Judge: Mark A. Young, Case: 23SMCP00188, Date: 2023-05-18 Tentative Ruling
Case Number: 23SMCP00188 Hearing Date: May 18, 2023 Dept: M
CASE NAME: Mika v. Lincoln
Avenue Capital Management LLC
CASE NO.: 23SMCP00188
MOTION: Preliminary
Injunction
HEARING DATE: 5/19/2023
Legal
Standard
Under Code of Civil Procedure
section 526(a), a preliminary injunction may be issued in the following cases:
1)
When it appears by the complaint that the plaintiff is entitled to the relief
demanded, and the relief, or any part thereof, consists in restraining the
commission or continuance of the act complained of, either for a limited period
or perpetually.
2)
When it appears by the complaint or affidavits that the commission or
continuance of some act during the litigation would produce waste, or great or
irreparable injury, to a party to the action.
3)
When it appears, during the litigation, that a party to the action is doing, or
threatens, or is about to do, or is procuring or suffering to be done, some act
in violation of the rights of another party to the action respecting the
subject of the action, and tending to render the judgment ineffectual.
4) When pecuniary compensation would
not afford adequate relief.
5)
Where it would be extremely difficult to ascertain the amount of compensation
which would afford adequate relief.
6)
Where the restraint is necessary to prevent a multiplicity of judicial
proceedings.
7) Where the obligation arises from
a trust.
In determining whether to issue a
preliminary injunction, the trial court considers two factors: 1) the
reasonable probability that the plaintiff will prevail on the merits at trial
(CCP §526(a)(1)); and 2) a balancing of the “irreparable harm” that the moving
party is likely to sustain if the injunction is denied compared to the harm
that the non-moving party is likely to suffer if the court grants a preliminary
injunction. (CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT
Corp. (1998) 63 Cal.App.4th 1396, 1402.) “A preliminary injunction is an interim
remedy designed to maintain the status quo pending a decision on the
merits.” (MaJor v. Miraverde Homeowners
Assn. (1992) 7
Cal.App.4th 618, 623.) “[A] cause of action must exist before injunctive
relief may be granted.” (Id. (citing Shell Oil
Co. v. Richter (1942) 52 Cal.App.2d 164, 168).)
The court’s ruling on a preliminary
injunction is not an adjudication of the merits, is not a trial, and does not
require a statement of decision. (Cohen v. Board of Supervisors,
(1985) 40 Cal.3d 277, 286.) The judge is not required to state her reasons for
granting or denying a preliminary injunction; a cursory statement is
sufficient. (City of Los Altos v. Barnes, (1992) 3 Cal.App.4th 1193,
1198.) A proposed order must be presented to the judge for signature, with any
required undertaking, within one day after the preliminary injunction is
granted, or other time ordered by the judge. (CRC 3.1150(f).)
Request
for judicial notice
Petitioner’s request for judicial
notice is DENIED as to Exhibits A-B, and GRANTED as to Exhibit C. Exhibits A-B
are not subject to judicial notice because they are printout of websites that
are reasonably subject to dispute and are not capable of immediate and accurate
determination by resort to sources of reasonably indisputable accuracy. Exhibit
C is a state record and thus, the Court takes judicial notice of it. (Evid.
Code § 452(c).)
Analysis
Petitioner Andrew Mika moves for a
preliminary injunction 1) staying the action pending in the Supreme Court of
the State of New York, County of New York, Index No. 654446/2022, captioned
Lincoln Avenue Capital Management, LLC v. Andrew Mika (the “New York Action”);
and 2) restraining and enjoining Respondent Lincoln Avenue Capital Management
LLC and its officers, directors, shareholders, members, employees, and agents,
and all persons acting on its behalf or under its direction or control, pending
arbitration of this matter, from: (a) enforcing or attempting to enforce any of
the restrictive provisions or covenants in the Employment Agreement entered
into by Mika and Lincoln on or about February 16, 2017, including any
provisions or covenants that purport to preclude Mika from competing with
Lincoln; and (b) maintaining, prosecuting, and/or proceeding with the New York
Action. Essentially, Petitioner asks this court to stay an action in another
state and prevent Respondent from proceeding in that action.
