Judge: Cynthia A Freeland, Case: 37-2021-00022311-CU-BT-NC, Date: 2023-08-11 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - July 27, 2023

07/28/2023  01:30:00 PM  N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

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Civil - Unlimited  Business Tort Summary Judgment / Summary Adjudication (Civil) 37-2021-00022311-CU-BT-NC MCLAUGHLIN VS HOLLAND [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion for Summary Judgment and/or Adjudication, 12/01/2022

Defendant Holland, L.P. ('Defendant')'s motion for summary judgment or, alternatively, summary adjudication is denied.

Plaintiff Scott McLaughlin ('Plaintiff')'s evidentiary objections are overruled. Defendant's evidentiary objections are overruled, except for Objection No. 10, which is sustained to the extent Defendant seeks to offer into evidence a confidential settlement communication. See Cal. Evid. Code § 1152.

Factual Background and Procedural History This action involves an employer's alleged interference with its former employee's prospective employment opportunity based on the terms of a non-compete clause. Defendant employed Plaintiff as a Regional Sales Manager. On November 23, 2015, at the outset of his employment, Plaintiff signed a Discovery & Confidential Information Agreement (the 'Agreement'). Paragraph 5 of the Agreement contains a non-compete clause (the 'Non-Compete Clause') that reads: Employee covenants and agrees that during Employee's employment and for a period of six months after termination for any reason, Employee will not directly or indirectly own, manage, operate, or be connected in any manner with any entity which renders services or sells products competitive with those described above. Furthermore, Employee shall not, directly or on behalf of any person or other entity, solicit or divert any customer or other employee of Holland during said period.

See the Non-Compete Clause.

In 2020, Plaintiff began working with an executive recruiter, Debbie Taylor, to help him new employment.

On February 8, 2021, MERMEC Inc. ('MERMEC') sent Plaintiff an amended employment offer (the 'Employment Offer') for the position of Vice President of Business Development & Sales. The Employment Offer was contingent upon, in relevant part, Plaintiff being 'free from obligation to any active non-competition agreements with previous employers at the commencement of [his] employment with MERMEC. Should such an agreement be presented, MERMEC will reserve the right to rescind this offer of employment.' Plaintiff signed the Employment Offer and MERMEC's Trade Secrets, Confidential Information, Work Product, Non-Solicitation, and Non-Competition Agreement on February 8, 2021. It is undisputed that Defendant and MERMEC are separate and unrelated entities, and each considers the other a direct competitor.

On February 9, 2021, Plaintiff resigned from Defendant effective immediately. That same day, Calendar No.: Event ID:  TENTATIVE RULINGS

2918618 CASE NUMBER: CASE TITLE:  MCLAUGHLIN VS HOLLAND [IMAGED]  37-2021-00022311-CU-BT-NC Defendant's Chief Human Resources Officer, Rich Trojan, e-mailed Plaintiff a copy of the Agreement, which Plaintiff promptly forwarded to Ms. Taylor so that she could provide it to MERMEC. On February 10, 2021, Defendant's parent company's Vice President and General Counsel, Gregory P. Preves, sent Plaintiff correspondence regarding the Agreement. The letter indicated that, based on Plaintiff's admission that MERMEC is a direct competitor of Defendant, Plaintiff 'may' be in violation of the Non-Compete Clause. However, the letter did not explicitly indicate that Defendant: (1) believed Plaintiff to be in violation of the Agreement at the time, or (2) was seeking to enforce the Non-Compete Clause or to disrupt Plaintiff's employment with MERMEC. Mr. Preves requested that Plaintiff provide a written response, no later than February 15, 2021, identifying his new employer and detailing the nature of his employment and work responsibilities so that it could be ascertained whether his new employment would breach his ongoing obligations to Defendant. Plaintiff did not directly respond to Mr. Preves's letter; instead, Plaintiff retained Diana Sensale, Esq. of the San Diego Employment Law Group to represent him. On February 12, 2021, Ms. Sensale responded to Mr. Preves's letter. Neither Plaintiff nor his agents informed Defendant where Plaintiff would be working or what tasks he would be performing.

