Judge: Walter P. Schwarm, Case: 30-2022-01274085, Date: 2022-10-04 Tentative Ruling

Plaintiffs (George Cardoza and AccuraGen, Inc.) Motion for Preliminary Injunction (Motion), filed on 9-7-22 under ROA No. 72, is DENIED.

The court GRANTS Plaintiffs’ Request for Judicial Notice, filed on 9-7-22 under ROA No. 68, as to the existence of Exhibits 1 and 2 pursuant to Evidence Code section 452, subdivision (h). (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-1570.) 

The Notice of Motion cites Code of Civil Procedure section 527 as the basis for Plaintiff’s request for preliminary injunction. (Motion; 2:1-20.)  Code of Civil Procedure section 526, subdivision (a), provides the grounds upon which a court has the authority to issue a preliminary injunction.  The Motion does not directly cite Code of Civil Procedure section 526. The court construes the Motion as requesting a preliminary injunction pursuant to Code of Civil Procedure section 526, subdivision (a)(2), because the Motion refers to irreparable harm. (Motion; 21:17-27.)

Code of Civil Procedure section 526, subdivision (a)(2), states, “(a) An injunction may be granted in the following cases: . . . [¶] (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.”  Code of Civil Procedure section 527, subdivision (a), provides, “(a) A preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor. No preliminary injunction shall be granted without notice to the opposing party.”

Code of Civil Procedure section 1281.8, subdivision (b), states, “A party to an arbitration agreement may file in the court in the county in which an arbitration proceeding is pending, or if an arbitration proceeding has not commenced, in any proper court, an application for a provisional remedy in connection with an arbitrable controversy, but only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without provisional relief. The application shall be accompanied by a complaint or by copies of the demand for arbitration and any response thereto. If accompanied by a complaint, the application shall also be accompanied by a statement stating whether the party is or is not reserving the party's right to arbitration.”  Woolley v. Embassy Suites, Inc. (1991) 227 Cal.App.3d 1520, 1527 (Woolley), provides, “The logical reason for the requirement that an applicant be required to show that an arbitration award may be rendered ineffectual is to ensure that the court does not invade the province of the arbitrator—i.e., the court should be empowered to grant provisional relief in an arbitrable controversy only where the arbitrator's award may not be adequate to make the aggrieved party whole. However, there is nothing in the statute's history which indicates that the provision was intended to supplant the general statutes applicable to injunctions or decisional law criteria governing them.”

“In deciding whether to issue a preliminary injunction, a trial court must evaluate two interrelated factors: (i) the likelihood that the party seeking the injunction will ultimately prevail on the merits of his [or her] claim, and (ii) the balance of harm presented, i.e., the comparative consequences of the issuance and nonissuance of the injunction. [Citations.]”  (Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 441-442; footnote 7 omitted.)  “A trial court deciding whether to issue a preliminary injunction weighs two interrelated factors—the likelihood the moving party will prevail on the merits at trial and the relative balance of the interim harms that are likely to result from the granting or denial of preliminary injunctive relief. [Citations.]” (County of Kern v. T.C.E.F., Inc. (2016) 246 Cal.App.4th 301, 315 (T.C.E.F); Italics in T.C.E.F.)  “These two showings operate on a sliding scale: ‘[T]he more likely it is that [the party seeking the injunction] will ultimately prevail, the less severe must be the harm that they allege will occur if the injunction does not issue.’ [Citation.]” (Integrated Dynamic Solutions, Inc. v. VitaVet Labs, Inc. (2016) 6 Cal.App.5th 1178, 1183.) 

Korean Philadelphia Presbyterian Church v. California Presbytery (2000) 77 Cal.App.4th 1069, 1084 (Korean Philadelphia), states, “An injunction cannot issue in a vacuum based on the proponents’ fears about something that may happen in the future.  It must be supported by actual evidence that there is a realistic prospect that the party enjoined intends to engage in the prohibited activity.”

