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Waymo LLC v. UBER Technologies, Inc.

United States District Court, N.D. California

June 5, 2017

WAYMO LLC, Plaintiff,
UBER TECHNOLOGIES, INC., et al., Defendants.


          JACQUELINE SCOTT, CORLEY, United States Magistrate Judge

         Waymo has sued Uber for violating federal and state trade secret laws. In particular, Waymo accuses its former employee Anthony Levandowski of downloading thousands of Waymo documents related to its driverless vehicle technology, forming competing driverless vehicle companies Ottomotto and Ottomotto Trucking, and then selling Ottomotto to Uber, all along taking the downloaded documents with him. In March 2016, after Levandowski departed Waymo but before the Ottomotto/Uber transaction closed, Ottomotto and Uber jointly retained an outside forensic expert, Stroz Friedman, to investigate certain Ottomotto employees who were formerly employed by Waymo, including Levandowski and Lior Ron. Stroz interviewed the employees, reviewed their digital devices and cloud storage, and prepared a report, memos and exhibits recording the results of their investigation (“the Stroz Report”). Waymo seeks to compel Uber to produce the Stroz Report and its exhibits in full. (Dkt. No. 321.) After carefully reviewing the record, including an in camera review of the Report and its exhibits, and having held oral argument on May 25, 2017, the Court GRANTS the motion to compel. Neither Uber nor Levandowski has met their burden to show that the Report and any of its exhibits are protected by the attorney-client privilege and Uber has waived any claim of attorney work-product. Thus, there is no basis to withhold the Report from Waymo. Waymo's motion to compel must be granted.


         Levandowski formed Ottomotto (“Otto”) on January 15, 2016. Twelve days later he resigned from Waymo. On February 1, 2016, he formed Otto Trucking.

         A. The Uber/Otto Term Sheet

         On February 22, 2016, Uber and Otto signed a Term Sheet. Uber was represented, in part, by Morrison and Foerster (“MoFo”) and Otto by O'Melveny and Myers (“OMM”). The Term Sheet created a process for Uber to potentially acquire 100% ownership of Otto through the execution of a Put Call Agreement. (Dkt. No. 510-3 at 3.[1]). Exhibit C to the Term Sheet required Uber to complete certain “Pre-signing Due Diligence” on Otto and certain of its employees in accordance with Attachment A to Exhibit C. (Id. at 50, 55-56.) Such due diligence was to be conducted by Stroz, identified in the Term Sheet as “an independent third party digital forensic expert, ” and included Stroz's completion of a Third Party Report. (Id. at 50, 53.) The Term Sheet defines the Third Party Report as:

the written report(s) produced by the Outside Expert summarizing in detail all of the facts, circumstances, activities or events obtained by the Outside Expert from any Diligenced Employee that the Outside Expert deems reasonably related to any Bad Act of such Diligenced Employee, in each case, based on the interviews, forensic due diligence and other due diligence investigation with respect to all Diligenced Employees conducted by the Outside Expert, as jointly directed by and engaged by [Otto] and [Uber].

(Id. at 53.) A “Bad Act” means fraud, misappropriation of Waymo's patents, copyrights, trademarks or trade secrets, breach of a fiduciary duty owed to Waymo, or breach of a non-solicitation agreement with Waymo. (Id.).

         Exhibit C required the initial due diligence of Otto employees, including Levandowski and Ron, to be completed prior to the signing of the Put Call Agreement. (Id. at 50.) Also prior to any signing of the Put Call Agreement, each diligenced employee had to certify that he or she had completed the due diligence in good faith and had responded truthfully to Stroz. (Id.)

         Following the execution of the Put Call Agreement, and regardless of whether the Uber/Otto transaction actually closed, Uber is required to indemnify Otto and/or any diligenced employee, including Levandowski, for any claim brought by an employee's former employer (Waymo) for a “Bad Act, ” including misappropriation of trade secrets. (Id. at 50-51.) However, the indemnification obligation excludes claims for misappropriation of trade secrets, among other “Bad Acts, ” committed before the signing of the Put Call Agreement if they

reasonably arise or result from any facts, circumstances, activities or events that either (x) were not truthfully disclosed by [Otto] and/or the Diligenced Employees to [Stroz] in response to relevant inquiries in connection with the due diligence performed by the [Stroz], or (y) were not contained or reflected in the due diligence materials provided by the Diligenced Employees to [Stroz].

(Id. at 51.) In other words, Uber agrees to indemnify Levandowski and others for Bad Acts committed before Uber entered into the Put Call Agreement, provided the employees disclosed the Bad Acts to Stroz during its pre-signing due diligence; that is, the due diligence conducted before the signing of the Put Call Agreement. Uber's indemnification obligation also excludes certain “Bad Acts” committed after the signing of the Put Call Agreement. (Id. at 51-52.)

         Following the settlement or final adjudication of a diligenced employee's indemnified claim, Uber has the right to dispute through arbitration or a court whether it was obligated to indemnify the employee; for example, to determine whether the indemnification is excluded because it arose from pre-signing Bad Acts that the indemnified employee did not properly disclose to Stroz. (Id. at 51.) If the court or arbitrator so concludes, the indemnified employee is required to reimburse Uber for expenses paid in indemnification. (Id. at 52.)

         The Term Sheet did not obligate Uber or Otto to enter into the Put Call Agreement or to eventually close the transaction; that is, Uber was not required to enter into the Put Call agreement regardless of the results of the initial Stroz due diligence. (Id. at 13 (“For the avoidance of doubt, no party hereto shall be under any obligation to enter into and deliver any legally binding definitive agreements with respect to the Transaction, and failure to do so shall not impose any liability on any party hereto”).) To the contrary, the Term Sheet provides that if Uber enters into the Put Call Agreement, its obligation to close the transaction shall not be conditioned upon a determination that there were no Bad Acts, including misappropriation, prior to the signing of the Put Call Agreement. (Id. at 53.) Thus, if Uber did not want to do the deal because Levandowski or other Otto employees misappropriated Waymo's trade secrets, that decision had to be made before it entered into the Put Call Agreement.

