Edwards Answering Brief on the Merits

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No.. S1 No S147 4719 190 0 IN TH THE E SU SUP PREME CO COU URT OF TH THE E STATE OF CALI CALIFO FORN RNIA IA

RAYMOND ED EDWA WARD RDS S  Plaintiff an and d Ap Appe pell llan ant, t, vs. ARTHUR ARTH UR AN ANDE DERS RSEN EN,, LL LLP, P, Defendan Defe ndantt an and d Re Resp spon onde dent nt..

Afterr a De Afte Deci cisi sion on by the Cou ourt rt o f Appeal Seco Se cond nd App Appel ella late te Di Dist stri rict ct,, Di Divi visi sion on Th Thre ree, e, Ca Case se No No.. B 17 1782 8246 46 Loss An Lo Ange gele less Su Supe peri rior or Co Cour urtt Ca Case se No. BC 29 2948 4853 53 Andria Andr ia K. Rich Richey ey,, Judg Judgee Pres Presid idin ing g

 NSW

 

RING

BRIEF

ON TH

M

RITS

OFFICE OFFI CES S OF RI RICH CHAR ARD D A. LO LOVE VE Richard A Love ve,, SB SBN N 61 6194 944 4 Beth Be th A. Sh Sheenf nfel eld, d, SB SBN N 116223

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1Los 1601Ang Wi Wilsh lshire ireCa Bo Boul ulev evar ard, Su Suit ite e1756 20 2000 00 Angel eles, es, Cali lifo forni rnia a d, 90 9002 0255-17 56  31 310 0 477477-2070 2070 / Fa Facs csim imil ilee 31 310 0 477 477-39 -3922 22 GREINES, M RTIN STEIN   RIC RICHLA HLAND ND LLP Marc Ma rc J. Pos ostter, SB SBN N 48493 Robin Rob in Me Mead adow ow,, SBN 51126 5700 57 00 Wi Wils lshi hire re Bo Boul ulev evar ard, d, Su Suit itee 37 375 5 Los Ang Angele eles, s, Ca Calif liforn ornia ia 90 9003 036-3 6-3626 626  31 310 0 85 8599-78 7811 11 /Facsimile 31 310 0 27 2766-52 5261 61 Atto At torn rney eyss fo forr Pla Plaint intiff iff an and d App Appel ella lant nt RAYMON RAY MOND D ED EDWA WARD RDS S II

 

T

LE OF CONT LE CONTEN ENTS TS

Page ISSUES   NDANSWERS

 

STAT ST ATEM EMEN ENT T OF THE CASE CASE

3

 

Factual Fact ual Backgro Background und..  

2.

3.

4

5

B.

C

3

Anders Ande rsen en req require uiress Edwa Edward rdss to si sign gn a NonNonCompe Co mpete te Agreem Agreement ent as a co condi nditio tion n of emplo em ploym ymen entt in Andersen Andersen s ac accou counti nting ng practi practice ce group.

3

Anders Ande rsen en se sell llss its ac acco coun unti ting ng pr prac acti tice ce gr grou oup p to HSBC.

4

As a co cond ndit itio ion n o f app approv roving ing hi hiss emplo employm ymen entt with wi th HSBC, HSBC, Ande Anderse rsen n in insi sist stss that that Edwa Edward rdss rele releas asee Ande Anders rsen en from from an any y an and d al alll empl employ oyme ment nt-related rela ted indenmific indenmification ation claims claims..

5

Edward Edwa rdss objec jects to the the pr prop opos osed ed rele releas asee and and refu refuse sess to ab aban ando don n his st stat atut utor ory y empl employ oyme ment nt rights.

7

Andersen Ande rsen termin terminate atess Edwards employ employmen mentt and HSBC HSB C with withdr draw awss its its emplo employm ymen entt of offe fer. r.

7

Find Finding ing No Actio Actiona nable ble Miscond Misconduct uct By An Ander dersen sen,, The Tria Triall Court Court Dism Dismiss isses es Edwards Claim Fo r Intentional Interf Int erfere erence nce With Prospec Prospective tive Economic Economic Advan Advantag tage. e.

8

The Cour Courtt o f Ap Appe peal al Rev ever erse sess The The Ju Judg dgme ment nt For For A Tria Triall On The The Meri Merits ts O f Edwards Intentional Interference Interfer ence Claim. Claim.

9

 

TABLE

 

CONTENTS CONTENT S Continue Continued d

Page LEGAL DISCUSSION

 

BUSINESS AN D PRO PROFES FESSION SIONS S CODE CODE SECTIO SECTION N 16600 PROHIBITS A N EMPLOYER FROM LIMITING A N

EMPLOYEE S A BI BI L LII T TY Y TO EN NG GA AG G E I N OTHER EMPLOYMENT IN T HE HE S AM AM E TRADE; NO NONEXCEPTIO PTIONS NS SHO SHOULD ULD B E IMPLIED. STATUTORY EXCE

Sect Sectio ion n 1660 16600 0 Is Unam Unambig biguo uous us:: I t Bars Al l Restraints Empl ploy oyee ee Mobili Mobility ty Other Other Than Than Those Expressly O n Em A ll ll ow ow e ed d B y Secti Sections ons 16601-166 16601-16602.5. 02.5. Th e pla plain in terms terms o f the st stat atut ute. e.

2.

 

12

Exceptions Th e Legislature Ha s Specified Th e Only Exceptions Sectio tion n 16 16600 600;; None Applies Here. To Sec

C

 

Th e sta statut tutee applies applies to all restr ints on the right

to en enga gage ge in a pr prof ofes essi sion on tr trad adee or business not as Andersen argues just to flat-out prohi itions practice.. o f such practice B.

 

 3

There Is An d Should B e N o Implied  Narrow

Restraint Exception T o Sectio Section n 16 1660 600. 0.  

2.

14

Legislative Legislat ive history history demonstr demonstrates ates t ha ha t t he he Legislature rejected a  narrow restraint exception when it enacted sec sectio tion n 1660 16600; 0; th e right to work is paramount.

14

While some cases refer to a supp supposed osed narrow restraint exception, no Ca Cali lifo forn rnia ia case case has has ever upheld uphel d restrain restraints ts beyond those expressly authorized b y statute.

16

 

 

TABLE

 

CONTENTS CONTEN TS Continued Continued

Page 3.

A narrow restra restrain intt except exception ion would severe severely ly undennine se sect ction ion 1660 16600. 0. a.

b.

Author Auth orit ity y from ot othe herr co cour urts ts is not not he help lpfu full here.

26

There Th ere Is An d Should B e N o   Trade Secrets Secrets Exception Exception To Sec Sectio tion n 16600 16600..

27

Tr Trad adee secr secret etss ar aree ampl amply y pr prot otec ecte ted d by oth other er la laws ws en enac acted ted af afte terr enactm enactment ent o f sec sectio tion n 1660 16600. 0.

27

In any any event vent,, Andersen s noncompetition agreement agree ment restric restricted ted Edwards right to work far than an ne nece cess ssar ary y to pr prot otec ectt any trad tradee secr secret ets. s. more th

29

 

2

II.

22

even ent, t, an empl employ oyer er li like ke Ande Anders rsen en,, In any ev which whic h was was with withdr draw awin ing g from from a trad trade, e, ha d no le legi giti tima mate te inte intere rest st in restr restrai ainin ning g n a r ro wl y o r o t he rwi se - a fonner empl em ploy oyee ee s abil bilit ity y to co cont ntin inue ue to work in that tr trad ade. e.

D.

18

WHETHER OR N O T IT IS ENFORCEABLE, A RELEASE

OF   A N Y AN D AL L CLAIMS PURPORTS T O RELEASE MPLOYE OYER R EVEN NONWAIVABLE CLAIMS; AN E MPL HA T A N VIOLAT VIO LATES ES PUBLIC PUBLIC POLICY B Y INSISTING T HA E MPL MPL OYE OYE E S IGN IGN SUCH A RELEASE.  

gn A Release O f Andersen Insisted Tha Thatt Edwards Edwards S i gn  A ny An d All Claims Against Andersen.

B.

 A An ny An nd d A ll ll

32

Does N o t Mean  Some B u t No t

Others. C.

32

33

Th e Release Cannot B e Construed To Mean Anything Other Than What   Says.  

34

 

TABLE TAB LE OF CONTE CONTENT NTS S Cont Contin inue ued d

Page

D

E

This Cou Court Doe Does Not Not Hav Have To Rule That That All All Cont Co ntra ract ctua uall Rele Releas ases es Viol Violat atee Pu Publ blic ic Poli Policy cy In Orde Orderr To Rule That Rule That The The Rele Releas asee In This This Cas asee Viol Violat ates es Publ Public ic Policy

 6

Edward Edwa rdss Gave Gave Ande Anders rsen en The The Oppo Opport rtun unit ity y To Rewr Rewrit itee Thee Releas Th Releasee To Avoid Avoid In Inva vali lidi dity ty;; An Ande ders rsen en Chos Chosee   ot To Do So

 6

CONCLUSION

 7

CERTIFIC CERT IFICATE ATE OF COMPLI COMPLIANC ANCE E

 

 V

 

T

LE OF

UTHO UTHORI RITI TIES ES

Cases

Page

Acco Acc o Cont Contra ract ctor ors, s, Inc Inc. v. McNa McNama mara ra   Pe Peep epee Lumb Lumber er Co. (1976)

63

Cal.Ap Cal .App.3 p.3d d 292 292

25

Advanced Adva nced Bion Bionic icss Corp Corp.. v. Medt Medtro roni nic, c, Inc. Inc. (2002) (20 02) 29 Ca1.4th 697 697

 8

Appl Ap plic icat atio ion n Grou Group, p, Inc nc.. v. Hunt Hunter er Grou Group, p, Inc Inc. (1998) 6 Cal.AppAth 88

2

Arth Ar thur ur Mur Murra ray y Dance Dance Stud Studio ioss v. Witt Witter er (Ohi (O hio o 1952) 105 N. N.E E.2 .2d d 685

6

Baker Ba ker Paci Pacifi ficc Corp. orp. v. Sutt Suttle less (199 (1990) 0) 220 220 Cal. Cal.Ap App. p.3d 3d 1148

2

Bard Ba rdin in v. Lockhe Lockheed ed Aerona Aeronaut utica icall Syst System emss Co. Co. (199 (1999) 9) 70 Cal.A Cal.AppA ppAth th 494 494 BDO BD O Seid Seidma man n v. Hirs Hirshbe hberg rg (199 (1 999) 9) 93 N. N.Y. Y.2d 2d 382 [712 N. N.E. E.2d 2d 122

34

69

N. Y . S. 2 d 854]

Boug Bo ught hton on v. Soco Socony ny Mobi Mobill Oil Co. (1964) 23 Cal Cal.Ap .App.2 p.2d d 188 188 Briggs v. Eden Eden Coun Counci cill for Hope Hope (199 (1999) 9) 19 Ca1.4th 1106 1106

33 35

24

22 23

Oppo Opport rtun unit ity y

Busk Bu skuh uhll v. Fami Family ly Life Ins. Ins. Co. (196 (1969) 9) 271 Cal. Cal.Ap App. p.2d 2d 514 514

 9

3

Campbell v Bd. o f Trustees o f Lel Leland and Stanf Stanfor ord d Jr. Univ Univ.. (9th Cir. 1987) 817 F.2d 499 499

22 23

Cent Ce nten eno o v. Rosev Rosevil ille le Commun Community ity Hospital Hospital (197 (1979) 9) 107 Cal.A Cal.App. pp.3d 3d 62

17 18

 

 

TABLE TAB LE OF AUTHOR AUTHORITI ITIES ES Cont Contin inue ued d

Cases

Page

Chamberlain v Augustine   19 1916 16)) 172 Cal. 285 City

 2

O f Oakland v

Buteau   191 1919) 9) 180 Cal. 83

24

Dobbin Dob bins, s, DeG DeGuire uire   Tu Tuck cker er,, P.C. P.C. v. Ruth Rutherf erford, ord, MacDon MacDonald ald   Olson   1985) 218 Mont. 392 [708 P.2d 577]

24

Dougla Dou glass v. Los An Angel geles es He Hera raldld-Exa Exami miner ner   19 1975) 50 Cal.App.3d 449

32

 

Sa

v. Play Playhut, hut, In Inc. c. AppAth   2000) Cal.AppA th 927 85 Cal.

33

Dyer Dy er s Ca Case se   1414) Y. B. Mich. 2 Hen. 5

 5

Gikas v. Zo Zoli lin n   1993 1993)) 6 Ca Cal. l.4t 4th h 84

3

Golde olden n St Stat atee Line Linen n Se Serv rvic ice, e, In Inc. c. v. Vidalin   19 1977) 69 Cal.App.3d 1 Gord Go rdon on Ter Termit mitee Co Contr ntrol ol v. Terrones   1978) 84 Cal.App.3d 176

12, 31

24

Gordon v Landau   1958 1958)) 49 Ca Cal. l.2d 2d 690

27,31

Gordon v. Wasserman   19 1957 57)) 153 Ca Cal. l.Ap App. p.2d 2d 32 328 8

3

Greene v. Ha Hawai waiian ian Dre Dredgin dging g Co Co..   1945 1945)) 26 Ca1.2d 245

9

VI

 

TABLE TA BLE OF AUTH AUTHOR ORIT ITIES IES Cont Contin inue ued d

Cases

Page

Gris Gr isso som m v. Vo Vons ns Com ompa pani nies es,, Inc. nc.  1991 1 Cal.A Cal.AppAt ppAth h 52

33

Grupe Gr upe Dev Develop elopmen mentt Co. v Sup Superi erior or Cour Courtt  199 1993 3 4 Ca Cal. l.4t 4th h 911 Hill Hi ll Me Medic dical al Corp. orp. v Wycoff  2001 86 Cal Cal.Ap .AppAt pAth h 895

13

12 14

Hollingsworth Hollingswort h Sol Solder derles lesss Termin Terminal al Co Co.. v Turley  9th 9th Cir. 1980 62 622 2 F. F.2d 2d 1324

28

In re Prov Provid idia ian n Cr Cred edit it Ca Card rd Cas asees  200 2002 2 96 Ca Cal.A l.AppA ppAth th 29 292 2

31

Inter Int ernat nation ional al Bus Busin ines esss Ma Mach chine iness Co Corp rp.. v Bajorek  9th  9t h Cir. 1999 191 F.3 F.3d d 1033

  3

4

Janken v GM Hu Hughe ghess Ele Elect ctro ronic nicss  1996 46 Cal. Cal.AppA AppAth th 55

33

Kaplan v Nalp Nalpak ak Co Corp rp..  195 1958 8 158 Ca Cal.A l.App. pp.2d 2d 19 197 7

13

King v Gerold  19 1952 52 10 109 9 Cal Cal.A .App. pp.2d 2d 31 316 6

23

Kolani v Gluska  19 1998 98 64 Cal Cal.A .AppA ppAth th 40 402 2

20

Latona v Ae Aetn tnaa U.S. He Heal althc thcar aree Inc. Inc.  C.D.C  C.D .Cal al.. 19 1999 99 82 F.S F.Supp upp.2d .2d 10 1089 89

20

 

llow ow Cab Cab Co. v Yell  1975 13 Ca Ca1. 1.3d 3d 804

15

V ll

 

TABLE OF AUTHO AUTHORI RITIE TIES S Cont Contin inue ued d

Cases

Page

Liberi Lib eriaa v. Vida Vidall   1 9 6 6 240 Cal.App.2d 273

33

Lora Lo rall Corp. orp. v. Moye oyes  1985 174 Cal.Ap Cal.App.3 p.3d d 268 268

28 3

Metr Me tro o Traf Traffi ficc Contr ontrol ol,, Inc. nc. v. Shad Shadow ow Traf Traffi ficc Netw Networ ork k  1 99 4 22 Cal.AppAth 853

31

18, 28

Mitche Mit chell ll v. Reyn Reynol olds ds  Q. B. 1711 24 Eng. Rep. 347

 5

Morl Mo rlif ife, e, In Inc. c. v. Pe Perr rry y  1997 1997 56 Cal.Ap Cal.AppAt pAth h 151 1514

 9

Morr Mo rris is v. Harr Harris is  1954 1954 127 127 Cal.App Cal.App.2d .2d 476

 2

Moto Mo tors rs Ins. Corp Corp.. v. Divi Divisi sion on o f Fair Employmen Employmentt Practi Practices ces  1981 118 Cal .A pp . 3d 209

25

Mugg Mu ggil illl v. Reub Reuben en H. Donn Donnel elle ley y Corp. orp.  1965 1965 62 Cal. Cal.2d 2d 239

24 27

Nort No rth h v. Hawki Hawkinso nson n  Mo. 1959 324 S. W . 2 d 733

34

Post Po ster er v. Sout Southe hern rn Cal. Rapi Rapid d Tran Transi sitt Dist Dist..  1990 1990 52 Cal. Cal.3d 3d 266

 9

Ready Re adyLi Link nk Healt Healthca hcare re v. Cotton Cotton  2005 126 C a l . A p p A t h 1006

27

Reeves v Hanlon  2004 2004 33 Cal.4 Cal.4th th 1140 1140

8 1

Vlll

31 35

 

TABLE TAB LE OF AUTHOR AUTHORITI ITIES ES Cont Contin inue ued d

Cases

Scott

v

Snelling

 

Page

Snelli Sne lling, ng, Inc. Inc.

  N.D.Cal N.D.Cal.. 1990 1990 732 732 F.Su F.Supp pp.. 1034 034 South  a y Rad Radiol iology ogy Medi Medica call Asso Associ ciat ates es v. Asher Asher   1990 220 220 Cal.A Cal.App pp.3 .3d d 1074

12

17,

18

Stephens v. County o f Tulare   2006 2006 38 Cal. Cal.4t 4th h 793

 

Stew St ewar artt Titl Titlee Co. v. Her erbe bert rt   1970 6 Cal.A Cal.App. pp.3d 3d 957 957

34

Unzueta v. Oc Ocean ean View View Scho School ol Dist Dist..  1992 6 Cal.A Cal.App. pp.4t 4th h 1689 1689

28

Vacc Va cco o In Indu dust stri ries es,, Inc. v. Van Van Den Den Berg Berg  1992 1992 5 Cal. Cal.Ap App. p.4t 4th h 34

17

Varia Va rian n Medica Medicall Syst System ems, s, Inc Inc. v. Delf Delfin ino o   2005 2005 35 Cal. Cal.4t 4th h 180 180

22

Warn Wa rner er and Co. v. Solbe olberg rg  N. N.D D. 2001 2001 634 634 N.W.2 N.W.2d d

25

65

[2001 N.D. N.D. 156]

Whyt Wh ytee v. Schl Schlag agee Lock Lock Co.  2002 1 1 Cal.A Cal.App.4t pp.4th h 14 1443 43

30

Wrig Wr ight ht v. Ryde Ryderr  1868 1868 36 Cal al.. 342 342

15

 X

 

TABLE TA BLE OF AUTHO AUTHORIT RITIES IES Cont Contin inue ued d

Statutes

Page

Business Busi ness and Prof Profes essi sion onss Co Code de se sect ctio ions ns:: 16600 16601 16602 16602.5

passim 1 11 13 15 17

13, 13, IS I, 11,   3

Civil Civ il Cod Codee se sect ctio ions ns:: 1673 1674 1675 3426 et seq.

