edwards answer to petition for review
TRANSCRIPT
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8147190
IN THE SUPREME COURT
OF THE STATE OF CALIFORNIA
RA YMOND EDW ARDS II,Plaintiff and Appellant,
vs.
ARTHUR ANDERSEN, LLP,Defendant and Respondent.
Appeal From Los Angeles County Superior CourtAndria K. Richey, Judge
ANSWER TO PETITION FO R REVIEW;REQUEST TO ADDRESS ADDITIONAL ISSUES IN THE EVENT
THAT REVIEW IS GRANTED
Richard A. Love (#61944)Beth A. Shenfeld (#116223)
LA W OFFICES OF RICHARD A. LOVE11601 Wilshire Boulevard, Suite 2000Los Angeles, California 90025-1756
Telephone: (310) 477-2070Facsimile: (310477-3922
Attorneys for Plaintiffand AppellantRaymond Edwards II
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TABLE OF CONTENTSPage No.
INTRODUCTION 1
A. Sta tement o f th e Case 2
B. Appellate Court Decision 6
C. The Peti tion for Review Should be Den ied 7
LEGAL DISCUSSION 8
I . THERE A RE N O G RO UN DS FOR SUPREME C OU RT R E VI EW " 8
II . THERE IS N O BAS IS FOR REVIEW OF THE APPELLATECOURT'S DETERMINATION THAT 16600 INVALIDATEDTHE NON-COMPETEINON-SOLICITATION AGREEMENT . . . . 11
A. T he L aw Prohibiting Restrictive C o v ~ n a n t sin th eEmployment Context Is Neither Unsettled nor Subject toConflicting Opinions By th e California Courts 12
B. An Exception Validating "Narrow Restraints" Is Contraryto t he L aw and Policy 15
1. Narrow Res t ra in t Exception 15
2. Neither th e Statute nor Precedent Support s theJud ic ial Crea t ion of th e "Narrow Restraint"Exception Proposed by Petitioner . . . . . . . . . . . . . . . . . . . 18(a ) The s tatu to ry language expressly precludes any
additional exceptions . . . . . . . . . . . . . . . . . . . . . . . . 18(b) There is No California Judicia l Precedent fo r
Utilizing a "Narrow Restraint" Test In th eContext of Routine Employee N on-C ompete
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193. Significant Policy Concerns Mili tate Agains t th eConstruction Urged by Petitioner 21
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TABLE O F C ON TE NT (CON'T)
Page No.
III. THERE IS NO BASIS FOR R EV IE W O F T HE A PP EL LATECOURT'S DETERMINATION THAT THE PROPOSEDRELEASE ENCOMPASSED A WA IV ER O F STATUTORYINDEMNITY RIGHTS 22
A. Review is No t Necessary to Resolve Any Conflictor Unsettled Area of La w 23
B. Th e Appellate Court Correctly Determined th e Legal Effect
of Petitioner's Conduct in Interposing th e TONC as aCondition ofEdwards ' Employment with HSBCIWTAS . . . . . 24
1. Th e Appellate Court Properly Construed th e BroadRelease Language to Encompass Waiver o f IndemnityRights 25
2. No post hoc narrow construction 26
C. Th e Appellate Court Holding is Narrow, Confined tot he Unique Facts of This Case 29
CONCLUSION 30
REQUEST FOR R EV IE W O F A DD IT IO NA L ISSUES 31
ISSUES PRESENTED 31
WHY REVIEW SHOULD BE GRANTED 32
LEGAL DISCUSSION 32
I. CARTWRIGHT ACT PROHIBITIONS APPLY TOEMPLOYMENT BOYCOTT 32
CONCLUSION 35
I I
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Cases
TABLE OF AUTHORITIES
Page Nos.
Application Group, Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881 (1998) . . . . . 9
Armendariz v. Foundation Health Psychcare Services, Inc.,24 Ca1.4th 83 (2000) 27
Baker Pacific Corp. v. Suttles, 220 Cal.App.3d 1148 (1990) . . 2 ,10 ,11 ,23 ,26 ,27
Bardin v. Lockheed, 70 Cal.AppAth 494 (1999) 25
Boughton v. Socony Oil, 231 Cal.App.2d 188 (1964) 16
Campbell v. Trustees of Leland Stanford Jr. Univ.,817 F.2d 499 (9 th Cir. 1987) 15-17
Chamberlain v. Augustine, 172 Cal. 285 (1916) 10, 20
Chavez v. Whirlpool Corp., 93 Cal.AppAth 363 (2002) 32
Cianci v. Superior Court, 40 Ca1.3d 903 (1985) 33
D'Sa v. Playhut, Inc., 85 Cal.App.4th 926 (2003) 2,9-11,23,26
General Commercial Packaging, Inc. v. TPS Package Engineering,126 F.3d 113 (9 th Cir. 1997) 17
Golden State Linen Servo Inc. v. Vidalin, 69 Cal.App.3d 1 (1977) 13
Gordon Termite Controlv. Terrones, 84 Cal.App.3d 176 (1978) . . . . . 1,10,12,13
Howard v. Babcock, 6 Cal.4th 409 (1993) 9, 13
IB Mv.
Bajorek, 191 F.3d 1033 (9th
Cir. 1999) 17, 18,20
Jacobs V. Freeman, 104 Cal.App.3d 177 (1988) 27
John F. Matull & Assoc., Inc. v. Cloutier, 194 Cal.App.3d 1049 (1987) 13
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Cases
TABLE OF AUTHORITIES (CON'T)
Page Nos.
KGB, Inc. v. Giannoulas, 104 Cal.App.3d 844 (1980) 10,20
King v. Gerold, 109 Cal.App.2d 361 (1952) 16
Kolani v. Gluska, supra, 64 Cal.App.4th 407 9
Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003) 7
Latona v. Aetna U.S. Healthcare, Inc., 82 F.Supp.2d 1089 (C.D. Cal. 1999). 17,28
Loral Corp. v. Moyes, 174 Cal.App.3d 268 (1985) " 13
Marin County Board of Realtors, Inc. v. Palsson, 16 Cal.3d 920 (1976) . . . . 32,33
Metro Traffic Control, Inc. v. Shadow Traffic Network,27 Cal.App.4th 853 (1994) 10, 12
Morris v. Harris, 127 Cal.App. 476 (1954) 1, 10, 12,20
Moss, Adams & Co. v. Shilling, 179 Ca1.App.3d 124 (1986) 12
Mugill v. Rueben H. Donnelly Corp., 62 Cal.2d 239 (1965) 20
Nichols v. Spencer Intern. Press, Inc., 371 F.2d 332 (7th Cir. 1967) 33
Nichols v. Spencer International Press, Inc., 371 F.2d 332 (7th Cir. 1967) 33
Ostrofe v. H.S.Crocker Company, Inc., 740 F.2d 739 (9 th Cir. 1984) 33,34
People v. Standish, 38 Ca1.4th 858 (2006) 9, 19
PG&E v. Thomas Drayage Co., 69 Cal.2d 33 (1968) 26
Quinonez v. National Association of Securities Dealers, Inc.,540 F.2d 824 (5 th Cir.1976) 33, 34
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Cases
TABLE OF AUTHORITIES (CON'Tl
Page Nos.
