Kindt v. Trango Systems CA4/1 (2014) · DecisionDepot
Kindt v. Trango Systems CA4/1
California Court of Appeal Oct 1, 2014 No. D062404Unpublished
Filed 10/1/14 Kindt v. Trango Systems CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
SHANE KINDT, D062404
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2010-00102377-CU-OR-CTL) TRANGO SYSTEMS, INC.,
Defendant and Appellant.
APPEALS from an order of the Superior Court of San Diego County, John S.
Meyer, Judge. Affirmed in part and reversed in part.
The McMillan Law Firm, Scott A. McMillan and Evan A Kalooky for Plaintiff
and Appellant.
Harrison & Bodell, Harry W. Harrison; Boudreau Williams and Jon R. Williams
for Defendant and Appellant.
After Shane Kindt resigned from employment at Trango Systems, Inc. (Trango),
he sued Trango on a variety of legal and equitable theories, including Labor Code
violations, interference with his subsequent employment, and attempts to enforce a
nonsolicitation agreement he contends was facially invalid under Business and
Professions Code section 16600.1 During trial, the court ruled the nonsolicitation
agreement was facially valid, and so instructed the jury. The jury found in Trango's favor
on Kindt's legal claims and the trial court found in Trango's favor on his equitable claims.
Kindt moved for a new trial, which the court granted on the basis of jury misconduct as to
his legal claims, but denied as to his equitable claims.
Trango appeals the court's order granting a new trial on Kindt's legal claims,
challenging the sufficiency of his evidentiary showing of jury misconduct and of the trial
court's statement of reasons for granting the motion. Kindt appeals the court's order
denying a new trial on his equitable claims, challenging: (1) the court's determination that
the nonsolicitation agreement is facially valid; (2) the sufficiency of the trial court's
statement of decision because it essentially incorporated the jury's tainted findings; and
(3) the court's exclusion of evidence regarding Trango's litigation history. We conclude
the trial court did not err by granting a new trial on Kindt's legal claims or by excluding
evidence of Trango's litigation history. However, we also conclude the court erred in its
determination of the facial validity of the nonsolicitation agreement and in rendering an
insufficient statement of decision. We affirm the order granting a new trial as to Kindt's
legal claims, and reverse the order denying a new trial as to his equitable claims.
1 Business and Professions Code section 16600 provides: " Except 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." All further statutory references are to the Business and Professions Code unless otherwise indicated.
2
FACTUAL AND PROCEDURAL BACKGROUND
Trango is a San Diego-based provider of wireless microwave communication
systems. Kindt joined Trango in 2006 as a regional sales manager in Dallas, Texas.
Among the paperwork Kindt signed at the beginning of his employment was a
"confidential information and invention assignment agreement" (Confidentiality
Agreement).
In early 2008, Trango's owner, Zdravko Divjak, met with Kindt to discuss a
promotion that would require him to relocate to San Diego. When Kindt expressed
reservations about relocating, Divjak suggested a "guarantee or an assurance" that would
require either party to provide six months' notice before terminating their relationship.
Trango's April 15, 2008, offer letter to Kindt (hereafter the Letter Agreement) included
the following provision regarding termination:
"Trango . . . is an 'at-will' employer. This means that either you or Trango . . . may terminate your employment, with or without cause, at any time. However, in the case that either you or the Company choose to terminate our relationship, both you and the Company will commit to a continued six months of employment, paid at your standard rate of pay, to find a suitable replacement."
Kindt accepted the offer the following day and began commuting from Dallas to
San Diego while transitioning into the new position, eventually relocating in San Diego
with his family in August 2008. On November 10, 2008, Kindt handed his supervisor,
John Seaman, a resignation letter that stated: "I will be moving my family back to Texas
at the end of November and I am prepared to fulfill my [six-] month term as set forth in
the [Letter Agreement]. This will make my final day of employment with Trango . . .
3
May 8th, 2009[,] as the 10th falls on a Sunday . . . . [¶] . . . I will do my best to assist
Trango . . . in finding a suitable replacement for my position if this is requested of me."
Within days, Trango identified an internal replacement for Kindt. Seaman informed
Kindt that his last day with Trango would be November 30, 2008, not May 8, 2009. He
did not have a new job lined up and expressed displeasure to Seaman.
After some apparent confusion over what Kindt's last day at Trango would be,
Trango confirmed it would need him through the end of November 2008 and he would
receive his termination paperwork and final paycheck then. When Kindt called in sick on
November 19, Trango notified him he was no longer needed and would only be permitted
to return to retrieve personal property and to return company property. Trango provided
Kindt with separation paperwork on November 19 and informed him his final paycheck
would be directly deposited on November 28.
On November 22, Kindt demanded prompt payment of his regular pay through
November 19, unused vacation pay, and unpaid salary for the remaining portion of the
six-month termination notice period specified in the Letter Agreement. He warned that
waiting time penalties would accrue for every day he was not paid.2
On November 28, Kindt received his final paycheck by direct deposit. Trango
paid him his regular wages through November 18, paid holiday pay for Thanksgiving and
the following day, and used his vacation pay for the remainder of the month. The
2 Labor Code section 203, subdivision (a), provides in pertinent part: "If an employer willfully fails to pay . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced . . . ." 4
paycheck included the balance of Kindt's unused vacation time, but did not include pay
for the six-month notice period or any waiting time penalties.
