no party can demonstrate what
the jury found as to when breach occurred, and BladeRoom
cannot refute the presumption of prejudice. See Gambini v.
Total Rental Care, Inc., 486 F.3d 1087, 1093 (9th Cir. 2007)
(“[T]he prevailing party is not entitled to have disputed
factual questions resolved in [its] favor . . . .”) (quoting
Swinton v. Potomac Corp., 270 F.3d 794, 805–06 (9th Cir.
2001)). As a result, “not only is it impossible to determine
that the jury would have reached the same result, there are
signs that the jury might very well have returned a different
verdict.” Hoard v. Hartman, 904 F.3d 780, 791 (9th Cir.
32   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

2018). Accordingly, we vacate the jury’s breach of contract
findings.

     Likewise, we vacate the jury’s misappropriation
findings. Under California law, misappropriation cannot
occur if someone “discloses his trade secret to others who
are under no obligation to protect the confidentiality of the
information.” Altavion, Inc. v. Konica Minolta Sys. Lab.,
Inc., 226 Cal. App. 4th 26, 57 (2014) (quotations and
citations omitted). Because the misappropriation claim
hinged on Emerson’s written—not implied—obligations in
the NDA, the same reasoning that lead us to vacate the
breach of contract verdict applies. There is simply no way
to know whether the jury found that Emerson
misappropriated trade secrets during or after the NDA’s
initial two-year period. Without that finding, we also do not
know whether the jury would have found that Emerson acted
willfully and maliciously. After all, the jury never heard
Emerson’s chief defense. For those reasons, “nothing about
th[e jury’s] verdict” suggests that the jury would still find
willful and malicious misappropriation without the error
excluding the NDA evidence and so we vacate the jury’s
misappropriation findings.      Clem, 566 F.3d at 1183
(alterations in original).

    Finally, the same reasons support vacating the jury’s
damages findings. The jury awarded damages in two lump
sums that did not separate damages for breach of contract
from misappropriation. As a result, we have no way to know
how much damages the jury intended to allocate for each
claim. And because we do not know whether the jury would
have found Emerson liable under breach of contract or
misappropriation, we cannot tell whether the damages
findings would be the same. Id. at 1183. We therefore
vacate the jury’s damages findings.
      BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                  33

     “[W]e do not take lightly the decision to reverse a jury
verdict.” VHT, Inc. v. Zillow Grp., Inc., 918 F.3d 723, 748
(9th Cir. 2019). But the district court’s error “went to the
heart of” Emerson’s defense and improperly precluded it
from the jury’s consideration. Hoard, 904 F.3d at 791.
“[W]e are convinced that this verdict for [BladeRoom], if
allowed to stand, would be a legally unjustified windfall to
[BladeRoom] and a miscarriage of justice.” Autohaus
Brugger, Inc. v. Saab Motors, Inc., 567 F.2d 901, 915 (9th
Cir. 1978); see also Obrey v. Johnson, 400 F.3d 691, 701
(9th Cir. 2005) (recognizing that we find harmful error when
“the error itself had substantial influence . . . or if one is left
in grave doubt”) (alterations in original) (quoting Kotteakos
v. United States, 328 U.S. 750, 765 (1946)). “Because this
error likely prejudiced the outcome of the case and—left
uncorrected—would contribute to a miscarriage of justice,
we vacate the district court’s judgment and remand for a new
trial.” Hoard, 904 F.3d at 787.

    Given our order to vacate the judgment and remand for
a new trial, we vacate the district court’s post-verdict orders
on appeal. 28 U.S.C. § 2106 (An appellate court “may . . .
vacate, set aside or reverse any judgment, decree, or order of
a court lawfully brought before it for review, and may
remand the cause and . . . require such further proceedings
to be had as may be just under the circumstances.”). We also
vacate the district court’s attorneys’ and expert witness fees
orders in the 20-15758, 20-15759, and 20-15760 appeals. Id.

                               III.

