Cangrade, Inc. v. Synopsys, Inc.

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United States District Court
Northern District of California
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
CANGRADE, INC.,
Plaintiff,
v.
SYNOPSYS, INC.,
Defendant.
Case No. 25-cv-01381-NW (SVK)
ORDER SETTING FORTH
TENTATIVE AND FINAL RULINGS
IN RE DKT. 80
Re: Dkt. No. 80
I. 	INTRODUCTION
Before the Court is the Parties’ Joint Submission regarding Plaintiff Cangrade’s responses
to certain Requests for Admissions (“RFAs”) and Requests for Production (“RFPs”). Dkt. 80.
The Court has reviewed the case file, the arguments of counsel and the relevant law and
determines that this matter can be resolved without oral argument. Civ. L.R. 7-1(b). However, as
some of the disputed requests involves third-party Paylocity, the Court issues certain tentative
rulings to give Paylocity an opportunity to be heard as directed below.
In sum, there are four (4) disputes addressed in the dispute summary chart (Dkt. 80-1):
1. 	A specific term of settlement of a lawsuit in Massachusetts between Cangrade and
third-party Paylocity (“the Massachusetts Action”). Dkt. 80-1 at 2 (RFA 54).
2. 	Documents reflecting settlement negotiations between Cangrade and third-party
Paylocity. Id. at 5 (RFP 11).
3. 	Documents reflecting communications between Cangrade and its investors relating to
ten different topics. Id. at 8-9 (RFP 4).
4. 	A series of RFAs directed to the existence or non-existence of communications
between Cangrade and its investors and between Cangrade and unidentified third-
parties. Id. at 9-25 (RFAs 72-111).
Case 5:25-cv-01381-NW Document 82 Filed 01/20/26 Page 1 of 6

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In addressing the disputed requests, the Court is guided by the parameters of relevance and
proportionality based upon the allegations in the current operative complaint. Dkt. 601; Fed. R.
Civ. P. 26(b)(1). Particularly helpful at the stage of this case, Rule 26 also provides that
information that is relevant and proportional to the needs of the case “need not be admissible in
evidence to be discoverable.” Id. With these precepts in mind, the Court addresses the disputed
categories summarized above.
II. 	DISCUSSION
A. 	RFA 54: A fact relating to the settlement between Cangrade
and third-party Paylocity.
RFA 54 seeks an admission that Cangrade received payment from Paylocity in settling the
Massachusetts Action. Dkt. 80-1. The fact of whether or not Cangrade received payment in
settling that action is not privileged and, in light of the claims and defenses asserted in this action,
whether any such payment was received is relevant and proportional to the needs of this case.
Fed. R. Civ. P. 26. The Court acknowledges that the Parties hotly dispute whether the remedies
Cangrade seeks this lawsuit overlap with whatever it may have recovered in the Massachusetts
Action and, similarly, whether an offset to recovery in this action would be appropriate. That
dispute may properly be the subject of motion practice before the presiding judge; it will not be
resolved in the context of a discovery dispute. Accordingly, the Court tentatively GRANTS
Synopsis’ request for a response to RFA 54 in the form of either an admission or a denial or, in
the alternative, tentatively ORDERS Cangrade to produce the final settlement agreement
between it and third-party Paylocity as reasoned below.
B. 	RFP 11: Documents relating to settlement negotiations.
RFP 11 seeks “[d]ocuments relating to the negotiation and execution of the settlement between
You and Paylocity in connection with the Massachusetts Lawsuit.” Dkt. 80-1 at 5. Although this
request is not entirely clear, based upon the Joint Submission, it appears that the Parties dispute
1 The presiding judge recently granted in part and denied in part with leave to amend Synopsis’
Motion to Dismiss the Second Amended Complaint. Dkt. 81. That order does not impact the
issues raised in this dispute and, as a third amended complaint has not yet been filed, this Court
properly looks to the Second Amended Complaint at Dkt. 60.
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the production of documents reflecting settlement negotiations as well as production of the
settlement agreement. See Dkt. 80.
