Twentieth Century Fox Film Corp. v. Netflix CA2/5 ( 2021 )

Filed 12/2/21 Twentieth Century Fox Film Corp. v. Netflix CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
TWENTIETH CENTURY FOX B304022
FILM CORPORATION, et al.,
(Los Angeles County
Plaintiffs and Super. Ct. No. SC126423)
Respondents,
v.
NETFLIX, INC.,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of the
County of Los Angeles, Marc D. Gross, Judge. Affirmed.
Orrick, Herrington, & Sutcliffe, Karen G. Johnson-
McKewan, Russell P. Cohen, Catherine Y. Lui, Daniel Justice,
Alexander Fields, Sachi Schuricht, Eric A. Shumsky, Jeremy
Peterman, Anne Savin, Jennifer Keighley, Lynne C. Hermle, and
Jason K. Yu, for Defendant and Appellant.
O’Melveny & Meyers, Daniel M. Petrocelli, Molly M. Lens,
Jonathan D. Hacker, and Leah Godesky, for Plaintiffs and
Respondents.
_________________________________
I. INTRODUCTION
The trial court granted summary adjudication in favor of
Twentieth Century Fox Film Corporation and Fox 21, Inc.
(collectively Fox) on their unfair competition claim1 and entered a
judgment enjoining Netflix Inc. (Netflix) from soliciting
employees under contract with Fox. On appeal, Netflix contends
there are triable issues on the UCL claim, two affirmative
defenses to that claim, and two cross-claims. Netflix also
maintains the injunction is an invalid restraint on employee
mobility. We affirm.
II. FACTUAL BACKGROUND2
A. Waltenberg Agreement
Marcos Waltenberg joined Fox in 2003 and on
December 9, 2014, he and Fox entered into a fixed-term
1 Fox brought the claim under the Unfair Competition Law
(the UCL), Business and Professions Code section 17200 et seq.
2 We recite the facts in the light most favorable to the party
opposing summary adjudication. (Aguilar v. Atlantic Richfield
Co. (2001) 25 Cal.4th 826, 843 (Aguilar).)
2
employment agreement (Waltenberg agreement) pursuant to
which Fox agreed to employ him for two years, from
January 1, 2015, to December 31, 2016. Waltenberg’s salary
during the contract term was below the market 25th percentile
for his position. The Waltenberg agreement included a unilateral
option for Fox to extend the two-year term for an additional two-
year period. The agreement also provided that Fox could pursue
injunctive and other equitable relief to prevent Waltenberg from
breaching his agreement.
On November 6, 2015, Netflix sent a written employment
offer to Waltenberg which he executed on November 7, 2015.
Netflix agreed to more than double Waltenberg’s Fox salary.
Netflix knew when it sent the offer that Waltenberg had entered
into a fixed-term agreement with Fox.
On December 16, 2015, Netflix agreed in writing to defend
and indemnify Waltenberg against any action taken by Fox in
response to his acceptance of Netflix’s employment offer. Netflix
also paid a law firm to represent Waltenberg regarding the
employment offer.
After Waltenberg tendered his notice to Fox, he offered to
stay for a limited period to assist in the transition to a new
employee, but Fox refused his offer. Waltenberg stopped working
at Fox on January 22, 2016.
Fox hired Hugo Domenech to finish the outstanding work
Waltenberg left behind, paying him £21,690.41 for work
performed between February 5, 2016, and March 18, 2016. Fox
then promoted a lower-salaried employee, Carlos Castillo, to
fulfill Waltenberg’s duties. Fox did not pay Waltenberg through
the full term of his agreement.
Waltenberg began working at Netflix on January 25, 2016.
3
B. Flynn Agreement
Tara Flynn joined Fox in 2010 and was under contract with
Fox from 2012 until her departure in 2016. Flynn’s agreements
with Fox, collectively, bound her to work for Fox for over seven
consecutive years. According to Netflix, at all times from 2012
onward, Flynn’s salary at Fox was below the market 25th
percentile for her position. Fox disputed this contention,
asserting that in 2015, Flynn’s contract was at the mid-point of
market.
On November 19, 2015, Fox and Flynn entered into a fixed-
term employment agreement pursuant to which Fox agreed to
employ her for two years, from November 19, 2015, to November
18, 2017 (Flynn agreement). The Flynn agreement included a
unilateral option for Fox to extend the two-year term for an
additional two-year period and also provided that Fox was
entitled to pursue injunctive and other equitable relief to prevent
Flynn from breaching her agreement.
On August 8, 2016, Netflix sent Flynn a written
employment offer which she executed on August 9, 2016. Netflix
agreed to double Flynn’s Fox salary. Netflix knew when it sent
the offer that Flynn had entered into a fixed-term agreement
with Fox.
On August 9, 2016, Netflix agreed in writing to defend and
indemnify Flynn against any action taken by Fox in response to
her acceptance of Netflix’s employment offer. Netflix also paid a
law firm to represent Flynn in connection with the employment
offer. Flynn’s last day of work at Fox was September 2, 2016.
Prior to that date, Netflix knew the term of her agreement with
Fox did not expire until November 18, 2017. Fox did not receive
4
the benefit of Flynn’s services from September 2, 2016, through
November 18, 2017.3 Flynn began working at Netflix on
September 6, 2016.
C. Fox’s Employment Contracts and Practices
Fox’s fixed-term agreements, including the Waltenberg and
Flynn agreements, contained nonnegotiable provisions, including
provisions entitling Fox to injunctive relief and a unilateral
option to extend the fixed-term contract.
In addition, Fox’s fixed-term agreements generally
contained a provision prohibiting employees from disclosing or
communicating to competitors confidential or trade secret
information which they acquired during the course of their
employment with Fox, as well as a nonsolicitation provision
preventing employees during the term of their employment, and
for a two-year period thereafter, from inducing or soliciting other
Fox employees to render services for any other person, firm, or
corporation.
Some of Fox’s fixed-term contracts also contained a “no-
shop” provision that prohibited employees from “‘seek[ing] or
negotiat[ing]’” for new employment more than 90 days before
their Fox employment agreement expired.
None of Fox’s fixed-term agreements included a provision
permitting the employee to terminate the agreement prior to the
end of the term.
3 The parties disputed whether the new employee Fox hired
to purportedly replace Flynn was a direct replacement as that
employee was hired for a different department.
5
Fox told its employees that their agreements obligated
them to work for Fox (and no one else) through the term of their
agreements and sent employees and prospective employers cease
and desist letters that threatened to enforce its legal rights.
Fox, however, terminated employees prior to the expiration
of their fixed-term employment pursuant to its contract payout
status policy and practice.
Certain Fox executives admitted that they used fixed-term
agreements to “‘lock in’” and “gain ‘control [of]’” and maintain
“‘leverage’” over employees. Whether a Fox employee had
received interest from a competitor was a motivating factor in
offering a fixed-term contract. Fox frequently offered employees
new fixed-term agreements while they had significant time
remaining on their existing contracts and Fox made raises and
promotions contingent on signing a fixed-term agreement. Fox
also refused to grant releases to fixed-term employees who joined
competitors during the term of their agreement. But Fox would
agree to release fixed-term employees to competitors in exchange
for something of value from the competitor.
According to Netflix, at least 127 Fox employees had
entered into sequential fixed-term contracts that, together,
provided an employment term that was longer than seven years.
Fox maintained, however, that when fixed-term employees
worked for Fox for more than seven consecutive years, they did so
under new and superseding agreements that were negotiated.
