Case Name: Jeffrey Blaisdell v. EVO Exhibits, LLC
Case No.: 18CV330111

This matter arises from a dispute between a California resident, Plaintiff Jeffrey Blaisdell (“Plaintiff”) and his former employer, Defendant EVO Exhibits LLC (“Defendant”), an Illinois LLC, over the enforceability of a non-competition and non-solicitation clause in his written employment agreement.

Plaintiff’s original and still operative Complaint was filed June 20, 2018 and states two cause of action for: 1) Declaratory Relief and 2) Interference with Prospective Economic Advantage. The Complaint alleges that Plaintiff is a California resident and that in early 2010 Defendant solicited him to work for it in California “as a sales representative employed from his home located on Bryan Avenue, in San Jose, California. Plaintiff was employed to call on prospective customers throughout the United States, including within the State of California, using his home as his ‘office’ from which he would work on a daily basis when he was not traveling. . . . On or about December 12, 2014, Defendants provided Plaintiff with the Employment At Will Agreement, a true and correct copy of which is attached as Exhibit “A.” Plaintiff was part of a group of employees told . . . that if they did not sign the Employment At Will Agreement their employment would be terminated immediately. . . . Plaintiff terminated his employment with [Defendant] on February 2, 2018. Thereafter, [Defendant] has falsely accused Plaintiff of using [Defendant’s] trade secret information to compete with [Defendant] and of violating the non-compete clause contained within the Employment Agreement. . . . [Defendant] has threatened to file suit in Illinois and have an Illinois court enforce the covenant not to complete, thereby depriving Plaintiff of his unwaivable right under Business and Professions Code Section 16600 to have the covenant not to compete declared void.” (Complaint at ¶¶ 5-9.)

Currently before the Court is Plaintiff’s motion for summary adjudication of his first cause of action for Declaratory Relief. The declaratory relief sought is stated in paragraph 10 of the Complaint: “Plaintiff prays that this court determine that the forum selection clause contained in Paragraph 16 is unreasonable and unfair and shall be and is unenforceable. Plaintiff further prays for a declaration from the court that the covenant not to compete contained in Paragraph 6 of the Employment At Will Agreement attached hereto as Exhibit A is void and unenforceable as in violation of Business and Professions Code Section 16600 and the public policy of the State of California.”

Paragraph 6 (“Nonsolicitation and Noninterference”) of what the Court will refer to as the 2014 Employment Agreement (or just “Employment Agreement”) states as follows: “During Employee’s employment with Evo and for a period of 18 months after Employee’s employment with Evo is terminated by Evo or Employee with or without cause, Employee will not, without the express prior written consent of Evo, directly or indirectly, individually or as a shareholder, director or officer of any corporation, a partner of any partnership, a member or manager of any limited liability company, an owner of any other entity or as an employee, agent, consultant or advisor of any entity (i) solicit, induce or provide or attempt to solicit or induce any customer or Prospective Customer of Evo for products or services which are competitive with the products or service of Evo may provide to such customers, regardless of whether or not EVO is now providing such products or services, (ii) recruit or hire any employee or Former Employee of Evo or otherwise attempt to solicit or induce any employee to leave the employment of EVO or (iii) otherwise interfere with Evo’s business relationship with any vendor, independent contractor or other party with whom Evo engages in business. For purposes hereof, (A) ‘Prospective Customer’ means any person, firm or entity which has been in contact with any employee or agent of EVO regarding the products and services of EVO during the then immediately preceding twelve-month period and (B) ‘Former Employee’ means any person who was employed by Evo during the then immediately preceding six-month period.”

Paragraph 16 (“Governing Law”) of the Employment Agreement states in pertinent part: “The laws of the State of Illinois (irrespective of its choice of law principles) shall govern all matters arising out of or relating to this Agreement and the transactions contemplated hereby, including, without limitation, its interpretation, construction, performance and enforcement. All actions or proceedings in any way, manner, or respect, arising out of or from or related to this Agreement shall be litigated only in courts having situs in Cook County, Chicago, Illinois. Employee hereby consents and submits to the exclusive jurisdiction of any court of the State of Illinois sitting in Dupage, Illinois for the purposes of all legal actions and proceedings arising out of or relating to this Agreement, and waive[s] any right that Employee may have to transfer the venue of any such action or proceeding.”

