Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-12-16514/USCOURTS-ca9-12-16514-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

---

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

DONALD GOLDEN,

Plaintiff-Appellant,

v.

CALIFORNIA EMERGENCY

PHYSICIANS MEDICAL GROUP; MED

AMERICA; MARK ALDERDICE;

ROBERT BUSCHO,

Defendants-Appellees.

No. 12-16514

D.C. No.

3:10-cv-00437-

JSW

OPINION

Appeal from the United States District Court

for the Northern District of California

Jeffrey S. White, District Judge, Presiding

Argued and Submitted

February 14, 2014—San Francisco, California

Filed April 8, 2015

Before: Alex Kozinski, Diarmuid F. O’Scannlain,

and Mary H. Murguia, Circuit Judges.

Opinion by Judge O’Scannlain;

Dissent by Judge Kozinski

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 1 of 23
2 GOLDEN V. CAL. EMERGENCY PHYSICIANS

SUMMARY*

Settlement

The panel reversed the district court’s order that a

settlement agreement be enforced in an employment

discrimination action filed by a physician.

The agreement included a provision that the physician

waive his rights to employment with the defendant or at any

facility that the defendant may own or with which it may

contract in the future. 

The panel held that the parties’ private party contract

dispute regarding whether the no-employment provision

voided the settlement agreement was ripe for review under

the traditional ripeness standard.

The panel held that the district court abused its discretion

in holding that Cal. Bus. & Prof. Code § 16600, which

provides that a contract is void if it restrains anyone from

engaging in a lawful profession, did not apply solely because

the no-employment provision in the settlement agreement did

not constitute a covenant not to compete. The panel

remanded the case to the district court for further

proceedings.

Dissenting, Judge Kozinski wrote that the settlement

agreement was not void because the no-employment

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 2 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 3

provision did not limit the physician’s current ability to

practice his profession.

COUNSEL

Richard Raines, Gagen, McCoy, McMahon and Armstrong,

Danville, Cal., argued the cause and filed the briefs for the

plaintiff-appellant.

Sarah E. Robertson, Fitzgerald, Abbott & Beardsley LLP,

Oakland, Cal., argued the cause for defendants-appellees. 

Mark Alan Delgado, Fitzgerald, Abbott & Beardsley LLP,

Oakland, Cal., filed the brief for defendants-appellees. With

him on the brief was Sarah E. Robertson, Fitzgerald, Abbott

& Beardsley LLP, Oakland, Cal.

OPINION

O’SCANNLAIN, Circuit Judge:

We must decide whether California law prohibits a

settlement agreement that may constrain a physician’s

freedom to practice medicine.

I

A

Donald Golden, M.D., is an emergency-room doctor

formerly affiliated with the California Emergency Physicians

Medical Group (together with other related defendants sued

in this action, collectively, “CEP”), a large consortium of

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 3 of 23
4 GOLDEN V. CAL. EMERGENCY PHYSICIANS

over 1000 physicians that manages or staffs many emergency

rooms, inpatient clinics, and other facilities in California and

other, mostly Western states. In May 2008, Dr. Golden sued

CEP in the California Superior Court of Alameda County,

regarding the loss of his staff membership at Seton Coastside

Medical Facility; he alleged various state and federal causes

of action including racial discrimination. CEP removed the

suit to federal court in January 2010 based on original

subject-matter jurisdiction under 28 U.S.C. § 1331.

Prior to the scheduled trial date, the parties orally had

agreed in open court to settle the case. In return for a

substantial monetary amount, Dr. Golden consented to

relinquish his current suit, to forego all other possible claims

he may have against CEP, and furthermore—most important

for this appeal—to waive any and all rights to employment

with CEP or at any facility that CEP may own or with which

it may contract in the future (the “no-employment

provision”). The magistrate judge then presiding expressly

confirmed with Dr. Golden that he bound himself thereby,

although he did so “extremely reluctantly.” The terms of this

agreement were subsequently reduced to writing.

Following the hearing, Dr. Golden refused to execute the

written agreement and attempted to have it set aside. Dr.