D. Netflix’s Continuing Recruitment
From the time Fox filed its complaint against Netflix on
September 16, 2016, until August 31, 2018, Netflix offered
6
employment to 14 individuals who were employed by Fox under
fixed-term contracts that had not expired at the time of the
offers. During that same time frame, Netflix hired eight Fox
employees who had fixed-term agreements that had not expired
at the time Netflix hired them.
III. PROCEDURAL BACKGROUND
A. Fox’s Complaint
On September 16, 2016, Fox filed a complaint against
Netflix asserting three causes of action for: tortious interference
with the Waltenberg agreement; tortious interference with the
Flynn agreement; and unfair competition in violation of the UCL.
Fox prayed for compensatory and punitive damages and a
permanent injunction against Netflix enjoining it from
interfering with any of Fox’s fixed-term employment agreements.
B. Netflix’s Cross-complaint
Netflix answered the complaint and, in its operative second
amended answer (filed during the proceedings on Fox’s summary
judgment motion), asserted affirmative defenses alleging, among
other things, that: Fox’s fixed-term employment agreements
were void as against public policy; Netflix’s interference with
Fox’s fixed-term agreements was justified; and Fox’s fixed-term
agreements were unconscionable.
Netflix also filed a cross-complaint and, in the operative
amended cross-complaint (filed during the proceedings on Fox’s
summary judgment motion), asserted claims for unfair
7
competition in violation of the UCL and declaratory relief. On its
UCL claim, Netflix prayed for a declaration that Fox’s
contracting practices were unfair, unlawful, and fraudulent and
an order enjoining Fox from continuing to use fixed-term
employment agreements against its employees. On its
declaratory relief claim, Netflix sought a declaration that Fox’s
fixed-term employment agreements were unenforceable and
could not be used to prohibit its employees from seeking
employment with other companies and a declaration that Fox
was estopped from enforcing its fixed-term employment
agreements to prohibit employees from seeking employment with
other companies.
C. Summary Judgment and Adjudication Motions
Both parties filed summary judgment or adjudication
motions. In its motion for summary adjudication of Fox’s UCL
claim,4 Netflix contended that the injunction sought by Fox
contravened California law prohibiting the specific performance
of personal services contracts.
Fox’s motion sought summary judgment on its complaint,
Netflix’s cross-complaint, and Netflix’s public policy and
unconscionability affirmative defenses. In the alternative, Fox
sought summary adjudication of its two tortious interference
claims, its UCL claim, Netflix’s public policy and
4 The ruling on Netflix’s summary adjudication motion is not
at issue in this appeal.
8
unconscionability defenses,5 and Netflix’s cross-claims for
violation of the UCL and declaratory relief.
D. Rulings
The trial court held an initial hearing on the parties’
respective motions during which it denied Netflix’s motion on
Fox’s UCL claim. Several months later, the court held a
continued hearing during which Fox stated it was “willing to
submit on the basis of a dollar each” on the first two causes of
action. The court then issued a final order on Fox’s motions,
denying its summary judgment motion on its complaint. The
court also denied Fox’s requests for summary adjudication of the
two tortious interference claims, ruling that Netflix had
submitted evidence showing there was a triable issue of fact on
both tort claims “as to resulting damages.” The court noted, as
an example, that “Netflix submitted evidence suggesting [Fox]
saved time and money by promoting Castillo to Waltenberg’s
position because [Fox] did not have to train someone from the
5 As the trial court noted in its final ruling on Fox’s summary
judgment motion, Netflix asserted a justification defense in its
second amended answer, which was filed with leave of court after
the first hearing on Fox’s motion. As the court also noted, Fox
did not separately move for summary adjudication of that
defense. In opposition to Fox’s summary judgment motion,
however, Netflix argued that there were disputed issues of fact as
to whether “‘the nature of [its] conduct’” justified any alleged
interference with Fox’s contracts, an argument that the court
considered and rejected. But Netflix’s separate statements in
opposition to Fox’s motion did not set forth any independent
factual basis in support of that defense, beyond the facts in
support of the public policy and unconscionability defenses.
9
outside and paid Castillo significantly less than Waltenberg.”
The court also concluded that Fox did not satisfy its burden to
submit evidence showing resulting damages for Netflix’s
inducement of Flynn’s breach of her fixed-term agreement.
According to the court, Fox’s “request for $1[.00] in [nominal]
damages does not save the motion for summary
judgment/adjudication because . . . there is a triable issue of
material fact as to whether [Fox] suffered any resulting damages,
which cannot be determined via the instant motion.”
The trial court, however, granted summary adjudication on
Fox’s UCL claim, finding that Fox had demonstrated economic
injury in the form of out-of-pocket losses, “contract disruption,”
“business disruption,” and injury to its property in the form of
lost contract rights. The court therefore concluded that Fox was
entitled to injunctive relief under the UCL as follows: “Netflix
shall not solicit employees who are subject to valid [f]ixed-[t]erm
[e]mployment [a]greements with Fox or induce such employees to
breach their valid [f]ixed-[t]erm [e]mployment [a]greements with
Fox.”
In addition, the trial court granted Fox’s summary
judgment/adjudication motion on Netflix’s public policy defense,
finding, among other things, that certain of the contract
provisions Netflix challenged as invalid or illegal were severable
from the fixed-term provisions of Fox’s employment agreements.6
Finally, the court granted Fox’s summary judgment/adjudication
motion on Netflix’s cross-claims for violation of the UCL and
declaratory relief, concluding, among other things, that Netflix
6 The court also granted Fox’s summary adjudication motion
on Netflix’s unconscionability defense, a ruling that Netflix does
not challenge on appeal.
10
had failed to join the affected Fox employees as necessary and
indispensable parties.
E. Judgment
Following the rulings on its motions, Fox dismissed without
prejudice its two remaining tortious interference claims, and the
trial court thereafter entered a judgment that permanently
enjoined Netflix from soliciting Fox employees subject to fixed-
term employment agreements. Consistent with the summary
adjudication order on the UCL claim, the judgment provided:
“Netflix, [] both individually and through any of its agents,
servants, employees, and representatives, either alone and/or in
concert with others, shall not solicit employees who are subject to
valid [f]ixed-[t]erm [e]mployment [a]greements with [Fox] or
induce such employees to breach their valid [f]ixed-[t]erm
[e]mployment [a]greements with [Fox].”
Netflix timely appealed from the judgment.
IV. DISCUSSION
A. Standard of Review
“‘“A trial court properly grants a motion for summary
judgment only if no issues of triable fact appear and the moving
party is entitled to judgment as a matter of law. (Code Civ. Proc.,
§ 437c, subd. (c); see also id., § 437c, subd. (f) [summary
adjudication of issues].)”’” (State of California v. Allstate Ins. Co.
(2009) 45 Cal.4th 1008, 1017.) “We review the trial court’s
decision [on a summary judgment motion] de novo, considering
11
all of the evidence the parties offered in connection with the
motion (except that which the court properly excluded) and the
uncontradicted inferences the evidence reasonably supports.
[Citation.]” (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.)
“In moving for summary judgment, a ‘plaintiff . . . has met’
his ‘burden of showing that there is no defense to a cause of
action if’ he ‘has proved each element of the cause of action
entitling’ him ‘to judgment on that cause of action. Once the
plaintiff . . . has met that burden, the burden shifts to the
defendant . . . to show that a triable issue of one or more material
facts exists as to that cause of action or a defense thereto. The
defendant . . . may not rely upon the mere allegations or denials’
of his ‘pleadings to show that a triable issue of material fact
exists but, instead,’ must ‘set forth the specific facts showing that
a triable issue of material fact exists as to that cause of action or
a defense thereto.’ (Code Civ. Proc., § 437c, subd. (o)(1).)”
