Professional Documents
Culture Documents
Arthur Andersen Opening Brief On The Merits
Arthur Andersen Opening Brief On The Merits
S147190
v.
I. ISSUES PRESENTED 1
D. Procedural History 8
IV. ARGUMENT 12
1
d. The legislative history of Section
16600 confirms the intent to bar only
prohibitions on engaging in a
business, trade or profession 31
11
3. The Court Of Appeal's Interpretation Of
The TONC Has Far-Reaching Adverse
Consequences And Leads To An Absurd
Result 60
V. CONCLUSION 65
111
TABLE OF AUTHORITIES
Page(s)
CASES
Brown v. Kling,
101 Cal. 295 (1894) 21, 35
Byrne v. Laura,
52 Cal. App. 4th 1054 (1997) 59
IV
Page(s)
Centeno v. Roseville Cmty. Hosp.,
107 Cal. App. 3d 62 (1979) , 32
Chamberlain v. Augustine,
172 Cal. 285 (1916) 19,20,21,22
Dunlop v. Gregory,
10 N.Y. 241 (1851) 34
v
Page(s)
Gordon v. Landau,
49 Cal. 2d 690 (1958) passim
Howard v. Babcock,
6 Cal. 4th 409 (1993) 23,24, 33
King v. Gerold,
109 Cal. App. 2d 316 (1952) 20, 28
VI
Page(s)
Moore v. Bonnet,
40 Cal. 251 (1870) 35
Morris v. Harris,
127 Cal. App. 2d 476 (1954) .43
People v. Standish,
38 Cal. 4th 858 (2006) 17
Perry v. Moran,
748 P.2d 224 (Wash. 1987) 39
Rodriguez v. Barnett,
52 Cal. 2d 154 (1959) 59
VB
Page(s)
Saala v. McFarland,
63 Cal. 2d 124 (1965) 32
Strong v. Theis,
187 Cal. App. 3d 913 (1986) 59
Swenson v. File,
3 Cal. 3d 389 (1970) 33
Wright v. Ryder,
36 Cal. 342 (1868) 31, 35
V111
Page(s)
STATUTES
IX
Page(s)
OTHER AUTHORITIES
x
Page(s)
Xl
I. ISSUES PRESENTED
state. First, the Court will determine the degree to which employers
"any and all" release language. On both issues, the Court of Appeal
1
In interpreting Business and Professions Code Section 16600
restrictions; its terms reach only contracts that prevent one from
thus outside the statute's prohibition. Second, the statute does not,
"every contract" and does not single out employment contracts for
2
None of these machinations was necessary or warranted. Long-
legitimate constraints.
releases "any and all" claims against his employer is unlawful despite
3
under Labor Code Section 2802 ("Section 2802"). In other words, the
and then used its creation as a rationale to invalidate it. Making this
the Court of Appeal was one that could have no legal effect. It is
terms of law, which the parties are presumed to know, and that, where
4
'Because neither the Non-Compete Agreement nor the TONC
should be reinstated.
1997 until 2002, when the facts giving rise to this lawsuit arose.
5
After leaving, although allowed to be employed by any Andersen
client (and anyone else for that matter), managers agreed not to raid
of its service teams to other firms in connection with closing its public
6
Andersen and cooperation in Andersen litigation in which the
might have against Andersen, "except for claims ... for any accrued
7
the agreement between HSBC and Andersen, Andersen was required
did not obtain a release from Andersen by signing the TONC. See
App. 542-76.
733-37. Edwards signed the July 8 offer letter, but thereafter refused
Edwards.
D. Procedural History
8
claim, all claims against Andersen have been dismissed through
issues from factual issues and then held as a matter of law that both
did not deprive Edwards of his right to pursue his profession and
therefore was not unlawful under Section 16600; and (2) the TONC's
9
standard release is silent on the issue of statutory indemnification
rights (and all other unwaivable rights), and therefore could not
First, the court held that the Agreement was invalid under
the statute. Id. at 791. The court adopted a bright line rule, outlawing
profession:
10
performing services for certain former clients, is invalid
under ... section 16600 unless it falls within the
statutory or "trade secret" exceptions to the statute. Such
a noncompetition agreement is invalid even if the
restraints imposed are narrow and leave a substantial
portion o/the market open to the employee. In so
holding, we conclude the "narrow restraint" exception to
section 16600, articulated by the Ninth Circuit, is not a
proper application of California law.
rights. The court found an implied waiver (in the face of contractual
Id. at 792.