Kindt moved back to Texas in early December and began seeking new
employment. With help from former Trango colleague Scott Carlson, he received a job
offer from Convergence Technologies (CTI). He accepted that offer on December 9.
Three days later, Seaman called Kindt to inform him that Trango was seeking a business
relationship with CTI. According to Kindt, Seaman stated he was under the impression
Kindt had filed a wrongful termination lawsuit against Trango and that if he dismissed it
Trango would not interfere with his new employment at CTI. According to Seaman, he
reminded Kindt of his obligations under the Confidentiality Agreement, but denied
threatening his employment prospects.
On December 19, Trango's senior vice president and general counsel, Ace
Blackburn, sent an e-mail to CTI employee Charles Wu with the subject line "Trango
Systems Non-Compete Agreement/Shane Kindt/CTI." The e-mail attached the
Confidentiality Agreement and a letter stating:
"We are hopeful that you will do your part to ensure compliance with this Agreement by Mr. Kindt. To the extent that we learn that Mr. Kindt, while employed by CTI, has directly or indirectly solicited business from any Trango customer, has used any of Trango's Confidential Information, or has violated in any other ways his Agreement with Trango, we will seek all available legal remedies against CTI and Mr. Kindt."
Shortly after Blackburn's e-mail to Wu, CTI employee Mark Kruer called Seaman
to discuss Kindt. According to Kruer, Seaman gave the impression CTI was "better off
just not hiring him . . . because [Trango] will take exception to this if you do." On
5
December 22, CTI terminated Kindt over concerns about becoming involved in litigation
with Trango. CTI asked Kindt to continue working in an independent contractor
capacity, but he declined. In February 2009 Kindt found a new job with a government
contractor supporting military operations in Afghanistan.
In October 2010, Kindt filed suit against Trango alleging nine causes of action.3
His complaint alleged, generally, that the Letter Agreement entitled him to an additional
six months' employment or pay, Trango owed him waiting time penalties for not
delivering his final paycheck on his last day of work, Trango attempted to enforce the
Confidentiality Agreement as an unlawful noncompete agreement, and Trango
wrongfully interfered with his employment at CTI.
During trial, the court ruled the Confidentiality Agreement was facially valid
under section 16600 and so instructed the jury.4 The jury returned a verdict in Trango's
favor on all of Kindt's legal claims. Kindt subsequently requested a separate bench trial
and statement of decision on his equitable claims. The court denied his request for a
3 Kindt asserted causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, failure to pay wages upon discharge, violations of Labor Code section 970 (by inducing relocation through misrepresentations), tortious interference with contract, intentional and negligent interference with prospective economic advantage, violation of section 16600, and unfair competition under section 17200 (by engaging in "illegal pay practices," attempting to enforce an unlawful noncompete agreement, and interfering with his subsequent employment).
4 The court instructed the jury as follows: "Every contract by which anyone is restrained from engaging in a lawful business or profession of any kind is, to that extent, void. The Court has determined that the language of the [Confidentiality Agreement] is not void." 6
separate trial, issued a statement of decision denying relief on his equitable claims based
primarily on the jury's findings, and entered judgment in Trango's favor.
Kindt filed motions for judgment notwithstanding the verdict (JNOV) and a new
trial. The court denied the JNOV motion, but granted a new trial on all his legal claims
because of jury misconduct. The court did not grant a new trial on his equitable claims,
and did not explain the impact, if any, of the jury's misconduct on the jury findings the
court cited in its statement of decision. Kindt and Trango each appealed.
I
TRANGO'S APPEAL
Trango appeals the trial court's order granting Kindt's motion for new trial on the
basis of jury misconduct. Trango contends the order was not supported by admissible
evidence of any misconduct, did not establish prejudice, and did not adequately state the
reasons for granting the motion.
A. Additional Background
Kindt moved for a new trial on all his claims based on 17 alleged errors falling
within five statutory grounds.5 To support his claim of "[j]ury bias, misconduct, and
irregularities," he submitted declarations from three jurors. Their testimony falls
5 Kindt asserted four bases of error on the grounds of misconduct and irregularities of the jury under Code of Civil Procedure section 657, subdivisions 1 and 2; four bases of error on the ground that the verdict is against law under section 657, subdivision 6; three bases of error on the ground of insufficiency of the evidence under section 657, subdivision 6; five bases of error on the ground of irregularities in the proceedings of the court under section 657, subdivision 1; and one basis of error on the ground of irregularities in the proceedings of the adverse party under section 657, subdivision 1. 7
generally into three categories: (1) dissatisfaction with the selection of the foreperson and
the foreperson's management of the deliberation process; (2) concern regarding the
foreperson's potential pro-Trango bias based on her human resources (HR) work
experience; and (3) the foreperson's and other jurors' discussion of law not addressed by
jury instructions, and consideration of extrinsic evidence.
Regarding the third category, the juror declarations reveal that "several jurors
[gave] legal opinions which were not included in the instructions the Judge gave us."