Golden’s attorney, who represented him during the settlement

negotiations and entered into the resulting agreement on his

behalf, moved the court to withdraw as counsel, a motion on

which the court never specifically acted. Instead, the district

court referred the matter to the magistrate judge to determine

whether it may enforce the settlement agreement. The

magistrate judge, on June 23, 2011, issued her Report and

Recommendation, advising that various provisions of the

written agreement, not relevant to this case, be struck and,

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 4 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 5

over Dr. Golden’s objections, that he be compelled to sign the

amended document. The district court adopted the magistrate

judge’s recommendation in full.

Dr. Golden nevertheless refused to sign the agreement

and filed a notice of appeal, which this Court dismissed for

lack of jurisdiction. Golden v. Cal. Emergency Physicians

Med. Grp., No. 11-16983 (9th Cir. Jan. 9, 2012). Thereupon

Dr. Golden’s former counsel moved the district court to

intervene and further moved to enforce the settlement

agreement. Following several continuances and responsive

papers filed by the defendants, former counsel, and Dr.

Golden, the district court ultimately granted the motion to

intervene, ordered the settlement be enforced, and dismissed

the case. Dr. Golden filed a timely notice of appeal.

B

On appeal, Dr. Golden raises only one argument1: the noemployment provision of the agreement violates California

law as a contract restraining the lawful practice of a

profession. See Cal. Bus. & Prof. Code § 16600. Since the

no-employment provision constituted a material term, Dr.

Golden submits, the entire settlement agreement is

consequently void and his lawsuit should be reinstated.

1

The no-employment provision expresses the parties’

agreement “that . . . Golden shall not be entitled to work or be

1 Earlier in the district court proceedings, Dr. Golden advanced various

reasonsfor invalidating the settlement, including friction with his counsel,

inadequate advice, and severe personal stress.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 5 of 23
6 GOLDEN V. CAL. EMERGENCY PHYSICIANS

reinstated at any CEP-contracted facility or at any facility

owned or managed by CEP.” Such provision, however, not

only waives any right Dr. Golden otherwise may have to

continue or to regain previous or current employment with

CEP; it also provides that “if CEP contracts to provide

services to, or acquires rights in, a facility that is an

emergency room . . . at which Golden is employed or

rendering services, CEP has the right to and will terminate

Golden from any work in the emergency room without any

liability whatsoever.” CEP retains a similar right, by virtue

of this provision, to terminate Dr. Golden as a hospitalist at

any facility that it may acquire or with which it may contract

at some future point. The parties nevertheless further agreed

to the possibility of a future employment arrangement at an

“urgent care facility” but only under very narrow and welldefined circumstances.

2

Section 16600 of the California Business and Professions

Code instructs 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.” Courts and

commentators appear unanimously to agree that this language

regulates non-competition covenants, to whatever extent it

also prohibits other professional restraints. Nowhere either

in the no-employment provision or in the remainder of the

agreement does Dr. Golden arguably surrender any right to

practice his profession generally, nor any right to seek

employment with CEP’s competitors or at facilities in which

CEP does not have an ownership interest or with which it

does not contract for services. Rather, the no-employment

provision solely governs the terms on which CEP agrees to do

business with Dr. Golden in the future. Concluding that the

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 6 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 7

no-employment provision did not inhibit Dr. Golden from

competing with CEP, the district court determined that

section 16600 did not void the settlement agreement.

II

Before we address the merits of Dr. Golden’s appeal, we

must first satisfy ourselves that we have jurisdiction over the

case. Unlike other issues, which the litigants are under an

obligation to raise or else we consider waived, the federal

courts must independently evaluate whether a particular

dispute meets the constitutional “case” or “controversy”

requirement of Article III. See, e.g., Plains Commerce Bank

v. Long Family Land & Cattle Co., 554 U.S. 316, 324 (2008)

(“[W]e bear an independent obligation to assure ourselves

that jurisdiction is proper before proceeding to the merits.”);

Metro. Wash. Airports Auth. v. Citizens for the Abatement of

Aircraft Noise, Inc., 501 U.S. 252, 265 n.13 (1991)

(“[Because ripeness] concerns our jurisdiction under Article

III, . . . we must consider the question on our own

initiative.”).

