Donald Golden v. California Emergency Physician , 896 F.3d 1018 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DONALD GOLDEN, No. 16-17354
Plaintiff-Appellant,
D.C. No.
v. 4:10-cv-00437-
JSW
CALIFORNIA EMERGENCY
PHYSICIANS MEDICAL GROUP; MED
AMERICA; MARK ALDERDICE; OPINION
ROBERT BUSCHO,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Jeffrey S. White, District Judge, Presiding
Argued and Submitted December 4, 2017
San Francisco, California
Filed July 24, 2018
Before: Milan D. Smith, Jr., and Sandra S. Ikuta, Circuit
Judges, and John D. Bates, * Senior District Judge.
Opinion by Judge Bates;
Dissent by Judge Milan D. Smith, Jr.
*
The Honorable John D. Bates, Senior District Judge for the United
States District Court for the District of Columbia, sitting by designation.
2 GOLDEN V. CEP
SUMMARY **
Settlement
The panel reversed the district court’s order directing the
plaintiff to sign a settlement agreement in an employment
discrimination suit.
The panel held that the settlement agreement, between a
doctor and his former employer, ran afoul of California law
because a provision of the agreement placed a “restraint of a
substantial character” on the doctor’s medical practice. The
panel remanded the case for further proceedings.
Dissenting, Judge M. Smith wrote that the settlement
agreement did not violate Cal. Prof. & Bus. Code § 16600,
and the district court did not abuse its discretion in granting
defendants’ motion to enforce the agreement.
COUNSEL
Matthew Borden (argued) and J. Noah Hagey, Braunhagey
& Borden LLP, San Francisco, California, for Plaintiff-
Appellant.
Sarah E. Robertson (argued), Jonathan McNeil Wong, and
Mark A. Delgado, Donahue Fitzgerald LLP, Oakland,
California, for Defendants-Appellees.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
GOLDEN V. CEP 3
OPINION
BATES, Senior District Judge:
We are now called on to answer the question that we left
open when this case was last before us: whether a provision
of a settlement agreement between Dr. Donald Golden and
his former employer, the California Emergency Physicians
Medical Group (“CEP”), places a “restraint of a substantial
character” on Dr. Golden’s medical practice. See Golden v.
Cal. Emergency Physicians Med. Grp., 782 F.3d 1083, 1093
(9th Cir. 2015) (“Golden I”). We conclude that it does, and
that it therefore runs afoul of California law. See Cal. Bus.
& Prof. Code § 16600.
I
Dr. Golden graduated from medical school in 1995. 1 He
later completed a fellowship in geriatrics and a residency in
internal medicine, and in 2000 he began working for CEP, a
partnership of nearly 2,000 physicians who staff emergency
rooms and other medical facilities in California and ten other
states. While at CEP, Dr. Golden worked primarily as an
emergency room physician, although he also worked part-
time in several other facilities, including two family practice
clinics and two occupational medicine clinics.
1
The following facts are summarized, for the most part, in the
majority opinion in Golden I. See 782 F.3d at 1084–85. We include our
own summary for convenience, not because we view the facts differently
than did the Golden I majority.
4 GOLDEN V. CEP
In 2007, CEP terminated Dr. Golden’s employment,
ostensibly because he lacked board certification. 2 Dr.
Golden sued CEP in Alameda County Superior Court,
claiming that he had in fact been fired because of his race.
CEP removed Dr. Golden’s suit to federal court and,
following a settlement conference before a magistrate judge,
the parties orally agreed to settle the case.
When the settlement agreement was later reduced to
writing, however, Dr. Golden refused to sign it. He claimed
that one of its provisions, Paragraph 7, was contrary to
California’s statutory prohibition on contracts “by which
anyone is restrained from engaging in a lawful profession,
trade, or business of any kind.” Cal. Bus. & Prof. Code
§ 16600. Paragraph 7 states:
The parties agree that, except as specified in
Paragraphs 7a and b, below, Golden shall not
be entitled to work or be reinstated at any
CEP-contracted facility or at any facility
owned or managed by CEP. The parties
further agree that if CEP contracts to provide
services to, or acquires rights in, a facility that
is an emergency room as defined and
regulated by California law 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. Similarly, the parties
2
Although Dr. Golden is not board certified in emergency medicine
or any other specialty, his declaration states that he is eligible for board
certification in internal medicine. But one CEP partner’s declaration
states that Dr. Golden is “likely not board eligible” because he “has been
practicing medicine for well over 15 years” without becoming certified.
GOLDEN V. CEP 5
agree that if CEP contracts to provide
services to, or acquires rights in, a facility at
which Golden is employed or rendering
services as a hospitalist, CEP has the right to
and will terminate Golden from any work as
a hospitalist without any liability whatsoever.
Paragraph 7a states that if CEP contracts with or acquires
rights in “an urgent care facility that is not an emergency
room . . . and Golden is already working at that urgent care
facility, Golden may be entitled to continue working at that
urgent care facility” so long as he meets certain criteria.
Paragraph 7b goes on to state the terms of Dr. Golden’s
continued employment if the conditions in Paragraph 7a are
met.
Following Dr. Golden’s refusal to sign the agreement,
his attorney withdrew, intervened in the proceedings, and
moved to enforce the agreement so that he could collect his
fee. The district court granted the motion and ordered Dr.
Golden to sign, reasoning that because Paragraph 7 would
not prevent Dr. Golden from competing with CEP, it was not
a restraint on his medical practice, and section 16600 did not
apply. Dr. Golden continued to refuse to sign the agreement,
however, and he instead took his first appeal to this Court.
See Golden I, 782 F.3d at 1085.
We reversed the district court’s order, holding that the
court had misconstrued section 16600. Id. at 1092–93. The
statute, we explained, applies not only to noncompetition
agreements but also to any contractual provision that places
a “restraint of a substantial character” on a person’s ability
to practice a profession, trade, or business. Id. at 1092
(quoting Chamberlain v. Augustine, 156 P. 479, 480 (Cal.
1916)). Thus, the fact that Paragraph 7 did not prohibit Dr.
