Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_14-cv-03073/USCOURTS-cand-4_14-cv-03073-1/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1332 Diversity-Injunctive &amp; Declaratory Relief

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

GOLDEN STATE ORTHOPAEDICS, 

INC.,

Plaintiff,

v.

HOWMEDICA OSTEONICS 

CORPORATION d/b/a STRYKER 

ORTHOPAEDICS,

Defendant.

Case No. 14-cv-3073-PJH 

ORDER GRANTING MOTION TO 

DISMISS AND DENYING MOTION TO 

TRANSFER

BACKGROUND

The above-entitled action was filed on July 7, 2014, by Golden State 

Orthopaedics, Inc. (“GSO”) against defendant Howmedica Osteonics Corporation d/b/a 

Stryker Orthopaedic (“Stryker”). GSO is a California-based distributor of orthopedic 

medical products and surgical instruments. Stryker is a New Jersey-based designer, 

manufacturer, and seller of orthopedic medical products and surgical instruments, and 

operates in California. 

Approximately five weeks earlier, on May 30, 2014, Stryker had filed suit in the 

District of New Jersey, against five former employees, California citizens who worked for 

Stryker as sales representatives, exclusively in California. Also named as a defendant 

was DePuy Orthopaedics, Inc. (“DePuy”), an Indiana-based designer, manufacturer, and 

seller of orthopedic medical products and surgical instruments, allegedly a direct 

competitor of Stryker in the orthopaedic reconstructive implant industry. See Howmedica 

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Osteonics Corp. v. Sarkisian, C-14-3449 (D.N.J.) (“the New Jersey case”). Stryker 

alleges that the five employees breached their employment contracts and the duty of 

loyalty by soliciting Stryker’s customers on behalf of DePuy, and that DePuy engaged in 

unfair competition, corporate raiding, and interference with contract and prospective 

economic advantage.

In the present complaint, GSO asserts that Stryker violated California Business 

and Professions Code § 16600 by compelling the five former California employees to 

sign employment agreements containing non-compete clauses. The former employees’ 

employment agreements also included forum-selection and choice-of law provisions, with 

four of the agreements requiring that any litigation against Stryker take place in New 

Jersey, under New Jersey law, and one agreement providing for Michigan law and a 

Michigan forum. GSO also alleged a claim of unfair competition under Business and 

Professions Code § 17200, plus a claim for declaratory relief.

On July 9, 2014, two days after GSO filed the present action, Stryker filed a motion 

in the New Jersey case, seeking leave to amend the complaint to add GSO as a 

defendant. Stryker claimed that it was only after GSO had filed suit in this district that it 

realized that the five former employees had worked for GSO (in addition to DePuy).

On August 29, 2014, Stryker filed a motion to dismiss the complaint in the present 

action for failure to state a claim, or to transfer the case to the District of New Jersey 

based on the first-to-file rule and/or on the forum-selection clauses in the former 

employees’ employment contracts. In the alternative, Stryker requested that the court 

decline to exercise jurisdiction, or stay the case pending resolution of the New Jersey 

action. On October 15, 2014, the New Jersey court granted Stryker’s motion to amend to 

add GSO as a defendant.

This court heard oral argument regarding the motion to dismiss/transfer the 

present case on October 30, 2014, and issued a written order on October 31, 2014. In 

the order, the court deferred ruling on the motion to transfer, deferred ruling on the 

motion to dismiss, and denied the motion to abstain. The court also stayed the present 

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case pending a decision on the pleadings in the New Jersey case, principally because 

transfer would be futile if the New Jersey court lacked personal jurisdiction over GSO. 

On November 26, 2014, the five former employees, DePuy, and GSO filed 

motions to, variously, dismiss for improper venue, transfer venue to the Northern District 

of California for the convenience of parties and witnesses, dismiss for lack of personal 

jurisdiction, and dismiss for failure to state a claim. On February 11, 2015, the assigned 

district judge referred the motions to a magistrate judge for issuance of a report and 

recommendation. On April 20, 2015, the magistrate judge issued an opinion and order 

granting the motion under 28 U.S.C. § 1404(a) (notwithstanding the forum selection 

clauses) to transfer the case for the convenience of parties and witnesses. 

On May 4, 2015, Stryker filed objections to and an “appeal” from the magistrate 

judge’s decision, pursuant to Federal Rule of Civil Procedure 72(a), requesting oral 

argument and noticing the hearing for June 1, 2015. On May 5, 2015, the assigned 

district judge issued a notice indicating that Stryker’s motion would be decided on the 

papers. The parties submitted additional briefing, including sur-replies. The last brief 

was filed on July 9, 2015. The docket reflects no further activity until February 10, 2016, 

when DePuy filed a notice of supplemental authority, to which responses were filed 

shortly thereafter. 

On August 26, 2016, the assigned district judge issued a summary order affirming 

the magistrate judge’s opinion and granting defendants’ motion to transfer the case to the 

Northern District of California. Based on the orders issued in the New Jersey action, the 

court finds that the motions to transfer the present action to the District of New Jersey are 

moot. Thus, the sole issue remaining for resolution is whether the complaint should be 

dismissed for failure to state a claim.

