NewLife Sciences, LLC v. Weinstock , 128 Cal. Rptr. 3d 538 ( 2011 )

MALLANO, P. J., Dissenting.

I would reverse because the trial court failed to rule whether the employment contract between NewLife Sciences, LLC, and Ronald Weinstock was void under Business and Professions Code section 16600, which provides that, “[ejxcept 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.” Rather, the trial court ruled that the contract, including the noncompetition clause, was enforceable as an issue sanction and never determined whether the provision was void or not.

NewLife Sciences claims that the noncompetition clause was lawful because it was part and parcel of the sale by Weinstock of the assets and goodwill of a business and thus enforceable under Business and Professions Code section 16601. That may turn out to be the case, but the trial court never decided the issue based on the evidence presented by NewLife Sciences, relying instead on a discovery sanction imposed on Weinstock.

“[0]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.’ ” (Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 946 [81 Cal.Rptr.3d 282, 189 P.3d 285], citations omitted.)

Plain and simple, I do not think that a noncompetition clause void under California law can be enforced as an issue sanction. If that were permitted, contracts void under other laws—those prohibiting usury (Cal. Const., art. XV, § 1), illegal discrimination (Civ. Code, § 51.5), the release of a claim of unpaid wages (Lab. Code, § 206.5), or a waiver of rights under the Consumers Legal Remedies Act (Civ. Code, § 1751)—could be enforced by the courts as a discovery sanction. The courts should have no part in doing so.

Our courts must make the determination whether a contract is void apart from an issue sanction to protect those who might suffer enforcement against them of a contract void under California’s public policy. Accordingly, I would reverse and send the matter back to the trial court to determine whether the employment contract is void or enforceable.

A petition for a rehearing was denied August 3, 2011.