On February 23, 2021, Defendant's President, Jordan Wolf, telephoned MERMEC's President and Chief Executive Officer, Dr. Alan Calegari, to discuss personnel issues between the two companies. The main subject of their discussion was that Defendant's former employee, 'TB', had begun working for MERMEC in violation of TB's non-compete agreement and was actively attempting to poach additional employees from Defendant. In the same conversation, it occurred to Mr. Wolf that MERMEC could be the employer that Plaintiff was leaving Defendant to join. Mr. Wolf thus inquired as to whether MERMEC had extended an employment offer to Plaintiff, which Dr. Calegari confirmed. Mr. Wolf then informed Dr.

Calegari that Plaintiff also had a non-compete agreement in place. Mr. Wolf did not ask that MERMEC rescind the Employment Offer. On February 23, 2021, Dr. Calegari sent Mr. Wolf a letter regarding TB and the issues concerning his employment and poaching activities. Dr. Calegari's letter stated that '[a] caveat of our potential offer of employment is the self-disclosure by the candidate of any restrictive non-compete condition present in his or her past employment. Such condition is clearly stated in all our current employment offers.' In his February 26, 2021 response, Mr. Wolf, among other things, proposed that Plaintiff be restricted from servicing certain customers during the beginning of his employment at MERMEC. Against this backdrop, Lara Stevens testified that Ms. Taylor telephoned Dr. Calegari on February 9, 2021 to inform him of the Non-Compete Clause. Dr. Calegari testified that, based on Ms.

Taylor's representations, MERMEC agreed to not take any action concerning the Employment Offer with the understanding that Plaintiff was attempting to resolve the issue with Defendant. On March 2, 2021, MERMEC rescinded the Employment Offer.

On May 19, 2021, Plaintiff commenced this action by filing a Complaint against Defendant for: (1) intentional interference with prospective economic advantage; (2) breach of California Business & Professions Code ('BPC') § 16600; (3) intentional infliction of emotional distress; and (4) negligence.

Defendant now seeks summary judgment or, in the alternatively, summary adjudication as to each cause of action.

Legal Analysis Motions for summary judgment and adjudication are subject to the same rules and procedures. See Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal. App. 4th 807, 819; Cal. Code Civ. P. § 437c(f)(2). The court applies a three-step analysis when ruling on a motion for summary judgment or adjudication: (1) identify the causes of action, issue(s) of duty or defense framed by the pleadings; (2) determine whether the movant has satisfied his or her burden of showing the defense or causes of action have no merit because one or more elements cannot be established, or that there is a complete defense to the cause or causes of action, or that a duty exists or does not exist; and (3) if the movant has made a prima facie showing that he or she is entitled to judgment as a matter of law, the burden shifts and the court determines whether the opposing party has provided evidence of a triable material fact as to the cause of action, issue of duty or defense. See Linden Partners v. Wilshire Linden Assocs.

(1998) 62 Cal.4th 508, 518; Choi v. Sagemark Consulting (2017) 18 Cal. App. 5th 308, 318 (citing Cal. Code Civ. P. §§ 437c(o), (p)(2); Pipitone v. Williams (2016) 244 Cal. App. 4th 1437, 1449). The opposing Calendar No.: Event ID:  TENTATIVE RULINGS

2918618 CASE NUMBER: CASE TITLE:  MCLAUGHLIN VS HOLLAND [IMAGED]  37-2021-00022311-CU-BT-NC party 'must set forth specific facts beyond the pleadings to show the existence of a triable issue of material fact.' Choi, 18 Cal. App. 5th at 318 (citing Cal. Code Civ. P. § 437c(p)(2)). 'There is a triable issue of fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.' Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850. The court must 'liberally construe the evidence in support of the [opposing party] and resolve doubts concerning the evidence in favor of that party.' Dore v. Arnold Worldwide, Inc. (2006) 39 Cal. 4th 384, 389.

Defendant's motion for summary judgment as to the first cause of action for intentional interference with prospective economic advantage is denied. The elements for intentional interference with prospective economic advantage are: '(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.' Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal. App. 4th 507, 521-522. To prevail on this cause of action, a plaintiff must plead and prove as part of his or her case-in-chief that the defendant's conduct was 'wrongful by some legal measure other than the fact of interference itself.' Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal. 4th 376, 393. Put differently, 'a plaintiff must plead that the defendant engaged in an act that is wrongful apart from the interference itself.' Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1153. 'To establish that the defendant's interfering conduct was independently wrongful, the plaintiff must instead prove that the conduct – whether directed at the plaintiff or someone else – was 'proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.'' Drink Tank Ventures LLC v. Real Soda in Real Bottles, Ltd. (2021) 71 Cal. App. 5th 528, 538 (quoting Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal. 5th 1130, 1142).

