Russell Beck and Sarah Tishler to Speak at PLI Noncompete Agreement Program

On Wednesday, May 15, 2024, Russell Beck and Sarah Tishler will be speaking at Practising Law Institute’s program on noncompete agreements. Russell is the Chairperson of the event.

The program, which will be held in New York City and is also available online, is titled “Fundamentals of Noncompetes 2024.”

The program starts at 1:30 p.m. ET on May 15, 2023. More information and registration is available here.

Speakers will “provide all of the essential information you need to know about restrictive covenant law, including understanding the types of restrictive covenants, the interests they can protect, and the rules for their use.”

In addition, according to the course description, attendees will learn how to:

  • Identify the key issues concerning restrictive covenant law and the various kinds of restrictive covenant agreements
  • Understand the basics of trade secrets, goodwill, and other protectable business interests
  • Evaluate and update agreements to protect your company’s business interests from departing employees
  • Manage through the common issues in litigation concerning noncompetes and other restrictive covenants

The presentation is for any “lawyer or human resources personnel that will be assisting companies or individuals in evaluating, enforcing, and defending against noncompetes and other restrictive covenants, anyone involved in the hiring of employees, and anyone else responsible for an organization’s internal hiring policies.”

ussell will be giving the opening remarks for the program. Sarah will be speaking on a panel titled “Practical Tips for Drafting Noncompete Agreements and Related Restrictive Covenants.” This panel will discuss the basic components and strategies of litigating matters concerning restrictive covenants. The panelists will provide valuable information to help attendees:


For up-to-the-minute analysis of legal issues concerning noncompete agreements in Massachusetts and across the United States, read Russell Beck’s blog, Fair Competition Law.

Beck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Russell Beck’s work in this area is well recognized, and includes:

  • Over thirty years of experience working on trade secret, noncompete, and unfair competition matters
  • Assisting the Obama White House as part of a small working group to develop President Obama’s Noncompete Call to Action
  • Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (6th ed., MCLE, Inc. 2021), used by other lawyers to help them with their noncompete matters
  • Authoring the book Trade Secrets Law for the Massachusetts Practitioner (1st ed. MCLE 2019), covering trade secrets nationally, with a focus on Massachusetts law
  • Drafting and advising on legislation for the Massachusetts Legislature to define, codify, and improve noncompetition law
  • Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
  • Founding and administering the award-winning blog, Fair Competition Law
  • Establishing and administering the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 1,660 and 870 members, respectively, around the world
  • Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm

In addition, Russell was honored for his work in this area of law in the 2020 Chambers USA Guide, which stated that Russell Beck is “an expert in the field of trade secret and restrictive covenant law,” and is also noted for his “ability to adjust and come up with successful solutions.” Chambers noted that Russell “basically wrote the new Massachusetts statute on noncompetes” and that “he’s an expert in employee mobility and nonrestrictive covenants.”

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

Sarah Tishler Quoted in Article about FTC’s Noncompete Ban

Sarah Tishler was recently quoted in an article about the Federal Trade Commission’s new rule banning noncompete agreements.

The article, titled “FTC’s Noncompete Ban a Blow to Asset Managers,” appeared in Ignites, a service from the Financial Times.

he article discusses the FTC’s issuance of a proposed final rule restricting noncompete agreements nationwide for most workers, as well as efforts by several entities to stop implementation of the rule through various lawsuits.

In the article, Sarah discusses the impact of restricting noncompete employment agreements as follows:

Noncompetes are “part of the normal set of options” available to a fund firm to protect proprietary information when an employee leaves, and they are especially relevant for the departure of “relationship-centric” employees, said Sarah Tishler, an attorney at Beck Reed Riden who is not related to the suits.

“If noncompetes are truly off the table, the likely outcome is an increase in the amount of trade secret litigation when fund employees go to a competitor,” Tishler said. “Without noncompetes, I think it is likely that there will be a lot of thought given to incentivizing top performers to stay, to avoid any temptation to jump to a competitor firm.”

The April 26, 2024, was written by Sabrina Kharrazi.


Sarah Tishler is a commercial litigator whose practice focuses on complex business disputes in state and federal courts, including intellectual property, breach of contract, and fraud claims.


eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

Steve Riden and Sarah Tishler Speaking About Tortious Interference for Federal Bar Association

 

On Wednesday, March 13, 2024, Steve Riden and Sarah Tishler will give a presentation for the Federal Bar Association titled “Tortious Interference with Contracts and Business Relations: Proving and defending claims (2024 Edition).”

The presentation will be conducted via webinar on March 13, 2024, from 2 to 4:10 p.m. ET. Registration information and other details are available here.

According to the program summary:

Commercial relationships and contracts are both susceptible to interference by others. Former employees and competitors sometimes resort to improper tactics to gain an unfair advantage. Business litigators need to be aware of the variety of fact patterns that can support a claim for tortious interference. This versatile tort is an essential tool to address a wide range of commercial misconduct and unfair competition.

These claims are used in a variety of industries, and the presentation will address real-world application of this tort in the following areas:

  • Real Estate Industry: How tortious interference claims come into play in real estate transactions, including case studies and real-world examples.
  • Tech Sector: Examining tortious interference in the dynamic realm of technology and innovation.
  • Employment Disputes: Addressing the application of tortious interference claims in employment-related conflicts.

This course is co-sponsored with myLawCLE.

