In a diversity action for declaratory and injunctive relief pursuant to Cal. Bus. & Prof. Code, §§ 16600, 17200 wherein plaintiff former employee was attempting to invalidate an anti-competition covenant with defendant former employer, the employer sought summary judgment on the ground that a case or controversy no longer existed.
The employer was a graphics design firm that primarily developed and prepared corporate communications. The employee resigned and went to work for a similar firm. The employer consistently maintained that it did not intend to prevent the employee from competing with its firm within California. However, it had provided ambiguous statements with respect to competitive activities outside of California. During his deposition, though, a chief executive officer asserted the employer’s lack of intention to enforce the covenant against the employee regardless of geography. Defense counsel, at a hearing on the motion, categorically committed to that position. He also stated that the employer would not restrict the employee’s use of certain vendors that it also used. Counsel, however, reserved the right to pursue a suit in the future should the employee misappropriate trade secrets. The court granted the motion. According to the court, counsel’s statements regarding the covenant rendered the action moot. Further, it held that it could not adjudicate the hypothetical of the employee possibly violating a trade secret sometime in the future. Appellant was represented by a business lawyer.
The court granted the employer’s motion for summary judgment.
Plaintiff former employee sued defendant former employer in which he sought declaratory and injunctive relief pursuant to Cal. Bus. & Prof. Code §§ 16600 and 17200. The court granted summary judgment in favor of the employer on grounds that the action was moot. The employee moved pursuant to Fed. R. Civ. P. 59(e) to alter the judgment.
The employee sought to invalidate an anti-competition covenant with the employer. The employer initially provided ambiguous statements about whether it planned to enforce the covenant to prevent the employee from engaging in competitive activities outside of California. At the hearing on the summary-judgment motion, however, defense counsel categorically committed to the position that the employer would not so enforce the covenant. The employee now sought to amend the judgment so that it was without prejudice and sought a determination that the employer was not a prevailing party for purposes of attorney’s fees. The court found that because the employer had provided judicial admissions that it would not seek to enforce the anti-competition covenant, such admissions would estop any enforcement action brought by the employer in the future. A judgment for dismissal without prejudice would be inconsistent with the definition of a judgment under Fed. R. Civ. P. 54(a). Neither party prevailed because the employee did not derive any actual benefit and if the employer never had an intention to enforce the anti-competition covenant it should have been more forthcoming.
The motion to alter the judgment was denied with regard to the request that the judgment be without prejudice. However, the motion was granted in the respect that neither party was deemed the prevailing party for purposes of costs and attorney’s fees.