   Given the complex issues on appeal, we also address a
couple of issues for consideration on the awards of damages
and prejudgment interest should they be determined after a
new trial.
34   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

                             A.

    California Civil Code § 3426.3(a) allows an aggrieved
party to recover actual damages and any unjust enrichment
on a trade secret misappropriation claim. Because the jury
here found that Emerson willfully and maliciously
misappropriated BladeRoom’s trade secrets, the district
court awarded punitive damages equal to the $30 million in
compensatory damages.

   Under California law, however, a party cannot collect
punitive damages for breach of contract awards. Applied
Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 516
(1994). Because the jury awarded a lump sum for breach of
contract and misappropriation damages, Emerson correctly
argued that the district court could not assume that the whole
award went to misappropriation.

     Courts that apply California law use three factors to
award punitive damages. Neal v. Farmers Ins. Exch., 21 Cal.
3d 910, 928 (1978). The second factor, “the amount of
compensatory damages awarded,” id., helps balance a
punitive damages award with actual harm that is caused. See
id. (“[I]n general, even an act of considerable
reprehensibility will not be seen to justify a proportionally
high amount of punitive damages if the actual harm suffered
[] is small.”). When weighing the second factor, the district
court here merely noted that under Neal, 21 Cal. 3d at 928,
“compensatory damages are a ‘relevant yardstick’ for
[punitive] damages.” And, in a footnote, the district court
explained that “[t]he trial evidence shows that either [the
breach of contract or misappropriation] claim for which the
jury found liability could support the amount of
compensatory damages it awarded.”
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC              35

    The district court misapplied the second factor for two
reasons. One, the district court abused its discretion based
on an earlier order denying Emerson’s motion to compel.
And second, the district court never explained why it
allocated compensatory damages the way it did.

    First, in the earlier order, the district court found that
“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.” To be sure,
the district court confirmed that “only the jury knows the
number.”

    A district court abuses its discretion when it “reaches a
result that is illogical, implausible, or without support in
inferences that may be drawn from the facts in the record.”
United States v. Hinkson, 585 F.3d 1247, 1262 n. 21 (9th Cir.
2009) (collecting cases from other circuits). It was illogical
for the district court to find how much the jury awarded for
each claim when it already found that it had “no way” to do
just that. See id. The district court should have explained
why its reasoning changed. Instead, after awarding punitive
damages, the district court issued another order that adopted
the same reasoning in the order that denied Emerson’s
motion to compel. In brief, the district court flipped its
reasoning twice without explaining why.             And the
inconsistency visibly benefited BladeRoom because it cost
Emerson millions in punitive damages that the district court
would not have awarded otherwise.              In sum, the
inconsistency was “beyond the pale of reasonable
justification” and an abuse of discretion. Harman v. Apfel,
211 F.3d 1172, 1175 (9th Cir. 2000).

   Second, apart from the logical inconsistency, the district
court never explained why it allocated compensatory
damages under the second punitive damages factor. We
36    BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

review damages allocations for abuse of discretion.
Hemmings v. Tidyman’s Inc., 285 F.3d 1174, 1195 (9th Cir.
2002). 8 Even though the evidence “show[ed] that either
claim for which the jury found liability could support the
amount of compensatory damages it awarded[,]” the district
court allocated the full $30 million in compensatory
damages to the misappropriation claim. But the allocation
was inadequate because although it “may well represent a
permissible allocation of the damages between the two
theories, . . . the [district] court gave no explanation for its
decision, leaving us guessing whether this exercise of
discretion is a permissible one.” Gibson v. Moskowitz,
523 F.3d 657, 667 (6th Cir. 2008).

    On remand, the district court must take several steps to
allocate damages. First, the district court should consider
adopting a more-detailed special verdict form. The verdict
form may, for example, ask the jury to allocate damages
between breach of contract and misappropriation. If the jury
can allocate damages accordingly, then the district court
would avoid trouble on remand. Yet, if the jury cannot
allocate damages, then the district court should take another
step to explain why it allocated damages. That way, the
parties are not left guessing at the allocated amounts.