Advanced Bionics Corp. v. Medtronic, Inc., (2002) 29 Cal.4th 697, 705–707 (Advanced Bionics), provides, “It is true, as Stultz and Advanced Bionics observe, that certain California cases have recognized that ‘Where there exists two or more actions involving the same subject matter or the same facts or principles, [a TRO] is necessary to prevent a multiplicity of judicial proceedings.”’ [Citations.] The above decisions, however, sought to avoid an ‘unseemly conflict’ that might arise between California courts if they were free to make contradictory awards. [Citation.] When the cases involve different states, as in the matter before us, judicial restraint takes on a more fundamental importance. The possibility that one action may lead to a judgment first and then be applied as res judicata in another action ‘is a natural consequence of parallel proceedings in courts with concurrent jurisdiction, and not reason for an injunction.’ [Citation.] ‘[T]he possibility of an “embarrassing race to judgment” or potentially inconsistent adjudications does not outweigh the respect and deference owed to independent foreign proceedings.’ [Citation.] [¶] Stultz and Advanced Bionics also contend that although we should pay deference to foreign state proceedings, California's strong public policy against noncompetition agreements under section 16600 weighs against allowing the action to proceed in Minnesota and provides the exceptional circumstance that warrants our upholding the California court's TRO. As they observe, the law protects Californians, and ensures ‘that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice.’ [Citation.] It protects ‘the important legal right of persons to engage in businesses and occupations of their choosing.’ [Citation.] We have even called noncompetition agreements illegal. [Citation.] Therefore, according to Stultz and Advanced Bionics, because the noncompetition provision in the Agreement is broad in application and forbids Stultz from working for any competitor on a competitive product for two years after employment termination, it is likely that a California court would conclude the provision is void under section 16600. [¶] We agree that California has a strong interest in protecting its employees from noncompetition agreements under section 16600. But even assuming a California court might reasonably conclude that the contractual provision at issue here is void in this state, this policy interest does not, under these facts, justify issuance of a TRO against the parties in the Minnesota court proceedings. A parallel action in a different state presents sovereignty concerns that compel California courts to use judicial restraint when determining whether they may properly issue a TRO against parties pursuing an action in a foreign jurisdiction. [¶] The comity principle also supports our conclusion. Comity is based on the belief ‘ “ ‘that the laws of a state have no force, proprio vigore, beyond its territorial limits, but the laws of one state are frequently permitted by the courtesy of another to operate in the latter for the promotion of justice, where neither that state nor its citizens will suffer any inconvenience from the application of the foreign law. This courtesy, or comity, is established, not only from motives of respect for the laws and institutions of the foreign countries, but from considerations of mutual utility and advantage.’ ” . . . “The mere fact that state action may have repercussions beyond state lines is of no judicial significance so long as the action is not within that domain which the Constitution forbids.” ’ [Citation.] The comity principle requires that we exercise our power to enjoin parties in a foreign court sparingly, in line with the policy of judicial restraint discussed above.” (Footnote 5 omitted; Italics in Advanced Bionics.)   “We conclude, therefore, that the Court of Appeal erred in upholding the TRO issued against the parties in the Minnesota proceedings. California courts have the same power as other courts to issue orders that assist in protecting their jurisdiction. However, enjoining proceedings in another state requires an exceptional circumstance that outweighs the threat to judicial restraint and comity principles. As explained, the circumstances of this case do not provide sufficient justification to warrant our court's issuing injunctive orders against parties pursuing the Minnesota litigation. [¶] We hold that the trial court improperly issued the TRO enjoining Medtronic from proceeding in the Minnesota action. We also conclude, however, that the Minnesota action does not divest California of jurisdiction, and Advanced Bionics remains free to litigate the California action unless and until Medtronic demonstrates to the Los Angeles County Superior Court that any Minnesota judgment is binding on the parties. As stated above, potentially conflicting judgments naturally result from parallel proceedings but do not provide a reason for issuing a TRO. [Citation.] For these reasons, we reverse the Court of Appeal judgment and remand for additional proceedings consistent with this conclusion.” (Id., at pp. 707-708; Footnote 6 omitted.)

