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Scales v. Badger Daylighting Corp.

United States District Court, E.D. California

June 1, 2017

DANIEL SCALES, an individual; ALEX MAGANA, an individual; and BRIAN MARTELLO, an individual, Plaintiff,
BADGER DAYLIGHTING CORP., a Nevada Corporation; and DOES 1-20 inclusive, Defendants.


         This matter is before the court on the motion to dismiss for forum non conveniens brought by defendant Badger Daylighting Corporation. (Doc. No. 9.) A hearing on the motion was held on April 4, 2017. Attorney David Greifinger appeared on behalf of plaintiff Daniel Scales. Attorney Jon Setoguchi appeared on behalf of defendant. Having considered the parties' briefs and oral arguments and for the reasons set forth below, the court will grant defendant's motion to dismiss.


         Defendant, Badger Daylighting Corporation (“Badger”), is incorporated in Nevada with its principal place of business in Indiana, and is in the business of “providing hydrovac excavation services throughout the United States and Canada.” (Doc. No. 9 at 8-9.) Plaintiff, Daniel Scales, is a California resident and was employed with Badger from August 2014 to July 2016 as a Regional Manager. (Id. at 9.) In this capacity, plaintiff received extensive training and attended “several executive management meetings in Indiana over the course of his employment.” Otherwise, plaintiff worked out of defendant's Taft, California office and his “activities related to commerce were for California centered business, only.” (Doc. No. 12 at 5.) As a Regional Manager, plaintiff had access to a wide variety of defendant's trade secrets and confidential information. (Doc. No. 9 at 9.) As part of his job, plaintiff developed relationships with customers in California and was responsible for training and interacting with defendant's employees since some of his duties included keeping track of payroll and benefits in a human resources capacity. (Id. at 9-10.)

         Upon accepting employment with defendant, plaintiff signed a Confidentiality and NonCompetition Agreement (“the Agreement”). (Id. at 10.) Plaintiff was told the documents were routine and that all new employees sign them. (Doc. No. 12 at 5.) The agreement contains several provisions relevant to resolution of the pending motion. First, in Paragraph 1 of the Agreement, plaintiff agreed to certain restrictive covenants. Specifically, Paragraph 1, subsection (b) provides that for a period of two years after terminating employment with defendant, plaintiff shall not “within the geographical area of the State(s) of California, Oregon, and Washington, compete in any manner with the Corporation . . . .” (Doc. No. 1 at 35-36.) Subsection (c) of Paragraph 1 also provides that upon termination of employment plaintiff shall not for a period of two years, “solicit for employment any employee, consultant, contractor, or sub-contractor of the Corporation.” (Id.) Second, “Paragraph 2 of the Agreement contains a confidentiality restriction that prohibits plaintiff from disclosing or using ‘Confidential Information' of Badger, which is defined to include any trade secret, confidential or competitively sensitive information of Badger.” (Doc. No. 9 at 10-11.) Perhaps most importantly, Paragraph 7 of the Agreement provides that the “Agreement shall be governed by and construed in accordance with the laws of the State of Indiana and any disputes arising hereunder shall be brought and heard in the state or federal courts sitting in Marion County, Indiana.” (Doc. No. 1 at 37.) Finally, plaintiff agreed that these restrictive covenants could be enforced through injunctive relief and that defendant may recover attorneys' fees and costs expended in enforcing the Agreement. (Doc. No. 1 at 37, ¶ 3.)

         On July 6, 2016, plaintiff resigned from Badger after two years of employment and accepted an offer from Clean Harbors Corporation (“Clean Harbors”). (Doc. No. 9 at 11.) According to defendant, “Clean Harbors is a direct competitor of Badger, offering services that compete with Badger's services in hydrovac excavation.” (Id.) Defendant believes plaintiff also “specifically targeted Badger employees in an effort to have them leave Badger and join Clean Harbors.” (Id.) Plaintiff now serves as Regional Manager for Clean Harbors in California, one of the territories he was responsible for while at Badger. (Id.) Defendant believes plaintiff's responsibilities in his current capacity at Clean Harbors are the same responsibilities as those he had when employed with Badger. (Id.)

         Following plaintiff Scales' departure, defendant Badger filed suit in Marion County Superior Court, Indiana on August 24, 2016.[1] (Id.) Defendant's complaint in that action alleges that plaintiff breached the parties' Agreement, namely the restrictive covenants, by working and soliciting employment for Clean Harbors immediately after terminating his employment with Badger. In its action filed in Indiana, Badger “seeks damages, attorneys' fees and costs and all other appropriate relief.” (Id. at 12.) Plaintiff has filed an answer to Badger's complaint in the Marion County Superior Court, but as of the time of the hearing on the pending motion before this court has not moved to dismiss the Indiana case. Trial in that action is currently set for January 23, 2018. (Id.)

         On January 27, 2017, plaintiff Scales along with two other former employees, plaintiffs Magana and Martello, filed suit against defendant in the Kern County Superior Court. Defendant removed the case to this federal court on February 15, 2017. Here, plaintiffs seek declaratory judgment “under section 1060 that their respective Non-Competition Agreements are an unlawful and unenforceable restraint of trade, in violation of section 16600 of the California Business and Professions Code, and that Defendants' efforts to enforce the Agreement constitutes an unfair business practice under Business and Professions Code section 17200.” (Doc. No. 1 at 17, ¶ 26.) On February 21, 2017, defendant filed the pending motion to dismiss the first cause of action as to plaintiff Daniel Scales only for forum non conveniens. (Doc. No. 9.)[2] Plaintiff Scales filed his opposition to defendant's motion to dismiss on March 17, 2017. (Doc. No. 12.) Defendant filed its reply on March 28, 2017. (Doc. No. 13.)


