Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03169/USCOURTS-cand-3_05-cv-03169-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Injunctive &amp; Declaratory Relief

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

HUNTER LANDERS, an individual residing

in California,

Plaintiff,

 v.

CURRAN & CONNORS INC., a Delaware

corporation and DOES 1 through 50, inclusive,

Defendants. /

No. C 05-03169 WHA

ORDER DENYING PLAINTIFF’S

MOTION FOR JUDGMENT ON

THE PLEADINGS AND

VACATING HEARING

INTRODUCTION

In this action, plaintiff moves for judgment on the pleadings pursuant to FRCP 12(c)

before discovery has even commenced. Because this order finds that the answer raises material

issues of fact to be explored during discovery, plaintiff’s motion is DENIED.

STATEMENT

Plaintiff Hunter Landers filed suit to invalidate an allegedly unlawful anti-competition

covenant of an employment agreement with his former employer, defendant Curran & Connors,

Inc. (“C & C”). C & C is a graphics design firm incorporated in Delaware, with its principal

place of business in New York (Answer ¶ 2). Its primary business is the development and

preparation of corporate communications such as websites, brochures and annual corporate

reports (ibid.). In 1995, plaintiff was hired by C & C to work in its Pennsylvania office; in

1997, he was promoted and began working out of C & C’s California office (id. ¶ 5). On or

around December 1, 1999, plaintiff executed an employment contract entitled “Employment

Case 3:05-cv-03169-WHA Document 31 Filed 10/06/05 Page 1 of 6
United States District Court

For the Northern District of California

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*

 The two exceptions are where the party sought to be restrained has either (1) sold the goodwill of a

business or an ownership interest in a business to or (2) been in a partnership with the party seeking the

restraint. Cal. Bus. & Prof. Code §§ 16601–02.

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and Non-Competition Agreement,” a copy of which is purportedly appended as an exhibit to the

complaint; defendant denies that this agreement was executed in California (id. ¶ 6). Defendant

admits that Paragraph 6(a)(iii) stated (id. ¶ 7):

The Employee will not directly or indirectly (A) interfere with, solicit or

accept for anyone other than the Corporation any business of the type

served or solicited by the Employee while in the Corporation’s

employment, or (B) perform any services of any competitive nature for

anyone other than the Corporation, or (C) engage in or conduct any

business which directly or indirectly competes with, restricts or interferes

with the business of the Corporation, in any State in which the Employee is

authorized to solicit business on behalf of the Corporation (as set forth in

Section 2 of this Agreement and as hereafter expanded) for a period of two

years commencing on the date of the termination of the Employee’s

employment relationship with the Corporation; provided, however, that the

restrictions of this subparagraph (iii) shall apply only if the Employee

voluntarily terminates his employment relationship with the Corporation

(including a termination incident to the Employee’s retirement or

disability) or if the Corporation terminates the employment relationship for

Cause (as defined in Section 7 of this Agreement).

On July 5, 2005, plaintiff resigned, effective July 19, 2005 (id. ¶ 8). Plaintiff is now

employed in the California office of Creative Strategy Group, Inc. (“CSG”), another graphics

design company which is incorporated in New Jersey, with its principal place of business in

Pennsylvania (Compl. ¶ 9). C & C admits that in certain markets, it competes directly with

CSG for the business of certain customers (Answer ¶ 16).

The complaint was filed in San Mateo County Superior Court on July 5, 2005, and

removed on August 4, 2005. Therein, plaintiff seeks declaratory and injunctive relief pursuant

to California Business and Professions Code § 16600. Section 16600 provides that, with

exceptions not relevant here, “every contract by which anyone is restrained from engaging in a

lawful profession, trade, or business of any kind is to that extent void.”*

 In addition, the

complaint alleges unfair competition in violation of California Buisness and Professions Code

§ 17200 et seq. In short, plaintiff argues that his agreement with C & C unlawfully restricts his

employment options and should be declared “unlawful, unenforceable, void and/or voidable”

(Compl. at 7–8).

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Defendant asserts that the disputed provision is enforceable, but denies threatening to

sue plaintiff, intending to enforce the employment agreement to prevent plaintiff from working

for CSG, or having a policy of seeking to enforce anti-competition provisions against former

employees (Answer ¶¶ 12–13). C & C further denies that it seeks to prevent plaintiff (or any

other California employees) from pursuing the employment of his choice in his field of

expertise (id. ¶¶ 17, 28–29). Defendant also denies that any actual or present controversy exists

and raises this as the basis for its Fifth Affirmative Defense (id. ¶ 19).

Defendant does admit that “C & C seeks to enforce an anti-competition covenant” (id.

¶ 15). Specifically, it argues that it is entitled to seek enforcement “in any other state . . . in

which [plaintiff] competes against C & C, such as Washington, Oregon, Nevada and/or

Arizona” (Opp. 5). Its Sixth Affirmative Defense alleges that New York law applies to the

employment agreement and the provision may be enforced insofar as plaintiff “seeks to

compete in states other than California.” Defendant also expressly denies that plaintiff lacks

knowledge of its trade secrets and proprietary information, but argues in its Eighth Affirmative

Defense that plaintiff’s claims are moot so long as he “does not use any of C & C’s confidential

information or trade secrets in California, and does not compete outside of California in those

states covered by the Agreement” (Answer ¶ 10).