11
Andersen to ask Edwards to sign the TONC in exchange for releasing
17,2007, the Court specified for review the two issues listed above.
IV. ARGUMENT
Agreement was invalid was based upon its sweeping, absolute reading
of Section 16600. The court held that Section 16600 proscribes all
practice his trade or profession. Id. at 798. This approach rewrites the
plain statutory language, and defies the decisions of this Court, other
law.
12
1. Section 16600 Does Not Bar All Employee Non-
Competition Agreements
Rather, the section bars only agreements that prevent one from
engaging in his or her line of work, and such agreements are invalid
only to the extent that they do so. The statute states: "[E]very
2
The broad rubric of "non-competition agreements" is itself an
invitation to imprecise and erroneous analysis. As the case law makes
clear, used carelessly, this term may include entirely distinct forms of
agreement, ranging from a blanket prohibition against an employee
competing with his former employer by barring him from that field
entirely, to competitive restrictions with field, time or geographic
limitations, to restrictions against soliciting any clients of the former
employer, to restrictions on soliciting specific named clients or clients
specified by category. Thus, "non-competition agreements" may
encompass absolute agreements not to compete, as well as "non-
interference" and "non-solicitation" agreements. Many of these
agreements are imbued with trade secret considerations, as well,
which are inseparable from employers' investment in the people who
carry those secrets with them.
13
contract by which anyone is restrained from engaging in a lawful
Bus. & Prof. Code § 16600. Thus, by its plain terms Section 16600
Trustees ofLeland Stanford Junior Univ., 817 F.2d 499,502 (9th Cir.
3
While the Court of Appeal acknowledged the established
principle that when interpreting a statute, courts are to "follow the
Legislature's intent, as exhibited by the plain meaning of the actual
words of the law," Edwards, 47 Cal. Rptr. 3d at 800 (citing Fitch v.
Select Prods. Co., 36 Cal. 4th 812,818 (2005», the Court of Appeal
nevertheless failed to examine the language of Section 16600. Id.
14
two examples of statutes categorically rendering certain forms of
interpretation.
in yet another critical way. The statute does not distinguish between
802-03.
"every contract" given the statutory scope, the court's reading means
15
restraints), or the court must read into the statute a limitation that
chose the latter, and its willingness to adopt a unique rule for
jurisprudence.
which permits all contracts to the extent that they do not prevent
with the statute's overall framework. Even contracts that fall within
16
these exceptions are exclusive: "Except as provided in this chapter,
void." Cal. Bus. & Prof. Code § 16600 (emphasis added); see also
4th 858, 870 (2006)), the court abandoned this principle. Because it
account for the contrary case law, the court was compelled to
4
What the statute outlaws is a contract in which: "anyone is
restrainedfrom engaging in a lawful profession . ..." "Restrained
from" means "prevented from"; it means "precluded from"; it means
"excluded from." The Legislature made clear that it meant a
preclusion. If the Legislature had meant to outlaw the broader
category of limits on engaging in a profession, not only a preclusion
from engaging, it could have adopted any number of word choices
stating that limits on engaging in a profession were meant to be
forbidden. But it did not do that. The statute covers post-employment
covenants that prohibit engaging in a profession (temporary as well as
permanent) not limits on engaging in a profession (left to common
law development).
17
penuitting non-competition agreements when necessary to protect the
801.
to cover circumstances to which the statute does not apply in the fIrst
instance.