Biosense Webster, Inc. v. Superior Court (2006) 135 Cal.App.4th 827, 837 (Biosense) states, “Real parties argue that Advanced Bionics is distinguishable because here there was no other lawsuit pending when the TRO was issued. They claim that ‘the comity principles so crucial to the formulation of the court's “exceptional circumstance” test have little if any relevance where there is no proceeding pending in another forum.’ We disagree. Judicial restraint and comity concerns are present whether a court is restraining a litigant from filing suit in a foreign court or from proceeding with an action already pending in another forum. [Citations.] The fact that there is no lawsuit pending in another state at the time an antisuit injunctive order is issued is merely a distinction without a difference that does not serve to render the principles announced in Advanced Bionics inapplicable. Instead, a court should focus on whether there is an ‘exceptional circumstance’ to justify restraining out-of-state litigation and not on the procedural status of the foreign litigation. Any other approach would automatically deny a sister state the right to exercise its proper jurisdiction and would ignore the possibility that the sister state's law may ultimately apply to the dispute. As the court noted in Gau Shan Co., Ltd. v. Bankers Trust Co., supra, 956 F.2d at page 1355, an antisuit injunction conveys the message that ‘the issuing court has so little confidence in the foreign court's ability to adjudicate a given dispute fairly and efficiently that it is unwilling even to allow the possibility.’ ”

Nitro-Lift Techs, L.L.C. v. Howard (2012) 568 U.S. 17, 21-22 (Nitro-Lift), provides, “For these purposes, an “arbitration provision is severable from the remainder of the contract,” Buckeye, supra, at 445, 126 S.Ct. 1204, and its validity is subject to initial court determination; but the validity of the remainder of the contract (if the arbitration provision is valid) is for the arbitrator to decide. [¶] This principle requires that the decision below be vacated. The trial court found that the contract contained a valid arbitration clause, and the Oklahoma Supreme Court did not hold otherwise. It nonetheless assumed the arbitrator's role by declaring the noncompetition agreements null and void. The state court insisted that its ‘[own] jurisprudence controls this issue’ and permits review of a ‘contract submitted to arbitration where one party assert [s] that the underlying agreement [is] void and unenforceable.’ [Citation.]  But the Oklahoma Supreme Court must abide by the FAA, which is ‘the supreme Law of the Land,’ U.S. Const., Art. VI, cl. 2, and by the opinions of this Court interpreting that law. ‘It is this Court's responsibility to say what a statute means, and once the Court has spoken, it is the duty of other courts to respect that understanding of the governing rule of law.’ [Citation.] Our cases hold that the FAA forecloses precisely this type of ‘judicial hostility towards arbitration.’ [Citation.] [¶] The state court reasoned that Oklahoma's statute ‘addressing the validity of covenants not to compete, must govern over the more general statute favoring arbitration.’ [Citation.] But the ancient interpretive principle that the specific governs the general (generalia specialibus non derogant ) applies only to conflict between laws of equivalent dignity. Where a specific statute, for example, conflicts with a general constitutional provision, the latter governs. And the same is true where a specific state statute conflicts with a general federal statute. There is no general-specific exception to the Supremacy Clause, U.S. Const. Art. VI, cl. 2. ‘ “[W]hen state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA.” ’ [Citation.] Hence, it is for the arbitrator to decide in the first instance whether the covenants not to compete are valid as a matter of applicable state law. [Citation.]” (Italics in Nitro-Lift.)