This included the foreperson's assertion that "California [is] an at-will employment state"
such that "the [Letter Agreement] was invalid, and the promise to allow continued
employment for six months was invalid." The foreperson also stated "there [is] no law
that stated that an employee had to be paid their final paycheck on the last day" of his or
her employment.6 One juror reported that the foreperson "cited California law
approximately [30] times during deliberations, talked about what they were legally
allowed to do in the shop that she worked in according to her HR experience, and
discussed the details of the [payroll processing] system that her shop and [Trango] both
use." Another juror reported that a juror stated Kindt could recover the waiting time
penalties he was seeking in this action "from another California court."
6 This contradicts Labor Code section 201, subdivision (a), which provides: "If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately." 8
Trango filed an opposing brief, but did not submit counterdeclarations regarding
jury deliberations. The trial court granted Kindt's motion for new trial as to his legal
claims as follows:
"The Motion for New Trial is GRANTED on the grounds of jury misconduct and irregularities in the proceedings of the jury. The undisputed declarations from Jurors 1, 7 and Alternate 1 demonstrate improper and prejudicial discussion and explanations of the law during deliberations."
B. Governing Legal Principles
"The authority of a trial court in this state to grant a new trial is established and
circumscribed by statute." (Oakland Raiders v. National Football League (2007) 41
seven grounds for a new trial motion, including irregularity in the proceedings and jury
misconduct.
When a party seeks a new trial based on jury misconduct, the court undertakes a
three-step inquiry. (People v. Dorsey (1995) 34 Cal.App.4th 694, 703.) First, the court
must determine whether the declarations offered in support of the motion are admissible.
(Id. at p. 703.) Under Evidence Code section 1150, only evidence of objective facts is
admissible to prove juror misconduct. (In re Stankewitz (1985) 40 Cal.3d 391, 397.)
Evidence regarding how such objective facts may have influenced jurors' subjective
thought processes is inadmissible. (Evid. Code, § 1150, subd. (a).)
After the court determines the supporting declarations are admissible, it must next
consider whether the facts establish misconduct. (People v. Dorsey, supra, 34
Cal.App.4th at pp. 703-704.)
9
Finally, assuming misconduct is found, the court must determine whether it was
prejudicial. (People v. Duran (1996) 50 Cal.App.4th 103, 112-113; People v. Hord
(1993) 15 Cal.App.4th 711, 724.) "Juror misconduct raises a rebuttal presumption of
prejudice . . . ." (People v. Dykes (2009) 46 Cal.4th 731, 809; Jones v. Sieve (1988) 203
Cal.App.3d 359, 367 ["once acts of jury misconduct are established, the presumption of
prejudice becomes conclusive unless rebutted by the prevailing party"].) The
presumption of prejudice "may be rebutted by an affirmative evidentiary showing that
prejudice does not exist or by a reviewing court's examination of the entire record to
determine whether there is a reasonable probability of actual harm to the complaining
party resulting from the misconduct." (Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388,
417.)
An order granting a new trial motion must state the ground on which it is based
and contain a statement of reasons supporting the stated ground. (Oakland Raiders,
supra, 41 Cal.4th at pp. 633-634.) "A statement of grounds that reasonably approximates
the statutory language is sufficient. [Citations.] The statement of 'reasons,' on the other
hand, should be specific enough to facilitate appellate review and avoid any need for the
appellate court to rely on inference or speculation." (Id. at p. 634.)
When the trial court provides a statement of reasons as required by Code of Civil
Procedure section 657, we review the court's decision for an abuse of discretion.
(Oakland Raiders, supra, 41 Cal.4th at p. 636.) "[T]he absence of a statement of reasons
calls for independent review . . . ." (Id. at p. 640.)
10
C. Analysis
1. Statement of Reasons
We begin by addressing the sufficiency of the trial court's statement of reasons
because that will determine our standard of review. (Oakland Raiders, supra, 41 Cal.4th
at pp. 636, 640.) Trango contends the trial court's "curt explanation" for its ruling is
insufficient.
Our Supreme Court has provided the following guidance regarding the sufficiency
of a statement of reasons:
"To avoid overtaxing our already burdened trial courts, it will be sufficient if the judge who grants a new trial furnishes a concise but clear statement of the reasons why he finds one or more of the grounds of the motion to be applicable to the case before him. No hard and fast rule can be laid down as to the content of such a specification, and it will necessarily vary according to the facts and circumstances of each case. For example, if the ground is 'irregularity in the proceedings' caused by counsel's referring to insurance, the judge should state that the reason for his ruling was the misconduct of counsel in making such reference; if the ground is 'misconduct of the jury' through their resorting to chance, the judge should specify this improper method of deliberation as the basis of his action; if the ground is that the decision is 'against the law' because of a failure to find on a material issue, the judge should so state and should identify that issue." (Mercer v. Perez (1968) 68 Cal.2d 104, 115.)