14-16 IS  5

27

3426.1 3426.2 3426.3 3426.4

3 27 27 27

Labor Lab or Co Code de se sect ctio ions ns:: 432.5 2802 2804 2922

2 33

2 88-10 10,, 32 32-3 -33, 3, 35 2 8 9 33

2

Pena Pe nall Co Code de sec secti tion: on: 499c

27

Other Authorit Authorities ies

I Anno Annota tate ted d Civi Civill Co Code de 18 1872 72

15,   6

  ontract ontract Law s   lear lear as Mud The De Demi mise seo the Not to   ompete  Oklahoma  2002 55 Ok Okla la.. L. L.Re Rev. v. 491

x

ove ovenan nantt 2

 

TABLE TABL E OF AUTHO AUTHORIT RITIES IES Conti Continue nued d

Other Authori Authoritie tiess

Page

Infrastru tructu cture re o f Hi High gh Techno Technolog logyy Industr Industrial ial Distri Districts cts:: Gilson, The Legal Infras Silicon Sili con Vall Valley ey Route Route 128, and Cove Covena nant ntss Not Not   1999) 1999) 74 N.Y.U. L.Re .Rey. 575

to

Compete

 

Hays, Unfair Compet Competiti ition on - Anoth Another er Decad Decadee   1963) 5 Ca Cal. l. L. L.Re Rey. y. 5

28

M.C.L M.C .L.. 44 445. 5.76 761 1

 4

M.C. M. C.L. L. 445 445.77 .774a 4a

 4

Coven enant antss Not to Compete   the Massachu Massachusett settss Hi Tech O Malley, Cov In Indu dust stry ry:: Assess Assessing ing the   ee for a Legis Legislat lative ive Soluti Solution on   19 1999 99)) 79 B.U. L.Rey. 1215

 

Rando Ra ndom m Hou House se Un Unab abri ridg dged ed Di Dict ctio iona nary ry 2n 2nd d ed. 19 1993 93))

 

 

ISSU ISSUES ES AND AND ANSWE ANSWERS RS

Q

To what what exte extent nt does Busi Busine ness ss and Profe rofess ssio ion ns Code Code section sect ion 166 166

prohib prohibit it employ employee ee noncom noncompeti petitio tion n

agreements?  

Sect Se ctio ion n 16 166 600 pr proh ohib ibit itss all res estr trai aint ntss on an em emplo ployee yee s righ rightt

to en enga gage ge in his or he herr tr trad adee or pr pro ofessi ession on,, exc xcep eptt th thos osee res estr trai ain nts sp spec ecif ifie ied d in se sect ctio ions ns 16601 th thro roug ugh h 166 6602 02..5, invo involv lvin ing g th thee sa sale le   an interest in a busi bu sine ness ss,, a co conc ncer ern n not pr pres esen entt in this case. Sec ecti tio on 16600 does not, empl em ploy oyer er cont conten ends ds here here,, perm permit it any re rest stra rain intt sh shor ortt

 

 

the

enti entire rely ly pre preclu cludin ding g the

empl em ploy oyee ee from en enga gagi ging ng in his or he herr tr trad adee or pr prof ofes essi sion on.. Rein Reinve vent ntin ing g se sect ctio ion n 166 660 00, as the the em empl ploy oyer er ur urg ges here, is a ta task sk for th thee Le Legi gisl slat atur ure, e, no nott the cour courts ts.. More Mo reov over er,, im impl plyi ying ng an op open en-e -end nded ed exce except ptio ion n to se sect ctio ion n 16 1660 600, 0, ev even en for for nar narrow row re rest stra rain ints ts,, wo woul uld d be bad bad pu publ blic ic po poli licy cy..

It

woul wo uld d requ requir iree a

judicial exam examinat ination ion   eac each restraint on a cas asee by case basis. The spe peccte terr  

li liti tiga gati tion on wo woul uld d pu putt a chill hill on em empl ploy oyee ee mo mobi bili lity ty an and d de defe feat at th thee

Legislat Legi slature ure s go goal al

 

ensur urin ing g th that at no Ca Cali liffor orni nian an be bo boun und d to a sin ingl glee

employer,   the employer yer attempte ted d to bi bind nd the emplo loye yeee here. In the long run, the the Le Legi gisl slat atur uree s po poli licy cy de deci cission ion - pla placi cing ng th thee em empl ploy oyee ee s righ rightt to ga gainf inful ul em empl ploy oyme ment nt ahea ahead d

the the emp employ loyer er s desi desire re to sq sque uelc lch h co comp mpet etit itio ion n

 

- has benefitted both empl ploy oyeees and em empl ploy oyer erss and has fueled the unprec unp recede edente nted d growt growth h

 

California Calif ornia s eco econom nomy. y.

There is also no need need to cont contor ortt the the pl plai ain n lang langua uage ge   se sect ctio ion n 16 1660 600 0 by implyin ying a tr trad adee secr secret etss ex exce cept ptio ion. n. Cal Califo iforn rnia ia s Un Unif ifor orm m Tr Trad adee Secre crets Act alre alread ady y pr prov ovid ides es am ampl plee re reme medi dies es for an em empl ploy oyer er ag aggr grie ieve ved d by a form former er em emplo ployee yee s mi misu suse se

 

trade tra de secr secrets ets..  

 

Q.

Does a contract provision releasing   ny an and d all all

cl claims aims

encomp enc ompass ass nonwa nonwaiva ivable ble statut statutory ory prote protect ctio ions ns such such as the employee empl oyee indemnity indemnity protect protection ion   Lab Labor or Code Code sectio sec tion n 2802? 2802?

A.

A n employee s release o f  any any and all all clai claims ms plai plainl nly y do does es

encom enc ompas passs a wa waiv iver er o f an em emplo ployee yee s right right to em empl ploy oyme ment nt-r -rel elat ated ed inde indemn mnif ific icat atio ion n un unde derr sectio ction n 2802.

An Any y and all all doe oess no nott mean ean some some

butt no bu nott al all. l. True, rue, La Labo borr Cod odee sec ecti tion onss 432.5 and 28 2804 04 wou ould ld vo void id su such ch a release, i f such a release were executed. Bu Butt in this case, the ques uestio tion is no nott whether whe ther such such a prov provis isio ion n wo would uld be ef effe fect ctiv ivee to actu actual ally ly rele releas asee suc such h clai claims ms,, be beca caus usee the the employ ployeee ref efus used ed to waive aive his nonnon-wa waiva ivabl blee rights. ts. Th Thee queest qu stio ion n here is wheth hether er it is a wrongful act for an employ oyeer to insi nsist that hat a depa depart rting ing em empl ploy oyee ee sign sign a wa waiv iver er o f no nonw nwai aiva vabl blee clai claim ms in orde orderr for the the empl em ploy oyee ee to ob obta tain in work ork with ith an anot othe herr em empl ploy oyeer. Since ince the the em empl ploy oyer er s prev previo ious us cond conduc uctt had had plac placed ed the the em empl ploy oyee ee un unde derr a clou cloud d o f potential li liab abil ilit ity, y, and sinc sincee the the em empl ploy oyee ee ob obje ject cted ed to sign signin ing g the the rele releas asee o f his his righ rightt to em empl ploy oyer er inde indemn mnif ific icat atio ion n for that that liab liabil ilit ity, y, the the em emplo ployer yer s insi insist sten ence ce that that he do so was a wrongful act for purposes o f the the em emplo ploye yeee s ca caus usee o f action fo forr in inte terf rfer eren ence ce with pro prospe specti ctive ve eco econom nomic ic adva advant ntag age. e.

2

 

STATEMENT O F T H E CASE

A.

Factual Backgrouud.

1.

Andersen Ander sen req requir uires es Edwards t o sign a   No Nonn-Com Compet petee Agr Agreem eement ent as a co cond ndit itio ion n of employm emp loyment ent in Andersen s accounting practi pra ctice ce group group..

In Ja Janu nuar ary y 1997, pla plaint intif ifff Ra Raym ymon ond d Ed Edwa ward rdss II, a cert certif ifie ied d pu publ blic ic acco accoun untan tant, t, acce accept pted ed an of offe ferr o f em empl ploy oyme ment nt wit with h Ar Arthu thurr An Ande ders rsen en LL LLP. P.  

M

1249-1250,

 

4,6.)

As a cond condit itio ion n o f em empl ploy oyme ment nt,, An Ander derse sen n re requi quire red d tha thatt Edw Edward ardss sign sign a Non Non-Co -Compe mpetete-Agr Agreem eement ent that that im impos posed ed num numer erous ous re rest stra rain ints ts on his his fu futu ture re ri right ght to pra practi ctice ce his his pr prof ofes essi sion on,, incl includ udin ing: g: •

I f yo you u lea leave the the Firm, for eigh eighte teen en mo mont nths hs af afte terr relea elease se or

resi resign gnat atio ion, n, yo you u agre agreee not to per perfo form rm prof profes essi sion onal al serv servic ices es o f the the type you pr prov oviided ded for any clie client nt on wh whic ich h you wor orke ked d duri du ring ng the the eigh eighte teen en mo mont nths hs pri prior or to rele releas asee or resi resign gnat atio ion. n. This Th is does no nott proh prohib ibit it yo you u from acce accept ptin ing g em empl ploy oym ment ent with ith a client.



F o r twelve months after you leave t he Firm, you agree not to solici sol icitt to per perfor form m pro profe fessi ssiona onall ser servic vices es o f the the typ ypee yo you u prov provid ided ed)) for any clie client nt o f the the of offfice ice s) to wh whic ich h you we re as assi sign gned ed du duri ring ng the the eigh eighte teen en mo mont nths hs pre preced ceding ing re rele leas asee or resignation.



You agree not to solicit away from the Firm any o f its prof profes essi sion onal al pers person onne nell for for eight eightee een n mo month nthss af after ter rele releas asee or resignation.

  7 M 1250,   8; 1275, Exh xh.. 3.)

3

 

Nonn-Co Comp mpet etee Ag Agre reem emen entt also also cont contai aine ned d a trad tradee secr secret etss clau clause se:: Th e No •

Upon your release or resignation, you agree not to remove, re reta tain in,, cop copy or util utiliz izee any conf confid iden enti tial al,, pr priv ivil ileg eged ed or propr propriet ietar ary y inf inform ormati ation on or pr prop oper erty ty o f the Fi Firm rm or its clie lients nts. Disc Di scov over erie ies, s, inve invent ntio ions ns or tech techni niqu ques es de deve velo lope ped d in the the cour course se o f yo your ur em empl ploy oyme ment nt belo belong ng to this Fi Firrm and and will ill be disc disclo lose sed d and as assi sign gned ed to it.

  7AA 7AA 1275, Exh. 3.)

2.

A n d e r s e n sells its a c c o unt i ng p r a c t i c e group to HS HSBC BC..

Edwa Ed ward rdss ros osee to the the posi positi tion on o f se seni nior or ma mana nage gerr in And Ander ersen sen s Pr Priv ivat atee Cl Clie ient nt Se Serv rvic ices es pra practic cticee group. He was respo pons nsib ible le for inc nco ome, gift gift an and d es esta tate te ta tax x plan planni ning ng and co com mplia plianc ncee se serv rvic ices es for high inco income me and high high net net worth wor th in indiv divid idua uals ls,, trus trusts ts,, clos closel ely y held enti entiti ties es,, and pr priva ivate te fo foun unda dati tion ons. s.   7AA 7AA 12 1250 50,,   7.) Edwa Ed ward rdss was on a fast trac track k to beco becom ming ing an An Ande ders rsen en part partne nerr.   7AA 7AA 12 1252 52,,  

12--13.) How 12 owev ever er,, in Ma Marc rch h 20 200 02, An Ande ders rsen en was indi indict cted ed

fo forr obst obstruc ruction tion o f jus justic ticee in conn connec ecti tion on wi with th the the inve invest stig igat atio ion n of nron Corp Co rpor orat atio ion n by the the Secu curritie itiess an and d Ex Exch chan ange ge Co Com mmiss missio ion. n. 7 AA 1252 1253,   14.) In June, Andersen was found guilty. 7   1253,   16.) Imme Im medi diat atel ely, y, An Ande ders rsen en anno announ unce ced d it wo woul uld d ceas ceasee prac practic ticing ing pu publ blic ic ac acco coun unti ting ng in the the Un Unit ited ed Stat tates es..

7A 7AA A 1253,

 

16-17.)

Mean Me anwh whil ile, e, And Anders ersen en began se selli lling ng o f f portions o f its acc account ounting ing prac practi tice ce grou groups ps to co com mpe peti tito torrs. 7AA 7AA 125 254 4,   18b.) In May 20 2002 02,, Ande An ders rsen en info inform rmed ed Ed Edwa ward rdss and oth other er em empl ploy oyee eess tha thatt an HS HSBC BC subs subsid idia iary ry   WT WTA AS) wo woul uld d pu purc rcha hase se the the Pr Priva ivate te Cli Client ent Se Serv rvic ices es pract practice ice grou group p wh wher eree Edw Ed war ards ds worke ked d.

7A 7AA A 1254,

 

20.) 20 .) Al Alth thou ough gh An Ande ders rsen en was getting ing ou outt

4

 

the bu busi sine ness ss,, it neve nevert rthe hele less ss advi advise sed d its em empl ploy oyee eess they hey wou ould ld be held held to o f the theirr Non-Compe thei Non-Compete te Agr Agreem eement. ent. (7A (7AA A 12 1256 56,,   25; 1289, Exh. 17.)

3.

As a condi t ion o f app approv roving ing his emp employ loymen mentt at E d wa wa rd rd s with HS HSBC BC,, And Anders ersen en in insi sist stss t h at

re rele leas asee An Ande ders rsen en fr from om any an d all employment-related employment-rela ted indemnif indemnification ication cla claims ims..

As a co cond ndit itio ion n o f the the HS HSBC BC tr tran ansa sact ction ion clos closin ing, g, Ande Anders rsen en requi required red that that all An Ande ders rsen en ma mana nage gers rs,, incl includ udin ing g Ed Edwa ward rds, s, ex exec ecut utee a Te Term rmin inat atio ion n of NonNo n-Com Compet petee Ag Agre reem emen entt ( T TON ONC C ) in or orde derr to ob obta tain in em empl ploy oyme ment nt wi with th HSB SBC. C. (7AA (7AA 1260,   34.) The TO TONC NC,, cr craf afte ted d by An Ande ders rsen en,, wo would uld ha have ve requ requir iree Edw Edwar ards, ds, amon am ong g oth other er thin things gs,, to to:: •

Release Andersen from any and all claims, including  cl  claims that in any way arise from or out of, are based upon or re rela late te to [E [Edw dwar ards ds ] em empl ploy oyme ment nt by, as asso soci ciat atio ion n wi with th or compensation compensa tion fro from m Anders Andersen; en;



Preserve confidential information and trade secrets indefinitely;



Refrain from disparaging Ander sen indefinitely; and



Cooperate with Andersen in connection wit h any investigation of, or liti litiga gati tion on agai agains nst, t, An Ande ders rsen en wit withou houtt co comp mpen ensa sati tion on..

Signing ning the the TO TON NC was a co cond ndit itio ion n o f And Anders ersen en ag agre reei eing ng to Edwa Ed ward rdss em empl ploy oym men entt wi with th HS HSBC BC an and d to re rele leas asee hi him m fro rom m th thee 19 1997 97 Non Non Comp Co mpet etee Agr Agreem eement ent..

(7AA 138 1384-1 4-1388 388,, Exh Exh.. 42 1

In the br broa oade dest st po poss ssib ible le term terms, s, su subdi bdivis vision ion  I d o f the TONe req equ uir ired ed that Ed Edwa ward rdss re rele leas asee an and d di disc scha harg rgee An Ander dersen sen from an any y and all (continued...)  

 

 n

other oth er wo word rds, s, An Ande ders rsen en was sell sellin ing g Ed Edwa ward rdss to HS HSBC BC.. 2

 f

Edwa Ed ward rdss didn t go along, he could not work for HSBC, his right to wo work rk for any othe otherr em empl ploy oyer er in the ind ndus ustr try y wo woul uld d be se seve vere rely ly res estr tric icte ted, d, an and d ifhe did find wo work rk else elsew whe herre in the industry, he and his po pote tent ntia iall new em empl ploy oyer er woul wo uld d fa face ce the the thre threat at o f lit litiga igatio tion n ove overr the the va vali lidi dity ty o f the nonc noncompe ompetiti tition on agreement. As Edwards put it at the time, You mean to tell me that hat I have to have have Mas Master ter And Anders ersen en s perm permis issi sion on to leav leavee th thee pla planta ntatio tion? n? (7AA (7AA 12 1257 57,,

 

27.)