(Aguilar, supra, 25 Cal.4th at p. 849.)
B. Evidentiary Rulings on Fox’s Objections
Netflix contends that the trial court erred by sustaining
Fox’s objections to three expert reports opining on the effects of
Fox’s contracting practices on its employees’ ability to obtain
alternative employment and on Netflix’s ability to hire skilled
employees. Netflix also contends the court erred by sustaining
Fox’s objections to 14 “admissions” purportedly made by various
Fox employees “about the company’s contracting practices.”
According to Netflix, the court’s rulings were made “without
explanation” and were otherwise “indefensible.” Fox counters
12
that Netflix waived its challenges to the court’s rulings by not
affirmatively demonstrating error on appeal. We agree.
An appealed judgment or order, including an order
sustaining evidentiary objections, is presumed correct. “‘All
intendments and presumptions are indulged to support it on
matters as to which the record is silent, and error must be
affirmatively shown.’” (Denham v. Superior Court (1970) 2
Cal.3d 557, 564.) As the appellant, Netflix has the burden of
overcoming the presumption of correctness. That burden
includes providing an adequate record (Ballard v. Uribe (1986) 41
Cal.3d 564, 574–575) and reasoned argument and citations to
authority on each point raised (Niko v. Foreman (2006) 144
Cal.App.4th 344, 368). If an appellant asserts a point, but fails to
support it with reasoned argument and citations to authority, the
appellate court may treat it as waived or forfeited, and pass it
without consideration. (People v. Stanley (1995) 10 Cal.4th 764,
793; Taylor v. Roseville Toyota, Inc. (2006) 138 Cal.App.4th 994,
1001, fn. 2 [contention forfeited when “merely asserted without
argument or authority”].)
Here, Netflix omitted Fox’s objections in the appellant’s
appendix and failed to discuss in the opening brief each of the
rulings it challenged in relation to the specific item of evidence to
which an objection was raised. Instead, Netflix complained that
“[w]e don’t know which among Fox’s laundry list of objections the
court sustained . . . .” And, although it asserted generally that
the three expert reports had adequate foundation and were
otherwise relevant, it made no further effort to explain, as to each
expert, how he was qualified to give the opinions proffered or why
each individual opinion was relevant to an issue in dispute.
Netflix similarly concluded that the admissions evidence was not
13
excludable as hearsay and was otherwise relevant, but did not
discuss each item of evidence in relation to the specific objections
that were sustained. Instead, Netflix pointed to the location of
the reports and admissions evidence in the record and urged us to
find the error. In short, neither Netflix’s original record nor its
brief was adequate to overcome the presumption of correctness as
applied to the challenged evidentiary rulings.
Moreover, even if Netflix had affirmatively demonstrated
error as to each opinion and item of admissions evidence, it made
no effort to demonstrate prejudice. At best, Netflix argued that
the expert opinions were relevant to the issue of whether Fox’s
contracting practices violated public policy and the admissions
were relevant to show Fox’s practices. A showing of relevance,
however, does not establish the requisite prejudice. Prejudice is
not presumed; it requires an affirmative showing of injury from
the error, i.e., that it is reasonably probable the trial court would
have denied summary adjudication on the UCL claim if the
proffered opinion and admissions evidence had been considered.
(Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 800.) Netflix’s
opening brief fell short of carrying that burden.
In its reply brief, Netflix claims to have cured any record or
briefing deficiencies by including Fox’s objections in its reply
appendix and discussing prejudice. But even if we assume,
without deciding, that Netflix cured the deficiencies in the record
by its belated reply appendix, it cannot for the first time in a
reply brief raise issues or arguments that should have been fully
addressed in its opening brief. (Raceway Ford Cases (2016) 2
Cal.5th 161, 178; Garcia v. McCutchen (1997) 16 Cal.4th 469,
482, fn. 10.)
14
C. Summary Judgment on Fox’s UCL Claim
Netflix contends that the trial court erred by granting
summary adjudication on Fox’s UCL claim because there was a
triable issue concerning damages. According to Netflix, because
the court found a triable issue on damages with respect to the
two substantive interference claims, summary adjudication of the
UCL claim was improper.
1. Legal Principles: the Unlawful Prong
“[The UCL’s] scope is broad. . . . [I]t does not proscribe
specific practices. Rather, as relevant here, it defines ‘unfair
competition’ to include ‘any unlawful, unfair or fraudulent
business act or practice.’ ([Bus. & Prof. Code,] § 17200.) Its
coverage is ‘sweeping, embracing “‘anything that can properly be
called a business practice and that at the same time is forbidden
by law.’”’ [Citations.] It governs ‘anti-competitive business
practices’ as well as injuries to consumers, and has as a major
purpose ‘the preservation of fair business competition.’
[Citations.] By proscribing ‘any unlawful’ business practice,
‘[Business and Professions Code] section 17200 “borrows”
violations of other laws and treats them as unlawful practices’
that the unfair competition law makes independently actionable.”
(Cel-Tech Communications, Inc. v. Los Angeles Cellular
Telephone Co. (1999) 20 Cal.4th 163, 180, fn. omitted.) “‘Virtually
any law—federal, state or local—can serve as a predicate for a
[UCL] action.’” (Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th
1176, 1185.)
15
Under the UCL’s unlawful prong, courts have held that, if
the underlying statutory or tort claim upon which the UCL claim
is predicated is ruled invalid, the UCL claim also fails, as it
“stand[s] or fall[s] depending on the fate of the antecedent
substantive causes of action.” (Krantz v. BT Visual Images (2001)
89 Cal.App.4th 164, 178; AMN Healthcare, Inc. v. Aya Healthcare
Services, Inc. (2018) 28 Cal.App.5th 923, 950 [“when the
underlying legal claim fails, so too will a derivative UCL claim”].)
2. Analysis
Although the elements of Fox’s tortious interference
claims7 require a showing of “resulting damage,” the “extent of
damage is not an element of a cause of action in tort, and the
general rule [in the statute of limitations context] is that the
cause of action is complete on the sustaining of ‘actual and
appreciable harm,’ on which the recoverable damages would be
more than nominal. (Davies v. Krasna [(1975)] 14 Cal.3d [502,]
514.)” (Evans v. Eckelman (1990) 216 Cal.App.3d 1609, 1620
[emphasis added].) Thus, for purposes of establishing its right to
relief under the UCL’s unlawful prong, all Fox was required to
show was that it suffered actual harm and that its resulting
7 “Tortious interference with contractual relations requires
‘(1) the existence of a valid contract between the plaintiff and a
third party; (2) the defendant’s knowledge of that contract; (3) the
defendant’s intentional acts designed to induce a breach or
disruption of the contractual relationship; (4) actual breach or
disruption of the contractual relationship; and (5) resulting
damage.’” (Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th
1130, 1141 (Ixchel).)
16
damages would have been more than nominal.8 Such a showing
would establish a completed tort under the elements of the
tortious interference claims upon which a UCL claim could be
predicated.
Here, the undisputed evidence of Netflix’s conduct showed
an unlawful practice, namely, intentional interference with the
fixed-term agreements of both Waltenberg and Flynn, as well as
continuing interference with the fixed-term agreements of more
than a dozen other Fox employees. The undisputed evidence also
showed that both employees’ salaries from Fox were below
market, at least for most of the years of the employees’
employment with Fox, and that Netflix specifically targeted both
of them, offering to double their salary and to defend and
indemnify them against any claims brought by Fox. That
8 The term “nominal damages,” in this sense, describes a
claim as to which there are no actual damages, but the law
nevertheless recognizes a technical invasion of a right or duty.
