Amn Healthcare, Inc. v. Aya Healthcare Servs., Inc.
239 Cal. Rptr. 3d 577
Cal. Ct. App. 5th2018Background
- AMN, a travel-nurse staffing company, required recruiters to sign Confidentiality and Non-Disclosure Agreements (CNDAs) that included a 1–18 month post‑employment nonsolicitation-of-employee clause and a broad definition of "Confidential Information."
- Four former AMN recruiters left for competitor Aya and recruited or communicated with travel nurses who were on temporary AMN assignments; Wallace also forwarded an internal AMN email and a Travelers-on-Assignment (TOA) list to her personal email before departing.
- AMN sued for breach of contract, trade-secret misappropriation (UTSA), breach of duty of loyalty, interference with prospective economic advantage, and related derivative claims; defendants counterclaimed for declaratory relief and sought injunctive relief against enforcement of the nonsolicitation clause.
- Defendants moved for summary judgment, arguing the nonsolicitation clause is void under Business & Professions Code § 16600 and that AMN’s non‑trade confidential information is not protected; the trial court granted summary judgment for defendants, declared §3.2 unenforceable, enjoined AMN from enforcing similar clauses, and awarded fees.
- The Court of Appeal affirmed: it held the nonsolicitation clause void under §16600 as applied to recruiters who solicit travel nurses on temporary AMN assignments; found AMN’s alleged non‑trade confidential information not protected; and sustained summary judgment on AMN’s contract, tort, and UTSA-based claims. The injunction and fee award were also affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of CNDA nonsolicitation clause under Cal. Bus. & Prof. Code §16600 | Clause valid because it bars solicitation of "employees" (travel nurses) and protects AMN’s workforce relationships | Clause is an unlawful restraint on engaging in the profession of recruiting travel nurses; §16600 bars such post‑employment restraints | Clause void under §16600 as applied — it restrained former recruiters from practicing their trade by barring solicitation of nurses on temporary AMN assignments |
| Use/protection of "confidential information" that is not a trade secret | AMN: recruiter identities, terms, assignment histories, and contact data are confidential/trade‑secret (and some argued protected by Labor Code §16607 for employment agencies) | Defendants: much of that info was publicly available or already known to Aya; non‑trade confidential info cannot be enforced to restrain competition under §16600 | Information that is not a trade secret is not protected to support contractual or tort restraints; many challenged data were not secret or were already known to Aya, so claims based on non‑trade confidential information fail |
| Trade‑secret misappropriation (UTSA) | AMN: identities, terms, TOA list, and an internal Wilhelm email are trade secrets misappropriated by defendants | Defendants: alleged items were general, known to Aya or publicly accessible, not the subject of reasonable secrecy, and no evidence they were used to obtain economic value | Summary judgment proper: AMN failed to show secrecy, independent economic value, reasonable efforts to maintain secrecy, or use/harm; UTSA claims fail |
| Injunctive relief and attorney fees (declaratory relief and private‑attorney‑general fees) | AMN: injunction overbroad and erroneous; fee award improper | Defendants: widespread enforcement attempts harmed public interest and other former AMN employees; injunctive relief and fees appropriate under CCP §1021.5 (and Civ. Code §3426.4 asserted) | Injunction against enforcing nonsolicitation clauses affirmed as within court's discretion; fee award under CCP §1021.5 affirmed because defendants were successful and action conferred significant public benefit on a large class |
Key Cases Cited
- Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (2008) (section 16600 broadly prohibits contractual restraints on the right to engage in a lawful profession absent statutory exceptions)
- Bosley Medical Group v. Abramson, 161 Cal.App.3d 284 (1984) (historical discussion of reasonableness rule for restraints and California’s repudiation of that rule)
- Galante v. Retirement Group, 176 Cal.App.4th 1226 (2009) (trade‑secret misuse can support injunction against wrongful use but does not create a judicial exception to §16600 for enforcing nonsolicitation clauses)
- Dowell v. Biosense Webster, Inc., 179 Cal.App.4th 564 (2009) (applies §16600 to narrowly worded restraints and rejects narrow‑restraint exceptions)
- Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal.App.4th 853 (1994) (broad nonsolicitation provisions found void under §16600)
- Cotton v. ReadyLink Healthcare, 126 Cal.App.4th 1006 (2005) (preliminary injunction on likely UTSA claim where employer database and per diem program were central proprietary assets)
- Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503 (1994) (breach of contract does not automatically give rise to tort liability; tort requires an independent duty)
- Aas v. Superior Court, 24 Cal.4th 627 (2000) (limits on converting contract breaches into tort claims; tort remedies require independent social‑policy duties)
- Cel‑Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 (1999) (framework for unfair competition law; derivative UCL claims fail if underlying claim fails)