Against this backdrop, Cangrade argues against production of any settlement-related
documents on various basis of confidentiality, privilege and relevance. Dkt. 80 at 5-7. Not to
bury the lede, the Court is not persuaded that any documents related to the settlement between
Cangrade and Paylocity are protected as confidential or privileged. The Court further concludes
on the record before it that the settlement agreement between the two is relevant, and its
production is proportional to the needs of this case. Documents related to settlement negotiations
leading up to the agreement, however, are at best only tangentially relevant, and with the
production of the settlement agreement, documents reflecting settlement negotiations are not
proportional to the needs of this case. Fed. R. Civ. P. 26(b)(1).
To briefly return to Cangrade’s arguments, it first suggests that the confidentiality
provisions in the settlement agreement prohibit its disclosure in this action, even in face of a court
order. Dkt. 80 at 6. Cangrade cites no authority for what would be an enormous work-around to
Rule 26, and this Court dismisses the argument accordingly. Cangrade also urges inadmissibility
of settlement-related documents under Federal Rule of Evidence (“FRE”) 408. Id. First, as noted
above, evidence need not be admissible to be discoverable. Fed. R. Civ. P. 26(b)(1). Second,
FRE 408 limits the use of evidence exchanged in confidential proceedings to settle a claim to
demonstrate liability as to that claim. Fed. R. Evid. 408, Advisory Committee’s Note on Proposed
Rules (“As a matter of general agreement, evidence of an offer-to compromise a claim is not
receivable in evidence as an admission of, as the case may be, the validity or invalidity of the
claim.” (Emphasis added)). Again, Cangrade cites no authority, and the Court is not aware of
any, that transfers FRE 408 protections as to a claim in one action to a different claim in another
action. Cangrade’s third attack on production of settlement-related documents is based on the
mediation privilege. Dkt. 80 at 6. However, all of the authorities cited by Cangrade limit the
privilege to materials related to the arranging and carrying out the mediation, using phrases such
as “made during the course of the mediation” and “setting up or conducting the proceedings.” Id.
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The privilege is similarly limited by Ninth Circuit authorities.2 Dkt. 80 at 3 (citing Wilcox v.
Arpaio, 753 F.3d 872, 876 (9th Cir. 2014) and The Facebook, Inc. v. Pacific Northwest Software,
Inc., 640 F.3d 1034, 1040-41 (9th Cir. 2011)). Thus, the mediation privilege protects neither the
settlement-related documents created in the several months following mediation nor the settlement
agreement itself. E.g., Folb v. Motion Picture Indus. Pension & Health Plans, 16 F. Supp. 2d
1164, 1180 (C.D. Cal. 1998), aff’d, 216 F. 3d 1082 (9th Cir. 2000). Finally, Cangrade makes a
general relevance argument by attempting to distinguish the claims and damages sought in the
Massachusetts Action from this suit. Dkt. 80 at 6-7. As discussed above, the legal impact of the
Massachusetts Action on this case is an issue for the presiding judge. Moreover, as also noted
above, admissibility in this action is a prerequisite to discoverability.
Accordingly, in response to RFP 11, the Court tentatively GRANTS Synopsis’ request as
to the settlement agreement between Cangrade and Paylocity and tentatively DENIES the request
as to other settlement-related documents. The Court ORDERS the Parties, including third-party
Paylocity, to meet and confer with the Court’s tentative rulings as guidance, no later than
January 27, 2026. If the Parties are unable to agree on production of the settlement agreement in
lieu of a supplemental responses to RFA 54 and RFP 11, or if Paylocity would like to be heard on
either of these issues, Synopsis, Cangrade and Paylocity may submit a single joint statement not to
exceed 2 pages each, for a total of 6 pages, no later than February 3, 2026.3 The Court will set a
hearing if necessary.
C. 	RFP 4: Investor Communications
RFP 4 seeks:
Documents and Communications exchanged with Investors relating
to the GitHub Post, the LOI, the potential merger between You and
Paylocity, this Litigation, the Massachusetts Lawsuit, the settlement
of the Massachusetts Lawsuit, Your Trade Secrets, the audit of
2 The Parties debate whether federal or state law governs privilege in this context, and if state law,
whether it is the law of Massachusetts or California. As all authorities cited by both sides limit the
mediation privilege to preparation for and conduct of the mediation itself, the Court need not
resolve this question.
