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  • BEYOND INNOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE CORPORATION et al BUSINESS TORT document preview
  • BEYOND INNOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE CORPORATION et al BUSINESS TORT document preview
  • BEYOND INNOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE CORPORATION et al BUSINESS TORT document preview
  • BEYOND INNOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE CORPORATION et al BUSINESS TORT document preview
  • BEYOND INNOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE CORPORATION et al BUSINESS TORT document preview
  • BEYOND INNOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE CORPORATION et al BUSINESS TORT document preview
  • BEYOND INNOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE CORPORATION et al BUSINESS TORT document preview
  • BEYOND INNOVATION INC A CALIFORNIA CORPORATION VS. AUTODESK INC A DELAWARE CORPORATION et al BUSINESS TORT document preview
						
                                

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AAT SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN FRANCISCO Document Scanning Lead Sheet Jan-02-2009 2:07 pm Case Number: CGC-07-466733 Filing Date: Jan-02-2009 2:06 Juke Box: 001 Image: 02359912 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