The Motion seeks a preliminary injunction that restrains Defendants (Neogenomics Laboratories, Inc. and Neogenomics, Inc.) from “. . . (a) enforcing any of the restrictive provisions or covenants in the Non-Compete Agreement, including any provisions or covenants that purport to preclude Cardoza from competing with NeoGenomics or soliciting its employees; (b) taking any actions in arbitration in Florida to enforce any restrictive covenants against Cardoza, or to otherwise restrain him from working in his chosen profession; (c) taking any action against AccuraGen relating to the hiring of Cardoza; and (d) taking any action against Plaintiffs to restrict competition or employment on the ground that any Plaintiffs are in possession of trade secrets or confidential information belonging to Defendants, and would ‘inevitably’ use or disclose such information or would undertake some other action that should prevent competition.” (Motion; 2:11-20.)  The Motion states, “Plaintiffs respectfully request that the Court enter a preliminary injunction that: (i) declares the restrictive Covenants in the Non-Compete Agreement to be invalid, and therefore unenforceable; and (ii) declares the arbitration provisions in Cardoza’s Agreements to be unconscionable, and therefore unenforceable.” (Motion, 8:5-8)

The court notes that on 9-26-22 Defendants filed a Motion to Dismiss or, in the Alternative, Stay the Action for Forum Non Conveniens (ROA No. 86) and a Motion to Compel Arbitration (ROA No. 104) that are currently pending.  Plaintiffs’ request to declare the restrictive covenants as invalid and unconscionable are not proper subjects for this Motion.  A motion for preliminary injunction is not the proper procedure to request the court issue a declaratory judgment because such a judgment would determine the merits of the issues between the parties.  It appears that the pending motions brought by Defendants may address the issues for which Plaintiffs seek a declaration.

Plaintiffs’ Reply Memorandum of Points and Authorities in Support of Plaintiffs’ Motion for Preliminary Injunction (Reply), filed on 9-27-22 under ROA No. 108, states, “It is the intention of Plaintiff Cardoza to seek a stay of that Florida action pending the resolution of this action before this Court. . . . Rather, what Plaintiffs’ seek is an Order from this Court maintaining the status quo until this Court can evaluate the arbitration clause under California law to determine if said arbitration clause was improperly foisted upon Plaintiff, thereby rendering it unenforceable. Moreover, AccuraGen seeks an Order from this Court declaring that it has a right to continue to employ Cardoza during the pendency of this action.” (Reply; 2:21-3:4.) The Notice of Motion does not request a stay of the Florida action.  Based on Code of Civil Procedure section 1010, California Rules of Court, rule 3.1110(a), and Luri v. Greenwald (2003) 107 Cal.App.4^th 1119, 1125, the court evaluates only the requests in the Notice of Motion.

Here, Plaintiff—Cardoza and Defendant—Neogenomics, Inc. signed a “CONFIDENTIALITY, NON-SOLICIATION AND NON-COMPETE AGREEMENT” (Restrictive Agreement) on 11-4-09. (Cardoza Decl., ¶ 2 and Exhibit 1; Uppercase in Restrictive Agreement.)  Paragraph 8 of the Agreement contains the Restrictive Covenant at issue in this Motion. (Cardoza Decl., ¶ 2 and Exhibit 1.)  Paragraph 8 of the Restrictive Agreement specifically contains terms relating to Non-Solicitation, Non-Competition, and Defendant—Cardoza’s acknowledgement of the Restrictive Covenants. (Cardoza Decl., ¶ 2 and Exhibit 1.)  The Restrictive Agreement contains an arbitration provision at paragraph 11. (Cardoza Decl., ¶ 2 and Exhibit 1.)

Plaintiff and Defendant—Neogenomics, Inc. also entered into an Employment Agreement (Employment Agreement) on 7-5-21. (Cardoza Decl., ¶ 9 and Exhibit 2.)  Paragraph 6 of the Employment Agreement is a terms pertaining to “Confidentiality, Non-Solicitation & Non-Complete Agreement.” (Cardoza Decl., ¶ 9 and Exhibit 2; Emphasis and underscore in Employment Agreement.)  Based on paragraph 6, the Employment Agreement attaches the Restrictive Agreement. (Cardoza Decl., ¶ 9 and Exhibit 2.)  The Employment Agreement contains a choice of law provision at paragraph 19 and an arbitration provision at paragraph 20. (Cardoza Decl., ¶ 9 and Exhibit 2.)

