Commercial

Non-Compete Clauses in Contracts Governed by Other State’s Laws

SANTA CLARA, CA – A California sales representative is suing his former employer, an Illinois company, for declaratory relief. The plaintiff says the non-compete clause in his employment contract is unenforceable. Jeffrey Blaisdell v. EVO Exhibits LLC.

The employment contract is, however, governed by Illinois law, which does not have the same restrictions as California. The contract also has a forum selection clause requiring all disputes be litigated in Illinois.

Blaisdell is likely trying to beat EVO to the punch by suing here in California, where California judges are more likely to invalidate the non-compete clause. If EVO sues in Illinois and gets a judgment before Blaisdell, California judges may give full faith and credit to the Illinois judgment regardless of California’s policy against non-competes.

If you are in a similar situation, your employment contract is governed by another state’s law and the contract requires disputes be litigated there, be aware of the issues and prepared to sue. Consider sticking to declaratory relief and not bogging your action down asking for damages, as Blaisdell has done. Timing might be everything.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
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Commercial

Breaking Myths About Non-Compete Clauses in California

MARIN, CA – An insurance brokerage, Woodruff-Sawyer & Co., is suing a former employee after the employee resigned. Plaintiff alleges that the employee started competing with plaintiff in violation of a buy-sell agreement that prohibits competition.

There are a lot of misconceptions floating around about the enforce-ability of non-compete clauses in California. In general, non-compete clauses are not enforceable but there are exceptions, including where owners and/or part owners sell their interest. The exceptions are spelled out in Business and Professions Code sections 1600 et seq. and include the sale of partnership interests, LLC member interests and other ownership forms.

Interestingly, in the case at hand, no trade secret or other violations are alleged – just the non-compete.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
Trade Secret

In Trial: Lawyers Battle Over Client… Information

SAN FRANCISCO, CA – According to defendant’s trial brief, a Los Angeles firm, SwedelsonGottlieb, sent an associate, William Noland, to open an office in San Francisco, which he did successfully. When the associate did not make partner, he went off on his own and got sued by his former employer out of “anger and spite.” According to the Complaint, Mr. Noland solicited SwedelsonGottlieb’s clients to go with him before and after his departure and took/used proprietary client data in the process.

Litigation is about storytelling as much as anything else. The stories told in almost every trade secret case of this type are the same. The defendant says the employer is just trying to bury their startup with attorney’s fees and costs. The plaintiff claims legitimate trade secret information existed and was misused.

In many instances, both stories are true. Often plaintiffs are disgruntled and looking for revenge. Equally as often, departing employees do not get good advice, or do not listen to it, and use more information than they should. Emotion, and specifically anxiety, drives the parties to costly outcomes.

Per defendant’s brief, Mr. Noland had incurred $500,000 in legal fees and costs, and trial obviously had not yet begun.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
Commercial

When to Leave Your Employer, Before Competing with Them

SAN FRANCISCO, CA – An interesting complaint was filed on the 30th by Bette Solis against Worldpay US, Inc. Ms. Solis alleges that she was an account executive at the payment processing company and, per contract, was entitled to commissions on accounts she procured. The complaint says defendant stopped paying, claiming Ms. Solis started a new competing business while still working for them.

The case raises a few questions that come up often. First, is it ok to work for two places at once? In general, employees owe fiduciary duties to their employers and cannot secretly compete with them. There are a line of cases that say it is ok to prepare to start a new job/company while still on payroll, but not to the point of compeintg. There is also some authority saying moonlighting is ok, but again probably not if the gig directly competes.

There is another legal rule in play here and that is with respect to contractual obligations post-breach. In general, if one party breaches a contract, the other party is excused from further performance. Whether forming a new competing company constitutes a breach will depend on the facts. There are also issues in the Solis case related to terms and conditions allegedly never provided, and potentially unenforceable non-compete clauses therein.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.
Trade Secret

Ventek Sues California Parks Company Alleging Employee/Trade Secret Theft

SAN FRANCISCO, CA – The complaint alleges that: the two companies entered into an agreement to join forces and bid on a National Park Service contract; the agreement prohibited taking proprietary information and/or soliciting employees; and defendant did both.

Key to the case will be whether there were trade secrets, and second whether they were incorporated into the defendants’ work product. That will likely determine whether the contractual terms are enforced.

While everyone in California seems to know that non-compete clauses are generally unenforceable, what is not common knowledge is that that non-solicitation clauses are hard to enforce as well. The California Supreme Court made clear in a case called Edwards v. Arthur Andersen that employee mobility is critical. The basic rule is: employers can protect trade secrets but not via contractual clauses that make it impossible for employees to work and ply their trade.

The other interesting aspect of the case is that it is filed in federal court. Until recently, trade secret cases were litigated in state court. President Obama signed the Defend Trade Secrets Act (18 U.S.C. § 1836) in 2016, making federal court an option.

This blog reports on cases filed in and around the San Francisco Bay Area. The statements made are based on the allegations in court-filed documents. Allegations are just accusations, and may or may not be true.
The authors of the blog are attorneys at the San Francisco litigation firm, Wood Robbins, LLP. If you have a legal issue, send them an email. If they cannot help you, they will try and point you in the right direction.