BladeRoom Group Limited et al v. Facebook, Inc.
Filing
795
ORDER denying 788 Motion to Strike. The hearing on this motion scheduled for 5/2/2018 is VACATED. Signed by Judge Edward J. Davila on 5/1/2018. (ejdlc1S, COURT STAFF) (Filed on 5/1/2018)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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SAN JOSE DIVISION
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BLADEROOM GROUP LIMITED, et al.,
Case No. 5:15-cv-01370-EJD
Plaintiffs,
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ORDER DENYING DEFENDANTS’
MOTION TO STRIKE
v.
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EMERSON ELECTRIC CO., et al.,
Re: Dkt. No. 788
United States District Court
Northern District of California
Defendants.
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Emerson moves to strike the damages of opinions of Plaintiffs’ expert, Michael Wagner, as
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based on unsupported factual assumptions. Dkt. No. 788. This motion will be denied.
I.
LEGAL STANDARD
The assumptions underlying an expert’s opinion must be supported by specific facts. See
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United States v. Various Slot Machs. on Guam, 658 F.2d 697, 700 (9th Cir. 1981); see also 02
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Micro Intern. Ltd. v. Monolithic Power Sys., Inc., 399 F. Supp. 2d 1064, 1076-77 (N.D. Cal.
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2005). Without such supporting facts, an expert’s opinion is not helpful to the jury and can be
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excluded. See Fed. R. Evid. 702(a).
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II.
DISCUSSION
A plaintiff must prove three elements to sustain a claim for misappropriation of trade
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secrets under CUTSA: “(1) the plaintiff owned a trade secret, (2) the defendant acquired,
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disclosed, or used the plaintiff’s trade secret through improper means, and (3) the defendant’s
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actions damaged the plaintiff.” Cytodyn, Inc. v. Amerimmune Pharms., Inc., 160 Cal. App. 4th
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288, 297 (2008). The standard elements a plaintiff must satisfy to prove breach of contract are
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“‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s
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Case No.: 5:15-cv-01370-EJD
ORDER DENYING DEFENDANTS’ MOTION TO STRIKE
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breach, and (4) damage to plaintiff therefrom.’” Wall St. Network, Ltd. v. New York Times Co.,
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164 Cal. App. 4th 1171, 1178 (2008) (quoting Regan Roofing Co. v. Super. Ct., 24 Cal. App. 4th
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425, 434-35 (1994)).
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The third element of trade secret misappropriation and the fourth element of breach of
contract, both of which require evidence that the defendant’s conduct caused any purported
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damages, are at issue. To that end, Emerson argues Plaintiffs failed to present sufficient evidence
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to support the causation assumptions on which Wagner’s lost profits and unjust enrichment
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opinions rest. In essence, Emerson believes it is appropriate for the court to determine the issue of
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causation as a matter of law for these categories of damages because undisputed evidence shows
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that Plaintiffs cannot meet the applicable standard. See Kurinj v. Hanna & Morton, 55 Cal. App.
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United States District Court
Northern District of California
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4th 853, 864 (1997) (“The issue of causation may be decided as a question of law only if, under
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undisputed facts, there is no room for a reasonable difference of opinion.”).
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Because the relevant evidence of causation is not undisputed, the court must decline
Emerson’s motion.
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A.
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“Determining whether a defendant’s misconduct was the cause in fact of a plaintiff’s injury
Authority Governing Damages Causation
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involves essentially the same inquiry in both contract and tort cases.” Tribeca Cos., LLC v. First
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Am. Title Ins. Co., 239 Cal. App. 4th 1088, 1103 (2015).
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“‘The test for causation in a breach of contract . . . action is whether the breach was a
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substantial factor in causing the damages.’” Id. (quoting US Ecology v. California, 129 Cal. App.
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4th 887, 909 (2005)). “Similarly, in tort cases, ‘California has definitively adopted the substantial
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factor test.’” Id. (quoting Rutherford v. Owens-Illinois, Inc., 16 Cal. 4th 953, 968-69 (1997)).
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Under that test, “‘a cause in fact is something that is a substantial factor in bringing about the
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injury.’” Id. (quoting Rutherford, 16 Cal.4th at 968-69).
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“The term ‘substantial factor’ has not been judicially defined with specificity, and indeed it
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has been observed that it is ‘neither possible nor desirable to reduce it to any lower terms.’”
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Rutherford, 16 Cal. 4th at 696. The California Supreme Court has suggested, however, “[u]ndue
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Case No.: 5:15-cv-01370-EJD
ORDER DENYING DEFENDANTS’ MOTION TO STRIKE
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emphasis should not be placed on the term ‘substantial.’” Id. But at the same time, “a force which
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plays only an ‘infinitesimal’ or ‘theoretical’ part in bringing about injury, damages or loss is not a
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substantial factor.” Id.
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B.
Application
i.
Lulea 2 Proposal
Emerson argues its alleged conduct could not have cost Plaintiffs the contract to design
and construct Facebook’s Lulea 2 data center because undisputed evidence shows that Plaintiffs
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ultimately declined to offer a “full solution” proposal and took themselves out of consideration.