Dr. Golden contends that section 16600 voids his

settlement agreement because, in a future set of

circumstances uncertain—perhaps unlikely—ever to

materialize, the no-employment provisionmayimpermissibly

restrain his professional practice. We must therefore

determine whether his prayer for relief would require us to

adjudicate a merely hypothetical dispute that is currently

unripe for review.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 7 of 23
8 GOLDEN V. CAL. EMERGENCY PHYSICIANS

A

“The ripeness doctrine is drawn both from Article III

limitations on judicial power and from prudential reasons for

refusing to exercise jurisdiction.” Nat’l Park Hospitality

Ass’n v. Dep’t of Interior, 538 U.S. 803, 808 (2003) (internal

quotation marks omitted). So-called prudential ripeness has

a “twofold aspect, requiring us to evaluate both the fitness of

the issues for judicial decision and the hardship to the parties

of withholding court consideration.” Abbott Labs. v.

Gardner, 387 U.S. 136, 149 (1967).

Nevertheless, in previous cases, we have concluded that

we do not analyze the prudential component of the ripeness

inquiry in private contract litigation. In re Coleman, 560 F.3d

1000, 1006 n.15 (9th Cir. 2009). We held specifically, in

Principal Life Insurance Co. v. Robinson, that “the

appropriate standard for determining ripeness of private party

contract disputes is the traditional ripeness standard, namely,

whether there is a substantial controversy, between parties

having adverse legal interests, of sufficient immediacy and

reality to warrant the issuance of a declaratory judgment.” 

394 F.3d 665, 671 (9th Cir. 2005) (internal quotation marks

omitted).

Principal reasoned that the prudential-ripeness doctrine,

“root[ed] in cases involving administrative agencies,” id. at

670, had developed in order to “prevent the courts, through

avoidance of premature adjudication, from entangling

themselves in abstract disagreements over administrative

policies, and also to protect the agencies from judicial

interference until an administrative decision has been

formalized and its effects felt in a concrete way by the

challenging parties,” id. (quoting Cal. Dep’t of Educ. v.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 8 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 9

Bennett, 833 F.2d 827, 833 (9th Cir. 1987) (internal quotation

marks omitted)). Given the origin and rationale of prudential

ripeness, Principal discerned “no legal or logical requirement

compelling the extension” of the doctrine “to cases involving

only private contracts.” Id.

Although we have not had occasion to apply Principal in

an appeal from an order enforcing a settlement agreement, the

principle exemplified in that case applies to the facts

presented here. Assessing the validity of a settlement

agreement, as our precedents make clear, is a question of state

contract law. See, e.g., O’Neil v. Bunge Corp., 365 F.3d 820,

822 (9th Cir. 2004) (“Typically, the construction and

enforcement of settlement agreements are governed by

principles of local law which apply to interpretation of

contracts generally.” (internal quotation marks omitted)). 

The decisive issue here, accordingly, is one of ordinary

contract law; thus, we do not consider the “prudential” factors

outlined in Abbott Laboratories and its progeny to assess this

case’s ripeness.

In addition, the reasoning articulated inPrincipal—which

originated as a declaratory-judgment suit—for dispensing

with the prudential component of the ripeness inquiry applies

with equal, if not greater, force in ordinary disputes about

contractual enforcement. Principal concluded that, when

reviewing administrative actions, important institutional

concerns cautioned all the more strongly against premature

judicial involvement. We notably observed that private suits

for declaratory judgments ordinarily do not have, as

administrative actions usually do, “consequences for many

members of the general public, not just those directly in the

immediate controversy.” 394 F.3d at 670. Extending

declaratory relief to private parties does not ordinarily trigger

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 9 of 23
10 GOLDEN V. CAL. EMERGENCY PHYSICIANS

separation-of-powers concerns as often does “judicial

entanglement in administrative agency actions before the

agencies have had an opportunity to take action or make

decisions.” Id. at 671. But if these considerations, which

gave rise to and justified the prudential-ripeness doctrine, are

absent in most private declaratory-judgment suits, all the

more so will they not appear in an action to enforce an

agreement. Moreover, declaratory-judgment suits raise

ripeness concerns—in a typical context—when conduct that

allegedly violates a contractual provision has not yet been

undertaken or when any injury from actual or potential

breaches has yet to materialize. See, e.g., Alcoa, Inc. v.