Key topics to be discussed:

  • What must plaintiffs prove to establish a tortious interference claim?
  • What are the potential defenses to defeat tortious interference claims?
  • What damages are available to prevailing plaintiffs in tortious interference cases?
  • How do tortious interference claims overlap with related employment, unfair competition, and defamation claims?

teve’s practice is in commercial litigation, and he represents corporate and individual clients in a wide array of commercial disputes across the country, and his primary focus is litigating trade secrets related matters. Over the past year, he has worked on myriad actions in state and federal courts involving trade secret issues, including representing several key witnesses in a jury trial that resulted in an award of more than $2 billion in damages for trade secret misappropriation.

arah is a senior counsel at Beck Reed Riden LLP. Sarah’s practice is concentrated on trade secret and restrictive covenant advising and litigation, employee mobility, and commercial litigation. Sarah has won successful outcomes for clients on both sides of these disputes in all stages of litigation, including the preliminary injunction stage, jury trials, and mediation. Sarah has also counseled clients on the identification and protection of trade secrets, and the enforceability of noncompetes and other restrictive covenants. Sarah was named by the Legal 500 as a Rising Star for 2023 in the area of Trade Secrets.

eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

 

Sarah Tishler Featured in Law360 on New Calif. Noncompete Restrictions

Sarah Tishler’s article about California’s latest effort to stamp out noncompete restrictions for its residents was published by Law360 under the title, “Calif. Law Tests Noncompete Prohibitions’ Potential Reach.”

The article, reprinted in full below, analyzes California’s new law expanding the scope of their restrictive covenant ban.

s increasing numbers of states enact laws to protect employees within their boundaries, the question of the reach of those laws — namely, the extent to which they will be enforced in other jurisdictions — is simultaneously becoming increasingly important and increasingly fractured.

Many states have tried to bolster protections for workers through laws that prevent employers from contracting around statutory limitations on post-employment restrictive covenants — in particular, preventing employers from requiring employees to adopt the law of a less protective state as the governing law for an employment agreement containing post-employment restrictive covenants.

There are nine states that have adopted these types of laws: California, Colorado, Louisiana, Massachusetts, Minnesota, Montana, North Dakota, Texas, and Washington.[1]

Michigan appears ready to become the tenth with H.B. 4399, legislation regulating post-employment restrictive covenants, which provides: “All of the following are void and unenforceable: … A choice of law provision in an agreement, to the extent that it would negate the requirements of this section.”

The most recent update to this trend is California’s addition to its Business and Professions Code, Section 16600.5, which was signed into law by Gov. Gavin Newsom on Sept. 1, and takes effect Jan. 1, 2024.

Section 16600 codifies California’s well-known policy prohibiting employee noncompetes: “Except 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.”

The new Section 16600.5 states, in relevant part:

  1. Any contract that is void under this chapter is unenforceable regardless of where and when the contract was signed.
  2. An employer or former employer shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California.[2]

here can be no question about the intent of the legislation. The Legislature’s findings in support of the law states in part: “The California courts have been clear that California’s public policy against restraint of trade law trumps other state laws when an employee seeks employment in California, even if the employee had signed the contractual restraint while living outside of California and working for a non-California employer.”

It is clear that California wants no ambiguity surrounding the reach of its restrictive covenant laws — if the employee resides in California, during or after signing a contract containing a provision that violates Section 16600, then California wants to ensure that there is no way the employer can enforce the provision in question.

In other words, it wants every California resident to live, or arrive, in the state free and clear of restraints on their employment.

This legislation has the potential to upend the usual considerations taken into account when negotiating an employment agreement with restrictive covenants. As it stands, many employers include forum selection and governing law clauses in their employment agreements, in an effort to maintain uniformity across their operations.

Up to now, that approach has generally found success in overcoming employees’ attempts at seeking statutory protection under laws like California Labor Code, Section 925, which provides as follows:

  1. An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:
    1. Require the employee to adjudicate outside of California a claim arising in California.
    2. Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.
  2. Any provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.

The substantive legislative intent of Section 925, therefore, is to ensure that California workers enjoy the benefit of Section 16600 regardless of what their contracts say, but that strategy has had mixed results in the courts.

For example, in Ronnoco Coffee LLC v. Castagna, a 2021 decision by the U.S. District Court for the Eastern District of Missouri, one of the defendants was employed by the plaintiff as a territory sales manager in Los Angeles.[3]

The agreement the California defendant signed prohibited him from working for a competitor during and for two years after his employment; prohibited him from soliciting the plaintiff’s employees, clients and customers; and prohibited him from disclosing any confidential and proprietary information.[4]

The agreement also specified that Missouri law governed the agreement and provided for jurisdiction and venue in that forum.[5]

Shortly after signing the agreement, the defendant resigned and began employment with a direct competitor.[6] On a motion to dismiss, the defendant specifically argued that as a California resident, Section 925 of the California Labor Code voided the agreement’s jurisdiction and venue provisions, and argued that California law should apply under conflict of law principles, voiding the restrictive covenants as well.[7]

Rejecting these arguments, the court noted that “district courts outside of California considering choice of law provisions and forum selection clauses have refused to apply § 925 when another state’s law has been chosen by the parties.”[8]

Following the enactment of Section 16600.5, the stakes seem even higher. Now it will not only be California employees attempting to avail themselves of the protections of California’s competition law. It has significantly increased the potential for employees from other states to relocate to California to seek the benefits of Section 16600.5.

Take the hypothetical of a New York company that employs a New York resident. The parties enter into an employment agreement containing a post-employment noncompete, with a choice of law clause selecting New York, and a forum selection clause also selecting New York courts.

The employee resigns, moves to California, and starts working for a direct competitor. The employer wants relief. What can it do?

  • Could the employer sue the former employee in California for breach of the noncompete? This seems like it has a high probability of failure given the explicit language of Section 16600.5; it is even more certain than in the past that a California court would void the noncompete.
  • Could the employer sue the former employee in New York? This seems more promising given New York’s jurisprudence on forum selection clauses.[9] Note that the employer would also have to establish personal jurisdiction over the employee, which is likely, but not necessarily guaranteed despite the existence of the forum selection clause.[10]
  • Could the employer sue the new employer in California under a theory of tortious interference with contract? It seems likely that a California court would hold that there could be no tortious interference with an invalid contractual provision.
  • Could the employer sue the new employer in New York? Establishing personal jurisdiction over a California company with, for argument’s sake, no business in New York would be an uphill battle.