The court finds that summary judgment is inappropriate owing to multiple triable issues of material fact.

The evidence shows that an economic relationship existed between Plaintiff and MERMEC with the probability of future economic benefit to the Plaintiff, viz., MERMEC had extended to Plaintiff the Employment Offer that would have provided him with economic benefits moving forward. The evidence further demonstrates that Defendant had knowledge of the Employment Offer before the alleged interference occurred. Mr. Preves's February 10, 2021 letter to Plaintiff indicates that Defendant had knowledge that Plaintiff: (1) had accepted employment from a direct competitor, and (2) may be in violation of the Non-Compete Clause. Even if that is not sufficient to prove knowledge, Mr. Wolf testified that during his February 23, 2021 phone call with Dr. Calegari, Dr. Calegari confirmed that MERMEC had provided Plaintiff with the Employment Offer. Immediately thereafter, Mr. Wolf brought to Dr.

Calegari's attention the Non-Compete Clause in the Agreement between Plaintiff and Defendant.

There is presently a triable issue of material fact as to whether Mr. Wolf's conduct was independently wrongful, i.e., wrongful by some legal measure other than the interference itself. More specifically, Mr.

Wolf testified that it was a typical company practice to, before discussing the existence and/or enforcement of a non-compete clause with a competitor, discuss the situation with the affected employee's direct supervisor, human resources, and/or legal counsel. However, Mr. Wolf further testified that this practice was not 'absolute' and depended on the particular facts and circumstances. To be clear, there is nothing unlawful about two corporate presidents discussing business dealings and restrictive covenants impacting their respective businesses. See Korea Supply Co., 29 Cal. 4th at 1158-1159. However, whether Mr. Wolf breached this policy by discussing the Non-Compete Clause with Dr. Calegari without first consulting with Plaintiff's direct supervisor, human resources, and/or Defendant's in-house counsel and, by extension, explicitly or implicitly implied that Defendant would seek to enforce the Non-Compete Clause in violation of BPC § 16600, is an issue of material fact for the jury to decide.

Additionally, the court agrees with Plaintiff that whether Mr. Wolf specifically intended to disrupt Plaintiff's relationship with MERMEC is of no moment. Plaintiff need not prove that Defendant acted with the specific intent or purpose of disrupting Plaintiff's prospective economic advantage. See Korea Supply Calendar No.: Event ID:  TENTATIVE RULINGS

2918618 CASE NUMBER: CASE TITLE:  MCLAUGHLIN VS HOLLAND [IMAGED]  37-2021-00022311-CU-BT-NC Co., 29 Cal. 4th at 1155-1157. That being said, there is also a triable issue of material fact as to whether Mr. Wolf's conduct actually disrupted Plaintiff's relationship with MERMEC and proximately caused Plaintiff's harm. More specifically, there is presently a dispute as to the reason(s) why MERMEC and/or Dr. Calegari chose to rescind the Employment Offer. Mr. Wolf has stated that Defendant was unaware of MERMEC's decision to rescind the Employment Offer and was surprised to learn of this development because Mr. Wolf had advised Dr. Calegari that Defendant was open to finding a solution that would allow Plaintiff to work for MERMEC while still protecting Defendant's interests. Dr. Calegari, for his part, testified that MERMEC acted unilaterally in rescinding the Employment Offer and that MERMEC does not 'take orders' from Defendant. However, he further testified that 'when I got knowledge and particularly, you know, coming from Jordan, you know, Wolf, the President of Holland, whom also is a good friend, I honor that and I just say, 'It's done. We'll rescind our offer. Not to worry.'' Plaintiff, on the other hand, contends that Mr. Wolf's/Defendant's conduct played a critical role in MERMEC's decision to rescind the Employment Offer.

Accordingly, the court denies Defendant's motion for summary judgment or, alternatively, summary adjudication as to the first cause of action.

Defendant's motion for summary judgment as to the second cause of action for breach of BPC § 16600 is denied. BPC § 16600 provides that 'every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.' Cal. Bus & Prof. Code § 16600.