Bonneville Power Admin., 698 F.3d 774, 793 (9th Cir. 2012)

(explaining that the court has “dismissed claims that are

based solely on harms stemming from events that have not

yet occurred, and may never occur” as insufficiently ripe). 

Declaratory-judgment suits may require the courts to rule on

legal issues before the surrounding facts have fully matured. 

But when a litigant resists his adversary’s attempt to enforce

a contract against him, the dispute has already completely

materialized. As a result, the special imperative, in

administrative appeals, that courts stay their hands slackens

considerably in a case such as this.

We therefore confirm expressly what the logic of

Principal necessarily implies: only the “traditional ripeness

standard” applies in actions to enforce settlement agreements. 

To satisfy this standard, Dr. Golden’s claim must at least

present a substantial controversy between parties having

adverse legal interests that savors of sufficient immediacy

and reality to warrant resolution.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 10 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 11

B

Dr. Golden’s former attorney sought, in the district court,

to enforce the settlement agreement so that he might collect

his contingency fee. No party here disputes that such claim

would be ripe for review. But Dr. Golden contends that if

section 16600 voids the no-employment provision, the whole

settlement agreement falls. Indeed, even CEP’s counsel

conceded at oral argument that the no-employment provision

is a material term, and CEP would not have consented to an

agreement that simply deleted that provision.2 To affirm the

district court’s enforcement of the settlement agreement—in

a way that would allow the parties to litigate the validity of

the no-employment provision in a future factual

context—would not defer resolution of the allegedly

“hypothetical” dispute between the parties. Rather, it would

settle such dispute, at least partially, by ruling that the

settlement agreement stands regardless of future events that

may, to some extent, void the no-employment provision.

This appeal triggers judicial concerns about ripeness

because Dr. Golden’s argument depends, in some sense, on

a “hypothetical” state of future affairs. But Dr. Golden does

2

In supplemental briefing that followed oral argument, CEP now takes

the position that the appeal is unripe for review, because “[w]ith the

exception of [the no-employment provision], the parties agree that the

Settlement Agreement is otherwise enforceable,” and thus “the District

Court’s decision ordering enforcement of the Settlement Agreement and

dismissing this action should be affirmed.”

CEP, however, does not—and indeed, after its concession at oral

argument, cannot—dispute the materiality of the no-employment

provision and, consequently, the fate of the entire agreement should we

find such provision void.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 11 of 23
12 GOLDEN V. CAL. EMERGENCY PHYSICIANS

not ask us for a declaratory judgment that the no-employment

provision theoretically violates California law in this

uncertain future. Rather, he argues that, under the State’s

business and professions code, the agreement is currently

void. Dr. Golden, moreover, did not force this issue himself;

his former attorney, interested in his contingency fee,

besought the district court to enforce the settlement. Only in

defending against the enforcement proceedings did Dr.

Golden contend that, due to the no-employment provision,

California law voids the agreement. Dr. Golden’s legal

interest in this case, stated precisely, concerns the present

enforcement of the settlement rather than the future

interaction between the no-employment provision and his

emergency-medicine practice.

For such reasons, this appeal satisfies the “traditional

ripeness standard” reaffirmed in Principal. The parties in this

case have clearly “adverse legal interests”—one wishes to

settle on the agreement’s terms, the other prefers to press the

suit. Whether a substantial monetary amount will change

hands—and whether a legal claim concededly worth at least

that much will be foregone—presents a “substantial

controversy.” Adjudicating the question presented by this

appeal will determine whether the lawsuit ends and the

money is paid in the present, and therefore savors of

“sufficient immediacy and reality” to warrant resolution.3

3 We may silence any lingering doubts about this case’s ripeness by

considering how we would dispose of this appeal had we found

jurisdiction lacking. To dismiss the appeal as unripe, without more, would

be a paradoxical ruling that the district court could currently enforce the

settlement agreement, notwithstanding any properly raised and distinctly

articulated concerns about its voidness under state law. This would be

equivalent to finding the case ripe and ruling against Dr. Golden on the

merits.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 12 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 13

We conclude, therefore, that this dispute is ripe for

review.