Along with these strategic issues, foundational constitutional questions regarding how other states should treat legislation such as California’s have simultaneously come to the fore.

Earlier this year, a petition to review a decision of the U.S. Court of Appeals for the Eighth Circuit was brought before the U.S. Supreme Court, captioned Traffic Tech Inc. v. C.H. Robinson Worldwide Inc.[11]

In Traffic Tech, five individual defendants, all California citizens, signed employment agreements with C.H. Robinson — a transportation and logistics giant — containing post- employment restrictive covenants, and a choice of law clause selecting Minnesota as the governing law of the agreements.[12]

The restrictive covenants at issue were indisputably illegal under California law, and legal under Minnesota law. Each of the individual defendants resigned from C.H. Robinson, began employment for a competitor, and continued to live and work exclusively in the state of California.[13]

C.H. Robinson sued the individual defendants first in Minnesota state court for breach of contract — specifically, breach of the customer nonsolicitation provision — and the defendants removed the case to the U.S. District Court for the District of Minnesota.[14]

n summary judgment, the defendants argued that the district court should apply California law to the dispute, rendering the restrictive covenants void and unenforceable.[15] After the district court granted summary judgment, C.H. Robinson appealed to the Eighth Circuit, arguing that the district court erred by not applying the usual choice of law test under Minnesota law.

The Eighth Circuit ruled that “Minnesota is committed to the rule that parties can agree on the law that governs their contract … a contractual choice-of-law provision will govern … so long as the parties acted in good faith and without an intent to evade the law,” reversing the district court and determining that Minnesota law applied, without consideration of the impact of California’s laws.[16]

The defendants’ petition for a writ of certiorari side steps the usual choice of law analysis, and goes straight to the question of “the constitutional limitations of the Full Faith and Credit Clause and the Due Process Clause, specifically as it relates to a State’s ability to disregard unwaivable rights of the citizens of another State.”[17]

The petition states: “This Court has not yet set forth how a State should address an applicable Anti-Waiver Statute of a sister State, such as Cal. Labor Code § 925.”[18] It goes on to summarize the “patchwork of conflicting case law” that has grown on this subject without clear guidance from the Supreme Court.[19]

Importantly for California and other states with similar statutes, the petitioners argue that Minnesota’s choice-of-law test, as applied by the Eighth Circuit, is unconstitutional because it exhibits a policy of hostility to the public acts of its sister state, violating the full faith and credit and due process clauses of the Constitution.[20]

However, this is not the end of the story for California’s legislation, specifically the new Section 16600.5. As the petition notes, the court’s existing jurisprudence on the full faith and credit clause and the due process clause with respect to conflicts of law requires that “for a State’s substantive law to be selected in a constitutionally permissible manner, that State must have a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.”[21]

The petition also cites former Justice John Paul Stevens’ 1981 concurrence in Allstate Insurance Co. v. Hague,[22] in which he wrote, “A choice — of — law decision that frustrates the justifiable expectations of the parties can be fundamentally unfair. This desire to prevent unfair surprise to a litigant has been the central concern in this Court’s review of choice — of — law decisions under the Due Process Clause.”[23]

It is difficult to square that precedent, which has not been abrogated since, with the explicit statutory command of Section 16600.5 to disregard where a given contract was signed, when a given contract was signed, and whether the employee lived and worked in California during the relevant time period.

If the touchstone of constitutionality in a conflict-of-laws analysis is fairness, can a statute allowing complete disregard of salient facts related to the dispute survive?

Unfortunately, the Traffic Tech case will not resolve these important constitutional questions, because the Supreme Court denied the writ for certiorari on October 2, 2023. Because the court’s denial did not include any rationale, it is impossible to know why the Supreme Court decided that it did not need to review the case.

Traffic Tech therefore joins the U.S. District Court for the District of New Jersey’s 2020 decision in Howmedica Osteonics Corp. v. DePuy Synthes Sales Inc.[24] and other recent cases touching upon these choice-of-law issues that the Supreme Court has declined to resolve.

These choice-of-law questions therefore remain live and salient for practitioners, employers and employees around the country.

Given the mixed success that California’s worker protections have found in other jurisdictions, particularly when faced with another state’s choice-of-law or venue provision, it is understandable why the California Legislature felt the need to go as far as it has.

Only time will tell, however, whether Section 16600.5 will be considered consistent with the U.S. Constitution, or whether legislators will need to go back to the drawing table to find another way to ensure that California workers receive the benefit of their home state’s laws.


Sarah Tishler is a commercial litigator whose practice focuses on complex business disputes in state and federal courts, including intellectual property, breach of contract, and fraud claims.


eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.


Footnotes:

  1. See: Cal. Labor Code § 925; Colo. Rev. Stat. Ann. § 8-2-113; La. Stat. Ann. § 23:921; Mass. Gen. Laws Ann. Ch. 149, § 24L; Minn. Stat. § 181.988; Mont. Code Ann. § 28-2-708;N.D. Cent. Code Ann. § 9-08-05; Tex. Bus. & Com. Code Ann. § 15.52.; and Wash. Rev. Code Ann. § 49.62.050.
  2. In addition to these provisions, § 16600.5 also mandates that employers who violate the law commit a civil violation, and affected employees may bring a private action for injunctive relief, the recovery of actual damages, or both.
  3. Ronnoco Coffee LLC v. Castagna, No. 4:21-CV-00071 JAR, 2021 WL 842599, at *1 (E.D. Mo., March 5, 2021).
  4. Id. at *2.
  5. Id. at *5.
  6. Id. at *3.
  7. Id. at *6.
  8. Id. In support, the Ronnoco court cited Howmedica Osteonics Corp. v. Howard, No. CV1919254SDWLDW, 2020 WL 1102494, at *4 (D.N.J. Jan. 17, 2020), report and recommendation adopted, No. 19-19254 (SDW) (LDW), 2020 WL 1082601 (D.N.J. Mar. 5, 2020); Genesys Telecommunications Labs. Inc. v. Morales, No. 119CV00695TWPDML, 2019 WL 5722225, at *7 (S.D. Ind. Nov. 5, 2019); Cherry Creek Mortg. Co. v. Jarboe, No. 18-CV-00462-KLM, 2018 WL 6249887, at *4 (D. Colo. Nov. 29, 2018). While it is accurate that many courts have refused to apply § 925 when another state’s law has been chosen by the parties, the courts are not unanimous. See, e.g., Focus Fin. Partners LLC v. Holsopple, 241 A.3d 784, 821 (Del. Ch. 2020) (applying Delaware conflict of law rules to determine that § 925 governed the case, and therefore invalidated the Delaware forum selection and choice- of-law provisions in the restrictive covenant agreement); C.H. Robinson Worldwide Inc. v. Traffic Tech Inc., No. CV 19-902 (MJD/DTS), 2021 WL 4307012, at *1 (D. Minn. Sept. 22, 2021) (as discussed below, this case was reversed in relevant part by the Eighth Circuit, and is on certiorari before the United States Supreme Court); Oxford Glob. Res. LLC v. Hernandez, 480 Mass. 462, 472 (2018) (affirming order of dismissal for forum non conveniens despite a forum selection clause selecting Massachusetts, because it was contrary to California’s fundamental public policy, and California had a materially greater interest in the dispute).
  9. See Ministers & Missionaries Benefit Bd. v. Snow, 26 N.Y.3d 466, 476 (2015) (holding that “New York courts should not engage in any conflicts analysis where the parties include a choice-of-law provision in their contract”); see also Capstone Logistics Holdings Inc. v. Navarrete, No. 17-CV-4819 (GBD), 2018 WL 6786338, at *20 (S.D.N.Y. Oct. 25, 2018) (“the courts of New York have refused to consider the public policy of foreign states – including California – to overturn an otherwise valid contractual choice of law provision”) (emphasis in original), aff’d and remanded in part, 796 F. App’x 55 (2d Cir. 2020). To further illustrate the disparate approaches taken by different jurisdictions, consider the Georgia Supreme Court’s recent decision in Motorsports of Conyers LLC v. Burbach, where the court clarified that while Georgia courts must generally honor a contractual choice-of-law provision selecting a foreign law, it may not if doing so is “restrained by the General Assembly” or “contrary to the policy or prejudicial to the interests of this state.” 2023 WL 5760197, at *3 (Ga. Sup. Ct. Sept. 6, 2023). Applying this standard, the Motorsports court held that the analysis for foreign choice-of-law provisions with respect to restrictive covenants begins by asking whether the restrictive covenant comports with Georgia’s restrictive covenant statute. Id. at *7. The Motorsports court vacated the judgment, and reversed and remanded the case back to the trial court to apply the standard it articulated. Id. at *8.
  10. While New York state and federal courts apply the general rule that a forum selection clause confers personal jurisdiction over a defendant (see, e.g., D.H. Blair & Co. v.Gottdiener, 462 F.3d 95, 103 (2d Cir. 2006)), they also are exacting in their requirements that a forum selection clause be unambiguous to be enforceable. For example, the Eastern District of New York deemed a forum selection clause ambiguous and unenforceable, and therefore found no personal jurisdiction, when the clause in question provided “This Agreement shall be governed by, construed and enforced, at the sole election of the company at any court.” PowerDsine Inc. v. Broadcom Corp., No. 07CV2490(SJF)(WDW), 2008 WL 268808, at *4 (E.D.N.Y. Jan. 29, 2008) (granting motion to dismiss in part for lack of personal jurisdiction). The court’s close analysis of the contractual language only underscores the importance of a well-drafted forum selection clause.
  11. Petition for Writ of Certiorari, Traffic Tech, Inc. v. C.H. Robinson Worldwide Inc., No. 23- 70 (July 10, 2023) (hereinafter “Petition”).
  12. C.H. Robinson Worldwide Inc. v. Traffic Tech Inc., 60 F.4th 1144, 1146-47 (8th Cir. 2023).
  13. C.H. Robinson Worldwide Inc. v. Traffic Tech Inc., No. CV 19-902 (MJD/DTS), 2021 WL 4307012, at *1 (D. Minn. Sept. 22, 2021), aff’d in part, rev’d in part and remanded, 60 F.4th 1144 (8th Cir. 2023).
  14. Id. at *5.
  15. Id. at *5-10.
  16. C.H. Robinson Worldwide, 60 F.4th at 1148 (internal quotation marks and citation omitted). Note that this case was decided before Minnesota changed its law to (prospectively) prohibit noncompete agreements. See Minn. Stat. § 181.988.
  17. Pet. at 10.
  18. (Pet. at 11.),
  19. See Pet. at 12-13.
  20. Pet. at 19.
  21. Pet. at 19, quotingPhillips Petroleum Co. v. Shutts, 472 U.S. 797, 818 (1985) (internal quotation marks and citation omitted).
  22. 449 U.S. 302 (1981).
  23. Pet. at 24-25, quoting Allstate Ins. Co. v. Hague, 449 U.S. 302, 327 (1981).
  24. Petition for Writ of Certiorari, Howmedica Osteonics Corp. v. DePuy Synthes Sales Inc., No. 22-55126 (Sept. 14, 2022), petition for writ of certiorari denied (Dec. 12, 2022). For further discussion of the Howmedica cases, see Sarah Tishler, Law360, Minn. Noncompete Ban May Add to Nat’l Venue Choice Tangle (July 20, 2023), available at https://www.law360.com/articles/1696897.

Russell Beck and Sarah Tishler in the Boston Bar Journal on Noncompete Regulation

Russell Beck and Sarah Tishler’s article about the FTC’s proposed nationwide rule banning non-compete agreements was recently published by the Boston Bar Journal.