Kindt moved for a new trial on 17 bases within five statutory grounds. (See fn. 5,
ante.) The trial court's order specifies which of the five proffered grounds it granted:
"the grounds of jury misconduct and irregularities in the proceedings of the jury." By
doing so, the court narrowed the universe of possible reasons from Kindt's original 17
down to only those four based on jury misconduct. The trial court then specified the
11
reason on which its grant of the motion was based: "improper and prejudicial discussion
and explanations of the law during deliberations." Finally, the order identifies the
evidence on which it was granted: "[t]he undisputed declarations from Jurors 1, 7 and
Alternate 1." We find the court's order "specific enough to facilitate appellate review"
(Oakland Raiders, supra, 41 Cal.4th at p. 634), and therefore review it for an abuse of
discretion (id. at p. 636.)
2. Admissibility of Juror Declarations
Trango contends the trial court erred in relying on the juror declarations because
they are "rife with inadmissible statements about the deliberative process" in violation of
Evidence Code section 1150.7 Trango asserts, for example, that the declarations "include
repeated statements about how the dissenting jurors 'felt' about the deliberative process,
how they 'got the impression' that certain things happened, how they 'had the feeling' that
the deliberations were being hurried, and how certain comments 'were important to
jurors,' or how they 'understood' certain jurors were considering questions on the verdict
form based upon their prior life experience . . . ." Trango's challenge is not persuasive.
The snippets to which Trango objects relate to the foreperson's alleged bias and
mismanagement of the deliberation process. But that is not the basis on which the trial
7 Kindt suggests Trango forfeited this objection by failing to assert it—or any other objections to the juror declarations—below. Trango counters that it asserted the objection in its brief in opposition to Kindt's motion for new trial. Of course, the better practice is to file evidentiary objections "in a separate document (rather than as part of opposing points and authorities)." (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2014) ¶ 9:102.6, p. 9(I)-83; Schoendorf v. U.D. Registry, Inc. (2002) 97 Cal.App.4th 227, 240, fn. 2, citing Weil & Brown, supra, 9:102.6, p. 9(I)- 83.) We will assume without deciding that Trango preserved this objection. 12
court granted Kindt's motion—it was the jurors' "discussion and explanations of the law
during deliberations." Trango never objected to the declarations in that regard, and it is
not likely to have successfully done so. (See In re Stankewitz, supra, 40 Cal.3d at p. 398
["Among the overt acts that are admissible and to which jurors are competent to testify
are statements[, particularly when] . . . [¶] . . . the very making of the statement sought to
be admitted would itself constitute misconduct."].)
Trango argues for the first time on appeal that certain aspects of the declarations
lack foundation regarding the jurors' discussions of the law during deliberations. Trango
never raised those objections with the trial court and, consequently, has forfeited them.
(People v. Engstrom (2011) 201 Cal.App.4th 174, 184; Evid. Code, § 353, subd. (a).) We
conclude the trial court did not abuse its discretion in considering the juror declarations to
the extent they relate to "discussion and explanations of the law during deliberations."
3. Misconduct
"In our system of justice it is the trial court that determines the law to be applied to
the facts of the case, and the jury is 'bound . . . to receive as law what is laid down as such
by the court.' [Citation.] 'Of course, it is a fundamental and historic precept of our
judicial system that jurors are restricted solely to the determination of factual questions
and are bound by the law as given them by the court. They are not allowed either to
determine what the law is or what the law should be.' " (In re Stankewitz, supra, 40
Cal.3d at p. 399; People v. Marshall (1990) 50 Cal.3d 907, 950 ["the introduction of
extraneous law, whether erroneous or not, constitutes misconduct"].) The juror
13
declarations establish that the foreperson's and other jurors' discussions and explanations
of the law run afoul of this precept.
Trango's only response to the juror's discussions and explanations of the law is that
the foreperson's references to at-will employment were consistent with the
Confidentiality Agreement, which states in Section 3 that "I understand and acknowledge
that my Relationship with the Company is and shall continue to be at-will, as defined
under applicable law, meaning that either I or the Company may terminate the
Relationship at any time for any reason or for no reason, without further obligation or
liability." However, Section 1 of the same agreement contemplates that the parties may
have modified what otherwise would have been an at-will relationship: "I understand and
acknowledge that this Agreement does not alter, amend or expand upon any rights I may
have to continue in the employ of, . . . or the duration of my employment . . . with, the
Company under any existing agreements between the Company and me or under
applicable law." On the record before us, we cannot conclude the trial court abused its
discretion in finding the jurors' discussion of the law regarding at-will employment—not
to mention discussions of the law regarding payment of wages upon termination, which
go unaddressed by Trango—constituted jury misconduct.
4. Prejudice
As discussed above, juror misconduct raises a rebuttable presumption of prejudice.
People v. Dykes, supra, 46 Cal.4th at p. 809.) That presumption "is even stronger when,
as here, the misconduct goes to a key issue in the case" (In re Stankewitz, supra, 40
Cal.3d at p. 402) and the jurors were divided (Weathers v. Kaiser Foundation Hospitals
14
(1971) 5 Cal.3d 98, 110 ["Since the verdict was nine to three, the disqualification for bias
of any one of the majority jurors could have resulted in a different verdict. Under the
circumstances, the order granting the new trial is sufficiently supported by competent
evidence."]).
