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SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO
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Jan-02-2009 2:07 pm
Case Number: CGC-07-466733
Filing Date: Jan-02-2009 2:06
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ORDER
INOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE COF
Instructions:
001002359912
Please place this sheet on top of the document to be scanned.Gor
ay: Do aLI, Clerk
eputy Clerk
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO COURT
UNLIMITED JURISDICTION
} Case No.: 466733
BEYOND INNOVATION, INC., a California ) ORDER SUSTAINING DEFENDANTS’
Corporation ) DEMURRER TO THIRD AMENDED
) COMPLAINT WITHOUT LEAVE TO
Plaintiffs, } AMEND
vs. )
)
AUTODESK. INC., a Delaware Corporation, ) Date: January 2, 2009
SHRIKANT BHAT, and DOES .1 — 10, ) Dept: 301
} Judge: Hon. Peter J. Busch
Defendants. }
On October 29, 2008, Defendant’s demurrer to the third amended complaint came on for
hearing before the Honorable Peter J. Busch. David S. Levin, Esq., appeared for Plaintiff, and
Hope Anne Case, Esq., appeared on behalf of Defendants. After oral argument, the court
ordered additional briefing, and took the matter under submission on November 17, 2008.
For the following reasons, the court determines that the Agreement is unenforceable,
that the illegality of the contract is not collateral to the agreement, and that the central purpose
of the Agreement is tainted with illegality. First, the non-solicitation provision in paragraph 7
and the non-compete provision contained in paragraph 9 of the contract are unenforceablerestraints on trade under B & P § 16600. Edwards v. Arthur Anderson LLP (2008) 44 Cal.4”
937, 945. B & P § 16600 states “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,” Paragraph 7 of the agreement precludes defendant Bhat from soliciting any
employees, consultants, candidates, or business of plaintiffs for 18 months following Bhat’s
termination. Paragraph 9 states that Bhat will not compete in any way with plaintiff's business
for 18 months following Bhat’s termination. These provisions are clearly violative of B & P
§ 16600’s policy of ensuring “that every citizen shall retain the right to pursue any lawful
employment and enterprise of their choice.” Jd. at 946 quoting Metro Traffic Control v. Shadow
Traffic Network (1994) 22 Cal.App.4® 853, 859. Thus, the provisions are void. At issue here is
whether the severability clause contained in paragraph 12(c) of the Agreement may be used to
save these unlawful provisions of the contract.
If as a matter of law the court determines that the contract or any clause of the contract is
unconscionable at the time it was made, the court has discretion to sever an unenforceable
provision or refuse to enforce the contract in its entirety. Civil Code 1670.5(a). Where the
unenforceable provision of the contract was so integral to the contract that the whole contract is
tainted, the court will not sever the unenforceable provision. Templeton Development v. Sup.
Ct. (2006) 144 Cal. App.4" 1073, 1085. In contrast, where the illegality is collateral to the main
purpose of the contract, then the court may sever the unenforceable provision. 7d. Here,
plaintiff argues that the purpose of the contract was to create an employment relationship, and
that the restrictions on the employee following termination were collateral to this main purpose.
Plaintiff urges the court to excise any illegal provisions and interpret the agreement as a twelve
month agreement to work.
The policy of B & P § 16600 favors voiding illegal contracts. In D’Sa v. Playhut, Inc.,a
case involving a claim of wrongful termination against public policy, the employer terminated
the plaintiff after the plaintiff refused to sign a confidentiality agreement that contained a
covenant not to compete. (2000) 85 Cal.App.4" 927, 929. The employer argued that aseverability provision should apply and that the covenant not to compete could be removed
from the agreement. Jd. at 934, In denying this request, the Court of Appeal held that the
severability clause existed for the benefit of the employer, and did not serve any purpose on
behalf of the plaintiff. 7d. The Court of Appeal further found,
“there exists a clear legislative declaration of public policy against covenants
not to compete ... [and that] the interests of the employee in his own mobility
and betterment are deemed paramount to the competitive business interests of
the employers, where neither the employee nor his new employer has
committed any illegal act accompanying the employment change.” Jd. at 933.