3 Although Paylocity has not previously been heard on this topic, in this instance its position is
aligned with Cangrade, who addresses it extensively in the current Joint Submission.
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Cangrade source code performed by Synopsys, Joseph Paulose, or the
CONDA.
Dkt. 80-1 at 8-9. Synopsis complains of the production of only a single document in response to
this RFP seeking communications with investors about any one of ten topics. Cangrade proffers
that there are only two persons at Cangrade who communicate with its “handful” of investors and
that those communications are sporadic and almost entirely by phone. 	Dkt. 80 at 7. Cangrade
also divides the topics between those that address the “software breach and resulting termination
of the merger” and those directed to the “origin and proceedings of the merger.” Id. Cangrade
objects to the latter category as irrelevant. Id. Cangrade does not identify which topics in RFP 4
fall into which category, although some are obvious. Synopsis does not specifically address
Cangrade’s relevance objection. See id. at 1-5.
The question of relevance must be addressed in the first instance, but, as noted, the record
before the Court is incomplete. Accordingly, the Court ORDERS that no later than January 27,
2026 Synopsis and Cangrade meet and confer, in light of the directives below, to further address
the relevancy of the topics in RFP 4. This meet and confer effort must be robust, either in
person or by video, conducted by counsel with full authority to negotiate and compromise to
resolve this issue. If the Parties are unable to resolve this dispute, they submit a further joint
statement to the Court, not to exceed 4 pages, no later than February 3, 2026.
As to the sufficiency of any search, Rule 26(g) requires the reasonable, diligent effort by
counsel in responding to discovery requests. Although searches by clients are not per se against
the Rules, searches without input or guidance by counsel may be inadequate. Notwithstanding the
context provided by Cangrade, the production of only a single document across a range of
subjects, even as those subjects are limited by Cangrade, raises a legitimate question as to the
sufficiency of the search. Further, as there are only two Cangrade employees who communicate
with investors, a more thorough search by counsel is not unduly burdensome. Accordingly, the
Court ORDERS as follows: Within 14 days of resolution of the scope of RFP 4, either by
agreement or court order, counsel for Cangrade is to search the two individuals’ emails and texts,
using search terms sufficient to capture relevant communications on the relevant topics. At this
time, Synopsis’ request for further discovery into Cangrade’s search for documents is unwarranted
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and is therefore DENIED without prejudice.
D. 	RFAs 72-111: Existence of Documents
In addressing this voluminous portion of the dispute, the Court is guided by the express
objective of Requests for Admission. See Fed. R. Civ. P. 36(a)(1)(A). In relevant part, Rule 36
provides:
A party may serve on any other party a written request to admit, for
the purposes of the pending action only, the truth of any matters
within the scope of Rule 26(b)(1) relating to:
(A) facts, the application of law to fact, or opinions about either ….
Id. The Advisory Committee Notes more precisely state the Rule’s objective as follows:
Rule 36 serves two vital purposes, both of which are designed to
reduce trial time. … [F]irst to facilitate proof with respect to issues
that cannot be eliminated from the case, and secondly, to narrow the
issues by eliminating those that can be.
Id., Advisory Committee’s Notes to 1970 Amendment.
Synopsis readily admits that these RFAs are in reaction to RFP 4 and the production of
only one document. Dkt. 80 at 5. As such, these RFAs are not directed to facts to be determined
at trial are therefore improper. Synopsis’ request is DENIED as outside the parameters of Rule
36. Notably, Synopsis’ concern regarding the existence of documents is addressed by the Court’s
ruling in re RFP 4, above. See, supra, § II.C.
III. 	CONCLUSION
In light of the early stage of this litigation, the Parties may stipulate to modest extensions
of the deadlines set forth herein to facilitate the resolution of any dispute without further Court
intervention.
SO ORDERED.
Dated: January 20, 2026
SUSAN VAN KEULEN
United States Magistrate Judge
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