Trango never specifically addresses the presumption of prejudice that arose from
its failure to controvert the juror declarations, which distinguishes this case from those on
which Trango relies. (Hasson v. Ford Motor Co., supra, 32 Cal.3d at pp. 408-410
[counterdeclarations filed]; Enyart v. City of Los Angeles (1999) 76 Cal.App.4th 499, 510
[counterdeclarations filed]; People v. Collins (2010) 49 Cal.4th 175, 237, 255-256
[evidentiary hearing during which three jurors testified; court's analysis addressed
misconduct, not prejudice].) In addition, we are unpersuaded by Trango's argument that
"the trial court's own rulings on the related JNOV motion and Kindt's equitable claims
seem to suggest that the outcome would have been the same" absent juror misconduct.
(Italics added.) The fact the trial court ultimately reached the same conclusion as the
jurors does not mean the jurors would not have reached a different outcome in the
absence of misconduct. We conclude the trial court did not abuse its discretion in
concluding the jury misconduct was prejudicial to Kindt.
II
KINDT'S APPEAL
Kindt contends the trial court erred by denying his motion for new trial as to his
equitable claims. In doing so, he challenges the court's determination that the
Confidentiality Agreement is facially valid under section 16600, the sufficiency of the
15
statement of decision, and the court's exclusion of evidence regarding Trango's litigation
history. We conclude the trial court erred by denying Kindt's motion for a new trial on
his equitable claims.
A. Facial Validity of the Confidentiality Agreement Under Section 16600
Kindt contends the trial court erred by concluding the Confidentiality Agreement
did not, on its face, constitute an unlawful restraint on employment under section 16600.
He argues three provisions—a broad definition of confidential information, a prohibition
on the use of confidential information in soliciting Trango's customers, and a restriction
on soliciting Trango's employees—are invalid under section 16600. We agree that the
overly broad definition of confidential information, when coupled with the prohibition of
its use in soliciting customers, makes the Confidentiality Agreement facially invalid. We
disagree, however, with respect to solicitation of Trango's employees.
1. Governing Legal Principles
Section 16600 provides: "Except as provided in this chapter,[8] every contract by
which anyone is restrained from engaging in a lawful profession, trade, or business of any
kind is to that extent void." It "evinces a settled legislative policy in favor of open
competition and employee mobility." (Edwards, supra, 44 Cal.4th at p. 946.) As such,
"[n]oncompetition agreements are invalid under section 16600 in California, even if
8 The chapter excepts noncompetition agreements in the sale or dissolution of corporations, partnerships, and limited liability corporations. (Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 945-946 (Edwards), citing §§ 16601, 16602, 16602.5.) Trango does not contend any of these exceptions apply here. 16
narrowly drawn, unless they fall within the applicable statutory exceptions . . . ." (Id. at
p. 955.)
An agreement need not outright prohibit competitive employment to be invalid
under section 16600, it need only restrain it. (Edwards, supra, 44 Cal.4th at p. 946; The
Retirement Group v. Galante (2009) 176 Cal.App.4th 1226, 1235 (Galante).) Courts
have deemed invalid agreements that unduly restrain a former employee from soliciting
business from his or her former employer's customers. (See Dowell v. Biosense Webster,
Inc. (2009) 179 Cal.App.4th 564, 575 (Dowell).)
This is not to say employers are powerless to prevent their former employees from
unfairly competing against them. To the contrary, in Galante we observed that "[a]n
equally lengthy line of cases has consistently held former employees may not
misappropriate the former employer's trade secrets to unfairly compete with the former
employer." (Galante, supra, 176 Cal.App.4th at p. 1237.) In accordance with this "so-
called trade secret exception to section 16600" (Edwards, supra, 44 Cal.4th at p. 946,
fn. 4), "courts have repeatedly held a former employee may be barred from soliciting
existing customers to redirect their business away from the former employer and to the
employee's new business if the employee is utilizing trade secret information to solicit
those customers." (Galante, at p. 1237; Dowell, supra, 179 Cal.App.4th at pp. 575-576.)
In reconciling the apparent tension between the Edwards court's admonition that
we recognize only statutory exceptions to section 16600, on the one hand, and the equally
long line of cases protecting employers' trade secrets, on the other—a balancing act the
Edwards court did not need to address (Edwards, supra, 44 Cal.4th at p. 946, fn. 4)—we
17
distilled the following in Galante: "section 16600 bars a court from specifically
enforcing (by way of injunctive relief) a contractual clause purporting to ban a former
employee from soliciting former customers to transfer their business away from the
former employer to the employee's new business, but a court may enjoin tortious conduct
(as violative of either the Uniform Trade Secrets Act (Civ. Code, § 3426 et seq.) and/or
the unfair competition law) by banning the former employee from using trade secret
information to identify existing customers, to facilitate the solicitation of such customers,
or to otherwise unfairly compete with the former employer. Viewed in this light,
therefore, the conduct is enjoinable not because it falls within a judicially created
'exception' to section 16600's ban on contractual nonsolicitation clauses, but is instead
enjoinable because it is wrongful independent of any contractual undertaking." (Galante,
supra, 176 Cal.App.4th at p. 1238.) Stated differently, "it is not the solicitation of the
customers, but is instead the unfair competition or misuse of trade secret information, that
may be enjoined." (Id. at pp. 1239-1240.)