18
reasonable restrictions on competition. In Gordon v. Landau, 49 Cal.
valid, and does not violate Section 16600. Id. at 694-95. In reaching
that conclusion, the Court specifically held that "[t]he contract did not
penalty upon the seller of his shares in a business ifhe should engage
under Civil Code Section 1673, the predecessor to Section 16600. Id.
was void. Id. at 288. Because the agreement barred the seller
19
geographic scope and preservation of a different occupation to the
service station at any time at any other place and there directly
20
competing with defendant." 231 Cal. App. 2d at 190-91. The
restriction did not even fall within the scope of Section 16600 because
business or trade:
Id. at 192 (emphasis added) (internal citations omitted); see also id. at
and prevents the party from earning a living, but the right to agree to
295,299 (1894)).
Cal. at 288. Nor does Boughton's reasoning conflict with this Court's
21
opinion in Chamberlain, as the Court of Appeal concluded. Id. at
and thus was invalid pursuant to former Civil Code Section 1673.
business, did not vitiate the agreement's total restriction upon the
Corp. v. Moyes:
v. Humanscale Corp., 130 Cal. App. 4th 401,411 (2005) ("[A] former
22
employee's right to pursue his or her lawful occupation is not without
limitation."); see also John F. Matull & Assocs., Inc. v. Cloutier, 194
Inc., 29 Cal. 4th 697, 706-07 (2002); see also Morlife, Inc. v. Perry,
56 Cal. App. 4th 1514, 1520 (1997); 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
and the foundation upon which its success, and indeed its survival,
23
(non-competition agreements "address important business interests"
ranks by soliciting away other employees. See, e.g., Loral Corp., 174
Cal. App. 3d at 276; Golden State Linen Serv., Inc. v. Vidalin, 69 Cal.
5
As this Court noted in Howard v. Babcock, the protection
afforded businesses by Section 16602 is so extensive that virtually
absolute restrictions on competition are permitted in the context of a
transfer of partnership interests. See 6 Cal. 4th at 416 (noting that
Section 16602 has justified enforcing broad covenants not to compete
among partners).
6 The Court of Appeal essentially ignored these cases, observing
only that because Edwards did not challenge the non-solicitation
24
The courts also enforce restrictions protecting an employer's
trade secrets. See, e.g., D'Sa v. Playhut, Inc., 85 Cal. App. 4th 927,
25
While a handful of decisions broadly construe Section 16600,
see Pet. for Review at 24-25, those cases do not support an absolute
26
Reuben H. Donnelley Corp., 62 Cal. 2d 239,242-43 (1965), held that
8
By comparison, the Andersen Non-Compete Agreement
imposed no penalty whatsoever for obtaining employment with a
competitor. See App. 1275. See also Int 'I Bus. Mach. Corp. v.
Bajorek, 191 F.3d 1033, 1041 (9th Cir. 1999) (distinguishing Muggill
as inapplicable when agreement contains only limited restraints).
27
c. The Ninth Circuit's "narrow restraint"
doctrine correctly interprets Section 16600
above, the Ninth Circuit's reading has stood for many years without
IS erroneous.
Boughton v. Socony Mobil Oil Co. and King v. Gerold. Following the
28
The courts of the Ninth Circuit consistently have applied this
precludes a party from pursuing his or her trade or business. See Int 'l
1131, 1133 (9th Cir. 1997); accord Merrill Lynch, Pierce, Fenner &
29
signed a contract agreeing not to solicit or deal directly with Disney
during the term of the contract and for one year after its termination.
Id. at 1132. Applying California law, the Ninth Circuit held the
packaging and shipping market, was valid: "[S]ection 16600 does not
30
d. The legislative history of Section 16600
confirms the intent to bar only prohibitions on
engaging in a business, trade or profession
good and valuable consideration, be valid."); see also Hill Med. Corp.
v. Wycoff, 86 Cal. App. 4th 895, 900-901 (2001); Vacca Indus., Inc. v.
Van Den Berg, 5 Cal. App. 4th 34, 47-48 (1992). In 1872, upon the
statutorily-defined standard. 9
9
Civil Code Section 1673, the predecessor to Business &
Professions Code Section 16600, provided:
Every contract by which anyone is restrained from
exercising a lawful profession, trade, or business of any
kind, otherwise than is provided by the next two sections,
is to that extent void.
Cal. Civ. Code § 1673 (1872).