(   continued) ac acti tion ons, s, cau causes ses o f actio action, n, clai claims ms,, dema demand nds, s, de debt bts, s, da dama mage ges, s, cost costs, s, lo loss sses es,, penalt pen alties ies,, attor attorneys neys fe fees es,, obl obliga igatio tions, ns, judgm judgments, ents, expe expenses nses,, comp compensa ensation tion or lia liabil biliti ities es o f any na natu turre wh what atso soev ever er,, in law or equ quiity ty,, wh whet ethe herr kn know own n or unk nkno now wn, co cont ntin inge gent nt or othe otherrwise ise, that that Em Empl ploy oyee ee no now w ha has, s, may ha have ve ev ever er had in the past or may have in th thee future against any o f the Re Relea lease sed d Pa Part rtie iess any act, act, om omis issi sion on,, tr tran ansa sact ction ion,, occ occur urren rence, ce, con conduc duct, t, by reason o f any ci circ rcum umst stan ance ce,, cond condit itio ion, n, harm harm,, ma matt tter er,, caus causee or thi thing ng tha thatt has has occu occurr rred ed from the the begi beginnin nning g o f ti time me up to and incl includ udin ing g the the da date te he here reof of,, in incl clud udin ing, g, witho hou ut limita itation, claims th thaat in any way arise from or ou outt of, are based upo pon n or re rela late te to Em Emplo ployee yee s em empl ploy oyme ment nt by, as asso soci ciat atio ion n wi with th or comp compen ensa sati tion on fro rom m [A [And nder erse sen] n] or any any o f its affi affilia liate ted d firm firms, s, ex exce cept pt for cl clai aim ms (i) ar aris isin ing g out o f [A [Ande nders rsen en s] ob obli liga gati tion onss se sett fo fort rth h in th this is Ag Agre reem emen entt or (ii) for any accr accrue ued d and unpai paid salary or ot othe herr em empl ploy oyee ee be bene neffit or comp compen ensa sati tion on ow owin ing g to Em Empl ploy oyee ee as o f the the da date te her hereo eof. f. (7A (7AA A 1385, Exh.42.) 2

Ander And ersen sen s pre presid sident ent and and

  hief oper operatin ating g

offic officer er adm admitt itted ed   s much.

(6AA 110 105 5-1106 06,, 11 1119 19 [ I be beli liev evee that that ce cert rtai ain n bu buye yers rs mi might ght be wil illi lin ng, mightt perc migh percei eive ve som somee val value ue to thos thosee (m (mana anager gers) s) ]. ].)) 6

 

Edwa Ed ward rdss obje object ctss to the prop propos osed ed re rele leas asee and and

 

re refu fuse sess to aban abando don n his st stat atut utor ory y empl employ oyme ment nt rights

Edwar Edw ards ds ob obje ject cted ed to An Ande ders rsen en,, in wr writ itin ing, g, rega regard rdin ing g th thee TO TON NC. In part partic icul ular ar,, he ob obje ject cted ed that that un unde derr the the TONC his st stat atut utor ory y righ rightt to inde indemn mnif ific icat atio ion n from An Ande ders rsen en wo woul uld d be viti vitiat ated ed:: charged or sued

 

[S [S]h ]hou ould ld a ma mana nage gerr be

for his role in wh what atev ever er cau ausse o f acti action on mi migh ghtt be

brou brough ghtt by the US Go Gove vern rnme ment nt or a for orm mer cl cliien ent, t, th thee ma mana nage gerr wo woul uld d not be ent entitl itled ed to any any ri righ ghts ts or comp compen ensa sati tion/ on/ind indem emnif nific icat ation ion from from And Anders ersen. en. (7AA (7AA 13 1316 16-1 -131 317, 7, Exh xh.. 24; 12 1263 63--12 1264 64,,   44 44;; 126 265 5,   51; 8AA 8AA 1509, Exh. 84.) 4.) An Ande ders rsen en did no nott respo espon nd to Ed Edwa ward rdss obj bjeectio ction n. (7AA 1264,   45.) At the the sam amee time, Edw dwar ards ds le lear arne ned d th that at th thee Int nter erna nall Re Reve venu nuee Serv rviice ha had d disa disall llow owed ed ce cerrta tain in tax tax she helt lter erss that that And nder erse sen n had sold to its cli lieents ts,, includ inc ludin ing g two o f Ed Edwa ward rds, s, cl clie ient nts. s. Ed Edwa ward rdss an anti tici cipa pate ted d hi hiss cl clie ient ntss wo woul uld d sue, and tha that he could be named as a defenda endant nt al alon ong g with And ndeersen. en. (7 AA 1258,   30 30..) Ed Edw war ards ds ag agai ain n ex expr pres esse sed d to And nder erse sen n his in incr crea ease sed d co conc ncer ern n ab abou outt the the TO TONC NC and its wa waiv iver er o f emp employ loyee ee inde indemnif mnificat ication ion rig rights hts,, butt agai bu again n An Ande ders rsen en did no nott re resp spon ond. d.  

5

1258-1259,

 

31.)

Anders And ersen en terminate terminatess Edwards employmen employmentt and HSBC HSBC withd withdra raws ws its empl employ oyme ment nt of offe ferr

Edwa Ed ward rdss sign signed ed HSBC s cond conditi itiona onall em empl ploym oyment ent of offe ferr but refu refuse sed d to sign the TONC. (7AA 1264,   46 46;; 126 265, 5,   50.) As a con onssequ queenc ncee, HSBC HS BC wi with thdr drew ew its of offe ferr o f em empl ploy oyme ment nt.. (7    

1264,   48 48;; 12 1265 65-1 -126 266, 6,

52; 8AA 1512, Exh. 85.) Edwards was ou outt o f jo b and sha hack ckle led d wit ith ha

non-compet non-c ompetition ition agre agreement ement.. 7

 

B.

F i n d i n g No A c t i o n a b l e M i s c o n d u c t B y A n d e r s e n The Tria Triall Cour Courtt Di Dism smis isse sess Edwa Edward rdss Clai Claim m For Intentio Inte ntional nal Interfe Interferenc rencee With With Prospectiv Prospectivee Economi Econ omicc Advantag Advantage. e.

Edwards Edwa rds sued ued An Ande ders rsen en for inte intent ntio iona nall lly y inte interf rfer erin ing g with his his prospective eco econom nomic ic ad adva vanta ntage ge o f emp employ loymen mentt wit with h HS HSBC. BC.3 (2 (2AA AA 38 384. 4.)) On e element o f suc uch h a caus ause o f acti action on is that that the the inte interf rfer eren ence ce be

proscrib pros cribed ed by an inde indepe pend nden entl tly y acti action onab able le wr wron ongf gful ul act, such such as a vio violat lation ion constitut titutiona ional, l, stat statut utor ory, y, re regu gula lato tory ry,, or com commo mon n law law.  Reeves o f cons (2004)

 

v

Hanlon

Cal. Ca l.4t 4th h 1140, 11 114 45. 5.)) Ed Edwa ward rdss cont conten ends ds that that And Anders ersen en s No Non n

Compet Com petee Agr Agreem eement ent viol violat ated ed Bus Busin ines esss and and Pr Prof ofes essi sion onss Cod Codee se sect ctio ion n 1660 16600 0 s po poli licy cy agai agains nstt re rest stra rain ints ts on em empl ploy oyme ment nt,, and and its its re rele leas asee o f  an any y an and d al alll claim laimss viol violaated ted La Labo borr Co Code de sec ecti tion on 280 2804 4 s po poli licy cy ag agaainst inst waiver o f an em emplo ployee yee s righ rightt to em empl ploy oyer er inde indemn mnif ific icat atio ion n und under er La Labo borr Code Co de se sect ctio ion n 28 2802 02..  lIAA 2103-2108.) Whe hen n the case was called for trial, the cour courtt hear heard d argu argum ment ent from the the pa part rtie iess but took took no evide idence.   l AA 22 2224 24.) .) Inste nstead ad,, the the co cour urtt gra granted nted judg judgme ment nt to And nder erse sen n ba bassed on the the co cour urtt s dete determ rmin inat atio ion n tha that, as a matte atterr theree wa wass no inde indepe pend nden entt wr wron ongf gful ul act by And nder erse sen. n.  IIAA 2233 o f law, ther 2234 22 34)) Th Thee co cour urtt de deci cide ded d the the NonNon-Co Comp mpet etee Ag Agre reem emen entt fell wi with thin in a  na narr rrow ow rest restra rain intt ex exce cept ptio ion n to se sect ctio ion n 16600 an and d the the TO TONC NC did did no nott relea elease se Edwar Edw ards ds inde indemn mnit ity y righ rights ts un unde derr se sect ctio ion n 28 2802 02.. (RT 17 1733-18 182. 2.))

)

Edwards asserted other claims against An der se n and HSB C,

incl includ udin ing g ra race ce dis discr crimi iminat nation ion (h (hee is Afr African ican-Am -Ameri erican) can)..   A A 398-399 52.) None o f those claims is in issue at this time. 8

 

 

Thee Cour Th Courtt

o

ppea pp eall Reve Revers rses es The Judg Judgme ment nt  o r  

Triial On The Tr The Meri Merits ts O f Edwards Intentional Interfere Inter ference nce Clai Claim m

Edwards Edw ards ap appe peal aled ed th thee ju judg dgme ment nt..   IlAA 2238.) The Co Cour urtt o f Ap Appe peal al re reve verrse sed d for a tria triall on th thee merits its o f Edwards inte intent ntio iona nall in inte terf rfer eren ence ce cla laim im.. (S (Sli lip p Opin inio ion n, p. 44 44.) .) The Co Cour urtt foun found d Ande An derse rsen n ha had d co comm mmit itte ted d tw two o wr wron ongf gful ul acts in vi viol olat atio ion n o f public pol policy icy.. Firs First, t, th thee Co Cou urt he held ld th that at An Ande ders rsen en vi viol olat ated ed sect sectio ion n 16600 by requir req uiring ing cons consid ider erat atio ion n fr from om Ed Edwa ward rdss for ter termi mina natio tion n o f the Non Non-Co -Compet mpetee Agre Ag reem emen ent. t. Th Thee ag agre reem emen entt wo woul uld d ha have ve for sp spec ecif ifie ied d pe peri riod odss proh prohib ibit ited ed Edwa Ed ward rdss from rom pe perf rfor ormi ming ng wo work rk for cl clie ient ntss o f And Anders ersen en s Lo Loss An Ange gele less offi office ce and and clie client ntss o f any An Ande ders rsen en of offi fice ce for whom whom he ha had d pe perf rfor orme med d wo work rk,, viol violat ated ed se sect ctio ion n 16600. Th That at pr proh ohib ibit itio ion n ap appl plie ied d ev even en i f th thee clie client nt appr approa oach ched ed Ed Edwa ward rdss an and d re requ ques este ted d hi hiss se serv rvic ices es.. (S (Sli lip p Op Opin inio ion, n, pp. 13-14 14..) Whil Wh ilee the the no nonc ncom ompe peti titi tion on cl clau ause se was circ circum umsc scri ribe bed d in time time an and d sco scope pe,, it none no neth thel eles esss re rest stri rict cted ed Ed Edwar wards ds abil abilit ity y to pr prac acti tice ce hi hiss prof profes essi sion on an and d was a wron wr ongf gful ul act act in vi viol olat atio ion n o f pu publ blic ic po poli licy cy ex expr pres esse sed d in sect sectio ion n 16600. (Sli (Slip p Opin Op inio ion, n, pp pp.. 22 22-2 -23. 3.)) Seco Se con nd, th thee Co Cour urtt he held ld th that at An Ande ders rsen en vi viol olat ated ed Lab Labor or Co Code de sect sectio ions ns 2802 and 2804 by in insi sist stin ing g th that at Ed Edwa ward rdss re rele leas asee any an and d all all claim laimss agai agains nstt An Ande ders rsen en as a co cond ndit itio ion n o f hi hiss ob obtai tainin ning g emp employ loymen mentt wit with h HS HSBC BC..   An Any y and all all cl clai aims ms ne nece cess ssar aril ily y en enco comp mpas asse sess an any y clai claim m Ed Edwa ward rdss mi migh ghtt ha have ve agai again nst An Ande ders rsen en fo forr in inde demn mnif ific icat atio ion n aris arisin ing g from from lo loss ss in incu curr rred ed   a direct dir ect con conseq sequen uence ce o f the di disch schar arge ge o f his du duti ties es as an An Ande ders rsen en employee. That hat violated the La Lab bor Code. (Slip Opin iniion, pp. 28-32 8-32.) .) Wheth ether or not th thee relea lease wou ould ld be en enfo forc rcea eabl blee in th that at re rega gard rd i f it ha had d be been en sig ign ned, req requiri uiring ng Edwar ard ds to si sign gn it was wr wron ongf gful ul.. (Sli (Slip p Op Opin inio ion, n, pp. 32-33.) 9

 

LEG

 n e

L DIS

element o f Edwards cause

U USSIO SSION N

of

ac acti tion on for Anders Andersen en s inter interfe feren rence ce

with his his prospe prospecti ctive ve ec econ onom omic ic ad adva vant ntag agee is th that at th thee in inte terf rfer eren ence ce  e prosc proscri ribed bed by an inde indepe pend nden entl tly y wron wrongf gful ul act, su such ch as a vi viol olat atio ion n of constit cons tituti utional onal,, stat statut utor ory, y, re regu gula lato tory ry,, or common common la law. w.  Reeves v Hanlon supra 33 Cal Cal.4 .4th th at p. 1145. Edwa Ed ward rdss cont conten ends ds that that Anders Andersen en s ef effo fort rtss to in inte terf rfer eree with with hi hiss st stat atut utor ory y ri righ ghts ts to enga engage ge in his his prof profes essi sion on unde underr Busi Busine ness ss an and d Pr Prof ofes essi sion onss Codee sect Cod sectio ion n 16600 600 and his his righ rightt to empl employ oyer er in inde demn mnif ific icat atio ion n for emplo em ployme yment nt-r -rela elate ted d ex expe pens nses es under under Labor Labor Code Code se sect ctio ion n 28 2802 02 each each consti con stitut tutee th thee re requ quis isit itee inde indepe pend ndent ent wron wrongf gful ul ac act. t. In esse essenc nce, e, Ande Anders rsen en was was tryi trying ng si simu mult ltan aneo eous usly ly to se sell ll Edwar Edwards ds to a ne w

empl em ploy oyer er,, to impe impede de its cl clie ient ntss from rom se seek ekin ing g out out Edwa Edward rdss se serv rvic ices es in

the futu future re

i f he

did no t go along w i th the sale, and to rid i t s e l f o f an any y

resp respon onsi sibi bili lity ty to Edwa Edward rdss for for its own own misc miscon ondu duct ct whil whilee

 

employed

Edwa Ed ward rds. s. Cali Califo forn rnia ia la law w just justif ifia iabl bly y cond condem emns ns Anders Andersen en s cond conduc uct. t.

1

 

I

BUSINESS

AND AN D PROF PROFES ESSI SION ONS S CODE CODE SECT SECTIO ION N 166 166

PROHIB PRO HIBITS ITS AN EMPL EMPLOY OYER ER FROM FROM LIMI LIMITI TING NG   EMPLOYEE S

ABIL AB ILIT ITY Y TO ENGA ENGAGE GE IN

EMPLOYMENT ST

TUTORY

A

N

OTHER

IN T HE SAME TRADE; N O N ON ON -

EXCE EX CEPT PTIO IONS NS SHOU SHOULD LD BE IMPLIE IMPLIED D

Sectio Section n 166 166

Is Unam Unambi bigu guou ous: s:

 

Bars Ba rs All All

Rest Re stra rain ints ts On Empl Employ oyee ee Mobi Mobili lity ty Othe Otherr Than Than Those Tho se Expr Expres essl sly y Allo Allowe wed d By Se Sect ctio ions ns 166 166 1166 2 5

1

Thee plai Th ain n te term rmss

of

the statut statutee

When Wh en inte interp rpre reti ting ng a sta statute tute,, cour courts ts foll follow ow the the Legisl Legislatu ature re s inte intent nt as exhibited by the the plai plain n mean meanin ing g o f the the actu actual al word wordss o f the the law. aw.  Stephensv ounty

a

ul ar e

  2006 2006)) 38 Cal. Cal.4t 4th h 793 801.

Busi Bu sine ness ss and and Pr Prof ofes essi sion onss Code Code se sect ctio ion n 1660 16600 0 prov provid ides es in plai plain n and and simple sim ple terms terms:: Except Exce pt as prov provid ided ed in this his chapt hapteer, ever every y cont contra ract ct by which which anyo anyone ne is restr estrai aine ned d from enga engagi ging ng in a lawf lawful ul prof profes essi sion on,, trade, or business o f any any kind kind  s to that that exte extent nt void void.. Thee stat Th statut utee coul could d no nott have have more more plai plainl nly y expr expres esse sed d the the Legi Legisl slat atur uree s intent: An em emplo ployer yer cann cannot ot by cont contra ract ct rest restra rain in a fo form rmer er empl employ oyee ee fr from om enga engagi ging ng in his his o r h er er pro profes fessi sion, on, trade trade or busine business. ss.

 

 

2.

The Th e statut statute e appl applie iess to all restraints on t h e

ri righ ghtt to enga engage ge in a prof profes essi sion on,, t ra ra d de e or busi bu sine ness ss,, not not,, as And Anders ersen en argu argues es,, just to flat-out prohibitions of suc such h pra practic ctice. e.

Ande An ders rsen en ur urge gess this Co Cour urtt to in inte terrpr pret et se sect ctio ion n 166 6600 00 as voiding nonco no ncomp mpeti etitio tion n agre agreem emen ents ts on only ly to the the exte extent nt th they ey enti entire rely ly pr proh ohib ibit it on onee from pu purs rsui uing ng his or her her vocation. (OB 14 17, th. 4 ( The The statute co cove verrs post-employm post-e mployment ent cov covena enants nts that prohibit enga engagi ging ng in a pr prof ofes essi sion on (temporary as well ell as pe perrman anen ent) t) no nott limits on en enga gagi ging ng in a pr prof ofes essi sion on (l (lef eftt to com common mon law law deve develop lopme ment nt)) (o (ori rigi gina nall em emph phas asis is)] )].) .)   utthe the statu statute te do does es no nott say say pro prohib hibit. it.

Restra Res train in do does es no nott me mean an pr proh ohib ibit it..

says rest restrrai ain. n. me mean anss to lim limit or hamper.

(Ran (R ando dom m Hou ouse se Unab abrridge idged d Die iet. t. (2n 2nd d ed. 19 1993 93)) p. 16 164 42. 2.)) The st stat atut utee thus voids vo ids con contra tracts cts that that lim limit it or hamp hamper er,, no nott just th thos osee th that at prohibit, engaging in one s tra trade de or pr prof ofes essi sion on.. As this this Co Cour urtt lon ong g ago co conc nclu lude ded, d, an and d as su subs bseq eque uent nt ca case sess co cont ntin inue ue to hold: ld:

Th Thee statut utee makes no exc except ptio ion n in favor o f cont contra ract ctss on only ly in

partial par tial rest restrain raintt o f trade. 289; 89; Morris Morris

 

Chamberlain

 

Augustine (1916) 17 172 2 Cal al.. 285, 285,

Harris (19 1954 54)) 127 Ca Cal. l.Ap App. p.2d 2d 47 476, 6, 478 478 [sam [same] e];; Golden

St Stat atee Linen Se Serv rvic ice, e, Inc.