6 GOLDEN V. CEP
Golden from competing with CEP was not dispositive;
rather, the question was whether Paragraph 7 substantially
restrained Dr. Golden’s practice of medicine, particularly in
light of CEP’s large presence in California. Id. at 1089,
1092–93. Because the factual record on that question was
not fully developed, however, we remanded to the district
court to determine in the first instance whether Paragraph 7
“constitutes a restraint of a substantial character to Dr.
Golden’s medical practice.” Id. at 1093.
On remand, the district court again ordered Dr. Golden
to sign the settlement agreement, concluding this time that
Paragraph 7 was not a restraint of a substantial character.
The court also denied Dr. Golden’s request for a jury trial
and ruled that an evidentiary hearing was unnecessary. Dr.
Golden timely filed this appeal, challenging both the district
court’s order directing him to sign the agreement and its
decision not to hold an evidentiary hearing. 3
II
We review a district court’s order enforcing a settlement
agreement for abuse of discretion. See Golden I, 782 F.3d at
1089. Like any other contract, however, we review the
validity of a settlement agreement de novo, and a district
court abuses its discretion if it incorrectly determines that a
settlement agreement is enforceable. See id.; Tompkins v.
23andMe, Inc., 840 F.3d 1016, 1021 (9th Cir. 2016). The
district court’s interpretation of state contract law is likewise
3
Because we are able to conclude on this record that the settlement
agreement was void under section 16600, we do not consider whether
the district court abused its discretion in deciding not to hold an
evidentiary hearing.
GOLDEN V. CEP 7
reviewed de novo. L.A. Lakers, Inc. v. Fed. Ins. Co., 869
F.3d 795, 800 (9th Cir. 2017).
CEP contends that the district court’s determination that
Paragraph 7 did not impose a “restraint of a substantial
character” on Dr. Golden’s medical practice is a factual
finding that we review for clear error. We disagree. We
think the question is better framed as a “mixed question[] of
law and fact”—one in which “the issue is whether the facts
satisfy the statutory standard.” In re Cherrett, 873 F.3d
1060, 1066 (9th Cir. 2017) (citation omitted). Thus, while
we defer to the district court’s specific factual findings as to
the nature and extent of the parties’ respective professional
activities, we review de novo both the district court’s
construction of Paragraph 7 and its conclusion that, in light
of the facts found, Paragraph 7 withstands scrutiny under
section 16600.
III
Section 16600 of the California Business and
Professions Code provides, with certain exceptions not
relevant here, 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.” In Golden I, we
concluded that section 16600 extends beyond
noncompetition agreements to any “restraint of a substantial
character,” citing both the statute’s sweeping language and
the California decisions interpreting that language. See
782 F.3d at 1090–92. Similar considerations guide our
analysis of what qualifies as a “substantial” restraint under
this standard. See Int’l Bus. Machs. Corp. v. Bajorek,
191 F.3d 1033, 1041 (9th Cir. 1999) (“We are not free to
read California law without deferring to our own precedent
on how to construe it.”).
8 GOLDEN V. CEP
A
We begin, as always, with the statute’s text. See Nat’l
Ass’n of Mfrs. v. Dep’t of Def., 138 S. Ct. 617, 631 (2018).
As we noted in Golden I, 782 F.3d at 1090, section 16600
speaks in categorical terms: it refers to “every contract by
which anyone is restrained” from practicing a “profession,
trade, or business of any kind,” Cal. Bus. & Prof. Code
§ 16600 (emphases added). This language also stands in
stark contrast to the statute’s handful of narrow exceptions,
which pertain mostly to the sale or dissolution of businesses.
See, e.g., Cal. Bus. & Prof. Code § 16601 (“Any person who
sells the goodwill of a business . . . may agree with the buyer
to refrain from carrying on a similar business within a
specified geographic area in which the business so sold . . .
has been carried on, so long as the buyer . . . carries on a like
business therein.”). As we said in Golden I, these exceptions
demonstrate that the California legislature knew how to
describe specific restraints in “considerable detail” and that,
had it intended to draw section 16600 more narrowly, it
easily could have done so. 782 F.3d at 1090.
We also noted in Golden I how broadly California’s
courts have read section 16600. See id. at 1091–92. In
Chamberlain v. Augustine, for example, the California
Supreme Court invalidated a provision of a contract for the
sale of stock in the Los Angeles Foundry Company, which
would have required the seller to pay $5,000 if he worked
for or acquired an interest in any other foundry in California,
Oregon, or Washington within three years of the date of the
sale. 156 P. at 479–80. Although the provision applied in
only three states and allowed the seller “to act as laborer or
molder in various foundries,” the court nonetheless
concluded that it imposed a “restraint of a substantial
character” on his metalworking trade, explaining that “[t]he
GOLDEN V. CEP 9
statute makes no exception in favor of contracts only in
partial restraint of trade.” Id. at 480.
Almost fifty years later, the California Supreme Court
applied section 16600 again, this time invalidating a
provision of a pension plan that would have required an
employee to forfeit his retirement benefits if he started
working for one of his employer’s competitors after he
retired. See Muggill v. Reuben H. Donnelley Corp., 398 P.2d
147, 149 (Cal. 1965). Citing Chamberlain, the court
explained that section 16600 nullifies any provision that
“prohibit[s] an employee from working for a competitor
after completion of his employment or impos[es] a penalty
if he does so.” Id. Since the forfeiture provision clearly
imposed such a penalty, it was void. Id.More recently, the California Supreme Court struck
down a contractual provision that barred an employee from
(1) practicing accounting for eighteen months for any client
on whose account the employee had worked in the eighteen
months prior to the termination of his employment and
(2) soliciting any of his former employer’s clients for twelve
months following his termination. Edwards v. Arthur
Andersen LLP, 189 P.3d 285, 290–292 (Cal. 2008) (citations
omitted). As the California court explained:
[O]ur courts have consistently affirmed that
section 16600 evinces a settled legislative
policy in favor of open competition and
employee mobility. The law protects
Californians and ensures that every citizen
shall retain the right to pursue any lawful
employment and enterprise of their choice. It
protects the important legal right of persons
to engage in businesses and occupations of
their choosing.