     8
       The week before oral argument, BladeRoom filed a letter of
supplemental authority under Circuit Rule 28(j). In the letter,
BladeRoom cited—for the first time—Passantino v. Johnson & Johnson
Cons. Prods., Inc., 212 F.3d 493, 509 (9th Cir. 2000), to suggest that the
district court did not abuse its discretion to award punitive damages.
Rule 28(j) prohibits a party from raising new issues not raised in the
briefs. United States v. LaPierre, 998 F.2d 1460, 1466 n. 5 (9th Cir.
1993). Thus, BladeRoom should have raised the argument in its
response brief, or, at the very least, it should have raised the argument
earlier than a week before oral argument. Id.
      BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                       37

                                  B.

    California Civil Code § 3288 allows the award of
prejudgment interest “[i]n an action for the breach of an
obligation not arising from contract, and in every case of
oppression, fraud, or malice.” 9 California Civil Code
§ 3287(b) allows a court to award prejudgment interest but
only for breach of contract claims.

    Awarding prejudgment interest under one section rather
than the other can make a sizeable difference. For instance,
§ 3288 prejudgment interest runs from the date that property
was lost. Greater Westchester Homeowners Assn. v. City of
Los Angeles, 26 Cal. 3d 86, 103 (1979). By contrast,
§ 3287(b) prejudgment interest runs from “no [] earlier than
the date the action was filed.”

    The district court awarded prejudgment interest on the
full compensatory damages award under § 3288, not
§ 3287(b). It also found that prejudgment interest should run
from October 30, 2012. Those decisions were erroneous.

    First, § 3288’s plain text bars prejudgment interest
awards for breach of contract claims. See Greater
Westchester Homeowners Assn., 26 Cal. 3d at 102
(“[U]nlike [§ 3287], which relates to liquidated and
contractual claims, [§ 3288] permits discretionary
prejudgment interest for unliquidated tort claims.”). Yet the
district court flouted § 3288’s plain bar when it awarded
prejudgment interest for a lump sum involving a breach of
contract claim. If the district court grants prejudgment
interest on remand, then it must award prejudgment interest

    9
      The parties stipulated for the court to award prejudgment interest
under § 3288.
38   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

for any breach of contract damages under § 3287(b), not
§ 3288.

    Moreover, to award § 3288 prejudgment interest for
BladeRoom’s lost profits, the district court relied on a factual
error. Section 3288 prejudgment interest runs from the date
that property was lost. Greater Westchester Homeowners
Assn., 26 Cal. 3d at 103. The district court found that
BladeRoom’s injury and loss occurred on October 30, 2012,
because “BladeRoom was notified it had lost the opportunity
to obtain [the Facebook contract].” But the evidence refutes
that finding. The evidence showed that “Facebook gave a
verbal approval . . . for [Emerson’s] design and concept.” on
October 30, 2012. At the time, the proposal was only
“10 percent done.” Almost a year later, Facebook asked
BladeRoom for an update on its proposal. And, in March
2014, Facebook awarded the contract to Emerson. In all, no
evidence suggests that BladeRoom became aware that it had
lost the contract on October 30, 2012. Instead, the evidence
may suggest that date was when Emerson knew that it could
win the contract. The district court’s October 30, 2012
finding therefore lacked a factual basis and a link to
BladeRoom’s lost profits.