DISCUSSION

A. Legal Standard

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests for the 

legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, 349 F.3d 1191, 

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1199-1200 (9th Cir. 2003). Under the minimal notice pleading requirements of Rule 8, 

which requires that a complaint include a “short and plain statement of the claim showing 

that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), a complaint may be 

dismissed under Rule 12(b)(6) if the plaintiff fails to state a cognizable legal theory, or 

has not alleged sufficient facts to support a cognizable legal theory. Somers v. Apple, 

Inc., 729 F.3d 953, 959 (9th Cir. 2013). 

While the court is to accept as true all the factual allegations in the complaint, 

legally conclusory statements, not supported by actual factual allegations, need not be 

accepted. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); see also In re Gilead Scis. 

Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). The complaint must proffer sufficient 

facts to state a claim for relief that is plausible on its face. Bell Atlantic Corp. v. Twombly, 

550 U.S. 544, 555, 558-59 (2007) (citations and quotations omitted). A claim has facial 

plausibility when the plaintiff pleads factual content that allows the court to draw the 

reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 

U.S. at 678 (citation omitted). "[W]here the well-pleaded facts do not permit the court to 

infer more than the mere possibility of misconduct, the complaint has alleged – but it has 

not ‘show[n]' – ‘that the pleader is entitled to relief.'" Id. at 679. Where dismissal is 

warranted, it is generally without prejudice, unless it is clear the complaint cannot be 

saved by any amendment. Sparling v. Daou, 411 F.3d 1006, 1013 (9th Cir. 2005).

Review is generally limited to the contents of the complaint, although the court can 

also consider a document on which the complaint relies if the document is central to the 

claims asserted in the complaint, and no party questions the authenticity of the 

document. See Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007). Thus, the court 

may consider matters that are properly the subject of judicial notice, Knievel v. ESPN, 

393 F.3d 1068, 1076 (9th Cir. 2005); Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 

2001), and may also consider exhibits attached to the complaint, see Hal Roach Studios, 

Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989), and 

documents referenced extensively in the complaint and documents that form the basis of 

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a the plaintiff’s claims. See No. 84 Emp’r-Teamster Jt. Counsel Pension Tr. Fund v. Am. 

W. Holding Corp., 320 F.3d 920, 925 n.2 (9th Cir. 2003).

B. Defendant’s Motion

Stryker argues that the § 16600 claim must be dismissed because GSO lacks 

standing to challenge the employment agreements. GSO concedes in the complaint that 

it "is not a party to these employment agreements," Cplt ¶ 12, and Stryker asserts that 

GSO lacks standing to bring a claim under § 16600 (or under § 17200, to the extent that 

it alleges that the agreements themselves are unlawful, unfair, or fraudulent). 

In addition, with regard to the § 17200 claim, Stryker asserts that GSO has not 

alleged the existence of an injury-in-fact, nor a causal connection between Stryker's 

purported violation and any damages it suffered. In particular, Stryker argues that there 

is no indication in the complaint as to what harm GSO claims it has suffered as a result of 

Stryker's purported § 17200 violation, and that GSO admits in the complaint that it was 

able to hire the former Stryker employees. Stryker claims that GSO's allegation that its 

future business will be chilled is too speculative and is insufficient to state a claim under 

§ 17200.

In opposition, GSO does not address the question whether it has standing to 

assert the § 16600 claim, instead focusing its very brief argument on whether it has 

adequately alleged loss of money or property, such that its § 17200 claim is sufficiently 

pled. On that point, GSO argues that it alleged that it lost money and value to its 

distribution network because some of its contractors have restricted themselves from 

competing to the full extent allowed by law, leading to "profit diminishment" caused by 

Stryker's actions now and in the future. GSO claims that this is sufficient to state a claim, 

but argues that if it is not, the court should grant leave to amend.

The motion is GRANTED. Section 16600 provides, in its entirety: "Except as 

provided in this chapter, every contract by which anyone is restrained from engaging in a 

lawful profession, trade, or business of any kind is to that extent void." Cal. Bus. & Prof. 

Code § 16600. This provision is “an expression of public policy to ensure that every 

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citizen shall retain the right to pursue any lawful employment and enterprise of their 

choice.” Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal. App. 4th 853, 859 

(1994); see also Latona v. Aetna U.S. Healthcare Inc., 82 F.Supp. 2d 1089, 1093 (C.D. 

Cal. 1999) (express purpose of § 16600 is "to prohibit contracts that restrain employees 

from engaging in their lawful professions"). 

While Stryker’s argument is not entirely clear, it appears to the court highly 

questionable that GSO has standing to assert this claim as pled, as GSO is not a 

California employee who has been injured by the inclusion of a noncompete provision in 

his/her employment agreement. 

As for the § 17200 claim, it is not sufficiently pled. Stryker does not address the 

elements of the claim, but only the requirement that a plaintiff plead loss of money or 

property because of the actions of the defendant. The complaint alleges in a conclusory 

fashion that Stryker's actions are unlawful, unfair, and fraudulent, but the only facts 

alleged relate to the "unlawful" prong – that Stryker violated § 16600. Thus, because the 

complaint does not state a claim for § 16600, it also fails to state a claim under § 17200.

CONCLUSION

In accordance with the foregoing, the motion(s) to transfer are DENIED as moot, 

and the motion to dismiss is GRANTED. The dismissal is with leave to amend. Any 

amended complaint shall be filed no later than October 7, 2016. No new claims or 

parties may be added without agreement of defendant or leave of court.

The court will set a case management conference by separate order, once the 

pleadings are settled.

IT IS SO ORDERED.

Dated: September 8, 2016

__________________________________

PHYLLIS J. HAMILTON

United States District Judge

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