10 GOLDEN V. CEP
Id. at 291 (citations omitted). Thus, the court noted,
California has rejected the common law “rule of
reasonableness,” which generally permits professional
restraints that are reasonable in relation to the legitimate
business interests at stake. See id. at 290; Restatement
(Second) of Contracts § 188 (Am. Law Inst. 1981). The
court also specifically rejected an exception for “narrow”
restraints that had been recognized in two prior Ninth Circuit
cases. See Edwards, 189 P.3d at 292–93 (disapproving
Bajorek, 191 F.3d at 1041, which upheld an agreement
whereby an employee would forfeit his stock options if he
began working for a competitor within six months of the
termination of his employment, and Gen. Commercial
Packaging v. TPS Package Eng’g, Inc., 126 F.3d 1131, 1134
(9th Cir. 1997), which upheld a business’s agreement not to
solicit a small subset of another business’s clients). “Section
16600 is unambiguous,” the court explained, “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.” Id. at 293. But absent any such
language, California’s “strong public policy” against
professional restraints “should not be diluted by judicial
fiat.” Id. (citation omitted).
Two decisions of California’s intermediate appellate
courts have probed the outer limits of this broad reading of
section 16600. In City of Oakland v. Hassey—a case
decided before Edwards—the California Court of Appeal
upheld a provision of a police officer’s employment contract
that would have required the officer to reimburse his
employer $8,000 in training costs if he left his job before five
years. 78 Cal. Rptr. 3d 621, 627–28 (Cal. Ct. App. 2008).
Because “[n]othing prevented [the officer] from working for
another police department, or anywhere else, for that
matter,” the court held that the agreement was not a restraint
GOLDEN V. CEP 11
on his profession and that section 16600 did not apply. Id.
at 634.
In Golden I, we noted that the provision at issue in
Hassey might not have survived under Edwards’s later
reading of section 16600, since “a requirement to reimburse
training expenses could impose a meaningful obstacle to
‘employee mobility,’ and, hence, limit the opportunities one
may have to engage in one’s chosen line of work.” 782 F.3d
at 1092 (citation omitted). But the California Court of
Appeal later rejected our suggestion. See USS-POSCO
Indus. v. Case, 197 Cal. Rptr. 3d 791, 795, 802 (Cal. Ct. App.
2016) (upholding a provision of an employment contract that
would require an employee to reimburse his employer for a
“three-year, employer-sponsored educational program”
should he leave his job during his first 30 months). As the
Court of Appeal explained: “Repayment of the fronted costs
of a voluntarily undertaken educational program, the
benefits of which transcend any specific employment and are
readily transportable, is not a restraint on employment.” Id.
at 802.
Because the California Supreme Court denied review in
both Hassey and USS-POSCO, we do not have a definitive
answer as to whether those cases correctly state California
law. Even if they do, however, they stand at most for the
proposition that a promise to reimburse an employer for “a
voluntarily undertaken and valuable educational
opportunity” is not a cognizable restraint under section
16600 because it does not “curb competition.” Id. Both
cases involve only a commitment to repay the cost of a
training program if the employee leaves the employer; they
do not address future employment. Far from hindering
employee mobility, moreover, a training program is likely to
enhance an employee’s competitiveness on the job market,
12 GOLDEN V. CEP
even if the employee is ultimately required to pay for it.
When limited to training reimbursement agreements,
therefore, Hassey and USS-POSCO are consonant with the
“settled legislative policy in favor of open competition” that
underlies section 16600. Edwards, 189 P.3d at 291.
With these authorities in mind, we proceed to determine
what constitutes a “restraint of a substantial character” under
section 16600. Golden I, 782 F.3d at 1093. Taken together,
the California cases suggest that the standard is
undemanding. We know that a restraint can be “substantial”
even if it is reasonable, see Edwards, 189 P.3d at 290
(rejecting the common law rule of reasonableness), and even
if it is narrow, see id. at 292–93 (rejecting the Ninth Circuit’s
“narrow-restraint” exception). The California Supreme
Court has applied section 16600 to invalidate a monetary
penalty for engaging in competitive conduct, see
Chamberlain, 156 P. at 480, an agreement to forfeit
retirement benefits, see Muggill, 398 P.2d at 149, and a
short-term promise not to compete or to solicit clients, see
Edwards, 189 P.3d at 290–92, and it has even suggested that
a stock option penalty or a promise not to solicit a small
group of clients would fail under the statute, see id. at 292–
93. And although two decisions of California’s intermediate
appellate courts have held that training reimbursement
agreements are permissible under section 16600, see USS-
POSCO, 197 Cal. Rptr. 3d at 802; Hassey, 78 Cal. Rptr. 3d
at 634, there are good reasons to treat that situation as
unique.
In light of these authorities, we conclude that a
contractual provision imposes a restraint of a substantial
character if it significantly or materially impedes a person’s
lawful profession, trade, or business. See Substantial,
Black’s Law Dictionary (10th ed. 2014) (defining the word
GOLDEN V. CEP 13
“substantial” to mean, among other things, “[o]f, relating to,
or involving substance; material”). To meet this standard, a
provision need not completely prohibit the business or
professional activity at issue, nor does it need to be sufficient
to dissuade a reasonable person from engaging in that
activity. See Edwards, 189 P.3d at 292. But its restraining
effect must be significant enough that its enforcement would
implicate the policies of open competition and employee
mobility that animate section 16600. See id. at 291.
We stress, however, that it will be the rare contractual
restraint whose effect is so insubstantial that it escapes
scrutiny under section 16600. California’s legislature has
clearly expressed its disapproval of contracts that restrain
lawful business and professional activities, and we are bound
to heed that policy judgment wherever its logic applies.
With these considerations in mind, we turn now to the
contractual provision at issue in this case.
