Edwards Answer to Petition for Review

8/14/2019 Edwards Answer to Petition for Review

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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

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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.


44/45

.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 ] ~ ~


45/45

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 , . ,

Edwards Answer to Petition for Review

Documents

Transcript of Edwards Answer to Petition for Review