(Civ. Code § 3360 [“When a breach of duty has caused no
appreciable detriment to the party affected, he may yet recover
nominal damages”]; see Avina v. Spurlock (1972) 28 Cal.App.3d
1086, 1088 [“Nominal damages are properly awarded in two
circumstances: (1) Where there is no loss or injury to be
compensated but where the law still recognizes a technical
invasion of a plaintiff’s rights or a breach of a defendant’s duty;
and (2) although there have been real, actual injury and damages
suffered by a plaintiff, the extent of plaintiff’s injury and
damages cannot be determined from the evidence presented”];
Kluge v. O’Gara (1964) 227 Cal.App.2d 207, 209–210 [“The term
‘nominal damages’ describes two types of award—a trifling or
token allowance for mere technical invasion of a right, without
actual damage; and the very different allowance made when
actual damages are substantial, but their extent and amount are
difficult of precise proof”].)
17
evidence demonstrated that the loss of their contracted services
prior to the expiration of the terms of their agreements caused
injury to Fox. (See Ventura County Employees’ Retirement
Association v. Pope (1978) 87 Cal.App.3d 938, 954 [“[An] action
for loss of services is a proprietary cause of action, i.e., one for
damages for wrongful interference with a contractual right to
services, and constitutes a claim for damages for injury to a
property right”].) That Fox, at the summary judgment stage, did
not produce undisputed evidence as to the extent and amount of
its injury was not fatal to its UCL claim because its evidence of
actual injury completed the tort claims, at least for purposes of
obtaining injunctive relief under the UCL’s unlawful prong. (See
e.g., Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 38–39
[holding that injunction is the proper remedy for intentional
interference with contract where damages would be inadequate];
Steroid Hormone Product Cases (2010) 181 Cal.App.4th 145, 154
[“The focus of the UCL is ‘on the defendant’s conduct, rather than
the plaintiff’s damages . . .’”]; see also Clemente v. California
(1985) 40 Cal.3d 202, 219 [“If [the] plaintiff’s inability to prove his
damages with certainty is due to [the] defendant’s actions, the
law does not generally require such proof”].)
Whether Fox, following the departure of Waltenberg and
Flynn, enjoyed net savings by hiring a lower-salaried
replacement or shifting responsibilities to a different department,
may be relevant to whether Fox met its burden to mitigate
damages. (Valle De Oro Bank v. Gamboa (1994) 26 Cal.App.4th
1686, 1691.) But it is irrelevant to the issue of whether Fox could
meet the elements of its cause of action for tortious interference
because “[t]ypically, the rule of mitigation of damages comes into
play when the event producing injury or damage has already
18
occurred and it then has become the obligation of the injured or
damaged party to avoid continuing or enhanced damages through
reasonable efforts.” (Ibid.) Further, the very purpose of
injunctive relief, to prevent future bad acts, would be defeated if,
as Netflix contends, the proponent of such relief were required to
demonstrate that it had not enjoyed savings as a result of
defendant’s conduct.
D. Public Policy Defense
Netflix next contends that the trial court erred in granting
summary adjudication of the UCL claim because there were
triable issues concerning whether the Waltenberg and Flynn
agreements were void as against public policy. According to
Netflix, Fox used a series of interrelated contract provisions and
practices to limit employee mobility which violated the
established public policy protecting an employee’s right to move
freely among jobs and an employer’s right to compete for skilled
employees. Netflix also contends that Fox’s practices violate
Business and Professions Code section 16600 (section 16600) and
other statutes that prohibit specific performance of personal
services contracts, as well as Labor Code section 2855 which
prohibits personal services agreements for terms of longer than
seven years.
1. Legal Principles
To be liable for inducing breach of contract, there must be a
valid contract. (Pacific Gas & Electric v. Bear Stearns & Co.
(1990) 50 Cal.3d 1118, 1126.) A contract that is contrary to
19
public policy is generally considered invalid and unenforceable.
“‘Whether a contract is illegal or contrary to public policy is a
question of law to be determined from the circumstances of each
particular case.’ [Citation.] ‘Before labeling a contract as being
contrary to public policy, courts must carefully inquire into the
nature of the conduct, the extent of public harm which may be
involved, and the moral quality of the conduct of the parties in
light of the prevailing standards of the community.’ [Citation.]”
(Dunkin v. Bosky (2000) 82 Cal.App.4th 171, 183.)
Even if a court determines that one or more of the
provisions in an agreement are unenforceable because they
violate public policy, it is not required to void the agreement in
its entirety if the offending terms can be severed or restricted.
(Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638,
658 [“courts may enforce contracts that illegally contravene
public rights, so long as the objectionable provisions can be
severed”] (Abramson).) “‘In determining whether to sever or
restrict illegal terms rather than voiding the entire contract,
“[t]he overarching inquiry is whether ‘“the interests of justice . . .
would be furthered”’ by severance.” [Citation.] Significantly, the
strong legislative and judicial preference is to sever the offending
term and enforce the balance of the agreement: Although “the
statute appears to give a trial court some discretion as to whether
to sever or restrict the unconscionable [or illegal] provision or
whether to refuse to enforce the entire agreement[,] . . . it also
appears to contemplate the latter course only when an agreement
is ‘permeated’ by unconscionability [or illegality].” [Citation.]’”
(Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 986.)
“In Armendariz [v. Foundation Health Pyschcare Services,
Inc. (2000) 24 Cal.4th 83 (Armendariz)], the California Supreme
20
Court[, in the unconscionability context,] identified several
factors that affect severability. ([Id.] at pp. 124–125.) Each
relates to whether the contract is permeated by unconscionability
or illegality. In simple terms, courts will not sever when the
‘good cannot be separated from the bad, or rather the bad enters
into and permeates the whole contract, so that none of it can be
said to be good . . . .’ [Citations.]
“One factor examines the contract’s essential object. ‘If the
central purpose of the contract is tainted with illegality, then the
contract as a whole cannot be enforced. If the illegality is
collateral to the main purpose of the contract, and the illegal
provision can be extirpated from the contract by means of
severance or restriction, then such severance and restriction are
appropriate.’ (Armendariz, supra, 24 Cal.4th at p. 124.)
“A second measure of the pervasiveness of a contract’s
illegality or unconscionability is whether the agreement contains
more than one objectionable term. (Armendariz, supra, 24
Cal.4th at p. 124.) The fact that an ‘arbitration agreement
contains more than one unlawful provision’ may . . . warrant the
conclusion ‘that the [] agreement is permeated by an unlawful
purpose. [Citation.]’ (Ibid.; [citation].)
“In a third and perhaps more practical test, courts will find
a contract permeated by illegality or unconscionability when
‘there is no single provision a court can strike or restrict in order
to remove the unconscionable taint from the agreement.’
(Armendariz, supra, 24 Cal.4th at pp. 124–125.) In such
situations, ‘the court would have to, in effect, reform the contract,
not through severance or restriction, but by augmenting it with
additional terms.’ (Id. at p. 125.) Courts have no power to cure
illegality by reformation or augmentation. (Ibid.) The only way a
21
court can cure a contract’s illegality is ‘through severance or
restriction.’ (Ibid.) If the taint of illegality cannot be removed by
those means, the court ‘must void the entire agreement.’ (Ibid.)”