B
Paragraph 7 impedes Dr. Golden’s ability to practice
medicine in three ways. First, it states that he “shall not be
entitled to work or be reinstated” at “any facility owned or
managed by CEP.” Second, it bars him from working at
“any CEP-contracted facility.” Finally, it states that “if CEP
contracts to provide services to, or acquires rights in” a
facility where Dr. Golden is currently working as an
emergency room physician or a hospitalist, CEP “has the
right to and will terminate” him from that employment
“without any liability whatsoever.” The second and third of
these three provisions substantially restrain Dr. Golden’s
practice of medicine and are therefore barred by section
16600.
14 GOLDEN V. CEP
The first provision pertains only to Dr. Golden’s future
employment at CEP. To the extent that it prevents him from
being reinstated at any of his prior CEP worksites—which
consist of a single emergency room and a handful of
nonemergency clinics—its impediment to medical practice
is minimal. And to the extent that it provides that Dr. Golden
“shall not be entitled” to work at any other facility owned or
managed by CEP, it simply restates the obvious proposition
that an employee does not have a general right to work for
an employer without the employer’s consent. 4 Insofar as
Paragraph 7 bars Dr. Golden from future employment at
facilities owned or managed by CEP, therefore, it does not
impose a substantial restraint on his medical practice. See
Golden I, 782 F.3d at 1093 (Kozinski, J., dissenting) (noting
that “[t]he provision barring Dr. Golden from current
employment by CEP cannot possibly” violate section 16600,
because if it did, “few employment disputes could ever be
settled”). 5
4
Indeed, even Dr. Golden’s partnership agreement with CEP gave
him no right to work at any CEP facility. Instead, it required him to
“apply for available work at a site, go through an interviewing and
credentialing process, and . . . be accepted to the medical staff of the
service location.”
5
The dissent contends that our “approval of this restraint runs
contrary to [our] own legal standard,” because “a provision that prevents
Dr. Golden from practicing his profession with one of the largest
providers of medical services in California” is “surely” a restraint of a
substantial character. Dissent at 24 n. 2. But the dissent ignores the fact
that this provision merely codifies a preexisting state of affairs between
the parties. Dr. Golden has no right to work at CEP: even absent the
settlement agreement, he could not work at CEP without CEP’s consent.
Conversely, should CEP and Dr. Golden later mutually agree to reinstate
their employment relationship, a contrary provision of a prior contract
between them would not preclude them from doing so. Thus, far from
GOLDEN V. CEP 15
The remainder of Paragraph 7, however, affects not only
Dr. Golden’s employment at CEP itself, but also his current
and future employment at third-party facilities. For
example, Paragraph 7 bars Dr. Golden from working at “any
CEP-contracted facility.” Under a fair reading of this
provision, Dr. Golden would be ineligible for employment
in any department of a hospital where CEP has a contract to
provide, say, anesthesiology services—even if he would
never have any contact with CEP’s staff. 6 Therefore, if Dr.
Golden were compelled to sign the settlement agreement,
CEP would be entitled to terminate him from his current
employment at four facilities where CEP also has contracts. 7
placing a restraint of a substantial character on Dr. Golden’s medical
practice, this part of Paragraph 7 imposes no restraint at all.
6
In such a case, perhaps, CEP might not have the authority to
prevent the third-party hospital from hiring Dr. Golden. By accepting
employment at a facility where CEP has a contract, however, Dr. Golden
would be in breach of Paragraph 7, which states that he “shall not be
entitled to work” at such facilities.
7
Dr. Golden stated in his declaration that if he were compelled to
sign the agreement, “CEP [could] and would fire me from all of my
present jobs because CEP has a contract and gets paid by the same people
who pay me.” The district court ruled Dr. Golden’s declaration
inadmissible on this point due to lack of personal knowledge. But CEP
conceded in a reply brief below that, “[a]s [Dr. Golden] correctly notes
in his Declaration, CEP also has or had contracts for services with
facilities that are owned and/or operated and/or otherwise affiliated with”
the facilities where Dr. Golden is presently employed. In light of this
concession, we think it proper to consider Dr. Golden’s assertion.
The dissent claims that, in so doing, we “cursorily overrule[] the
district court’s exclusion of this testimony.” Dissent at 29. Not so. Dr.
Golden has not asked us to review the district court’s evidentiary ruling,
and we do not do so here. Instead, we rely only on a concession made
by CEP and the plain language of Paragraph 7, which states that CEP
16 GOLDEN V. CEP
Paragraph 7 also states that CEP “has the right to and will
terminate” Dr. Golden from a position as an emergency
room physician or a hospitalist at any facility where CEP
later contracts or “acquires rights.” 8 This means that if Dr.
Golden were employed as a hospitalist or an emergency
room physician, and if CEP later acquired a contract to
provide, say, psychiatry services at his hospital, CEP would
“have the right to and [would]” unilaterally terminate his
employment.
This interference with Dr. Golden’s ability to seek or
maintain employment with third parties easily rises to the
level of a substantial restraint, especially given the size of
CEP’s business in California. 9 CEP currently staffs 160
facilities in the state—including hospitals, trauma centers,
urgent care clinics, and skilled nursing facilities—and it
handles between twenty-five and thirty percent of the state’s
emergency room admissions. Moreover, CEP appears to be
“has the right to and will” terminate Dr. Golden from employment with
any employer who contracts with CEP.
8
The record is unclear as to the exact meaning of the phrase
“acquires rights” in Paragraph 7. Indeed, one CEP partner testified at his
deposition that he had “no idea what it means.” But to the extent that it
suggests that CEP could fire Dr. Golden from a facility where CEP
acquires “rights” other than the contractual right to staff and operate the
facility—an ownership interest, for example—it only broadens the scope
of Paragraph 7’s applicability.
9
Indeed, we think it possible that even a smaller business with a
more limited network of contractual relationships could run afoul of
section 16600 by barring a former employee from current or future
employment with its contractual partners. We need say no more than
this, however, because here the restraint imposed by Paragraph 7 is
clearly substantial.
GOLDEN V. CEP 17
growing: according to its own records, the group’s market
share has increased steadily over the past decade or so,
moving from around twenty percent of all emergency room
admissions in California in 2006 to just over twenty-seven
percent in 2014. 10 These facts persuade us that Paragraph
7’s effect on Dr. Golden’s medical practice is substantial,
and that section 16600 therefore applies.
