• Massachusetts Court Declines to Decide California Non-Compete Dispute
  • July 15, 2003 | Author: Kelly O. Scott
  • Law Firm: Ervin Cohen & Jessup LLP - Beverly Hills Office
  • As discussed in the January 2003 issue of the Employment Law Reporter, in the recent case of Advanced Bionics Corporation v. Medtronic, Inc., 29 Cal.4th 697 (2002) the California Supreme Court held that principles of judicial restraint and comity should have prevented a California trial court from issuing a temporary restraining order against proceedings pending in a parallel Minnesota action. Both cases concerned the enforcement of a non-compete agreement by the former Minnesota employer against an employee who was now living and working in California. The California Supreme Court indicated that the "respect and deference owed to independent foreign proceedings" were more important than the possibility of "an embarrassing race to judgment" and, therefore, the parties should remain free to litigate in both states "unless and until Medtronic demonstrates to the Los Angeles County Superior Court that any Minnesota judgment is binding on the parties."

    At least one state court has declined to participate in the race. In the case of Aware, Inc. v. Fernando Ramirez-Mireles, 2001 Mass. Super. Lexis 221 (April 4, 2001), a Massachusetts superior court dismissed a case which sought to enforce a trade secret non-disclosure and non-competition agreement against an employee working in Aware's California office. The court held that the doctrine of forum non-convenience required that the case be decided in California. The doctrine embodies the principle that, where in a broad sense the ends of justice strongly indicate that the controversy may be more suitably tried elsewhere, then jurisdiction should be declined. In this case, since all of what Ramirez-Mireles did for Aware was in California, all of what he was doing for his current employer was in California, he resided in California and many witnesses were located in California, the case could be more suitably tried in California.

    More importantly, however, the Massachusetts court applied Massachusetts choice of law rules and determined that California law should be applied in light of the strong public policy embodied in California Business and Professions Code §16600. Section 16600 has specifically been held by California courts to invalidate employment contracts which prohibit an employee from working for a competitor when the employment has terminated. Citing the Medtronic decision, the Aware court noted that, "under California law, the interests of the employee and his own mobility and betterment are deemed paramount to the competitive business interests of the employer."

    Based on these facts, the Aware court reasoned that "thus, it seems, the first judge who decides to enter an order that will run squarely contrary to the strong public policy of the State of California, ought to be a California judge, subject to the reversal authority of California appellate courts¿ this court should not start down the road to a possible judgment against a California resident, that seems contrary to California public policy, but will have to be enforced in some ancillary proceeding in California." Accordingly, the Aware court granted Ramirez-Mireles' motion to dismiss on forum non-convenience grounds.

    Although further clarification is required from the California Supreme Court, the decision in Aware holds some hope for California employers who are interested in hiring California residents who are bound by restrictive covenants entered into under the laws of another state. Applying the same reasoning in Aware, it is possible that other states will defer to California before enforcing a non-competition agreement which involves an employee living and working in California.