Radovich v. NFL, 352 U.S. 445 (1957) 33,34
Rojas v. Superior Court, 33 Ca1.4th 407 (2004) 9, 19
Roman v. Cessna Aircraft, 55 F.3d 542 (10 th Cir. 1995) 33,34
S.Bay Radiology Med. Assoc. v. Asher, 220 Cal.App.3d 1074 (1990) 13
Sta te ex rei Van De Kamp v. Texaco, Inc., 46 Ca1.3d 1147 (1988) 32,34, 35
Stephens v. County o f Tulare, 38 Ca1.4th 793 (2006) 9
Thompson v. Impaxx, Inc., 113 Cal.App.4th 1425 (2003) . . . 1,2, 11,12,24,26,27
Vacco Indus. Inc. v. Van Den Berg, 5 Cal.App.4th 34 (1994) 13
Statutes Page Nos.
Business & Professions Code 16600 1,6 ,9-15 ,17 ,19 ,20 ,35Business & Professions Code 16601 and 16602 9, 13, 18Business & Professions Code, 16700 et seq 32Business & Professions Code, 16720, 16726 32
California Rules of Court, Rule 28(b) 8, 29California Rules of Court, Rule 28(a)(2) 31,36
Civil Code 1638 25Civil Code 1673 14,20
Labor Code 2802 5,7 , 10Labor Code 2804 10
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INTRODUCTION
The petition by defendant Arthur Andersen, LLP seeks review of
two findings in the appellate court's decision confIrming, on the particular
facts presented, that an employer's interference with an employee's
prospective employment subjects the employer to liability where the
employer (1) asserts the provisions of an overly broad and impermissible
non-compete agreement as an impediment to the employment; or (2)
requires the employee sign an overly broad release relinquishing
nonwaivable statutory rights as a condition of future employment. The
decision does not, as petitioner suggests, "transform" California law or
depart from the applicable precedent. Indeed, there is nothing particularly
radical about the decision which confirms:
(1) In the employer/employee context , broad covenants not to
compete - such as the one presented in this case - are unenforceable under
the clear and express language of Business and Professions Code 16600
(See, e.g., Morris v. Harris, 127 Ca1.App. 47 6 (1954) - ban on client
solicitation invalid; Gordon Termite Control v. Terrones, 84 Ca1.App.3d
176 (1978) - anti-solicitation covenant invalid; Thompson v. Impaxx, Inc.,
113 Ca1.App.4th 1425 (2003)).
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(2) An employer may not penalize an employee who refuses to
execute an agreement which contains illegal provisions where the employer
presents the agreement on a take-it-or-leave-it basis, refuses to negotiate the
offending terms, or otherwise clarify its intent not to enforce the
impermissible terms. Baker Pacific Corp. v. Suttles, 220 Ca1.App.3d
1148, 1155 (1990); D'Sa v. Playhut, Inc., 85 Ca1.App.4th 926 (2003);
Thompson v. Impaxx, Inc., 113 Ca1.App.4th 1425 (2003).
A. Statement of the Case
Plaintiff Raymond Edwards was employed as a Tax Manager by
petitioner Arthur Andersen in Los Angeles. Appx. 1249-1250, 1264.
Following its indictment on federal charges, Andersen began selling of f its
practice groups to various entities. Appx. 1252-1254. Certain employees,
including Edwards, were offered employment by WTAS/HSBC, the
company acquiring Edwards' particular practice group; Edwards accepted
the offer. Appx. 1260,1264, 1304-1308,1320-24. However, as a condition
of employment by WTAS, Andersen required that its employees, including
Edwards, secure Andersen's release from a broad non-compete agreement
previously executed as a condition of employment with Andersen [Appx.
1441, 1452]; this requirement was curious, as Andersen was transferring the
practice group to WTAS for compensation, and had no apparent interest in
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preventing its former employees who were hired by WTAS from providing
tax/accounting services to former clients.
Rather than provide Edwards with a release, Andersen presented him
- and the other employees - with a proposed agreement ent it led
"Termination of Non-compete" ("TONC") which, among other matters,
required Edwards to "waive" his rights to compensation or indemnification
from Andersen for any penalties or losses arising from the tax practice and
advice provided to clients at the direction of Andersen (and its partners and
principals), and to release Andersen from any liability for any civil wrongs
or i llegal acts Andersen may have committed against him. Appx. 961, 963
65,968,1441,1452,1407-1408.
The re lease was as broad as i t could be, with only two express
exceptions: (1) claims arising out of Andersen's obligations under the
TONC, or (2) claims for accrued salary or other benefit or compensation
owing to the employee as of the date of the agreement:
"Notwith.standing anything to the contrary
herein, Employee, on behalf of Employee,
Employee's heirs, administrators, estates,
executors, personal representatives, successors
and assigns, does hereby release and forever
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discharge AA, Andersen Worldwide Society
Cooperative ("A W" ) and their respective
affiliated firms, and each of their respective
assigns, past or present partners, officers,
principals, directors, employees, agents,
successors (whether at law, equity or
otherwise), and affiliates (collectively, the
"Released Parties") f rom any and a ll actions,
causes o f action, claims, demands, debts,
damages, costs, losses, penalties, attorneys fees,
obligations, judgments, expenses, compensation
or liabilities of any nature whatsoever, in law or
equity, whether known or unknown, contingent
or otherwise, that Employee now has, may have
ever ha d in the past or may have in the future
against any of the Released Parties by reason of
any act, omission, transaction, occurrence,
conduct, circumstance, condition, harm, matter,
cause or thing that has occurred form the
beginning of t ime up to and including the date
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hereof, including, without limitation, claims that
in any way arise from o r o ut of, are based upon
or relate to Employee's employment by,
association with or compensation from AA or
any of its affiliated firms, except for claims (1)
arising out of AA's obligations set forth in the
Agreement or (ii) for any accrued and unpaid
salary or other employee benefit or
compensation owing to Employee as o f the date
hereof . . . " [emphasis added]
Appx. 1407-1408.
Andersen prepared the TONC and made receipt of the executed
TONC an express condition in the acquisition documents, which prohibited
WTAS/HSBC from hiring any Andersen employee who did not sign the
TONC. Appx. 961, 963-65, 968,1027-28,1035-36,1254-56,1441,1451-
52. When Edwards voiced his concern about the scope of the release
provisions which purported to waive his statutory right to indemnity under
Labor Code 2802, Andersen did no t dispute his interpretation, refused to
negotiate the scope of the release to exempt the indemnity waiver, and
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insisted that Edwards accept the terms as written. Appx. 1262-67, 1310,
1316-17, 1264. When he refused, Andersen closed the HSBCIWTAS
transaction excluding Edwards from the list of employees to transfer [Appx.
1035,1195-1200,1202-3,1424], WTAS/HSBC revoked his employment
offer [Appx. 1264, 1265-66], and Andersen terminated his employment.