         I. Forum Non Conveniens Analysis

         Forum selection clauses where venue is proper[3] are ordinarily enforced by way of a motion to transfer venue brought under 28 U.S.C. § 1404(a). In this regard transfer is the appropriate procedural mechanism where the alternative venue is another federal court. Atl. Marine Const. Co., Ins. v. U.S. District Court for Western Dist. of Texas, U.S.,, 134 S.Ct. 568, 580 (2013) (noting that, “[s]ection 1404(a) is merely a codification of the doctrine of forum non conveniens for the subset of cases in which the transferee forum is within the federal court system; in such cases, Congress has replaced the traditional remedy of outright dismissal with transfer.”). Alternatively, “the appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens.” Id. The forum selection clause here points to a state forum and is reflected in Paragraph 7 of the Agreement, which provides, “any disputes arising hereunder shall be brought and heard in the state or federal courts sitting in Marion County, Indiana.” Accordingly, defendant's motion to dismiss is premised on the doctrine of forum non conveniens. Furthermore, the court notes that defendant has filed suit against plaintiff in the Marion County Superior Court for breach of contract.[4] (Doc. No. 9 at 11.) While the procedural vehicle differs for federal and nonfederal forums, the Supreme Court has held that because § 1404(a) derives from the doctrine of forum non conveniens the analysis should be the same since both “entail the same balancing of interests standards.” Id.

         Under the forum non conveniens analysis, the initial inquiry where a state forum is at issue is whether the forum selection clause is valid. The Supreme Court has found that forum selection clauses are presumptively valid and should be honored “absent some compelling and countervailing reason.” Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004) (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12 (1972)); see also Atl. Marine, 134 S.Ct. at 583 (“In all but the most unusual cases, therefore, “the interest of justice” is served by holding parties to their bargain.”); Golden State Medical Supply, Inc. v. Capmatic, Case No.: CV 15-08567-SJO (AGR), 2016 WL 8856649, at *2-3 (C.D. Cal. Jan7, 2016). As such, the “party challenging the clause bears a ‘heavy burden of proof' and must ‘clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or over-reaching.'” Murphy, 362 F.3d at 1140. (quoting Bremen, 407 U.S. at 15). In Bremen, the Supreme Court identified three grounds upon which the challenging party can show that the forum selection clause is unreasonable and should not be enforced:

(1) ‘if the inclusion in the agreement was the product of fraud or overreaching'; (2) ‘if the party wishing to repudiate the clause would effectively be deprived of his day in court were the clause enforced'; and (3) ‘if enforcement would contravene a strong public policy of the forum in which suit is brought.'

Murphy, 362 F.3d at 1140 (quoting Richards v. Lloyd's of London, 135 F.3d 1289, 1294 (9th Cir. 1998) (quoting and citing Bremen, 407 U.S. at 12-13)); see also Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1029-30 (9th Cir. 2016); Holland America Line Inc. v. Wartsila North America, Inc., 485 F.3d 450, 457 (9th Cir. 2007). In addition, the Ninth Circuit has found that within the “context of employment contracts, ” the following additional factors may be “taken into account when determining the enforceability of the forum selection clause including:

(1) ‘any power differentials which may exist between the two parties to the contract, ' (2) the educational background of the party challenging the clause, (3) the business expertise of the party challenging the clause, and (4) the ‘financial ability to bear [the] cost and inconvenience' of litigating in the forum selected by the contract.

Id. (quoting and citing Spraldin v. Lear Siegler Mgmt. Servs. Co., 926 F.2d 865, 869 (9th Cir. 1991)); see also Kedkad v. Microsoft Corporation, Inc., No. C13-0141 TEH, 2013 WL 4734022, at *3 (N.D. Cal. Sept. 3, 2013).

         While the forum non conveniens analysis ordinarily involves a balancing of both the public interest and convenience of the parties, where the court find a forum selection clause to be valid, it need not consider the private interest factors. Atl. Marine, 134 S.Ct. at 582; see also Sun v. Kao, 170 F.Supp.3d 1321, 1325 (W.D. Wash. 2016); Adema Techs. Inc. v. Wacker Chemie AG, No. 13-CV-05599-BLF, 2014 WL 3615799, at *2 (N.D. Cal. July 22, 2014) (where the forum selection clause is valid the court should not consider the parties' private interests), aff'd sub nom. Adema Techs., Inc. v. Wacker Chem. Corp., 657 F. App'x 661 (9th Cir. 2016) (citing Atl. Marine, 134 S.Ct. at 581-82). The plaintiff's choice of forum does not warrant consideration and the court should only consider public interest factors such as: “‘the administrative difficulties following from court congestion; the local interest in having localized controversies decided at home; and the interest in having the trial of a diversity case in a forum that is at home with the law.” Adema Techs. Inc., 2014 WL 3615799, at *2 (citing Atl. Marine, 134 S.Ct. at 581 n.6) (quoting Piper Atlantic Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981))). Thus, the court first considers whether the forum selection clause is valid.

         A. Validity of the Forum Selection Clause

         Defendant proffers several reasons as to why in this case the forum selection clause was not the result of fraud or overreaching. (Doc. Nos. 9 at 15-17; 13 at 6-7.) However, plaintiff has not challenged the validity of the forum selection clause on this basis. Rather, plaintiff contends only that this forum selection clause is unreasonable because it deprives plaintiff of his day in court and violates California public policy as expressed in the California Labor Code. (Doc. No. 12 at 8, 10.) In light of plaintiff's focus, the court need not consider defendant's arguments with respect to fraud or overreaching, and instead turns to plaintiff's contentions.

         1. Plaintiff&#39 ...

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