On November 21, 2022, Lincoln
initiated the New York Action against Mika. (Mika Decl., ¶ 19.) The New York
Action asserts various claims for relief, including a claim for breach of the
Non-Compete provision of the Employment Agreement. (Mika Decl., ¶ 19.) On Friday, March 31, 2023, Mika provided
formal notice (“Notice”) to Lincoln and its counsel that he was voiding certain
provisions of the Employment Agreement, including the Governing Law Provision
found in Section 5.10, as well as the Non-Solicitation, Non-Compete, and
Disclosure restrictions found in Sections 3.4, 3.6, and 3.9 of the Employment
Agreement. (Mika Decl., ¶ 22, Ex. D.) Petitioner asserts that once he submitted
the Notice, the cited terms were void, and that the dispute should be adjudicated
in California under California Law. On April 5, 2023, Mika filed this petition
to compel arbitration, and for declaratory and injunctive relief to prevent and
enjoin Lincoln from enforcing the void provisions of the Employment Agreement.
Under the circumstances, the Court is not inclined to grant a
preliminary injunction to stay the New York proceeding or prevent Lincoln from
continuing its prosecution of that action. First, Code of Civil Procedure
section 526(b) provides that an injunction cannot be granted to “stay a
judicial proceeding pending at the commencement of the action in which the
injunction is demanded, unless the restraint is necessary to prevent a
multiplicity of proceedings.” (Emphasis added.)
Caselaw recognizes that California courts have the power to issue
orders that prohibit a party from taking action in a case pending in another
jurisdiction that would interfere with the California court's proceedings. The
Supreme Court has provided guidance on when a California court may order an
anti-suit injunction against a sister state proceeding. In Advanced Biotics,
the high court declared that such an order requires “exceptional circumstances”
that outweigh the threat to judicial restraint and comity principles. (Advanced
Bionics Corp. v. Medtronic, Inc. (2002) 29 Cal.4th 697, 707-708.) In that
matter, a former employee (Stultz) brought a California action against Medtronic,
a Minnesota corporation, where Stultz had signed a noncompetition agreement as
a condition of employment. (Id. at 701-704.) The employee had worked in
Minnesota during the duration of his employment but resigned and took a job
with a competitor in California. (Id.) Stultz and his new employer,
Advanced Bionics, sued the former employer, Medtronic, for declaratory relief that
Medtronic's covenant not to compete and choice-of-law provisions violate
California's law and public policy. (Id. at 701.) While the action was
pending, Medtronic filed a state court action in Minnesota against the
employee, and obtained a temporary restraining order (TRO) from the Minnesota
court enjoining Advanced Bionics from hiring Stultz in any competitive role. (Id.
at 702.) In turn, Stultz and Advanced Bionics obtained a TRO from the
California state court restraining Medtronic from taking actions to enforce the
covenant not to compete outside of the California action. (Id. at 702-703.)
The Supreme Court held that the trial court erred in granting the
employee's request for a TRO enjoining the Minnesota Corporation from taking
any further steps in a Minnesota action it had filed against the employee after
the employee filed the California action. (Id. at 707.) The Supreme Court
held as such despite the fact that California has a strong interest in
protecting its employees from noncompetition agreements, and a California court
probably would have concluded that the contractual provision at issue was void under
Cal. Bus. & Prof. Code, § 16600. (Id. at 706-707.) The Supreme Court
cautioned that a “parallel action in a different state presents sovereignty
concerns that compel California courts to use restraint when determining
whether they may properly issue a TRO against parties pursuing an action in a
foreign jurisdiction.” (Id. at 707.)
The majority opinion in Advanced Bionics does not detail
what specific circumstances may be exceptional, except to the extent that the
circumstances in the underlying case were not exceptional. The concurring
opinions in Advanced Bionics, however, are more informative on this
issue. Drawing from state and federal case law, Justice Moreno’s concurrence
persuasively advocates for a restrictive test to determine whether an anti-suit
injunction is proper in a given context. “Under this approach, courts should
only issue antisuit injunctions in two situations: if ‘necessary to protect the
jurisdiction of the enjoining court, or to prevent the litigant's evasion of
the important public policies of the forum.’ [Citation.] The circuits that
follow the restrictive approach ‘have interpreted these exceptions narrowly.’
[Citation.]” (Id., at 714.) As to
the protection of jurisdiction, “[t]ypically, only two scenarios threaten a
court's jurisdiction. The first is when the concurrent proceedings are in rem
or quasi in rem. [Citation.]” (Id. at 715.) The second is when a “foreign
court in an in personam action [attempts] to carve out exclusive jurisdiction
over the matter. In such a case, ‘an injunction may ... also be necessary to
protect the enjoining court's jurisdiction.’ [Citation.]” (Id.)