CEP’s arguments against the application of section
16600 are unpersuasive. CEP’s main point is that we should
review for clear error the district court’s determination that
Paragraph 7 is not a restraint of a substantial character, and
that Dr. Golden has identified no such error here. See Wash.
Mut., Inc. v. United States, 856 F.3d 711, 721 (9th Cir. 2017)
(explaining that reversal under clear error review requires “a
definite and firm conviction that a mistake has been made”
(citation omitted)). We do not think—and Dr. Golden does
not argue—that any specific factual finding made by the
district court was clearly erroneous. But as we have already
said, the question whether a restraint is one of a substantial
character is a mixed question of law and fact; thus, although
we defer to the district court’s factual findings, we review de
novo its determination that Paragraph 7 is not a substantial
restraint. See In re Cherrett, 873 F.3d at 1066. And as we
10
In his declaration, CEP’s chief operating officer admits that CEP
has “rather ambitious” plans for expansion, but he states that the group
anticipates that its future expansion will take place primarily outside of
California, because “so many of the service locations in the state are part
of the Kaiser system” and because “it is extremely unlikely that any
medical group other than Kaiser would staff a Kaiser-owned service
location.” Nothing in the agreement itself guarantees that CEP will
adhere to its stated plans, however, and CEP’s growing share of
California’s market for emergency room services suggests that its
business in the state is growing as well.
18 GOLDEN V. CEP
have already explained, the district court erred in making
that determination here.
Next, CEP suggests that Paragraph 7 does not impose a
substantial restraint to the extent that it impedes Dr.
Golden’s ability to practice as an emergency room
physician, because that position does not appear to be the
focus of his current practice. At his deposition, for example,
Dr. Golden testified that he no longer practices emergency
medicine and that he had not applied for a position in that
field since 2011. And Dr. Golden’s CV lists seven
specialties besides emergency medicine—starting with
geriatrics, the specialty in which he completed his
fellowship—which further suggests that Dr. Golden’s
medical practice extends beyond emergency medicine.
“A person’s ‘profession’ under section 16600 is not so
expansive [as] to include all work for which he is qualified.”
Campbell v. Bd. of Trs. of Leland Stanford Junior Univ.,
817 F.2d 499, 503 (9th Cir. 1987). But Dr. Golden worked
as an emergency room physician for three years before he
was terminated by CEP, and he testified at his deposition that
he still works as a hospitalist. Thus, work as an emergency
room physician and a hospitalist is included within his
“profession” for purposes of section 16600. And in any case,
Paragraph 7 does not only restrain Dr. Golden from holding
these positions: as we have already said, it would also
prevent him from practicing any type of medicine at a
facility where CEP has a contract. Even if emergency
medicine were not properly characterized as Dr. Golden’s
current profession, then, Paragraph 7 would still restrain
other aspects of his medical practice—including his work as
a hospitalist.
CEP also argues that Paragraph 7 does not substantially
restrain Dr. Golden from practicing emergency medicine
GOLDEN V. CEP 19
because his lack of board certification would independently
preclude him from working at most emergency rooms. But
CEP does not argue that Dr. Golden’s lack of board
certification prohibits him from practicing as a hospitalist.
Moreover, there is no dispute that if Dr. Golden were to
become board certified in emergency medicine, the only
restraint on his ability to practice that specialty would then
be Paragraph 7.
Finally, we reject the dissent’s contention that our
analysis is improperly based on speculation about events that
may or may not occur should Paragraph 7 be allowed to take
effect. See Dissent at 23 (citing Golden I, 782 F.3d at 1094
(Kozinski, J., dissenting)); see also id. at 24–30 (arguing that
Dr. Golden might not ultimately work at a facility where
CEP later contracts to provide services, that CEP might not
have the authority to fire Dr. Golden from such facilities, and
that CEP might not continue to grow in California).
Paragraph 7 is unequivocal: it states that Dr. Golden “shall
not be entitled to work” at any facility where CEP has a
contract, and that CEP “has the right to and will terminate”
Dr. Golden’s employment if it later contracts with a facility
where he is working as a hospitalist or emergency room
physician. Far from being “highly speculative,” Dissent at
22, these future events—the ones on which we base our
decision—are expressly contemplated by the language of the
contract before us. 11 And in any case, the dissent’s argument
11
Moreover, even if it were proper to require Dr. Golden to prove
that CEP would likely enforce Paragraph 7 according to its plain terms,
there is some evidence in the record to support that conclusion. For
example, Dr. Golden stated in his declaration that he was terminated
from a position as an emergency room physician in late 2010, shortly
after CEP took over the contract for the emergency room where he was
working. And although the dissent contends that this was because Dr.
Golden was not board certified or board eligible, see Dissent at 26 n.4,
20 GOLDEN V. CEP
was rejected by the majority in Golden I. See 782 F.3d at
1088 (concluding that Dr. Golden’s challenge to Paragraph
7 was ripe because his “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”). 12 We are bound by that conclusion here.
In sum, the text of section 16600, the California courts’
interpretation of that text, and the statute’s underlying
legislative policy together persuade us that the statute applies
to any professional restraint that substantially—i.e.,
significantly or materially—restrains a person’s lawful
profession, trade, or business. Under this standard,
Paragraph 7 survives to the extent that it bars Dr. Golden
from working at facilities that are owned or operated by
CEP, but it fails to the extent that it prevents him from
working for employers that have contracts with CEP and to
the extent that it permits CEP to terminate him from existing
employment in facilities that are not owned by CEP. Thus,
because CEP does not argue that any exception to section
16600 applies, and because the parties do not dispute that
Paragraph 7 is material to the settlement agreement, see
Dr. Golden stated in his declaration that “there were [other] non-[board
eligible or board certified] doctors” employed at that emergency room
“who were not terminated” when CEP took over.