The article, titled “The FTC New Proposed Rule on Non-Competes,” explores the arguments for and against adopting the FTC’s proposed nationwide ban on noncompetes. The article is presented in a point / counterpoint format, with Russell and Sarah’s article providing the perspective against the proposed rule, and Spencer Thompson and Patricia Washienko of Washienko Law Group, LLC, writing in support of the proposed rule.

For context, the FTC’s proposed rule provides:

“It is an unfair method of competition for an employer to enter into or attempt to enter into a non-compete clause with a worker; maintain with a worker a non-compete clause; or represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.”

Moreover, the proposed rule sets forth a proposed “functional test” for defining what qualifies as a non-compete. That test would consider a contractual term to be

“a de facto non-compete clause because it has the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer.”

s Russell and Sarah explore in the article, this statutory language and accompanying test is so broad that virtually any restrictive covenant – including nondisclosure agreements, nonsolicitation agreements, and no-service agreements – could be rendered invalid. The proposed rule carries with it numerous unintended and detrimental consequences, does not further the FTC’s stated goals, and deprives the states of the ability to tailor noncompete legislation to the economic and labor practicalities of their workforce.

Russell and Sarah explain that the

the Proposed Rule would bring to a screeching halt the state-level activity on non-competes, depriving the states of their function as the laboratories of democracy (to paraphrase Justice Brandeis). In the last decade alone, nearly two-thirds of U.S. states have made changes to their laws on non-competes. State legislatures are able to tinker with the specific policies that work best for their unique economic environments; a policy that may work well in Boston may not be the right fit for Bangor.

The Boston Bar Journal is a peer-reviewed, online publication of the Boston Bar Association. It presents timely information, analysis, and opinions to more than 10,000 lawyers in nearly every practice area. The Boston Bar Journal is governed by a volunteer Board of Editors dedicated to publishing outstanding articles that reflect their authors’ independent thought.


For up-to-the-minute analysis of legal issues concerning noncompete agreements in Massachusetts and across the United States, read Russell Beck’s blog, Fair Competition Law.

eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Russell Beck’s work in this area is well recognized, and includes:

  • Over thirty years of experience working on trade secret, noncompete, and unfair competition matters
  • Assisting the Obama White House as part of a small working group to develop President Obama’s Noncompete Call to Action
  • Authoring the book Negotiating, Drafting, and Enforcing Noncompetition Agreements and Related Restrictive Covenants (6th ed., MCLE, Inc. 2021), used by other lawyers to help them with their noncompete matters
  • Authoring the book Trade Secrets Law for the Massachusetts Practitioner (1st ed. MCLE 2019), covering trade secrets nationally, with a focus on Massachusetts law
  • Drafting and advising on legislation for the Massachusetts Legislature to define, codify, and improve noncompetition law
  • Teaching Trade Secrets and Restrictive Covenants at Boston University School of Law
  • Founding and administering the award-winning blog, Fair Competition Law
  • Establishing and administering the Noncompete Lawyers and Trade Secret Protection groups on LinkedIn, with over 1,660 and 870 members, respectively, around the world
  • Founded and chaired the Trade Secret / Noncompete Practice for an AmLaw 100 firm

In addition, Russell was honored for his work in this area of law in the 2020 Chambers USA Guide, which stated that Russell Beck is “an expert in the field of trade secret and restrictive covenant law,” and is also noted for his “ability to adjust and come up with successful solutions.” Chambers noted that Russell “basically wrote the new Massachusetts statute on noncompetes” and that “he’s an expert in employee mobility and nonrestrictive covenants.”

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

Sarah Tishler Featured in Law360 on Noncompete Choice-of-Law and Venue Rules

Sarah Tishler’s article about the challenges presented by choice-of-law and venue provisions in noncompete statutes was published by Law360 under the title, “Minn. Noncompete Ban May Add To Nat’l Venue Choice Tangle.”

The article, reprinted in full below, follows Minnesota’s outright ban on noncompete agreements and focuses on the choice-of-law and venue provision designed to protect Minnesota-based employees.

s of July 1, employee noncompete agreements are no longer valid in the state of Minnesota.

While the law does not apply retroactively to existing employee noncompetes, as of its effective date, Minnesota has joined just three other states — California, North Dakota and Oklahoma — in banning noncompetes entirely.[1]

The outright ban on noncompetes has made headlines for good reason. But also contained in the statute is a significant choice-of-law and venue provision designed to be as protective as possible for Minnesota-based employees.

Subsection 3 of the statute provides that an employer “must not require an employee who primarily resides and works in Minnesota” to agree to a contract — not just noncompetes — that would

  1. require the employee to adjudicate out of Minnesota a claim arising in Minnesota; or
  2. deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota.

Any contractual provision violating the foregoing is “voidable at any time by the employee,” and if such a provision is rendered void, the dispute “shall be adjudicated in Minnesota and Minnesota law shall govern the dispute.”

The subsection also explicitly provides that in addition to injunctive relief and any other remedies, “a court may award an employee who is enforcing rights under this section reasonable attorney fees.”

With this provision, Minnesota joins at least California, Colorado, Louisiana and Washington in providing explicit statutory choice-of-law and venue rules for state resident employees.[2]

With the passage of this law, Minnesota will consider any noncompete agreement signed after July 1 to be voidable by the employee if the agreement requires the employee to adjudicate a dispute outside of Minnesota or deprives the employee of “the substantive protection of Minnesota law,” i.e., the new ban against noncompetes. The Minnesota law goes further than some other states, however, by providing in the statute itself reasonable attorney fees for any employee enforcing rights under that section.

he clear intent of the statute is to prevent employers from avoiding the new ban against noncompetes by inserting another state’s law and venue into contractual choice-of-law and venue provisions. Nonetheless, this type of statutory protection has received entirely mixed treatment in the courts when judges are confronted with the inevitable — and messy — question of whether state or federal law governs the validity, and enforcement, of forum selection clauses in diversity cases.