Andersen also denied Edwards termination benefits, asserting that his
refusal to s ign the TONC wa s a "resignation". Appx. 1182, 1264-65.
The trial court dismissed Edwards' claim alleging anti-trust
violations at the pleading stage. During pre-trial proceedings, and without
taking any evidence, the trial court ru led , as a mat ter of law, that Edwards
could not establish that Andersen engaged in any "wrongful conduct" when
it refused to release Edwards from the il legal non-compete, and required
execution of the TONC as a cond it ion for Edwards' employment by
WTAS/HSBC.
B. Appellate Court Decision
The Court of Appeal, in a thoughtful and well-reasoned opinion,
reversed, finding, among other matters:
1. The broad non- compete was inval id under Business and
Professions Code 16600 and against public policy, and requiring Edwards
to execute the TONC in order to secure release from the noncompete was
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an "independently wrongful act" for purposes of the elements of the
intentional interference claim (142 Cal.App.4th 625-627);
2. The broad release in the proposed TONC purported to waive
Edwards' unwaivable statutory indemnity rights (Labor Code 2802);
therefore, Andersen's requirement that Edwards execute the TONC as a
condition of employment with HSBC was also an independently wrongful
act supporting the intentional inference claim. J (142 Cal.App.4th at 631)
c. Th e Petition fo r Review Should be Denied
First, petitioner contends that review is necessary to resolve an
important issue of unsettled law concerning the enforceability of broad non-
compete agreement s. In fact, there is no conf lict among the California
appellate courts as to the validi ty of the type of non-compete agreement at
issue here: without exception, every court that ha s considered such an
agreement has h eld it invalid.
Andersen also challenges the appellate court's finding that the broad
The elements o f a cla im for wrongful interference withprospective economic advantage are: (1) an economic relationship betweenplaintiff and a third party with the probability of future economic benefit toplaintiff; (2) defendant' s knowledge of the relationship; (3) an intentionalwrongful ac t by defendant des igned to disrupt the relat ionship; (4) actual
disruption; and (5) economic harm to plaintiff proximately caused bydefendant's conduct. Korea Supply Co. v. Lockheed Martin Corp., 29Cal.4th 1134, 1153-54 (2003). Th e trial court ha d concluded, as a matterof law, that plaintiff could no t establish the third element - independentlywrongful act.
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release encompassed an impermissible waiver of statutory indemnity rights,
and argues that review is necessary to provide "clarification and
uniformity" on the issue of standard contractual release language. This
case, however, does not present an appropriate vehicle for "clarification" of
the rules of interpretation of release language in executed agreements for
the simple reason that there was no executed release here.
I t was not, as petitioner suggests, employment contract provisions in
executed agreements which were deemed to be "wrongful acts", but
petitioner's conduct, in refusing to release Edwards from invalid provisions,
and requiring his assent to additional invalid provisions which were
"wrongful acts" supporting the interference claim - a conclusion which
finds ample judicial precedent. The appellate decision was properly limited
to these peculiar facts , and does no t implicate the concerns raised by
petitioner. Supreme Court review is neither necessary nor appropriate.
LEGAL DISCUSSION
I . THERE AR E N O G RO UN DS FO R SUPREME COURT
REVIEW
Review should be denied here for the s imple reason that it is
unnecessary to decide an important or novel legal question or secure
uniformity in case law. (See, Ca1.Rules of Court, Rule 28(b))
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The appellate court's holding rests upon the following well-settled
and uncontroversial principles:
(1) The Court interprets a statute according to the plain meaning
of th e words of the statute which are the expression of legislative intent
behind the statute: if th e language is unambiguous, the inquiry ends.
Stephens v. County of Tulare, 38 Ca1.4th 793,801 (2006). Where
exceptions to a general rule are speci fied by s ta tute , other exceptions are not
to be implied or presumed unless a contrary legislative intent is evident.
People v. Standish, 38 Ca1.4th 858, 87 0 (2006); Rojas v. Superior Court, 33
Ca1.4th 407, 424 (2004).
(2) Except as provided in 16601 and 16602 (validating
reasonable restraints in connection with sale o f goodwill of a business or
dissolution of a partnership - neither of which are applicable here),
Business & Professions Code 16600 invalidates "every contract by which
anyone is restrained from engaging in a lawful profession, trade, or business
of any kind". Howard v. Babcock, 6 Ca1.4th 409, 416 (1993); Application
Group, Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881, 900 (1998); Kolani
v. Gluska, supra, 64 Cal.App.4th 407, D'Sa v. Playhut, supra, 85
Cal.App.4th at 933.
(3) Th e California courts agree that, in the employment context, th e
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provisions o f Bus & Prof Code 16600 presents "an absolute ba r to post-
employment restraints"; the statute makes no exception for "partial"
restraints (Morris v. Harris, 127 Cal.App.476 (1954); Chamberlain v.
Augustine, 172 Cal. 285 (1916)) or even those which are "reasonably
limited in time and geographic scope" (KGB, Inc. v. Giannoulas, 104
Cal.App.3d 844, 848 (1980)). Indeed, no California court has validated a
non-compete or non-solicitation in the absence o f a showing (not made
here) that the restriction was necessary to protect trade secret - the only
judicially recognized limitation on 16600. See, e.g., Metro Traffic
Control, Inc. v. Shadow Traffic Network, 27 Cal.App.4th 853, 861 (1994);
Gordon Termite Control v. Terrones, supra, 84 Ca1.App.3d at 178. (4) An
employer who conditions employment upon execution of an agreement
containing illegal provisions engages in wrongful conduct that violates
public policy. Baker Pacific Corp. v. Suttles, 220 Ca1.App.3d 1148, 1155
(1990); D'Sa v. Playhut, Inc., 85 Ca1.App.4th 927 (2003).
(5) California Labor Code 2802 requires an employer to
indemnify its employees for losses incurred in consequence o f the discharge
o f his duties; any agreement to waive these benefits is void. Labor Code
2804;
(6) Where an employer presents an employee with a proposed
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agreement on a t a k e ~ i t ~ o r - I e a v e i tbasis, the court will no t reform th e
proposed contract or engage in "post hoc narrow construction" to validate
an illegal provision, particularly where the employer has refused to
negotiate the offending terms, or otherwise clarify its intent not to enforce
the impermissible terms. Baker Pacific Corp. v. Suttles, 220 Cal.App.3d
1148, 1155 (1990); D'Sa v. Playhut, Inc., 85 Cal.AppAth 926 (2003);
Thompson v. Impaxx, Inc., 113 Cal.AppAth 1425 (2003).
Guided by this precedent and the unambiguous language of the
relevant statutes, the appellate court correctly concluded that 16600
invalidated the restrictive covenants and that the broad release language of
the TONC impermissibly encompassed a waiver o f statutory indemnity
rights.