Previously on May 31, 2019 (after a hearing held May 7, 2019) this Court denied Defendant’s motion to dismiss or stay this action on forum non coveneniens grounds, despite the choice of forum language in Paragraph 16, finding that “the covenant not to compete is a statutory non waivable right. Moving party has not met its burden of showing that the contractually designated forum will not diminish in any way the substantive rights afforded under California law.”

Request for Judicial Notice
In support of his motion Plaintiff has submitted a request for judicial notice, asking the Court to take notice of a complaint Defendant filed against him in Illinois on August 23, 2018 pursuant to Evidence Code §452(d) (court records). A copy of the complaint is attached to the request as exhibit A. Judicial notice of this Complaint is GRANTED but the complaint can only be noticed as to its existence and filing date, and not as to the truth of any of its contents.

Motion for Summary Adjudication
The pleadings limit the issues presented for summary judgment or adjudication and such a motion may not be granted or denied based on issues not raised by the pleadings. (See Government Employees Ins. Co. v. Sup. Ct. (2000) 79 Cal.App.4th 95, 98; Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1258; Nieto v. Blue Shield of Calif. Life & Health Ins. (2010) 181 Cal.App.4th 60, 73 [“the pleadings determine the scope of relevant issues on a summary judgment motion.”].) The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty. (See Code of Civil Procedure (“CCP”) §437c(f)(1); McClasky v. California State Auto. Ass’n (2010) 189 Cal.App.4th 947, 975 [“If a cause of action is not shown to be barred in its entirety, no order for summary judgment—or adjudication—can be entered.”]; Palm Spring Villas II Homeowners Association, Inc. v. Parth (2016) 248 Cal.App.4th 268, 288.)

The moving party’s declarations and evidence will be strictly construed in determining whether they negate or disprove an essential element of a plaintiff’s claim “in order to resolve any evidentiary doubts or ambiguities in plaintiff’s (or opposing party’s) favor.” (Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56, 64, parentheses added.) While the same standards of admissibility govern both, the opposition declarations are liberally construed while the moving party’s evidence is strictly scrutinized. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) The evidence must be liberally construed in support of the opposing party, resolving any doubts in favor of that party. (Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037.)

Where a plaintiff (or cross-complainant) seeks summary judgment, the burden is to produce admissible evidence on each element of a “cause of action” entitling him or her to judgment. (CCP §437c(p)(1); See Hunter v. Pacific Mechanical Corp. (1995) 37 Cal.App.4th 1282, 1287, disapproved on other grounds in Aguilar; S.B.C.C., Inc. v. St. Paul Fire & Marine, Ins. Co. (2010) 186 Cal.App.4th 383, 388.) This means that plaintiffs who bear the burden of proof at trial by a preponderance of evidence must produce evidence that would require a reasonable finder of fact to find any underlying material fact more likely than not. “Otherwise, he would not be entitled to judgment as a matter of law.” (Aguilar, supra at p. 851; LLP Mortgage v. Bizar (2005) 126 Cal.App.4th 773, 776 [burden is on plaintiff to persuade court there is no triable issue of material fact].)

At that point the burden shifts to the defendant to raise a triable issue of material fact. “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable finder of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar, supra, at p. 850.)

Summary judgment or adjudication may be had in a declaratory relief action since the propriety of the application of declaratory relief lies in the trial court’s function to render such a judgment when only legal issues are presented for its determination. (Las Tunas Beach Geologic Hazard Abatement Dist. v. Superior Court (1995) 38 Cal.App.4th 1002, 1015.) Plaintiff’s motion here is a permissible motion for summary adjudication of a declaratory relief claim. The declaratory relief statue (CCP §1060) expressly states that an action may be brought under it to determine “any question of construction or validity” of all or part of a contract. The questions presented here (application of California choice-of-law principles, identification of California fundamental public policy, statutory and contract interpretation) are questions of law, not disputed fact, which the Court may determine.