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Though Emerson recognizes that Plaintiffs submitted a proposal for Lulea 2 in July, 2012,
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Emerson states it “was not in response to a request for proposal and instead was part of an
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United States District Court
Northern District of California
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informal cost study Facebook’s Tin Tse was conducting as part of his research and development.”
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Emerson contends that when Facebook’s Marco Magarelli actually asked Plaintiffs for a proposal
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that would accommodate Sweden’s arctic conditions, Plaintiffs “elected to advise Facebook that
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[Plaintiffs] would not submit a proposal because [Plaintiffs] did not have a ‘full solution’ for those
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arctic conditions.” On that basis, Emerson surmises that Plaintiffs’ “August 2013 decision to not
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bid on Lulea 2 severed any causal link between anything Emerson did and [Plaintiffs’] non-receipt
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of a Lulea 2 contract.”
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The trial record does not support Emerson’s characterization of the evidence as undisputed.
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As an initial matter, Trial Exhibit 1457 does not unequivocally establish that the proposal
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Plaintiffs submitted to Facebook in July, 2012, was something other than a “full solution”
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proposal for the design and construction of Lulea 2. Though Facebook’s Tse internally
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characterized the proposal as “an extension” of a research and development project to other
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Facebook employees, Plaintiffs’ Barnaby Smith did not characterize it that way in his initiating
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email. To the contrary, Smith described the document as “the proposed design to meet the full
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30MW requirement for 4 No. 7 data halls, a technical specification, commercials and an outline
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programme for how we will deliver the requirement in a fast, scalable way.” Smith also testified
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that he sent the email at Trial Exhibit 1457 with a “full proposal for the data center” after
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Facebook asked Plaintiffs to submit a proposal for Lulea 2 following the meeting in the United
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Kingdom in June, 2012. Tr., 1117:20-1118:8; 1193:1-13.
Nor does the admitted evidence establish that Facebook requested an additional proposal in
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August, 2013, or that Plaintiffs declined that request. Reviewing his email dated August 9, 2013,
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at Trial Exhibit 1469, Facebook’s Magarelli testified he was “pretty confident” he was not asking
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Plaintiffs for another Lulea 2 proposal on that date, but was asking for “customization of their
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design to meet our requirements” for Lulea 2. Id. at 2712:19-2713:2. In addition, Plaintiffs’
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Smith testified that Plaintiffs did not decline a request for proposal in August, 2013, due to “artic
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conditions.” Id. at 1235:25-1236:13. Smith stated Plaintiffs had designed around those
conditions, but were waiting for further detail from Facebook on the Lulea 2 project. Id. at
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United States District Court
Northern District of California
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1236:7-1237:17.
As such, there is evidence in the record upon which a reasonable jury could find that
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Plaintiffs did, in fact, submit a proposal for the design and construction of Lulea 2 to Facebook.
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To that extent, Wagner’s lost profits and unjust enrichment opinions are not inadmissible merely
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because those opinions are based on the assumption that Plaintiffs submitted a proposal for Lulea
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2.
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ii.
Prime Contractor Role
Alternatively, Emerson argues that undisputed evidence proves “that Emerson was ready,
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willing and able to serve as prime contractor even if Facebook hired someone else to build the data
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hall” at Lulea 2, and that Plaintiffs were not able to serve as the prime contractor but were only
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interested in designing and constructing the data hall. Emerson contends that it would have been
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selected for that role since it was the only bidder for that work, and that Wagner failed to account
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for that fact when calculating his unjust enrichment opinion.
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But again, the evidence on this issue is not undisputed. As Emerson points out,
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Facebook’s Tse testified that Emerson was the only company being considered for “everything
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else” - the portion of Lulea 2 other than the data hall. Id. at 1527:22-1529:8. Tse also testified,
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however, that Emerson had not built any modular data centers as of June, 2012, and did not offer a
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Case No.: 5:15-cv-01370-EJD
ORDER DENYING DEFENDANTS’ MOTION TO STRIKE
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modular product, but that a modular solution was one of the design requirements for the Lulea 2
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data center. Id. at 1401:6-12; 1442:8-11; 1502:7-1503:24. Moreover, Emerson’s Pouchet testified
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that Facebook would not award the Lulea 2 project to Emerson unless it provided the design that
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Facebook wanted. Id. at 1707:20-1708:20.
A reasonable jury could therefore find that Emerson’s alleged misappropriation was a
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“substantial factor” in obtaining any role in the design and construction of Lulea 2, including as
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prime contractor, because Facebook required a modular solution. Wagner’s unjust enrichment
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opinion is therefore not inadmissible for relying on this assumption without apportioning for
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“landing Facebook as client in the prime contractor role, without the data hall.”
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United States District Court
Northern District of California
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III.
ORDER
Emerson’s Motion to Strike (Dkt. No. 788) is DENIED. The hearing on this motion
scheduled for May 2, 2018, is VACATED.
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IT IS SO ORDERED.
Dated: May 1, 2018
______________________________________
EDWARD J. DAVILA
United States District Judge
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