That’s what lawyers for Western Digital argued last week in an attempt to vacate the eye-popping award, which an arbitrator in Minnesota levied late last year to resolve claims that Western Digital stole trade secrets from rival hard drive maker Seagate Technology LLC.
An American Arbitration Association arbitrator granted Seagate the award in November, after determining that evidence presented by Western Digital was forged by the employee at the center of the spat. Western Digital, which was represented by Irell & Manella and Merchant & Gould in the AAA arbitration, brought in new counsel from Arnold & Porter to contest the decision in state court in Minneapolis. In a Jan. 23 brief, A&P asserted that the arbitrator “exceeded his powers and engaged in prejudicial misconduct by awarding [$630.4 million] based on a punitive sanction that excluded massive, relevant, and untainted evidence.” The award is five times higher than any other sanction ever issued, according to the motion.
“This sanction was designed not to protect Seagate from the consequence of the co-defendant’s misconduct, or to deter future misconduct, but could have been intended only to punish,” Western Digital argued.
A hearing on the motion is scheduled for March 1 before Judge Janet Poston of Hennepin County District Court in Minnesota. Frederick Finch of Bassford Remele, a lawyer for Seagate, declined to comment.
The filing is the latest twist in a four-year battle stemming from accusations by Seagate that a former employee misappropriated trade secrets when he decamped to Western Digital. Western Digital hired Sinig Mao, a Seagate engineer, in September 2006. Seagate sued a month later, alleging that Mao would inevitably share Seagate’s trade secrets with his new employer. The case was ordered into AAA arbitration, and the companies disclosed in November that the arbitrator had awarded Seagate $525 million. The arbitrator, former Hennepin County District Court Judge Robert Schumacher, later tacked on another $105 million in interest.
In his November decision, which was first made public last week, Schumacher found that Seagate could not prove some of its trade secret claims, but he nevertheless sided with Seagate after finding that Mao had fabricated evidence related to three Seagate trade secrets.
Mao had contended that he included information about the trade secrets in a set of PowerPoint slides he presented during a conference lecture. But Schumacher concluded that Mao faked one of the slides that was included as evidence in the arbitration and determined that “it is implausible that the other two disputed slides were not also fabricated.” (Western Digital stated in last week’s brief that it “strongly disagrees” with that finding.) As a result of Western Digital and Mao’s wrongful conduct, the judge found that the company was able to introduce a certain hard drive product nine months sooner than it could have otherwise.
Western Digital described Sining Mao as a “former” employee in a quarterly report filed with the Securities and Exchange Commission on Friday. Mao recently retained his own counsel in the case from Minneapolis’s Bowman and Brooke; partner George Soule confirmed that his client was no longer employed by Western Digital. Mao “strongly denies” claims that he fabricated evidence and will separately seek to vacate the award on Thursday, Soule said.
Western Digital counsel Michael Schissel and Lisa Blatt of Arnold & Porter didn’t respond to a request for comment. A company spokesman declined to comment beyond the court filing. Irell & Manella and Merchant & Gould had previously represented Western Digital. Those firms are not listed on last week’s brief, and lawyers at both firms did not respond to requests for comment.