31
vitality after the enactment of the Civil Code. Compare Hill Med.
Corp., 86 Cal. App. 4th at 901 ("California codified its public policy
the enactment of the Civil Code."); and Bosley Med. Group, 161 Cal.
same subject."); South Bay Radiology Med. Assocs. v. Asher, 220 Cal.
32
are not presumed to alter the common law otherwise than the act
expressly provides.").
See Howard, 6 Cal. 4th at 416 ("We have held that the common law
omitted). 10
enactment reveals that the Legislature did not intend to prohibit all
10
Indeed, it seems unlikely that the California Legislature
intended to change common law on covenants not to compete because
its enactment of Civil Code Section 1673 was merely part of a large
undertaking to codify existing California law into four different codes,
including civil, civil procedure, criminal and political codes. Section
1673 was included as one of hundreds of sections in Senate Bill 430,
"An Act to Establish a Civil Code," adopted in 1872. Section 16600,
passed in 1941, as Senate Bill 360, Ch. 526, is virtually identical to
Section 1673.
33
use of unreasonable restraints on trade barring an individual from
trade over an entire line of travel. See Cal. Civ. Code § 1673 (1872),
Commissioner's Note.
lawful trade are per se unreasonable and thus prohibited. See Cal.
be limited to a specified county; and to this effect, also, are the cases
34
of Wright v. Ryder, 36 Cal., p. 342, and Moore vs. Bonnet, 40 Cal., p.
11
As noted above, Wright v. Ryder, 36 Cal. 342, 358 (1868), held
that "an 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."
Moore v. Bonnet, 40 Cal. 251, 254 (1870), held that a covenant
precluding the exercise of a business throughout the entire state is
void, and could not be saved by construing it as limited only to San
Francisco since it was not a severable agreement; accordingly, it
failed as an unreasonable restriction. See also Brown v. Kling, 101
Cal. 295, 299 (1894) (upholding covenant not to compete limited to a
radius within five miles of the city for three years; "At common law
such a contract would have been valid.") (quoted with approval in
Boughton, 231 Cal. App. 2d at 193).
35
e. Out-of-state authority supports tailored
competitive restraints protecting customer
relationships
36
In fact, three of the four states that employ nearly identical
statutory prohibition. See Ex parte Howell Eng 'g & Surveying, Inc.,
2006 Ala. LEXIS 346 (Ala. Dec. 15, 2006); Dobbins, DeGuire &
(Mont. 1985). Accord Mont. Mountain Prods. v. Curl, 112 P.3d 979,
12
See Ala. Code. § 8-1-1 (2006); Mont. Code Ann. § 28-2-703
(2006); Okla. Stat. tit. 15, § 217 (2006).
37
miles for two years was unreasonable restraint because doctor-
Dobbins, 708 P.2d at 579; see also BDO Seidman v. Hirshberg, 712
Dunn, Creswell & Sparks v. Bowlin, 765 S.W. 2d 743, 746 (Tenn.
App. 1987) (covenant by which accountant agreed not to work for any
13
Michigan's similar statute, Mich. Compo Laws Ann. § 445.761,
also permits covenants not to compete that do not preclude a former
employee from pursuing his vocation. See, e.g., Merrill Lynch,
Pierce, Fenner & Smith Inc. v. Ran, 67 F. Supp. 2d 764 (E.D. Mich.
1999) (agreement by broker not to solicit brokerage firm's clients for
one year after termination enforceable because it did not preclude him
from pursuing his vocation). Research suggests that North Dakota is
the only state with similar statutory language to adopt a sweeping
prohibition on non-competition agreements comparable to that
announced by the Court of Appeal in this case. See Warner & CO. V.
Solberg, 634 N.W.2d 65, 71-72 (N.D. 2001); Werlinger v. Mut. Servo
Cas. Ins. Co., 496 N.W.2d 26,28-29,30 (N.D. 1993).
38
of employer's clients for three years was enforceable); Perry v.
former employee).
customers."); Dam, Snell & Taveirne, Ltd. v. Verchota, 324 Ill. App.