III

“We review a district court’s enforcement of a settlement

agreement for abuse of discretion.” Doi v. Halekulani Corp.,

276 F.3d 1131, 1136 (9th Cir. 2002); see also Callie v. Near,

829 F.2d 888, 890 (9th Cir. 1987). A district court abuses its

discretion when, among other instances, it applies an

incorrect rule of law. See, e.g., Bateman v. U.S. Postal Serv.,

231 F.3d 1220, 1223 (9th Cir. 2000).

In its order enforcing the settlement agreement, the

district court held section 16600 of the California Business

and Professions Code to be inapposite. The no-employment

provision, explained the district court, “is not a covenant not

to compete,” but rather “reflects the parties[’] intent that . . .

Defendants chose not to employ Dr. Golden at [their]

facilities.” Furthermore, the no-employment provision “does

not . . . preclude Dr. Golden from working for one of [their]

competitors or at a hospital or other facility not operated by

Defendants.”

The decisive question for this appeal, therefore, is

whether the district court erred by categorically excluding

this settlement agreement from the ambit of section 16600 on

the sole ground that it did not constitute a covenant not to

compete.

A

Dr. Golden contends that no California case has ever

explicitly limited the reach of section 16600 to traditional

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 13 of 23
14 GOLDEN V. CAL. EMERGENCY PHYSICIANS

non-compete clauses in employment agreements. Further,

Dr. Golden argues that no case cited by CEP has upheld such

a clause specifically as consistent with section 16600. No

California court, seemingly, has yet confronted such an

argument. Given CEP’s dominance of emergency medicine

within the State and its aggressive plans to expand its

geographical footprint, Dr. Golden asserts that the agreement,

if enforced, will substantially limit his opportunities to

practice. CEP not only will refuse to employ him, but also

will “terminate” him, “without any liability whatsoever,” if it

subsequently acquires an interest in a facility where he would

be working. Dr. Golden argues that the settlement clearly

restrains him in a meaningful way from practicing his

medical specialty by forcing him preemptively to surrender

a position he may obtain in the future if certain

circumstances—completely outside his control—eventually

come to pass.

B

This Court looks to state law to guide its “construction

and enforcement of settlement agreements.” O’Neil,

365 F.3d at 822. The California Supreme Court has not ruled

expressly whether section 16600 applies only to typical socalled “non-compete covenants.” In other words, California

seems not to have settled whether a contract can

impermissibly restrain professional practice, within the

meaning of the statute, if it does not prevent a former

employee from seeking work with a competitor and if it does

not penalize him should he do so.

When the highest court of a state has not yet decided an

issue of state law, a federal court must “applywhat [it] find[s]

to be the state law after giving proper regard to relevant

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 14 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 15

rulings of other courts of the State.” Comm’r v. Estate of

Bosch, 387 U.S. 456, 465 (1967) (internal quotation marks

omitted); accord, e.g., Martin v. United States, 984 F.2d

1033, 1039 (9th Cir. 1993).

1

In the first place, section 16600 of the California Business

and Professions Code 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.” The

statute does not specifically target covenants not to compete

between employees and their employers: the text does not

include any form of the word “compete” or “competition,”

and does not even implicitly constrain itself to contracts

concerning employment. Rather, section 16600 voids “every

contract” that “restrain[s]” someone “from engaging in a

lawful profession, trade, or business.” Id. (emphasis added).

The breadth of this statutory prohibition appears even

more stark when read alongside the successive provisions in

the Code that admit of a few, narrow exceptions. Section

16601 permits a business owner selling his interest in the

company, under certain circumstances, to “agree with the

buyer to refrain from carrying on a similar business within a

specified geographic area.” Likewise, section 16602

countenances an agreement among partners, upon

dissociation or dissolution of the partnership, “not [to] carry

on a similar business within a specified geographic area.” 

See also Cal. Bus. & Prof. Code § 16602.5 (allowing “[a]ny

member . . . , upon or in anticipation of a dissolution of, or

the termination of his or her interest in, a limited liability

company . . . [to] agree . . . not [to] carry on a similar

business within a specified geographic area”). Such statutory

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 15 of 23
16 GOLDEN V. CAL. EMERGENCY PHYSICIANS

exceptions seem by their plain language to correspond to

more conventional non-compete covenants. Given the

different, narrower language with which such sections

describe the category of contracts excepted from the ban, we

reasonably expect the general prohibition to extend further.