I I . THERE IS NO BASIS F O R R EV IE W OF THE APPELLATE
COURT'S DETERMINATION THAT 16600 INVALIDATED
THE NON-COMPETE/NON-SOLICITATION AGREEMENT 2
2 Petitioner apparently concurs that i f th e agreement wasinvalid, its conduct in refusing to release Edwards would constitutewrongful conduct. The issue presented by petitioner solely addresses the
scope and interpretation of 16600 and whether it "prohibits al l employeenon-competitions agreements (except those within the statutory exceptionsof Sections 16601 an d 16602 or the judge-made "trade secrets" exception)as the Court of Appeal held, or does Section 16600 invalidate n o n ~
competition agreements only to the extent that they prevent the pursuit of a
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A. The La w Prohibiting Restrictive Covenants in th e
Employment Context Is Neither Unsettled nor Subject to
Conflicting Opinions By th e California Courts
Petitioner asserts that the appellate decision "upends" the law,
creating a confl ict among the distr ict courts and requiring this Court's
immedia te intervention. Nothing could be further f rom the truth. In fact, it
is petit ioner's argument that departs from the statutory language and upends
precedent in order to conform the law to immunize its conduct .
The courts have uniformly interpreted the provisions of section 16600
broadly to protect an individual's r ight to employment in the business of his/her
choice even where he competes with his former employer. Metro Traffic Control
Inc. v. Shadow Network, supra, 22 Cal.AppAth 853; Gordon Termite Control v.
Terrones, supra, 84 Cal.App.3d 176. And the appellate courts have repeatedly
invalidated restrictive covenants similar to those presented here. See, Morris v.
Harris, supra, 127 Cal.App. 476; Gordon Termite Control v. Terrones, supra, 84
Cal.App.3d 176 - anti-solicitation covenant; Moss. Adams & Co. v. Shilling, 179
Cal.App.3d 124 (1986) - anti-solicitation covenant; Thompson v. Impaxx, Inc.,
supra, 113 Cal.App.4th 1425 - anti-solici tation covenant. In fact, petit ioner cites
to no California appellate case upholding similar restr ictions in the
lawful trade, profession or business". [Peti tion for Review ("Petit ion), p. 1]
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employer/employee context in the absence of a showing that the restr ictions were
necessary to protect trade secrets.
The only judicially created exception to the statutory prohibition is found
where the particular restriction is "narrowly drawn" an d necessary to protect
confidential information - an argument no t presented here. Indeed, the vast
majority of the cases upholding restrictions (and which petitioner cites as evidence
of the "conflict" among the courts) fall within this category. See, e .g. , Gordon v.
Landau, 49 Ca1.2d 690 (1958); John F. Matu/l & Assoc., Inc. v. Cloutier, 194
Cal.App.3d 1049 (1987); Golden State Linen Servo Inc. v. Vida lin , 69 Cal.App.3d 1
(1977); Loral Corp. V. Moyes, 174 Cal.App.3d 268 (1985).
The distinction is significant; when considered in the context of the
particular facts presented, the cases are clearly harmonized and present no conflict
requiring resolution. 3
In the face of this precedent, petitioner valiantly attempts to manufacture a
"conflict" by suggesting that the appellate courts have taken different positions on
whether the statutory scheme was a codification of the common law or a rejection
of it. See, Pet it ion, p. 17-20. The analysis by the court of appeals here, recounting
The other cases cited by Petitioner as evidence of the"conflict" are inapposite. Fo r example: Vacco Indus. Inc. v. Van Den Berg,5 Cal.App.4th 34 (1994), S.Bay Radiology Med. Assoc. v. Asher, 220Cal.App.3d 1074 (1990), and Howard V. Babcock, 6 Ca1.4th 40 9 (1993) allinvolved construction of the statutory exceptions (16601, 16602) to16600.
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the common law development in the area of restrictive covenants, confirms that any
difference stems from the changing nature of the common law in the 19 th century,
and, not, as petitioner suggests, from any disagreement about the public policy
underlying the statute or the scope of the prohibition: 4
These authorities may easily be harmonized. As we
have observed, the common law rule changed over
time. Wright v. Ryder, supra , 36 Cal . at p. 357.) Fairly
read, the foregoing authorities suggest section 16600
embodies the original, strict common law antipathy
toward restraints of t rade, while the section 16601 and
16602 exceptions incorporated the later common law
"rule of reasonableness" in instances where those
exceptions apply." 142 Cal.App.4th at 623, fn.6.
Indeed, i t was the erosion o f the common law prohibition against restraints which
prompted the legislature to enact Civil Code 1673 (the predecessor to 16600)-
which was designed, not to relax such prohibitions, bu t to clarify the public policy
against employment restraints. See discussion at 142 Cal.AppAth at 622-623.
4 Andersen's suggestion that the appellate court failed to"grapple seriously" with the legal precedent [Petition, p. 19] is particularlycurious given the court's exhaustive and scholarly review of the authoritiesconstruing 16600. See, 142 Cal.AppAth at 624-623
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B. An Exception Validating "Narrow Restraints" Is Contrary to th e
La w and Policy
The appellate court's holding reflects nothing more than a routine
application of 16600's broad prohibition against restrictive covenants in
conformity with the statute and relevant case authority. Obviously unhappy with
that result, petitioner seeks a radical change in the law, asking the Court to imply an
exception to the prohibitions where none exists, by validating "narrow restraints".
As the appellate court correctly concluded, to the extent that the "narrow
restraint" exception created by the federal courts would operate to validate the
restrictions here, it must be rejected; the result sought by Andersen can only be
reached only through a misapplication of California law and an abandonment of
well settled principles and precedent.
1. Narrow Restraint Exception
The "narrow restraint" exception urged by petitioner evolved from a series
of cases out of the Ninth Circuit . The genesis of these cases is detailed in the
decision below. The court in Campbell v. Trustees o f Leland Stanford Jr. Univ.,
817 F.2d 499 (9 th Cir. 1987) recognized that California law rejected the common
law rule allowing "reasonable" restraints of trade, yet nonetheless concluded that
the restraint would be valid if it barred the employee from pursuing "only a small or
limited part of the business, trade or profession", and remanded the case for trial on
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that issue.
The Campbell court found support for i ts reasoning in the decisions of
Boughton v. Socony Oil, 231 Cal.App.2d 188 (1964), and King v. Gerold, 109
Cal.App.2d 361 (1952), neither of which involved restrictive covenants in the
employment context prohibiting employment by competitors, or solicitation of, or
employment by past clients. The appellate court here properly concluded that those
cases provided no support for the sweeping conclusions of the Campbell court:
"While not expressly based upon the trade secret
exception, King v. Gerold obviously falls within its
reach; the appellant 's transgression in that case was not
simply manufacturing house trailers, but manufacturing
trailers using a design substantially similar to the
respondent inventor's [citation]
"I n Boughton the restriction was no t upon the plaintiff's
practice of a profession or trade, but on the use of the
land, a distinction which formed the crux of the court's
holding [citation] As support for its alternative holding
that a covenant not to compete is no t invalid if the
prohibition is only upon "a small or limited part of a
business, trade or profession [citation], Boughton relied
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upon King v. Gerold. But, as noted, King does no t stand
for such a broad proposi tion . To the contrary, as
applied to an employee's noncompetition agreement,
Boughton's analysis contradicts Chamberlain v.