Waldron, 366 N.E. 2d 603, 606 (Ill. App. 1977) ("The protection of
39
this asset [the employer's clientele] is recognized as a legitimate
interest of an employer.").
In sum, should this Court look for guidance to the law of other
14
Contrary to Edwards's assertion in the Court of Appeal, AOB at
51, the validity of the Non-Compete Agreement is a question oflaw,
subject to resolution via summary adjudication or, as here, by bench
trial with the court ruling as a matter oflaw. See, e.g., Latona, 82 F.
Supp. 2d at 1093. Moreover, to the extent that certain facts must be
known to evaluate the validity of the Agreement, such facts are
disclosed by the record and are not in dispute. See RT 177:10-12.
40
a. The first restriction in the Agreement was
lawful
even in his area of subspecialty (tax accounting for high net worth
41
individuals). Merely restricting Edwards temporarily from servicing a
tiny group of former Andersen clients did not prevent or preclude him
performed "to go around all the different C.P.A. firms." See id. at
620-21. 15 Indeed, the trial court confirmed the breadth of this market,
Section 16600. See Loral Corp., 174 Cal. App. 3d at 279. Indeed,
15
After leaving Andersen, Edwards went to work for BDO
Seidman, then the fifth largest accounting firm in the country. App.
1266,2025.
42
employer's business or its relationship with customers. Loral, 174
Harris, 127 Cal. App. 2d 476 (1954), which the Court of Appeal read
from any of the clients of the employer for a ten-year period. Id. at
477. This broad restrictive covenant barred the employee even from
for a brief duration. This restriction did not prohibit Edwards from
43
not fall within the scope of Section 16600. See Gen. Commercial
Packaging, 126 F.3d at 1134; see also Int'l Bus. Mach Corp., 191
comer of the market but would not preclude him from engaging in his
For twelve months after you leave the Firm, you agree
not to solicit (to perform professional services of the type
you provided) any client of the office(s) to which you
were assigned during the eighteen months preceding
release or resignation.
App.1275.
provide any tax accounting services to any client of that or any other
firm (except for the few clients he serviced while at Andersen), and to
44
Without question, Andersen had an investment in its client
Section 16600); Loral Corp., 174 Cal. App. 3d at 276 ("Section 16600
* * *
The Court of Appeal's decision could be reached only by
field, do not violate Section 16600. The Court should have affirmed
the trial court's decision, finding the narrow restrictions in the Non-
Compete valid.
45
B. Contrary To The Court Of Appeal's Decision, The TONC
Is A Lawful, Standard Form Release
As discussed above, when Andersen sold portions of its Los
might have against Andersen, except for "claims ... for any accrued
rights. In the face of this silence, the court strained to create illegality
by importing into the agreement a term that was neither expressed nor
46
imported-a waiver of employee indemnification rights-is
2802 and 2804, and the principle that contracts incorporate all
release of "any and all" claims to be lawful, it must explicitly set out
the employees' acts within the course and scope of their employment.
Litigation ,-r 3: I (The Rutter Group 2005). Section 2802 codifies that
47
by the employee in direct consequence of the discharge of his or her
Section 2802], is null and void...." Cal. Lab. Code § 2804. Thus, by
implied waiver into the TONC. Id. ("The provision did not expressly
48
That approach was erroneous. An ancient and inviolate
know and to have had in mind, necessarily enter into the contract and
form a part of it, without any stipulation to that effect, as if they were
and citations omitted). Thus, Section 2802 could not have been
parties are presumed to know and to have had in mind" the law, and
the contracting parties. Baker Pacific Corp. v. Suttles, 220 Cal. App.
49
contract analysis. It means this: A release, to avoid
invalidation on public policy grounds the majority
asserts, must literally set forth and exclude from its
effects acts already so excluded by operation of law ...
if the releasor lacks the "sophistication" or "bargaining
strength" of the releasee, and arguably cannot therefore
be deemed to understand the principle of incorporation
[of law] ... , and its legal effect on, all releases in this
state.