When carving out exceptions to section 16600, the

California legislature demonstrated an ability to describe,

with considerable detail, a subspecies of the contracts “by

which anyone is restrained from engaging in a lawful

profession, trade, or business.” But when articulating the

general rule against professional restraints, the legislature

adopted categorical language: “every contract” that

“restrain[s]” anyone “from engaging in lawful profession . . .

of any kind” is “void.” Id. § 16600 (emphasis added). 

Accordingly, the statutory context lends little support to

construing section 16600 much more narrowly—as simply a

prohibition of agreements between employers and employees

not to compete—than its plain language would otherwise

suggest.

2

The California Supreme Court, furthermore, has

articulated a broad understanding of what constitutes a void

contract under section 16600. In a seminal case, which both

parties here invoke for support, the supreme courtinvalidated,

under the predecessor to section 16600, a provision in a

contract that required one of the parties to pay $5,000 in

liquidated damages to the other party if he takes up

employment within a certain geographical area. Chamberlain

v. Augustine, 156 P. 479 (Cal. 1916). The court specifically

rejected the argument that the contract withstands the law’s

ban because it does not restrict the party from “exercising a

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 16 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 17

lawful business, but is merely an agreement that if he did

engage in such business he would pay the sum.” Id. at 480. 

Although this contract did not affirmatively prevent the party

from engaging in his lawful business, “[i]t imposes upon him

a liability in the sum of $5,000 if he does engage in such

business” and thus “he is not as free to do so as he would

have been if he were not bound by it.” Id. The court in

Chamberlain did not determine merely that the contract

imposed an impediment to competition; rather, it concluded

that “the necessity of paying $5,000 . . . is clearly a restraint

of a substantial character and the form in which it is cast does

not make it less a restraint.” Id. At least in this canonical

statement of the California Supreme Court, the crux of the

inquiry under section 16600 is not whether the contract

constituted a covenant not to compete, but rather whether it

imposes “a restraint of a substantial character” regardless of

“the form in which it is cast.”

The California Supreme Court’s most recent statement on

section 16600 underscores how strictly the state understands

the statutory proscription on professional restraints. 

Analyzing the genesis of the law, the court explained “that

section 16600 evinces a settled legislative policy in favor of

open competition and employee mobility.” Edwards v.

Arthur Andersen LLP, 189 P.3d 285, 291 (Cal. 2008); see

also D’sa v. Playhut, Inc., 85 Cal. App. 4th 927, 933 (2000).4

4 California’s stringent rule departs from the more traditional approach

of the common law, which recognized a “rule of reasonableness” with

respect to covenants not to compete and other similar contractual

restraints. See Restatement (Second) of Contracts § 188 (1981); see also

Bosley Med. Group v. Abramson, 161 Cal. App. 3d 284, 288 (1984)

(discussing history of California’s rejection of the common-law rule). 

Although the Code permits such anti-competitive covenants in some

circumstances, see Cal. Bus. & Prof. Code §§ 16601, 16602, 16602.5, and

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 17 of 23
18 GOLDEN V. CAL. EMERGENCY PHYSICIANS

At issue specifically in Edwards was a more traditional

variety of non-compete covenants—an employment

agreement forbidding a certified public accountant from

poaching Arthur Andersen’s clients and personnel after

leaving the firm. Nevertheless, the court used this

opportunity to reaffirm the State’s strong policy against

restraints to professional practice and specifically to disavow

even narrow exceptions that the federal courts had begun to

fashion. Notably, Edwards rejected a proposed

rule—apparently suggested by earlier California cases and

extended by the Ninth Circuit—“that a mere limitation on an

employee’s ability to practice his or her vocation would be

permissible under section 16600, as long as it was reasonably

based.” Id. at 291. The state supreme court, moreover, did

not simply inquire—as both the district court in this case did

and CEP, in its brief, urges us to do—whether the challenged

provisions permit the employee to compete with his former

employer. The decisive concern for the court, rather, was that

the agreement “restricted his ability to practice his accounting

profession.” Id. at 292.