     If the district court awards § 3288 prejudgment interest
on remand for BladeRoom’s lost profits, then it would have
to find when the lost profits began. See Greater Westchester
Homeowners Assn., 26 Cal. 3d at 102 (“[Section 3288]
prejudgment interest [is] ‘awarded to compensate a party for
the loss of his or her [p]roperty.’”) (quoting Bullis v. Sec.
Pac. Nat. Bank, 21 Cal. 3d 801, 815 (1978)). Put simply,
§ 3288 prejudgment interest awards “represent[] the
accretion of wealth which money or particular property
could have produced during a period of loss.” Id. at 102–03.
Although the district court relied on Lakin v. Watkins
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC              39

Associated Indus., 6 Cal. 4th 644, 663 (1993), to award
§ 3288 prejudgment interest from “the date of the injury[,]”
the case law rejects that approach. First, the California
Supreme Court has explained that § 3288 prejudgment
interest runs from “the date of loss of the property.” Greater
Westchester Homeowners Assn., 26 Cal. 3d at 103 (quoting
Bullis, 21 Cal. 3d at 815). And second, the California
Supreme Court’s holding in Lakin did not specifically apply
§ 3288. Rather, Lakin opined about the “general” purpose
of prejudgment interest. 6 Cal. 4th at 663. And the
distinction makes sense because California’s Civil Code has
three prejudgment interest statutes that each deal with
different legal claims. Cal. Civil Code §§ 3287, 3288, 3291.
Thus, any § 3288 prejudgment interest award for
BladeRoom’s lost profits must run from when the lost profits
began.

    Should the district court be called on to award § 3288
prejudgment interest for unjust enrichment after a new trial,
the district court should make two findings. First, it should
find whether § 3288 allows prejudgment interest for unjust
enrichment damages. And second, if so, then the district
court should apply the same standard that it applied for lost
profits—it should find when the unjust enrichment began.
See Greater Westchester Homeowners Assn., 26 Cal. 3d
at 103.

                             IV.

    We REVERSE the district court’s order granting the
motion in limine as it relates to the NDA’s twelfth
paragraph. We VACATE the district court’s judgment and
post-verdict orders on appeal and REMAND for a new trial
consistent with this opinion. Given the new trial, the orders
related to attorneys’ and expert witness’ fees in the 20-
15758, 20-15759, 20-15760 appeals are also VACATED.
40   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

RAWLINSON, Circuit Judge, concurring:

    I concur fully in the majority opinion. I write separately
to bring two additional matters to the attention of the district
court.

     1. In the event that the jury on retrial again imposes
liability on Emerson Electric for unjust enrichment, it would
be BladeRoom’s burden to prove the amount of damages.
See Ajaxo, Inc. v. E*Trade Fin. Corp., 48 Cal. App. 5th 129,
185 (2020) (indicating that plaintiff has the “burden of
proving damages [in a trade secret case] by showing the
misappropriation, the subsequent commercial use, and . . .
evidence by which the jury can value the rights the defendant
has obtained”). It is not sufficient for the damages expert to
attribute the entire value of the sale of Emerson Electric’s
Hyperscale division to the misappropriation of
BladeRoom’s trade secret despite admitting that the
Hyperscale division had business and value that did not
involve use of the misappropriated trade secret. See
02 Micro Int’l Ltd. V. Monolithic Pwr. Sys., 399 F. Supp. 2d
1064, 1076 (N.D. Cal. 2005) (rejecting expert damages
testimony that calculated damages “based on an assumption
that all of the trade secrets were misappropriated” when the
jury found that only some of the trade secrets were
misappropriated). In 02, the district court determined that a
damage calculation that was not consistent with the evidence
“was useless to the jury” because any jury award would be
“based on speculation and guesswork, not on evidence.” Id.
at 1077.

    Similarly, in Hilderman v. Enea Teksci, Inc., No.
05cv1049BTM (AJB), 2010 WL 546140 at *2 (S.D. Cal.
Feb. 10, 2010), the district court found the expert’s damages
opinion “unreliable because it rest[ed] on [an] unfounded
assumption[]” that the “entire Goodwill value” was
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC                41

attributable to the allegedly misappropriated trade secrets
(internal quotation marks omitted). See also Wyatt Tech.
Corp. v. Malvern Instr. Inc., No. CV 07-8298
(ABC)(MANx), 2010 WL 11505684 at *3 (C.D. Cal. Jan 25,
2010) (“In calculating lost profits, a plaintiff must prove in a
reasonable manner the link between the injury suffered and
the illegal practices of the defendant.”) (quoting City of
Vernon v. S. Cal. Edison Co., 955 F.2d 1361, 1371 (9th Cir.
1992) (emphasis in the original). The court determined that
the damages calculations were “flawed and inadmissible at
trial because they were not limited to [Defendant’s] alleged
wrongdoing.” Id. at *4.

