we did this originally and it caused confusion because hover and focus styles were similar (both gray backgrounds).  people thought there were accidentally 2 focused items.

what's the recommendation to prevent this happening again?

the MD spec generally doesn't like hover and nor does Polymer.

we did this originally = on downloads many moons ago

@bettes/sgabriel, can you let us know whether there should be hover effects in 3-dot menus? We have avoided hover effects in many other similar situations (including system menu), so I'm not sure it's necessary. Note that we have removed focus highlight by default, so the first row won't be immediately highlighted anymore. I'd argue that also means there won't be any expectation of hover effects.

On the other hand, since we're hiding focus in action menus by default now, I think it's less likely that people will be confused by seeing 2 highlighted items. A user would both have to open the 3-dot menu, press tab to focus an item in it, and move the mouse to hover over an item to see both highlights at once.

Conclusion from ux sync: 
"Make it work like a context menu." Mouse and keyboard are mutually exclusive, so you can only have one selection at a time.  

The following revision refers to this bug:
  https://chromium.googlesource.com/chromium/src.git/+/12399c275d9261a7cb37816faffd1b7e35fbbd6b

commit 12399c275d9261a7cb37816faffd1b7e35fbbd6b
Author: scottchen <scottchen@chromium.org>
Date: Thu Apr 06 23:20:39 2017

MD Settings: mouse movements should focus cr-action-menu items

BUG= 703975 
CQ_INCLUDE_TRYBOTS=master.tryserver.chromium.linux:closure_compilation

Review-Url: https://codereview.chromium.org/2801453002
Cr-Commit-Position: refs/heads/master@{#462674}

[modify] https://crrev.com/12399c275d9261a7cb37816faffd1b7e35fbbd6b/chrome/test/data/webui/cr_elements/cr_action_menu_test.js
[modify] https://crrev.com/12399c275d9261a7cb37816faffd1b7e35fbbd6b/ui/webui/resources/cr_elements/cr_action_menu/compiled_resources2.gyp
[modify] https://crrev.com/12399c275d9261a7cb37816faffd1b7e35fbbd6b/ui/webui/resources/cr_elements/cr_action_menu/cr_action_menu.html
[modify] https://crrev.com/12399c275d9261a7cb37816faffd1b7e35fbbd6b/ui/webui/resources/cr_elements/cr_action_menu/cr_action_menu.js