CEP cites a decision from an intermediate appellate

tribunal, City of Oakland v. Hassey, 163 Cal. App. 4th 1477

(2008), which upheld a contractual provision requiring police

officers to reimburse the department if they voluntarily left

their jobs before completing five years of service. According

to CEP, this case counsels against applying section 16600

outside the context of non-compete covenants. The

the state courts uphold restrictive contracts to protect trade secrets, see

Muggill v. Reuben H. Donnelley Corp., 398 P.2d 147, 149 (Cal. 1965);

Gordon v. Landau, 321 P.2d 456, 459 (Cal. 1958), otherwise California

does not make exceptions for narrow or reasonable restraints, see

Edwards, 189 P.3d at 292–93.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 18 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 19

California Court of Appeal concluded, contrary to the police

officer’s claim of contractual invalidity under section 16600,

that “nothing in the agreements . . . ‘restrained [him] from

engaging in [his] lawful trade, business or profession.’ 

Nothing prevented him from working for another police

department, or anywhere else, for that matter.” Id. at 1491

(alterations in the original) (citation omitted). Although CEP

invokes the case to argue that section 16600 outlaws only

agreements not to work for a former employer’s competitors,

Hassey does not necessarily read that statute so narrowly. 

The decisive point in Hassey, indeed, was that “nothing in the

agreements . . . restrained [him] from engaging in [his] lawful

trade, business or profession.” Id. (internal quotation marks

omitted).

Both Edwards and Hassey begin with the text of the law: 

whether the contested provision “restrained anyone from

engaging in [his] lawful trade, business, and profession,” and

not specifically whether it prevented him from competing

with his former employer’s services. In Edwards,

furthermore, the California Supreme Court restated the

statutory anti-restraint policy even more emphatically and

intimated that even “a mere limitation on an employee’s

ability to practice his or her vocation . . . [that was]

reasonably based” would fall afoul of section 16600. 

189 P.3d at 291. Under such a broad reading of the statute,

the contractual provision approved by the intermediate

appellate court in Hassey perhaps also should have failed: a

requirement to reimburse training expenses could impose a

meaningful obstacle to “employee mobility,” Edwards, 189

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 19 of 23
20 GOLDEN V. CAL. EMERGENCY PHYSICIANS

P.3d at 291, and, hence, limit the opportunities one may have

to engage in one’s chosen line of work.5

C

In determining a contract’s validity under section 16600,

therefore, the court should direct its inquiry according to the

actual statutory language: whether the challenged provision

“restrain[s anyone] from engaging in a lawful profession,

trade, or business of any kind.” Cal. Bus. & Prof. Code

§ 16600. This prohibition extends to any “restraint of a

substantial character,” no matter its form or scope. 

Chamberlain, 156 P. at 480. The statutory context of section

16600 furthermore suggests that the prohibition on

professional restraints extends to a larger category of

contracts than simply those where the parties “agree . . . to

refrain from carrying on a similar business within a specified

geographic area.” Cal. Bus. & Prof. Code § 16601; see also

Edwards, 189 P.3d at 293 (“[The prohibition in section 16600

is] unambiguous, and if the Legislature intended the statute to

apply only to restraints that were unreasonable or overbroad,

it could have included language to that effect.”).

5 Dr. Golden makes a similar point in his reply brief, claiming that

Hassey contravenes Chamberlain v. Augustine. The obstacle to employee

mobilityinChamberlain, Dr.Golden argues, is indistinguishable fromthat

of Hassey—that is, a payment of money to a former employer. Whether

Hassey conflicts with the rule of Chamberlain, which the California

Supreme Court has notsince explicitly abrogated, depends on whether the

reimbursement requirement is a restraint of a “substantial character”

similar to the sum of liquidated damages at issue in the older case. The

Hassey court does not answer that question expressly, but like

Chamberlain, as well as Edwards, it analyzed the issue according to the

broader statutory language of section 16600.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 20 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 21

The district court, in ruling on whether section 16600

applies to the no-employment provision, began its analysis by

stating a narrower principle: “[i]n California, covenants not

to compete are void.” From that premise, the court then

proceeded to find that, because the no-employment provision

is not such a covenant, it does not fall within the statutory

prohibition.6 Accordingly, the district court seems to have

mischaracterized the appropriate legal rule; such an error

constitutes an abuse of discretion.