As an initial matter Defendant’s request for a continuance to conduct further discovery pursuant to CCP §437c(h) is DENIED. There is no need for a continuance to allow Defendant to conduct discovery into “the legal basis for his claims, and the facts, evidence and witnesses that support such claims” (Declaration of Defense Counsel Holiday Powell at ¶16) as this motion for summary adjudication of a declaratory relief claim that seeks a declaration as to whether a contract provision is void under California law turns on questions of law, not disputed facts. The proper interpretation of a written contract, whether California law applies to the contract despite the choice of law provision in paragraph 16 of the contract and whether paragraph 6 of the contract is void under Bus. & Prof. Code §16600 are questions of law for the Court and no discovery is necessary on those issues. Defendant could not reasonably believe otherwise. Because the motion turns on purely legal questions the declaration of Defense Counsel Powell is insufficient to trigger a mandatory continuance as she does not and cannot demonstrate facts establishing a likelihood that controverting evidence may exist nor can she identify specific reasons why any such evidence could not be submitted now.

The argument that Defendant needs discovery to investigate what portions of the contract Plaintiff seeks to void is entirely unpersuasive as Plaintiff is bound by his pleading on summary adjudication and paragraph 10 of the Complaint is not ambiguous in defining the scope of the sought-after declaration. Determining the applicability of the choice of law provision in paragraph 16 of the Agreement is an obvious part of the analysis of the requested declaratory relief. Again, Defendant could not reasonably believe otherwise.

Furthermore, even if a declaration otherwise satisfies the criteria for a mandatory continuance (and the Powell declaration does not), no continuance is required for discovery into matters unrelated to the crux of the motion, which here is whether California law applies to the contract and whether paragraph 6 is void under Bus. & Prof. Code §16600. (See Ace American Ins. Co. v. Walker (2004) 121 Cal.App.4th 1017, 1023 [court need not grant continuance where proposed discovery “focused on matters beyond the scope of the dispositive issues framed by the pleadings.”]; See also Depew v. Crocodile Enterprises, Inc. (1998) 63 Cal.App.4th 480, 493 fn. 14 [no error in denying continuance request for discovery of corroborative evidence that was not “essential” to justify opposition].)

In making the request for a continuance, Defense Counsel failed to disclose to the Court that Defendant has already propounded written discovery on Plaintiff and received responses to that discovery several months ago. Defense Counsel also failed to disclose to the Court that Plaintiff’s deposition was taken by Defendant in the Illinois matter almost three weeks before the opposition to the motion here was filed on May 28, 2019 (meaning that Plaintiff’s testimony would have been available to Defense Counsel in preparing the opposition to this motion), and Plaintiff was asked at that deposition about his residence in California, the location of his customers, etc. (See second declaration of Plaintiff Counsel Michael Ackerman, filed with Plaintiff’s Reply, and attached exhibits A-D.)

Under CCP §437c(j) the Court has the power to require a party filing a declaration in “bad faith” or “solely for the purposes of delay” to pay the opposing parties’ expenses (other than attorney’s fees) incurred in countering the declaration. The declaration submitted by Defense Counsel Powell clearly could be considered such a declaration. The imposition of such a sanction requires prior notice and an opportunity to be heard. If Plaintiff wishes to pursue such a sanction, he may do so through a noticed motion.

Plaintiff has established that he is entitled to the sought after declaration, that “the forum selection clause contained in Paragraph 16 is unreasonable and unfair and shall be and is unenforceable,” and that “that the covenant not to compete contained in Paragraph 6 of the Employment At Will Agreement attached hereto as Exhibit A is void and unenforceable as in violation of [Bus. & Prof. Code §16600].” (See Complaint at ¶10.) The motion for summary adjudication of the first cause of action for Declaratory Relief is therefore GRANTED as follows:

California Bus. & Prof. Code §16600, stating that “[e]xcept as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void,” codifies a fundamental public policy of the State of California. In Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, the California Supreme Court addressed a non-competition agreement which prohibited the employee from performing similar professional services for an 18-month period for any client on whose account he had worked on at the accounting firm and also prohibited the employee from soliciting any client of the firm for a year after termination. (Id. at 948.) The Court found this agreement invalid and took an expansive view of Bus. & Prof. Code §16600, ruling that the only exceptions to its bar on noncompetition agreements were those expressly stated in Bus. & Prof. Code §16601 (relating to the sale or dissolution of corporations); §16602 (sale or dissolution of partnerships) and §16602.5 (sale or dissolution of limited liability corporations). Edwards also held that an employer could not lawfully make the signing of an employment agreement which contained an unenforceable covenant not to compete a condition of continued employment.