 

Vidalin (1 (197 977) 7) 69 Ca Cal. l.Ap App. p.3d 3d 1 12 [section

1660 16 600 0 ba bars rs li limi mite ted d terr territ itor oria iall restra restraint intss on em emplo ploym ymen ent]; t]; Hill Medica Medicall Corp. v

Wycoff 2001 86 Ca Cal. l.Ap App. p.4t 4th h 89 895, 5, 90 9000-90 901 1 [lim [limit ited ed terr territ itor oria iall

restrictions on em empl ploy oyme ment nt,, vo void id;; Cal Califo iforni rniaa co codi difi fied ed its its pub public lic po poli licy cy an and d reje reject cted ed the the co com mmo mon n la law w ru rule le o f re reaso asonab nablen lenes esss in 187 872, 2, upon upon th thee Snelli lling, ng, Inc. (N.D.Cal. enactment o f th thee Civi Civill Co Code de ]; Scott v Snelling   Sne

1990) 732 F.Supp pp.. 103 034, 4, 1042 [n [no o ru rule le o f reason exce exceptio ption n for lim limite ited d terr territ itor oria iall re rest stri rict ctio ions ns on comp compet etit itio ion; n; Cal Califo iforni rniaa co cour urts ts hav havee been been cl clea earr in 12

 

th thei eirr expr expres essi sion on tha that [sec section tion 16600] re repr pres esen ents ts a st strron ong g pu publ blic ic pol policy icy   the sta tate te whi which ch sh shou ould ld not be diluted by judi judici cial al fiat ; th thee st stat atut utee sho should uld be interpreted as broadly as it itss lan langua guage ge re reads ads ].) ].)

B

The Legi Legisl slat atur uree Has Spec Specif ifie ied d The The Only Only Excep Excepti tion onss To Sect ection ion 166

; Non None App Applies lies Here ere

Sectio Sec tion n 16 1660 600 0 begi begins ns by spe peccifYing ing th that at th thee only exc except eption ionss are thos thosee in foll follow owin ing g few sect sectio ions ns::  Except

as

provided in this ch chap apte terr .  

(Emphasis (Emp hasis add added. ed.)) The only nly exce except ptio ions ns sp spec ecif ifie ied d in the the ch chap apte terr co cont ntai aini ning ng se sect ctio ion n 1660 16 600 0 are are fo forr terr territ itor oria iall lly y lim limite ited d no nonc ncom ompe peti titi tion on agre agreem emen ents ts in co conj njun unct ctio ion n wit ith h an owner owner s the the sale ale  

 

a bu busi sine ness ss,, a par partner tner s di diss ssol olut utio ion n

or disa disass ssoc ocia iati tion on from a part partne ners rshi hip, p, or a mem member ber s di diss ssol olut utio ion n

termination

 

 r

in inte tere rest st in a limi limite ted d li liab abil ilit ity y co com mpany pany,, as long as th thee ne new w

owne ow nerr or re rema main inin ing g pa part rtne ners rs or mem embe bers rs con onti tinu nuee to carry on th thee sa same me busi bu sine ness ss.. (Bu Buss.

 

Pr Prof of.. Code Code,, §§ 166 6601 01,, 166 6602 02,, 16 1660 602. 2.5. 5.))

Thee Le Th Legi gisl slat atur uree spec specif ifie iess no othe otherr ex exccep epti tion on an and d th ther eref efor oree do does es no nott inte intend nd for ther theree to be ot othe herr ex exccep epti tion ons. s.

Th Thee ex expr pres essi sion on   some things in a

st statu atute te ne nece cess ssar arily ily me mean anss the the exc exclus lusion ion   othe otherr th thin ings gs not ex expr pres esse sed. d. Gikas v Zolin (1 (199 993) 3) 6 Ca1.4th 84 841 1, 85 852; 2; Gr Grup upee Development Development   Superi Sup erior or Court Court (1 (199 993) 3) 4 Ca1.4th 91 911, 1, 92

Legis Le gislat latur uree spec specif ified ied on onee cl clas asss limitations

 

 

o

v

[ From th thee fact th thaat th thee

spec pecia iall ta tax xes th thaat is no nott sub ubje ject ct to th thee

se sect ctio ion n 65 6599 995, 5, mo more reov over er,, we may reas reason onab ably ly in infe ferr tha thatt it

inte intend nded ed that that al alll othe otherr cl clas asse sess

 

spec specia iall ta taxe xess fall wi with thin in th thee st staatu tute te..

Expr Ex pres essi sio o uniu uniuss es estt exclu exclusi sio o alte alteri rius us ].)

The Le Legi gisl slat atur uree ha hass mo modi difi fied ed the the la law w as to nonc noncom ompe peti titi tion on agreem agr eement entss over ti time me..  Kaplan v Nalpak Corp Corp.. (1 (195 958) 8) 158 Ca Cal. l.Ap App. p.2d 2d  3

 

197 200-20 200-201 1 [no noti ting ng chang hangee in scope cope o f pennis sib sible le ter territ ritori orial al restri restrictions ctions under und er se secti ction on 16601 to mo more re ne near arly ly re refl flec ectt comm common on la law w]; Hill Hill Medical Medical Corp v Wycoff supra 86 Ca1.App.4th at pp pp.. 90 9022-90 903 3 [n [not otin ing g am amend endme ments nts

to se secti ction on 16601 that that tr traack deve develo lopm pmeent ntss in fo fonns nns o f busi busines nesss owners ownership]. hip]. I f the the Le Legi gisl slat atur uree wan ante ted d to change the plai plain n ten tenns ns o f se sect ctio ion n 16600 to add

additi add itiona onall exce except ptio ions ns iitt wo woul uld d have have do done ne SO.4 None o f the the stat statut utor ory y exce except ptio ions ns appl applie iess in th this is case case no norr do does es Ander And ersen sen cont conten end d on onee does.

C

Ther Theree Is And Should Be No Imp Impli lied ed Narr Narro ow Rest Re stra rain intt Excep Excepti tion on To Secti Sectiou ou 1660 16600 0

Legisl Leg islat ativ ivee histor history y demons demonstra trates tes that th thee Legi Le gisl slat ature ure re reje ject cted ed a narrow narrow re rest stra rain intt exce except ptio ion n when when it enac enacte ted d se sect ctio ion n 16600; the the ri rig ght to work work is para paramo moun untt

Section l66

predec deces essor sor stat statut utee fonner Civ Civil il Cod Codee se sect ctio ion n 16 1673 73 s pre

was enacted in 1872. At that time in the develo lop pment o f th thee co comm mmon on la law w co cour urts ts ha had d so som metim etimes es drifted away from thei theirr ce cent ntur urie iess-ol old d ban on all Leg egis isla latu ture ress kn know ow ho how w to stat statee ex exce cept ptio ions ns to a st stat atut utee like se sect ctio ion n 1660 16 600 0 wh when en th that at is thei theirr inte ntent nt.. In Mi Mich chig igan an fo forr exa examp mple le M M.C .C.L .L.. 44 445. 5.76 761 1 provid pro vides es tha thatt all all agre agreem emen ents ts by whi hich ch any pers person on pr prom omis ises es not to eng engag agee in any tr trad adee pro profe fess ssion ion or bu busi sine ness ss whet whether her rea reasona sonable ble or unr unrea easo sona nable ble part partia iall or gene genera rall limi limite ted d or un unli limi mite ted d ar aree decla declare red d to be ag agai ains nstt public public poli po licy cy an and d void oid. How owev ever er iin n 1985 the the Mic Michig higan an Le Legi gisl slat atur uree adde ded d M.C. M.C.L. L. sect se ctio ion n 44 445. 5.77 774a 4a wh whic ich h pr prov ovid ides es tha thatt emp employ loyer er an and d em empl ploy oyee ee ma may y en ente terr a noncompe nonc ompetiti tition on agr agreeme eement nt i f the the ag agre reem emen entt is reas reason onab able le as to its du dura rati tion on geogra geo graphi phical cal ar area ea and typ typee o f employment. 4

Thee Ca Th Cali lifo forn rnia ia Le Legi gisl slat atur uree has has neve neverr und undert ertake aken n suc such h a mo modi difi fica cati tion on

section ion 16 1660 600. 0. o f sect

 4

 

contr contrac acts ts in re rest stra raint int o f em empl ploy oyme ment nt and and begu begun n to up upho hold ld agre agreem emen ents ts providing for narr narrow ow or rea reasona sonable ble res restr trai aint nts. s.   Wright v Ryd Ryder er 1868 1868)) 36 Cal. 34 342, 2, 357-358.)5 The Legis gislatu laturre pu putt a ha halt lt to tha that dri drift away from the the ban ban by adop adopti ting ng form ormer se sect ctio ion n 1673. Th That at stat tatute ute, the the subs substa tant ntiv ivel ely y identica identi call pre precur cursor sor to se sect ctio ion n 16 1660 600, 0, expr expres essl sly y fo forb rbad adee all agr agree eemen ments ts in restraint o f tr trade ade exce except pt thos thosee expr expres essl sly y exce except pted ed in fo form rmer er sect sectio ions ns 16 1674 74 and and 167 675, 5, the the pred predec eces esso sors rs o f sections 16601 an and d 1660 16602. 2.  The Cal Califo iforni rniaa Co Code de Com Commis missi sione oners rs comm commen entt to fo form rmer er Ci Civil vil Cod Codee se sect ctio ion n 16 1673 73 expl explai aine ned d the stat statut utee was nece necess ssar ary y beca becaus usee [c]o [c]ont ntra ract ctss in restraint o f tr trad adee ha have ve bee been allo allow wed by mo mode dem m deci decisi sion onss to a ve verry dang danger erou ouss exte extent nt..

An Anno nota tate ted d Ci Civi vill Co Code de (18 1872 72)), pp pp.. 50 5022-50 503; 3; Ex Exh. h. 2 to

Andersen Anders en s Feb Februa ruary ry 21

2

7

Requ Re ques estt for Judi Judici cial al Noti Notice ce.) .) In part partic icul ular ar,,

the the Commis Commissio sioner nerss st stre ress ssed ed the the public public po poli licy cy cons conside idera ratio tion n tha thatt con contr tract act re rest stra rain inin ing g a pe pers rson on from prac practi tici cing ng his or her her tra trade or prof profes essi sion on tend tendss to enfo enforc rcee idle idlene ness ss,, and depr depriv ivee the the Stat Statee ofthe services o f its citize citizens. ns.,, ,,7 7 For cent centur urie ies, s, cour courts ts had had reco recogn gniz ized ed that that cove covena nant ntss no nott to comp compet etee are are subj subjec ectt to gre great at abus abuses es by em empl ploy oyer ers, s, wh who o ar aree perp perpet etua uall lly y labo labour urin ing g for ex excl clus usiv ivee adva advant ntag agee in tra trade, de, and and to red educ ucee it to as few ha han nds as possible. Mitchell v Reynolds (Q. B. 1711) 24 Eng. Rep. 347, citin iting g 26..) Dyer s Case Case (1414) Y. B. Mich. 2 Hen. 5 p. 26 5

Every Ever y con contra tract ct by wh whic ich h on onee is rest restra rain ined ed from ex exer erci cisi sing ng a law lawful ful pr prof ofes essi sion on,, tr trad ade, e, or bu busi sine ness ss o f any kind, ind, othe otherrwi wise se tha than n is prov provid ided ed by the the next next tw two o secti ection onss, is to tha that exte extent nt vo void id..  

7 Andersen suggests it is unl ikel y the Legislature intended to change com omm mon law beca becaus usee se sect ctio ion n 1673 was me merrely ely pa part rt o f a larg largee un unde dert rtak akin ing g to codifY exis existi ting ng Cali Califo forn rnia ia law into into four four diff differ eren entt code codes, s, in incl clud udin ing g civi civil, l, civil ivil proc proced edur uree, crimi rimina nall an and d po poli liti tica call co code des. s. (OB 33 33,, fn. 10.) Th Thee Co Code de Commi Com missi ssione oners rs comme comment ntss quo quoted ted above dem demons onstra trate te oth other erwis wisee with rega regard rd to the the adop adopti tion on ofthis pa part rtic icul ular ar se sect ctio ion. n. (S (See ee   v Ye Yell llow ow Cab Cab   o (1975) 13 Ca1.3d 8 4 817 [ Our con conside siderat ration ion o f thi thiss arr arrest esting ing contentionan and d in inde deed ed

of

the wh whol olee qu ques esti tion on

of

of

the the true true me mean anin ing g an and d inte intent nt(continued...) section 15

 

Fonner section 1673 wa wass ena enacte cted d in 1872, not lon ong g afte afterr sl slav aver ery y wa wass

ab abol olis ishe hed d in this this Country. The sta tattute recogniz izeed th thaat th thee ri righ ghtt to wor ork k is a fundam fun dament ental al asp aspect ect o f pers person onal al fr free eedo dom m.

Th Thee aver averag agee in indi divi vidu dual al

employee has little but his labor to sell or to use to make a living. He is of ofte ten n in ur urge gent nt nee need o f sell llin ing g it and in no po possit itio ion n to ob obje ject ct to bo boil iler erpl plat atee re rest stri rict ctiv ivee co cove vena nant ntss plac placed ed befor oree him to sign. To him, th thee righ rightt to wo work rk and sup suppor portt his family ily

is

Murra Mu rrayy Dance Stud Studio ioss

v

the the mo most st im impo port rtan antt righ rightt he po poss sses esse ses. s. Witter (O (Ohio hio 19 1952 52))

1 5

rthur

N.E. N.E.2d 2d 68 685, 5, 704. 704.))

Sect Se ctio ion n 16 1660 600 0 is a re rest stat atem emen entt o f tha thatt ri righ ght. t.

2.

While some cases refer to a s u p p o se d  narrow restra restraint int exception exception no California California case case has has ever ever uphe upheld ld rest restra rain ints ts be beyo yond nd th thos osee ex expre press ssly ly auth author oriz ized ed by st stat atut ute. e.

As An Ande ders rsen en po poin ints ts out, ut, la lang ngua uage ge can be found ound in va vari riou ouss Cali Califo forn rnia ia deci decisi sion onss supp suppor orti ting ng no noti tion onss that that sect sectio ion n 16 1660 600 0 wa wass a co codif dific icati ation on o f the comm common on la law w8 an and d that that the the co comm mmon on la law w co coun unte tena nanc nced ed a na narr rrow ow res estr trai aint nt exce except ptio ion n to the re rest stri rict ction ion on em emplo ployee yee non non-co -compe mpetit tition ion agre agreem ement ents. s. (OB pp pp.. 31 31-3 -32. 2.))

7

( .. • continued)

1714 - ca cann nnot ot pr proc ocee eed d wi with thou outt re refe fere renc ncee to th thee Cod Codee Co Comm mmis issi sion oner erss Not Notee whic wh ich h app ppea earred im imme medi diat atel ely y fo foll llow owin ing g sect sectio ion n 17 1714 14 in th thee 1872 co code de ].) The Co Code de Co Comm mmis issi sion oner erss co comm mmen ents ts to fon fonner ner se sect ctio ion n 1673 quot quoted ed ab abov ovee should sq sque uelc lch h any no noti tion on that that the the Le Legi gisl slat atur uree in inte tend nded ed a wh whol oles esal alee adoption o f th thee comm common on la law w in this regar egard. d. Th Thee Co Comm mmis issi sion oner erss vi view ewed ed th thee then then-r -rec ecen entt comm common on law exp expans ansion ion o f exce except ption ionss as very dang danger erou ous. s. 8

I Ann nnot otat ated ed Civi Civill Requ Co Code deest (1 (187 , pp pp. . 50 502503; 3;e.)Exh. 2 to An Ande ders rsen en s February ques t 872) for2), Judi Ju dici cial al 2-50 No Notic tice. ) 21 2007 Re 16

 

B ut a ca care refu full re read adin ing g o f thos thosee deci decisi sion onss re reve veal alss th that at what what th thos osee ca case sess

are are real really ly sayi saying ng

is

that that the the statutory ex exce cept ptio ions ns to se sect ctio ion n 16 1660 600 0 re refl flect ect the

same same exce except ptio ions ns to the the rule ule agai agains nstt no nonc ncom ompe peti titi tion on agre agreem emeent ntss th that at ar aree implied by th thee commo ommon n law. None None hol holds that that section 16600 co codi difi fied ed exis existi ting ng common common law. None None al allo low ws a re rest stra rain int, t, na narr rrow ow or ot othe herw rwis ise, e, beyond bey ond that ne nece cess ssar ary y to prot protec ectt righ rightts al alrready eady guar guaran ante teed ed by ot othe herr st stat atut utes es.. Fo r exam exampl ple, e, the co cour urtt in Va Vacco cco Industries Industries Inc. Inc.

v.

Va Van n De Den n Berg Berg

(1992) 5 Ca Cal. l.Ap AppA pAth th 34, st stat ates es that that Sect Sectio ions ns 166 16600 an and d 16601 ar aree codifications o f the co comm mmon on law law an and d are to be co cons nstr true ued d and int nter erpr pret eted ed reaso reasona nably bly in ligh lightt o f the co comm mmon on law law dec decisi isions ons on th thee same su subj bjec ectt.

Id. Id.

at p. 47.) 47.) Howev ever er,, the case invo nvolved ved the sale o f st sto ock in a business. That That is a statutory exce except ptio ion n to se sect ctio ion n 1660 16600. 0. (Bus (Bus..

Pro rof. f. Code Code,, § 16601.)

That Th at it was was also also a co comm mmon on-l -law aw ex exce cept ptio ion n does does not not vali valida date te al l comm common on law exce except ptio ions ns with withou outt reg egaard to the statu tatutte, nor nor ca can n th thee ca casse be fairly read

as

sayi saying ng it does does.. Simi Si mila larl rly, y, ev even en thoug though h South   y Radiol Radiology ogy Medical Medical Associat Associates es v. Asher (199 (1990) 0) 220 Cal. Cal.Ap App. p.3d 3d 107 1074, st stat ates es th that at   [ s] s]ect ection ion 16 1660 600 0 embo embodi dies es

th thee common common la law w proh prohib ibit itio ion n agai agains nstt re rest stra rain ints ts on trad tradee

Id at p. 1080),

the co cour urtt goes oes on to acknow knowlledge dge that that   [i]n de decl clar arin ing g a co cont ntra ract ct void to th thee exte extent nt it exce exceed edss su such ch st stat atut utor ory y limi limita tati tion onss as th thos osee impo impose sed d by se sect ctio ion n 1660 16 600, 0, the Legi Legisl slat atur uree ther thereb eby y ad adop opte ted d a rule rule o f public policy policy..   Ibid. quoting Centeno

v.