12
The dissent cites this language from Golden I for the proposition
that we “cannot rely” on future events in evaluating Paragraph 7. Dissent
at 27 n.6. But this is not what Golden I said. Rather, Golden I said that
the “legal interest” that Dr. Golden sought to vindicate was the contract’s
present invalidity—not its invalidity at some future point in time—such
that his case was ripe. See 782 F.3d at 1088 (“[Dr. Golden] argues that,
under the State’s business and professions code, the agreement is
currently void.”). Our holding is entirely consistent with this
proposition.
GOLDEN V. CEP 21
Golden I, 782 F.3d at 1088 n.2, the entire agreement is void,
and the district court abused its discretion in ordering Dr.
Golden to sign it.
We therefore REVERSE the district court’s order
directing Dr. Golden to sign the settlement agreement and
REMAND for further proceedings consistent with this
opinion.
M. SMITH, Circuit Judge, dissenting:
Dr. Golden filed a lawsuit against CEP when it
terminated his medical staff privileges, allegedly because of
poor performance. Just before trial was to begin, the parties
reached a settlement agreement in which CEP agreed to pay
Dr. Golden some money, and he agreed to give up any
opportunity to work again for CEP. At that point, however,
this dispute ceased being a typical employment dispute and
metastasized into one of those cases that only Franz Kafka
could love. First, when the parties finalized the settlement
agreement in writing, they appeared before a magistrate
judge to confirm their agreement, at which appearance Dr.
Golden expressly told the judge that he agreed with the terms
of the settlement agreement. Apparently, his word meant
nothing. Shortly thereafter, Dr. Golden backed out of the
settlement agreement, and refused to sign the settlement
document, which he knew stiffed his lawyer out of the
contingency fee he had earned for representing Dr. Golden
for three years. Then, undercutting the quid pro quo
underlying the entire settlement, Dr. Golden claimed
retroactively that the reason he refused to sign the settlement
agreement to which he had assented in open court was that
it violated California Business and Professions Code
§ 16600. This is sheer humbug, and it is lamentable that the
22 GOLDEN V. CEP
change in California law conjured by the majority has the
effect of rewarding Dr. Golden’s dishonorable conduct.
The parties are before us for a second time, disputing
whether the district court abused its discretion in concluding
that the settlement agreement did not constitute a restraint of
a substantial character in violation of section 16600. I
respectfully dissent because the majority concludes that the
agreement violates section 16600 based primarily on a series
of highly speculative future professional restraints that may
or may not happen, and because the district court followed
our guidance and applied it faithfully to the facts.
Section 16600 bars contracts that restrain an individual
from “engaging in a lawful profession, trade, or business of
any kind.” In Edwards v. Arthur Andersen LLP, the
California Supreme Court evaluated the validity of non-
competition agreements under section 16600. The court
rejected a rule of reasonableness approach due to section
16600’s “settled legislative policy in favor of open
competition and employee mobility.” 189 P.3d 285, 288,
291 (Cal. 2008). Edwards further declined to accept a
“narrow-restraint” exception that we previously adopted.
See id. at 290–92.
In Golden v. California Emergency Physicians Medical
Group (Golden I), we expanded section 16600’s application
to “other contractual restraints on professional practice.”
782 F.3d 1083, 1093 (9th Cir. 2015). However, we did not
extend Edwards to prohibit all restraints on one’s profession.
Instead, section 16600 bars only restraints “of a substantial
character.” Id.; see Chamberlain v. Augustine, 156 P. 479,
480 (Cal. 1916). Therefore, Edwards’s admonition against
a “narrow-restraint” exception is limited to “employee
noncompetition agreements,” 189 P.3d at 288, and other
contractual restraints are subject to a “restraint of a
GOLDEN V. CEP 23
substantial character” standard, see Golden I, 782 F.3d at
1093; see also In re J.T. Thorpe, Inc., 870 F.3d 1121, 1139
(9th Cir. 2017) (Korman, J., dissenting). 1
Until today, no court has defined what constitutes a
“restraint of a substantial character” under California law.
Rather, we have emphasized that there is no one-size-fits-all
approach to this inquiry. We have acknowledged that this is
a more “stringent rule” than the traditional “rule of
reasonableness.” Golden I, 782 F.3d at 1091 n.4 (quoting
Restatement (Second) of Contracts § 188 (1981)). More
importantly, we have acknowledged that this is a fact-
specific inquiry. See id. at 1093. Indeed, the foundational
case states that whether an agreement constitutes a “restraint
of a substantial character” requires consideration of “[t]he
circumstances surrounding the transaction.” Chamberlain,
156 P. at 480.
On remand, the district court “conduct[ed] further fact-
finding” on what we acknowledged was a “relatively
undeveloped” record and reached the proper result. See
Golden I, 782 F.3d at 1093. First, the district court correctly
applied the law to the facts before it and therefore did not
abuse its discretion in granting the motion to enforce the
settlement agreement. Second, as warned by the dissent in
Golden I, any potential restraint imposed by Paragraph 7 is
too speculative to “serve as an excuse for Dr. Golden to
finagle his way out of his contract.” Id. at 1094 (Kozinski,
J., dissenting). The evidence before the district court
1
Under the majority’s analysis of Edwards any restraint, no matter
how “narrow,” is impermissible. Whether or not this is a correct
interpretation of Edwards, we are bound by our prior decision in Golden
I, as was the district court. See Int’l Bus. Machs. Corp. v. Bajorek,
191 F.3d 1033, 1041 (9th Cir. 1999) (“We are not free to read California
law without deferring to our own precedent on how to construe it.”).
24 GOLDEN V. CEP
provides only “remote [and] contingent” scenarios that may
or may not impose a substantial restraint on Dr. Golden’s
profession at some unknown time in the future. Id. For these
reasons, the district court did not abuse its discretion.
Like the majority, I divide Paragraph 7 into three
categories. I agree with the majority that the first category—
the bar on Dr. Golden from employment at facilities owned
or managed by CEP—cannot constitute a restraint of a
substantial character. 2 See id. at 1093 (“The provision
barring Dr. Golden from current employment by CEP cannot
possibly violate . . . [section] 16600 . . . . If this violates
section 16600, few employment disputes could ever be
settled.”). I disagree with the majority that the remaining
two categories—(1) that “Golden shall not be entitled to
work or be reinstated at any CEP-contracted facility” and
(2) “CEP has the right to and will terminate Golden” from
an emergency room physician or hospitalist at any facility
where CEP later contracts or acquires rights 3—violate
section 16600.