BPC § 16600 'evinces a settled legislative policy in favor of open competition and employee mobility.' Edwards v. Arthur Andersen LLP (2008) 44 Cal. 4th 937, 946. BPC § 16600 is strictly applied in the employment context. See Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal. App. 4th 853, 859. Noncompetition agreements are invalid in California, even if narrowly drawn, unless they fall within one of the statutory exceptions set forth in BPC §§ 16601, 16602, or 16602.5. See Brown v. TGS Management Company, LLC (2020) 57 Cal. App. 5th 303, 318.

The court finds that summary judgment is inappropriate because there is a triable issue of material fact as to whether Defendant sought to enforce the Non-Compete Clause and thus breached BPC § 16600's prohibition against such provisions under California law. Mr. Wolf testified that he did not explicitly request that Dr. Calegari rescind the Employment Offer after informing him of the Non-Compete Clause's existence. Moreover, a review of Mr. Preves's February 10, 2021 letter to Plaintiff reveals that Defendant was not, at that time, expressly seeking to enforce the Agreement against Plaintiff or otherwise suggesting that Plaintiff had, in fact, breached the Agreement. However, Plaintiff testified that Mr. Wolf's/Defendant's conduct constituted, in essence, enforcement of the Agreement and/or Non-Compete Clause against Plaintiff or, at a minimum, an implication to MERMEC/Dr. Calegari that the Agreement and/or Non-Compete Clause was enforceable against Plaintiff.

Accordingly, the court denies Defendant's motion for summary judgment or, alternatively, summary adjudication as to the second cause of action.

Defendant's motion for summary judgment as to the third cause of action for intentional infliction of emotional distress is denied. The elements for intentional infliction of emotional distress are: '(1) outrageous conduct by the defendant; (2) the defendant's intention of causing or reckless disregard of the probability of causing emotional distress; (3) the plaintiff's suffering severe or extreme emotional distress; and (4) actual and proximate causation of the emotional distress by the defendant's outrageous conduct.' Yau v. Santa Margarita Ford, Inc. (2014) 229 Cal. App. 4th 144, 160. 'Extreme and outrageous conduct is conduct that is 'so extreme as to exceed all bounds of that usually tolerated in a civilized community' and must be 'of a nature which is especially calculated to cause, and does cause, mental distress.'' Chang v. Lederman (2009) 172 Cal. App. 4th 67, 86-87 (quoting Potter v. Firestone Tire & Rubber Co. (1993) 6 Cal. 4th 965, 1001; Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal. 3d 148, 155, fn. 7). 'Behavior may be considered outrageous if a defendant (1) abuses a relation or position which gives him power to damage the plaintiff's interest; (2) knows the plaintiff is susceptible to injuries through mental distress; or (3) acts intentionally or unreasonably with the recognition that the acts are likely to result in illness through mental distress.' Smith v. BP Lubricants USA Inc. (2021) 64 Cal. App. Calendar No.: Event ID:  TENTATIVE RULINGS

2918618 CASE NUMBER: CASE TITLE:  MCLAUGHLIN VS HOLLAND [IMAGED]  37-2021-00022311-CU-BT-NC 5th 138, 147.

The court finds that summary judgment is inappropriate because there is a triable issue of material fact as to whether Defendant's conduct was extreme and outrageous. More specifically, as set forth above, Mr. Wolf testified that Defendant had a general, albeit not absolute, policy to, before discussing the existence and/or enforcement of a non-compete clause with a competitor, discuss the situation with the affected employee's direct supervisor, human resources, and/or in-house counsel. Mr. Wolf admits he did not do so when discussing Plaintiff with Dr. Calegari. Instead, Mr. Wolf claims that, in some instances, he simply likes to gather additional information about where a former employee is going to work and what tasks they may be performing so that Defendant can make an informed decision as to what, if any, steps it needs to take to protect its interests. However, when pressed regarding other employees who had left Defendant to work for MERMEC or other competitors of Defendant, Mr. Wolf testified that he was not involved in conversations pertaining to those departures. Plaintiff, for his part, testified that Mr. Wolf had stepped outside his role as President of Defendant and intentionally inserted himself into Plaintiff's employment relationship with MERMEC for the purpose of interfering with it.