2. Analysis
We begin by construing de novo the provisions of the Confidentiality Agreement
Kindt contends unlawfully restrain his employment by restricting his solicitation of
Trango customers. (D'Sa v. Playhut, Inc. (2000) 85 Cal.App.4th 927, 934 (D'Sa).) The
second clause of Section 8 of the Confidentiality Agreement provides:
"[D]uring my Relationship with the Company and at any time following termination of my Relationship with the Company for any reason, with or without cause, I shall not use any Confidential Information of the Company to attempt to negatively influence any of the Company's clients or customers from purchasing Company
18
products or services or to solicit or influence or attempt to influence any client, customer or other person either directly or indirectly, to direct his or its purchase of products and/or services to any person, firm, corporation, institution or other entity in competition with the business of the Company."
Section 4 of the Confidentiality Agreement, in turn, defines confidential
information as follows:
"I understand that 'Confidential Information' means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, suppliers, customer lists and customers (including, but not limited to, customers of the Company on whom I called or with whom I became acquainted during the Relationship), prices and costs, markets, software, developments, inventions, laboratory notebooks, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, licenses, finances, budgets or other business information disclosed to me by the Company either directly or indirectly in writing, orally or by drawings or observation of parts or equipment or created by me during the period of the Relationship, whether or not during working hours. I understand that 'Confidential Information' includes, but is not limited to, information pertaining to any aspects of the Company's business which is either information not known by actual or potential competitors of the Company or other third parties not under confidentiality obligations to the Company, or is otherwise proprietary information of the Company or its customers or suppliers, whether of a technical nature or otherwise. I further understand that Confidential Information does not include any of the foregoing items which has become publicly and widely known and made generally available through no wrongful act of mine or of others who were under confidentiality obligations as to the item or items involved."
Invoking the common law trade secret exception to section 16600, Trango
contends the provisions are valid because they "are meant only to protect Trango's trade
secrets and confidential information . . . ." Although we, like the Dowell court, doubt the
continued validity of the trade secret exception to section 16600 considering the decision
19
in Edwards (Dowell, supra, 179 Cal.App.4th at pp. 577-578), we need not resolve the
issue here. Even were the exception valid, Trango's definition of confidential
information and the restrictions on its use in soliciting customers "are not narrowly
tailored or carefully limited to the protection of trade secrets, but are so broadly worded
as to restrain competition." (Id. at p. 577.)
Under our holding in Galante, Trango can only restrain Kindt insofar as trade
secret law will allow. (Galante, supra, 176 Cal.App.4th at p. 1238.) California's
Uniform Trade Secrets Act defines a trade secret as follows: " 'Trade secret' means
information, including a formula, pattern, compilation, program, device, method,
technique, or process, that: [¶] (1) Derives independent economic value, actual or
potential, from not being generally known to the public or to other persons who can
obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that
are reasonable under the circumstances to maintain its secrecy." (Civ. Code, § 3426.1,
subd. (d).) Trango's definition of confidential information extends to matters far beyond
this definition of trade secret.
For example, Trango's definition of confidential information includes "trade
secrets," but it is by no means limited to them—it also includes "proprietary information,
technical data . . . , or know-how." In addition, although Trango argues the definition is
confined to trade secrets by its express exclusion of information that has "become
publicly and widely known and made generally available," the definition contradicts
itself because it also states it "includes, but is not limited to . . . information not known by
actual or potential competitors of the Company . . . ." Trango's overly broad definition of
20
confidential information is substantially similar to the provision the Dowell court found
facially invalid as unnecessarily exceeding the scope necessary to protect trade secrets.
(Dowell, supra, 179 Cal.App.4th at pp. 568, 578 [defining confidential information as
" 'information disclosed to me or known by me as a result of my employment by the
COMPANY, not generally known to the trade or industry in which the COMPANY is
engaged, about products, processes, technologies, machines, customers, clients,
employees, services and strategies of the COMPANY, including, but not limited to . . .
marketing, merchandising, selling, sales volumes or strategies, number or location of
sales representatives, names or significance of the COMPANY's customers or clients or
their employees or representatives, preferences, needs or requirements, purchasing
histories, or other customer or client-specific information.' "]; see D'Sa, supra, 85
Cal.App.4th at p. 930.)
Kindt's allegations regarding Trango's conduct here demonstrate the perils of
overly broad nonsolicitation provisions (or definitions of confidential information
incorporated into them) and the ease with which they may be used preemptively to
restrain conduct beyond that which may be enjoined by trade secret law. As the D'Sa
court cautioned, "even if we could construe the covenant not to compete as a trade secret
provision, it is not likely that the average employee . . . would so interpret it . . . .
[M]any, if not most, employees would likely interpret the provision as a covenant not to
compete, and might act according to their interpretation rather than consult an attorney to
find out if their interpretation is correct." (D'Sa, supra, 85 Cal.App.4th at p. 935; see
Kolani v. Gluska (1998) 64 Cal.App.4th 402, 408 ["Employers could insert broad,
21
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."].)9
We thus conclude the nonsolicitation clause of Section 8 of the Confidentiality
Agreement, when coupled with the overly broad definition of confidential information in
Section 4, is facially invalid under section 16600.