On 7-28-22, Defendant— NeoGenomics, Inc. sent a cease and desist letter to Plaintiff—Cardoza. (Cardoza Decl., ¶ 3 and Exhibit 3.)  Plaintiffs filed this case against Defendants on 8-5-22. On 8-12-22, Defendant— NeoGenomics, Inc. demanded arbitration against Plaintiff—Cardoza. (Cardoza Decl., ¶ 28 and Exhibit 4.)

Plaintiffs’ requests in the Notice of Motion under subsections (a), (b), and (d) involve judicial restraint and comity since they pertain to actions Defendants may take in Florida. Thus, the Court cannot issue a preliminary injunction according to Medtronic and Biosense unless there is an exceptional circumstance.  The Reply states, “Plaintiffs contend that exceptional circumstances exist to allow this Court to issue an order protecting Plaintiff Cardoza’s right to continue working for AccuraGen for the following reasons: [¶] 1. It is uncontroverted that the covenants and restrictions in the Agreements are invalid, illegal and unenforceable under California law; [¶] 2. The arbitration provisions as set forth in the Agreements are both procedurally and substantively unconscionable; and [¶] 3. Other than stating that Cardoza has commenced employment with AccuraGen, NeoGenomics has failed to produce any evidence whatsoever that Plaintiff Cardoza has breached the Agreements.” (Reply 4:1-9.)

As to the first “exceptional circumstance,” Advanced Bionics found that California’s policy against non-competition agreements did not support the issuance of a temporary restraining order to restrain a party in out-of-state proceedings.  The second “exceptional circumstance” requires the court to determine the validity of the arbitration agreements, and which state’s law to apply to that analysis.  As discussed above, this Motion is not the proper procedure for the court to make that determination.  As to the third exceptional circumstances, the lack of evidence as to breach of the Restrictive Agreement or Employment Agreement is a completed defense to having an arbitrator enforce those agreements against Plaintiff—Cardoza.  The court finds that these exceptional circumstances are not sufficient to prevent Defendants from enforcing the Restrictive Agreement and Employment Agreement in another out-of-state forum. 

Further, it appears that an arbitrator’s award would be adequate to resolve the dispute between the parties as to the application of Business and Professions Code section 16600.  A preliminary injunction is not necessary to ensure Plaintiff’s relief from an arbitrator is adequate.  The court notes that Plaintiff’s request for a preliminary injunction does not focus on the adequacy of the award from an arbitrator without a preliminary injunction.  Rather, the focus of the Motion pertains to actions Defendants may take in Florida.   Therefore, to the extent that the court is required to make a finding under Code of Civil Procedure section 1281.8, subdivision (b), the court finds that an award from an arbitrator would not be rendered ineffectual without a preliminary injunction.

Therefore, the court DENIES the Motion as requested by Plaintiff—Cardoza under Advanced Bionics and Biosense. 

Plaintiff—AccuraGen, Inc. seeks an injunction under subsection (c) of the Notice of Motion prohibiting Defendants from “. . . taking any action against AccuraGen relating to the hiring of Cardoza. . . .” (Motion; 2:15-16.) There is, however, currently no threatened action against Plaintiff—AccuraGen. The cease and desist letter was only addressed to Plaintiff George Cardoza. (Cardoza Decl., ¶ 3 and Exhibit 3.) Further, the Demand for Arbitration only named Plaintiff George Cardoza as a Respondent. (Cardoza Decl., ¶ 28 and Exhibit 4.)  Thus, the court DENIES  the Motion as  requested by Plaintiff—AccuraGen, Inc. based on Korean Philadephia.

In summary, the court DENIES Plaintiffs (George Cardoza and AccuraGen, Inc.) Motion for Preliminary Injunction filed on 9-7-22 under ROA No. 72.

Defendants are to give notice.