Augustine, supra, 172 Cal. 285 . . . Chamberlain
reasoned. . . 'The statute makes no exception in favor
of contracts only in partial restraint of trade.' [citation]"
Campbell was followed by General Commercial Packaging, Inc. v. TPS
Package Engineering, 126 F.3d 113, (9 th Cir. 1997) (validating a restrictive
covenant between General Commercial Packaging and its subcontractor, TPS,
because it did no t "completely restrain" defendant from plying its trade), IB M v.
Bajorek, 191 F.3d 1033 (9 th Cir. 1999) (approving a restraint requiring a former
employee to forfeit options if employee worked for a competitor), and Latona v.
Aetna U.S. Healthcare. Inc., 82 F.Supp.2d 1089 (C.D. Cal. 1999) (refusing to
validate six month prohibition on employment by competitors and prohibition on
solicitation of customers under narrow restraint exception).
Although purporting to permit only "narrow restraints" under 16600, this
"exception" has morphed into a rule which allows all restr ictions unless the
employee can prove he has been "completely barred" from practicing his trade or
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profession. See, e.g. , IB M v. Bajorek, 191 F.3d 1033, 1040 (9 th Cir. 1999)
[emphasis added] Under this formulation, the broad prohibition against
employment restrictions is read narrowly, and the default mode is in favor o f such
restrictions unless the employee can prove a total bar. Such an interpretation turns
the statute on its head, and, the appellate court did no t err in rejecting it.
2. Neithe r the Statute nor Preceden t Supports th e Judicial
Creation of th e "Narrow Res tra in t " Exception Proposed
by Petitioner
(a ) The statutory language expressly precludes any
additional exceptions
Here, the statutory language is unambiguous:
"Except as provided in this chapter, every contract by
which anyone is res trained from engaging in a lawful
profession, trade, or business of any kind is to that
extent void." [emphasis added]
Th e words are s imple and clear ly convey the legislative intent to invalidate "every"
contract which attempts to restrain a person's employment.
And , the fact that the statute expressly sets forth exceptions - 16601,
16602 (validating geographic restrictions in connection with the sale of goodwill of
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a business or dissolution of partnership)5 - confirms the legislative intent to prohibit
all other restraints. People v. Standish, 38 Ca1.4th 858, 870 (2006); Rojas v.
Superior Court, 33 Ca1.4th 407, 424 (2004). It is t hus not surprising that the
appellate decision here "adopts a bright l ine test"; it is, however, disingenuous of
petitioner to content that this test "conflicts with the plain language of the statute".
[Petition, p. 1 6 t
In the face of such clear legislative intent, the court should no t imply the
broad exception proposed here which will effectively eviscerate the proscriptions of
16600, thereby rendering it meaningless. Almost any "restraint" can be
characterized as "narrow" - indeed such an exception would have validated many
of restraints which the courts have routinely held improper.
(b ) There is No California Judicial Precedent fo r
Utilizing a "Narrow Res tra in t " Test In the Context
of Routine Employee Non-Compete Agreements
Even if one looks beyond the legislative intent as reflected in the language of
the statute, no California judicial precedent supports the expansive interpretation
As Edwards was neither a shareholder no r a partner ofAndersen, the statutory exceptions have no application to the non-competeat issue here.
6 Indeed, while repeatedly asserting that the decision"conflicts" with the plain language of the statute nowhere does petitioneractually explain ho w it conflicts, most l ikely because there is no conflict.
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urged by petitioner. The California courts agree that the statute presents "a n
absolute ba r to post-employment restraints", and makes no exception for "part ial"
restraints (Morris v. Harris, 127 Cal.App.476 (1954); Chamberlain v. Augustine,
172 Cal. 285 (1916)7) o r e ve n those which ar e "reasonably limited in time and
geographic scope" (KGB, Inc. v. Giannoulas, 104 Cal.App.3d 844, 848 (1980)).
Indeed, no California case has validated an employment non-compete or non-
solicitation in the absence of a showing (not made here) that the restriction was
necessary to protect t rade secret - the only judicially recognized limitation on
16600.
The broad language of federal cases is especially t roubling: it ignores the
statutory language, fai ls to recognize California's strong public policy in favor of
mobility in the workforce and discards well settled judicial precedent. Indeed, the
holding in IB M v. Bajorek - validating a covenant which required a former
employee to forfeit profi ts from stock options i fhe went to work for a competitor-
directly contradicts the holding of Mugill v. Rueben H. Donnelly Corp., 62 Cal.2d
239 (1965) where this Court expressly concluded that 16600 "invalidates
7 In Chamberlain v. Augustine, 172 Cal. 285 (1916) theSupreme Court expressly held that Civil Code 1673 - the predecessor to
16600 - "Makes no exception in favor of contracts only in partial restraintof trade." The statutory language of 1673 - "Every contrac t by whichanyone is restrained from exercising a lawful profession, trade, or businessof any kind, otherwise than is provided b y th e n ex t two sections , is to tha textent void" - is virtually identical to that of 16600.
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provisions in employment contracts prohibiting an employee from working for a
competitor after completion of his employment or imposing a penalty if he does
so."
To the extent it would validate the broad restrictions of the Andersen non-
compete, the "narrow restraint" exception created by the federal courts represents a
significant departure from California law.
3. Significant Policy Concerns Militate Against the
Construction Urged by Petitioner
Petitioner wholly ignores the policy concerns identified by the appellate
court which further militate against adoption o f the Ninth Circuit's approach. First,
as noted above, the exception urged by petit ioner will overturn an entire body of
precedent in this area, creating uncertainty surrounding the determination as to what
restrictions will be deemed "narrow" enough to survive. Furthermore, i t will only
create an incentive for employers to draft agreements pushing the envelope of the
"narrowness" requirement, leaving employees in confusion as to what competition
is permitted. At best, these employees will be forced to bear the cost of challenging
the validity of the restrictions. Those wh o cannot afford to do so wil l find thei r
employment prospects severely restricted if not completely eliminated, and
prospective employers will find the pool of available talent severely limited. The
potential impact on the business community cannot be overstated:
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"Perhaps most troubling, prospective future employers
may be re luctant to hire an employee who has s igned a
questionable noncompetition agreement, in order to
'avoid the expense and energy of defending a lawsuit in
which they are likely to be joined. , ,, Edwards v.
Andersen, 142 Cal.AppAth at 622.
The appellate decision was correct, rests upon sound legal principles in
conformity with the overwhelming precedent. As there is no "conflict" to resolve
there are no grounds for review of this issue.