(Abramson, supra, 115 Cal.App.4th at pp. 559–660.)
2. Analysis
Netflix’s public policy arguments appear to conflate two
separate issues: (1) whether five challenged contract provisions
in the Waltenberg and Flynn agreements violated statutes and/or
public policy, rendering the fixed-term provisions unenforceable;
and (2) whether Fox’s contracting practices generally violated
statutes and/or public policy, rendering the fixed-term provisions
of such contracts unenforceable. We address each issue
separately.
a. Offending Provisions
i. Fixed-term provision
Netflix suggests that the fixed-term provisions of the
Waltenberg and Flynn agreements violate public policy because
they operate to restrict an employee’s right to move freely within
the marketplace to find more favorable employment. We
disagree. As our Supreme Court recently observed, there are
public policy benefits to fixed-term contracts: “When parties
enter a contract not terminable at will, they cement their
bargained-for intentions in accordance with the terms of that
contract into the future. The concreteness of this relationship
means that contracting parties as well as other entities may
22
structure their decisions, invest resources, and take risks in
reliance on it. It is precisely this ‘exchange of promises resulting
in such a formally cemented economic relationship [that courts
have] deemed worthy of protection from interference by a
stranger to the agreement.’ [Citation.] ‘Intentionally inducing or
causing a breach of an existing contract is therefore a wrong in
and of itself.’ [Citation.]” (Ixchel, supra, 9 Cal.5th at p. 1146.)
Thus, there is nothing about the fixed-term provisions
themselves that would have rendered the Waltenberg and Flynn
agreements unenforceable.
ii. Other provisions
Our analysis of Netflix’s public policy challenges based on
the other provisions of the Waltenberg and Flynn agreements
begins with the premise that the fixed-term provisions of those
agreements are not only presumptively lawful, but also
consistent with sound and established public policy.9 To
overcome this presumption, Netflix relies on four different
provisions in those agreements—the unilateral option and the
injunctive relief, nonsolicitation, and confidentiality provisions—
and argues that, individually or collectively, those provisions
operate to invalidate the fixed-term provision as an unlawful
restraint on employee mobility.
Fox’s unilateral option to extend the Waltenberg and Flynn
agreements does not, on its face, violate public policy. It allowed
Fox, during the employee’s current agreement, to extend the
9 The Labor Code expressly recognizes and governs the use of
fixed-term agreements in the employment context. (Lab. Code
§§ 2922, 2924, 2925, and 2855.)
23
stability and predictability of the parties’ economic relationship
for a period of two years. Thus, like the fixed-term provision
itself, the option is consistent with public policy. Moreover, it
does not purport to restrain either employee after he or she leaves
Fox and therefore does not contravene section 16600. (See
Angelica Textile Services, Inc. v. Park (2013) 220 Cal.App.4th 495,
509.)
But even if we assume that the option provisions in the
Waltenberg and Flynn agreements violated public policy, they
could have been severed or limited without affecting the fixed-
term provision or any other material provision in the agreements,
such as the employee’s title, salary, or bonus during the two-year
term of the agreement. Although the elimination of the option
would have adversely affected Fox’s right to extend the future
stability and predictability of the parties’ economic relationship,
it would have had no effect on the two-year term, which would
have remained enforceable without any modification to or
rewriting of the agreements. And, to the extent the option
provision could have been used to extend Flynn’s agreement
beyond seven consecutive years in violation of Labor Code section
2855, severance of the offending option period would have cured
any potential violation without affecting the two-year base term
of her agreement.
Netflix counters that the doctrine of severability is
“inapplicable” because the Waltenberg and Flynn agreements are
“at an end” and thus there is no contractual relationship to be
preserved by severance. But the focus of Netflix’s public policy
argument is on the validity of the agreements at the time Netflix
interfered with them. In other words, Netflix contends that, prior
to its interference, the fixed-term agreements were unlawful,
24
making Waltenberg and Flynn the equivalent of at-will
employees, i.e., fair game for solicitation.
Netflix next argues that severability could not have saved
the fixed-term provisions because the other offending provisions
on which it relies must be viewed “in tandem” and therefore
“[s]evering an individual contractual provision would be
particularly unlikely to cure the taint of illegality . . . .” But
Netflix offers no persuasive argument as to why severance of a
given offending provision, like the unilateral option, could not
have been accomplished without affecting the core purpose of the
fixed-term agreements.
Similarly, even if we assume the injunctive relief provision
violated public policy by purporting to authorize specific
performance of a personal services agreement, it could also have
been severed without affecting the core purpose of the two-year
term agreements. Severance would have affected one form of
relief available to Fox in the event of a breach, but it would not
have left Fox without a remedy, i.e., contract damages.
Likewise, the nonsolicitation provision,10 which was
unrelated to the fixed-term provision, could also have been
severed to the extent it unfairly restrained Waltenberg and Flynn
from competing with Fox for two years after they left its
employment. Even without those provisions, the stability and
10 Netflix also argues that the no-shop provision violated
public policy by unfairly restricting current fixed-term employees
from exploring other job opportunities during the majority of
their fixed term of employment. But neither Waltenberg nor
Flynn was subject to that provision; and, in any event, it was
unrelated to the duration of the affected employees’ fixed-term
agreements and could be severed from those agreements without
affecting their core purpose.
25
predictability of the parties’ basic economic relationship would
have remained in full force and effect for the agreed upon two-
year term.
Finally, the confidentiality provision—which did not violate
public policy on its face—could also have been severed, with no
impact on the core purpose of the Waltenberg and Flynn
agreements. It had a discrete subject matter—nondisclosure of
confidential and trade secret information—unrelated to the basic
economic relationship of the parties during the two-year term.
Thus, that relationship, and in particular the stability and
predictability of it during the defined term, would have been
unaffected by the deletion of the confidentiality provision.
b. Contracting Practices
Netflix complains of the “anticompetitive effect of the
interlocking array of mobility-reducing practices Fox imposed on
Flynn and Waltenberg.” It asserts that Fox “locked” in both
employees by using unilateral options to control whether and
when they could leave the company. It also claims Fox routinely
“strong-arm[ed]” employees, like Flynn, into signing new fixed-
term agreements before the term of their existing agreement had
expired. And, Netflix maintains that Fox threatened to bar
employees, like Flynn, from leaving by threatening to enforce the
fixed-term provisions.
Contrary to the implication of Netflix’s “contracting
practices” defense, the evidence showed that both Waltenberg
and Flynn were sophisticated business executives who negotiated
their fixed-term employment agreements with Fox at arm’s
26
length.11 Therefore, there is nothing in the record to suggest that
the timing of the relevant negotiations—i.e., during the term of
the existing agreement—constituted an unlawful restraint on
employee mobility or other public policy violation. Indeed, there
is at least one legitimate business reason for the timing of
negotiations that is unrelated to “strong-arm” tactics, namely, a
desire to communicate Fox’s interest in retaining an employee
before the employee seeks employment elsewhere. Given the
public policy favoring the stability and predictability of fixed-
term employment relationships, the timing of the Waltenberg
and Flynn negotiations did not rise to the level of a policy
violation that rendered those agreements unenforceable.
Similarly, even if we assume that Fox conditioned
promotions, salary increases, or bonuses for either Waltenberg or
Flynn on their willingness to agree to a new fixed-term contract,
such conduct would be consistent with a desire to continue the
stability and predictability of the parties’ economic relationship.
