United States District Court, N.D. California
ORDER DENYING PLAINTIFFS' MOTION FOR PRELIMINARY
INJUNCTION, AND DENYING IN PART AND GRANTING IN PART
DEFENDANTS' MOTION TO DISMISS DOCKET NOS. 9, 30
M. CHEN UNITED STATES DISTRICT JUDGE
Gold Coast Search Partners LLC (“Gold Coast”),
Anna Brady, and Janelle Matthews (collectively,
“Plaintiffs”) filed suit seeking declaratory and
injunctive relief. Brady and Matthews signed non-compete and
non-solicitation covenants in a pre-employment agreement
(“Employment Agreement”) when they were former
employees of Defendants Career Partners, Inc.
(“CPI”) and Brian O'Callaghan (collectively,
“Defendants”). Plaintiffs' complaint seeks a
declaratory judgment holding these covenants invalid.
Plaintiffs also seek to enjoin Defendants from enforcing the
Employment Agreement in an earlier-filed action before a New
York state court.
before the Court are two motions: Plaintiffs' preliminary
injunction motion (“PI Mot.”) and Defendants'
motion to dismiss (“MTD”). The Court heard both
motions in a consolidated hearing.
to the reasons discussed below, Plaintiffs' preliminary
injunction motion is DENIED because (1) the
requested relief would enjoin parallel state proceedings,
which violates the Anti-Injunction Act, and (2) the requested
relief seeks a prior restraint on speech. Defendants'
request to stay this action under the Colorado River
doctrine is GRANTED. As a result, the
remainder of Defendants' motion to dismiss is
DENIED as moot; the denial is without
prejudice, should Defendants wish to refile if the stay is
a New York corporation engaged in the business of talent
recruitment for investment firms. Compl. ¶ 8. CPI's
main office is in New York City. MTD at 3. It is in the
business of recruiting pre- and post-MBA candidates with
CPI's investment-firm clients. Id. Brady and
Matthews began working as recruiters for CPI in its San
Francisco, California office in September 2009 and March
2010, respectively. Compl. ¶ 15. Both separated from CPI
in January 2019 to start their own company-Gold Coast, a
professional recruiting firm for private equity firms and
hedge funds. Id. ¶¶ 4, 15; PI Mot. at 6.
When Brady and Matthews joined CPI, they signed the
Employment Agreement containing the at-issue restrictive
covenants. Compl. ¶ 4.
Employment Agreement's non-compete covenant reads as
Covenant Not to Compete
Candidate agrees that to the extent the Candidate is employed
in the New York office, the Candidate agrees not to compete,
directly or indirectly, either as principal, manager, agent,
consultant, officer, stockholder, partner, investor, lender
or employee or in any other capacity, carry on, be engaged in
or have any financial interest in, any business or Person
which is in competition with the business of CPI within a 250
mile radius of CPI's principal place of business. In view
of the services which Candidate will perform and has
performed for-‘ [sic] CPI, which are special, unique,
extraordinary and intellectual in character and will place
Candidate in a position of confidence and trust with the
Customers and other employees of CPI and will provide her
with access to Confidential Information of CPI, Candidate
expressly acknowledges that the restrictive covenants set
forth in this Agreement are necessary in order to protect and
maintain the proprietary interests and other legitimate
business interests of CPI. Candidate agrees and hereby
acknowledges that (i) such provisions do not impose a greater
restraint than is necessary to protect the goodwill or other
business interests of CPI, (ii) such provisions contain
reasonable limitations as to time and scope of activity to be
restrained, (iii) such provisions are not harmful to the
general public, and (iv) such provisions a.re [sic] not
unduly burdensome to Candidate, and the consideration of
employment is sufficient to compensate Candidate for the
restrictions confined in such provisions. In consideration
thereof and in light of Candidate's education, skills and
abilities, Candidate agrees that she will not assert in any
forum that such provisions prevent Candidate from earning a
living or otherwise are void or unenforceable or should be
held void or unenforceable. This provision is not
intended to apply to any person primarily employed in the
California offices and, to the extent that this
provision is inconsistent with California law, it shall not
¶ 18 (emphasis added). The Employment Agreement also
includes the following non-solicitation clause:
“FOURTH: Non-Solicitation of CPI Customer &
A. CPI Customers-Candidate agrees that he/she shall not, on
their own behalf or on behalf of any business or Person other
than CPI, directly or indirectly, solicit, call on or contact
any Customer, as defined under Article FIRST, for any
business purpose or otherwise as contemplated by this
Agreement during the term of this Agreement without written
permission from CPI. Candidate also agrees that he or she
will not provide services to any CPI Customer or accept
employment with any CPI Customer without the consent of CPI,
which consent will not be unreasonably withheld. B. CPI
Employees-Candidate agrees that he/she shall not, on their
own behalf or on behalf of any business or Person other than
CPI, directly or indirectly, solicit or offer employment to,
or hire, any individual who has been employed by CPI at any
time during the term of this Agreement without written
permission from CPI.”
