Phillips 66 Hit with $195 Million in Exemplary Damages Following $605 Million IP Verdict Over Abusive Behavior

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Phillips 66 Hit with $195 Million in Exemplary Damages Following $605 Million IP Verdict Over Abusive Behavior

Alameda County, CA — A California Superior Court judge has awarded an additional $195 million in exemplary damages to startup Propel Fuels, following a $605 million jury verdict against oil giant Phillips 66 for trade secret misappropriation. The ruling highlights Phillips 66’s “abusive behavior” during acquisition talks and marks a significant win for Propel Fuels in the intellectual property dispute.

Judge Michael Markman ruled Wednesday that Phillips 66 engaged in “reprehensible” conduct by leveraging its bargaining power to build a new renewable fuels business using Propel’s confidential sales and pricing models after terminating merger negotiations in August 2018. The exemplary damages amount is triple the expected value of the proposed deal, set at $65 million including executive incentives.

“The evidence shows Phillips 66 saved months, if not years, of development time by abusing Propel’s trust,” said Judge Markman, who also added 7% prejudgment interest from the October 2024 jury verdict date. A hearing to address postjudgment interest is scheduled for August 5.

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Trial testimony revealed that while merger talks were progressing in early 2018, Phillips 66’s internal team—led by executive Nick Dombalis—secretly advocated against the deal while assuring Propel otherwise. No measures were taken to segregate sensitive information during this period, which the court found particularly damaging.

Propel’s legal counsel from Kobre & Kim LLP argued the conduct justified damages as high as $1.2 billion, citing the extreme nature of Phillips 66’s actions under California’s Uniform Trade Secrets Act. Meanwhile, Phillips 66’s defense disputed the necessity of using “clean teams” to protect trade secrets, referencing expert testimony that no such standard applies universally.

Following a recent California Supreme Court ruling invalidating liability caps in similar trade secret cases, Judge Markman found Phillips 66’s contractual defense to be without merit, further strengthening Propel’s position.

Propel Fuels, a pioneer in low-carbon fuel retail, is now set to receive a total award of approximately $834 million, underscoring the substantial risks companies face when intellectual property is improperly used.

Representing Propel are attorneys Michael Ng, Daniel Zaheer, Jeremy Bressman, and Adriana Riviere-Badell of Kobre & Kim LLP, alongside David Frederick of Kellogg Hansen Todd Figel & Frederick PLLC. Phillips 66 is represented by Theodore Boutrous of Gibson Dunn & Crutcher LLP and Jeffrey Homrig of Latham & Watkins LLP.