Rose Ro sevi vill llee Communi Community ty Hospita Hospitall (19 (1979) 79) 10 107 7 Cal. Cal.Ap App.3 p.3d d

62, 70.)9 A s in Vacco the co cour urtt in South   y in fact fact ap appl plie ied d a statu atutor ory y

9 T h e So Sout uth h Bay court's relian reliance ce on Centeno   Rose Rosevill villee Commu Communi nity ty Hospital supra 107 Cal. Cal.Ap App. p.3d 3d 62, 62, is puzzl puzzlin ing. g. Th e plaintiffin Centeno soug sought ht to in invo voke ke se sect ctio ion n 16600, 00, but but ther theree was was no nonnon-co comp mpet etit itio ion n ag agre reem emen entt at issu issuee in the the case. Th e plain plainti tiff ff,, a ra radi diol olog ogis ist, t, be beca came me embr em broi oile led d in a co cont ntrrover oversy sy with with his his part partne ners rs which cu culm lmin inat ated ed in his no (continued...) 17

 

exception, the spe specifi cificc par partne tnersh rshipip-dis dissol solutio ution n exc excepti eption on o secti section on 16 1660 602, 2, nott so no some me ge gene nera rall co comm mmon on law rule o rea reason sonabl ablene eness ss or nar narrow rownes ness. s.  ld. at pp.1081-1082.) As the Court o App ppea eall in this case co con nclu cluded ed::

Fa Fair irly ly read read,, th thee

fo fore rego goin ing g auth author orit itie iess sugg sugges estt se sect ctio ion n 16600 em embo bodi dies es the the orig origin inal al,, str strict ict common com mon law an antip tipath athy y to towa ward rd re rest stra rain ints ts

o

trad trade, e, wh whil ilee th thee sect sectio ion n 16601

and and 16602 ex exce cept ptio ions ns in inco corp rpor orat ated ed th thee late laterr co comm mmon on law law rule o wher eree thos thosee excep exceptio tions ns apply. apply. reasonableness in inst instance ancess wh

(Slip (Slip Op Opini inion on,,

p. 22, fn. 6, emphasis added.)

3

A narrow narrow rest restra rain intt excepti exception on would sever severely ely unde underm rmin inee sect sectio ion n 1660 16600 0

Ther Th eree are sev ever eraal sound pu publ blic ic polic icy y reaso easons ns to reje reject ct a na narr rrow ow restra res traint int exc excepti eption on to sec sectio tion n 16 1660 600. 0.  

Emplo Em ployee yeess ar aree not not ch chat atte tels ls:: Th They ey sh shou ould ld rema remain in free to

choo choose se the their ir fiel field d

o

emplo loy yment and for whom th they ey work. As this Court

has expl explai aine ned, d, se sect ctio ion n 16600 wa wass in inte tend nded ed to en ensu sure re  th  that at ev ever ery y ci citi tize zen n shall ret etai ain n th thee rig ight ht to pu purs rsue ue any lawf lawful ul employ emp loymen mentt and ent enterp erpris risee o their choice. [[Citat Citation. ion.]]   prot protec ects ts th thee im impo port rtan antt leg legal righ rightt o pe pers rson onss to enga engage ge in busine bus inesse ssess and occ occupa upation tionss o their choosing. [Citat [Citation.] ion.]  Advanc  Adv anced ed Bionics Bionics Corp Corp..

v

Medtro Med tronic nic,, Inc. Inc. (200 (2002) 2) 29 Ca Cal. l.4t 4th h 697, 706,

quoting Met etro ro Traf Traffi ficc Cont Contro rol, l, Inc.

v

Shad Sh adow ow Traf Traffic fic Network Network 1994 1994))

continued) lon longe gerr bein eing a me memb mber er o th thee pa part rtne ners rshi hip. p. Th Thee ho hosp spit ital al for wh whic ich h th thee pa part rtne ners rshi hip p prov provid ided ed ra radi diol olog ogy y se serv rvic ices es re refu fuse sed d to allo allow w him to use th thei eirr radio adiolo log gy faci facili liti ties es,, cla claimi iming ng it ha had d an ex excl clus usiv ivee con contra tract ct wit with h th thee rema remain inin ing g 9



partners.  ld. at p. 66.) Centeno wa wass th thu us a rest restra rain intt-of of-t -tra rade de case, not a nonno n-co comp mpeti etitio tion n agree agreement ment ca case se..  8

 

22 Ca Cal. l.Ap App. p.4t 4th h 853, 859, and Morlife

Inc

Perry (1997) 56 Cal.App.4th

1514, 15 1520 20.) .) As this Court has stated, The days when a servant was practica prac tically lly the the slav slavee o his ma mast ster er have have long long si sinc ncee pass passed ed..

Greene

 

Hawaii Haw aiian an Dredgi Dredging ng Co (1 (194 945) 5) 26 Ca Cal. l.2d 2d 245, 245,251. 251.))  n y res restrai traint, nt, nar narrow row or no not, t, ne nece cess ssar aril ily y de defe feat atss st stat atut utor ory y inte intent nt by

inte interf rfer erin ing g to le lessser or greate terr ex exte tent nt wit ith h an empl employ oyee ee s rig ight ht to pu purs rsue ue  any any lawf lawful ul em empl ploy oyme ment nt..

Th That at is un undo doub ubte tedl dly y why se sect ctio ion n 16 1660 600 0 bars bars

contr con trac acts ts that re restr strain ain.. A br brig ight ht-l -lin inee rule ule agai agains nstt re rest stra rain ints ts agai agains nstt employm employment ent offe offers rs much-n much-neede eeded d ce cert rtai aint ntyy and av avoi oids ds the

in

terr terror orem em effec effectt olvaguely

worked noncom noncompeti petition tion agree agreeme ments nts.. A narr narrow ow rest restra rain intt st stan anda dard rd would would

cr crea eate te un unce cert rtai aint nty y and and pr prov ovid idee no cl clea earr gu guid idel elin ines es for ei eith ther er em empl ploy oyee eess or empl em ploy oyer ers. s. Un Unde derr such such an am amor orph phou ouss stan standa dard rd,, a dete determ rmin inat atio ion no reas reason onab able lene ness ss or narr narrow owne ness ss wo would uld nece necess ssar aril ily y depe depend nd on the facts o each noncom non compet petiti ition on agre agreem emen entt and and each each empl employee oyee s si situ tuat atio ion. n. Such Su ch un unce cert rtai aint nty y br bree eeds ds litig litigati ation on and and wa wast stes es judic judicial ial resou resourc rces es..  Briggs v Ed Eden en Council Councillor lor Hope Hope

 

Opportunity (1999)   9 Cal Cal.4t .4th h 11 1106 06,,

1122 [a [abs bsen entt br brig ightht-li line ne tes testt fo forr app applic licati ation on o anti anti-SL -SLAPP APP stat statute, ute, confu con fusi sion on and and dis disagr agree eeme ment nt ine inevit vitabl ably y wi will ll aris arise, e, th thus us del delay aying ing res resolu olutio tion n and and wa wast sting ing pre precio cious us judi judicia ciall re reso sourc urces es]; ]; Poster v So Sout uthe hern rn Cal. Rapid Transi Tra nsitt Dist. Dist. (1990) 52 CaJ.3d 26 266, 6, 27 272 2 [ Th Thee legi legisl slat ativ ivee pur purpos posee o section 998 is bett better er serv served ed by the the br brig ight ht li line ne ru rule le ]].) .) Beca Be caus usee em empl ploy oyeers an and d em empl ploy oyee eess co coul uld d onl nly y gues guesss at wha whatt co cour urts ts might ight hold in any pa part rtic icul ular ar ca casse, an and d that that wo woul uld d na natu tura rall lly y en enco cour urag agee employers, who wo woul uld d pr pref efer er to stif stifle le co comp mpet etit itio ion, n, to pu push sh mo more re an and d mo more re

 9

 

restrict rest rictive ive cov covena enants nts..  

As

the cour courtt state tated d in Latona v Aetna

Healthcare Healthc are Inc. (C. (C.D. D.Ca Cal. l. 1999 1999))

82

u.s.

F.S .Sup upp p.2d 1089, the the em empl plo oye yerr is in a far

bett better er po posi siti tion on to know the app ppllica icable law. On the othe otherr hand: Employees

 

will ill tend tend to as asssum umee that that the the cont contra ract ctua uall term termss

 

 

propo proposed sed by thev eir r em empl ploy are ar lega lespec gal, l, t that draconian. Furthe Fur thermo rmore, re,thei even en   the thoyer ey er st stro rong ngly lye susp su ect th at a no nonn-co comp mpet etee clause is un unen enfo forc rcea eabl ble, e, such such em empl ploy oyee eess wi will ll be re relu luct ctan antt to challenge challe nge the the lega legali lity ty o the the cont contra ract ctua uall ter terms and and risk risk the the deployment o [the [the emp employe loyerr s] consi consider derabl ablee lega legall res resour ources ces against again st them them.. Thus the the in ter terro rorem rem effect effect o f the Agreemen Agreementt will will te tend nd to se secu cure re empl employ oyee ee co comp mpli lian ance ce wi with th its il ille lega gall te term rmss in th thee va vast st majo ajority rity o f cases.  Id. at p. 1096, emph phaasis added.) Accor ccord, d, Kolani

v

Gl Glusk uska a 1998) 1998)

64 Ca Cal. l.Ap AppA pAth th 402: Many Ma ny, , perh pecons rhap aps sting m oscounsel t, em empl ploy oyee s alle wo woul uld ding ho hono th eseclau clin ause sesurt, s t, wi with thout out co nsul ulti ng counselor orees chal ch leng ngin g nor the ther thes clau clese ause cour co thuss dire thu direct ctly ly un unde derm rmin inin ing g the the st stat atut utor ory y po poli licy cy fa favo vori ring ng comp compet etit itio ion. n. Em Empl ploy oyer erss wo would uld have have no disi disinc ncen enti tive ve to use use the br broa oad, d, ille illega gall clau clause sess   perm permit itte ted d to retre etreat at to a na narr rrow ow,, lawf lawful ul cons constr truc ucti tion on in the the even eventt o litigation.   d. at p. 407.) 3.

It is unlikely that a us useeful ful body o f ap appe pell llat atee la law w would ever ever

deve develo lop p in the the fi l o f  narrow narrow restraints.

Because

o

co cost st and tim time

issu issues es,, the vas vastt ma majo jori rity ty o case casess inv involv olving ing non noncom compet petiti ition on cla claus uses es end wit with h a ruling one wa way y or the other on a reque equesst for pr prel eliimina narry injun junction. And beca becaus usee th thee out outco come me o ea each ch case case de depe pend ndss on its ow own n sp spec ecif ific ic facts, ne neit ithe herr side ide can pred predic ictt in ad adv van ancce the the ou outc tcom omee o

o

litiga litigati tion on ove overr the the enfo enforc rcea eabil bility ity

an any y parti particular cular nonnon-com competi petition tion agr agreem eement. ent.

See Baker Pacifi Pacificc Corp. orp. v Suttles (1 (199 990) 0) 22 220 0 Ca Cal. l.Ap App. p.3d 3d 114 148, 8, 1155: We rejec ejectt the con onccept that that a wor orke kerr, com compe pell lled ed by ec eco ono nom mic ne nece cess ssit ity y to se secu curre em emp ploy loyment, ent, can can be thus thus coer coerce ced d into into sign signin ing g sw swee eepi ping ng JO

agre ag ex ing variou res respon ponsibl sible enti entitie ties s ts. in uninforme rmed d h oreem peemen thents e atsgrexcul eeculpat mepating nt w ill var no nottious besen enfo forc rced ed bye the th e cour co urts . the uninfo 2

 

onee   s on

co comm mmen enta tato torr has note noted, d, in a st staate with with no st stat atut utee rega regard rdin ing g

noncompe nonc ompetition tition ag agre reem emen ents ts,, re reli lian ance ce on co comm mmon on la law w prece precede dent nt result resultss   unpredicta unpre dictable ble an and d inco incons nsis iste tent nt outc outcom omes es.. (O Malley Malley,, Cov Covena enants nts Not

to

Compet Com petee in the Mass Massac achu huse sett ttss Hi Tec Tech Indu Indusstr tryy: Asse Assess ssing ing the   eedfor a Legislative Legis lative Solu Soluti tion on (199 (1999) 9) 79 B.U. .U. L.Re L.Rev. v. 1215, 1217 1217,, 1225 1225-1 -122 227. 7.))

  Covenant Covenantss not not to co comp mpeete, te, and in pa part rtic icul ular ar,, empl employ oyme ment nt cove covena nant ntss not to co compe mpete te,, have have prov provid ided ed a st stea eady dy st stre ream am o f co confu nfusin sing g an and d uncert uncertain ain liti litiga gati tion on sinc sincee ea earl rly y Medi Mediev eval al co cour urts ts an and d Parl Parlia iame ment nt be bega gan n to ad addr dres esss th thes esee contracts.

(Note, Contr Contract act Law:  s Clea lear as Mud: The Demi Demise se o f the

Covenant   ot to Comp Compet etee 4.

in

Oklahoma (2002)

55

Okla Ok la.. L. L.Re Rev. v. 491, 491, 491. 491.))

Employee mobility has h el el pe pe d dff u uee l an unpreceden ted

econom eco nomic ic boom boom in Calif alifor orni nia. a. Stat States es wher wheree na narr rrow ow rest restra rain ints ts are are au auth thor oriz ized ed

ha have ve not far ared ed ne near arly ly as wel ell, l, es espe peci cial ally ly wher wheree growt growth h in th thee econ econom omy y de depe pend ndss on inno innova vati tion on and risk risk-t -taaki king ng.. (Se (See Gils Gilson on,, The Legal Legal Infrastructure o f Hi High gh Tech Techno nolo logy gy Indust Industria riall Distri Districts cts:: Si Sili lico con n Valley Route 128, a nd Cov Covena enants nts Not

to

Compete (1 (199 999) 9) 74 N.Y. N.Y.U. U. L.Re L.Rev. v. 575.) 75.)

Thus Th us,, sect sectio ion n 1660 16600 0 ulti ultima mate tely ly bene benefi fits ts Ca Cali lifo forn rnia ia empl employ oyer erss as much much as Calif Ca lifor ornia nia empl employ oyee ees. s. (S (See ee Application Grou Group p In Inc. c. (1998)

61

Cal.App Cal. AppAth Ath 881, 881,

9 1

[

v

Hunter Grou Group p Inc Inc..

o the extent it is in invo vok ked by a Cali lifo forn rnia ia

empl em ploy oyer er to protec protectt itself itself from from unfair co comp mpeti etitio tion, n, more moreov over er,, sect sectio ion n 16600  

is all the more ore impo import rtan antt as a st staatem tement ent

Califor ifornia nia public public o f Cal

poli po licy cy whic which h ensu ensure ress tha that Cali Califo forn rnia ia empl employ oyer erss will will be able able to comp compet etee ef effe fect ctiv ivel ely y fo forr the most most tale talent nted ed,, skille skilled d empl employ oyee eess in their their in indu dust stri ries es ].) ].)  

Empl Em ploy oyer erss cann cannot ot have have thei theirr cake cake an d eat it too. Employers

want wa nt the the fr free eedo dom m to fire empl employ oyee eess

will ll,,  a twi

for any any reas reason on or no reason.

(Lab (Lab.. Code Code,, § 2922.) At the sa sam me time, however, th they ey want want to control their form former er empl employ oyee eess abi bili lity ty to fin find othe otherr ga gain infu full emplo employm ymen entt afte afterr they are fired. (E.g., an impl implie ied d na narro rrow w restr restrai aint nt exce except ptio ion. n.)) Empl Employ oyer erss can t 21

 

havee it both hav both ways. The Legi Legisl slaature ture has struck a ba bala lanc ncee betw betwee een n empl employ oyer er right rig htss and inte intere rest stss and empl employ oyee ee righ rights ts and in inte tere rest stss th thro roug ugh h sect sectio ion n 1660 16 600. 0. The co cour urts ts shou should ld not not ups pseet that that ca care refu full llyy-dr draw awn n ba bala lanc nce. e. In shor short, t, se seve vera rall soun sound d poli policy cy rea reasons sons supp suppor ortt th thee Legisl Legislatu ature re s adoption

of

a no-r no-res estr trai aint nt rule rule.. The The Legi Legisl slat atur uree de deci cide ded d th that at once once the

na narro rrow-r w-rest estrai raint nt camel mel got got its nose nose unde underr the the te tent nt,, th ther eree woul would d

 e

no

ef effe fect ctiv ivee way way to ke keeep the the ent ntir iree-re rest stra rain intt ca cam mel out. Ande Anders rsen en and and its coho cohort rt empl employ oyer erss can argu rgue all they want want ab abou outt th thei eirr need needss and conc concer erns ns,, butt thei bu theirr ar argu gume ment ntss must must be addr addreess sseed to the Legi Legisl slat atur ure, e, not not th thee cour courts ts..   Varian Varian Medical Syst System emss Inc. nc.

v

Delfino (2005)

35

Cal. Ca l.4t 4th h 180, 196 [ Suc Such h

an as asse sess ssme ment nt is, howe howeve ver, r, a que quest stio ion n for for the the Legi Legisl slat atur ure, e, and and th thee Legislatu Legi slature re has alre alread ady y an answe swered red iC]

a

utho uthorit rity y fro rom m other other co cour urts ts

 

not

helpful help ful here here

Ninth Nin th Circ Circuit uit deci decisi sion ons. s. Andersen s

 rief is

peppered peppe red with

ci cita tati tion onss to Ninth Ninth Ci Circ rcui uitt de deci cisi sion onss read readin ing g a narrow narrow restr restrai aint nt ex exce cept ptio ion n into se secctio tion 16600. The Court ourt o f App Appea eall s de deci cisi sion on in th this is case case care carefu full lly y expl explai aine ned d whe here re the the Nint Ninth h Ci Circ rcui uitt went went wron wrong g in in inte terp rpre reti ting ng Cali Califo forn rnia ia la law w as counte untena nanc ncin ing g su succh res restrain raints ts on th thee ri righ ghtt to enga engage ge in a la law wfu full pr prof ofes essi sion on,, trad tradee or busi busine ness ss.. (Sli (Slip p Op Opin inio ion, n, pp. pp. 14-2 14-23. 3.)) In brief, th thee root root o f the prob proble lem m lies in case casess su

h

as Campbell   Bd Bd..

