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A ruling by the California Supreme Court has brought into question whether California’s policy against non-competition agreements holds water when confronted with situations involving citizens from states that allow such contracts. “The court has strongly affirmed California’s strong interest in protecting its citizens from non-compete agreements,” said Los Angeles lawyer Robin Meadow, who represented the losing party. “Where it’s not clear is how that policy is going to affect other kinds of fact situations than ours, and the availability of anti-suit injunctions.” In Advanced Bionics Corp. v. Medtronic Inc., 02 C.D.O.S. 12135, Sylmar-based Advanced Bionics had tried to prevent Minneapolis-based Medtronic from seeking to enforce its two-year non-compete agreement with former Medtronic employee Mark Stultz in a Minnesota court. Advanced Bionics, which had employed Stultz, argued that Minnesota’s non-compete law violated California’s law and public policy. Both companies were involved in the manufacture of implantable medical devices — Medtronic to treat chronic pain and Advanced Bionics to restore hearing to the profoundly deaf. The agreement Stultz signed prohibited him from working for any competitor for two years after leaving Medtronic and stipulated that Minnesota law would govern the contract. Los Angeles’ Second District Court of Appeal upheld the California trial court’s temporary restraining order that prohibited Medtronic from taking any further steps in a suit it had filed in Minnesota. The Second District also said California courts should decide the dispute. By a unanimous vote, however, the California Supreme Court reversed Thursday, citing judicial restraint and comity — the latter by which courts in one jurisdiction may accede to the courts of another. “California courts have the same power as other courts to issue orders that assist in protecting their jurisdiction,” Justice Ming Chin wrote. “However, enjoining proceedings in another state requires an exceptional circumstance that outweighs the threat to judicial restraint and comity principles. “The circumstances of this case,” he added, “do not provide sufficient justification to warrant our court’s issuing injunctive orders against parties pursuing the Minnesota litigation.” Meadow, a partner in L.A.’s Greines, Martin, Stein & Richland, said Thursday he hopes and believes the ruling is narrow. “All they’ve said is in this kind of fact situation, the [California] policy is not important enough to allow the trial court to [impede] with pending litigation in another state. Beyond that it’s hard to say,” he said. “The court can’t say in one breath that this policy is important, and in the next breath say that courts can’t do anything about it.” David Axelrad, a partner in Encino’s Horvitz & Levy who represented Medtronic, referred calls to his client’s media representatives, who expressed great satisfaction at the ruling. “It’s an important decision. It means that litigation can go forward in Minnesota,” Medtronic spokesman Bob Hanvik said. “Minnesota recognizes non-compete agreements and California does not, so it’s important from that perspective to get a fair hearing. “To me,” he added, “it’s a fair decision. [The agreement] was executed in Minnesota, and that’s where [Stultz] worked for five years.” Hanvik declined to comment on the ruling’s impact on California’s policy against non-compete contracts. In a separate concurring opinion, Justice Carlos Moreno said he felt the majority hadn’t sufficiently explained its reasons for deferring to the principles of comity. “In the present case, the issue is not simply whether California has a strong public policy against non-competition agreements,” he wrote. “Instead, the question is whether Medtronic initiated its action in Minnesota for the purpose of evading California’s public policy.” He concluded that “based on the facts of this case,” Medtronic did not. In her own separate concurring opinion, Justice Janice Rogers Brown said that applying California law to a dispute like the one at issue could give rise to “a kind of political imperialism.” “Relocating to California may be, for some people, a chance for a fresh start in life, but it is not a chance to walk away from valid contractual obligations, claiming California policy as a protective shield,” she wrote. “We are not a political safe zone vis-a-vis our sister states, such that the mere act of setting foot on California soil somehow releases a person from the legal duties our sister states recognize.”

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