Kindt contends another clause in Section 8 of the Confidentiality Agreement
prohibits him from soliciting Trango's employees,10 and is also facially invalid under
section 16600.11 We disagree. An employer may validly contract with a former
employee to restrain him from "raiding" other employees. For example, in Loral Corp. v.
Moyes (1985) 174 Cal.App.3d 268, the court upheld a provision in an employment
9 We note that even Trango's general counsel appears to have interpreted the nonsolicitation provision as a covenant not to compete—the subject line of his e-mail to CTI referred to it as a "Non-Compete Agreement," and he testified that Kindt would be in breach of it if he, "out of spite, went head to head with Trango, using a competitor product."
10 The relevant portion of Section 8 of the Confidentiality Agreement provides: "I agree that during the term of my Relationship with the Company, and for a period of twenty-four (24) months immediately following the termination of my Relationship with the Company for any reason, whether with or without cause, I shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company's employees or consultants to terminate their relationship with the Company, or attempt to solicit, induce, recruit, encourage or take away employees or consultants of the Company, either for myself or for any other person or entity."
11 Although Kindt is not alleged to have solicited any Trango employees, he argues the provision is nonetheless relevant because he was referred to CTI by another former Trango employee subject to the same restriction, which put Trango "in a position to exert leverage on CTI . . . ." 22
termination agreement in which the employee, Moyes, agreed not to "disrupt, damage,
impair or interfere with the business of [Loral] . . . by way of interfering with or raiding
its employees . . . ." (Id. at pp. 274, 279.) The Loral court found the restriction valid
because it did not limit Moyes's ability to obtain other work, and only "slightly
affect[ed]" Loral's other employees—it did not restrain them for being employed by
Moyes's new employer; "[a]ll they los[t] is the option of being contacted by [Moyes]
first." (Id. at p. 279.)
Kindt's reliance on VL Systems, Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th 708 is
misplaced because that case involved an agreement in which a customer restrained its
vendor from ever hiring any of the customer's employees. (Id. at pp. 710, 715, 718.) The
court concluded "[s]uch a broad provision is not necessary to protect [the customer's]
interests and is outweighed by the policy favoring freedom of mobility for employees."
(Id. at p. 718.) The anti-raiding clause of Section 8 of the Confidentiality Agreement is
more akin to the anti-raiding provision found valid in Loral Corp. v. Moyes, supra, 174
Cal.App.3d 268 than to the no-hire agreement found invalid in VL Systems. (VL Systems,
supra, at p. 715 ["The facts of this case sharply contrast with the situations in which
[anti-raiding] provisions have been upheld, including Loral."].) We conclude the anti-
raiding clause of Section 8 of the Confidentiality Agreement is not facially invalid under
section 16600.
23
B. Sufficiency of the Statement of Decision
Kindt challenges the sufficiency of the statement of decision on the bases that it
erroneously incorporated the jury's tainted factual findings and contains no independent
findings made by the court.
1. Governing Legal Principles
Under Code of Civil Procedure section 632, a court trying a question of fact must,
upon timely request, "issue a statement of decision explaining the factual and legal bases
for its decision on the principal controverted issues at trial . . . ." (In re Marriage of Fong
(2011) 193 Cal.App.4th 278, 293.) "A statement of decision need not address all the
legal and factual issues raised by the parties." (Muzquiz v. City of Emeryville (2000) 79
Cal.App.4th 1106, 1124-1125.) Instead, "a statement of decision is adequate if it fairly
discloses the determinations as to the ultimate facts and material issues in the case."
(Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513.)
"A statement of decision facilitates appellate review by revealing the bases for the
trial court's decision" (In re Marriage of Fong, supra, 193 Cal.App.4th at p. 293), and
" 'furnishes to the losing party a basis of his motion for a new trial; he is entitled to know
the precise facts found by the court before proceeding with his motion for new trial, in
order that he may be able to point out with precision the errors of the court in matters
either of fact or law. [Citation.]' " (Whittington v. McKinney (1991) 234 Cal.App.3d 123,
127.)
24
2. Kindt's Section 16600 Claim
Kindt predicated his section 16600 claim on two theories: (1) the Confidentiality
Agreement was facially invalid under section 16600; and (2) even if not facially invalid,
the agreement nonetheless violated section 16600 "as applied." (Italics added.) The
statement of decision referenced the trial court's prior determination that the
Confidentiality Agreement was facially valid, and concluded, "[c]onsistent with that
determination and the evidence presented at trial, [Kindt] has failed to prove his Eighth
Cause of Action." Based on our conclusion above that the Confidentiality Agreement is
facially invalid, and the statement of decision's silence as to Kindt's as-applied theory, we
conclude the statement of decision is insufficient with respect to Kindt's section 16600
claim.
3. Kindt's Section 17200 Claims
The statement of decision addressed each of Kindt's three predicates for his unfair
competition claim under section 17200.12 Regarding the predicates of "illegal pay
practices" and interference with Kindt's subsequent employment, the statement of
decision noted the issues were the subject of other claims resolved by the jury and
"[b]ased on the evidence, the Court finds no basis to determine otherwise." As for the
claim predicated on Trango's attempt to enforce an unlawful noncompete agreement, the
statement of decision cross-referenced its earlier determination that the "[Confidentiality]
Agreement was not a void noncompetition agreement."