2
The majority’s approval of this restraint runs contrary to its own
legal standard. The majority concludes that a restraint of a substantial
character is any restraint that “significantly or materially impedes a
person’s lawful profession, trade or business.” Under the majority’s
legal standard, surely a provision that prevents Dr. Golden from
practicing his profession with one of the largest providers of medical
services in California is a restraint of a substantial character. The
majority’s divergent conclusions between category one versus categories
two and three illustrate how difficult it is to cabin the legal standard
produced by the majority.
3
To the extent that “acquires rights” includes scenarios where CEP
owns or manages a facility, this would fall within the first category,
which does not constitute a restraint of a substantial character. To the
extent that this term is unclear, it was Dr. Golden’s burden to prove that
GOLDEN V. CEP 25
Although there is no controlling authority directly on
point, a review of the relevant cases is helpful. Paragraph 7
bears no resemblance to the onerous restraints that the
California Supreme Court invalidated in Chamberlain and
Edwards. The agreement in Chamberlain required the
defendant, who sold stock in his company, to pay the
purchaser $5,000 if he became directly or indirectly
interested in a similar business in the next three years. 156 P.
at 479–80. This is, without a doubt, a “restraint of a
substantial character”—it barred the defendant from
engaging in an entire “profession, trade, or business.” See
Cal. Bus. & Prof. Code § 16600. In Edwards, the California
Supreme Court struck down a non-competition agreement
that barred an accountant from providing accounting
services to former clients for eighteen months and barred the
accountant from soliciting his former employer’s clients for
twelve months. 189 P.3d at 292.
The only intervening state court decision since Golden I,
USS-POSCO Industries v. Case, rests at the other end of the
spectrum. There, the California Court of Appeal concluded
that a clause requiring the repayment of costs for employer-
provided training if an employee left the job within a certain
time did not violate section 16600. 197 Cal. Rptr. 3d 791,
800–01 (Ct. App. 2016). The court held that, unlike the
provisions in Edwards and Chamberlain, the provision did
not restrain the employee from engaging in his chosen
profession. Id. at 801–02. It discouraged leaving for a
certain length of time by requiring repayment of educational
training funds, but this did not rise to the level of a restraint
this term violated public policy, a burden he did not carry. See Rosen v.
State Farm Gen. Ins. Co., 70 P.3d 351, 359 (Cal. 2003).
26 GOLDEN V. CEP
of a substantial character in violation of section 16600. See
id. at 802.
In light of this background, the district court did not
abuse its discretion in concluding that the remainder of
Paragraph 7 was not a restraint of a substantial character.
The contracts in Edwards and Chamberlain barred
individuals from engaging in their chosen profession. In
contrast, Dr. Golden has been employed, and has not been
denied any position for which he has applied, 4 since this
litigation began. Nor can Dr. Golden point to any evidence
that he would be fired, actually restrained, or barred from
engaging in his profession upon signing the settlement
agreement.
In addition, Paragraph 7 limits employment only with
CEP or CEP-affiliated facilities. 5 Dr. Golden is free to
engage as a hospitalist, emergency room physician, or in any
other medical specialty for entities unaffiliated with CEP,
which is far from a “curb [on] competition,” id., or a
limitation on “open competition,” see Edwards, 189 P.3d at
290. Similar to the provision in USS-POSCO, Paragraph 7
imposes certain restrictions on future employment options,
4
The majority points to Dr. Golden’s termination from a position as
an emergency room physician shortly after CEP took over the contract
for that emergency room. Dr. Golden was terminated because he was
not board certified or board eligible in emergency medicine, as required
by CEP. As discussed more thoroughly below, his termination and his
inability to find employment on this basis is a restraint imposed by his
insufficient qualifications, not Paragraph 7.
5
CEP’s handling of twenty-five to thirty percent of emergency room
admissions for California (excluding specialty hospitals) is irrelevant to
our inquiry, because the provision barring Dr. Golden from working for
CEP is not void under section 16600.
GOLDEN V. CEP 27
but does not curb competition or substantially restrain Dr.
Golden’s ability to engage in his chosen profession.
Therefore, Paragraph 7 is more akin to the provision upheld
in USS-POSCO than the restraints struck down in
Chamberlain and Edwards.
More importantly, even if the two remaining categories
could constitute an impermissible restraint, the evidence—
including the facts found by the district court—indicate that
any potential restraint remains too speculative to determine
the outcome in this case. 6 As the dissent in Golden I
forewarned: “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 . . . .” Golden I,
782 F.3d at 1093 (Kozinski, J., dissenting). The majority
treats remote and contingent scenarios as if they were
certainties in order to justify voiding the settlement
agreement. In doing so, the majority expands the scope of
section 16600 and preserves for Dr. Golden “an unfettered
6
The majority suggests that this argument is precluded by our
decision in Golden I that Dr. Golden’s challenge to Paragraph 7 is ripe.
I disagree. In Golden I, we concluded that Dr. Golden’s interest
“concerns the present enforcement of the settlement” and therefore this
case is ripe for adjudication. 782 F.3d at 1088. The present enforcement
of the settlement, however, cannot rely upon “the future interaction
between the no-employment provision and his [medical] practice.” See
id. Ignoring this guidance, the majority “base[s] [its] decision” on the
interaction between “future events” and Dr. Golden’s medical practice.
Similarly, the majority’s position that all of the future events it relies
upon “are expressly contemplated” by Paragraph 7 is overstated. For
example, Paragraph 7 does not expressly contemplate CEP’s future
growth in California. To strike down Paragraph 7 requires facts
indicating that it will substantially restrain Dr. Golden, not that it may
substantially restrain Dr. Golden.
28 GOLDEN V. CEP
right to employment . . . , no matter how remote or
contingent.” Id. at 1093–94.
