California employers and labor advocates will be watching closely when the state Supreme Court takes up the issue of non-compete agreements and their validity next year.
In the meantime, the issue remains in a sort of limbo after California Appeals Court in October issued a ruling that appears to invalidate the practice. The agreements are typically made when an employee joins a firm. Usually, the pact prohibits the individual leaving a company from working for rivals. Upon leaving, a severance package is often contingent on signing a waiver of the employee’s right to sue.
“The California Legislature didn’t want to force people to retrain and enter into new careers any more than they wanted them to have to move 50 to 100 miles away to engage in their business,” said Justice Richard Aldrich of the Appellate Court of California, Second Appellate District, which issued the recent ruling. “We interpreted California statutes to mean what they say and this is any restriction on a person’s right to gainful employment is invalid and unenforceable under California law.”
The ruling stemmed from a case involving L.A. tax manager Raymond Edwards, who signed a standard non-compete agreement when he started work for Arthur Andersen LLP in 1997. When HSBC Holdings PLC bought Andersen in 2002, Edwards was required to sign a termination of the non-compete as a condition of his transfer to the new company. When Edwards refused to sign it, Andersen withheld severance benefits and HSBC withdrew his job offer.
Edwards sued Andersen and HSBC in 2003 for interference with economic advantage, among other claims. A Los Angeles Superior Court dismissed Edwards’ claims on summary judgment, on the grounds that both the Andersen non-compete and HSBC termination of non-compete were valid. The California Supreme Court has since agreed to hear the case in its next session, so the appellate opinion is no longer law, but the Supreme Court’s decision may have an impact on whether employers offer severance benefits in the future.
The court also ruled that the HSBC waiver was invalid because it required Edwards to give up normal indemnities given by the California Labor Code, including one’s ability to sue their employer.
“Issues with respect to the release could have more wide-reaching effects because releases are so common whenever employers terminate people,” said Scott J. Witlin, of Ogletree Deakins Nash Smoak & Stewart PC.
Since part of an employer’s benefit in offering severance packages is the ability to avoid future litigation, Witlin said, “It may make employers more reluctant to offer severance packages in the future.”
Beverly High Appeal
L.A. County Superior Court Judge Wendell Mortimer Jr. headed off a major trial expected to begin this month by dismissing 12 lawsuits alleging that the old Beverly High oil and gas facilities and a nearby heating and cooling plant caused cancer.
“It makes me feel good about the legal system,” said Polly Towill, a partner at Sheppard Mullin Richter & Hampton LLP who represented Venoco Inc., the current operator of the Beverly High oil and gas facilities. “This judge had a huge task and took a lot of time and I think he reached the right decision.”
The suits, which has been in litigation for more than three years, asserted that toxic chemicals coming from the well has caused cancer to past students and nearby workers. Over the years, the case ballooned to include approximately 1,000 plaintiffs.
The decision was based on Sheppard’s summary judgment motions that said that the plaintiffs had insufficient evidence that the alleged chemicals caused, or could cause, their cancers.
Allen Stewart, the Dallas-based lead attorney on the plaintiffs’ case, could not be reached for comment but has said that he will appeal the decision.
Also working on the plaintiffs’ case in Los Angeles is the Law Offices of Masry & Vititoe. That firm is still better known for employing Erin Brokovich than for its status as the national leader in environmental tort cases. Though not an attorney, Brokovich has been involved in the case. Judge Mortimer is expected to issue a more detailed ruling soon.
Howdy, Partner
There have been a number of promotions and shifts over the past few weeks:
Lewis R. “Skip” Miller’s new firm, Miller Barondess LLP, has established a permanent office in Century City’s AIG Sun American Center. Miller has also hired Jerrold E. Blair, an Of Counsel in real estate, who was most recently with MCA/Universal.
Anthony R. Callobre and Mark A. Spitzer have joined Bingham McCutchen LLP as partners in the firm’s finance group. Both came from Sheppard Mullin.
Davis Wright Tremaine LLP snagged Robert Layton for health care. He joins from Sheppard Mullin.
Proskauer Rose LLP hired Eric Remensperger from Gibson Dunn & Crutcher LLP as head of its West Coast real estate practice and hired Raj Tanden as a tax partner, from Morrison & Foerster LLP.
Susan Baldwin Myers returned to Mayer Brown Rowe & Maw LLP as an Of Counsel after a 15-year hiatus. She was most recently managing counsel of international operations and project counsel at Toyota Motor Credit Corp.
Brian Pass has joined Sheppard Mullin as an entertainment partner. He comes from the Brown Raysman division of the recently combined Thelen Reid Brown Raysman & Steiner LLP. Pass brings senior associate Kevin Straw.
Staff reporter Emily Bryson-York can be reached at
[email protected]
om or at (323) 549-5225, ext. 235.