50
Id. at 1163-64 (emphasis in original). The present case provides an
Indeed, the Court of Appeal here fell into precisely the trap
support in law. The court concluded that employers are better situated
16
While the Court of Appeal relied upon Baker, that decision
does not control this case. As the majority opinion notes, the releasee
in Baker was seeking to uphold a broad release proscribed by statute
(Civil Code Section 1668) on the theory that a party could contract to
contravene statutory proscriptions. 220 Cal. App. 3d at 1153. Here,
Andersen had no intent to seek a waiver of Edwards's unwaivable,
indemnity rights, and is not attempting to do so through litigation.
Andersen was attempting to follow the law, which it believed was
incorporated into its agreement with Edwards under the authority
cited above. The majority opinion in Baker is inapposite.
51
indemnification rights, and puts both employers and employees on
unconvmcmg.
Code § 2804 (emphasis added). The terms "null" and "void" mean to
have "no legal effect," but they do not mean wrongful or unlawful.
See Black's Law Dictionary 1098, 1604, 1644 (8th ed. 2004)
between a "void" act that has no legal effect and an act that is
obvious conclusion that tort liability should not attach to the former as
52
that the TONC was an independently wrongful act because it violated
as meaning "of no legal effect," the court nevertheless held that the
2804).
53
800. When the statute is viewed "in context," the Labor Code
Cal. Lab. Code § 206.5 (emphasis added). This section and numerous
18
See, e.g., Cal. Lab. Code § 215 ("Any person, or the agent,
manager, superintendent or officer thereof, who violates any
provision ... is guilty of a misdemeanor."); § 225.5 (b) ("For each
subsequent violation, or any willful or intentional violation, two
hundred dollars ($200) for each failure to pay each employee, plus 25
percent of the amount unlawfully withheld"); § 354 ("Any employer
who violates any provision of this article is guilty of a misdemeanor,
punishable by a fine not exceeding one thousand dollars ($1,000) or
by imprisonment for not exceeding 60 days, or both").
54
that purports to waive indemnification rights. Instead, Section 2804
trial court correctly held, "[T]he Labor Code pretty much tells us that
govern its interpretation."); Sierra Vista Reg '[ Med. etr. v. Bonta, 107
55
first step in interpreting intentions of parties); Brandt v. Lockheed
Missiles & Space Co., 154 Cal. App. 3d 1124, 1129-30 (1984)
ascertain what is contained therein, and courts are "not to insert what
has been omitted, or to omit what has been inserted." Cal. Civ. Proc.
Code § 1858.
RT 174.
The trial court followed the maxim set forth in Section 1858,
56
By contrast, the Court of Appeal interpreted the release to
who use the same standard release language do every day-the court
waiver into the contract was error. Cal. Civ. Proc. Code § 1858.
possible").
57
It is well established that "a contract must receive such
and capable of being carried into effect." Cal. Civ. Code § 1643
could have agreed with the trial court and found that the TONC did
Alternatively, the court could have interpreted, and did interpret, the
Cal. Civ. Code § 1643. As this Court has said: "If a contract is
58
interpretation as will make it lawful, operative, definite, reasonable,
and capable of being carried into effect, if that can be done without
2d 154, 160 (1959) (citation omitted; emphasis added); see also Cal.
courts have invoked this interpretive rule to find contracts lawful and
Cal. App. 3d 319, 325, 328 (1976) (in declaratory relief action,
create a trust rather than an oral joint tenancy); Strong v. Theis, 187
Cal. App. 3d 913, 919, 920 (1986); S. Tahoe Gas Co. v. Hofmann
59
The trial court followed established rules of contract
178 ("And I think using the interpretation rules that I have to these
[sic], the TONC is not illegal."). Likewise, the Court of Appeal easily
could (and should) have construed the release provision in the TONC
to be valid, by assuming that the parties did not intend a release not
expressed in the language of the contract, and that Section 2804 would
60
Practice Guide: Employment Litigation, Form 16:A ("Settlement
19 Indeed, the trial court noted that the TONC contains a "typical"
release. See RT 174 (July 21,2004). See also Jefferson v. Cal. Dep't
ofYouth Authority, 28 Cal. 4th 299, 302-04 (2002) (concluding
standard language releasing "all claims" in connection with settlement
of workers compensation claim was enforceable). As a result, the
Court of Appeal's invalidation of the release language has far-
reaching impact well beyond this employment dispute.