     In addition, “lost anticipated profits cannot be recovered
if it is uncertain whether any profit would have been derived
at all from the proposed undertaking.” Food Safety Net Svcs.
v. Eco Safe Sys. USA, Inc., 209 Cal. App. 4th 1118, 1132
(2012) (citation and alteration omitted). More specifically,
“lost profits based on a future contract cannot be recovered
when the contract is uncertain or speculative.” Id. (citation
omitted). Consequently, BladeRoom will not be entitled to
future profits absent definitive evidence of a future contract
that was lost due to Emerson Electric’s misappropriation of
Bladeroom’s trade secret. See Sargon Enters., Inc. v. Univ.
of S. Calif., 55 Cal. 4th 747, 775 (2012) (explaining that there
is no recovery for “claimed lost profits” that are “uncertain,
hypothetical and entirely speculative”) (citation and internal
quotation marks omitted). If the asserted loss profit
testimony is not based on “objective evidence of past volume
of business or any other provable data,” the testimony should
be excluded. Id. at 778 (citation and internal quotation
marks omitted). At bottom, there must be “a substantial
similarity between the facts forming the basis of the project
projections and the business opportunity that was
42   BLADEROOM GROUP LTD. V. EMERSON ELECTRIC

destroyed.”   Id. (citation and internal quotation marks
omitted).

    2. BladeRoom concedes that Facebook and Emerson
were joint tortfeasors and that they “conspired” to
misappropriate BladeRoom’s trade secrets. With that
concession, California law required an offset. See Calif. Civ.
Proc. Code § 877(a); see also Dell’Oca Bank of NY Trust
Co., N.A., 159 Cal. App. 4th 531, 561 (2008). In the event a
retrial results in the imposition of damages against Emerson
Electric, the court should apply an offset for the amount of
the settlement between BladeRoom and Facebook. See
Calif. Civil Proc. Code § 877(a) (providing that when one
tortfeasor settles a case, that settlement “shall reduce the
claims against the other[] [tortfeasor] in the amount [of the
settlement]”); see also Dell’Oca, 159 Cal. App. 4th at 561
(construing § 877 broadly to allow “an offset for sums paid
to settle plaintiffs’ claims against the other defendants”).

    Correspondingly, Emerson Electric would be entitled to
discovery of the settlement terms. See Fed. R. Civ. P.
26(b)(1) (authorizing discovery of “any nonprivileged
matter that is relevant to any party’s claim or defense and
proportional to the needs of the case”); see also Phillips ex
rel. Ests. of Byrd v. Gen. Motors Corp., 307 F.3d 12506,
1212 (9th Cir. 2002) (indicating that “confidential settlement
information” may be produced under appropriate
circumstances); Burke v. Regalado, 935 F.3d 960, 1048
(10th Cir. 2019) (holding that the district court “erred when
it declined to order disclosure of the settlement agreement”
when the settlement agreement was “relevant” and
“necessary” to resolving the case). Any concerns regarding
unauthorized disclosure of the settlement terms may be
addressed by a protective order fashioned by the district
court. See Phillips, 307 F.3d at 1211 (explaining that courts
     BLADEROOM GROUP LTD. V. EMERSON ELECTRIC              43

have “broad discretion . . . to decide when a protective order
is appropriate and what degree of protection is required:);
see also St. Bernard Par. v. Lafarge N. Am., Inc., 914 F.3d
969, 975 (5th Cir. 2019) (explaining that “discovery of
confidential settlement agreements is generally available
under an appropriate protective order”).