         B. The Stroz Pre-Signing Due Diligence

         A few days after the execution of the Term Sheet, Otto and Uber formally engaged Stroz to investigate Levandowski, Ron and other Otto employees, and to create the Third Party Report required by the Term Sheet. (Dkt. No. 370 ¶ 10; Dkt. No. 370-3; Stroz Report, Exh. 4.) Stroz identified its clients as Otto and Uber. (Dkt. No. 370-3.)

         By letter dated March 14, 2016, Levandowski's personal attorney John Gardner wrote Stroz. (Stroz Report, Exh. 2.) Gardner stated that his firm represents Levandowski “individually, with respect to a proposed examination by Stroz . . . of Mr. Levandowski's electronic media, personal accounts and related materials, all as described in your joint engagement letter with Morrison & Foerster LLP and its client Uber USA, LLC, and O'Melveny & Myers LLP and its client Ottomotto Inc. (collectively, ‘Clients'), dated March 4, 2016 (‘Stroz Examination').” (Id.) The letter went on to recite how Stroz had requested certain information of Levandowski, and how Levandowski would only disclose such information to Stroz provided Stroz agreed to certain conditions, including not disclosing certain of the information to Otto or Uber. Gardner sent a similar letter to Stroz one week later involving a Stroz request that Levandowski disclose additional information. (Stroz Report, Exh. 3.) In both letters Gardner represented that Levandowski and Otto “share a common legal interest in the subject matter of the Stroz Examination, and in Stroz's retention through O'Melveny & Meyers, as counsel for Ottomotto Inc., as a related party to Mr. Levandowski.” He made no mention of any purported common interest with Uber. (Stroz Report Exhs. 2, 3.)

         Stroz interviewed Levandowski, without counsel present, at Stroz's office on March 22 and 23, 2016 and conducted a follow up telephone interview on April 1, 2016. (Stroz Report, Exh. 5.) Prior to the interviews, on March 18, he provided certain information to Stroz via a written questionnaire. Stroz interviewed Ron on March 22, 2016, also without any counsel present, and on April 11 Stroz conducted a follow-up telephone interview. (Stroz Report, Exh. 6.) Stroz interviewed other Otto employees on March 23 and 24, 2016. (Stroz Report, Exhs. 7 & 8.) Stroz also collected and analyzed the interviewees' devices and cloud-based storage. Prior to the commencement of the interviews, Stroz adopted a protocol for its investigation which gave OMM the right to require Stroz to withhold from disclosure to MoFo documents that OMM contends are protected by a privilege from disclosure to MoFo. (Stroz Report, Exh. 1.)

         In early April 2016, prior to the execution of the Put Call Agreement, and at MoFo's request, Stroz provided MoFo with an interim report; in particular, it provided MoFo with its memos of its interviews of Levandowski, Ron and the diligenced employees; data regarding information found on the diligenced employees' devices; and an oral report regarding certain Stroz fact finding. (Stroz Report at 3-4.) The interview memos were redacted as requested by OMM and Gardner. In August 2016, counsel for the diligenced employees consented to Stroz producing its Report to MoFo, OMM, Gardner and Ron's counsel, Levine & Baker LLP, as well as in-house counsel at Uber and Otto. (Stroz Report at 5.)

         C. The Execution of the Put Call and Joint Defense Agreements

         At some point Uber and Otto executed the Put Call Agreement, dated April 11, 2016, obligating them to complete the transaction assuming certain conditions were satisfied. (Dkt. No. 515-3.) As was stated in the Term Sheet, the Put Call Agreement reiterated that the closing conditions will be deemed satisfied regardless of whether Levandowski or any other diligenced employee committed a Bad Act prior to the signing of the Put Call Agreement. (Id. at 39.)

         Also dated April 11, 2016, is a “Joint Defense, Common Interest and Confidentiality Agreement” among Otto, Otto Trucking, Uber, Levandowski and Ron. (Dkt. No. 370-2 at 2-11.) The first paragraph states that it is entered into “in contemplation of potential investigations, litigation, and/or other proceedings relating to the proposed transactions between Ottomotto, Otto Trucking and Uber and/or any affiliates of Uber.” (Id. at 2.)

         Four months later, in August 2016, Stroz issued its final report. That same month, Uber bought Otto for approximately $680 million and hired Levandowski to lead its self-driving car program. (Dkt. No. 433 at 4:24-25.)

         This litigation commenced in February 2017. Waymo now moves to compel production of Stroz's August 5 Report and all of its exhibits. (Dkt. No. 321.)


         Uber contends that the Stroz Report and all of its exhibits are protected from disclosure as attorney work-product. It also contends that six of the documents comprising the Report and its exhibits are protected by the attorney-client privilege: (1) the Stroz Report itself, (2) Stroz's protocol for review of data and devices, (3) Levandowski's side letter agreement with Stroz dated March 14, 2016, (4) Levandowski's side letter agreement with Stroz dated March 21, 2016, (5) Stroz's memorandum of its interview of Levandowski, and (6) Stroz's memorandum of its interview with Ron. Mr. Levandowski, on the other hand, contends that the Stroz Report and all of the exhibits, even those for which Uber only claims the work-product privilege, are protected from disclosure by his personal attorney-client privilege. As requested by the district court, the undersigned has reviewed the Stroz Report and its exhibits in camera. (Dkt. No. 271 at 2; Dkt. No. 350.)

         A. The Report and its Exhibits are not Protected by the ...

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