Accordingly, the court finds a triable issue of material fact as to whether Mr. Wolf abused his position with Defendant to harm Plaintiff's interests.

Accordingly, the court denies Defendant's motion for summary judgment or, alternatively, summary adjudication as to the third cause of action.

Defendant's motion for summary judgment as to the fourth cause of action for negligence is denied. 'To succeed in a negligence action, the plaintiff must show that (1) the defendant owed the plaintiff a legal duty, (2) the defendant breached the duty, and (3) the breach proximately or legally caused (4) the plaintiff's damages or injuries.' Thomas v. Stenberg (2012) 206 Cal. App. 4th 654, 662. Causation is generally a question of fact for the jury to decide except in cases where the facts as to causation are undisputed. See Constance B. v. State of California (1986) 178 Cal. App. 3d 200, 207. 'A plaintiff meets the causation element by showing that (1) the defendant's breach of its duty to exercise ordinary care was a substantial factor in bringing about plaintiff's harm, and (2) there is no rule of law relieving the defendant of liability.' Ortega v. Kmart Corp. (2001) 26 Cal. 4th 1200, 1205.

The court finds that summary judgment is inappropriate because there are triable issues of material fact as to the existence of a legal duty owed to Plaintiff and whether Defendant breached that duty. The parties are correct that the existence of a legal duty of care is a question of law to be decided by the court. See, e.g., Burns v. Neiman Marcus Group, Inc. (2009) 173 Cal. App. 4th 479, 487. However, determining the existence of a legal duty requires an examination of various fact-specific policy factors, including: (1) the foreseeability of harm to the plaintiff; (2) the degree of certainty that the plaintiff suffered injury; (3) the closeness of the connection between the defendant's conduct and the injury suffered; (4) the moral blame attached to the defendant's conduct; (5) the policy of preventing future harm; (6) the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach; and (7) the availability, cost, and prevalence of insurance for the risk involved. See Ballard v. Uribe (1986) 41 Cal. 3d 564, 572, fn. 6. In this case, there are, at a minimum, triable issues of material fact as to whether: (1) it was reasonably foreseeable that Mr. Wolf revealing the Non-Compete Clause to Dr. Calegari would result in MERMEC rescinding the Employment Offer, and (2) the connection between Defendant's conduct and the injury suffered, i.e., the reasons MERMEC rescinded the Employment Offer. Additionally, to the extent a legal duty of care exists, there is a triable issue of material fact as to causation, i.e., whether Defendant's conduct caused Plaintiff's damages (the rescission of the Employment Agreement).

Accordingly, the court denies Defendant's motion for summary judgment or, alternatively, summary adjudication as to the fourth cause of action.

To the extent that Defendant argues that the Complaint is barred under the assumption of risk doctrine and/or due to Plaintiff's contributory negligence because Plaintiff voluntarily resigned from his employment knowing that the Employment Offer was contingent, such argument is not well taken. To Calendar No.: Event ID:  TENTATIVE RULINGS

2918618 CASE NUMBER: CASE TITLE:  MCLAUGHLIN VS HOLLAND [IMAGED]  37-2021-00022311-CU-BT-NC start, contributory negligence is a defense only to actions grounded in negligence. See Daly v. General Motors Corp. (1978) 20 Cal. 3d 725, 735. 'The defense of assumption of risk is available when there has been a voluntary acceptance of a risk, and such acceptance, whether express or implied, has been made with knowledge and appreciation of the risk.' Morton v. California Sports Car Club (1958) 163 Cal. App. 2d 685, 688. In this case, whether Plaintiff contributed to his alleged injuries is a question of fact for the jury. There is also a question of fact as to whether Plaintiff knew of and appreciated the risk that MERMEC could rescind the Employment Offer at the time he resigned from Defendant. Finally, to the extent Defendant contends that Plaintiff cannot prove punitive damages, there is a question of fact as to whether Mr. Wolf/Defendant intended to harm Plaintiff by informing Dr. Calegari/MERMEC of the Non-Compete Clause and whether such disclosure is the type of despicable conduct contemplated under California Civil Code § 3294.

Conclusion In light of the foregoing, the court denies Defendant's motion for summary judgment or, alternatively, summary adjudication.

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, July 28, 2023. If no party appears at the hearing, this tentative ruling will become the order of the court as of July 28, 2023. If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this notice is not required.

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