Stanford Jr Univ (9th Cir. 1987) 817 F.2 .2d d 4 99 ,   Trustees   Leland Stanford

which whi ch inte interp rpre rete ted d Calif Californ ornia ia law law as prohib prohibiti iting ng only only those those rest restra rain ints ts th that at prec preclu lude de one fro from purs pursui uing ng an entire bu busi sine ness ss,, trade trade or pr profe ofessi ssion on..  Id at p. 502.) That interp rpre rettation was based sed on dict icta in two two cases th thaat were not empl em ploy oyee ee noncom noncompet petitio ition-a n-agree greemen mentt ca cases ses at al all, l, Boughton 22

 

Socony Soco ny Mobil Mobil

 

Oi l Co.

  1964 1964)) 231 CaI.A I.App pp.2 .2d d 188, 192, and and   in g v Ger Gerold old 195 1952 2

109 10 9 CaI CaI.Ap .App.2 p.2d d 31 316. 6. Thee issue in Bo Th Boug ught hton, on, sup supra, ra,

231

CaI.App.2d

188

wass the va wa vali lidi dity ty

o f a cove covena nant nt in deed to a parcel o f land that the the land would not be used sed as

a ga gasol solin inee se serv rvic icee st stat atio ion n for a spec specif ifie ied d pe peri riod od o f time. A subs subseq eque uent nt purcha pur chaser ser soug sought ht to ha hav ve the rest restri rict ctio ion n de decl clar ared ed inva invali lid d un unde derr sect sectio ion n 1660 16 600. 0. Th Thee cour courtt up uphe held ld the jud judgme gment nt de decl clar arin ing g the the cove covena nant nt va vali lid. d. Sect Se ctio ion n 16600 was no nott imp mpllic icaated; it wa wass a lan land us usee case. I f an ow owne nerr can can ref refuse to sell his or her property at all, he or she can agree to sell only on specified speci fied con condit ditions ions..  I  Id. d. at pp. 19 1900-19 192. 2.)) CaI. I.Ap App. p.2d 2d 31 316 6 wa wass an un unfa fair ir comp compet etit itio ion n case case.. King King,, su supr pra, a, 1 9 Ca Thee is Th issu suee on app ppea eall was the va vali lidi dity ty o f a prov provis isio ion n in a li liccense to prod produc ucee the li lice cens nse, e, the the tr trai aile lers rs de desi sign gned ed by the the li lice cens nsor or that that,, on te term rmin inat atio ion n o f the li lice cens nsee ee wo woul uld d no nott cont contin inue ue to pro produc ducee trai traile lers rs o f the the lic licen enso sorr s de desi sign gn.. Thee cour Th courtt held that that se secction 16600 did not bar bar the li lice cens nsor or s claim to da dama mage gess for the the lic licen ensee see s cont contin inue ued d produc productio tion n o f trailers o f the the lic licens ensor or s design desig n foll followi owing ng ter termin minati ation on o f the the lic iceense se.. Th Thee defend fendaant coul could d still sell tr trai aile lers rs,, just no nott trai traile lers rs that that viol violat ated ed pla plainti intiff ff s de desi sign gn righ rights ts..  Id. at p 318

Thu Th us in Campbell, the the Ni Nint nth h Circ Circui uitt mi mist stoo ook k  oughton and   in g as crea cr eati ting ng a na narr rrow ow re rest stra rain intt exce except ptio ion n that that thos thosee case casess did did no nott adop adoptt and and did did nott ne no need ed to adopt.  C  Cam ampb pbel ell, l, supra supra,, 817 F .2 .2 d at p. 502.) Once th e Nint h Circu rcuit ball go gott rolli lin ng, however, it coul could d no nott stop. In International Business Busin ess Mach Machines ines Co Corp rp..

v

9th Cir. 1999) 191 F. F.3d 3d 1033, the the ajorek   9th

cour courtt reco recogn gniz ized ed tha thatt ma many ny sub subseq seque uent nt Ca Calif liforn ornia ia case casess ha had d reje reject cted ed the the na narr rrow ow restraint noti otion. Yet the the cour courtt st stil illl felt comp compeell lleed to foll follow ow its ow own n

23

 

dec ecis isio ion ns in inte terrpr pret etin ing g the statute:

We are not free to read Ca Cali lifo forn rnia ia law law

witho wit hout ut def defer errin ring g to our own prec preced eden entt on ho how w to con constru struee it. it. Id at p. 1041.)

This Th is Co Cour urtt is under no such constraint:

[T [T]h ]hee ques esti tio on be bein ing g one o

the the con constr structi uction on o a st stat atut utee o this state, we cannot be boun und d by the the decision o a feder ederal al cou court, how owev ever er grea greatt our resp respec ectt for that that cou court, rt, wh when en such such de decis cisio ion n is at va vari rian ance ce wi with th the the view iews expr expres esse sed d by the the hi high ghes estt cour courtt o this this sta state. te.

City  

Oakland   Buteau (191 919 9) 180 Cal. 83, 89 89-9 -90. 0.))

There The re sh shou ould ld no nott be one Ca Cali liffornia law law in state tate co cour urtt and a diff ifferen erentt Cali Ca lifo forn rnia ia law law in federal court. This Co Cour urtt now has the the opp ppor ortu tuni nity ty to clarifY fo forr all cou court rtss th that at the Ni Nint nth h Cir Circu cuit it has mi misr srea ead d the the cas asees an and d Calif Cal ifor orni niaa do does es no nott have have a narr narrow ow re rest stra rain intt exce except ptio ion n to se sect ctio ion n 16600. 2.

Other st at e s decisions. An Ande ders rsen en also also reso resort rtss to ou outt-of of-s -stat tatee

auth author orit ity y in sup suppor portt o its readi reading ng o sect sectio ion n 16600. (OB 36-40 6-40.) .) Ulti Ul tim mat atel ely, y, ho howe weve ver, r, An Ande ders rsen en has to co conc nced edee that that only fou four stat states es hav avee a sta tatu tute te si simi mila larr to sect sectio ion n 16600. (OB 37 11 And

o

those tho se four four,, An Ande ders rsen en

also has to con conced cede tha that courts in those states are divide ided on wh whet ethe herr a statu sta tute te tha thatt pro prohib hibits its cont contra ract ctss in rest restra rain intt o eng engag agin ing g in a lawf lawful ul Sta tate tess wi with th di diff ffer eren entt st stat atu utes, tes, or no stat statut utee at all, ha have ve up uphe held ld nonc no ncom ompet petiti ition on agre agreem emen ents ts that that no Cal Califo iforn rnia ia cour courtt wo would uld coun counte tena nanc nce, e, incl includ udin ing g cove covena nant ntss that that im impo pose se mo mone neta tary ry fin fines on form former er em empl ploy oyee eess for co comp mpet etin ing g wi with th a form former er emplo loy yer. er. Comp Compar aree ca case sess cite cited d by An Ande ders rsen en   BDO Seid Seidma man n v Hirshberg (1999) 93 N. N.Y. Y.2d 2d 382 [712 N. N.E. E.2d 2d 12 1220 20,6 ,690 90 N. N.Y. Y.S. S.2d 2d 854] [u [uph phol oldi ding ng acti action on for liqu liquid idat ated ed da dama mage gess o 1Y time timess the the annu annual al bil billin ling g o any o emp employ loyer er's 's clie client ntss who bec becom omee cli client ent o former employee]; Dob Dobbin bins, s, DeGuire DeGuire   Tucker, P v Ruth Rutherfor erford, d, MacDonald MacDonald   Olson (1985) 21 218 8 Mont. 392 [708 P.2d .2d 577] [same; 100% o gros grosss armu armual al fe fees es]) ]) wi with th Cali Califor fornia nia case casess   Muggill v Reuben   Donne Donnelley lley Corp. 1965) 965) 62 Ca Cal. l.2d 2d 23 239 9, 24 2422-24 243 3 [i [inv nvali alidat dating ing forfe forfeitu iture re o pensio pension n ben benefi efits ts i retiree work wo rkss for for co comp mpeti etito tor] r];; Go Gord rdon on Term Termit itee Control Control v Terro Terrones nes 1978 1978))  

84 Ca Cal. l.Ap App. p.3d 3d 176 76,, 178 [i [inv nval alid idat atin ing g cont contra ract ct requ requir iring ing a form former er em emp ploye loyeee to pay 50 pe perr acco accoun untt i h so solic licite ited d for former mer cus custom tomers ers].) ].) 24

 

profession profe ssion,, tr trad adee or bu busi sine ness ss ne neve vert rthe hele less ss auth author oriz izes es na narr rrow ow rest restra rain ints ts on such su ch en enga gage geme ment nt.. (OB 37-38, fn 13 12   ome mean anin ingf gful ul

conc conclu lusi sion onss can be draw drawn n from sp spli litt deci decisi sion onss in

other oth er sta states tes.. 13 Ou Outt-of of-s -sta tate te auth author orit ity y is simp simply ly no nott he help lpfu full he here re..

North Da North Dako kota ta,, fo forr exam exampl ple, e, agre agrees es wit with h Ca Cali lifo forn rnia ia in Warner  n o v Solberg (N (N.D .D.. 20 2001 01)) 63 634 4 N.W. N.W.2d 2d 65 [2001 N.D. 156], the co cour urtt invo invoke ked d a st stat atut utee ide dent ntiica call to sect sectio ion n 166 660 00 an and d in inva vali lida date ted d a co cont ntra ract ct proh prohib ibit itin ing g an insu insura ranc ncee agen agentt fr from om so soli lici citi ting ng bu busi sine ness ss from from any o f his agency age ncy s cl clie ient ntss for th thre reee year yearss af afte terr ter termi mina natio tion n o f em emplo ployme yment nt wit with h the agency. Th Thee co cont ntra ract ct wou ould ld no nott ha have ve pr proh ohib ibit ited ed th thee ag agen entt from en enga gagi ging ng in his trade, but it wo woul uld d have li lim mite ted d it. As Aske ked d to imply a rrea easo sona nabl blee  

of

rest restra rain intt ex exce cept ptio ion n to the the sta tatu tute te,, the the co cour urtt he held ld:: Be Beca caus usee th thee pla plain in language o f th thee stat statut ute, e, th thee hi hist stor ory y o f the the le legi gisl slat atio ion n in No Nort rth h Dak akot otaa   , and and beca becaus usee No Nort rth h Da Dako kota ta has has enac enacte ted d tr trad adee-se secr cret etss legi legisl slat atio ion, n, we decl declin inee to do so. ((6 634 N.W .W..2d at p. 71.) Eve ven n thou though gh the the la lang ngua uage ge an and d co cont ntex extt o f a si sist ster er-s -sta tate te st stat atut utee are are iden identi tica call to a Ca Calif lifor ornia nia stat statut ute, e, i f the rea reasoni soning ng o f a si sist ster er sta tate te de deci cisi sion on on the sta tatu tuto torry pr prov ovis isio ion n is un unso soun und, d, Ca Cali lifo forn rnia ia co cour urts ts wil illl not foll llo ow it.  Ac Acco co Co Cont ntra ract ctor ors, s, In Incc. v McNamara   Pe Peep epee Lu Lumb mber er   o 1976 63 Ca Cal. l.A App pp.3 .3d d 292 92,, 29 296. 6.)) Mo More reov over er,, ther theree is  n osupp suppor ortt for a co conc ncep eptt th that at le legi gissla lati tive ve inte intent nt ca can n be de dete term rmin ined ed by the the Le Legis gislat latur uree s pr pres esum umed ed knowledge of judici judicial al int interp erpret retati ation on o f sim simila ilarr st stat atut utes es in fo fore reig ign n 13

jurisdictions. Mo Moto tors rs Ins. Corp. rp. v Division o f Fair Empl Employme oyment nt Pra Practi ctices ces (1981) 118 Cal Cal.A .App. pp.3d 3d 20 209, 9, 220220-221. 221.)) 25

 

b

n

any an y ev even entt

an

employe emp loyerr like like

Ander An derse sen n whic which h was was withdr withdrawin awing g from from a trad tradee ha had

no

legitimate

interest in res restrai traini ning ng - narr narrow owly ly or othe otherw rwis isee - a for orm mer empl employ oyee ee s abil ab ilit ity y to cont ontin inu ue to work work in that trade.

This ca case se demo demons nstr trat ates es th thee insi insidi diou ouss natu nature re o f prior rest restrain raints ts narrow or no nott on em empl ploy oyee ee mo mobi bili lity ty.. He Here re An Ande ders rsen en atte attemp mpte ted d to use th thee existence o f a non onco com mpe peti titi tio on agre reem emen entt - overly bro broad - to extr extrac actt co conc nces essi sion onss - ma man ny i egal from from dep depar artin ting g em empl ploy oyee eess wh when en Ander Andersen sen itselfhad no legi legiti tima mate te co conc ncer erns ns ab abou outt fut utu ure comp compet etit itio ion. n. An Ande ders rsen en wa wass selling o f f its ac acco coun unti ting ng pr prac acti tice ce gr grou oup p and and ge gett ttin ing g out out o f that bus busine iness. ss.

 

co cou uld no nott ma matt tter er to An Ande derrse sen n wh whet ethe herr Ed Edwa ward rdss and all th thee oth ther er de depa part rtin ing g empl em ploy oyee eess wo woul uld d co cont ntin inue ue in th that at bus usin ines esss be beca caus usee th they ey wo woul uld d no nott be in comp compet etit itio ion n wi with th An Ande ders rsen en.. In ef effe fect ct A And nder erse sen n wa wass us usin ing g its ov over erbr broa oad d noncompetition nonco mpetition agre agreement ement as leve levera rage ge to se sell ll its empl employ oyee eess to pros prospe pect ctiv ivee buye bu yers rs and and to limi limitt its cl clien ients ts ffut utur uree acce access ss to th thos osee em empl ploy oyees ees serv servic ices es i f they chose not to be sold. Thee res Th estr trai ain nts An Ande ders rsen en so soug ugh ht to im impo pose se he here re wo would uld have ave no mean me anin ing gfu full eff ffec ectt ot othe herr th than an to limi limitt Ed Edwar wards ds ri righ ghtt to enga engage ge in his lawf lawfu ul prof profes essi sion on th ther ereb eby y st stif ifli ling ng co comp mpet etit itio ion n in the prof profes essi sion on.. Th That at is a violation o f th thee le lett tter er an and d sp spir irit it o f sec sectio tion 16600. Th That at is a wrongful act act for purposes o f Edwards cause o f act actio ion n fo forr int interf erfere erence nce with prosp prospect ective ive economic econ omic adv advanta antage. ge.

 

 

D.

There I s A n d Should Be No  Trade Secrets

Exception Exce ption To Se Sect ctio ion n 166 660 00.

Somee Cali Som Califo forn rnia ia court urts have, as a shor shorth than and d re refe fere renc nce, e, re refe ferr rred ed to a  trade  t rade secret secretss ex exce cept ptio ion n to sect sectio ion n 16600 6600..

 4

This is a misnomer. Trad adee

se secr cret etss is an inde indepe pend nden entt body oflaw wi with th its own own st stat atut utor ory y sc sche heme me an and d remedi rem edies es providi providing ng ampl amplee prot protec ecti tion on for for em empl ploy oyer erss wi with thout out mixi mixing ng it up with wit h non-co non-comp mpeti etitio tion n ag agre reem emen ents ts unde underr sect sectio ion n 1660 16600. 0.

1.

protec tected ted by Trade secrets ar e amply pro

laws ws enac enacte ted d aft other la after er ena enactme ctment nt o f section sectio n 1660 16600. 0.

Califo Cal iforni rniaa ad adop opte ted d the the Un Unif ifor orm m Trad Tradee Se Secr cret etss Ac t ef effe fect ctiv ivee in 1985 1985.. (C (Civ iv.. Code Code,, § 34 3426 26 et seq eq..) The Act Act prov provid ides es a ve veri rita tabl blee arse sena nall o f weapon wea ponss agains againstt trade trade secr secret etss thef theft. t.

 

actua act uall or threat threatene ened d

misappropriation o f a trad adee sec ecre rett may be enjo enjoiine ned. d. Affi Affirm rmat ativ ivee acts to prot protec ectt a tr trad adee secr secret et may be comp ompell elled by co cour urtt or orde der. r. (Civ. Code ode, § 3426 3426.2 .2.) .) Comp Compen ensa sato tory ry an and d ex exem empl plar ary y dama damage gess may may be impo imposed sed (C (Civ iv.. Code ode, § 3426 3426.3 .3)) and and in eg egre regi giou ouss cases ses atto attorn rney ey s fe fees es may may be awar awarde ded d (C (Civ iv.. Code, Code, § 34 3426 26.4 .4). ). In addit dition, sell sellin ing g an empl employe oyerr s tr trad adee se seccrets may be puni punish shed ed as a crime. (Pen. Code, § 49 499c 9c.) .)

Reub uben en H Don Donnel nelley ley Cor orp p ssu upra For examp example le:: Muggill v Re 62 Cal Cal.2d .2d at p. 242 242 (se (sectio ction n 16600 inva invali lida date tess pr prov ovis isio ions ns in empl ploy oym ment co cont ntra ract ctss proh prohib ibit itin ing g an empl employ oyee ee fr from om workin working g fo forr a co comp mpet etit itor or af afte terr completion o f his his empl employ oyme ment nt or impo imposi sing ng a pe pena nalt lty y i f he do does es so   , unle un less ss th they ey are are nece necess ssar ary y to prot protec ectt the the employer employer s trade trade se secr cret etss ); Gordon Healthcare care v Cotton v Landau (195 (1958) 8) 49 Ca Cal. l.2d 2d 690, 690, 694; ReadyLink Health 14

oftrade secret (2 (200 005) 5)ation 12on 6 Cal. Ca l.Ap App. p.4t 4th 100 10excepti 06, 1ption 022 02on 2 (toMisapp Mis approp tion inform inf ormati consti con stitut tutes eshan exce secti section onropria 1660 16riatio 600 0 n ).