12 Under section 17200, "unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice . . . ." 25
Apart from its legal determination on the section 16600 claim, the trial court
essentially acknowledged it based its statement of decision on the jury's findings:
"The court would consider the jury advisory and I'm not going to do anything differently than the jury did. In other words, the predicate for your equitable claims I think is the same as the factual determination that the jury made. [¶] . . . [¶] The jury made determinations and those determinations I think are the factual determinations in the statement of decision."
Kindt does not take issue, per se, with the statement of decision's incorporation of
the jury's findings, acknowledging Angelier v. State Board of Pharmacy (1997) 58
Cal.App.4th 592, 598, which upheld a statement of decision that incorporated by
reference an administrative board's findings. Instead, he contends that once the court
granted a new trial on the basis of jury misconduct, the statement of decision became
insufficient because of its reliance on the jury's invalidated findings. The trial court's
order granting a new trial did not address the resulting anomaly, and the court did not
subsequently amend its statement of decision to make determinations independent from
those made by the tainted jury. Under the circumstances, this was error.
Trango argues the trial court could still have independently reached the same
conclusions based on the evidence the court received during trial. "In a mixed trial of
legal and equitable issues where legal issues are first tried to a jury, the court must follow
the jury's factual determinations on common issues of fact." (Hoopes v. Dolan (2008)
168 Cal.App.4th 146, 161.)13 Because the trial court here concluded that "the predicate
13 Hoopes v. Dolan, supra, 168 Cal.App.4th at pages 160 to 161 distinguished the cases the parties cite for the proposition that trial courts sitting in equity must make 26
for [Kindt's] equitable claims . . . is the same as the factual determination that the jury
made," the court was bound by the jury's earlier determinations on those issues. Within
that framework, the trial court's conclusion with respect to the jury's findings that it "finds
no basis to determine otherwise" is not the same as the trial court independently making
the same findings as the jury.
C. Exclusion of Evidence Regarding Trango's Litigation History
Kindt argues the trial court erred by excluding evidence of Trango's litigation
history. We review the trial court's evidentiary rulings for an abuse of discretion.
(People v. Thomas (2011) 51 Cal.4th 449, 485.)
Kindt contends the trial court should have admitted evidence of a prior lawsuit,
Trango v. Solectek, in which Trango sued a former employee and his new employer for
breaching the same agreement at issue here and for misappropriating trade secrets. Kindt
asserts that as a result of the trial court's denial of injunctive relief in Solectek, Trango
knew or should have known the Confidentiality Agreement was invalid. However, the
record shows the trial court in Solectek denied injunctive relief because of Trango's
evidentiary shortcomings and not because of the facial invalidity of the agreement. We
see no abuse of discretion in excluding evidence of the Solectek action.
independent factual findings. Saks v. Charity Mission Baptist Church (2001) 90 Cal.App.4th 1116 is distinguishable because the trial court received additional evidence during the equitable phase of the trial that contradicted the evidence presented to the jury. (Hoopes, at p. 160, citing Saks, at pp. 1145-1148). A-C Co. v. Security Pacific Nat. Bank (1985) 173 Cal.App.3d 462 is distinguishable because the jury was merely advisory and did not decide separate legal claims. (Hoopes, at p. 161, citing A-C, at p. 474.) 27
Kindt also contends the trial court erred in excluding testimony from CTI
employee Kruer regarding Trango's reputation for litigiousness. Kruer testified in
deposition that CTI's decision to terminate Kindt was based on its desire to avoid
litigation, considering Kruer's awareness of protracted litigation between Trango and
another company run by Kruer's friend. But Kruer also testified he was unaware of the
specifics of that other lawsuit or whether Trango had a reputation in the industry for
being litigious. Again, we see no abuse of discretion in excluding Kruer's testimony
about Trango's purported litigiousness.
DISPOSITION
The order granting Kindt's motion for new trial on his legal claims is affirmed and
the order denying Kindt's motion for new trial on his equitable claims is reversed. The
matter is remanded to the trial court for a new trial. Kindt is entitled to costs on appeal.
McDONALD, J.
WE CONCUR:
HALLER, Acting P. J.
AARON, J.
28
AI Brief
AI-generated · verify before citing
Holding. The court affirmed the order granting a new trial on legal claims due to jury misconduct, but reversed the order denying a new trial on equitable claims, finding the nonsolicitation agreement facially invalid and the statement of decision insufficient.
Issues
Whether the trial court abused its discretion in granting a new trial on legal claims based on jury misconduct.
Whether the trial court erred in its determination of the facial validity of the nonsolicitation agreement under Business and Professions Code section 16600.
Whether the trial court's statement of decision regarding equitable claims was sufficient.
Disposition. Affirmed in part and reversed in part.
Quotations verified verbatim against the opinion
“The trial court did not err by granting a new trial on Kindt's legal claims or by excluding evidence of Trango's litigation history.”
“However, we also conclude the court erred in its determination of the facial validity of the nonsolicitation agreement and in rendering an insufficient statement of decision.”