Judge: Margaret L. Oldendorf, Case: 22BBCV00516, Date: 2023-02-27 Tentative Ruling
Case Number: 22BBCV00516 Hearing Date: February 27, 2023 Dept: P
FOR THE COUNTY OF LOS ANGELES
NORTHEAST DISTRICT
I. INTRODUCTION
Defendant Brian Hartstein (Hartstein) was employed by
Plaintiff HCMC Legal, Inc. (Hire Counsel) for over 21 years. He was hired as a
salesperson in 2000; from 2011 on he was a senior manager with a stock
ownership interest. Hire Counsel alleges that in June 2022 Hartstein quit with
no notice and went to work for a competitor, thereafter soliciting its customers
to the new company and enticing former co-workers to follow him as well.
Hire Counsel initiated litigation against Hartstein on
July 15, 2022, by filing this lawsuit. The Complaint alleges Harstein breached
his employment agreement and breached duties owed to Hire Counsel when he began
soliciting its customers after leaving the company. Hartstein responded by
filing a motion to compel arbitration and for an injunction precluding Hire
Counsel from enforcing certain provisions of the Employment Agreement he had
with them. Specifically, he sought an injunction precluding Hire Counsel from enforcing
a provision prohibiting Harstein from soliciting its customers after leaving
employment. Both motions were denied on December 12, 2022. Both rulings were appealed.
Hire Counsel now seeks an injunction against Harstein. Because
the relief requested is a matter embraced by the appeals, the motion is taken
off calendar pending resolution of the appeals.
II. LEGAL
STANDARD
Code Civ. Proc. §916(a) provides that “the perfecting of
an appeal stays proceedings in the trial court upon the judgment or order appealed
from or upon the matters embraced therein or affected thereby, including
enforcement of the judgment or order, but the trial court may proceed upon any
other matter embraced in the action and not affected by the judgment or order.”
In Varian Med. Sys. Inc. v. Delfino (2005) 35
Cal.4th 180, 189 the California Supreme Court stated:
Subject
to certain exceptions not relevant here, “the perfecting of an appeal stays
proceedings in the trial court upon the judgment or order appealed from or upon
the matters embraced therein or affected thereby, including enforcement of the
judgment or order, but the trial court may proceed upon any other matter
embraced in the action and not affected by the judgment or order.” [fn. 5] (§
916, subd. (a).) The purpose of the automatic stay provision of section 916,
subdivision (a) “is to protect the appellate court's jurisdiction by preserving
the status quo until the appeal is decided. The [automatic stay] prevents the
trial court from rendering an appeal futile by altering the appealed judgment
or order by conducting other proceedings that may affect it.” (Elsea v.
Saberi (1992) 4 Cal.App.4th 625, 629, 5 Cal.Rptr.2d 742 (Elsea).)
To
accomplish this purpose, section 916, subdivision (a) stays all further trial
court proceedings “upon the matters embraced” in or “affected” by the appeal.
In determining whether a proceeding is embraced in or affected by the appeal,
we must consider the appeal and its possible outcomes in relation to the
proceeding and its possible results. “[W]hether a matter is ‘embraced’ in or
‘affected’ by a judgment [or order] within the meaning of [section 916] depends
on whether postjudgment [or postorder] proceedings on the matter would have any
effect on the ‘effectiveness' of the appeal.” (In re Marriage of Horowitz
(1984) 159 Cal.App.3d 377, 381, 205 Cal.Rptr. 880 (Horowitz).) “If so,
the proceedings are stayed; if not, the proceedings are permitted.” (Betz v.
Pankow (1993) 16 Cal.App.4th 931, 938, 20 Cal.Rptr.2d 841 (Betz).)
III. DISCUSSION
“Under California law, an appeal from the denial of a
motion to compel arbitration automatically stays all further trial court
proceedings on the merits. [See Varian Med. Systems, Inc. v. Delfino
(2005) 35 C4th 180, 190, 25 CR3d 298, 306-307; and detailed discussion in
Eisenberg, Cal. Prac. Guide: Civil Appeals & Writs (TRG), Ch. 7.]” Knight,
Cal. Practice Guide- Alternative Dispute Resolution (The Rutter Group 2022) ¶5:338.2.
Hire Counsel makes three arguments as to why it is
entitled to seek injunctive relief despite the stay. First, it argues that Harstein
“conceded” in his motion to compel arbitration that provisional relief was not
subject to the arbitration provision. Second, Hire Counsel argues that it
opposed the motion to compel arbitration by arguing that not all causes of
action were subject to the arbitration agreement and further, that the 7th
cause of action for violation of Penal Code §502(c)(3) allows Hire Counsel to
seek provisional relief. Third, Hire Counsel notes that Code Civ. Proc. §1281.8(b)
authorizes a party to seek a provisional remedy whether or not arbitration is
pending. None of these arguments is persuasive in this case.
The determinative issue is whether the relief sought (a
preliminary injunction) is a proceeding on the order appealed from or matters “embraced
therein or affected thereby.” The concessions made and/or arguments raised by
the parties in connection with the motion to compel arbitration do not determine
whether the relief sought here is embraced or affected by the orders appealed
from. The fact that injunctive relief may be appropriate for violations of
Penal Code §502, or that Code Civ. Proc. §1281.1(b) provides for injunctive
relief, are also not determinative. None of these arguments bears on the
critical question of whether a preliminary injunction proceeding enforcing the
Employment Agreement (or denying such relief) is a proceeding on the order
appealed from or matters embraced or affected thereby. It is.
The orders denying Harstein’s petition to compel
arbitration and request for injunctive relief involve contract interpretation issues
concerning the very provisions on which Hire Counsel bases its request
for a preliminary injunction. In other words, the relief sought is matter “embraced”
and “affected” by the orders appealed from. Consequently, the stay applies to
it.
VI. ORDER
Hire Counsel’s motion for preliminary injunction is
removed from calendar at this time, pursuant to the automatic stay. Hartstein is ordered to give notice.
Dated:
____________ ___________________________________
MARGARET L. OLDENDORF
JUDGE OF THE SUPERIOR COURT