The Supreme Court in Edwards also expressly rejected the approach that had been taken by some federal courts in applying §16600 in such a way as to allow them to carve out enforceable contracts. (See Edwards, supra, at pp. 947-950 [rejecting Ninth Circuit’s “narrow-restraint” interpretation of Bus. & Prof. Code §16600]; see also Dowell v. Pacesetter (2009) 179 Cal.App.4th 564, 576-579 [non-competition and non-solicitation clauses facially void under §16600; “Any attempt to construe the noncompete and non-solicitation clauses in such a way as to make them lawful would not be reforming the contract to correct a mistake of the parties but rather to save a statutorily proscribed and void provision.”]; Fillpoint LLC v. Maas (2012) 208 Cal.App.4th 1170, 1182 [non-solicitation agreement inconsistent with §16600 unenforceable]; Wanke, Industrial, Commercial, Residential v. Keck (2012) 209 Cal.App.4th 1151, 1177 [following Edwards, §16600 prohibits enforcement of non-solicitation agreement in all cases where trade secret exception does not apply].)

As the Court already ruled in its May 31, 2019 order, given the fundamental California public policy codified in §16600, the forum selection clause in Paragraph 16 of the Employment Agreement is unenforceable. “California courts will refuse to defer to the selected forum if to do so would substantially diminish the rights of California residents in a way that violates our state’s public policy.” (America Online Inc. v. Superior Court (2001) 90 Cal.App.4th 1. 12; see also Intershop Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 200 [“a forum selection clause will not be enforced if to do so would bring about a result contrary to the public policy of this state”].)

For similar reasons the choice-of-law provision (choosing Illinois law) must give way to California law in these circumstances given the interest at stake. In Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, the California Supreme Court announced that “[i]n determining the enforceability of arm’s-length contractual choice-of-law provisions, California courts shall apply the principles set forth in Restatement section 187, which reflects a strong policy favoring enforcement of such provisions.” (Id. at 464-465.) “[T]he proper approach under Restatement section 187, subdivision (2) is for the court first to determine either: (1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties’ choice of law. If neither of these tests is met, that is the end of the inquiry, and the court need not enforce the parties’ choice of law. If, however, either test is met, the court must next determine whether the chosen state’s law is contrary to a fundamental policy of California. If there is no such conflict, the court shall enforce the parties’ choice of law. If, however, there is a fundamental conflict with California law, the court must then determine whether California has a ‘materially greater interest than the chosen state in the determination of the particular issue ….’ (Rest., § 187, subd. (2).) If California has a materially greater interest than the chosen state, the choice of law shall not be enforced, for the obvious reason that in such circumstance we will decline to enforce a law contrary to this state’s fundamental policy.” (Id. at p. 467, emphasis added. See also Washington Mutual Bank, FA v. Superior Court (2001) 24 Cal.4th 906, 914-915 [“When the parties have an agreement that another jurisdiction’s law will govern their disputes, the appropriate analysis for the trial court to undertake is set forth in Nedlloyd . . . which addresses the enforceability of contractual choice-of-law provisions.”])

Assuming for purposes of argument that the Employment Agreement here was “arms-length” (and the Complaint alleges Plaintiff only signed under threat of termination), the fact that Defendant is an Illinois LLC indicates that Illinois has a “substantial relationship” to the transaction and/or that there is a “reasonable basis” for the choice of Illinois law. The question then becomes whether Illinois law is in “fundamental conflict” with California law by allowing contracts contrary to a fundamental policy of California (here meaning Bus. & Prof. Code §16600). There clearly is a fundamental conflict, because Illinois law allows for the enforcement of restrictive covenants on former employees under the so-called “rule of reasonableness” that is directly contrary to California’s determination set forth in Bus. & Prof. Code §16600 that all such covenants are void as a matter of law unless the specific statutory exceptions apply. “Our supreme court has established a ‘rule of reasonableness’ test to determine the enforceability of a restrictive covenant. A restraint on trade is reasonable only if it: (1) is no greater than is required to protect a legitimate business interest of the employer; (2) does not impose undue hardship on the employee; and (3) is not injurious to the public. Furthermore, the activity, time and geographic restrictions must be reasonable. . . . No single factor bears greater value in our assessment, and we must weigh each factor depending upon ‘the specific facts and circumstances of the individual case.’” (AssuredParnters, Inc. v. Schmitt, 44 N.E.3d 463, 471 (Ill. App. Ct. 2015), citing Reliable Fire Equip. Co. v. Arredondo, 965 N.E.2d 393, 397 (Ill. 2011).)