Fox’s ability to offer, and an employee’s ability to demand,
promotions and increased pay are bargaining levers that are
typically negotiated as terms of an employment agreement.
Netflix does not adequately explain how such negotiating conduct
contravenes public policy.
Finally, even if we assume that Fox threatened to enforce
its contract rights under the fixed-term agreements upon
11 Although Netflix asserted an unconscionability defense
contending, among other things, that the Waltenberg and Flynn
agreements were procedurally unconscionable, the trial court
ruled that Netflix had failed to demonstrate a triable issue on
that defense, and Netflix does not challenge that ruling on
appeal.
27
learning of Waltenberg’s or Flynn’s imminent departure, that
conduct does not rise to the level of a public policy violation
sufficient to render the fixed-term agreements invalid. Like the
other conduct upon which this defense is based, threats to sue
employees who admittedly intend to breach their agreements
would seem to be within Fox’s legitimate interests in vindicating
otherwise valid contract rights.
E. Justification Defense
Netflix next argues that its justification defense to its
intentional interference with the Waltenberg and Flynn
agreements requires a fact-specific inquiry that should have been
allowed to go to the jury.
1. Legal Principles
“As a general rule interference with contractual relations is
justifiable when a person seeks to protect an interest of greater
social value than that attached to the stability of the contract
involved. [Citation.] Restatement, Torts, section 767, suggests
that in determining justification a court must balance the social
interest in the protection of the expectancy (contract) against the
social interest in the preservation of the actor’s freedom of action
(interference with another’s contract).” (Bledsoe v. Watson (1973)
30 Cal.App.3d 105, 108.)
“Justification is determined by examination of the factors
of: ‘(a) the nature of the actor’s conduct, (b) the nature of the
expectancy with which his conduct interferes, (c) the relations
between the parties, (d) the interest sought to be advanced by the
28
actor and (e) the social interests in protecting the expectancy on
the one hand and the actor’s freedom of action on the other hand.’
(Rest., Torts, § 767.)” (Winn v. McCulloch Corp. (1976) 60
Cal.App.3d 663, 673 (Winn).)
2. Analysis
Netfix’s justification defense is premised on its assertion
that by interfering with the Waltenberg and Flynn agreements, it
was promoting those employees’ interests in mobility in the job
market. The record, however, does not suggest that the objective
Netflix sought to advance by its intentional interference was the
ability of Waltenberg or Flynn to move more freely within the job
market. To the contrary, the undisputed evidence suggests that
Netflix’s primary, and perhaps sole, objective in targeting the two
employees and doubling their under-market salaries was to
obtain their services and, in the process, gain a competitive
advantage over Fox and other production companies.
Moreover, by voluntarily agreeing to abide by the fixed
term of their agreements, Waltenberg and Flynn gave up their
respective rights to move freely within that market, at least
temporarily, in favor of the economic stability and predictability
that their contracts provided. Their commitment to a two-year
term of employment, in turn, gave rise to a legitimate expectancy
in Fox that warranted protection under established public policy.
Thus, Netflix’s interference could not be justified as promoting an
interest or right that the targeted employees had voluntarily
relinquished.
Finally, we compare the social interest of protecting Fox’s
expectancy interest against Netflix’s freedom of action (Winn,
29
supra, 60 Cal.App.3d at pp. 672–673) and observe that “a
competitor’s stake in advancing his own economic interest will not
justify the intentional inducement of a contract breach [citation],
whereas such interests will suffice where contractual relations
are merely contemplated or potential. [Citation.]”
(Environmental Planning & Information Council v. Superior
Court (1984) 36 Cal.3d 188, 194.) Thus, the social interest in
protecting Fox’s legitimate expectancy of stable and predictable
economic relationships outweighs any arguable competitive
interest that could have been advanced by Netflix’s interference.
F. Cross-Claims
Netflix additionally contends that the trial court erred by
summarily adjudicating its UCL and declaratory relief cross-
claims12 based on the indispensable party doctrine. According to
Netflix, the court abused its discretion by determining that
Netflix had failed to join indispensable parties, namely, the Fox
12 Netflix sought “a declaration that Fox’s contracting
practices constitute unfair, unlawful, and/or fraudulent business
practices;” “an order enjoining Fox from continuing to use or
enforce fixed-term employment agreements or other restraints of
trade against its employees in California;” a “declaration that
fixed-term employment agreements with Fox employees are
unenforceable . . . and may not be used to prevent these
individuals from seeking employment with other companies,
including Netflix;” and “a declaration that Fox is estopped from
enforcing fixed-term employment agreements to prohibit Fox’s
employees from employment with other companies, including
Netflix . . . .”
30
employees whose fixed-term agreements would be impacted by
the injunctive and declaratory relief sought by the cross-claims.
1. Legal Principles
“In civil litigation generally, the question whether a person
must be joined as a party to a suit is governed by the compulsory
joinder statute, section 389 of the Code of Civil Procedure
[(section 389)]. Subdivision (a) of that statute states: ‘A person
who is subject to service of process and whose joinder will not
deprive the court of jurisdiction over the subject matter of the
action shall be joined as a party in the action if (1) in his absence
complete relief cannot be accorded among those already parties or
(2) he claims an interest relating to the subject of the action and
is so situated that the disposition of the action in his absence may
(i) as a practical matter impair or impede his ability to protect
that interest or (ii) leave any of the persons already parties
subject to a substantial risk of incurring double, multiple, or
otherwise inconsistent obligations by reason of his claimed
interest.’ ([ ] § 389, subd. (a).) If such a person (sometimes called
a ‘necessary’ party) cannot be joined, subdivision (b) requires the
court to consider ‘whether in equity and good conscience’ the suit
can proceed without the absent party, or whether the suit should
instead be dismissed without prejudice, ‘the absent person being
thus regarded as indispensable.’ (Id., subd. (b).) To make that
judgment, the statute instructs the court to consider several
factors, including: (1) the extent to which ‘a judgment rendered
in the person’s absence might be prejudicial to him or those
already parties’; (2) ‘the extent to which, by protective provisions
in the judgment, by the shaping of relief, or other measures, the
31
prejudice can be lessened or avoided’; (3) ‘whether a judgment
rendered in the person’s absence will be adequate’; and
(4) ‘whether the plaintiff or cross-complainant will have an
adequate remedy if the action is dismissed for nonjoinder.’
(Ibid.)” (Bianka M. v. Superior Court (2018) 5 Cal.5th 1004,
1016–1017 (Bianka M.).)
“Because the determination of whether a person or entity
must be joined as a party to a civil action is a case-specific
inquiry that ‘“weighs ‘factors of practical realities and other
considerations,’”’ a trial court’s ruling on joinder is reviewed for
abuse of discretion.” (Bianka M., supra, 5 Cal.5th at p. 1018.)
2. Analysis
Netflix initially contends the trial court abused its
discretion because it “ignored” the statutory factors it was
required to consider in making its indispensable party
determination. Although a trial court may abuse its discretion by
failing to consider all of the statutory factors that define and limit
that discretion, its ruling “need not specifically state that it has
considered all of the relevant factors . . . .” (Dubois v. Corroon &
Black Corp. (1993) 12 Cal.App.4th 1689, 1696.) Thus, that the
court did not recite the four indispensable-party factors does not,
by itself, establish an abuse of discretion.