III. THERE IS N O B AS IS FOR REVIEW OF THE APPELLATE
COURT'S DETERMINATION THAT THE PROPOSED RELEASE
ENCOMPASSED A WA IV ER O F STATUTORY INDEMNITY
RIGHTS
In conformity with California precedent (and in the face of no contrary
authority) the appellate court held under the particular facts of the case, tha t an
employer engages in wrongful conduct when it requires an employee, as a condition
of future employment, to execute a broad release which purports to rel ieve the
employer of its statutory obligation to indemnify the employee; although such a
release is invalid, and therefore might never be enforced, the employer's insistence
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upon inclusion of the offending term is wrongful. Petit ioner challenges the
appellate court's f inding that the broad release language encompassed an
impermissible waiver of indemnity rights and asks this Court to revisit the appellate
court's interpretation of the proposed TONC,
A. Review is No t Necessa ry to Resolve Any Conflict or Unsettled
Area of Law
Sixteen years ago, in Baker Pacific Corp. v. Suttles, 220 Ca1.App.3d 1148
(1990), the Court declared a pre-employment release tendered to a prospective
employee as contrary to public policy, and decried the ' ' 'pistol to the head'
approach to an employment relationship, where hiring is conditioned on acceptance
of statutorily proscribed terms", finding it "not acceptable to us." Id. at 1155. Ten
years later, in D'sa v. Playhut, Inc., 85 Ca1.App.4th 927 (2000) the Court
reaffirmed such coercive conduct was disfavored when it held that an employee
terminated because he refused to sign an unenforceable covenant not to compete
could pursue a claim for wrongful termination in violation of public policy: the
Court specifically held that "a n employer cannot lawfully make the signing of an
employment agreement, which contains an unenforceable covenant not to compete,
a condition of continued employment, even if such agreement contains choice of
law or severability provisions which would enable the employer to enforce the other
provisions of the employment agreement." Id. at 935. And, three years ago, in
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Thompson v. Impaxx, Inc., 113 Ca1.App.4th 1425 (2003), the appellate court again
confirmed that an employer who attempts to condition employment upon agreement
to an unenforceable (because illegal) provision engages in wrongful conduct which
violates public policy.
Petitioner's conduct holding Edward's employment prospects hostage to
secure the illegal release was virtually indistinguishable from that of the employers
in the above-referenced cases, and the appellate court appropriately found in
accordance with this authority that such conduct was wrongful, subjecting
petitioner to l iabili ty on the interference claim. There is thus no uncertainty or
conflict among the appellate courts that would justify review of the court's
interpretation of the release.
B. Th e Appellate Court Correct ly Determined the Legal Effect of
Pet it ioner ' s Conduct in Interposing th e TONC as a Condition of
Edwards ' Employment with HSBC/WTAS
Pet it ioner does not dispute that an employer has no r ight to condition
employment upon execution of an agreement containing illegal provisions but
contends that the appellate court's interpretation of the TONC was flawed. This
argument finds no support in the facts or law.
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1. The Appellate Court Properly Construed the Broad
Release Language to Encompass Waiver of Indemnity
Rights
Petitioner correctly notes that interpretation of a contract must begin with its
express terms (Cal. Civil Code 1638), but then proceeds to ignore those terms,
urging the court to imply an exception where none is expressed. I t is well settled
tha t a broadly worded re lease , such as a release of all claims, covers all claims
within the scope of the language, even if it does not expressly release the particular
claim. Bardin v. Lockheed, 70 Cal.AppAth 494,505 (1999).
The release proposed in the TONC wa s as broad as it could be, releasing all
claims/liabilities - both past and future - of any nature arising from the Edwards'
employment by Anderson except for claims: (1) arising out of Andersen's
obligations set forth in the Agreement or (2) for any accrued and unpaid salary or
other employee benefit or compensation owing to Employee as of the date of the
agreement . No express reference to indemni ty rights was necessary in the face of
this broad language. As the appellate court noted, "[i]t is difficult to imagine a
theory under which indemnity rights would no t be covered, given this broad
language." 142 Cal .App.4 th at 628. The inc lusion of exceptions, expressly
referenced in the proposed TONC, further confirms no other exceptions were
intended; had petitioner intended to except indemnity rights from the release, it
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could easily have included such an exception, particularly where it knew of
Edwards' concerns regarding the scope of the release.
Furthermore, petitioner's ow n conduct confirmed a waiver was intended.
When Edwards conveyed his concerns about the scope of the release, petitioner did
not dispute Edwards' interpretation, offered no assurances, and refused to discuss
or negotiate the terms. And, when another employee expressed similar concerns,
petitioner entered into a separate indemnity agreement. See, e.g., PG&E v. Thomas
Drayage Co., 69 Ca1.2d 33, 39-40 (1968) - circumstances of transaction offered to
prove intent of the contracting parties. The express language of the release as well
as the circumstances of the transaction clearly supports the appellate court's
conclusion that the broad release language encompassed a waiver of indemnity
rights.
2. No post hoc narrow construction
Notwithstanding overwhelming authority to the contrary (see, e.g.,
Thompson v. Impaxx, Inc., supra, 113 Cal.App.4th 1431, Baker Pacific Corp. v.
Suttles, supra, 220 Cal.App.3d at 1148; D'Sa v. Playhut, Inc., supra, 85 Cal.App.4th
at 934), petit ioner contends that the court should have validated or "saved" the
improper provision through "post hoc" narrow construction of the proposed terms.
The problem with this approach was noted by the court in Thompson v.
Impaxx, Inc.:
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"[The employee] wa s presented with the contract is i t
was written and . . . was fired for refus ing to s ign it, as
written. The question . . . is the legal effect of those
acts, a question which cannot be addressed by a pos t
hoc narrow construction of the contract." Thompson v.
Impaxx, Inc., supra, 113 Ca1.App.4th at 1431.
The common thread supporting the Courts' refusal to reform the contracts in
these cases is the parties' position vis-a-vis the challenged contract. Because of the
offending language, the parties never actually entered into the transaction or agreed
to the challenged terms. I t is this factual context - involving a proposed agreement,
presented on a take it or leave i t bas is - that dist inguishes this case from those cited
by petitioner in which the courts construe contractual terms narrowly, choosing a
lawful interpretation over one which would invalidate the contract. The policies
underlying the "lawful" construction urged by pet it ioner here - to "save" the
contractual relationship and protect the expectations of the parties (see, Jacobs v.
Freeman, 104 Ca1.App.3d 177,188 (1988), Armendariz v. Foundation Health
Psychcare Services, Inc., 24 Ca1.4th 83, 123-124 (2000)) do no t attain where, as
here, the offending agreement was never accepted: there is no contractual
relationship to save and no expectations to protect. See, e.g., Thompson v. Impaxx,
Inc., supra, 113 Ca1.App.4th at 1431; see, also, Baker Pacific Corp. v. Suttles,
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supra, 220 Cal.App.3d at 1155 - distinguishing the case from other authori ties
because it tested the validity of the agreement prior to the parties ' entering into the
agreement.
The decisions also recognize the significant incentive for employers to
overreach and bind employees to illegal terms in the hope that they would never be
challenged; if they were, the only consequence for the employer would be a
subsequent declaration that the objectionable terms were unenforceable.
On the other hand, the employee faced with such an overreaching provision
faces the stark choice of adhering to the illegal terms or foregoing employment. If,
l ike Edwards, he stands on his rights and refuses to s ign, he has no recourse for the
lost employment opportunity if the employer can, after the fact, re ly upon a narrow
construction to "save" the contract. The employee who signs on remains subject to
the il legal terms, and is pu t to the burden and expense of obtaining a determination
of invalidity. Either result is intolerable, particularly where the employer could
easily remedy the situation by excising or clarifying the offending terms.
