Propel Fuels Inc., a major low-carbon fuels retailer at stations in California, received a $604.9 million jury verdict in its trade secrets misappropriation case against Phillips 66 Co.
The verdict followed a five-week trial in Alameda County Superior Court in Oakland, California.
The jury found for Propel on its claim that Houston-based Phillips 66’s California renewable fuels business was developed from Propel’s trade secrets in violation of California’s Uniform Trade Secrets Act and awarded unjust enrichment damages.
The jury also found Phillips 66’s misappropriation was willful and malicious, meaning the Court may now triple the total damages award.
The verdict follows more than two years of pretrial proceedings and a trial that featured voluminous evidence and testimony from 31 witnesses, including 10 expert witnesses, according to plaintiff’s lead counsel Michael Ng of Kobre & Kim.
Propel Fuels found and CEO Rob Elam said, “Before its discussions with Phillips 66, Propel had worked for more than 13 years to create the market for these fuels, which are important alternatives that improve air quality and help fight climate change. We were pioneers who helped create the market, and what Phillips 66 stole was the result of hard work by entrepreneurs who took the kind of risks that are the foundation for our entire modern economy.”
“Propel did what many innovators cannot do—it stood up to a much larger adversary and persevered through a long process to vindicate its rights,” said Michael Ng of the global disputes and investigations firm Kobre & Kim, lead counsel for Propel. “We are grateful to the jury, who spent more than a month examining detailed evidence supporting this verdict … and the highly experienced presiding judge, who devoted considerable time and effort to the arguments of both sides.”
Propel’s co-counsel, Daniel Zaheer of Kobre & Kim said the selected jury was very diverse and highly educated.
“We had several engineers, several with an accounting background. We wanted people that were meticulous, people that would look at the details in the evidence closely,” Zaheer said.
The verdict form had 150 questions and addressed 88 trade secrets, yet the jury managed to complete deliberations in about eight hours over two days, Zaheer said.
A Phillips 66 spokesman said the company was disappointed with the verdict but remained confident in its case and would carefully evaluate all legal options.
Daniel Zaheer
Zaheer said counsel for the defendant discussed the deadline for an appeal with the court after the verdict was read, adding, “They have retained special appellate counsel.”
The lawsuit, filed on Feb. 16, 2022, alleges Phillips 66 stole confidential data, proprietary strategies and business intelligence developed by Propel over 13 years at a cost to Propel of hundreds of millions of dollars. Founded in 2004, Propel was an early pioneer in the sale of low-carbon renewable fuels, including E85, a cleaner energy solution for use in Flex Fuel vehicles.
In 2015, Propel was the first in the market to retail high-blend renewable diesel, which Propel sells under its HPR™ brand. Renewable diesel is a cleaner diesel fuel produced from lower carbon intensity feedstocks an Propel’s HPR (R99) was the first high-blend renewable diesel targeted to consumers in the California market.
Propel and Phillips 66 entered into due diligence in 2017, in connection with a proposed acquisition of Propel by Phillips 66. Propel alleged at trial that, during the due diligence process, Propel revealed to Phillips 66, under a non-disclosure agreement meant to ensure confidentiality, its proprietary strategies and data, and was actively building a new integrated renewable fuels business for Phillips 66.
Phillips 66 abruptly and without explanation terminated the deal on Aug. 24, 2018, and the very next business day informed California regulators it would enter the E85 market in the state and launched retail sales of high-blend renewable diesel weeks later.
Propel alleged that Phillips 66 rapidly expanded its California renewables business using Propel’s data and market insights; Phillips 66 now retails E85 or renewable diesel at more than 600 stations in the state.
Phillips 66 was represented by Jeff Homrig and Jake Ryan of Latham & Watkins. Their two main defenses, Zaheer said, were that they had been developing the low-carbon fuels business before getting into acquisition talks with Propel, and that Phillips 66 launched a different business compared to Propel’s.
“I think the complexity came from the jury trying to understand why these two fuels–which are not fossil fuels–function dramatically different, and understanding all how that nuance was a a departure from a petroleum company like Phillips 66,” Ng said.
A key turning point in the trial, Ng emphasized, was an inadvertent confession by the Phillips 66 executive charged with implementing the company’s new fuels business.
A juror question that Judge Michael Markman instructed the witness to answer had to do with Propel’s unique real world market data that was developed to validate the new business, Ng explained.
“They had previously claimed they had not used it,” Ng said. “But in response to the question, admitted it was part of the basis for their launch of the new competing renewable fuels business.”