Of course, that fact pattern is precisely how the question presents itself in the first place.

To offer one example: An employee from Massachusetts, California or Minnesota signs an employment agreement with a company containing a forum selection clause choosing New Jersey. That employee quits and begins working for a competitor in direct violation of the employment agreement. Where will the parties be ordered to litigate?

In Depuy Synthes Sales, Inc. v. Howmedica Osteonics Corp. in March 2022, the U.S. Court of Appeals for the Ninth Circuit said that, in this exact scenario, state law decides the validity of a forum selection clause and choice-of-law and venue clause, and therefore the noncompete clause was void under California Labor Code, Section 925.[3]

In contrast, in Howmedica Osteonics Corp. v. Howard in 2020, the U.S. District Court for the District of New Jersey had come to the polar opposite conclusion under the same forum selection clause in the same employment contract, rejecting arguments that Section 925 invalidated it.[4]

The lack of uniformity persists in other jurisdictions that have considered the same issue.[5] In the related areas of venue transfer and forum non conveniens, similar issues appear.

While some jurisdictions consider the existence of a state forum selection statute to be evidence of the state’s strong public policy, other jurisdictions merely shrug. In support of the former, in AG Resource Holdings LLC v. Terral, the Delaware Chancery Court held in 2021:

The Louisiana [forum selection] laws cited above are clear pronouncements by the Louisiana legislature regarding its public policy on matters of employment and competition. Under the circumstances, Louisiana’s interests must be respected and enforced.[6]

On the other end of the spectrum, in Hilb Group of New England LLC v. LePage, the U.S. District Court for the Eastern District of Virginia in May 2022 wrote:

No Massachusetts court has held that the [Massachusetts Noncompetition Agreement Act, which mandates that all cases involving Massachusetts residents must take place in Massachusetts] manifests the state’s strong public policy. Thus, the enforcement of the Agreement’s forum selection clause would not go against a strong public policy of Massachusetts.[7]

A clear path out of this jumble of precedent appears unlikely. In late 2022, the U.S. Supreme Court denied certiorari in the Howmedica case from the Ninth Circuit, leaving the circuits to go their own way.

As more states seek to ensure that their residents are indeed protected by the state laws that pass their legislatures, employers operating in multiple states and employers with remote work forces must proceed with caution and stay abreast of the rapid changes to state laws.

Otherwise, the law chosen in a given noncompete or employment agreement may not be the law eventually applied by a court — sometimes with dramatic results.


Sarah Tishler is a commercial litigator whose practice focuses on complex business disputes in state and federal courts, including intellectual property, breach of contract, and fraud claims.


eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.


Footnotes:

  1. Stay tuned for what New York Gov. Kathy Hochul will do with Bill No. S3100A, the bill passed by the New York State Senate and Assembly that would ban all noncompetes.
  2. See, e.g., Massachusetts Noncompetition Agreement Act, M.G.L. 149 § 24L(e)-(f):
    1. No choice of law provision that would have the effect of avoiding the requirements of this section will be enforceable if the employee is, and has been for at least 30 days immediately preceding his or her cessation of employment, a resident of or employed in Massachusetts at the time of his or her termination of employment.
    2. All civil actions relating to employee noncompetition agreements subject to this section shall be brought in the county where the employee resides or, if mutually agreed upon by the employer and employee, in Suffolk county; provided that, in any such action brought in Suffolk county, the superior court or the business litigation session of the superior court shall have exclusive jurisdiction.
  3. Depuy Synthes Sales, Inc. v. Howmedica Osteonics Corp., 28 F.4th 956 (9th Cir. 2022).
  4. Howmedica Osteonics Corp. v. Howard, 2020 WL 1102494, at *3 (D.N.J. Jan. 17, 2020), report and recommendation adopted, 2020 WL 1082601, at *1 (D.N.J. Mar. 5, 2020).
  5. See, e.g., Terral v. AG Res. Holdings LLC, 54,156 (La. App. 2 Cir. 3/9/22), 335 So. 3d 1009, 1016-17 (invalidating Delaware choice-of-law provision in favor of Louisiana statute); Zeppelin Systems USA Inc. v. Pyrolyx USA Indiana LLC, 2020 WL 1082774, at *4 (S.D.N.Y. Mar. 5, 2020) (upholding validity of forum-selection clause under federal law, despite an Indiana law that would render the clause invalid); NuMSP LLC v. St. Etienne, 462 F. Supp. 3d 330, 345 (S.D.N.Y. May 22, 2020) (“in determining whether a forum selection provision is invalid, the Court focuses on the public policy of the forum state, not some other state”).
  6. AG Resource Holdings LLC v. Terral, No. CV 2020-0850-JRS, 2021 WL 486831, at *5 (Del. Ch. Feb. 10, 2021).
  7. Hilb Group of New England LLC v. LePage, No. 3:21-cv-757, 2022 WL 1538583, at *4 (E.D. Va. May 16, 2022).

The Legal 500 Honors Russell Beck, Nicole Corvini Daly and Sarah Tishler

The Legal 500 United States 2023 named Russell Beck as a Hall Of Fame lawyer for trade secrets attorneys in the U.S. Nicole Corvini Daly was named a Next Generation Partner, and Sarah Tishler was recognized as a Rising Star.

According to the The Legal 500, its “Hall of Fame highlights individuals who have received constant praise from their clients for continued excellence. The Hall of Fame highlights, to clients, the law firm partners who are at the pinnacle of the profession.”

Russell Beck, Nicole Corvini Daly, and Sarah Tishler are the only attorneys from a small firm included on this list of national experts.

According to one testimonial from The Legal 500, “Russell Beck and his team are incredibly effective, efficient and they get results.”

Another testimonial notes that “Nicole Daly is talented, on departing employee matters, Heather Krauss and Sara Tishler. They all provide extremely user-friendly advice.”

