Uber Crashes and Burns at the Federal Circuit
Waymo LLC v. Uber Technologies, Inc. et al.
Decided: September 13, 2017
Just before leaving his job with the self-driving technology company Waymo, Anthony Levandowski allegedly stole his employer’s trade secrets; he was later accused of delivering those trade secrets to Uber Technologies—his new employer. Waymo filed a trade secret action against Uber; in response, Uber filed a motion arguing that the doctrine of equitable estoppel compels arbitration because: (a) Waymo’s complaint says that “Levandowski was able to misappropriate Waymo’s trade secrets by virtue of his job at Waymo;” and (b) Waymo’s employment agreements with Mr. Levandowski contain provisions requiring arbitration of “all employment-related disputes.”
The District Court ruled against Uber, holding that although there are circumstances under which equitable estoppel might apply—such as when a party seeks to enforce some provisions of an agreement while attempting to avoid its obligations under other portions of the same agreement—California law holds that those circumstances do not apply here, because Waymo does not rely on the Waymo/Levandowski employment agreement to make its trade secret case against Uber.
The Federal Circuit affirmed. The panel’s opinion begins by explaining that two California cases (Kramer and Goldman) establish that when a non-party to an agreement attempts to enforce the agreement’s arbitration clause, equitable estoppel only applies in the following circumstances:
“(1) when a signatory must rely on the terms of the written agreement in asserting its claims against the nonsignatory or the claims are intimately founded in and intertwined with the underlying contract, and
(2) when the signatory alleges substantially interdependent and concerted misconduct by the nonsignatory and another signatory and the allegations of interdependent misconduct [are] founded in or intimately connected with the obligations of the underlying agreement.”
The Federal Circuit calls these the “Kramer/Goldman circumstances.”
Uber presented a three-part argument for why this case meets the first Kramer/Goldman circumstance: First, Uber need not show that Waymo relies on the Levandowski employment agreements to make its trade secrets case, because the first Kramer/Goldman circumstance only requires Uber to show that Waymo’s “claims are intimately founded in and intertwined with the underlying contract.” The Federal Circuit rejected this argument, noting that California courts define “reliance on an agreement” as “raising claims that are intimately founded in or intertwined with that agreement;” Waymo’s claim that Uber misappropriated its trade secrets does not depend on the terms of its agreements with Mr. Levandowski.
In its second (and alternative) argument regarding the first Kramer/Goldman circumstance, Uber asserted that Waymo must necessarily rely on its agreements with Levandowski to make its trade secret claims, because its complaint refers to the agreements. For its part, Waymo argued that the complaint refers to the agreements only to show that it has taken reasonable measures to safeguard its trade secrets; the panel sided with Waymo, quoting the Kramer case for the proposition that “Plaintiffs’ claims themselves must intimately rely on the existence of the … Agreements, not merely reference them.”
And in its third argument regarding the first Kramer/Goldman circumstance, Uber said that the District Court erred when it accepted Waymo’s conditional representation that it would not rely on the agreements “provided that Uber does not open the door by reference to these agreements….” The Federal Circuit also rejected this argument, explaining that this type of “conditional representation does not demonstrate reliance on the employment agreements.”
Finally, the panel also rejected Uber’s arguments that this case meets the second Kramer/Goldman circumstance—that the alleged concerted acts of misconduct are intimately connected with the obligations of the underlying agreement—because Waymo’s complaint does not allege that Uber and Levandowski conspired to breach his employment agreement with Waymo.