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Here’s What Happened:
Beginning in 2004 and over the next 13 years, Propel Fuels, Inc. developed low-carbon renewable fuels. In 2015, Propel went to market with a retail high-blend renewable diesel fuel which targeted the California market.
In 2017, Phillips 66 Company wanted to acquire Propel. During the due diligence phase, the parties entered into a non-disclosure agreement that was designed to ensure confidentiality of Propel’s proprietary strategies, information, formulas and data.
In 2018, Phillips 66 suddenly terminated the negotiations. The next day, Phillips 66 informed California regulators that it was going to enter the market with its own hi-blend renewable diesel fuel within a few weeks. Phillips 66 rapidly expanded the market throughout the State of California.
Was it a coincidence that Phillips 66 suddenly had a new renewable diesel fuel after deciding not to acquire Propel? Propel didn’t think so either.
Propel sued Phillips 66 for breach of the non-disclosure agreement and the misappropriation of 88 trade secrets. During the trial, in answer to a question from the juror, a Phillips 66 executive inadvertently admitted that Propel’s information was part of the basis for the launch of a new business to compete with Propel.
It was a complex case that required a lot of detailed analysis by the jury. The jury verdict form had 150 questions for the jury to answer in rendering their verdict; and render they did. After 8 days of deliberation, the jury awarded Propel $605 million in damages.
WHY YOU SHOULD KNOW THIS: Non-disclosure agreements are a necessary shield to safeguard proprietary information during contract negotiations. This case illustrates the consequences for breaching a non-disclosure agreement and then using misappropriated trade secrets to set up a competing business.
Cited Authority: Propel Fuels, Inc. v. Phillips 66 Company, 22 CV 007197 (Superior Court of California, County of Alameda, 2024)