ANALYSIS

1. LEGAL STANDARD.

“After the pleadings are closed but within such time as not to delay the trial, any party

may move for judgment on the pleadings.” FRCP 12(c). A motion for judgment on the

pleadings is evaluated according to virtually the same legal standard as a motion to dismiss

pursuant to FRCP 12(b)(6), in that the pleadings are construed in the light most favorable to the

non-moving party. Brennan v. Concord EFS, Inc., 369 F. Supp.2d 1127, 1130–31 (N.D. Cal.

2005). The factual allegations of the non-moving party are accepted as true, while the

allegations of the moving party, if denied, are assumed to be false. Hal Roach Studios, Inc. v.

Richard Feiner and Co., 896 F.2d 1542, 1550 (9th Cir. 1990).

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“Judgment on the pleadings is proper when proper when the moving party clearly

establishes on the face of the pleadings that no material issue of fact remains to be resolved and

that it is entitled to judgment as a matter of law.” Ibid. But if the answer raises issues of fact or

an affirmative defense that, if proved, would defeat recovery, “it will usually bar judgment on

the pleadings.” Gen. Conference Corp. of Seventh-Day Adventists v. Seventh-Day Adventist

Congregational Church, 887 F.2d 228 (9th Cir. 1989).

Although materials outside of the pleadings should not be considered, a court may

consider all materials properly submitted as part of the complaint, such as exhibits. Hal Roach

Studios, 896 F.2d at 1555 n.19. Otherwise, if “matters outside the pleadings are presented to

and not excluded by the court,” the motion must be treated as a summary judgment motion

instead. FRCP 12(c). 

2. APPLICATION.

By order dated October 3, 2005, the Court indicated that no materials outside the

pleadings would be considered on this 12(c) motion; thus, there was no basis for converting it

into a summary judgment motion and allowing the parties to conduct immediate discovery.

At this early stage of litigation, it is not particularly surprising that plaintiff has failed to

clearly establish, from the pleadings alone, that no material issue of fact remains to be resolved. 

Defendant has denied numerous allegations so those facts must be assumed false and raised

several affirmative defenses, which if proved, would bar relief. Moreover, because defendant is

the non-movant, all reasonable inferences must be construed in its favor.

Plaintiff seeks a declaratory judgment, which requires him to demonstrate that there is

“a case of actual controversy.” 28 U.S.C. 2201. Curiously enough, on the face of the

pleadings, the parties appear to agree that plaintiff’s employment options within the state of

California are not restricted by his employment agreement with C & C. Defendant expressly

denies threatening to sue plaintiff or intending to prevent him from continuing to work for CSG. 

The Sixth Affirmative Defense even alleges that “California’s interests with respect to

competition provisions do not apply” in other states, which implicitly acknowledges that such

provisions would likely be rendered unenforceable in California (Answer at 5). Likewise, the

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Eighth Affirmative Defense alleges that plaintiff’s claims are moot so long as he does not use

any of C & C’s confidential information or trade secrets in California or attempt to compete in

other states (id. at 6).

If there is no dispute with respect to plaintiff’s right to work in California, the only

controversy, (“actual” or otherwise), is whether any anti-competition provisions would be

unenforceable in other states. Plaintiff greatly oversimplifies the issue by arguing that there is

an actual case or controversy because it seeks to void a provision that defendant seeks to

enforce (Reply Br. 3). Defendant’s admission that it “seeks to enforce an anti-competition

covenant” is not necessarily inconsistent with its recognition that it would likely be

unsuccessful in California (Answer ¶ 15)(emphasis added). Nor does the fact that defendant

filed an opposition, rather than stipulating to plaintiff’s desired relief, have any bearing on

whether there is an actual controversy. Defendant denies threatening plaintiff with any lawsuit,

at least not yet. The pleadings are silent as to whether plaintiff performs any work for his

current employer (or seeks other employment) outside California. Construing all facts and

inferences in defendant’s favor, the Court must assume not. The possibility that defendant will

succeed in proving this affirmative defense is sufficient to defeat a 12(c) motion.

Even assuming arguendo that an actual controversy exists, however, the Court disagrees

with plaintiff’s assertion that there are “sufficient admissions of record” in the pleadings to

clearly establish that the application of California law justifies a judgment in his favor, even in

other states (Br. 7). Plaintiff appears to be conflating two separate issues: (1) which state’s law

governs the employment agreement and (2) whether California Business and Professions Code

§ 16600 voids the anti-competition provision. As discussed above, the parties agree that within

California, no matter what law governs the agreement, § 16600 would trump with respect to the

anti-competition provision. But if plaintiff sought employment outside California, other states

routinely enforce covenants not to compete. The relevant question, then, would be which

state’s law would govern.

Plaintiff insists that California law would govern, but cites no legal authority supporting

the proposition that California residency would control as a matter of law. Defendant pleads as

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an affirmative defense that New York law applies and argues, in the alternative, that the

applicable law depends on where the contract is being enforced — i.e., Oregon law would apply

if it sought to enforce the agreement in Oregon. Because the employment agreement itself

contains no explicit choice-of-law provision, the Court would be forced to engage in an

inherently fact-intensive choice-of-law inquiry. Plaintiff’s own attempts to interject extrinsic

evidence further demonstrates that this is an issue which cannot be resolved on the pleadings

alone.

CONCLUSION

For the reasons stated above, plaintiff’s motion for judgment on the pleadings is

DENIED. The hearing on this motion, currently scheduled for OCTOBER 20, 2005 AT 8:00 A.M.,

is VACATED.

IT IS SO ORDERED.

Dated: October 6, 2005 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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