In addition, Beck Reed Riden LLP was recommended in the category of “Trade secrets (litigation and non-contentious matters).”

The following is the independent editorial write up from The Legal 500 on the firm’s ranking:

The ‘incredibly effective’ Boston-based boutique Beck Reed Riden LLP, known for its ‘well-informed counseling and tenacious litigation’ is headed by Russell Beck, who is described as ‘one of, if not the most prominent thought leader in this area’. The firm focuses its practice on trade secret and non-compete work for its market-spanning client list, including such well-known companies as Staples, Inc. It has a particular specialism in counseling and litigating on misappropriation cases involving employee hire and departures. Co-founder of the firm and notable litigator Stephen Riden is a name to note, as is the ‘talented’ Nicole Daly. Senior counsel Sarah Tishler, who specialises in trade secrets, restrictive covenants, and employee mobility work joined the team in August 2022 from Williams Simons & Landis PLC.

The Legal 500 US provides impartial, third-party opinions on leading lawyers and law firms across the country. The Legal 500 relies upon a sophisticated methodology to determine which firms and attorneys are included in its list.


eck Reed Riden LLP is among the leading authorities in trade secret, noncompete, and unfair competition law, and our experience handling these matters is backed by our extensive employment law and business litigation experience. Our hand-picked team combines attorneys with complementary expertise and practical experience.

The Wall Street Journal featured Beck Reed Riden LLP’s noncompete agreement experience. In 2016, the White House issued a report entitled, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses,” relying in part on Beck Reed Riden LLP’s research and analysis, including its 50 State Noncompete Survey.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.

Supreme Court Declines To Resolve Circuit Split On Forum Selection Clauses

Late last year, the Supreme Court denied certiorari in Howmedica Osteonics Corp. v. DePuy Synthes Sales, Inc., which was brought to the Supreme Court for review from an opinion of the Ninth Circuit Court of Appeals. 28 F.4th 956 (9th Cir. 2022).  At the heart of Howmedica (as explained in a previous article, here) was the classic Erie law school hypothetical – does federal or state law control in federal court when deciding if a party’s contractual forum selection clause preempts a state statutory forum selection mandate?

o briefly summarize the Howmedica case: A former sales representative for Howmedica had an employment agreement containing a New Jersey forum selection and choice of law provision, as well as noncompete and nonsolicitation clauses. He ultimately resigned and went to work for a competitor. When Howmedica attempted to enforce the restrictive covenants, the former employee asserted that the forum selection and choice of law clauses were void under California Labor Code § 925, because he was a California resident.

The former employee filed a declaratory judgment action in the Central District of California, asking the court to declare those provisions void. Howmedica moved to transfer venue to the District of New Jersey under 28 U.S.C. § 1404(a). The district court denied the motion, holding that state, not federal, law governed the validity of a forum selection clause in a contract, and that the forum selection clause was therefore invalid and unenforceable. The Ninth Circuit agreed, and held that § 1404(a) and Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988), “do not broadly preempt all state laws controlling how parties may agree to or void a forum-selection clause.” Howmedica then petitioned the Supreme Court for certiorari review.

y applying state law to decide the validity of a forum selection clause, the Ninth Circuit joined the Seventh Circuit in the minority on this issue.  See, e.g., Jackson v. Payday Fin., LLC, 764 F.3d 765, 774 (7th Cir. 2014). The Second, Third,[1] Fourth, Fifth, Sixth, Tenth, Eleventh, and D.C. Circuits have all gone the other way—they hold that federal law as pronounced in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), applies to determine the validity and enforceability of forum selection clauses.

Despite the circuit split, the Supreme Court denied Howmedica’s petition for certiorari on December 12, 2022. This means that in practical terms, significant uncertainty remains with respect to how contractual forum selection clauses will be treated in the face of the increasing number of state statutes that mandate a given forum for particular subjects, such as employment restrictive covenants.

But, the case law is also far from uniform on a multitude of subsidiary issues.  For example, courts have come to opposite conclusions on whether a given state’s statutory forum selection mandate (such as in the Massachusetts Noncompetition Agreement Act (“MNAA”)) in and of itself demonstrates that state’s clear public policy for the purposes of deciding a motion for transfer. In Hilb Grp. of New England, LLC v. LePage, for example, the Eastern District of Virginia held that “no Massachusetts court has held that the Massachusetts Noncompete Agreement Act [which mandates that all cases involving Massachusetts residents must take place in Massachusetts] manifests the state’s strong public policy. Thus, the enforcement of the Agreement’s forum selection clause would not go against a strong public policy of Massachusetts.” No. 3:21-cv-757, 2022 WL 1538583, at *4 (E.D. Va. May 16,2022).

n contrast, the Delaware Chancery Court came to the opposite conclusion regarding whether a statute demonstrates a state’s public policy. In AG Res. Holdings, LLC v. Terral, the Delaware Chancery Court held that “[t]he Louisiana [forum selection] laws cited above are clear pronouncements by the Louisiana legislature regarding its public policy on matters of employment and competition. Under the circumstances, Louisiana’s interests must be respected and enforced.” No. CV 2020-0850-JRS, 2021 WL 486831, at *5 (Del. Ch. Feb. 10, 2021). Idaho provides another example. Idaho Code § 29-110(1) states that it is against Idaho public policy for a contract to restrict a party’s ability to enforce its rights in Idaho courts. Idaho courts have interpreted this statute as evidence of the state’s “strong public policy” against forum selection clauses that mandate proceedings outside of Idaho.  See, e.g., Off-Spec Sols., LLC v. Transportation Invs., LLC, 168 Idaho 734, 739, 487 P.3d 326, 331 (2021); see also Gemini Technologies, Inc. v. Smith & Wesson, Corp., 931 F.3d 911, at 915-17 (9th Cir. 2020).