In any event, the facts of this case demonstrate that there
was no abuse of discretion. The Fox employees with fixed-term
agreements that would be affected by the requested injunction
and declaration of rights were necessary parties to the cross-
claims. Their interest in the stability and predictability of their
employment relationship, as provided by the fixed-term
32
provision, could be impeded or impaired by an injunction that
prevented Fox from using or enforcing fixed-term agreements
that, among other things, set compensation and benefits for a
predictable period of time. Similarly, a declaration that Fox’s
fixed-term agreements were unfair, unlawful, and fraudulent
would, in effect, convert the affected employees’ contracts to at-
will relationships, thereby depriving them of the benefits of fixed-
term agreements, such as Labor Code section 2924’s prohibition
against discharging fixed-term employees, except in cases of
willful breach of duty, habitual neglect of duty, or incapacity.
In its opening brief, Netflix nonetheless claims that the
employees are not necessary parties because Fox, a joined party,
has the “same interest” in the litigation of Netflix’s cross-claims
as its employees who seek to preserve the validity of their fixed-
term agreements. But, as noted, the employees’ interest in job
security and a predictable future income stream would not
necessarily be an interest that Fox would advance in defense of
the cross-claims. To the contrary, Fox could take the position
that, if the court declares the fixed-term agreements to be at-will
relationships, the affected employees’ compensation should be
reduced to reflect that fundamental change in the parties’
relationship. Thus, absent joinder of the affected employees,
their economic interests could be adversely impacted by the
litigation without their participation.
In its reply brief, Netflix also contends that it would
adequately represent the interest of those employees that wanted
to leave Fox prior to the expiration of their fixed-term
agreements. Although Netflix’s interest may coincide with the
interest of those Fox employees that Netflix sought to hire—i.e.,
both Netflix and the affected employees would wish to void the
33
fixed-term—Netflix’s interest would not more generally coincide
with the interest of all Fox employees in California, who neither
desired to void the terms of their employment agreements nor
were deemed desirable recruits by Netflix. Those employees’
interest in job security and a predictable future income stream
would not be an interest Netflix would advance in its pursuit of a
declaration deeming all such contracts unenforceable.
Netflix further maintains that, even if the Fox employees
were necessary, each of the statutory factors weighs against
finding them indispensable. According to Netflix, any judgment
on its cross-claims rendered in the employees’ absence would be
“minimally prejudicial” to them. But, as explained, a declaration
that converted all of Fox’s fixed-term agreements to at-will
relationships would substantially prejudice those employees who
wanted to preserve the predictable future income stream and job
security of a fixed-term relationship.
Netflix next argues that, to the extent there may be
potential prejudice from an injunction or declaration, those
remedies could be shaped to reduce or avoid the prejudice. But
other than suggesting that a declaration could be limited to
Netflix’s rights vis-à-vis Fox only, Netflix provides no other
measures by which potential prejudice could be avoided.
Regardless of whether the declaration is limited to Netflix’s
rights against Fox, the nature and extent of the relief sought
under the cross-claims could necessarily effect the legitimate
interests of the employees in their fixed-term agreements. Even
an adjudication and declaration of only the parties’ respective
rights could result in the conversion of the affected employees’
relationship from one for a specified term to an at-will
34
relationship, as those terms are used and understood under the
Labor Code.
Netflix also complains that it will be prejudiced by a finding
that the Fox employees are indispensable because it will not have
an alternative remedy if its cross-claims against Fox are
dismissed, but it does not provide support for that conclusion. To
the extent Netflix is suffering actual harm from Fox’s alleged
business practices, it fails to address why an action at law for
damages could not be maintained to vindicate its rights without
impeding or impairing the interests of Fox’s employees. And,
even assuming that the UCL and declaratory relief cross-claims
are the only viable means by which Netflix can vindicate its
rights against Fox, it was Netflix’s decision to file the cross-
claims without involving the affected employees in the action.
Finally, we do not agree that the trial court can enter an
adequate judgment in the absence of the employees. If the
employees are not bound by any judgment entered against or in
favor of Fox, they will be free to subsequently sue Fox for breach
of contract and violations of the Labor Code, thereby exposing
Fox to inconsistent judgments. (Lee v. Rich (2016) 6 Cal.App.5th
270, 277 [“An indispensable party is not bound by a judgment in
an action in which the indispensable party was not joined and
may collaterally attack the judgment”].)13
13 Because we affirm the ruling on the cross-claims on
indispensable party grounds, we do not reach Netflix’s
contentions on the trial court’s alternative ruling on those claims
based on standing.
35
G. Injunction Against Solicitation
In its opening brief, Netflix maintains that, even if the trial
court properly granted summary adjudication of Fox’s UCL claim,
the injunction entered on that order must be reversed because it
violates the prohibition against specific performance of personal
services contracts. Relying on Beverly Glen Music, Inc. v. Warner
Communications, Inc. (1986) 178 Cal.App.3d 1142 (Beverly Glen),
Netflix maintains that the injunction effectively prohibits Fox
employees who wish to work for Netflix from making that change
and results, in practical effect, in a decree of specific performance
of their fixed-term agreements. And, in its reply brief, Netflix
also suggests that the injunction is vague and overbroad because
its blanket prohibition against any solicitation puts Netflix at
risk of contempt for “taking any action to hire a fixed-term
employee who wants to leave Fox.”
1. Background
At the November 25, 2019, hearing on Fox’s motion on the
UCL claim, Netflix’s counsel stated that she had “serious
concerns” about the proposed “form” of the injunction. According
to counsel, the injunction presented “risks of foreclosure of First
Amendment rights and [was] too vague to make clear what is
actually being enjoined.” In response, the trial court encouraged
counsel to “[g]o on with that thought, please,” but counsel moved
on to another topic.
Later in the argument, Netflix’s counsel argued that, under
Fox’s employment contracts, “the employees don’t have any
choice about where they work as soon as they sign on the dotted
36
line.” In response, the trial court and Netflix’s counsel engaged
in the following exchange: “The Court: Let me give you a
hypothetical and a response to that last comment. [¶] Suppose
they quit, and they decide to go down the street to a competitor;
that they weren’t solicited. They just went in and said, ‘I would
like to interview for a job.’ [¶] [Netflix’s Counsel]: So Your
Honor, that doesn’t happen often because . . . it’s well understood
in the working community that you’re in a better position to get a
new job when you’re currently employed. It’s very difficult to
persuade a new employer that the reason you’re unemployed is
by choice. [¶] The Court: Understood. But I think your scenario
is a little overbroad when you say they don’t have a choice to go
somewhere else. And the injunction that I’m proposing wouldn’t
cover that scenario.”
Netflix’s counsel then asserted that she was unsure about
the meaning of “‘not solicited[,]’” prompting the trial court to
advise that, if counsel thought the term was ambiguous, the court
and counsel could “tinker with [the wording of the injunction] a
little bit.” Counsel replied that Netflix did not “believe that an
injunction should issue under any circumstances.” Counsel then
reiterated that she thought the injunction was overbroad or
vague, but, because she only had “an hour to think about” the
issue, it was “a little difficult . . . to give chapter and verse on why
[Netflix thought it was] vague.” The court offered counsel “more
time to think about [the issue] if [she thought it was] necessary,”
but counsel declined the offer and moved on to discuss another
issue.
Later in the hearing, the trial court and Fox’s counsel also
discussed the scope of the injunction. “[Fox’s Counsel]: So I
heard your comments about tweaking the scope of the injunction.