20 Among the claims which cannot be waived are minimum wage
claims under the Fair Labor Standards Act, D.A. Schulte, Inc. v.
Gangi, 328 U.S. 108, 116 (1946), EEOC claims, E.E.O.c. v. Cosmair,
Inc. v. L 'Oreal Hair Care Div., 821 F.2d 1085, 1090 (5th Cir. 1987),
claims for wages, Cal. Lab. Code § 206.5, and countless others. See
also Littlev. Auto Stiegler, Inc., 29 Cal. 4th 1064, 1077 (2003)
(Tameny claim unwaivable); County ofRiverside v. Superior Court,
27 Cal. 4th 793, 804-805 (2002) (listing some employee protections
that are not waivable by contract, including Labor Code Sections 219,
365,2804,2855, and Unemployment Insurance Code Section 1342, as
well as reciting numerous case law holdings as to rights which cannot
be waived). See generally Ann Taylor Schwing, 2 California
Affirmative Defenses § 47: 13 (2005 ed.), Rights and privileges that
61
Rather than promoting clarity and certainty for employees and
exceptions. 21
62
The burden of the Court of Appeal's new rule on commerce is
not explicitly carve out every unwaivable right from a general release
statute making such claims unwaivable by law and by the general rule
63
Corp., 29 Cal. 4th at 1153-54, 1159; Della Penna v. Toyota Motor
Second, the TONC also was lawful because it did not and could
law. As the trial court correctly held, "[T]he TONC is not illegal.
22
Indeed, the trial court concluded that "there wasn't any
significant restriction on [Edwards's] ability to work. There wasn't
even perhaps any minimal restriction on his ability to work."
Edwards, 47 Cal. Rptr. 3d at 798.
64
exchange for being released from the Non-Compete Agreement could
V. CONCLUSION
Without reason or necessity, the Court of Appeal has altered the
23
The legality of the TONC differentiates D'Sa v. Playhut, Inc.,
85 Cal. App. 4th 927 (2000), erroneously relied upon by the Court of
Appeal, from this case. In D 'Sa, the agreement in question was
unlawful under Section 16600 because it prohibited the employee
from working for a competitor. Id. at 934-35. Accordingly, requiring
the employee to sign such an unlawful agreement as a condition of
employment was a violation of public policy. Id. at 931-32. Here,
while Edwards needed to sign the TONC as required by HSBC, the
TONC did not itself contain an unlawful provision (it merely released
"any and all" claims), and it cannot be rendered unlawful because it
was utilized to undo the Non-Compete Agreement, because that
Agreement merely contained narrow restraints on competition, did not
prohibit employment with a competitor, and therefore was valid under
Section 16600, as discussed.
24 Even if this Court were to conclude that the Non-Compete
Agreement and/or the TONC were unlawful, thereby establishing the
"wrongful act" element of Edwards's interference claim, as the court
below recognized, Edwards would not necessarily be entitled to
judgment. The Court of Appeal's opinion and determination dealt
only with the third element of the tort. If the opinion below were
affirmed in either respect, then factual issues would remain for trial.
See Edwards, 47 Cal. Rptr. at 795, 804 n.7.
65
legitimate interests of employers in preserving their client
agreements, the Court altered Section 16600: That section does not
protection.
66
the decision below finds an employer has committed an unlawful act
term, and worse, when by law, it could not contain such a term. The
decision thereby turns standard "any and all" release language into a
senseless snare for liability, placing at risk not just employers, but any
requests that this Court reverse the Court of Appeal's decision and
67
CERTIFICATE OF WORD COUNT
subdivision (d)( 1), the text of this petition consists of 13,996 words as
68
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.!
Clerk of the Court Clerk of the Court
California Court of Appeal Superior Court of Los Angeles
Second District, Division Three 111 N. Hill Street
Ronald Reagan State Building Los Angeles, CA 90012
300 South Spring Street,
Second Floor
Los Angeles, CA 90013
LA\!629959.!