The Court of Appeal determined that a covenant not to compete could not be severed, or
alternatively narrowly construed as a confidentiality agreement. Jd. at 935.
Here, the contract provides that Bhat may not solicit any employces, consultants,
candidates, or businesses of plaintiff (47), may not quit the job for 12 months, unless agreeing
to pay $20,000 ( 7), covenants not to compete for 18 months ( § 9), and agrees to injunctive
relief against him in the event that he breaches the agreement. These provisions of the
agreement restrict Bhat “from performing work for [plaintiff's] clients and therefore restricted
his ability to practice his ... profession.” Edwards v. Arthur Andersen 44 Cal.4™ at 947, These
restrictions are unlawful restraints on trade that pervade the agreement and cannot be severed.
Thus, the court declines to exercise its discretion and sever invalid portions of paragraph 7 of
the Agreement.
At the October 29, 2008 hearing, plaintiff asserted that at a minimum not all of
paragraph 7 was unenforceable and the court could construe the paragraph 7 as a 12 month
employment agreement. For the above teasons, the contract’s illegality is pervasive and cannot
be severed from rest of paragraph 7. Further, restricting the contract to a 12 month employment
agreement would contravene the public policy behind B & P § 16600. At the Court of Appeal
has noted,
“Employers could insert broad, 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.
Employers would have no disincentive to use the broad, illegal clauses if
permitted to retreat to a narrow, lawful construction in the event of litigation.”
Kolani v. Gluska (1998) 64 Cal. App.4" 402, 407.
In D’Sa, the court denied the employer's request to narrowly construe the covenant not
to compete, holding that to do so “would not be reforming the contract based on a mistake of
the parties; rather we would be saving a statutorily proscribed and void provision.” D’Sa v.
Playhut 85 Cal.App.4" at 935. Here, excising all illegal provisions except for the covenant not
to quit for 12 months would, in effect, be saving an illegal non-solicitation provision.
Because the court determines that the illegality pervades the relevant portions of the
agrecment, and therefore, the relevant terms cannot be saved, the court declines to exercise its
discretion in favor of saving the lawful provisions of the contract. Asa result, plaintiff's claims
fail.
IT IS ORDERED that defendants’ demurrer to the third amended complaint is sustained
without leave to amend.
Dated: Ognva. ny m2 204, 2008" fabs /) fp
The Honorable Pgter J. Busch
Judge of the Superior CourtCalifornia Superior Court * County of San Francisco
Law & Motion Department + Room 301
BEYOND INNOVATION, INC., a
California Corporation
Plaintiffs, No. 466733
vs. Certificate of Service by Mail
(CCP § 1013a(4))
AUTODESK. INC., a Delaware
Corporation, SHRIKANT BHAT, and
DOES 1 - 10,
Defendants.
I, Gordon Park-Li, Clerk of the Superior Court of the City and County of San
Francisco, certify that:
1) lam not a party to the within action;
YAN ~
2) On 2 2008 , 1 served the attached:
ORDER SUSTAINING DEFENDANTS’ DEMURRER TO THIRD AMENDED
COMPLAINT WITHOUT LEAVE TO AMEND
by placing a copy thereof in a sealed envelope, addressed to the following:
David S. Levin Hope Anne Case
Levin Law Firm DLA Piper LLP
405 Sherman Avenue 2000 University Avenue
Palo Alto, California 94306 East Palo Alto, CA 94303
3) I then placed the sealed envelope in the outgoing mail at 400 McAllister St, San
Francisco, CA 94102 on the date indicated above for collection, attachment of required
prepaid postage, and mailing on that date following standard court practice.
NAN ~ 3 2009 GORDON PARK-LI, Clerk
Dated: By: Wle bet ~
deputy