This thorny issue will continue to cause uncertainty for employers operating in multiple states, as well as employers whose workforce is spread out across more than one state.  Without clear guidance from the Supreme Court, practitioners must continue to be sensitive to the ever-changing landscape of state laws and the judicial decisions interpreting those laws, in order to understand where a case may eventually be heard, and what laws may apply to the dispute.

 

Sarah Tishler is the author of this article. Sarah is a commercial litigator whose practice focuses on complex business disputes in state and federal courts, including intellectual property, breach of contract, and fraud claims.


Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.


[1] By way of example of the disparate outcomes in different jurisdictions, analyzing the very same forum selection clause, in the very same employment contract at issue, the District of New Jersey upheld the forum selection clause, and rejected arguments that California Labor Code § 925 invalidated it. Howmedica Osteonics Corp. v. Howard, 2020 WL 1102494, at *3 (D.N.J. Jan. 17, 2020), report and recommendation adopted, 2020 WL 1082601, at *1 (D.N.J. Mar. 5, 2020). Same facts—opposite outcome.

 

Forum Selection Clauses Head To The Supreme Court

Essential to the drafting of any robust employment agreement, and indeed, nearly all modern contracts, is a forum selection clause that governs that agreement. Forum selection clauses are thought to provide the parties to a contract with certainty about where any disputes arising from that contract will be heard; they are presumed to avoid congesting the courts with disputes over venue, so the parties may head to the merits of a case. In general, unless there are obvious defects with a contract’s validity, courts will honor the agreement on venue that the parties reached and memorialized in the contract.

ut what happens when a state passes a law that expressly bans contractual forum selection clauses that would remove a case from that state’s jurisdiction? This type of law is becoming increasingly common among states that view non-compete clauses and other restrictive covenants with suspicion (or outright hostility).

For example, Massachusetts’ Noncompetition Agreement Act provides that “[a]ll civil actions relating to employee noncompetition agreements subject to this section shall be brought in the county where the employee resides or, if mutually agreed upon by the employer and employee, in Suffolk county . . .” Mass. General Laws c.149 § 24L(f).

California is another example. California Labor Code Section 925 provides: “An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would …:[¶] (1) Require the employee to adjudicate outside of California a claim arising in California.” (§ 925, subd. (a).) “Any provision of a contract that violates subdivision (a) is voidable by the employee, and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.” (§ 925, subd. (b).)

A classic Erie law school exam hypothetical presents itself: in the event that an employee is a California resident, and signs an employment agreement with a company that contains a forum selection clause choosing New Jersey, where will the parties be ordered to litigate if the company sues the (now former) employee when he quits and starts working for a competitor, in direct violation of his employment agreement?

his is the exact scenario before the Supreme Court in Howmedica Osteonics Corp. v. DePuy Synthes Sales, Inc., on certiorari from an opinion of the Ninth Circuit Court of Appeals. 28 F.4th 956 (9th Cir. 2022). In that case, Jonathan Waber was a sales representative for Howmedica, and signed a standard employment agreement with the company, containing a New Jersey forum selection and choice of law provision, as well as non-compete and non-solicitation clauses that prevented former employees from competing, soliciting, and servicing for one year after their departure. Mr. Waber ultimately resigned from Howmedica, and accepted a position with DePuy Synthes Sales. When Howmedica attempted to enforce the restrictive covenants against Mr. Waber, his attorney responded by asserting that the forum selection and choice of law clauses were void under California Labor Code § 925. Communication between the parties broke down, and litigation ensued.

After Mr. Waber filed a declaratory judgment action in the Central District of California, asking the court to declare those provisions void, the petitioner moved to transfer venue to the District of New Jersey under 28 U.S.C. § 1404(a). The district court denied the motion, holding that state, not federal, law governed the validity of a forum selection clause in a contract. Deeming the forum selection clause invalid, and therefore unenforceable, the court assigned no weight to the forum selection clause when evaluating the transfer factors. The Ninth Circuit affirmed, holding that § 1404(a) and Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988) “do not broadly preempt all state laws controlling how parties may agree to or void a forum-selection clause.”

In so doing, the Ninth Circuit joined the Seventh Circuit in the minority view that state law, not federal judge-made law, controls the validity of a forum selection clause in a case sitting in diversity in federal court. The Second, Third, Fourth, Fifth, Sixth, Tenth, Eleventh, and D.C. Circuits have all gone the other way—they hold that the issue is procedural, rather than substantive, and that federal law as pronounced in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) is properly applied to determine the validity, as well as the enforceability, of forum selection clauses.

The circuit split on this important issue is clear, as are the implications for its resolution. To take one example of the disparate outcomes in different jurisdictions, analyzing the very same forum selection clause, in the very same employment contract at issue, the District of New Jersey upheld the forum selection clause, and rejected arguments that California Labor Code § 925 invalidated it. Howmedica Osteonics Corp. v. Howard, 2020 WL 1102494, at *3 (D.N.J. Jan. 17, 2020), report and recommendation adopted, 2020 WL 1082601, at *1 (D.N.J. Mar. 5, 2020). Same facts—opposite outcome.

The Supreme Court has yet to announce whether it will grant certiorari for this case. While Howmedica may not spark the same headline news as other cases before the Supreme Court this term, it is definitely one to watch for practitioners in the labor and employment space.

Sarah Tishler is the author of this article. Sarah is a commercial litigator whose practice focuses on complex business disputes in state and federal courts, including intellectual property, breach of contract, and fraud claims.

Beck Reed Riden LLP is Boston’s innovative litigation boutique. Our lawyers have years of experience working with clients ranging from Fortune 500 companies to start-ups and individuals. We focus on business litigation and employment.

We are experienced litigators and counselors, helping our clients as business partners to resolve issues and develop strategies that best meet our clients’ legal and business needs – before, during, and after litigation. We’re ready to roll up our sleeves and help you. Read more about us, the types of matters we handle, and what we can do for you here.