Jury hands Propel Fuels $605m in secrets case

Verdict finds opponent’s misconduct “willful and malicious” | California court has power to treble damages | Dispute emerged when mooted acquisition deal failed to materialise, and defendant promptly entered low-carbon fuels market.

A California jury has awarded renewable fuels company Propel Fuels a $604.9 million damages verdict in its trade secrets misappropriation case against a larger competitor, Phillips 66.

Following a five-week trial, the jury at the Superior Court of California in Oakland also ruled on Wednesday, October 17, that Phillips 66’s misappropriation was “willful and malicious”.

According to this finding, the court now has the power to treble the total damages award in the future.

‘Pioneers’ in clean fuel

Propel filed its complaint in February 2022, alleging that Phillips 66 stole confidential data, proprietary strategies and business intelligence developed by Propel for more than a decade—costing the company hundreds of millions of dollars.

In a statement released after this week’s verdict, Rob Elam, founder and chief executive of Propel, said he was “pleased” that the jury held Phillips 66 accountable for stealing trade secrets.

He added: “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.”

Founded in 2004, Propel develops low-carbon renewable fuels including E85 (or flex fuel), a high-level ethanol-gasoline blend containing 51% to 83% ethanol that is more environmentally friendly than pure gasoline.

In 2015, Propel became the first company in California to produce and market high-blend renewable diesel, which it sells under its HPR brand.

Failed acquisition

During the legal proceedings, Propel outlined how it had entered into due diligence with the defendant in 2017 following a proposed all-cash acquisition broached by Phillips 66.

Propel alleged at trial that Propel had gone on to reveal—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.

The company contended that Phillips 66 then “abruptly and without explanation” terminated the deal in August 2018, proceeding to announce to California regulators the very next day that it would soon enter the E85 market.

Phillips 66 launched retail sales of high-blend renewable diesel just a few weeks later.

Propel further alleged that Phillips 66 rapidly expanded its California renewables business using stolen data and market insights, and that it now retails E85 or renewable diesel at more than 600 stations in the state.

Unjust enrichment

Propel insisted Phillips 66’s California renewable fuels business was developed from Propel’s trade secrets in violation of California’s Uniform Trade Secrets Act.

The jury agreed, awarding unjust enrichment damages following more than two years of pretrial proceedings and a trial featuring evidence and testimony from 31 witnesses, including 10 expert witnesses.

Michael Ng, trial lawyer at Kobre & Kim, acted as lead counsel for Propel.

Commenting on the win, he said that Propel did what “many innovators cannot do”.

He explained: “It stood up to a much larger adversary and persevered through a long process to vindicate its rights.

“We are grateful to the jury, who spent more than a month examining detailed evidence supporting this verdict and their finding that Phillips 66’s misappropriation was willful and malicious, and the highly experienced presiding judge, who devoted considerable time and effort to the arguments of both sides.”

WIPR has approached Phillips 66 for comment.

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