37
I would really caution the court not to do that. I think the court
has it exactly right . . . . [¶] The Court: I wasn’t suggesting
[that] I was going to. But I was just suggesting that I have an
open mind to hear suggested revisions. I think it’s right the way
it is.” Fox’s counsel concluded his arguments on the issue by
stating, “I think you have it exactly right. Everybody knows
what ‘solicit’ means and certainly everybody knows what
inducing breach of contract means. [¶] So I would submit on the
tentative exactly word for word as it’s written.” Although the
court afforded Netflix’s counsel the opportunity to respond, she
did not return to the issue of the scope of the injunction, choosing
instead to address other topics.
At the end of the hearing, the trial court offered Netflix’s
counsel another opportunity to address the scope of the
injunction, asking, “Any last words about the scope of the
injunction? You raised it, but you really didn’t address it.”
Counsel again declined the opportunity to further explain
Netflix’s position, responding that she had “[n]othing further at
this time.”
2. Legal Principles
“‘A permanent injunction is an equitable remedy for certain
torts or wrongful acts of a defendant where a damage remedy is
inadequate. A permanent injunction is a determination on the
merits that a plaintiff has prevailed on a cause of action for tort
or other wrongful act against a defendant and that equitable
relief is appropriate.’ [Citation.]” (Syngenta Crop Protection, Inc.
v. Helliker (2006) 138 Cal.App.4th 1135, 1166–1167.)
38
Business and Professions Code section 17203, which
authorizes injunctive relief for violations of the UCL, provides in
part: “The court may make such orders or judgments . . . as may
be necessary to prevent the use or employment by any person of
any practice which constitutes unfair competition, as defined in
this chapter, or as may be necessary to restore to any person in
interest any money or property, real or personal, which may have
been acquired by means of such unfair competition.”
The remedial power granted under this section is
“extraordinarily broad. Probably because . . . unfair business
practices can take many forms, the Legislature has given the
courts the power to fashion remedies to prevent their ‘use or
employment’ in whatever context they may occur.” (Consumers
Union of U.S., Inc. v. Alta-Dena Certified Dairy (1992) 4
Cal.App.4th 963, 972.) The court’s power “necessarily includes
the authority to make orders to prevent such activities from
occurring in the future.” (Id. at p. 973.) Injunctive relief “may be
as wide and diversified as the means employed in perpetration of
the wrongdoing.” (People v. Casa Blanca Convalescent Homes,
Inc. (1984) 159 Cal.App.3d 509, 536.) We ordinarily review the
issuance of a permanent injunction for abuse of discretion.
(Upland Police Officers Association v. City of Upland (2003) 111
Cal.App.4th 1294, 1300.)
3. Analysis
a. Scope of injunction: forfeiture
Although Netflix’s counsel complained at the summary
judgment hearing that the proposed injunction was vague or
39
overbroad, she declined the trial court’s invitation to explain her
position on the issue, even after being offered more time to
consider it. And, when the court suggested that it would consider
modifications to the language of the proposed injunction, counsel
failed to propose any change, arguing instead that no injunction
should issue. Later in the hearing, when the court reiterated
that it had an open mind to hear suggested revisions, counsel
again failed to propose any changes. Having been given ample
opportunity at the hearing to persuade the court on whether the
scope of the injunction should be modified, Netflix cannot now
claim on appeal that the court abused its discretion by fashioning
a vague or overbroad injunction. (Keener v. Jeld-Wen, Inc. (2009)
46 Cal.4th 247, 264.)14
14 Even though Netflix declined the trial court’s invitation to
suggest modifications to the injunction, the court’s order included
at least one modification to Fox’s requested relief. In its written
ruling, the court found that “Netflix [was] likely [to] continue to
solicit employees subject to [f]ixed-[t]erm [e]mployment
[a]greements with Fox and/or induce such employees to breach
their [f]ixed-[t]erm [e]mployment [a]greements with Fox, without
making a proper determination as to whether each separate
[f]ixed-[t]erm [e]mployment agreement violates [various statutes]
and/or is unconscionable.” (Italics added.) It then ordered that
the injunction applied only to employees who were subject to
“valid [f]ixed-[t]erm [e]mployment [a]greements.” The injunction
therefore does not preclude Netflix from soliciting employees who
are subject to any fixed-term agreements that contain contractual
provisions that are not at issue in this litigation and are
otherwise unlawful.
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b. Legal validity
Netflix’s assertions about the legal validity of the
injunction are belied by the terms of that decree. The injunction
does not restrain Fox employees from leaving Fox at any time,
even during the fixed term of their agreement, subject only to a
potential claim for breach of contract. By its express terms, the
injunction restrains only Netflix; it proscribes only solicitation or
inducement during the fixed term of an employee’s agreement.
Netflix thus remains free to solicit lawfully Fox’s at-will
employees and to hire Fox fixed-term employees at the end of
their contract term. Netflix can also hire Fox employees during
the fixed term, if the employee initiates the contact with the
company without inducement or other act of interference by
Netflix. Thus, contrary to Netflix’s characterization, the
injunction does not directly or indirectly decree specific
performance of any fixed-term personal services agreement with
Fox.
We also conclude that Netflix’s reliance on Beverly Glen,
supra, 178 Cal.App.3d 1142 is unavailing. There, a singer signed
a recording contract with the plaintiff recording studio. (Id. at
p. 1143.) During the term of the contract, the defendant
recording studio offered the singer a “better deal” which she
accepted as she was “having some difficulties” with the plaintiff.
(Id. at pp. 1143–1144.) In response, the plaintiff first sued the
singer to enjoin her from performing for any other studio, but the
trial court denied the injunction based on the prohibition against
specific performance of personal services contracts, and the
plaintiff thereafter dismissed the action. (Id. at p. 1144.)
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The plaintiff then sued the defendant studio seeking to
enjoin it from employing the singer. (Beverly Glen, supra, 178
Cal.App.3d at p. 1144.) The trial court once again denied the
requested injunction, ruling that the plaintiff could not
accomplish indirectly, by enjoining the defendant, what it failed
to accomplish directly in its suit against the singer. (Ibid.)
The Court of Appeal in Beverly Glen, supra, 178 Cal.App.3d
1142 affirmed the denial of the injunction against the defendant
studio, holding that “if [the defendant studio’s] behavior has
actually been predatory, [the] plaintiff has an adequate remedy
by way of damages. An injunction adds nothing to [the] plaintiff’s
recovery from [the defendant studio] except to coerce [the singer]
to honor her contract. Denying someone [her] livelihood is a
harsh remedy. The Legislature has forbidden it but for one
exception. To expand this remedy so that it could be used in
virtually all breaches of a personal service contract is to ignore
over 100 years of common law on this issue.” (Id. at p. 1145.)
Here, unlike in Beverly Glen, supra, 178 Cal.App.3d 1142,
Fox did not seek to enjoin Netflix from hiring either Waltenberg
or Flynn, so as to specifically enforce their fixed-term
agreements. It sued under the UCL to enjoin Netflix from future
solicitation of its fixed-term employees. As explained, the
injunction under the UCL does not indirectly result in the specific
performance of the affected employees’ fixed-term agreements, as
they are free under that decree to leave Fox during the term of
their agreements for other employment, even at Netflix, so long
as they are not solicited or induced by Netflix to leave. Thus,
because the injunction sought in Beverly Glen would have had the
effect of forcing the singer to specifically perform her agreement
with the plaintiff, that case does not prohibit the injunction here
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which enjoins future predatory business practices by a
competitor, but without compelling the affected employees to
perform for the full term of their existing agreements.
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V. DISPOSITION
The judgment is affirmed. Plaintiffs are awarded costs on
appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KIM, J.
We concur:
MOOR, Acting P. J.
HOFFSTADT, J.
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