Compl. ¶ 19. The Employment Agreement defines
“Customers” broadly to include past and present
clients of CPI, which further includes the clients'
agents and employees. Id. at ¶ 20. The
Employment Agreement contains a New York choice-of-law
provision. Id. ¶ 26. Brady and Matthews
remained as California residents throughout their employment
with CPI. PI Mot. at 3. On occasions during their employment
with CPI, Brady and Matthews traveled to and performed
services in New York.
Plaintiffs began operating as Gold Coast, Defendants'
counsel sent Plaintiffs correspondence requesting
confirmation that Brady and Matthews would comply with the
Employment Agreement. Id. at 4. Defendants received
no response. Id. Around the same time, Plaintiffs
opened an office in New York City (less than one mile away
from CPI). Id. at 5. Defendants allege Plaintiffs
caused at least one CPI customer to engage Gold Coast rather
than CPI. MTD at 4.
Defendants filed suit in New York Supreme Court (the
“New York Action”) to enforce the restrictive
covenants of the Employment Agreement, among other things.
See Plaintiffs' Request for Judicial Notice
(“RJN”), Ex. 1, at 14-22 (Defendants'
complaint in New York seeks injunctive relief, breach of
contract, theft of compensation, unfair competition, and
tortious interference with contract). Plaintiffs contend that the
Employment Agreement's restrictions are unlawful and
unenforceable in California. If enforced, these restrictions
would “destroy Gold Coast and would render Ms. Brady
and Ms. Matthews unable to conduct their business and work in
their chose profession to earn a living.” Compl. ¶
30. Plaintiffs also allege that Defendants have disparaged
and slandered Gold Coast. Id.
24, 2019, Defendants herein propounded 300 document requests
in the New York Action, which requested information related
to Plaintiffs' interactions with CPI's clients, among
other things. PI Mot. at 7. On June 14, 2019, Plaintiffs
herein (defendants in the New York Action) filed a motion to
dismiss in the New York Action on forum non conveniens
grounds, as well as on the merits. MTD at 4, fn 3. Plaintiffs
have not contested personal jurisdiction in New York.
31, 2019, the parties met for a preliminary conference in the
New York Action. At this conference, the New York Supreme
Court stayed the case pending the disposition of the motions
before this Court. The parties also set November 7, 2019, as
the hearing date before the New York Supreme Court for the
pending motion to dismiss.
New York Action commenced on April 25, 2019. Plaintiffs filed
this action on June 3, 2019. Docket No. 1. On July 13, 2019,
Plaintiffs filed their motion for preliminary injunction.
Docket No. 22. Defendants filed their opposition to
Plaintiffs' motion while concurrently filing their motion
to dismiss. Docket Nos. 27, 30.
seeking a preliminary injunction must meet one of two
variants of the same standard. Under the original
Winter standard, a party must show “that he is
likely to succeed on the merits, that he is likely to suffer
irreparable harm in the absence of preliminary relief, that
the balance of equities tips in his favor, and that an
injunction is in the public interest.” Winter v.
NRDC, Inc., 555 U.S. 7, 20 (2008). Under the
“sliding scale” variant of the Winter
standard, “if a plaintiff can only show that there are
‘serious questions going to the merits'-a lesser
showing than likelihood of success on the merits-then a
preliminary injunction may still issue if the ‘balance
of hardships tips sharply in the plaintiff's favor,'