Escolar Documentos
Profissional Documentos
Cultura Documentos
8147190
v.
1. INTRODUCTION 1
V. CONCLUSION 16
TABLE OF AUTHORITIES
CASES
Chamberlain v. Augustine,
172 Cal. 285 (1916) 11
Gordon v. Landau,
49 Cal. 2d 690 (1958) 8, 12
Howard V. Babcock,
6 Cal. 4th 409 (1993) 13
11
Int'l Bus. Mach. Corp. v. Bajorek,
191 F.3d 1033 (9th Cir. 1999) 10
King v. Gerold,
109 Cal. App. 2d 316 (1952) 8
More v. Bonnet,
40 Cal. 251 (1870) 12
Wright v. Ryder,
36 Cal. 342 (1868) 12
STATUTES
OTHER AUTHORITIES
III
J. Boatman,As Clear as Mud: The Demise ofthe
Covenant Not to Compete in Oklahoma,
55 Okla. L. Rev. 491 (2002) 13
IV
I. INTRODUCTION
Appeal reconciled the case law by surmising that Section 16600 permits
at least accounted for the long line of authority upholding narrow non-
1
As shown by Arthur Andersen LLP, long-standing precedent permits
the only interpretation that comports with the statutory language and intent,
also the only reading that fairly balances the interests of employers (and
As· for his second argument, asserting the illegality of releasing "any
and all" claims, even where the release does not purport to, and legally
releases;
• Contracts uniformly are read to presume that the parties both knew
principles, courts will not imply terms not written and must adopt
2
Andersen's Non-Compete Agreement ("Agreement") and
accounting practice. 2 Andersen sold its Los Angeles tax practice to HSBC.
Edwards was not "sold" to HSBC-he was free to engage in his profession
Andersen utilized the TONC to release all employees moving to HSBC, not
3
just Edwards. Andersen had valid reasons for the TONC-including
Andersen's narrow Agreement was not within the scope of the prohibitions
4
Edwards suggests that Andersen had no legitimate reason for the
Agreement or the TONC because in 2002 Andersen was "withdrawing
from a trade." AB at 26. That assertion unfairly blurs the two agreements.
Edwards signed the Agreement (without protest) when Andersen hired him
as a tax manager in 1997. App. 386-87, 706. Obviously, Andersen then
had an ongoing interest in protecting its client relationships. In 2002, when
closing its practice, Andersen had a strong interest in receiving, as
consideration for release of the Agreement, employee cooperation in
litigation, part of the separate TONC.
5 E.g., AB at 1 ("There is ... no need to contort the plain language of
section 16600 by implying a 'trade secrets exception"'). Compare
Edwards v. Arthur Andersen LLP, 47 Cal. Rptr. 3d 788, 791 (2006) ("We
conclude a noncompetition agreement ... is invalid under ... section
16600 unless it falls within the statutory or 'trade secret' exceptions to the
statute") (emphasis added); id. at 796.
4
reasonable non-competition agreements are not prohibited by the statute, no
improper judge-made exceptions are necessary. Jd. at 18, 25. The plain
plain language. AB at 11. How this is so when the statute uses none of
profession, trade, or business of any kind is to that extent void." Cal. Bus.
Edwards focuses solely on the term "restrain," and concludes that "restrain"
must mean "limit," and therefore the statute bars all limits on employee
Oxford English Dictionary (2d ed. 1989) ("Restrain: To check, hold back,
5
person) back; prevent: restrained them from going.") (emphases added).
This reading of "restrain" comports with the case law. See, e.g., Bosley
does not-as Edwards reads it-say "all" restraints are invalid; it focuses
them to "that extent" only. Plainly, if a person can obtain employment with
and can practice with access to virtually limitless clients, OB at 42, that
6
This comports with the statute's public policy impetus: To protect
employees' ability to pursue their profession or calling (not their
"mobility," as Edwards claims). See Metro Traffic Control, Inc. v. Shadow
Traffic Network, 22 Cal. App. 4th 853, 859 (1994) (Section 16600 ensures
"that every citizen shall retain the right to pursue any lawful employment
and enterprise of their choice").
7 The Agreement did not restrict Edwards's employment opportunities
in any way. OB at 41-42,44.
6
all-instead, they promote it, and they therefore do not violation Section
16600. See Loral Corp. v. Moyes, 174 Cal. App. 3d 268, 276 (1985)
restrain trade and business do not violate the statute.") (emphasis added).
contract" and to "anyone." While Edwards and the Court of Appeal both
ignore this linguistic hurdle, any valid interpretation must consider that the
employment context. 8
8
The Court of Appeal evaded this problem by limiting its holding to
employment contracts, and Edwards takes the same way out. AB at 31
n.18. As discussed, however, OB at 15-16, the false dichotomy between
employment and other contracts not only ignores the plain statutory
language referring to "every contract," but it results in a rule created
without reference to the broader realm in which Section 16600 operates.