27

 

When Whe n the the Le Legi gisl slat atur uree adop adopte ted d the the Trade Secr creets Act Act it ma made de no changes to sec sectio tion n 1660 16600. 0.

 

did no nott add an exception for trad tradee se secr cret etss to

sect sectio ion n 16600 s pr proh ohib ibiti ition on on cont contra ract ctss in re rest stra rain intt o f eng ngaaging ging in a law lawful prof pr ofes essio sion, n, trad tradee or bu bussines iness. s. Th Thee Le Legi gisl slat atur uree s failur lure to alte alterr an exis existi ting ng st stat atut utor ory y sc sche heme me in ligh lightt o f int inter erven vening ing stat statut utor ory y de deve velop lopme ments nts reve reveals als an inte intent nt to ke keep ep that that sche hem me in plac placee acc accordi ording ng to its origin iginaal pla plain lang langua uage ge..  Unzueta v Ocean View School Dis Dist. t. (1 (199 992) 2) 6 Ca Cal. l.Ap AppA pAth th 16 1689 89,,

1697-1698.) Thee Le Th Legi gisslatu lature re did no nott have have to ch chan ange ge sectio tion 16600 to accom accommod modate ate trad tradee se secr cret etss conc concer erns ns be beca caus usee trad tradee secr secret etss law law alre alread ady y prov provid ides es the nece necess ssar ary y prot protec ecti tion on.. Mo More reov over er,, sect sectio ion n 166 6600 00 alre alread ady y lim limits its its appl applic icat atio ion n to cont contra ract ctss th that at rest restra rain in enga engagi ging ng in  a lawful profession, tr trad adee or bu busi sine ness ss.. or bu busi sine ness ss..

Mi Misu susi sing ng trad tradee se secr cret etss is no nott a lawf lawful ul pr prof ofes essi sion on,, trad tradee

N No o trad tradee se secr cret etss exce except ptio ion n is requi equire red d to gu guar aran ante teee lawf lawful ul

conduct. IS A forme ormerr em empl ploy oyee ee s cond conduc uctt is eith either er prop proper er un unde derr trad tradee secr secret etss law or it

is

not.

An

empl em ploy oyer er cann cannot ot enfo enforc rcee an ille illega gall rest restri rict ctio ion n on an

empl em ploy oyee ee s righ rightt to en enga gage ge in a prof profes essi sion on,, tra trade or bu busi sine ness ss un unde derr the gu guis isee o f prot protec ecti ting ng righ rights ts

no nott alr already eady prot protec ecte ted d by trad tradee sec ecrrets ets law. (See (See Loral

  orp v Moyes (19 1985 85)) 174 Ca Cal. l.Ap App. p.3d 3d 268 68,, 275 [ G Gen ener eral ally ly the the law law o f

unfa un fair ir comp compet etit itio ion n proh prohibi ibits ts fo form rmer er em empl ploy oyee eess from disc disclo losi sing ng or mi misu susi sing ng

Sim imil ilar arly ly no exce except ptio ion n is req requir uired ed to prev preven entt other other form formss o f unfair competition.   is alrea lready dy the the se sett ttle led d rule rule that that   th e emp mplo loye yerr will ill be able to rest restra rain in by cont contra ract ct on only ly tha thatt con conduc ductt o f the the form ormer em empl ploy oyee ee that that wo would uld ha have ve been sub ubje ject ct to judi judici cial al re rest stra rain intt un unde derr the the law law o f unfair comp competiti etition, on, abse absent nt th thee contr contract. act. Metro Met ro Tra Traffic ffic Co Cont ntro roll IIn nc. v Sha Shadow dow Traf Traffi ficc Network (19 1994 94)) 22 Cal Cal.A .AppA ppAth th 853,861, [qu [quoting oting Hays Hays,, Unfair Competition - Anot Another her Dec Decade ade (1963) 5 Ca Cal. l. L. L.Re Rev. v. 51 51,, 69 69]]; 15

Ho Holli lling ngsw swor orth th Sold Solderles erlesss Term Terminal inal   o v Turley (9th Cir. 1980) 62 622 2 F.2d .2d 1324,  338  33 8 [same].)  8

 

an emplo employer yer s trad tradee se secr cret etss an and d co con nfid fiden enti tial al in info form rmat atio ion n - ev even en in th thee absence

o

contractual contr actual restrictio restrictions ns ].)

Thus Th us,, im imp ply lyin ing g a trad tradee sec ecrrets exc xcep epti tio on to sect sectio ion n 16600 wo woul uld d add nothing to the ind indep epend enden entt bo body dy o

l w o

trad tradee secr secret etss law. Ca Case sess

invok inv oking ing the tra trade de se secr cret etss ex exce cept ptio ion n to se sect ctio ion n 166 660 00 are are simp simply ly appl applyi ying ng trad tradee sec secre rets ts law. Ther Th eree are good reasons to keep trade secrets law sepa separa rate te from se sect ctio ion n 166 660 00. Giv Giving ingju judi dicia ciall co cogn gniz izan ance ce to an un unwr writ itte ten n trad tradee secr secret etss except exc eption ion op open enss th thee po poss ssib ibil ility ity tha thatt ther theree are ot othe herr un unwr writ itte ten n jud judicia iciall exceptions

as

well. ll. Em Empl ploy oyer erss wo woul uld d kee eep p lo lob bby byin ing g for for ot othe herr un unwr writ itte ten n

exce except ptio ions ns,, and em empl ploy oyee eess an and d th thee co cour urts ts wo woul uld d ha have ve to ke keep ep de deal alin ing g deal eal with wit h the them. m.

As

we ha have ve sh show own n, ho howe weve ver, r, th thee plai plain n term termss

o

section sectio n 16 1660 600 0

prec preclu lude de un unwr writ itte ten n ex exce cept ptio ions ns for a na narr rro ow rest restra rain intt or an any y ot othe herr ki kind nd o rest restra rain intt not ex expr pres essl sly y au auth thor oriz ized ed by th thee Le Leg gisla islatu ture re.. Th Thee stat statut utor ory y fr fram amew ewor ork k sh sho ould no nott be un unde derrmi min ned by opening th thee do doo or to ot othe herr unauthorized unauthor ized exce exceptio ptions. ns. Thee Le Th Legi gisl slat atur uree se sepa para rate ted d trad tradee se secr cret etss law law from from th thee law regu regula lati ting ng nonc no ncom ompe peti titi tion on ag agre reem emen ents ts.. Th This is Co Cour urtt sh shou ould ld ke keep ep it tha thatt wa way. y.

 

In any ev event ent Ander Andersen sen s noncompe noncompetit tition ion agreeme agre ement nt re rest stri rict cted ed Edwards Edwards ri righ ghtt to w

r

far far more than han nece necess ssar ary y to prot protec ectt any any trad tradee secrets.

Anders And ersen en s no nonco ncomp mpeti etitio tion n agr agreem eement ent imp impose osed d res restri trictio ctions ns on Edwa Ed ward rdss far be beyo yond nd an any y ev even en th theo eore reti tica call nee need d to prote protect ct tra trade de secr secret ets. s. Unde Un derr the the agre agreem emen ent, t, fo forr eigh eighte teen en mo mont nths hs after after lea leavi ving ng An Ande ders rsen en,, Ed Edwa ward rdss coul could d no nott perf perfor orm m pro profes fessio sional nal ser servic vices es  

o

th thee ty typ pe he prov provid ided ed An Ande ders rsen en

 

for any cli clien entt on which he worked ked du durring ing the eigh eighte teen en mon ontths pri prior or to his his termination.   AA 1250,   8; 1275, Exh. 3.) This was a flat-out, im impr prop oper er restraint

o

enga engagi ging ng in his prof profes essi sion on with ith clie client ntss who wante anted d his his serv servic ices es,,

withou wit houtt regard wh whet ethe herr trad tradee se secr cret etss wo woul uld d be compromised. 16 Andersen never nev erthe theles lesss ar argu gues es this was a legi legiti tim mate ate rest restra rain intt on his trad tradee beca becaus usee Edwa Ed ward rdss cou could ld have have found othe otherr clie lients nts.  OB  O B 41 41--42 42)) As we ha have ve shown, howeve how ever, r, the on only ly leg legit itim imat atee re rest stra rain ints ts are tho those se expr expres essl sly y aut author horize ized d by sta tattut utee, and and this is not one

o

thos thosee exce except ptio ions ns.. Mo More reov over er,, the on only ly

Calif Cal iforn ornia ia case case cite cited d by Andersen in support o the leg legiti itima macy cy

o

an

18-mon 18month th re restr stric ictio tion n on Ed Edwa ward rdss pr provi ovidi ding ng serv servic ices es to fo form rmer er An Ander derse sen n client cli entss is

 o r l

Corp.

 

Moyes supra 174 Ca Cal. l.Ap App. p.3d 3d 268, a case case

invo involvi lving ng a prov provis isio ion n agai agains nstt raidi aiding ng em empl ploy oyee eess fr from om a form ormer em empl ploy oyer er.. Loral sim simply ply do does es not supp suppor ortt An Ander derse sen n s po posi siti tion on rega regard rdin ing g a rest restri rict ctio ion n

on serv servicin icing g fo form rmer er clie client nts. s. In addi additi tion on,, un unde derr An Ander dersen sen s no nonc ncom ompe peti titi tion on agre agreem emen ent, t, for tw twel elve ve mont mo nths hs aft after er leav leavin ing g An Ande ders rsen en,, Ed Edwa ward rdss coul could d not soli solici citt to perf perfor orm m professional profes sional ser servic vices es

o

the the type he prov provid ided ed an anyy client

o

the the offi office ce to

whic wh ich h he wa wass as asssigne igned d du durring ing the the eigh eighte teen en mo mont nths hs prec preced edin ing g his his termination.   AA 1250,   8; 1275, Exh. 3. 3.)) Ag Agai ain n this this flatat-out rest restrraint aint on Edwardss abil Edward abilit ity y to prac practi tice ce his prof profes essi sion on wa wass wit withou houtt rega regard rd to wh whet ethe herr it would wou ld pro protec tectt legi legiti tima mate te trad tradee secre ecrets ts.. The The on only ly appl applic icab able le Ca Cali lifo forn rnia ia case casess ci cite ted d in su supp ppor ortt

16

o

the the agre agreem emen entt are thos thosee inv involv olving ing cust custom omer er list listss that that

Cali Ca lifo forn rnia ia cour courts ts have have reje reject cted ed the the not notion ion o a pre presum sumpti ption on o

inevitable inevi table discl disclosur osuree o tra trade se seccrets as an ex excu cuse se to lim limit employee mobility.  Whyte v Schl Schlag agee Lock   o (2002) 101 Cal.A Cal.AppAth ppAth 14 1443 43,, 14 1458 58.) .) 30

 

amount only

if

to

tr trad adee se secr cret ets. s. (OB (OB 45 17 A cust ustomer omer list can be a trad tradee se secr cret et

it deri derives ves indep indepen ende dent nt ec econ onom omic ic valu valuee from no nott be bein ing g genera generally lly

know kn own n to th thee publ publiic or to othe otherr pers person onss who ca can n obt obtain ec econ onom omic ic valu valuee from from its disc disclo losu sure re or use, is the sub subject ject o f ef effo fort rtss th that at ar aree re reaso asonab nable le under under the ci circ rcum umst stan ance cess to main mainta tain in its se secr crec ecy, y, and and di disc sclo losu sure re will ill ca caus usee da dama mage ge to th thee empl employ oyer er s bus busines iness. s. (Civ. Code, § 342 3426.1 6.1,, su subd bd.. (d (d); ); Reeves v

Hanlon supra 33 Ca Call.4 .4tth at p. 1155; In re Prov Provid idia ian n Cred Credit it Card Card Cas ases es (2 (200 002) 2) 96 Cal.A al.App pp.4 .4tth 292, 292, 300300-30 301. 1.)) There is no evi vide den nce th that at is th thee ca case se here,

much

le less ss that that the the nonc noncom ompe peti titi tion on ag agre reem emen entt was was na narr rrow owly ly tail tailor ored ed to

protec pro tectt only only vali valid d trade trade se secr cret ets. s. Andersen Anders en s noncom noncompet petit ition ion ag agre reem emen entt was was pl plai ainl nly y overb overbro road ad..

 

In su sum, m, cont contra rary ry to Anderse Andersen n s as asse sert rtio ion, n, th thee Cour Courtt o f Ap Appe peal al did not not  ignor  ign or(e (e]] a weal wealth th

o f pre preced cedent ent

(OB (OB 45) in find findin ing g Anderse Andersen ns

noncom non compe peti titi tion on agreem agreement ent inva invali lid d under under se sect ctio ion n 16 1660 600. 0.  8 To the cont contra rary ry,,

The case The casess cite ited by Ande Anders rsen en ar aree Gordon v Landau supra 49 Cal. Cal.2d 2d at p. 694 (agr (agree eeme ment nt not not to use use co conf nfid iden enti tial al lists); Go Gold lden en St Stat atee Linen Linen  

v

  ut

69ha Cve al. l.A A pp atan p.d9Loral (sameCorp , rp dictum Service Vidalin supra Co beca becaus usee Inc defe defend ndan ants ts foun found d not not to have done dopp. ne.3d so so); ); and v Moyes supra 174 Cal. Cal.Ap App. p.3d 3d at p. 276 276 (s (sam ame, e, but di dict ctum um beca becaus usee ca case se in invo volv lved ed prov pr ovis isio ion n not not to raid raid fo form rmer er empl employ oyer er s empl employ oyeees es). ). See also also Buskuhl v Family Fam ily Life Life Ins o (196 (1969) 9) 271 Cal. Cal.Ap App. p.2d 2d 514, 514, 522 522 (c (con ontr trac actt to protect confident conf idential ial nature o f fina financi ncial al insti institu tuti tion on cus custom tomers ers valid) valid);; Gordon v Wasserman (1957 1957)) 153 Cal. Cal.Ap App. p.2d 2d 328, 328, 330 330 (c (con ontr trac actt to pr prot otec ectt confid con fident ential ial customer customer lists lists valid). valid). Anders Ande rsen en compla complains ins that th e Court o f Ap Appe peal al ad adop opte ted d a rule th that at appl applie iess to empl employ oyme ment nt cont contra ract ctss only. only. (OB 15.) 15.)  n fact, th thee Cour Courtt o f Appe Ap peal al expr expres ess(e s(ed d] no opinio opinion n on the operati operation on o f se sect ctio ion n 16600 16600 outs outsid idee  8

o f the the co cont ntext ext o f em emplo ployee yee noncompe noncompetit tition ion agreements agreements.. p. 22, fn 6.)

31

(S (Slip lip Opini Opinion, on,

 

ther theree is no Califo California rnia prec preceden edentt to val alid idat atee th thee agreem eemen ent. t. The stat statut utee should sho uld be un unde ders rsto tood od by its pl plai ain n te tenn nnss and no nott ridd iddled led wi with th im imag agin inar ary y except exc eption ionss th that at un unde denn nnine ine its la laud udab able le pu purp rpos oses es..

II

WHETHER OR NO T I T IS EN ENFO FORC RCEA EABLE BLE,, A RELEASE O F  A N Y AND AL ALL L CLAIMS PURPORTS T O RELEASE EVEN

ABLE LE CL CLAI AIMS MS;; AN EMPLO NONWAIVAB EMPLOYER YER VIOLATES VIOLATES INSIST ISTING ING THAT AN EMPLOYEE P U BL BL I C P OL OL IC IC Y BY INS SIGN SUCH A RE RELE LEAS ASE. E.

A.

Andersen Insisted That Edwards S ign A Rele Releas asee O f Claims ims Agains Againstt Anders Andersen en   A n y An d All Cla

Ande An ders rsen en mad adee it a co cond ndit itio ion n o f Edw Edward ardss obt obtain aining ing emp employ loymen mentt with wi th HSB HSBC C that that Ed Edwa ward rdss re rele leas asee An Ande ders rsen en from, am amon ong g ma man ny oth other er thin things gs,,  any  an y and all claims, including cl clai aim ms that that in any wa way y arise from or ou outt of, are base based d up upon on or rel elat atee to [Edw [Edwar ards ds ] em empl plo oym ymen entt by, asso associ ciat atio ion n wi with th or comp compen ensa sati tion on from from A An nde ders rsen en.. To th thee ex exte tent nt th that at this this prof proffe fere red d rele releas asee encomp enc ompass assed ed Edwards sta statut tutor ory y rig rights hts as Ande Andersen rsen s em empl ploy oyee ee,, it vio violat lated ed publicc poli publi policy. cy. Labo La borr Co Code de se sect ctio ion n 28 2802 02,, su subd bdiv ivis isio ion n (a), prov provid ides es in pe pert rtin inen entt par partt that that an em empl ploy oyer er shal shalll in inde den nmi mirry his or her her em empl plo oyee yee for all nec eces essa sary ry expe expend ndit itu ures res or loss losses es incu incurr rred ed by the the em empl ploy oyee ee in di dire rect ct co cons nseq eque uenc ncee o f the dis discha charg rgee o f hi hiss or her dutie ties

 

Thee co Th cost st o f de defe fend ndin ing g a laws lawsui uitt

ar aris isin ing g from an employ employee ee s di disc scha harg rgee o f his or her her dutie ties is one such inde indenm nmif ifia iabl blee exp expens ensee (s (see ee e. e.g. g.,, Douglas v Los ngele ngeless Her Herald ald Exa Examin miner er

3

 

(1975 (1975)) 50 Ca Cal. l.Ap App. p.3d 3d 449 449,46 ,461), 1), and Edw dwar ards ds was legi legiti tima mate tely ly co conc ncer erne ned d such such a la laws wsui uitt was in the offing.   abor Co Code de sect sectio ion n 28 2804 04 pr prov ovid ides es that that any ag agre reem emen entt ma made de by an any y

empl em ploy oyee ee to wa waiv ivee th thee bene beneffits its o f secti section on 28 2802 02 is  null null an and d void. void.