The courts of California have not clearly indicated the

boundaries of section 16600’s stark prohibition but have

nevertheless intimated that they extend to a considerable

breadth. At the very least, we have no reason to believe that

the State has drawn section 16600 simply to prohibit

“covenants not to compete” and not also other contractual

restraints on professional practice. We refrain, however,

from addressing the ultimate merits of this question on the

relatively undeveloped record that accompanies this appeal,

leaving the district court at liberty to order additional briefing

or to conduct further fact-finding as it deems prudent. On

remand, the district court should determine in the first

instance whether the no-employment provision constitutes a

restraint of a substantial character to Dr. Golden’s medical

practice.

6 The district court did reasonably recapitulate Dr. Golden’s argument

that, due to the no-employment provision, “in effect, he cannot work

because Defendants own a large number of hospitals and facilities in

California.” Despite acknowledging this contention, and quoting the

statutory language, the court still stated and applied a more circumscribed

legal rule than that of the California courts.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 21 of 23
22 GOLDEN V. CAL. EMERGENCY PHYSICIANS

IV

For the foregoing reasons, we reverse the judgment of the

district court and remand the case for further proceedings not

inconsistent with this opinion.

REVERSED AND REMANDED.

KOZINSKI, Circuit Judge, dissenting:

Dr. Golden and California Emergency Physicians (CEP)

have a serious disagreement and they have agreed to resolve

it by parting ways. Dr. Golden is paid a large sum of money

and, in exchange, he gives up his right to continue working

for CEP. The provision barring Dr. Golden from current

employment by CEP cannot possibly violate California

Business and Professions Code § 16600 because the

continuation of their employment relationship is the very

subject in controversy in this lawsuit, and one possible

outcome would be that he would lose his job and get nothing

in exchange. If this violates section 16600, few employment

disputes could ever be settled.

The only way section 16600 might be implicated is if, at

some future time, Dr. Golden were working for an entity that

is acquired by CEP, in which case the agreement would give

the employer a right to fire him without a further showing of

cause. We have no way of knowing whether this part of the

settlement agreement will ever come into play, as its

enforcement depends on numerous circumstances that are not

capable of determination at this time: where Dr. Golden will

choose to live and work; where he will find employment; and

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 22 of 23
GOLDEN V. CAL. EMERGENCY PHYSICIANS 23

what facilities, if any, CEP will acquire in the future. If the

stars align and all this came to pass, we would then have to

determine whether Dr. Golden’s ability to practice his

profession at that indefinite future time would be adversely

affected, a highly contingent inquiry depending on numerous

factors that are susceptible to little more than a guess today. 

The majority remands for further fact-finding, but factfinding normally involves reconstructing past events, not

prognosticating about the future. The court will need a ouija

board to “find” any of the facts the majority believes are

relevant to whether the agreement will violate section 16600.

What we know for sure is that the settlement agreement

does not limit Dr. Golden’s ability to practice his profession

at this time—except to the extent that he can’t work for CEP. 

No case cited by the majority, and none I’m aware of, has

construed section 16600 as preserving an unfettered right to

employment in all future circumstances, no matter how

remote or contingent.

If and when the scenario Dr. Golden fears to comes to

pass, he can raise section 16600 as a defense to his dismissal. 

A court can then adjudicate the issue in light of the concrete

circumstances as they exist at that time—including making a

factual determination whether CEP’s share of the market is so

great that being dismissed by them impairs Dr. Golden’s

ability to practice his profession. If it is, then that portion of

the settlement agreement might, in the words of section

16600, be “to that extent void.” But I can see no justification

for allowing this remote contingency to serve as an excuse for

Dr. Golden to finagle his way out of his contract and deprive

his lawyer of the fee he has earned. Because I seriously

doubt that the California Supreme Court would reach such a

result, I would affirm the judgment of the district court.

 Case: 12-16514, 04/08/2015, ID: 9487536, DktEntry: 51-1, Page 23 of 23