9 E.g.} AB at 1 ("implying an open-ended exception to section 16600,
even for 'narrow restraints,' would be bad public policy").
7
competition agreements because they are outside the scope of the statute's
prohibition. See Boughton v. Socony Mobil OilCo., 231 Cal. App. 2d 188,
exception that the Court of Appeal tried to craft. See Gordon v. Landau, 49
Corp., 174 Cal. App. 3d at 276 ("Section 16600 does not invalidate an
added); Golden State Linen Servo, Inc. Vo Vidalin, 69 Cal. App. 3d 1,9
8
employee will not solicit [employer's] customers after leaving its
employ"). II
"trade secret" cases at least had the benefit of accounting for some of the
case law. Inexplicably, Edwards discounts all of that law, opining that
enacted in 1985. Edwards simply cannot account for the numerous cases
created when the statute has legislative exceptions, OB at 17-18, 25, his
II
Edward's only response to Loral is that it involved a "provision
against raiding employees from a former employer," AB at 30, contrary to
the opinion. He attempts to distinguish the other cases (including Landau)
in a footnote, wrongly stating that they merely involve "customer lists that
amount to trade secrets." AB at 3 I n.!7 (emphasis added). Edwards does
not explain how that argument squares with his assertion that Section
16600 is an absolute prohibition, with only statutory exceptions, and that,
under his theory, there is no protection even for narrow agreements
relating to trade secrets. See n.5, supra.
12
E.g., D'Sa v. Playhut, Inc., 85 Cal. App. 4th 927,935 (2000) ("[A]
covenant not to compete will not be viewed as a violation of section 16600
if it is necessary to protect the employer's trade secrets....") (internal
quotation marks omitted).
9
the many cases, trade secret and otherwise, which uphold narrow non-
competition agreements. 13
13
See also Int'! Bus. Mach. Corp. v. Bajorek, 191 F.3d 1033, 1040-41
(9th Cir. 1999) (restriction excluding former employee "from one small
comer of the market [and] not preclud[ing] him from engaging in his
profession, trade or business" outside the scope of Section 16600); Gen.
Commercial Packaging, Inc. v. TPS Package Eng 'g, Inc., 126 F.3d 1131,
1133 (9th Cir. 1997).
14
Indeed, Edwards repeatedly has admitted that non-competition
agreements protecting trade secrets are valid despite Section 16600. See,
e.g., Appellant's Opening Brief at 34-35 ("[A] long line of well-settled and
undisturbed California authority holds that an employer may not interfere
with or restrict and employee's right to provide services to the employer's
clients, except where necessary to protect the employer's trade secrets and
therefore prevent unfair competition"); id. at 43 ("[T]he only valid
employment restraints are those which are narrowly drawn to protect a
trade secret."); Appellant's Reply Brief at 3 ("binding California precedent
... invalidates ... restrictions on an individual's right to compete ...
unless the restrictions are necessary to preserve the employer's trade secret
or other confidential information."); Answer to Petition for Review at 13
("judicially created exception" to Section 16600 "is found where the
particular restriction is 'narrowly drawn' and necessary to protect
confidential information"); id. at 20.
10
unlimited as to time, prohibiting salesman from calling on his· former
profession).15
unnecessarily harsh rule. Given the statutory scope, that rule would apply
critical portions. The Code Commission was concerned that the common
law had, in some instances, gone too far, allowing very broad prohibitions,
11
What Edwards ignores, however, is that the Code Commission did
restraints will be valid. 18 Thus, the legislature was concerned with the
unwarranted expansion of restraints on trade, not with their use per se.
preferred customers are a real asset to their business and the foundation
17
The Commission approvingly cited Wright v. Ryder, 36 Cal. 342,
358 (1868), which states that: "[A]n agreement in partial restraint of trade,
restricting it within certain reasonable limits or times, or confining it to
particular persons, would, if founded upon a good and valuable
consideration, be valid." See RJN, Ex. 2 at 7 (Cal. Civ. Code § 1673
(1872), Commissioner's Note).
18
The Code Commission wrote: "By the terms of this section ... , the
restraint to be imposed would seem to be obliged to be limited to a
specified county; and to this effect, also, are the cases of Wright v. Ryder,
36 Cal., p. 342, and [More] v. Bonnet, 40 Cal. 251 (1870)." RJN, Ex. 2 at 7
(Cal. Civ. Code § 1673 (1872), Commissioner's Note) (emphasis added).
12
upon which its success, and indeed its survival, rests"); cf Howard v.
In the face of the decisions by this and other California courts, and the
Ninth Circuit, the legislature has chosen not to alter Section 16600.10
19
Edwards's authorities recognize employer's interests. See R.