For instance, the majority suggests that Paragraph 7 may
bar Dr. Golden from working as a hospitalist at a facility if
CEP later contracts to provide anesthesiology services at that
facility. First, it is speculative whether Dr. Golden will work
as a hospitalist at a facility where CEP later contracts to
provide unrelated services. Second, even if this did occur,
we do not know now whether CEP, as a contractor of
unrelated services, would have “the right to and [would]
terminate Golden” from his position. Indeed, the majority
recognizes that CEP might not have the authority to prevent
the third-party hospital from hiring Dr. Golden or to require
the third-party hospital to fire Dr. Golden. 7 Because we do
not know whether CEP will, at some unknown time, be able
to “interfere[] with Dr. Golden’s ability to seek or maintain
employment with third parties,” it is improper to hold that
Paragraph 7 constitutes an actual restraint of a substantial
character.
Similarly, Dr. Golden’s argument that he would be fired
immediately from all his current jobs if the settlement
agreement is enforced is baseless. The only evidence that
Dr. Golden proffers is his self-serving affidavit. However,
the district court ruled Dr. Golden’s declaration on this point
inadmissible due to a lack of personal knowledge, and Dr.
Golden fails to explain how the district court abused its
discretion in doing so. See United States v. Lloyd, 807 F.3d
1128, 1151 (9th Cir. 2015). Therefore, there is no factual
7
The majority suggests that Dr. Golden would breach the agreement
if he worked at a facility where CEP has a contract. This hypothetical
depends on CEP pursuing a breach of contract claim against CEP, which
may not occur.
GOLDEN V. CEP 29
basis to conclude that he would be fired immediately from
all his current jobs.
The majority, in a footnote, cursorily overrules the
district court’s exclusion of this testimony. This is error.
First, the majority fails to provide a legal basis for
concluding that the district court abused its discretion in
excluding this portion of Dr. Golden’s affidavit. Second, it
relies on specious reasoning. CEP conceded that it contracts
with facilities that employ Dr. Golden; however, CEP did
not concede that Dr. Golden would be fired immediately
from his present jobs if the court enforced the settlement
agreement. The majority makes this inferential leap without
justification. Moreover, as stated above, it is not enough to
state summarily that CEP will terminate Dr. Golden from
any employer who contracts with CEP because we do not
know whether CEP would have the authority to do so.
The majority also points to CEP’s growth in California
in support of its view that the agreement will substantially
restrain Dr. Golden’s employment with CEP-affiliated
facilities. 8 CEP’s presence has grown in California in the
past decade. Nevertheless, past performance is not
necessarily indicative of future results: CEP’s previous
growth does not mean that its future growth in California is
certain, or even likely. Indeed, CEP’s chief operating officer
states that CEP’s future growth is aimed outside of
California due to the extensive Kaiser system in California.
CEP has plans to contract with only one facility in Northern
8
The majority notes that one type of facility that CEP currently
staffs is urgent care centers. Under certain conditions, Paragraph 7 does
not bar Dr. Golden from working in CEP-owned or contracted urgent
care facilities.
30 GOLDEN V. CEP
California, where Dr. Golden currently resides and works. 9
Further, if CEP’s current presence in California was
sufficient in and of itself, we would have declared Paragraph
7 unlawful in Golden I based on CEP’s large presence,
782 F.3d at 1084, instead of remanding for further fact-
finding, id. at 1093.
Last, the majority’s conclusion that Paragraph 7 imposes
an impermissible restraint on his ability to practice
emergency medicine is unsupported by the record. Dr.
Golden did practice emergency medicine for a few years
prior to 2011. However, the record indicates that he would
not now be qualified to work at a CEP-affiliated emergency
facility for reasons independent of Paragraph 7—he is not
board certified in emergency medicine. If a person’s
profession does not necessarily “include all work for which
he is qualified,” surely it goes without saying that Dr.
Golden’s profession does not include work for which he is
not qualified. See Campbell v. Bd. of Trs. of Leland Stanford
Junior Univ., 817 F.2d 499, 503 (9th Cir. 1987). Therefore,
any restraint on Dr. Golden’s ability to practice emergency
medicine is due to his want of professional credentials, and
not as a consequence of Paragraph 7.
The majority’s last resort is to rely on further
speculation: If Dr. Golden is qualified to become board
certified (which is uncertain at best), if he actually becomes
board certified, and if he decides to practice emergency
9
Even assuming CEP is in the processing of growing more in
California, other speculative problems remain. For one, CEP generally
offers existing physicians at new facilities an opportunity to join CEP.
Although CEP has the power to unilaterally withhold an offer from an
existing physician at a new service location, it has not done so since at
least 2013. Whether CEP will deviate from its general practice is too
speculative to be relevant here.
GOLDEN V. CEP 31
medicine, then the only restraint on practicing that specialty
with a CEP-affiliate is Paragraph 7. This scenario is too
remote to serve as the basis for striking down Paragraph 7,
invalidating the settlement agreement, and changing
California law.
In sum, the settlement agreement would not substantially
restrain Dr. Golden from engaging in his chosen profession.
The only discernable limitation on his profession is that he
can no longer work for CEP, which even the majority agrees
does not violate section 16600. Even if the other provisions
of Paragraph 7 may someday impose a substantial restraint,
such future events are too speculative to justify reversing the
district court today. Dr. Golden has been employed
continuously since this litigation began and he cannot point
to a single instance where Paragraph 7 will actually restrain
his medical practice. Thus, to hold that Paragraph 7
constitutes a restraint of a substantial character is
impermissibly speculative and erroneous.
In Golden I, we remanded this case to the district court
with instructions to determine, based on the facts before it,
whether the settlement agreement constitutes a restraint of a
substantial character. The district court applied the correct
law and did not rest its decision on a clearly erroneous
finding of fact. See Latshaw v. Trainer Wortham & Co.,
452 F.3d 1097, 1100 (9th Cir. 2006). The majority’s opinion
today limits employers and employees from entering into
settlement agreements based on hypothetical scenarios that
may or may not happen years down the road. Because the
district court did not abuse its discretion in granting the
motion to enforce the settlement agreement, I respectfully
dissent.