Also troubling is the chill ing effect on the exercise of employment rights and
the substantial risk that the "i n terrerom" effect of the agreement will secure
employee compliance with illegal terms. Latona v. Aetna U.S. Healthcare, Inc.,
supra, 82 F.Supp.2d at 1096.
In the face of the foregoing authorities, the appellate court could not, as
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petitioner asserts, "easily" have construed the release clause to be valid, but was
compelled to rule as it did.
C. Th e Appellate Court Holding is Narrow, Confined to t he Unique
Facts of This Case
Petitioner forecasts great uncertainty in the drafting of contracts - even those
outside the employment context - under the court 's decision, and suggests that
parties draft ing general releases will have to include all manner of exceptions for
unwaivable claims. [Petition, p. 35] Amicus likewise envisions a flood of litigation
and uncertainty as plaintiffs counsel "excited by the prospect that they can sue for
claims thought finally resolved" 8 race to the courthouse to nullify scores of
settlement agreements containing broad release language. [Amicus letter, p. 7] This
hysteria is speculative, premature and unfounded.
The holding here is c learly l imited to the unique factual context - where an
employer insists upon execution ofthe agreement, and refuses to remove the
offending terms; it is not unreasonable to require an employer, when pu t on notice
of illegal provisions in employment contracts that it prepared, to ac t affirmatively to
excise the offending provisions and bring the contracts into conformity with the
law.
Of course, counsel's level of excitement (or for that matter,lack thereof) over a particular decision hardly furnishes grounds for review.See, California Rules of Court, Rule28(b).
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Significantly the appellate court did not even purport to address the situation
posited by Amicus - how the court should interpret a fully executed contract
containing an overlybroad release. Indeed, it is unlikely such a contract would be
completely nullified because of the very interpretation rules asserted by petitioner -
severance, lawful construction to save the contract - all of which are appropriate to
consider when interpreting an executed agreement.
CONCLUSION
There is no basis for review of the appellate court's decision which,
grounded upon well-settled precedent, was thorough, well-reasoned an d correct. In
, contrast , i t is pet it ioner that advocates for a radical change in the law, seeking to
overturn decades of judicial precedent by creating a statutory exception where none
exists in order to immunize itselffrom liabili ty for its improper conduct. For the
reasons stated herein, Edwards respectfully requests that this Court deny the
Petition for Review.
Respectfully submitted,
DATED: October 30,2006
LAW OFFlCES OF RICHARD A . LOVE
B y : 4 6 e ~ Beth A. Shenfeld
Attorneys for Plaintiffand Appellant
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REQUEST FOR R EV IE W O F A DD IT IO NA L ISSUES
(Ca . Rules of Court, Rule 28(a)(2
Pursuant to California Rules o f Court, Rule 28(a)(2) Edwards respectfully
requests that, if the Court grants Andersen's petition for rev iew, the court
additionally address the following issue found in the unpublished portion of the
Court of Appeals' opinion:
ISSUES PRESENTED
"I s an employer who agrees with another enti ty to
restrict employment opportunities for an employee
effectively agreeing to an employment boycott
ent it led to an exemption from anti-trust liability based
upon a "bona fide sale" as th e Court of Appeal held,
where although the employer transfers a portion of its
business, the challenged combination is no t the "sale"
but employment boycott which resul ts in actual harm to
the employee in the fo rm of restricted employment
opportunities."
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WHY REVIEW SHOULD BE GRANTED
The collusive "no-hire" agreement between Andersen and HSBC implicates
the broad public policy in favor of open competition as reflected in the Cartwright
Act (Ca. Bus. & Prof Code, 16700 et seq.) prohibiting combinations which create
restrictions in trade. The Appellate Court's determination that the no-hire
agreement was effectively a "merger" and therefore exempt from the Cartwright
Ac t prohibitions fundamentally misconstrues the decision of this Court in State ex
re i Van De Kamp v. Texaco, Inc., 46 Ca1.3d 1147, 1163 (1988), creating an
exemption where none exists.
LEGAL DISCUSSION
I. CARTWRIGHT ACT PROHIBITIONS APPLY TO EMPLOYMENT
BOYCOTT
Edwards sought damages under the Cartwright Ac t which prohibits
"combinations" in restraint of trade. (Bus. & Prof Code, 16720, 16726) The
purpose of the Act is to protect and promote competition. Chavez v. Whirlpool
Corp., 93 Cal.App.4th 363, 369 (2002). Since the two statutory schemes share
similar language and objectives, California courts often look to federal precedent
under the Sherman Act for guidance. Id.; Marin County Board of Realtors, Inc. v.
Palsson, 16 Ca1.3d 920, 925 (1976).
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The Cartwright Ac t applies to the sale of human services; there is no
exception for the professions. Marin County Board o f Realtors, Inc. v. Palsson,
supra, 16 Ca1.3d at 925; Cianci v. Superior Court, 40 Ca1.3d 903,925 (1985)
[medical profession] The federal courts, interpreting the similar language of the
Sherman Act, have long recognized that employment boycotts, whether in the form
of blacklisting former employees of competitors (see, e.g., Radovich v. NFL, 352
U.S. 445 (1957), "no switching" agreements under which competitors agree not to
hire each other's employees for a specified period of time (Roman v. Cessna
Aircraft, 55 F.3d 542 (10 th Cir. 1995), Nichols v. Spencer International Press, Inc.,
371 F.2d 332 ( 7 t h Cir. 1967, or agreements by competitors not to hire employees
terminated or rejected by member firms (Quinonez v. National Association of
Securities Dealers, Inc., 540 F.2d 824 (5 th Cir.1976), Ostrofe v. H.S.Crocker
Company, Inc., 740 F.2d 739, 742-3 (9 th Cir. 1984, operate as a restraint on trade
in the labor market for services and run afoul of the anti-trust statutes.
The challenged combination here was the agreement between HSBC and
Andersen to restrict the future employment prospects of Andersen employees who
did not sign the TONC - in effect a "no-hire agreement" - tha t was prohibited
under the provisions of the Cartwright Act. That agreement operated to restrain the
labor market of which Edwards was a member; as a direc t v ict im of the boycott,
Edwards had s tanding to sue under the Car twright Act. See, e.g., Nichols v.
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Spencer Intern. Press, Inc., 371 F.2d 332 (7th Cir. 1967); Roman v. Cessna Aircraft
Company, 55 F.3d 542 (10thCir. 1995); Quinonez v. National Association of
Security Dealers, 540 F.2d 824 (5th Cir. 1976); Radovich v. National Football
League, 352 U.S. 445 (1957); Ostrofe v. B.S. Crocker Company, Inc., 740 F.2d 739
(9th Cir. 1984). 9
The appellate court , relying on the decision in State ex rei. Van De Kamp v.
Texaco, Inc., 46 Ca1.3d 1147,1163 (1988), held that because Andersen transferred
assets to HSBC the "combination" was exempt from the provisions of the
Cartwright Act.