California also clearly has a materially greater interest than Illinois in this dispute, as California has a strong public policy (codified in §16600) of protecting the freedom of employment of its citizens (such as Plaintiff) as well as in protecting the freedom of California businesses to fairly compete for the customers and employees of other businesses within California without being threatened with litigation based on contracts that are void under §16600. Plaintiff continues to live in California and any purported restraints on his ability to work in California based on language in the 2014 Employment Agreement drafted by Defendant are clearly of greater concern to California than Illinois.

Post-Edwards, federal courts presented with circumstances similar to those here have largely heeded the California Supreme Court’s controlling statement on the scope of §16600 and found that California law applies despite contractual choice-of law language to the contrary. (See Hendrickson v. Octagon, Inc. (N.D.Cal. 2016) 225 F.Supp.3d 1013 [In dispute over fee-sharing provisions in sport agent employment agreement, California law applied rather than Virginia law, despite contractual choice-of-law provision specifying Virginia law, since Virginia law applied rule of reasonableness that was contrary to California public policy, which prohibited such restraints on trade, and California had materially greater interest in dispute, in that sports agents were based in California and continued to live and work for competitor in California.])

Once the determination has been made that California law, specifically Bus, & Prof. Code §16600, applies to the 2014 Employment Agreement, paragraph 6 of the Employment Agreement must be found to be void in its entirety, regardless of whether Plaintiff has sought to have the entire paragraph declared void. The severability clause in paragraph 14 of the Agreement cannot save any portion of paragraph 6. As stated in Edwards and its progeny, California courts will not reform an overbroad covenant not to compete. This was the California position well before Edwards was decided. “Generally, courts reform contracts only where the parties have made a mistake, and not for the purpose of saving an illegal contract. Illegal contracts are void. . . . [T]he policy of [Bus. & Prof. Code §16600] would be undermined by doing so. Employers could insert broad, facially illegal covenants not to compete in their employment contracts. Many, perhaps most, employees would honor these clauses without consulting counsel or challenging the clause in court, thus directly undermining the statutory policy favoring competition. Employers would have no disincentive to use the broad, illegal clauses if permitted to retreat to a narrow, lawful construction in the event of litigation.” (Kolani v. Gluska (1998) 64 Cal.App.4th 402, 406-407, emphasis added, internal citations omitted.) California courts thus will not reform or “blue pencil” such overbroad contracts because of the potential for chilling employees’ freedom of movement. (See D’Sa v. Playhut, Inc. (2000) 85 Cal.App.4th 927, 935, citing Kolani). No reformation of paragraph 6 is possible under California law.

Defendant’s reliance on Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268 (“Moyes”) in attempting to argue that to argue that triable issues exist as to whether Paragraph 6 of the Employment Agreement contract is enforceable as written or could be reformed is misplaced and the argument is unpersuasive. While never formally overturned, Moyes ceased to be an accurate statement of California law many years before the Supreme Court’s 2008 Edwards decision. (See Kolani, supra; Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1429 [antisolicitation covenants are void as unlawful business restraints except where enforcement is necessary to protect trade secrets.]) Paragraph 6 of the Employment Agreement cannot reasonably be interpreted as an attempt to protect trade secrets. To the extent the Employment Agreement can be reasonably interpreted as addressing trade secrets at all it does so only in paragraphs 5 and 9.

Similar attempts to cite Moyes as support for an argument that an illegal/void contract provision can be enforced or reformed have been rejected. “Because the Edwards court found section 16600 ‘unambiguous’ it noted that ‘if the Legislature intended the statute to apply only to restraints that were unreasonable or overbroad, it could have included language to that effect’; and that it was up to the ‘Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600.’ We thus doubt the continuing viability of Moyes post-Edwards.” (AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, 938-939, internal citations omitted.)

Finally the Court notes that Defendant has submitted an evidentiary objection to Exhibit 2 to the Declaration of Plaintiff’s Counsel Ackerman filed with Plaintiff’s initial motion. As the admissibility of this document does not affect the outcome of the motion the Court will not rule on the objection. “In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.” (CCP § 437c(q).)