California Supreme Court Grants Review in Case Addressing Validity of Non-Compete Provisions
Topics: Court Decisions
On October 17, 2007, the California Supreme Court granted review of Alliance Payment Systems, Inc. v. Walczer, a California appellate court decision. This case involved a business dispute between two former partners which they subsequently resolved by way of a settlement agreement. In the settlement agreement, the former partners agreed not to solicit each others' customers for five years. They further agreed that if either received money from the others' customers (even without solicitation) the money would be turned over to the partner who originally had the customer.
In the ensuing dispute between the partners, the appellate court held that both of these provisions violated California Business and Professions Code section 16600's prohibition against contracts in restraint of trade because they were not tied to the protection of trade secrets. However, the court held that the non-solicitation of customers provision was enforceable under the dissolution of partnership exception to Section 16600. Notably, though, the court held that the provision requiring the turning over of monies was not enforceable under any exception to Section 16600. The California Supreme Court subsequently granted review.
The California Supreme Court's grant of review in the Walczer case appears to signal an interest on its part in providing further guidance on non-compete issues under Section 16600. This is further bolstered by the fact that another case addressing these issues -- Edwards v. Arthur Andersen -- is also still pending review before the Court. Please contact us directly to discuss any questions you have regarding the effect the grant of review may have on your workplace.