In its action to enjoin an anticipated sale of Getty Oil to Texaco, the
Attorney General in Texaco alleged that the merger might substantially lessen
competi tion in the state market for crude oil and related products - in other words,
the merger posed an "incipient threat" to competi tion . The Court held that a merger
- where the ent ities lose their separa te ident ities and become a single entity- was
not a "combination of capital" prohibited under the Cartwright Act, particularly
where the merger is challenged as posing an incipient threat to competition, rather
than effecting an actual restrain t of trade.
The appellate court clearly misapplied the Texaco holding. Here, Edwards
9 The trial court concluded that Edwards did not have standingto bring the Cartwright Act claim. The appellate court did not adopt thetrial court's reasoning bu t concluded that, irrespective of Edwards' standingto sue, the combination was "exempt" as a "bona fide merger or sale"
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did not challenge the transfer (or sale) to HSBC as posing an incipient threat to
competition in the provision of accounting services (the commodity offered for
sale). Indeed, it was no t the acquisition, bu t the agreement between HSBC and
Andersen concerning the conditions under which Andersen employees could be
h ir ed by HSBC - the employment boycot t - which was intended to, and did, e ffect
an actual, rather than threatened, unreasonable restraint, in the labor market as
demonstrated by HSBC's withdrawal of the i ts employment offer. Thus, Texaco is
inapposite.
CONCLUSION
The appellate court's conclusion that the no-hire agreement was a "bona
fide" sale or merger, and therefore exempt from the proscript ions of the Cartwright
Act, has broad implications which extend beyond the confines of this case. The
Cartwright Act, like the provisions of Bus & Prof Code, 16600 further the
fundamental public policy in favor of free competition, and against agreements
which restrict that competitions. Validation of a no-hire agreement necessarily
implicates these policy concerns as i t directly impacts the free flow of workers in
the market place . Review is necessary to c lari fy the scope of the exemption
recognized by the Court in Texaco, and to provide guidance in its interpretat ion.
For the reasons stated herein, Answering Party Edwards respectfully requests
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pursuant to Rules o f Court, Rule 28(a)(2) that, in the event this Court determines to
accept Andersen's petition for review, it also accept for review the appellate court's
ruling affirming dismissal of the Cartwright Act claim.
Respectfully submitted,
DATED: October 30, 2006
LAW OFFICES OF RICHARD A . LOVE
B y : 0 - ~ ~Beth A. ShenfeldAttorneys for Plaintiff and Appellant
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R t . C t . \ ~ t . \ lst? '/.1 -CERTIFIED FOR PARTIAL PUBLICATION
IN TIIE COURT OF APPEAL OF THE STATE. OF CALIFORNIA .
SECOND APPELLATE DISTRICT
DIVISION TIiREE
. . . . . . . . . i ~ . l : . : l
RAYMOND ~ D WARDS II,
Plaintiffand Appellant,
v.
B178246
(Los Angeles CountySuper. Ct. No. BC294853)
O e ; J ~ : YClerk
ARlHURANDERSEN LLP,
Defendant and Respondent.
THE COURT:
ORDER MODIFYING OPINION
[NO CHANGE IN JUDGMENT]
The opinion in the above-entitled matter filed on August 30, 2006 is hereby
modified as follows:
On page 2, line 22, "16000" is changed to "16600.".On page 5, lines 19 through 21, the sentence beginning "As a result . . ." is
modified to read: "Allegedly as a result, HSBC withdrew its employment offer."
6 n page 9, line 26, "16001" is changed to "16601."
On page 9, line 27, " 1 6 0 0 2 ' ~is changed to "16602."
On page 32, line 5, the word "Andersen's" is changed to "Edwards's."
This modification does not affect the judgment.
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.Jt
PROOF OF SERVICE1013A(3) C.C.P. Reviscd1)S7oI/88
STATE OF CALIFORNIA, COUNTY OF LOS ANGELES
I am employed in the County of Los Angeles, State of California. I am over the ageof 18 an d not a party to the within action; my business address is 11601 WilshireBoulevard, Suite 2000, Lo s Angeles, California 90025.
On October 30, 2006, I served the foregoing document described as ANSWER TOPETITION FO R REVIEW; REQUEST TO ADDRESS ADDITIONAL ISSUES INTHE EVENT THAT REVIEW IS GRANTED on the interested party or parties in thisaction by placing [ ] the original and/or [X) a true copy thereof, enclosed in a sealedenvelope, and addressed as follows:
Clerk of the Superior Courtfor the Hon. Andria K. Richey
Department 31I I I N. Hill StreetLos Angeles, CA 90012
Clerk of the CourtCalifornia Court of AppealSecond District, Division Three300 South Spring StreetNorth Tower, Second FloorLos Angeles, California 90013
[Xl (BY MAIL) I am "readily familiar" with the firm's practice of collection andprocessing correspondence for mailing. Under that practice it would be depositedwith the U.S. postal service on that same day with postage thereon fully prepaid at
Los Angeles, California in the ordinary course of business. I am aware that onmotion of the party served, service is presumed invalid i f postal cancellation date orpostage meter date is more than one da y after date of deposit for mailing in affidavit.
[Xl (STATE) I declare under penalty of perjury under the laws of the State of Californiathat the foregoing is true and correct.
Executed on October 30, 2006, at Los A 1 ] ~ ~
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PROOF OF SERVICE1013A(3) C.C.P. Revised 05/01/88
STATE OF CALIFORNIA, COUNTY OF LOS ANGELES
I am employed in the County of Los Angeles, State of California. I am overthe age of 18 and not a party to the within action; my business address is 11601Wilshire Boulevard, Suite 2000, Los Angeles, California 90025.
On October 30, 2006, I served the foregoing document described asANSWER TO PETITION FOR REVIEW; REQUEST TO ADDRESSADDITIONAL ISSUES IN THE EVENT THAT REVIEW.IS GRANTED onthe interested party or parties in this action by placing [ ] the original and/or [x] atrue copy thereof, enclosed in a sealed envelope, and addressed as follows:
Attorneys for Defendant and ReSjlondentARTHUR ANDERSEN LLPWayne S. Flick, Esq.
Yury Kapgan, Esq.LATHAM & WATKINS LLP633 W. Fifth Street, Suite 4000Los Angeles, CA 90071
[ ] (BY MAIL) I am "readily familiar" with the firm's practice of collection andprocessing correspondence for mailing. Under that practice it would bedeposited with the U.S. postal service on that same da y with postage thereonfully prepaid at Los Angeles, California in the ordinary course of business. Iam aware that on motion of the party served, service is presumed invalid i fpostal cancellation date or postage meter date is more than one day after date
of deposit for mailing in affidavit.[X] (BY FEDERAL EXPRESS) I deposited the document in a fully sealed
Federal Express envelope in the box regularly maintained by FederalExpress at the above-referenced place of business with delivery fees
.provided for and addressed to the person(s) on whom the document is to beserved.
[X] (STATE) I declare under penalty ofpeIjury under the laws of the State ofCalifornia that the foregoing is true and correct.
Executed on October 30, 2006, at L o s / ~ l ~ e s , . ,