As to preventing evasion of important public policies, this is a
“narrowly drawn” exception, where only “‘the evasion of the most compelling
public policies of the forum will support the issuance of an antisuit
injunction.’” (Id. at 716.) “Even the possibility that the party filing
in a sister state may benefit favorably from an application of that state's law
does not necessarily constitute an evasion of the forum state's public
policies.” (Id.) Courts “have granted an antisuit injunction in cases in which
the litigants are both residents of the state in which the injunction is
sought, and one resident is seeking to evade the law of the common domicile in
order to gain an inequitable advantage over the other.” (Id. at 717.) An
evasive purpose “might also be inferred if the foreign suit is initiated
contrary to the dictates of a forum selection clause.” (Id. at 717-718.)
The question is not whether California law should apply, but simply whether the
allegedly evading party initiated the suit in a foreign jurisdiction for the
purpose of evading California's public policy. (Id. at 718.)
Justice Moreno rejected the liberal approach, where a mere duplication
of the parties and issues, alone, would be generally sufficient to justify the
issuance of an antisuit injunction. (Id. at 713.) “Courts following this
approach consider vexatiousness or oppressiveness in a race to judgment in the
foreign forum as sufficient grounds to issue an antisuit injunction.” (Id.)
Such an injunction may issue where the trial court determines “‘that allowing
simultaneous prosecution of the same action in a foreign forum thousands of
miles away would result in ‘inequitable hardship’ and ‘tend to frustrate and
delay the speedy and efficient determination of the cause.’ ” (Id.) The justice
criticized this approach as not “giving sufficient attention to concerns of
comity; under [the liberal] approach, it is simply enough to show that there is
parallel litigation in a foreign forum causing ‘ “an absurd duplication of
effort' [which] would result in unwarranted inconvenience, expense, and
vexation.” ’ ” (Id. at 714.)
The Court finds the restrictive test more appropriate and in line
with traditional notions of comity and parallel jurisdiction. Working from this
perspective, an anti-suit injunction would not be appropriate here. The facts of Advanced Bionics also demonstrate that an
anti-suit injunction should not be issued. There, the same California policies
were present—those embodied by Cal. Bus. & Prof. Code, § 16600. Similarly,
a former employee, now a California resident, also sought to invalidate a
non-compete clause in an employment contract. Despite this, the Supreme Court
did not find that the strong public policy behind that section would override
the judicial restraint required of an anti-suit injunction.
Here, Petitioner does not demonstrate that staying the New York
action would prevent multiplicity of proceedings. Generally, as the later filed
action, comity would suggest that this action would be
stayed in favor of the earlier filed New York action. (See Farmland Irr. Co.
v. Dopplmaier (1957) 48 Cal.2d 208, 215 [where an action is brought in a
court of this state involving the same parties and the same subject matter as
an action already pending in a court of another jurisdiction, the trial court
has discretion to stay the California proceedings]; accord Thomson v. Cont'l
Ins. Co., (1967) 66 Cal. 2d 738, 746.)
Furthermore, Respondent
did not apparently file the New York suit to evade important California
policies. At the time the New York suit was filed, Respondent apparently had a
valid noncompete clause. While California law made the noncompete clause voidable
at the employee’s discretion, Petitioner did not exercise this discretion until
after the New York suit was filed. Until that point, even under California law,
the contract’s choice of law provision provided that New York was the proper
jurisdiction for any litigation. Even if the modified agreement requires
arbitration in California, it does not state that California law would control
litigation or that any suit would be filed in California. The arbitration
agreement does not provide that the employer should file an arbitration in
California in the first instance. Instead, the arbitration agreement triggers “at
the request of either the Employee or Employer.” At best, the Arbitration Agreement provides that the arbitrator
would follow California law in determining the award.
Furthermore, the New York court would be perfectly capable of
compelling arbitration, consistent with the arbitration agreements at issue. In
fact, under the Federal Arbitration Act (which facially applies to the
Agreements at issue), the New York court would be required to order arbitration
just as this Court would, so long as such agreements were validly entered.
Thus, the Court cannot conclude that the New York action was somehow designed
to avoid the arbitration provisions or California policies which may apply to
the contracts at issue.
Lastly, there is no apparent risk to California’s jurisdiction.
Petitioner does not show that the New York action attempts to carve out
exclusive jurisdiction in this matter.
Therefore, there are no exceptional
circumstances present to justify an anti-suit injunction here.
Accordingly, the motion is DENIED.