Gibson, The Legal Infrastructure ofHigh Technology Industrial Districts:
Silicon Valley, Route 128, and Covenants Not to Compete, 74 N.Y.D. L.
Rev. 575, 628 (1999) (rather than a "blanket prohibition" on non-
competition agreements, courts should balance the employee's interest in
mobility against the employer's interest in enforcing the covenant); C.
O'Malley, Note, Covenants Not to Compete in the Massachusetts Hi-Tech
Industry: Assessing the Needfor a Legislative Solution, 79 B.D. L. Rev.
1215, 1232 (1999) (broad prohibition on non-competition agreements
would "void[] the agreements providing assurance that a company's
investment will not easily defect to a competitor," and thereby "undermine
pre-existing employer-employee relationships"). Application Group, Inc. v.
Hunter Group, Inc., 61 Cal. App. 4th 881 (1998), cited by Edwards,
involved choice of law principles, and merely recognized California law
prohibiting restrictions on employment with a competitor, not an issue here.
20 Contrary to Edwards's position that the common law is unworkable,
the commentator he cites observes that the "dominant method of assessing
the validity of most types of restrictive covenants" is derived from the
common law. 1. Boatman, Note, As Clear as Mud: The Demise ofthe
Covenant Not to Compete in Oklahoma, 55 Okla. L. Rev. 491, 496 (2002).
13
As for Edwards's assertion that the common law leaves affected
which this Court can provide. A rule permitting narrow restrictions based
by the statute, once announced by this Court, will foster as much certainty
Edwards argues that "any and all" is broad language, which cannot
the TONC forced him to waive those rights, when, by law, such aprovision
. would have been null and void under Labor Code Section 2804. His
14
• An agreement will not be read to imply terms not written;21
unlawful;22 and
While Edwards tries to avoid these rules by arguing that the TONC
was not a true contract, because he never executed it, he thereby destroys
his own claim. Edwards alleged that the TONC is unlawful because it
waived his indemnity rights under Section 2804. App. 11, 137,391,400.
employee to waive the benefits of this article ... is null and void"). Thus,
for Section 2804 to apply in the first instance, the TONC must be a
contract, and by now claiming that the TONC is not a contract because he
Cal. Civ. Proc. Code § 185 8 (courts are "not to insert what has been
omitted, or to omit what has been inserted.").
22 See, e.g., Loral Corp., 174 Cal. App. 3d at 278 ("contract must be
construed to be lawful if possible"). See also Cal. Civ. Code § 1643.
23 E.g., City ofTorrance v. Workers' Camp. Appeals Bd., 32 Cal. 3d
371, 378 (1982) (all applicable laws are part of contract without any
provision to that effect). Edwards cites Bardin v. Lockheed Aeronautical
Systems, 70 Cal. App. 4th 494, 505 (1999), to support his contention that
"any and all" language releases employee indemnification claims, but that
case (which did not involve a release of unwaivable employee
indemnification rights) recognizes that contracts are interpreted under
existing law.
15
never signed it, Edwards defeats his own claim of unlawfulness under
Section 2804.
releases can be cured prospectively with addition of a tag line, stating that
the release does not apply to claims to which it cannot legally apply. AB at
36. Not only is it senseless to add verbiage stating what the law already
unspecified rights that cannot legally be waived) would hardly meet his
V. CONCLUSION
non-compete agreement, limited both in scope and time, and the TONe is a
standard "any and all" release. Neither is "unlawful," and Edwards has no
16
contracts are not wrongful acts for a tortious interference claim, Edwards's
nonetheless hold that use of such an agreement before this Court clarified
the law does not support a wrongful interference claim against Andersen.
17
CERTIFICATE OF WORD COURT
(d)(l), the text of this petition consists of 4,088 words as counted by the
petition.
18
PROOF OF SERVICE
I am familiar with the office practice of Latham & Watkins for collecting
and processing documents for mailing with the United States Postal Service.
Under that practice, documents are deposited with the Latham & Watkins
personnel responsible for depositing documents with the United States Postal
Service; such documents are delivered to the United States Postal Service on that
same day in the ordinary course of business, with postage thereon fully prepaid. I
deposited in Latham & Watkins ' interoffice mail a sealed envelope or package
containing the above-described document and addressed as set forth below in
accordance with the office practice of Latham & Watkins for collecting and
processing documents for mailing with the United States Postal Service:
LA\1629959.2
Jeffrey A. Berman, Esq. Scott H. Dunham, Esq.
Sidley Austin LLP Christopher W. Decker, Esq.
555 W. Fifth Street, Suite 4000 D'Melveny & Myers LLP
Los Angeles, CA 90013-1010 400S. Hope Street
Amicus Curiae Attorneys Los Angeles, CA 90071-2899
Amicus Curiae Attorneys
LA\1629959.2