57 Cal.App.5th 155
Cal. Ct. App.2020Background
- Biosite (now Quidel) developed an FDA‑approved BNP immunoassay for a point‑of‑care analyzer; BNP assays are analyzer‑specific.
- In 2003 Biosite and Beckman executed a BNP Assay Agreement: Beckman would manufacture a BNP assay for Biosite; Biosite would buy its requirements exclusively from Beckman.
- Section 5.2.3 of the Agreement barred Beckman from researching or developing assays that detect BNP or NT‑proBNP until two years before the Agreement’s expiration; other biomarkers were not restricted.
- Beckman sued for declaratory relief, arguing §16600 voided §5.2.3 as an unlawful restraint on trade; the trial court granted Beckman’s summary adjudication motion.
- Quidel petitioned for a writ; after the California Supreme Court decided Ixchel (holding a rule‑of‑reason applies outside the employment context) the Court of Appeal remanded, concluded the trial court erred, and directed vacatur of the summary adjudication order so factual development can occur under a rule‑of‑reason analysis.
Issues
| Issue | Beckman’s Argument | Quidel’s Argument | Held |
|---|---|---|---|
| Does Edwards’s per se rule against noncompetes extend beyond employment contracts? | Edwards applies broadly; §16600 voids all noncompetition restraints unless an exception applies. | Edwards was limited to employment; it should not be extended to commercial exclusive‑dealing agreements. | Edwards is limited to employment context; it does not control non‑employment agreements. |
| What standard governs noncompetition provisions outside employment? | §16600 should be applied as a per se ban. | Apply a rule‑of‑reason balancing test (assess purpose, effects, necessity, market foreclosure). | Ixchel controls: a rule‑of‑reason applies to non‑employment restraints. |
| Are in‑term exclusive/dealing restraints per se invalid? | In‑term restraints are void under §16600. | In‑term restraints can be valid; legality depends on reasonableness/market effect. | In‑term restraints are not per se void; validity requires factual inquiry (rule‑of‑reason). |
| Was summary adjudication appropriate on §16600 challenge to §5.2.3? | No additional factual development necessary; clause is void as a matter of law. | Summary adjudication improper because factual issues (market effects, necessity, foreclosure) remain. | Grant writ: trial court erred; vacate summary adjudication and deny the motion so facts can be developed. |
Key Cases Cited
- Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (Cal. 2008) (held employee noncompete agreements are per se invalid under §16600)
- Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal.5th 1130 (Cal. 2020) (held rule‑of‑reason applies to contractual restraints outside the employment context)
- Great Western Distillery Prods., Inc. v. John A. Wathen Distillery Co., 10 Cal.2d 442 (Cal. 1937) (upheld limited exclusive requirements contract where public interest not harmed)
- Vulcan Powder Co. v. Hercules Powder Co., 96 Cal. 510 (Cal. 1892) (invalidated agreements tending to create a monopoly)
- Dayton Time Lock Serv., Inc. v. Silent Watchman Corp., 52 Cal.App.3d 1 (Cal. Ct. App. 1975) (upheld in‑term exclusive restraints in franchise‑like contexts subject to market analysis)
- Kelton v. Stravinski, 138 Cal.App.4th 941 (Cal. Ct. App. 2006) (invalidated in‑term covenant in partnership context where it foreclosed competition)
- Centeno v. Roseville Cmty. Hosp., 107 Cal.App.3d 62 (Cal. Ct. App. 1979) (upheld exclusive hospital staffing arrangement under a reasonableness analysis)
- AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., 28 Cal.App.5th 923 (Cal. Ct. App. 2018) (addressed employee mobility and invalidated noncompete/nonsolicitation restraints in employment context)