The

statu statute te means just that that,, nu nulll and voi oid. d.   Liberia v Vida Vidall 19 1966 66)) 240 24 0 Cal Cal.A .App. pp.2d 2d 273 73,, 276,

fn

1.) This reflects cts a stron trong g pu publ blic ic po poli licy cy to

pr prote otect ct em empl ploy oyee eess from bear bearin ing g the the cost cost o f their employers ent enterpr erprises ises..   Grissom   Va Vans ns Com Compan panies ies,, v

  nc

(1991)

 

Cal.A Cal .AppA ppAth th 52 52,, 59 59-6 -60; 0; Janken

Hughes Elec Electron tronics ics (19 1996 96)) 46 Ca Cal. l.Ap AppA pAth th 55, 74, th th.. 24.) 24.) Forc Fo rcin ing g an employee to waive his or her statu tuttory rights as a

condition o f obt obtain aining ing em empl ploy oyme ment nt vio viola late tess th this is pub public lic po poli licy cy..   D Sa   Playhu Pla yhut, t, In Inc. c. (2000)

85

Cal. Ca l.Ap AppA pAth th 927, 927,929929-934 934 [an em empl ploy oyer er canno cannott

la lawf wful ully ly mak makee the sign signin ing g o f a co cont ntra ract ct that that vi viol olat ates es pu publ blic ic po poli licy cy a condition o f continued empl employme oyment]; nt]; Bake Bakerr Pa Pacif cific ic Corp. rp.

v

Sutt Su ttle les, s, sup supra, ra,

220 22 0 Ca Cal. l.Ap App. p.3d 3d at p. 1154 [ req requi uiri ring ng pr pros ospe pect ctiv ivee em empl ploy oyee eess to sig ign n an ille illega gall agr agree eemen mentt as a cond condit itio ion n o f em empl ploy oyme ment nt is co cont ntra rary ry to law law ]].) .) Ind ndee eed, d, the the Le Legi gisl slat atur uree said aid so as plai plainl nly y

as

poss po ssib ible le in La Labo borr Co Code de

sectionA32.5: No em empl ploy oyer er,, or agen agent, t, ma mana nage ger, r, supe superi rint nten ende dent nt,, or of offi fice cerr ther thereo eof, f, sh shal alll req equ uir iree any em empl ploy oyee ee or ap appl plic ican antt fo forr employ empl oyme ment nt to agr gree ee,, in wri riti ting ng,, to any te term rm or co cond ndit itio ion n whic wh ich h is kn know own n by such such emp mplo loye yerr, or age gen nt, ma mana nage ger, r, su supe peri rint nten ende dent nt,, or of offi fice cerr there thereof of to be pr proh ohib ibit ited ed by law.

B

Any Any And All Does Does Not Not Mean Mean  Some  u

Nott No

Others

And nder erse sen n con onte ten nds th thaat the rel elea ease se it sou ough ghtt to im impo pose se on Edw dwaards co coul uld d no nott ha have ve inte intend nded ed to en enco comp mpas asss no nonw nwai aiva vabl blee righ rights ts be beca caus usee th that at  

 

woul wo uld d hav havee been wrong. Bu Butt right ight or wrong, the relea eleasse says wh what at it says.  

says  a ny and all ccllaims.

Any and all d do oes no nott mean ean an any y an and d all,

Stewart art Ti Titl tlee exce except pt thos thosee thin things gs that that coul could d get get us in trou troubl ble. e. As Stew

  o v

Herbert (19 (1970) 70) 6 Ca Cal. l.Ap App. p.3d 3d 95 957 7 ho hold ldss:

 All means eans ever everyo yone ne or the the who hole le nu numb mber er [citation}, and and it doe oess not ad admi mitt o f an exce except ptio ion n or excl exclus usio ion n not spe speci cifi fied ed [ci cita tati tion onJ. J. Th Thee wo word rd all all as defi define ned d in   Bou Bouvier vierss Law Dict Di ctio iona nary ry,, Th Thir ird d Re Revi visi sion on,, me mean anss Co Comp mple lete tely ly,, wh whol olly ly,, the whole who le am amou ount nt,, qu quan anti tity ty or nu numb mber er.. Id. at p. 962 19

Anders And ersen en s argu argume ment nt that that its prof proffe fere red d relea elease se did no nott pur purpo port rt to waiv wa ivee em empl ploy oyee ee inde indem mnity nity righ rights ts beca becaus usee it did no nott expl explic icit itly ly me ment ntio ion n empl em ploy oyee ee inde indemn mnit ity y righ rights ts (OB 46 46)) is ther theref efor oree futil tile.

An Any y and and all all rrig ight htss

nece necess ssar aril ily y incl includ uded ed em empl ploy oyee ee inde indemn mnit ity y righ rights ts.. (S (See ee Bardin v Lockheed Aeronautical Aeronauti cal Systems Systems

  o

(199 (1999) 9) 70 Ca Cal. l.Ap AppA pAth th 494,505 [ A App ppel ella lant nt

ar argu gues es that that the the rele releas asee does does not expr expres essl sly y relea elease se resp respon onde dent ntss from rom diss dissem emin inat atin ing g fa fals lsee or base basele less ss stat statem emen ents ts.. We do no nott find that that limi limita tati tion on in the the lang langua uage ge o f the re relea lease se..

 

br broa oadl dly y and and una unamb mbig iguo uous usly ly re rele leas ases es a fo form rmer er

 fro om any any  n all all liab liabil ilit ityy for dama damage ge o f wh what atev ever er ki kind nd . . .   employer  fr

(original (ori ginal empha emphasis)] sis)].) .)

 

The Rele Releas asee Cann Cannot ot Be Cons Constr tru ued To Mean Mean   nyth nythin ing g Othe Otherr Than Than What What  Says

And nder erse sen n ar argu gues es that that cour courts ts can can cons constr true ue exec execut uted ed cont contra ract ctss as valid to the the exte ten nt pe perm rmit itte ted d by law. Such Such cont contra ract ctss are not ne nece cess ssar aril ily y

 

Any and a  ll have have bee been n desc descri ribe bed d as the the most com compre prehen hensiv sivee

wordss in the En word Engl glis ish h langu languag age. e. North   Hawkinson (M (Mo. o. 19 1959 59)) 324 S.W .W..2d 733, 74 744 4 [s [sep epar arat atee op opin inion ion o f Pres Presiding iding Justice Sto Storc rckma kmanJ. nJ.)) 34

 

inva invali lida date ted d in ev ever ery y pa part rt just just because they are inva invali lid d is some pa parrt. (OB 59 59-6 -60. 0.)) That s

true true,, bu butt that that prin princi cipl plee has

no

appl applic icat atio ion n here. Th This is case case do does es

not invol involve ve an ex exec ecut uted ed release for whic hich the there was othe therwise va vali lid d consideration.

 

invo involv lves es an em empl ploy oyer er insi insist stin ing g tha thatt an em empl ploy oyee ee exe execu cute te

an inva invali lid d relea elease se in orde orderr to obtai btain n the the bene beneffits o f fut future ure empl employmen oyment. t. Whether

or

nott a signe no igned d releas leasee late laterr cou ould ld have be been en reform ormed to co comp mpor ortt

with wi th the the la law w, An Ande ders rsen en s ins nsiistenc tencee that that an em empl ploy oyee ee sign an un unla law wful ful rele releas asee was its itselfun elfunla law wful. An Ande ders rsen en s ar argu gume ment nt was mad adee an and d re reje ject cted ed in Baker Pacific Pacific Corp.

unintelligible.

v

Suttles Sutt les,, supra, supra, 220 Ca Cal. l.Ap App. p.3d 3d 1148, as cir circul cular ar and and

Id at p. 1154.)

  fa

relea lease is un unla lawf wful ul,, it follo ollow ws that that

requiring prosp prospective ective em emplo ploye yees es t o sign sign an ille illega gall agre agreem emen entt empl ploy oyme ment nt o f em

is cont contra rary ry to law law.

as

a condi conditio tion n

Ibid.

Ande An ders rsen en also ar argu guees tha that its cond conduc uctt was no nott un unla law wful be beca caus usee the the Labor Lab or Co Code de do does es no nott cr crim imin inal aliz izee atte attemp mpte ted d viol violat atio ions ns

o f La Labor bor

Co Code de

section ion 2802. (OB 54-55.) But an act does no nott have have to be criminal in order to be un unla lawf wful ul for pu purp rpos oses es o f a ca caus usee

o f acti action on

fo forr int inter erfe fere renc ncee wit with h

econo economi micc adva advant ntag age. e. The The act simp simply ly mu must st viol violat atee a cons consti titu tuti tion onal al,, st stat atut utor ory, y, re regu gula lato tory ry,, or comm common on law law prov provis isio ion n tha thatt re refl flec ects ts the pu publ blic ic of

 

v

Hanl nlon on,, supra, supra, policy thiss stat thi state. e.  Reeves Ha Cal.4t Cal. 4th h at p. 114 145. 5.)) Ande An ders rsen en viol violat ated ed the pu publ blic ic po poli licy cy o f thi this st stat atee by insi insist stin ing g that that its

empl em ploy oyee eess waive aive em empl ploy oym men entt righ ights gu guar aran ante teed ed to them them,, an and d no nott subj subjec ectt to wai aive verr, un unde derr the the La Labo borr Cod odee.

35

 

D

Th Thiis Cou ourrt Does No Nott Have To Rule That All Cont Co ntra ract ctua uall Re Rele leas ases es Vi Viol olat atee Pu Publ blic ic Po Poli licy cy In Orde Or derr To Rule That The Relea lease In This Case Vi Viola olates tes Pu Publi blicc Po Polic licy y

Ander An dersen sen offe fers rs a pa para rade de o f ho horr rrib ible le cons conseq eque uenc nces es th thee wor world ld will will suffer

i f the

re relea lease se o f em empl ploy oyme ment nt inde indemn mnifi ificat catio ion n rig rights hts it ins insist isted ed

Edwa Ed ward rdss sign sign is held wrongful. (OB 60-63.) But th thee vast ast majo ajorit ity y

of

rele releas ases es do not invo involv lvee em empl ploy oyme ment nt te term rmin inat atio ions ns or si simi mila larr si situ tuat atio ions ns tha thatt invo involv lvee ov over errid ridin ing g pu publ blic ic po poli licy cy conc concer erns ns and and un unwa waiv ivab able le st stat atut utor ory y ri righ ghts ts.. Furt Fu rth hermo ermore re,, ho how w dif ifffic icu ult co cou uld it be to add the ph phra rase se ex exce cept pt as ot othe herw rwis isee pro prohib hibite ited d by law to a re rele leas ase? e?

E

Edwardss Ga Edward Gave ve An Ande ders rsen en Th Thee Op Oppo port rtun unit ity y To Rewrite Rew rite Th Thee Re Rele leas asee To Av Avoi oid d Inva Invali lidi dity ty An Ande ders rsen en Chose Not To Do So

As betw betwee een n em emp ploy loyer and employ loyee, th thee em emp plo loy yer ought to bear bear th thee burden

o f dra raft ftin ing g

a vali lid d rel eleease se.. In this this cas asee, An Ande ders rsen en c

n t

even even pl plea ead d

ig ign noranc ance th thaat the the rel elea ease se it trie tried d to force on Ed Edwa ward rdss wo woul uld d hav avee req equ uir ired ed him to wai aive ve un unwa waiv ivab able le rights ts.. Edw Edwar ards ds wa wass pa pain infu full lly y awar awaree th that at he was expo expose sed d to po pote tent ntia iall li liab abil ilit ity y by Anders Andersen en s ma mark rket etin ing g shel shelte ters rs,, and and he spec specif ific ical ally ly ra rais ised ed the the is issu suee

o f dis disallo allowed wed

o f waiver o f his

tax

indemn indemnific ificatio ation n

righ rights ts wh when en An Ander dersen sen pres presen ente ted d him him wi with th the the re rele leas ase. e. Ne Neve vert rthe hele less ss,, Andersen made no cha changes and co con ntin tinued to in insi sisst th that at he sig ign n it on a tak akee it-or-lea it-or -leave-i ve-itt basi basis. s.

 

 

  ndersenmu must st ther theref efor oree de defe fend nd that that rele releas asee on a ta take ke-i -itt-or or-l -lea eave ve-i -itt

basis.   ndersencann cannot ot su succ cces essf sful ully ly do so beca becaus usee the rele releas asee is pat patent ently ly overbro ove rbroad ad and enco encomp mpas asse sess empl employ oyme ment nt rig ight htss th that at cann cannot ot be released.

  ON

LUS ON

Contrary to the the tria iall court s con conclus clusion ion Edw Edwards ards has establish established ed

wrong wr ongful ful acts acts by An Ander dersen sen nece necess ssar ary y to su supp ppor ortt hi hiss caus causee o f actio action n for intent int ention ional al int interf erfere erence nce with with pros prospec pectiv tivee eco econom nomic ic advant advantag age. e. Th e judgment o f the the Co Cour urtt o f Ap Appe peal al re reve vers rsin ing g the tr tria iall cou court rt s judgment judgment should

be aff affirm irmed. ed. Dated: March 1

b

2007

L

W OF OFFI FICE CES S OF Rl H RD   LOVE

Richard   Love Beth   Shenfeld GREINES GREIN ES MARTIN MARTIN STEIN Marc   Poster

Rl

HL

Robin Rob in Mead Meadow ow

 

f f . ~ ; ~ - ; E ~~=

At Attor torney neyss for for Plaintiff and Appella Appellant nt R

YMOND E DW DW

37

RD RD S I I

ND

LLP

 

  ERTIFI

TE  

Pursuant Purs uant to Cali Califo forn rnia ia Rule Ruless

OMPLI

o f Cou ourt rt,,

N

E

rul ulee 8.204 c l , th thee at atta tach ched ed

Answering  rief On The Mer Merits its was prod produc uced ed usin using g 13-p 13-poi oint nt Ti Time mess

  ew

Roman type style tyle an and d co cont ntai ains ns 9,25 9,256 6 word wordss not in incl clud udin ing g the ta tabl bles es o f conten con tents ts and au auth thor orit itie ies, s, ca capt ptio ion n page page,, sign signat atur uree bl bloc ocks ks,, or th this is Cert Certif ific icat ation ion page page,, as co coun unte ted d by the wor word proc proces esssing ing prog progra ram m us useed to ge gene nera ratte it.

Da te d : M ar ar ch ch

2007 LAW LA W OFFI OFFICE CES S OF RICH RICHAR ARD D

 

LOVE

GREI GR EINE NES, S, MART MARTIN IN,, STEIN STEIN   RIC RICHLA HLAND ND LLP LLP

Atto Attorn rney eyss for for Plaintif Plaintifff and Appell Appellant ant RAYMON RAY MOND D EDWAR EDWARDS DS II

38

 

P RO RO OF OF O F SERVICE

STATE OF OF CA C AL I F O R N IA COUNTY OF LOS AN A N GE L E S

)   )

I am empl emplo oye yed d in the County o f Lo Loss Ange Angeles les,, State State of California. I am ov over er th thee age of   8 and no nott a pa part rty y to the the with within in action; my bu bussin ineess address is 5700 5700 Wils Wilshi hire re Boulev Boulevard ard,, Suite Suite 375, 375, Loss Angele Lo Angeles, s, Californi Californiaa 90 90036 036-36 -3626. 26. On March 26, 26, 2007 2007,, I serv served ed th thee fore foreg goin ing g docu docume ment nt de desc scri ribe bed d as  nswering  rief O n The M er erii ttss on the the inte intere rest sted ed part partie iess in th this is acti action on by plac placin ing g a true true copy copy thereofenc thereofenclo lose sed d in seal sealed ed envelo envelope pess as st stat ated ed belo below. w.

xx

 YM

IL

I caus caused ed such such enve envelo lope pe to be de depo posi site ted d in th thee mail at Los Ang Angele eles, Cali Califo forn rnia ia.. The The en enve velo lope pe was mailed mailed with with posta postage ge thereo thereon n full fully y prep prepai aid d as fo foll llow ows: s:

SEE SE E ATTACH ATTACHED ED SERV SERVIC ICE E LIST LIST

I am re read adil ily y fami famili liar ar with with firm s prac practi tice ce o f col collec lection tion an and d processing processing corres correspon ponden dence ce fo forr mailin mailing. g.   is de depo posi site ted d with with U.S. U.S. po post stal al serv ervic icee on th that at same day in th thee ordi ordina nary ry cou ours rsee o f business. I am aware th that at on moti motio on o f party served served,, servic servicee is presume presumed d invalid invalid i f postal canc canceellat llatio ion n date ate or pos osta tage ge mete meterr date is more more th than an I day after ter da date te o f de depo posi sitt fo forr mail mailin ing g in affidavit. Execut Exe cuted ed on March 26, 26, 2007 2007,, at Los Los Ange Angele les, s, Cali Califo forn rnia ia..

  (State)

 

I decl declar aree unde underr pena penalty lty o f peJj peJjur ury y unde underr th thee laws laws o f th thee Stat Statee o f Cal Califo iforni rniaa th that at th thee fore forego goin ing g is tr true ue and and corr correc ect. t.

Z

R ebecca E Nieto

 

SERV SE RVII E LIST LIST

Wayne S Flic Flick, k, Esq Esq.. Yury Kap Kapgan gan,, Esq. Esq. Latham   Wat Watkins kins LL LLP P 633 We West st Fi Fift fth h ;;tr ;;tree eet, t, Su Suit itee 4000 Los An Ange gele les, s, CA 9007 900711-20 2007 07 Kristine L Wil Wilkes kes,, Es Esq. q. Colleen C Sm Smit ith, h, Esq Esq.. Sh Shir iree een n M. Be Beck cker er,, Es Esq. q. Latham   Watk Watkins ins LL LLP P 600 600 Wes Westt Broa Broadw dway ay,, Su Suit itee 1800 San Diego, CA 92 9210 1011-33 3375 75 Sharon A. McF cFaadden, Esq. courtesy copy Arthur Art hur An Ander dersen sen LL LLP P 33 Wes Westt Mon Monroe roe Stre Street et,, Flo Floor or   8 Chicago,IL 60 6060 6033-53 5385 85  ttor  tt orne neys ys for Defe Defenda ndant nt and and Resp Respon onde dent nt RTHU RTHUR R Cler Clerk k for the the Honorab Hon orable le Andr Andria ia K Richey Loss An Lo Ange gele less Su Supe peri rior or Cou Court rt   North Nor th Hill Hill Stre Street et Loss An Lo Ange gele les, s, CA 9001 90012 2 Office   the the Cler Clerk k Court   Appeal Second Sec ond App Appell ellate ate Di Distr strict ict,, Div Divisi ision on Thre Threee 300 300 So Sout uth h Sp Spri ring ng St Stre reet et Se Seco cond nd Floo Floor, r, No Nort rth h Tow Tower er Loss An Lo Ange gele les, s, CA 9001 900133-12 1233 33

NDER NDERSE SEN N LLP LLP

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